OPEN BANKS

The rapid transformation of the financial world is fundamentally changing the principles of banking operations. In recent years, the main conditions for the sector's resilience have become digital services, solutions based on artificial intelligence, and comprehensive cybersecurity systems.

Meanwhile, the widespread digitalisation of financial services against the backdrop of the developing "open banking" system has heightened the necessity of strengthening cybersecurity in this sphere.

To discuss the stages of implementing innovative solutions and pathways for achieving ambitious challenges in the coming years, the region's financial community gathered in Baku for the ninth International Banking Forum.

On the path to open finance

The financial technology sector in Azerbaijan is in a stage of dynamic development: the country has 17 electronic money organisations, 9 payment organisations, and 2 payment system operators, whose total transaction volume for the first 10 months of this year amounted to ₼53.1 billion. Five new licences were issued this year alone. This indicates increasing market competition, with more companies ready to introduce their innovations, which also speaks to the presence of fairly good basic conditions for this.

Another impressive statistic: over the last three years in Azerbaijan, the volume of operations through the national payment system has increased 3.6 times, reaching ₼606 billion in the first ten months of 2025. In 2024, 63.8% of all cashless transactions in the country were conducted using payment cards.

As emphasised by the Deputy Chairman of the Central Bank of Azerbaijan (CBA), Vusal Khalilov, at the forum, one of the key directions for transforming the financial sector is the transition from an open banking model to a broader format of open finance. The full functionality of open banking in Azerbaijan launched in early October, something the market had been awaiting for several years.

Another key autumn event was the integration of electronic money and payment organisations into the open banking system. This allows customers to see accounts held in different banks through a single application—a step that significantly intensifies competition between financial services and stimulates the development of ecosystem solutions.

To date, the open banking ecosystem already encompasses 19 commercial banks and the national postal operator as payment service providers, as well as 4 banks acting as account information providers.

Simultaneously, the CBA is finalising work on open API (Application Programming Interface) standards, as well as security and client consent models. "This process facilitates the personalisation of financial services, enhances competitiveness, and enables effective management of data flows," noted V. Khalilov.

At the current stage, open banking provides users only with the ability to view data: lists of accounts, balances, and transaction history. However, after integration is complete, the regulator plans to provide API specifications for payment services as well, which will essentially pave the way for a transactional model of open banking. This will become the next major step in the digital transformation of the country's financial sector, extending far beyond simple information exchange.

According to the Head of the CBA's Department, Sahib Hasanov, an important element of the reforms remains the development of a special regulatory regime—the regulatory "sandbox." The Central Bank tests projects in real conditions, assessing their technological resilience. The experimental period has been extended for two participants from the first selection stage, and based on the results of the second stage, "several projects will be admitted to the test environment in the near future." Additionally, the CBA is preparing a pre-sandbox model—an interim regime designed to ensure more flexible integration of innovations. The regulator is also moving to a format of "permanent openness" for application intake, which will allow banks and fintech companies to submit projects without waiting for subsequent cycles.

Mr. Hasanov added that, as international practice shows, technical sandboxes are particularly effective, where organisations can refine API solutions using synthetic data even without a licence. "A technical 'sandbox' is already being used in Georgia. This issue will become relevant in our country in due course," believes S. Hasanov.

According to the President of the Association of Banks of Azerbaijan (ABA), Zakir Nuriyev, to ensure regional development in the digital payment ecosystem, it is necessary to assess the possibilities for jointly applying the sandbox regime with neighbouring countries, including Türkiye and Georgia. "This approach would allow for even deeper integration ties between countries in the region. The experience of Singapore and Malaysia can be viewed as a successful example in this sphere," noted Mr. Nuriyev.

Another notable point for the ABA President is the preservation of the development trend for digital payments using payment cards, despite new requirements that will be defined in legislation regarding card-to-card operations.

He added that, in continuation of the reforms, appropriate amendments need to be made to the Law "On Payment Services and Payment Systems" to limit the turnover of transactions conducted within a closed network.

Cybersecurity as a priority

It is worth noting that the Central Bank already places special emphasis on improving the regulatory framework that ensures the safe and stable operation of the banking sector. Work is currently underway on the framework documents "IT Management," "Data Management," and "Artificial Intelligence Management." The prepared draft documents will be presented to the financial sector shortly. Simultaneously, rules for the remote opening of accounts are being developed, which plays an important role in developing digital channels. Work on preparing the corresponding regulatory base is planned for completion in the near future.

Separate emphasis has been placed on cybersecurity—a key element of trust in the digital financial environment. As stated by V. Khalilov, the CBA regularly updates information security standards and strengthens requirements for the continuity of digital transactions. A process is currently underway to prepare new regulatory requirements for combating digital fraud.

"The new structure envisages the further strengthening of digital security regulation. Requirements on information security entered into force last year. Today, the need to develop separate requirements for combating digital fraud has become a necessity," stated Elvin Juvvarov, Specialist in Payment Systems and Product Development at the CBA.

According to him, a centralised system for combating digital fraud will be created in the country; it will ensure the automated exchange of information between banks, payment organisations, and law enforcement agencies. Preliminary discussions on this issue are ongoing, but it is certain that implementing the system will become an important turning point in the fight against fraud nationally. "Experience shows that in many cases, citizens report their complaints either to the bank or to the police. Thanks to the centralised system, all information will be gathered on a single platform and automatically cross-referenced," indicated Mr. Juvvarov.

The main advantages of the new system are the ability to facilitate real-time information exchange between banks and the police. "This will ensure more rapid detection of fraud cases and create conditions for more accurate risk assessment. At the same time, the centralised platform will allow for the formation of statistics in a complete and operational manner. The new system will also prevent the loss of citizens' complaints between the bank and the police," added the CBA representative.

The aforementioned trends reflect a deep transformation of the entire country's financial architecture, emphasises the Executive Director of the Centre for Analysis of Economic Reforms and Communications, Vusal Gasimli. Data-based management, the formation of digital ecosystems, the transition from open banking to an open financial space, real-time settlements, and the development of artificial intelligence are shaping new standards in the banking sphere.

"The primary task of the banking sector is to balance innovation with security, ensuring a transition to sustainable and reliable systems. The new banking model is no longer built solely on service provision; it is being formed on the basis of data-driven management, risk forecasting using artificial intelligence, real-time incident detection, and the implementation of progressive regulatory standards," said V. Gasimli.

All of the above demonstrates that the digitalisation of finance in Azerbaijan has ceased to be an initiative of individual players and has transformed into a comprehensive national strategy. The transition from open banking to open finance sets a long-term trajectory for the banking sector, where innovation, security, and customer trust are becoming a unified development circuit.