Digital transformation: ‘Open Banking API Strategy to help establish comprehensive and nurturing fintech ecosystem in Oman’
MUSCAT, NOV 26
Developing fintech and digital technology has the potential to facilitate Oman’s economic diversification, according to the International Monetary Fund (IMF).
In a report, the Washington DC-headquartered financial agency of the United Nations acknowledged nascent efforts by the Omani government to unlock the benefits of digitalization in driving economic development.
“Given the rapid development of advanced technology, adopting digital technologies, as being implemented as part of Oman’s e-government initiatives, and investing in relevant education are of even greater importance to support development and facilitate economic diversification,” the Fund stated.
The observations came in a newly published ‘Selected Issues’ paper prepared by IMF staff as background documentation for the periodic consultation with Oman.
In particular, the report stressed the importance of new technology, such as artificial intelligence (AI) and machine learning (ML), in improving efficiency and reducing cost, enhancing forecasting accuracy, and improving risk management and compliance.
“It also enhances financial inclusion and boosts geographic competition among banks, which can service more distant customers. These new technologies also offer the potential to strengthen prudential oversight and to equip central banks with new tools to pursue their monetary and macro-prudential mandates,” it stated.
According to the report, the Omani government along with the Central Bank of Oman (CBO) have been building an ecosystem that is conducive to the success of the financial services sector. The CBO has taken steps to develop fintech and the digital transformation journey in the financial and banking sector, it said.
The Fund cited in particular the Central Bank’s plans towards formulating an Open Banking API (application programme interface) Strategy as part of a wider push to stimulate innovation in the finance sector.
“The Open Banking API Strategy is part of the Oman fintech strategy, which aims at establishing a comprehensive and nurturing fintech ecosystem in Oman,” it said.
Further, the unveiling of a Financial Regulatory Sandbox in December 2020 now enables participants to live-test their innovative fintech solutions in a safe environment under the supervision of the central bank, the report noted.
“A Regulatory Sandbox allows the regulator, innovators, financial service providers and customers (as final users) to conduct field tests in an off-market development environment and collect evidence on the benefits and risks of new financial innovations, while carefully monitoring and containing their risks,” the report stated.
In other efforts to support digitalization, Oman and Saudi Arabia signed a memorandum of understanding (MoU) in November 2021 to strengthen cooperation in the fields of communications and information technology, the IMF noted. A Saudi-Omani Digital Skills Initiative launched at the same time aims to support the exchange of best practices and expertise, as well as develop digital skills to meet the needs of the labour market.
Local banks too have undertaken initiatives to stay abreast of fintech’s rapid evolution, it said. Bank Muscat, one of Oman’s biggest lenders, launched a $100 million fintech investment vehicle called BM Innovate to create a strong network in the fintech ecosystem and invest in both local and international fintech companies. Other banks are engaging and partnering with third party service providers to accelerate fintech adoption, it added.
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