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  • Khalid Chami

The Future of UAE's Banking is APIs As a Platform



As the mandates have been changing in the financial sector, it has come to notice that the system of open banking has been growing significantly across the globe. And when it comes to this growth, the UAE is no exception.

What is UAE popularly known for? It is notable for its man-made islands along with its huge skyscrapers. And the residing people here are happy, educated, and content with their lives. The backbone of this country is its government - who is caring and for whom the advancement of the country along with its people is of greatest importance.

And speaking about the development, UAE lags in no sector. Take it from education to sports, from tourism to finance, it is moving neck to neck with the technology and the trend which is, of course, an indisputable fact. So focusing on the country’s financial area, let's take a view of how the APIs provide a perfect platform for banking in UAE. But before we get to that, let’s learn a bit about what this API is.

API Banking - A new dividing line for the banking services

The API - Application Programming Interface Banking, is a package deal which comprises of simple, secure, and smart interfaces that are meant for the bank's corporate customers as well as the partners. Now keeping in mind the increased demand for a technology that will help in a simpler and an accurate transaction from corporates - each of the interfaces is carefully designed. This will provide an easy and a hassle-free deep integration that can be obtained between your and your partner's system, which the automated file transfer fail to produce.

The package of this API banking encloses:

A user interface which you can use for your business and the operation team that will configure the behavior of your services.A quality assured testing tool which comes with pre-baked test plans, and a monitoring dashboard to suit your operation and support staff.For your change management teams, it provides a deployment tool.

Thus API banking provides opportunities to the banks through which they can deliver the best services to their customers. Some of them are:

It accelerates the decline of fully integrated universal banks.It terminates the traditional banking strategy which basically aims at providing a full range of products and services to a large number of clients with all the required infrastructure and back-office support under one roof.It yields various financial services landscape by opening up and unbundling the banking process.

Unlatching business values with APIs

APIs are the technology enablers that are used for several purposes in the field of banking which includes - application integration, banking as a platform, innovation, and client connectivity. Now the target audience in each of these cases varies depending on the approaches. So let’s take a quick glance at two of these qualities related to the banking industry of UAE.

1. APIs for banking as a platform:

When we consider APIs for the banking, this banking as a platform takes place when a bank acts as an infrastructure provider to the external third parties and this is well connected with the digital neobanks. Now you might wonder what neobanks are? Well, it is a term which is gaining a lot of attention in the media. A neobank is basically an institution which provides a combination of checking accounts, savings accounts, and debit cards via digital channels. This is primarily done through mobile which means it diminishes the requirement of any physical bank branches.

One of the notable examples of this neobank in UAE is the Mashreq Neo. It is among the UAE’s oldest banks which has created the country's newest. It is a full-service digital-only bank for the customers in UAE. It is a retail bank which is targeted at the present generation.

This neobank offers you with the flexibility of holding multi-currency accounts. The payments in this bank are done via wallets which allows you with remittances as well. And not only this, but it also connects you to 30 stock exchanges of the world so that you can buy and sell stocks.

Thus the neobanks like this possess the state-of-the-art technology capabilities and they leverage a banking license with modular application stacks.

2. APIs for banking innovation:

With the growth in the open banking, the APIs connect with the banks and the third-party firms and enter into collaborative partnerships for innovation. And this is where the fintech is being introduced. Now for the customers to access the banking services, they manually have to log in to a web-based or opt for a mobile platform - for pulling the balance and the transaction data on demand. So with the emergence of the APIs, new connectivity channels are made which are streamlining and securing on demand. It also helps in providing the programmatic access to financial data for accounting packages, treasury management systems, as well as for the ERP platforms. Thus the APIs in the banking innovation encourages open banking regulations along with developing the portals and promoting the APIs to encourage the adoption.

Now let's take a quick view of how the fintech hive has increased the global access at UAE.

When it comes to the fintech in the UAE, the fintech sector is among the top three sectors which have not only attracted new startups with latest solutions but the traditional finance firms in UAE are now budding with new ideas that will help them in blending the technology with the traditional processes.

In a recent Fintech Summit which was held in UAE organized by the leading regional deal facilitation company Naseba, FinTech Hive brought together 22 startups, which doubled from 11 in 2017. Here assembled all the prominent Banking, Financial Services, and Insurance (BFSI) institutions, and technology providers along with the funders to share the latest trends and innovative developments transforming the fintech industry. These included the people from the Middle East as well as from the Africa region. It was here that it came to notice that the innovations in the field of the blockchain, robotics, Artificial Intelligence (AI) and digital-only banking are enhancing the fintech's rapid growth in the region.

According to an article in the Khaleej Times, the Mena fintech market’s current worth is $2 billion but its increased annual investment will uplift the number of fintech start-ups from six in 2005 to around 250 by 2020.

And in another report in its Banking/ Financial Services column, it has been detailed that the Dubai International Financial Centre (DIFC) has built up its position as the Middle East, Africa and South Asia's (Measa) number one FinTech hub. And this has been claimed to be one of the world's top 10 FinTech hubs which have a series of agreements that have been signed between FinTech Hive at DIFC and the global Fintech accelerators.

