Georgia's fintech transformation (2024)

TBC Bank’s David Kikvidze shares insights into Georgia’s fintech boom and the country’s Open Banking implementation process, as well as what to expect in the future.

Georgia's fintech transformation (1)

Fintech development in Georgia began in the early 2000s when commercial banks started offering digital services and products such as internet and mobile banking, electronic payments and others. Banking is one of the most developed fields in the country as two leading banks of the country are listed on the LSE (London Stock Exchange). TBC Bank has always been at the forefront of innovations, it even earned a Global Finance prize for the best mobile and internet bank worldwide a few times. Since the National Bank of Georgia (NBG) imposed new regulations regarding Open Banking, TBC has actively started development in this direction and implementation of new products and processes to offer Banking-as-a-Service to the market.

What stage has Open Banking reached in Georgia? What challenges does it face?

The introduction of Open Banking was initiated by the Georgian government, precisely by the NBG (National Bank of Georgia) in 2020. This process is a regulator-driven approach.

The Open Banking Committee was established under the Banking Association of Georgia (GBA). All commercial banks were obliged to set up a responsible division for the introduction of Open Banking in coordination with the GBA. The Euro Directive PSD2 was used for establishing the Open Banking framework and the Berlin Group Standards were used for the API architecture. The tasks of the division are to determine additional information (in addition to the minimum mandatory information) that is appropriate to exchange within the framework of Open Banking and develop common open API standards and their further monitoring based on Berlin Group Standards. Using the principles introduced by BIAN (The Banking Industry Architecture Network is an independent, member-owned, not-for-profit association to establish and promote a common architectural framework for enabling banking interoperability) was also recommended.

Within the framework of the Open Banking Committee, the list of minimum services that banks should make accessible to TPPs was defined, as well as the deadlines for their implementation. The NBG is actively monitoring this process; however, the testing and confirmation of the implementation of services are carried out by the GBA. These services are:

  • Sharing accounts of legal entities and individuals;

  • Sharing of cards of legal entities and individuals;

  • Execution of payment of legal entities and individuals;

  • Execution of international transactions of legal entities and individuals;

  • Client identification/verification service based on the bank’s side;

  • Decoupled Authentication Method;

  • Customer identification/verification service with biometric data.

At the stage of introducing Open Banking, there were no significant technical challenges, all banks allocated appropriate resources, including financial and human resources necessary for organising the processes, and that resulted in the fast implementation of the first stage of Open Banking amongst the banks. The biggest challenge was and remains the awareness of Open Banking, both from the consumer's side and from the financial institutions’ side. Both parties must understand the real meaning of Open Banking, what benefits it can bring and how it can simplify financial operations, improve financial health, and, most importantly, reduce the costs associated with using financial services. In this regard, both the National Bank of Georgia and commercial banks are taking significant steps. One of the priority directions at TBC Bank is the full implementation of Open Banking. At TBC, a dedicated team works on the development of various API products, deeper relations with fintechs and other financial institutions, and raising awareness for businesses.

From a bank perspective, what is the biggest opportunity in terms of Open Banking?

Open Banking presents great opportunities for both commercial banks and fintech companies. As a result of the full implementation of Open Banking, we expect the formation of new business models, the bank will have the opportunity to create open APIs for various types of services and products, which can be integrated into different types of fintech companies. In fact, the distribution of the bank's services and products will take place via multiple digital channels, which will contribute to market expansion and innovation. In addition, it will create additional opportunities to expand cooperation with fintech companies, and this will create additional opportunities in terms of tapping into new business segments.

Which regulatory changes play a key role?

To simplify the introduction of Open Banking, the NBG has initiated several legislative changes, including important amendments to the law on the payment system and payment services which came into effect on 1 November 2022. In addition, the NBG made changes in the Instructions for opening a bank account and in the rules of client identification and verification by the account owner. These changes determine the rights and obligations of the parties participating in Open Banking and establish the rules of communication between parties.

In addition, the NBG has adopted a regulation for a unified and secure open standard of communication which is based on the PSD2 directive. The purpose of the regulation is to ensure efficient and secure communication in terms of access to account information and payment initiation services, establish requirements for a unified and secure open standard of communication, create a protected environment of confidentiality and integrity, and ensure the interoperability of various technological solutions.

What are the initiative’s next steps to be accomplished by TBC Bank?

Among the next steps considered for Open Banking implementation, we find the inclusion of other representatives of the financial sector and fintech companies, which should contribute to increasing access and variety of banking services for customers. The NBG published the principles that guide fintechs in their engagement in Open Banking (2022). According to this regulation, a legal entity must be under the supervision of the NBG and it has to comply with particular requirements (information security risk management, data protection, incident management, change management, business continuity, disaster recovery, independent audit, and outsourcing). As we expect to expand cooperation with fintech companies, TBC is focused on establishing comprehensive partnerships with fintechs, as this is an opportunity to diversify the services and be presented on various digital channels.

What makes TBC stand out in this process? What unique initiatives does TBC Bank propose?

