Exploring the Underpinnings of Kazakhstan's Transparent Banking Strategy
**ASTANA - Kazakhstan is pushing forward with digital payment reforms, one of the key initiatives being open banking. In an interview with The Astana Times YouTube channel, Binur Zhalenov, the chief digital officer at the National Bank of Kazakhstan (NBK), breaks down open banking and the role of artificial intelligence (AI) in Kazakhstan's financial ecosystem.
Open banking involves a standardized exchange of financial information between various financial institutions and third-party providers, all with the customer's consent. This data exchange is made possible through Open APIs (application programming interfaces) for secure access to consumer data.
Globally, around 100 countries are exploring open banking at various stages. Karimova, representing a regulatory sandbox, is a prime example of an environment where financial innovations are quirkily trialed.
National digital infrastructure
In Kazakhstan, open banking forms part of a digital strategy initiated by the NBK in 2024 to construct what they call a Digital National Bank. Consisting of five key pillars, it aims to create a cohesive ecosystem around its central banking and supervisory functions.
The first pillar addresses the establishment of a national digital financial infrastructure. The second involves the implementation of supervisory technology, using AI and machine learning, to strengthen financial oversight.
"The third is a data-driven central bank, where we build a so-called data factory. This factory unifies the entire technology stack - from data collection to data analysis - so all decisions in the central bank are based on data. We are indeed heavily focused on that right now," Zhalenov shared, having presented the concept to the government just last week.
Internal digital transformation and the adoption of agile working practices are the fourth and fifth pillars.
"Open banking is part of the first pillar," Zhalenov reiterates. "Digital tenge," a central bank digital currency (CBDC), is also part of this effort.
"Cashless in Kazakhstan has a high penetration, around 86%. They are not just cashless; they are digital. Eight out of ten transactions are made using mobile banking applications," Zhalenov said.
This progress is due to progressive regulation and interbank infrastructure that allows seamless transfers between banks.
"These factors facilitate competition. When we have competition in the market, market participants are forced to innovate to make their consumers happy because they fight for their consumers. The idea of a national digital financial infrastructure is to support this competition," Zhalenov explains.
To put it differently, Zhalenov characterized the national digital financial infrastructure as "roads between banks," allowing money to flow freely via "payment rails," including card payments, peer-to-peer transfers, and QR codes. As the central bank, NBK is responsible for building infrastructure for each of these types.
Consumer control
The ultimate goal, according to Zhalenov, is to give consumers more control over their finances. Transfers between banks can often be expensive and complicated, which the NBK is aiming to solve as part of its broader push toward open banking and a more competitive financial ecosystem.
"We want to develop a market where the consumer dictates what to do to the banks, not vice versa. Because, at the moment, there are several banking ecosystems in Kazakhstan, and most consumers are locked in this ecosystem," Zhalenov said.
"It is extremely difficult to send money from one bank to another because tariffs are high. Once we tackle this issue, the money will move easier, faster, and cheaper. This, in turn, will incentivize every market participant to offer something new to retain customers within the ecosystem," he said.
Open banking explained
The strategy Zhalenov's team is pursuing comprises three components. First is interbank payments.
"Last year, we launched a faster payment system. With your mobile number, you can send money to another bank at a relatively cheap fee. This year, we will connect all banks, making participation in the system mandatory. There will be a legal mandate for every bank to participate," he explains.
The second component is QR payments, a solution that has found strong favor with Kazakhstan's citizens but has so far been limited by bank-specific terminals. That is expected to change.
"What we are planning to do is that you have your mobile banking application, for example, Freedom [a second-tier bank in Kazakhstan], and with this banking application, you can pay in Kaspi terminal, for example, or Halyk terminal," he explains.
The third component is account aggregation.
"What we are going to do is that in your mobile banking application, you provide consent to share your data from other banks. When you give this consent in this banking application, you can see the accounts from other banks," the official said, highlighting that it will take additional time to introduce this feature due to personal data protection issues.
"Now the consumer will dictate. It will be easy to switch from one ecosystem to another, which will drive more competition in the market and which, in turn, automatically makes fees lower and innovation more intense," he concluded.
In 2025, Kazakhstan anticipates a more extensive open banking framework, featuring enhanced functionality and more integrated digital interactions, including shifting toward product-oriented Open APIs, enabling a broader range of sophisticated financial products and services.
The full rollout of peer-to-peer mobile number transfers is scheduled for the first half of this year. The introduction of QR payments is planned for later in the year.
What about data privacy, then?
As Kazakhstan moves towards digital transformation, concerns about data privacy are top of mind - both for regulators and the public. To address this issue, Zhalenov says NBK relies on two tools - stricter regulation and enhanced technology.
"Every year, regulation becomes stricter and stricter. For instance, we have, as a benchmark, GDPR [The General Data Protection Regulation] in the European Union, which has a very strict regulation. In Kazakhstan, the regulation is much more liberal," Zhalenov said.
The drafting of a new banking law follows President Kassym-Jomart Tokayev's directive. It will have a dedicated chapter on data privacy and protection.
Fraud concerns, however, go beyond data. Fraud, particularly digital fraud, has also become a pressing issue for the country's financial sector.
In 2024, working closely with banks and law enforcement agencies, NBK launched the Anti-Fraud Center, designed to help financial organizations identify and stop fraudulent transactions, react quickly to suspicious activity, and share information instantly with each other. The center maintains a single database of all fraud-related cases.
While Zhalenov did not provide explicit details about the AI-driven data privacy mechanisms in place, it is reasonable to expect that stricter regulation, enhanced technology, and the broader adoption of AI will collectively contribute to strengthening data privacy measures in Kazakhstan's digital transformation efforts.
Stay tuned for the full interview with Binur Zhalenov, coming soon on The Astana Times YouTube channel!**
Sources:
- Central Bank of Kazakhstan - Open Banking and Digital Financial Services Innovations
- Government of Kazakhstan - Basic Banking License to Foster Fintech Innovation
- Astana International Financial Centre - Regulatory Sandbox for Financial Inclusion
- National Bank of Kazakhstan - Anti-Fraud Center to Detect and Prevent Digital Fraud
- World Bank - Fintech Landscape and Opportunities in Kazakhstan
- In Kazakhstan, the first pillar of the National Bank of Kazakhstan's (NBK) digital strategy, initiated in 2024, involves the establishment of a national digital financial infrastructure, which is a crucial part of the open banking movement.
- To facilitate smooth data exchange in open banking, the NBK is working on implementing product-oriented Open APIs (application programming interfaces) by 2025, which will enable a wider range of advanced financial products and services.
- In line with the digital transformation, the NBK is drafting a new banking law, following President Kassym-Jomart Tokayev's directive, that will include a dedicated chapter on data privacy and protection measures.
- The NBK, in collaboration with banks and law enforcement agencies, launched the Anti-Fraud Center in 2024. This center is designed to help financial organizations combat fraud, foster quick responses to suspicious activity, and share information in real time with other institutions.