Hence it is seen that the UAE’s FinTech Hive continues to lead the region's efforts by producing an enabling environment for the innovative solutions so as to contribute to the development of the financial services industry.

Thus it is clear that when a bank adopts for APIs, it gains its business value including the internal staff, neobanks, fintech partners, and the end customers.

The practices of APIs

The APIs have been practiced in various banking sectors. Let’s take a view at some of them:

· The mobile payment hub The mobile payments in the UAE are experiencing a remarkable growth. Although the liquid money still reigns supreme when it comes to making payments in the UAE but it has come to the notice that with the growth in the region of e-commerce, newer payment methods like the Samsung Pay and Apple Pay are steadily gaining ground.

With the new innovations like Samsung Pay, Emirates NBD Pay, and the Apple Pay, people are making use of this technology and taking its advantage to pay for things directly from their smartphones. For most of the people, the ability to access account information as well as making the payments using an app has become so prevalent that physically visiting a bank branch has become a novelty.

According to an article in the Khaleej Times, a survey which was done by the Gemalto claims that almost 67 percent of UAE consumers has confessed that it is easier to use online banking solutions rather than having to physically visit a branch. And it is also said that the government of UAE has been working hard and aim to become cashless by the year 2020.

Thus with the use of APIs, the country’s business can now serve in a larger network of distributors that will capture an even bigger market, particularly by expanding in other countries.

· The fintech hub

The Dubai bank Emirates NBD has recently launched its API sandbox which will enable open banking collaboration with the fintech firms, and this has been launched as a part of an AED1 billion investment in digital transformation. This sandbox is tagged as a “game-changer” as it will simplify as well as enhance the innovation for the bank’s employees and the partnerships with FinTechs, startups, developers, academia and small businesses.

This API sandbox is powered by Virtusa and is enabled by the group chief investment officer Miguel Rio Tinto, following Open Banking Standards which will ensure the security and the privacy for the user. The platform of this sandbox consists of more than 200 APIs and have 900 end points, which covers the retail, corporate and small to medium-sized enterprise banking. The developers of this sandbox also have access to over three million simulated customer transactions that are based on the Banking Industry Architecture Network (BIAN) model.

It has been assured that the Emirates NBD has a very strict registration process which will cover the compliance and the security. Till now four FinTechs have already been launched so as to create a proof of concepts on the platform.

Other than these, the APIs also play an important role in the digital market’s maker as well as in the data aggregator, thus providing a complete package to the banking system.

The benefits of API in the UAE banking system

As it has been mentioned above that the UAE has attained massive growth with the use of APIs, let's take a view at some of the benefits obtained by its banking system:

1. More sharing of the data:

The invention of this Application Programming Interfaces is not only limited to the customers but is also ideal for the businesses as it provides the freedom to access all banking data in real-time. The feature of this API is to provide results which are more accurate as well as it gives an up to date information about the finances. Thus through this, the customers will be able to draw a clear comparison and acquire greater savings. It will also help them in gaining more access to a personalized resource which in result will assist them in making sturdier and better banking decisions.

Although, while using the APIs the privacy about the personal information always remains as one of the top concerns, but don't you worry. The UAE's advancement in security includes technologies such as encryption and biometric authentication which allows the bank to achieve optimum reliability, especially in the Middle East.

2. Establishment of new payments’ services

The main aim of open banking as well as using the API is that the banks should become more customer-centric. Now when we concentrate on being customer-centric, then it should involve a meeting with the customers at a personal level by providing them a bespoke experience which is matched to each individual level. Thus the organizations which collect and analyze customer data, are known to provide the best customer experience which indirectly drives higher profits.

Now with the continual advancement in UAE of the e-wallets, mobile payments, Near Field Communication (NFC), and the real-time transfers, the presence of open banking has increased in the region. And this has taken place with the support of a high mobile penetration rate in the region which was recorded in 2017 as 228.3%, with at least 19.8 million subscriptions.

3. The collaboration between banks and fintech

The banks in the UAE has organized a collaborative framework with fintech start-ups so that they can enhance the client's value proposition. Other than this, the UAE is also considered to be emerging quickly in its regional hub for start-ups within the financial sector. Whereas, Dubai and Abu Dhabi are the most preferred destinations when it comes to Fintech firms for owing to the availability of an advanced technological infrastructure. Let's take a look at one such example:

Fintech Hive

The Fintech Hive is known to be a collaboration between the banks in the UAE and the fintech start-ups. This was the first financial technology which has been an accelerator in the region established by the Dubai International Financial Centre (DIFC).

In 2018, the First Abu Dhabi Bank, Arab Bank, and the Noor Bank joined as a new supporting entity from the financial sector. The list also included the returning partners such as Abu Dhabi Islamic Bank, Citigroup, Emirates Islamic, Emirates NBD, HSBC, Mashreq, Standard Chartered, UAE Exchange and Visa.

This effort was made so that the UAE could move towards an innovative and knowledge-based economy. And this also prepared them for the future so that they can support the local as well the regional talent by providing them the tools and platforms they need to flourish.

Thus you can see that the UAE has attained and touched new heights with the implementation of the APIs in its banking system as well as collaborating the fintech along with it. Hence it proves to be a perfect platform in the banking systems for UAE.

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