Jordan Takes a Major Step Towards Financial Inclusion with Compliance Program for Financial Institutions
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Jordan’s Central Bank has launched its Open Finance initiative, positioning the country as a regional hub for fintech innovation. The program aligns with the kingdom’s vision for economic modernization, fostering an environment conducive to innovation.
Key Pillars of Open Finance in Jordan
Empowering Fintech Startups and Third-Party Providers
The Open Finance initiative is designed to empower fintech startups and third-party providers (TPPs) to deliver cutting-edge financial services, particularly to underserved segments such as individuals and micro-small-medium enterprises (MSMEs).
Enhancing Financial Services and Customer Experience
The regulator is committed to supporting innovation, enhancing financial services, and encouraging banks and payment service providers (PSPs) to improve their offerings.
Key Requirements for Banks and PSPs
- Provision of APIs for TPPs to access customer data after obtaining consent
- API access includes transaction data, account information, and other relevant data
- AISP (Account Information Service Providers) and PISP (Payment Initiation Service Providers) are among the targeted TPPs
Technical and Security Requirements
- Establish and document standards based on best practices
- Open Finance policies must address security aspects, data sharing, contracting with TPPs, and defining roles and responsibilities of boards and executive managers
- Risk management is also a crucial aspect, as banks and PSPs must identify, manage, and monitor risks associated with TPP contracts and open finance services
Challenges Ahead
Lack of Knowledge and Culture about Open Banking Services
A lack of knowledge and culture about open banking services among customers and financial institutions may hinder the adoption of this innovative technology.
Technical Limitations Among Banks and PSPs
Technical limitations among banks and PSPs, including a lack of standardized specifications, hampers connectivity and collaboration with multiple banks and PSPs.
Initiatives to Address Challenges
Open Finance Incubator
An Open Finance incubator will foster collaboration and provide an environment for fintech startups.
Task Force Establishment
A task force was established to collaborate with the market, establish clear objectives for technical standards, and develop regulatory expertise.
What’s Next?
By 2023, all banks and PSPs in Jordan will be required to open Account Information and Payment Initiation services to authorized TPPs. The Central Bank of Jordan plans to collaborate with the private sector to define an API standard, simplifying access for TPPs and promoting further innovation in the financial sector.
Future Outlook
The ecosystem is expected to expand to include insurance, microfinance, and exchange services, broadening the scope of Open Finance beyond banks and PSPs. This expansion will usher in a new era of innovation and accessibility in Jordan’s financial sector.
Additional Resources
For more information on the Jordanian framework and challenges and opportunities in the region, check out our latest webinar: Open Finance in the Middle East.