Kazakhstan's plan for open banking unveiled, revealing details about financial institutions collaborating with third parties for streamlined services.
Kazakhstan's Digital Transformation
Astana, Kazakhstan is revolutionizing its financial sector with a series of digital payment reforms, chief among them an open banking initiative, as detailed by Binur Zhalenov, a digital guru at the National Bank of Kazakhstan (NBK), in an interview with The Astana Times YouTube channel.
Zhalenov, who also chairs the National Payments Corporation, explained open banking as a secure exchange of financial data between various banking institutions and third-party providers, made possible through Open APIs. This data-sharing brings more power to consumers, allowing them to make swift transfers between banks at competitive rates.
Open banking is integral to NBK's broader digital strategy called the Digital National Bank, launched in 2024. The Digital National Bank is meant to create a comprehensive ecosystem, with five core pillars:
- Establishing a national digital financial infrastructure
- Employing AI and machine learning to strengthen financial oversight
- Building a data-driven central bank
- Internal digital transformation and agile working practices
- Adopting Islamic financing methods
The national digital financial infrastructure forms the backbone of this transformation by ensuring seamless transactions via various payment rails, including card payments, peer-to-peer transfers, and QR codes. With Kazakhstan's fintech market already mature, boasting a high penetration of cashless digital payments, this infrastructure will further support competition, enabling financial institutions to create innovative solutions to retain customers.
Customer Control
Open banking aims to give consumers more control by reducing the costs, complexity, and time involved in Switching between banks. By making it simpler to transfer money between financial institutions, NBK aspires to create a market where consumers dictate the terms, as opposed to being locked into banking ecosystems.
Open Banking Components
NBK's open banking approach includes three essential components:
- Interbank payments: NBK is making participation in its faster payment system mandatory by 2025 through a legal mandate, reducing fees for money transfers between banks.
- QR payments: By enabling users to make payments without using bank-specific terminals, transactions become more accessible and versatile.
- Account aggregation: Through the use of account aggregation, consumers can view their accounts from multiple banks within a single mobile banking application, boosting competition in the market by making it easier to switch banking providers.
Kazakhstan is on track to expand its open banking framework in 2025 by introducing broader functionality and more integrated digital interactions, including a shift toward product-oriented Open APIs and advanced financial products and services.
Data Privacy and Fraud
As the country embraces digital transformation, data privacy concerns remain a priority. To address these concerns, NBK implements two strategies: stricter regulations and advanced technology. A new banking law is in the works, featuring a dedicated chapter on data privacy and protection, complemented by AI solutions for fraud detection and prevention.
Furthermore, NBK established the Anti-Fraud Center in collaboration with banks and law enforcement agencies. This center streamlines fraud-detection processes, helping financial organizations spot and react swiftly to suspicious activities and share information with each other. As a result, the center has blocked over 1.5 billion fraudulent transactions, returning over 300 million tenge (roughly $579,820) to victims.
AI and the Future of Fintech
AI is making an impact in nearly every sector, and fintech is no exception. NBK is exploring 55 AI use cases, ranging from chatbots trained on NBK data to advanced tools for capital flow monitoring, compliance, and fraud prevention. By employing AI in financial supervision, the central bank can make data analysis easier, streamline business processes, and identify potential risks early on.
With nearly 1200 market participants subject to supervision, AI provides a way to manage large amounts of data more efficiently. AI applications in fintech have strong potential for growth, extending to real-time risk assessment, credit scoring, and investment decision-making processes.
- Astana, Kazakhstan's financial sector revolution, spearheaded by an open banking directive, aims to offer consumers more control over their finances by 2025, reducing costs, complexity, and time when switching banks.
- In order to implement its open banking strategy, the National Bank of Kazakhstan (NBK) has identified three essential components: interbank payments, QR payments, and account aggregation.
- The NBK's digital strategy, known as the Digital National Bank, launched in 2024, includes a focus on technology to bolster its financial oversight, such as AI and machine learning for fraud detection and prevention.
- With the adoption of open banking and advanced technology, Kazakhstan's fintech market, known for its mature fintech industry and high penetration of cashless digital payments, is poised for even greater innovation in business and technology.
