UAE Central Bank Implements Open Finance Framework
03 August 2024
Arushi Dhawan
The UAE Central Bank (CBUAE) has taken a significant step towards fostering a more collaborative and data-driven financial landscape with the launch of the Open Finance Framework. This framework, implemented in April 2024, aims to revolutionize the way financial institutions operate and empower consumers to manage their finances more effectively.
Dubai: The UAE Central Bank recently issued the Open Finance Regulation, establishing a framework for the licensing, supervision, and operation of an open finance framework. This framework, known as the Open Finance Framework, encompasses both open banking and open insurance components, allowing for cross-sectoral sharing of data and transaction initiation on behalf of customers.
Major Development in Financial Services
The Open Finance Framework is a significant milestone for the UAE Central Bank’s financial services regime and is one of nine initiatives within the Central Bank’s Financial Infrastructure Transformation Programme. Notably, the UAE Central Bank is the first global regulator to implement a consolidated trust framework and centralized API, facilitating a secure and centralized connection for data sharing and transaction initiation with users' express consent.
Scope and Implementation
Previously, payment account information services and payment initiation services were permitted under the UAE Central Bank Retail Payment Services and Card Schemes Regulation. The new Open Finance Framework, however, has a broader scope, applying to various UAE Central Bank licensees, including banks, finance companies, payment service providers, stored value facility providers, insurance brokers and companies, exchange houses, and loan-based crowdfunding operators.
Global Context
While other jurisdictions such as the UK (2017), European Union member states (2018), and Australia (2019) have introduced open banking regimes, their scope has been limited to payment accounts maintained by banks and other payment service providers. The UAE’s Open Finance Framework is broader, reflecting a more inclusive approach to financial services.
Strategic Objectives
The UAE Central Bank’s Open Finance Framework aligns with its vision and strategic objectives, providing new opportunities in the financial services sector and enhancing digital financial inclusion.
Regulated Products
The Open Finance Framework regulates a wide range of accounts and financial products in the onshore UAE jurisdiction, including:
Open Banking:
- Deposits
- Payment accounts and services
- Savings accounts and term deposits
- Credit, debit, and charge card accounts and products
- Standing orders
- Direct debits
- Stored value facilities and prepaid payment accounts
- Part-paid payment accounts
- Foreign exchange accounts and products
- Credit, loans, and other personal finance accounts and products
- Mortgages and other loans secured on property or other assets
- Virtual accounts or products providing for the items above
Open Insurance
-Insurance products, including life and general insurance
Impact and Phased Implementation
The full implementation timeline for the Open Finance Framework is not yet clear, but the UAE Central Bank plans to roll it out in phases, with most customers expected to have access in 2024. Initially, a few banks licensed by the UAE Central Bank will be included, with further details to be released in due course.
Certain entities already licensed by the UAE Central Bank, such as banks, finance companies, and insurance brokers, will be deemed to hold a license under the Open Finance Framework. These entities must obtain approval from the Central Bank to conduct activities within the framework, subject to governance, control, capital, and insurance requirements.
Entities not currently licensed by the UAE Central Bank but seeking to conduct open financial services in onshore UAE must obtain an Open Finance Licence. The application steps are outlined in the Open Finance Regulations.
Exemptions for Financial Freezones
Existing financial services providers in UAE financial freezones (Abu Dhabi Global Market and Dubai International Financial Centre) are not subject to the Open Finance Framework unless they intend to conduct open financial services in onshore UAE. In such cases, they must apply for an Open Finance Licence from the UAE Central Bank.
Actions for Financial Services Providers
UAE Central Bank licensees should monitor updates on the phased rollout of the Open Finance Framework and review their governance, control, capital, and insurance obligations to ensure compliance. Entities seeking an Open Finance Licence should seek legal and professional advice to support their application.
In Conclusion
The UAE's Open Finance Framework marks a pivotal moment in the evolution of the country's financial sector. By fostering collaboration and data-driven innovation, this initiative has the potential to empower consumers, drive competition, and ultimately create a more dynamic and inclusive financial ecosystem for all.
ALKETBI TOUCH:
ALKETBI team can provide support in evaluating the impact of the Open Finance Framework on your business, obtaining necessary authorizations, and drafting relevant documentation and policies. For more information, contact our experts!
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