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No Open Banking

A transcontinental country striding across Eastern Europe and Central Asia.

Internet penetration of 82%, which is by far the highest in central Asia, and about 130% mobile usage. The financial market in Kazakhstan is actively developing towards digitization and increased accessibility of services. The Republic has ranked among the top 3 countries in Central and South Asia for innovations, and its growth rates have positioned it as one of the fastest-growing fintech markets in the region.

In February 2023, the Concept for the Development of Open API and Open Banking in the Republic of Kazakhstan for 2023-2025 was published by CBK and AIFS. The document describes a unified regulatory approach and vision for the development of Open Banking in Kazakhstan. Concrete steps and measures are also proposed to develop the financial infrastructure and legislative environment for the introduction of open banking interfaces. Thus, in 2023, the creation of a permanent working group is expected, as well as the development of a number of infrastructure and regulatory solutions. The main focus will be on maximizing customer value through the detailed elaboration of various use cases. All initiatives envisaged by the Concept are planned to be implemented by the end of 2025.

There is a significant informal economy in Kazakhstan, estimated to be between 27-29% of GDP, and 40% of adults do not have a formal account at a financial institution, and it has been suggested that the cultural heritage of socialism might be inhibiting the ‘liberalisation of finance’ with state-owned financial institutions being inefficient.

Open banking will allow market participants to create innovative payment and financial services, increase their availability, reduce transaction costs, and increase competition.

In Kazakhstan, the open banking model is customer-centric, providing the customer with full control over their finances and the ability to make informed decisions regarding their management and shaping them according to their individual needs.

The customer-centric model is supported by a centralised consent management system and an Open API platform, which are becoming key tools in interacting with financial services. This approach not only allows for the creation of an infrastructure where security and control over the customer’s finances are paramount but also promotes the dynamic development of the financial market, aligning with modern customer requirements and expectations.

The government has been focusing on developing a digital currency, and in May 2021, it announced plans to pilot a central bank digital currency. This would involve digital wallets and a plan that by July 2022, a model for making a decision would be complete on the introduction of the digital tenge. 

In early 2023, Kazakhstan initiated work to implement the Open API and Open Banking principles. Numerous engagements with stakeholders and market players ensued to deliberate on the integration and uptake of these concepts. Given the intricacies of technical deployment and risk evaluation, a phased approach was deemed prudent. Consequently, a foundational blueprint was outlined for the inaugural phase, marked by the launch of the pilot project “Exchange of Information on Customer’s Current Accounts.”

2024 sees focus on scaling the initial account aggregation use case used in the pilot; expanding business case standards, and creating and implementing a sandbox. The development of open API standards for payment initiation and corporate account information exchange are expected in Q2 2024.