What is Open Finance and How Does It Work

Introduction to Open Finance

Open Finance in the UAE marks a significant shift in how payments are initiated, processed, and settled. Enabled by a secure regulatory framework and standardized APIs under the CBUAE, Open Finance allows businesses and consumers to interact with financial institutions in real-time — particularly when it comes to making and receiving payments.

In this article, we focus specifically on Open Finance as a payment innovation: how it works, how it differs from existing payment infrastructure, and what changes to expect in the UAE over the coming months.

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Understanding Open Finance for Payments

At its core, Open Finance introduces a new method for initiating payments directly from a user’s bank account. This is often referred to as account-to-account (A2A) payments where funds move directly between bank accounts without relying on card networks or intermediaries.

Unlike card-based payments, which require a combination of issuing banks, card schemes, payment processors, and acquirers, Open Finance payments are initiated directly via an API call between a regulated third party and the bank. This dramatically simplifies the payments stack, reducing cost and complexity.

For consumers, this means they can pay straight from their bank account using a trusted, regulated channel. For merchants and platforms, this translates to faster settlements, fewer intermediaries, and lower transaction fees.

Open Finance's Regulatory Context in the UAE

In the UAE, Open Finance is being implemented through a phased framework overseen by the Central Bank. Key to this framework is AlTareq: a national initiative that ensures a consistent, secure, and trusted payments experience across all Open Finance participants.

AlTareq defines how payment initiation should work, what standards must be followed, and what protections are in place for consumers and businesses. All entities that offer Open Finance payments — including banks, fintechs, and payment service providers — must operate within this regulated environment.

This ensures that account-to-account payments aren’t just fast and cheap — they’re also safe, reliable, and compliant.

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How Open Finance Payments Work in Practice

A typical Open Finance payment experience might look like this:

1. At checkout, the user selects “Pay by AlTareq.”
2. The user is redirected to their banking app or website to authenticate the payment.
3. Upon customer consent and successful authentication, the funds are transferred instantly from the user’s account to the merchant’s account.
4. Both parties receive immediate confirmation of the payment.

There are no card numbers, CVVs, or expiration dates involved. Just a secure and direct payment experience facilitated by bank APIs.

Key Differences Compared to Traditional Payment Methods

• No reliance on card rails: Payments do not pass through Visa or Mastercard.
• Lower transaction fees: No interchange or acquirer fees, leading to better margins for businesses.
• Faster settlement: In many cases, funds are settled in near real-time.
• Reduced fraud exposure: Since the payment is authenticated through the bank, there’s no need to store sensitive information or worry about chargebacks.

What to Expect as Open Finance Rolls Out

Over time, more banks and businesses in the UAE will adopt the Open Finance payment functionality, particularly for online and recurring payments. We can expect:

• Greater Open Finance payments using “Pay by AlTareq” at checkout.
• Wider adoption across e-commerce platforms, billing systems, and digital services.
• More integrated payment experiences within mobile apps and financial platforms.

As the ecosystem matures, Open Finance has the potential to become the default payment method in many digital journeys; reducing costs and improving reliability across the board.

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