ADGM unveils framework to regulate open banking platforms
Third-party FinTechs will now be responsible for taking care of their customers’ data privacy
The Financial Services Regulatory Authority of the Abu Dhabi Global Market introduced a new framework to supervise FinTech companies that provide third-party services to customers.
Third-party providers are companies that act as intermediaries between customers and financial institutions to help users manage their data more effectively when performing financial transactions, the ADGM said on Thursday.
“It will help TPPs and financial institutions collaborate in order to serve their customers more efficiently, and it lays the ground for the development and growth of open finance in the region,” said Emmanuel Givanakis, chief executive of the regulatory authority.
The new framework will ensure the financial companies and customers' interests are protected as it requires TPPs to take appropriate care of the data, he said.
Globally, lenders have embraced open banking to revolutionise the traditional banking model and boost their balance sheets as the pandemic led to record low interest rates and slower loan growth.
However, privacy concerns persist as open banking allows lenders to share customer data, such as transaction history and spending patterns, with regulated third-party providers after obtaining the account holder’s consent.
Before the coronavirus outbreak, 88 per cent of UAE banks expected to enable open banking in the next 12 months, according to a survey conducted by FinTech company Finastra in January last year.
The new framework will regulate how TPPs gain access to, process and transfer customer data, ADGM said.
In addition, there will be regulatory requirements for TPPs in areas such as data protection and privacy of information, conduct of business, technology risk, anti-money laundering and countering terrorist financing, the ADGM said.
The system will allow TPPs to work along with financial institutions in a “secure and efficient manner that facilitates transactions, while protecting the data and interests of customers”.
The framework will help TPPs and financial institutions collaborate to serve their customers more efficiently
Emmanuel Givanakis, chief executive, ADGM FSRA
The ADGM framework will also provide a foundation to support the growth of open banking, with the focus on giving customers and businesses more control over their financial data.
“This is all part of ADGM’s ongoing efforts to develop a sound and progressive FinTech ecosystem that fosters innovation and new models to deliver financial services,” the free zone said.
The new system will cater to a range of FinTech services that fall under the auspices of the FSRA.
Updated: April 5, 2021 01:21 PM