Up close and personal with MEAPT's most prominent players in the ecosystem. Today we invite Abe Karar, Chief Product and Strategy Officer of Open Finance Solutions provider FinTech Galaxy
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3 questions, 1 player, and endless insight. Welcome to the "FireSide 2022" content series where we reflect on trends, industries, investments, and venture capital in the Middle East, Africa, Pakistan, and Turkey. For today's FireSide chat, we invite the startup on a mission to gather 22 Arab Countries Under 1 API- here's our session with Abe Karar, Chief Product and Strategy Officer at FinTech Galaxy
How does Open Finance benefit financial service providers in their decision-making process and what is the impact of data regulation/transparency on building safe Open Banking infrastructures?
Financial service providers can gain a better understanding of their customers by aggregating data from various financial institutions in the ecosystem. With Open Finance and the broader access to data, FinTechs coming up with innovative financial solutions, banks, and financial institutions have better visibility into customers’ financial wellbeing and overall financial health. That’s because Open Finance goes beyond payment account data, and encompasses a wider range of products, including mortgages, loans, pensions, insurance, and investments.
By leveraging this data, financial services providers can customize their product offering, personalize the customer experience, and make better decisions that result in a higher cross-sell ratio, enhanced product uptake, and reduced credit risk. This ultimately plays for the benefit of the end-user.
When we look at Europe, we find that with PSD2 (the revised Payment Services Directive 2) came GDPR (General Data Protection Regulation) and a heightened focus on data privacy and consumer protection. Implementing a robust framework for data privacy and protection would enable Open Banking/Finance to have a better impact, and achieve its full potential.
It’s very important to recognize the risks associated with potential breaches of financial data; therefore, it’s the responsibility of the Regulators to ensure that certain safeguards are implemented to protect the end consumer. In fact, it was not just PSD2 and GDPR, we have seen that in many jurisdictions where Open Banking has been implemented, there is some data regulation that has also been implemented to augment and protect. Take Bahrain for example, the Bahrain Open Baking Framework (BOBF) is supported with the Bahrain Data Privacy Law (PDPL) that was released around the same timeframe in 2019. The same applies to Australia, where their Open Banking regulation was published with their Consumer Data Rights (CDR). It is the responsibility of the regulators to implement a robust licensing process to approve TTPs and to have the right reporting in place to ensure that such data privacy, security, and protection are observed and maintained by the various players in the ecosystem.
How is Fintech Galaxy providing conducive environments for FinTech innovations in MENA and how would that bring the MENA-based financial sector up to speed with global market trends?
"Our objective is to reach a point where FinTechs can smoothly operate across borders and leverage our Open Banking/Finance to scale their product and service offering"
Our key focus is to turn innovation into value, and we do that by connecting the various players of the ecosystem in a way that allows them to solve real-life problems, satisfy real business use cases, and resolve consumer pain points. This is done through our platform that crowdsources FinTech solutions globally.
We deliver on Open Innovation challenges across the region including what we have done so far with the Arab Open Finance Challenge. We create value by guiding FinTechs throughout their collaboration journey with financial institutions, from POC to production. We also work with regulators to enable cross-border collaboration between FinTechs and financial institutions; we bridge FinTechs that are approved/licensed by regulators with other countries, with the ultimate objective of facilitating license passporting across the region. A good example of that is the collaboration facilitated with Egypt, Bahrain, the UK, UAE, and Singapore. Our objective is to reach a point where FinTechs can smoothly operate across borders and leverage our Open Banking/Finance to scale their product and service offerings.
The fact that we focus on collaboration across the region and globally allows us to bring MENA-based FinTechs up-to-speed with the regulatory requirements of other countries where they wish to scale. Our partnership with APIX, participation in the Singapore FinTech Festival (SFF), and our collaboration with the Mayor of London’s office to bring FinTechs and talents from the UK to the region are prime examples of how we facilitate collaboration and provide conducive environments for FinTech innovations in MENA.
As Open Banking & Finance gain investor attention in MENA and across Emerging Venture Markets, we've seen a rise in VC funding for such solutions. Open Banking startups such as Tarabut Gateway and Financial API integrators such as Telr raised sizable investments over 2021, taking part in the 183% YoY growth in VC funding backing MENA-based FinTechs over the past year. As recorded in our 2022 FinTech Venture Investment Report, more than 25% of capital raised by the top 10 Fintech rounds in MENA was funneled into Open Finance Solution Providers.
What could be 1 prediction for the FinTech space in the MENA region and how do you see your role in bringing that to fruition in the near future?
“…a new Open Finance standard that would allow FinTechs to easily integrate with financial institutions across the entire Arab region, regardless of the country.”
In the long run, Financial Technology will become pervasive and will transcend all geographies and borders. We believe that we will reach a point where we see a new Open Finance standard that would allow FinTechs to easily integrate with financial institutions across the entire Arab region, regardless of the country.
This is our long-term vision: Our platform was named FinX22 for a reason, 1 API for 22 Arab Markets. We believe that we can accomplish this with the right partnerships with regulators, ecosystem enablers, and connected FinTechs. We have seen how successful this is in Europe, and although the Arab countries have their own regulatory frameworks, we believe that at one point technology will remove these barriers and allow the FinTech ecosystem to flourish as one across the entire region.
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