This is an excerpt from Guidelines for Effective Open Banking/ Finance Adoption created by the Council of Arab Central Banks and Monetary Authorities Governors, Arab Regional Fintech Working Group, Arab Monetary Fund, and Fintech Galaxy.

Open Banking (OB) is evolving into a more comprehensive model known as Open Finance (OF), which includes a larger variety of financial services, including investments, pensions, insurance, and consumer credit. Arab countries are developing open infrastructures, facilitating financial institutions' collaboration with Third Party Providers (TPPs), and encouraging data sharing to extend the sector's capacity to innovate. Central banks play a crucial role in putting OB regulations, ensuring data protection, and promoting interoperability between market participants for enhanced consumer benefits and financial system resilience. An effective OB/OF regulatory framework should take into consideration diverse aspects to provide a sound foundation for the OB ecosystem. Authorities can leverage the potential of OB and APIs to deploy several use cases, including account aggregation, credit scoring services, digital identity verification, remote customer onboarding, digital lending, personal financial management, account-to-account payments for large purchases, as well as Buy Now Pay Later (BNPL) arrangements. Continuous improvement and adaptation are crucial in this ongoing process.

Landscape of Open Banking/Finance in the Arab Region

The Arab Countries are actively progressing towards Open Banking (OB) and Open Finance (OF) adoption, fueled by their affinity for technology and drive for innovation. Factors such as the COVID-19 pandemic and a youthful, digital-native population have contributed to the anticipated growth of the regional OB market by 25% annually over the next five years. Furthermore, OF is expected to play a crucial role in promoting financial inclusion in the Arab countries, with projections indicating nearly double the growth by 2027.

Jordan overview

Jordan is aiming to digitalize the banking sector and become a leading regional hub for fintech. The central bank launched a vision for financial technology and innovation and issued instructions for Open Finance services that require banks to grant TPPs access to customer data via APIs. Jordan has a robust technological infrastructure and is focusing on financial literacy and increasing trust in financial institutions. The Open Finance regulation aligns with other Arab countries' developments and is based on the UK Open Banking Standard. Associations between third-party providers and banks are governed by comprehensive written contracts.

Jordan's Perspective on Open Banking/ Finance

- Jordan's Open Finance regulation allows OF gear to work in full motion and extend existing use cases to include new non-banking services.

- The CBJ established a committee to draft instructions to regulate OB services and explored best practices from around the world.

- The committee finalized the draft instructions and issued them in November 2022 after feedback from banks and payment service providers.

- Challenges to OB/OF adoption in Jordan include aligning instructions with data protection and privacy regulations and defining unified API standards.

- CBJ plans to engage in workshops and training sessions and may encourage the market to define unified API standards to overcome these challenges.

- Key areas for a smooth adoption of OB/OF include conducting workshops and training sessions to educate all parties involved and developing additional provisions and regulatory technical standards.

Glimpse into the future

Jordan's financial landscape is on the brink of a revolution with the release of Open Banking and Open Finance instructions by the Central Bank of Jordan (CBJ). These regulations cover a wide range of aspects and represent a huge step forward for Jordan's financial industry. The benefits of Open Banking and Open Finance lie in their platform-based approach, systematic regulation, and the use of APIs that connect institutions with customers to create value. But what sets Jordan's regulation apart is that services are not limited by account types, meaning that Open Finance gear can work to extend the existing use cases and include a myriad of new ones, such as insurance, mortgage, utility provider services, and many other non-banking services.

Open Banking and Open Finance are set to transform Jordan's financial industry, empowering customers, driving innovation, and improving the overall customer experience. With the CBJ's regulations leading the way, Jordan is poised to become one of the leaders in the Open Banking and Open Finance space.

At Fintech Galaxy, we connect financial institutions and TPPs on a secure and cost-effective platform. Our Open Banking and Open Finance tools drive innovation and competition, providing personalized solutions and promoting financial inclusion. We are committed to helping all market participants reap the benefits of Open Finance by providing access to the latest tools and technology. Contact us to find out how we can help you achieve your financial goals.

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