The Central Bank of Kuwait will test a first-of-its-kind product for open banking in the regulatory sandbox.
Keen to enable new fintech and support open banking to help create innovative business models in financial services, the Central Bank of Kuwait (CBK) has given the go-ahead to trial a one-of-a-kind product launching this in the local market within the Regulatory Sandbox and applying the same to voluntary customer banking transactions to fully assess and evaluate the product before final market launch.
Commenting on the new product, His Excellency the Governor of CBK, Basel Al Haroon, said CBK is sparing no effort to support advanced fintech, adding that the new open banking product that was initially launched in the market within the Regulatory Sandbox is the first of its kind in the State of Kuwait. The product works in an open banking model and provides users with analysis services of transactions processed on their bank accounts with different banks, as well as electronic payment services.
Central Bank of Kuwait Focuses on Fintech
Al-Haroon shed light on the importance of fintech for CBK, which can be defined as new technologies related to the financial sector, and aims to improve financial activities, including the launch of advanced products, services and business models in the financial services sector. . To this end, the CBK launched the Regulatory Sandbox in 2018 and updated it in 2019 to expand the scope of accepted products and services. The Regulatory Sandbox is a secure space that allows experimentation with innovative products and services related to fintech without jeopardizing the stability of the financial and banking system.
Regarding the CBK’s other efforts to support and regulate open banking, the governor noted that CBK specialists had conducted a wide-ranging study concluding that there was a need for a regulatory framework for open banking. banking and application programming interface (API) specifications. To this end, the CBK has formed an “Open Banking Task Force”, which includes specialists from Kuwaiti banks. The CBK has also formed the “CBK open banking Working Group” which includes CBK specialists and representatives of Kuwaiti banks.
In conclusion, the Governor commended the cooperation of Kuwaiti banks in supporting the development of open banking, noting the motivating role of the CBK and its willingness to deploy the latest technologies to improve banking and financial services in the country.
Kuwait fintech and wider digital ecosystem
Economic development strategies have been implemented in much of the Middle East and Africa (MEA), including Kuwait. Kuwait Vision 2035 will seek to diversify Kuwait’s economy and help the country become less dependent on oil, which for most of the previous century until today has spurred the economic development of the country and its other Gulf Cooperation Council (GCC) neighbors.
According Hoot Suite, in terms of the percentage of the population aged 15 and over, almost 80% have an account at a financial institution, almost a quarter have a credit card and more than a third make purchases online and/or pay bills on line. As in the rest of the world during the height of the 2020 pandemic, Kuwaitis have also gone digital and their activities there have increased significantly. For example, online banking usage was 84% during the pandemic. And in terms of perceived readiness for digital transformation, 80% of Kuwaitis felt that the government and telecom providers felt ready to go digital. services.
In the Middle East and particularly in the Gulf region, as highlighted by The Fintech Times Fintech: Middle East and Africa 2021 Report, Kuwait has been a historic regional hub for the financial services sector. To this day, Kuwait’s financial system comprises four sectors: banking, insurance, other financial institutions and investment funds. There were over 100 financial institutions offering financial products and services in the country. The banking sector in Kuwait is dominated by retail, with personal loans/finance accounting for 40% of total facilities.
Additionally, Kuwait has produced some of the region’s most iconic tech companies, such as delivery app Talabat and e-commerce platform Boutiqaat.
Due to its historical financial services ecosystem in the region, coupled with the country’s high economic development and support from the top – coupled with a young and tech-savvy population, fintech has potential for growth in Kuwait.
The future of Kuwait appears to be growing with digital transformation and sectors like fintech helping to lead that charge.