Open Banking Strategy Driving Financial Innovation in Kazakhstan

Open Banking Strategy Driving Financial Innovation in Kazakhstan

ASTANA - Kazakhstan's Digital Finance Revolution

Kazakhstan is in the throes of a digital finance revolution, spearheading a wave of digital payment reforms led by open banking and the employ of artificial intelligence (AI). In an exclusive chat with The Astana Times YouTube channel, Binur Zhalenov, the digital bigwig at the National Bank of Kazakhstan (NBK), expounds the intricacies of open banking and AI's role in the country's financial ecosystem.

Born from a coveted Bolashak scholarship, Zhalenov is also the head honcho at the National Payments Corporation.

Unlocking Financial Freedom

Open banking hinges on the standardized exchange of financial info between various financial institutions and third-party providers, done with the client's consent. Secure access to this consumer data is powered by Open APIs, creating a connected payment landscape. Globally, around 100 nations are delving into open banking, each at different stages.

A Digital Fortress

In Kazakhstan, open banking underpins the digital strategy of the NBK, aiming to construct a Digital National Bank — a comprehensive ecosystem encompassing the bank's central governing and supervisory functions. The blueprint comprises five key pillars:

1. Building a national digital infrastructure
2. Bolstering oversight with AI and machine learning
3. Data-driven decision-making via a centralized tech stack
4. Internal digital transformation and agile working practices
5. Drive open banking and digital tenge, the national digital currency

"While open banking is a fundamental part of the digital infrastructure's first pillar, digital tenge is an essential component, too," Zhalenov said, outlining the national digital infrastructure concept he presented to authorities last week.

Laying Down the Roads

Zhalenov likened the national digital financial infrastructure to the "roads between banks," enabling money to travel seamlessly via "payment rails," comprising card payments, peer-to-peer transfers, and QR codes. The NBK will construct infrastructure for each type.

Giving Power to the People

Zhalenov stated that the real goal lies in handing control back to consumers. Current bank-to-bank transfers are typically expensive and laborious, an issue the NBK tackles through broad digital banking ecosystems and open banking initiatives.

"We aim to make it super easy, swift, and affordable for consumers to shift funds. Each market participant stands to benefit from offering attractive perks to retain clients in their ecosystem," Zhalenov explained.

Open Banking in Action

The NBK team has devised an approach with three interconnected components:

1. Interbank payments: Cheap bank-to-bank transfers made using mobile numbers. This year, the team plans to connect all banks and make participation mandatory.
2. QR payments: Connecting mobile banking applications to allow payments at various terminals. This coming change means hassle-free transactions for consumers.
3. Account aggregation: Enabling consumers to view accounts from various banks within a single mobile banking application, provided the user wishes to share their data.

2025: A New Era

Looking ahead, Kazakhstan's open banking framework will expand with more robust functionalities and deeper digital interactions — shifting towards product-oriented Open APIs, inviting a broader range of sophisticated financial products and services. The first half of 2025 witnesses the full launch of peer-to-peer mobile number transfers, while QR payments are set to roll out this year.

Privacy Concerns: Addressed and Secured

Data privacy remains a priority, especially amid digital transformation. To address these concerns, the NBK employs two tactics: stringent regulation and advanced technology. A new banking law in the works features a dedicated chapter on data privacy and protection.

Countering Digital Fraud

Besides data protection, digital fraud represents another hot topic. In 2024, the NBK launched the Anti-Fraud Center, a platform for financial organizations to promptly detect and halt fraudulent transactions. The center maintains a single database of all fraud-related incidents.

"By creating an integrated fraud-alert system, we swiftly share info about fraudsters across banks, preventing leakage of funds," Zhalenov explained.

AI: More Than Just a Buzzword

Artificial Intelligence is rapidly making its presence felt in fintech, and the NBK is no exception. The bank is examining around 55 instances of AI implementation, ranging from a chatbot powered by NBK data to advanced tools for capital flow monitoring, compliance, and fraud prevention.

"AI is an essential tool in our financial supervision, helping us streamline such processes as SupTech solutions do," Zhalenov said, highlighting the bank's partners' implementation of SupTech solutions to bolster financial oversight. With nearly 1200 market participants under its wing, AI helps sift through massive data more efficiently, allowing authorities to recognize potential risks earlier.

A New Age of Personalized Finance

Fueled by advancing technologies, finance services will soon pivot toward a more tailored and user-centric experience.

"Instead of generic credit offers, customers could receive customized deals based on their profiles," Zhalenov envisioned, emphasizing that AI will help steer away from the traditional one-size-fits-all approach.

Don't miss the full interview with Zhalenov dropping this week on The Astana Times YouTube channel! Stay tuned!

1. The National Bank of Kazakhstan (NBK), under Zhalenov's leadership, is integrating artificial intelligence (AI) into its operations, exploring its potential use cases in areas such as capital flow monitoring, compliance, and fraud prevention as part of a new age of personalized finance.
2. With open banking as the foundation for digital transformation, Kazakhstan's financial ecosystem is also embracing technology, as the country moves towards product-oriented Open APIs to enable deeper digital interactions and introduce a broader range of sophisticated financial products and services powered by artificial intelligence (AI).

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