Dylan October 18, 2023 Middle East, Regulation Open Finance in Jordan: A Dive into the Instructions Understanding the Key Pillars of Open Finance in Jordan Challenges Initiatives What's Next? Webinar Towards the end of 2022, the Central Bank of Jordan launched the Open Finance initiative, aimed at enhancing financial services and customer experience within the country. This initiative aligns with Jordan’s vision for economic modernisation, fostering an environment that is conducive to innovation. By implementing Open Finance, Jordan is positioning itself as a regional hub for Fintech, while also progressing towards a digital cashless society. The introduction of Open Finance in Jordan is a pivotal step towards empowering fintechs and third-party providers (TPPs) to deliver cutting-edge financial services, in particular to underserved segments including individuals and MSMEs. The regulator is here to support innovation, to enhance financial services and the whole financial sector, not just to restrict banks and other institutions. The instructions are here to encourage banks and PSPs to enhance the services that they provide. We want everyone in the financial sector to benefit from these emerging technologies. Understanding the Key Pillars of Open Finance in Jordan Target Financial Institutions: The Open Finance instructions apply to all banks and Payment Service Providers (PSPs) holding licences in Jordan. Enforceability: It is mandatory for all financial institutions to allow TPPs access to customer data via APIs after obtaining customer consent. API Scope: TPPs can access various types of customer account data, including transaction data, account information, and other relevant data. Target TPPs: This includes both Account Information Service Providers (AISPs), which access customer data, and Payment Initiation Service Providers (PISPs), which facilitate third-party providers in offering payment services. Technical and Security Requirements: The responsibility for establishing and documenting technical and security standards for Open Finance services, based on best practices, lies with banks and PSPs. Open Finance Policy: Both banks and PSPs must create comprehensive documented policies addressing security aspects, data sharing, and contracting with TPPs, including defining the roles and responsibilities of boards and executive managers in relation to Open Finance services. Risk Management: Banks and PSPs must identify, manage, and monitor risks associated with TPP contracts and provide Open Finance services. Authentication: Banks and PSPs are required to conduct due diligence with TPPs to verify their identity. The instructions also encompass data privacy and consumer protection requirements. Commercialisation: Banks and PSPs are allowed to monetise their APIs but there is currently no guidance in terms of fees and pricing. The Open Banking Canvas summarises the key pillars of Open Finance in Jordan. Challenges Open Finance regulation faces various challenges in Jordan, including a lack of knowledge and culture about open banking services. A cultural shift is needed to address these issues, where Open Finance is seen as an opportunity rather than a threat. Many banks and PSPs also lack the technical knowledge required to meet the requirements and expose their APIs. This lack of technical know-how is a hurdle to creating a unified API standard. The sector will need guidance in order to implement technical standards that facilitate secure data-sharing. On the TPP side, the absence of standardised specifications hampers connectivity and collaboration with multiple banks and PSPs. Initiatives To address these challenges, Jordan has initiated several steps: Open Finance Incubator: The Central Bank of Jordan is creating an Open Finance incubator to nurture collaboration and provide a fertile environment for fintech startups. Task Force: To collaborate with the market, the CBJ formed a task force that will help the regulator understand the needs of the market and establish clear objectives for the technical standards. Regulatory Expertise: Building regulatory expertise can foster stronger partnerships between financial institutions and TPPs. Developing a culture of trust and confidence in risk management is essential. What's Next? By the end of 2023, all banks, including payment and electronic transfer companies licensed to operate in Jordan, will be required to open Account Information and Payment Initiation services to authorised third-party providers. The Central Bank of Jordan plans to collaborate with the private sector to define and establish the aforementioned API standard. This move will simplify the process for TPPs to access customer data, promoting further innovation in the financial sector. In the future, the ecosystem is set to expand to include more players such as 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 and align the Kingdom with the new global Open Finance reality. Webinar For more details regarding the Jordanian framework, as well as challenges and opportunities in the region, check out our latest webinar: Open Finance in the Middle East.