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The UAE’s Step Forward into Open Finance

The Central Bank of the United Arab Emirates (CBUAE) recently unveiled two groundbreaking fintech regulations on April 23, 2024, heralding a new era of financial innovation in the region. Among these regulations, the Open Finance Regulation stands out, introducing a revolutionary "Open Finance Framework" that positions the CBUAE at the helm of financial transformation. Let's delve into what this entails and how it's poised to reshape the financial landscape of the UAE.

1. Pioneering Foundations: The RP Regulation of 2021

To understand the significance of the Open Finance Regulation, it's crucial to look back at its precursor, the Retail Payment Services and Card Schemes Regulation (RP Regulation) of 2021. This regulation laid the groundwork for overseeing specific retail payment services, mandating a "Category IV license" for certain service providers, such as Payment Initiation Services and Payment Account Information Services.

2. The Open Finance Revolution: Unveiling the Open Finance Regulation of 2024

Fast forward to 2024, and the CBUAE introduces the Open Finance Regulation, a game-changer in the realm of financial services. This regulation mandates the participation of "Licensees" — initially comprising UAE licensed banks, foreign bank branches licensed in the UAE, and insurance companies — in the Open Finance Framework. Under this framework, Licensees must grant Open Finance Providers access to customer data and the ability to initiate transactions on customer accounts and products.

Unlike its predecessor, the Open Finance Regulation introduces a paradigm shift by making data sharing mandatory across various sectors, including banking, insurance, and e-money. This move underscores the UAE's commitment to spearheading digital reform in the information age, with a detailed and comprehensive framework at its core.

3. Key Data and Technology Requirements: Empowering Customer Control

Central to the Open Finance Regulation is the empowerment of customers to decide who can access their financial data and for what purposes. Licensees are mandated to collaborate with customers' chosen Open Finance Service providers, ensuring stringent measures for customer consent, data security, and privacy.

Prohibitions on activities like "data scraping" and interception of digital connections are enforced, alongside robust requirements for authentication, secure communication standards, and IT governance. Additionally, the CBUAE may issue additional technical standards aimed at enhancing digital access, cybersecurity, and customer experience.

4. Technical Components of the Open Finance Framework: Building Bridges

At the heart of the Open Finance Framework lies the mandate for Licensees to establish and maintain a dedicated interface, providing secure online access to accounts and products through the "API Hub" and other components. The "Trust Framework" comprises essential elements like the Participant Directory, Digital Certificates, API Portal, and Sandbox, fostering secure and efficient interactions within the ecosystem.

5. Phased Roll-Out: A Strategic Approach

The implementation of the Open Finance Regulation will unfold in phases, with banks and insurers leading the initial onboarding process. Subsequent phases will be announced by the CBUAE, marking a strategic approach towards widespread adoption and seamless integration into the financial ecosystem.

The introduction of the Open Finance Regulation marks a significant milestone in the UAE's journey towards financial innovation and inclusivity. By embracing open finance principles, the UAE is poised to unlock new opportunities, foster greater competition, and empower consumers in an increasingly digital world.

How can Surety help?

Considering a new business in the UAE, or are you an existing business looking to evidence your compliance? Surety allows you to easily identify control and compliance gaps and trace back your compliance state to the underlying requirements.

Identify efficiencies and demonstrate an effective control environment to your regulators. Globally. Get in touch to see how Surety can help.

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