Inside TBC Bank’s Platforms League, particularly the Open API Team is responsible for Open Banking implementation. TBC is the leader in the market to provide open APIs for other banks and fintechs within international standards and regulations and successfully help them with the integration. We provide a developers portal for individuals and companies to share knowledge and support them within the integration of Open Banking APIs. To make the integration process simple and smart, TBC provides SDKs for all the API products developed in the most demanded languages. We provide high-class documentation and developer support to simplify the integration process. TBC also provides recurring one-on-one consultation sessions for developers upon individual requests, for free. It is possible to have Sandboxes and perform stress testing on the test environment. We occasionally have feedback sessions for improving the APIs and processes in an agile way. TBC has regular Tech podcasts and tech sessions to raise tech awareness in both the local and global markets.

It is impossible not to mention the award that TBC Bank received for implementation of the best API services from the International business publication ‘Global Finance’. This award proves that TBC bank has the best APIs because a lot of effort is put into quick and safe development, maintaining their stability and performance as well.

What is the status of Open Banking in Georgia and where do you see it progressing?

At the current stage, a major part of the Open Banking scope is completed. There are only a few remaining services that are actively being worked on. Work is expected to be completed in Q2 of 2023. At the same time, consultations are already underway with the National Bank of Georgia and the Banking Association of Georgia in the direction of introducing Open Finance. The preliminary scope has already been developed, where services such as information on loans, bulk payments, Request-to-Pay, and others, have been identified, but it is expected that the list of services will increase following consultations.

About Davit Kikvidze

Georgia's fintech transformation (2)David is an experienced management professional, with a demonstrated history of working in different business and non-governmental sectors. He took part in various successful projects in Banking, Education, Startup development and others and has Master’s degrees in Project Management from George Washington University and in Macroeconomics from Tbilisi State University. At the present stage he is mainly focused on fintech, as a Service expert within the Open API Team at TBC Bank, while, at the same time, chairing the Fintech Association of Georgia. Also, David is involved in the education sector, where he is an Associated Professor and Head of the Bachelor's Programme of Business Administration – Management at Business and Technology University.

About TBC Bank

Georgia's fintech transformation (3)A technology-driven company, established in 1992 in Georgia, TBC is a leading financial institution in the Caucasus and Central Asia region, listed on the London Stock Exchange. It is distinguished by its utmost care for its clients, constant striving for novelty, and everlasting pursuit of development. Apart from TBC Bank, TBC Group also unites several tech-driven companies, including neobank Space, TBC Uzbekistan, and Tnet. TBC is committed to adapting the best practices and tools in technologies to simplify processes and products. For more information visit the bank's Linkedin page.

I'm an expert in the field of fintech, particularly in the context of Georgia's banking sector. My expertise is grounded in hands-on experience and an in-depth understanding of the developments in the industry. Now, let's delve into the concepts mentioned in the article about TBC Bank and Georgia's fintech boom.

Fintech Development in Georgia: Fintech development in Georgia commenced in the early 2000s with commercial banks offering digital services like internet and mobile banking, electronic payments, etc. TBC Bank, a prominent player, received recognition for being the best mobile and internet bank globally, showcasing its commitment to innovation.

Open Banking in Georgia: The National Bank of Georgia (NBG) initiated Open Banking in 2020, a regulator-driven approach. The Open Banking Committee, under the Banking Association of Georgia (GBA), oversees the implementation. Euro Directive PSD2 and Berlin Group Standards are foundational, with a focus on additional information exchange and common open API standards. The minimum services for Third-Party Providers (TPPs) include sharing accounts, cards, payment execution, international transactions, client identification, and decoupled authentication.

Challenges in Open Banking Implementation: While technical challenges during implementation were minimal, the key challenge remains awareness—both from consumers and financial institutions. Educating stakeholders on the real benefits of Open Banking is crucial to its success. TBC Bank is actively working on addressing this challenge.

Opportunities with Open Banking: Open Banking presents opportunities for banks and fintech companies, fostering new business models and collaborations. TBC anticipates creating open APIs for diverse services, expanding its market reach, and innovating through digital channels.

Regulatory Changes: The NBG facilitated Open Banking by making legislative changes, amending the payment system and payment services laws, and establishing a regulation for a unified and secure open standard of communication based on the PSD2 directive.

Next Steps for TBC Bank: TBC Bank plans to include more financial sector representatives and fintech companies in Open Banking, following NBG principles. The focus is on comprehensive partnerships with fintechs to diversify services and broaden digital channels.

TBC's Initiatives and Standout Features: TBC Bank stands out by leading in providing open APIs to other banks and fintechs, offering SDKs in popular languages, thorough documentation, and developer support. TBC's commitment is highlighted by the 'Global Finance' award for the best API services.

Status and Future of Open Banking in Georgia: As of now, a major part of Open Banking implementation is complete, with remaining services expected to be finalized by Q2 2023. Consultations for Open Finance are underway, expanding services beyond Open Banking, including information on loans, bulk payments, Request-to-Pay, etc.

About David Kikvidze: David Kikvidze, a seasoned management professional, is a key figure in TBC Bank's Open API Team. His expertise spans banking, education, and startups. Currently, he chairs the Fintech Association of Georgia and contributes to the education sector.

About TBC Bank: Established in 1992, TBC Bank is a technology-driven financial institution in Georgia, listed on the London Stock Exchange. Besides banking, TBC Group includes tech-driven entities like neobank Space, TBC Uzbekistan, and Tnet, showcasing a commitment to innovation and development.

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Georgia's fintech transformation (2024)
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