The Open Banking Interviews: Wajeeha Hussain Awadh, Section Head of Digital Banking & Fintech, Al Baraka Banking Group
After all the European stories of the last two months, it is great to finally have an interview with someone from outside Europe, to some extent. This week we are happy to share our interview with Wajeeha Hussain Awadh, a member of LinkedIn Group Innovation in Payments, representing Al Baraka Banking Group, a wholesale bank with headquarters in Bahrain.
Their view on Open Banking is very similar to the European one, and yet surprisingly different here and there.
Part XII of The Open Banking Interviews (see part XI, with Laurent Dumont and Kris Roggeman from Crelan).
Hello Wajeeha, great that you wanted to join us. Could you please briefly describe the position of Al Baraka Banking Group in the market?
Al Baraka Banking Group is licensed as an Islamic wholesale bank by the Central Bank of Bahrain and is listed on Bahrain Bourse and NasdaqDubai. It is a leading international Islamic banking group providing its unique services in countries with a population totaling around one billion.
The Group has a wide geographical presence in the form of subsidiary banking units and representative offices in 17 countries, which in turn provide their services through over 700 branches.
Al Baraka Banking Group is the first Islamic Bank in our series of Open Banking Interviews, and therefore also the first bank where PSD2 is not applicable, except of course for the Digital Bank in Germany. Nevertheless, on the website, it’s clear that Al Baraka decided to follow the route for more openness with regards to APIs. What was the main driver for you to set up a developer portal? Are there any specific attention points here, given that you are a non-European bank?
In Bahrain, Open Banking regulations apply just like PSD2 in Europe. So from July 2019 onwards, by regulation, banks are obliged to open up their APIs to TPP’s to enable innovation and better customer service in the country and that, of course, apply to our subsidiary in Bahrain (Al Baraka Islamic Bank).
So that’s one aspect, the regulation in Bahrain.
However, as a group, we realize the opportunities open banking can bring to our business as well as the impact it can leave on our customer experience.
The developer portal, which you have mentioned, was initially an initiative by our Turkish subsidiary. They have opened up 29 APIs on the portal including the ones from our digital bank in Germany that is called “Insha” as well as our payment FinTech Company in Turkey “alneo”. The portal allows FinTechs to test their solutions using these APIs and create different projects.
Seeing this shift in the markets we operate in (Bahrain and Germany) and our belief in the future of Open Banking made us as a group to decide to make this initiative a global one. In this way, we can exploit and look into different opportunities that Open Banking can bring to us by reaching out to more FinTechs and start-ups. We can experience different kinds of partnerships, collaborations, developments where both parties can benefit from.
This is an area that we are exploring, and we decided not to be reactive to the markets but rather take the proactive approach when it comes to innovation and Open Banking.
Is the regulation in Bahrain also payments driven like PSD2, or is it a lot broader, a lot more open? I noted you support already a lot more APIs than most European banks do today.
The regulation in Bahrain is aligned with PSD2 and namely focusing only on account information services and the payment information services. However, when it comes to our Global API portal, we offer 29 APIs covering different areas for mainly testing purposes.
Therefore, in addition to accounts, we are looking into investments, credit cards, financing and many more. That is because we are trying to foster this opportunity as a bank with a proactive approach.
I can imagine that starting to think this way had a huge impact on the internal organization. How did the journey to everywhere banking go and what was the biggest challenge to realizing this?
It is known that cultural change is one of the major challenges banks face with Open Banking. However, our approach in Al Baraka has been always proactive when it comes to innovation. For example, we have our own incubation and acceleration center, we have created FinTech startups which we have pushed to the market, and we have launched a fully digital bank in Germany, so we have been already quite active in this area when it comes to change and shift in culture.
However, of course, there are other challenges that I would like to highlight here such as the security aspect. The more we go digital and become innovative the risk becomes higher and the security concern is always raised.
So addressing this concern, which is totally valid, is a challenge by itself. Another challenge is the monetization in Open Banking that is still a vague area. Meanwhile, it goes without saying that it’s always important for us to ensure that our business teams understand Open Banking concept as well and not just our technical teams.
What do you see as the main drivers when it comes to Open Banking? Do you think it’s data, rather APIs, or are these 2 elements in balance? Do they need to be combined to truly benefit the advantage of Open Banking tomorrow?
The core concept of Open Banking is about data. Data is not owned by the banks; it’s owned by the customer himself. The idea of Open Banking is that the bank is opening up the data of customers to TPP’s via APIs.
As technology advances and develops day by day, we can say that today the means to Open Banking are APIs. We don’t know what tools we’ll be using for Open Banking tomorrow. So, it’s not the tool that matters, rather than the concept of Open Banking, which is the data that we share today. It’s all about data.
In terms of next-level Open Banking, what do you see as key trends for 2020 and beyond for consumers?
2020 is very close, so I’ll share some insights on beyond 2020: I think that more and more jurisdictions and countries will come up with Open Banking regulations because this is the future of banking. Open Banking allows a lot of innovation and creates healthy competition.
As banks collaborate and partner with FinTechs through the Open Banking concept, there will be new kinds of businesses in the market for consumers to access financial services. Think about virtual hubs for financial services.
Consumers can go to one single platform to have access to different kinds of financial products from different providers and choose the suitable service without going to multiple providers (i.e. financial institutions).
Customers can customize their service or product, or personalize it, and move forward without having a direct interaction with their bank or insurance company. If banks know how to deal with this approach, Open Banking will be a great advantage leading to cost reduction and increase in revenue.
Do you see any difference when we look at SMEs and business customers when it comes to Open Banking in the future?
Many think that what would happen to individual consumers is valid for SMEs, and that is true, but I think that there is a bigger opportunity here for SMEs, being that Open Banking could lead to an open economy. This can be achieved by initiatives like the Global Financial Innovation Network (GFIN) that offer global sandbox, allowing testing cross border solutions, so FinTechs can test their solutions globally.
An SME can benefit from this when it has to deal with merchants all over the globe. Imagine how a letter of credit and a letter guarantee would work in countries that have Open Banking regulation and allow FinTechs to test their solutions globally?
This might totally shift how businesses deal with payments and not just that: it may even broaden the business opportunities for SMEs operating in one single market.”
Do you see any difference in Open Banking in the different countries where you’re active in?
Of course. Each market has its own characteristics and its speed when it comes to adopting innovation, FinTechs, and open banking. Some countries have already related regulations and they are pushing for Open Banking, while others are just starting the digital transformation when it comes to opening the payment gateways etc.
I think the interesting formula here is that in many cases, what would work in one country does not necessary work in another country and that is not just because of the regulation but the market digital maturity and consumer behavior.