Bahrain's regulator publishes a framework for open finance, and the perimeter includes insurance

Bahrain's regulator has published a framework for open finance, extending the data-portability principles of open banking beyond banks to insurers, lenders, and payment providers. Bahrain was among the first in the region to implement open banking; it is now among the first to move to open finance, and the move is the one the market has been waiting for.

The distinction between open banking and open finance is the perimeter. Open banking compels banks to share account data; open finance compels the broader financial sector to share its data. The wider perimeter is the one that produces the use cases that open banking struggled to generate, because a customer's financial life is not contained in their bank account. A lender underwriting a small business is better served by the business's insurance, payments, and treasury data than by its bank statement alone, and the open finance framework is what makes that data available.

The framework will take years to function, as open banking did. The standards need to be written, the APIs need to be built, the participants need to onboard, and the use cases need to be developed. Each of these is a multi-year process, and the framework's publication is the beginning rather than the end. But the beginning matters, because it sets the direction, and the direction is the one the market will build toward.

The implication is that the region's data portability is widening, and Bahrain is leading the widening. The markets that follow — and several will — will benefit from Bahrain's framework as a template, and the regional open finance market will develop faster for the precedent. The framework is a small jurisdiction's intervention and a large regional signal, and it is the kind of intervention that, by setting the direction, shapes the market that follows.