Bahrain's open banking adoption is led by lenders, not by switching services

Bahrain's open banking framework has been live long enough to show which use cases are actually being built on it, and the pattern is the one that has emerged in every open banking market globally: the use case that dominates is not account switching but credit underwriting. The framework was designed to enable consumers to switch banks and to manage their finances across providers. The use case that has arrived is lenders using account data to underwrite loans.

The reason is economic. Account switching is a use case that benefits the consumer and the acquiring bank but not the consumer's existing bank, and the existing bank has no incentive to make it easy. The result is that switching flows remain low in every open banking market, because the friction is not in the data access but in the consumer's motivation to switch and the acquiring bank's cost of acquisition. Underwriting, by contrast, benefits the lender and the borrower, and both have an incentive to make it work.

The dominance of the underwriting use case is not a failure of open banking; it is a revelation of where the value is. A lender that can underwrite against a borrower's cash-flow data can lend to borrowers it could not previously reach, at rates it could not previously offer. That is a real economic benefit, and it is the one the market is choosing to build on. The switching use case was the one the regulators emphasised; the underwriting use case is the one the market found.

The implication for Bahrain, and for the region's other open banking markets, is that the framework's impact will be on credit supply rather than on bank competition. That is a different outcome than the one the policy was designed to produce, but it is a useful one, and it is the outcome that every open banking market has arrived at. The regulators should take note, and the next round of framework design should build for the use case that actually works.