The rise of
digital banking has been one of the most
significant trends in the financial services industry in recent years. Driven
by advances in technology, digital banks offer a variety of advantages over
traditional banks, including convenience, efficiency, and lower costs. This has
led to increased competition for traditional banks, and has forced them to
adapt their business models in order to compete.
اضافة اعلان
Because Jordan has a young and tech-savy population, with a
high rate of internet and smartphone literacy, the
Jordanian Central Bank has
been supportive of the development of the digital economy, and has taken steps
to create a favorable regulatory environment for digital banks.
Why Jordan is a favorable environment for digital
banking:
A young and tech-savvy population (with a median age of 23
years old). This means there is a large pool of potential customers who are
familiar with and comfortable using
digital technologies
High internet and smartphone penetration: Jordan has a high
rate of internet and smartphone penetration. In 2022, 92 percent of Jordanians
had access to the internet, and 88 percent owned a smartphone. This means that
a large number of people have the necessary infrastructure to use
digital banking services.
A favorable regulatory environment: The Jordanian Central
Bank has taken steps to create a favorable regulatory environment for digital
banks. In 2020, the
Central Bank of Jordan (CBJ) issued a new regulation that
allows for the establishment of digital banks in the country.
Challenges facing digital banks
Lack of trust in digital banking: there is still a lack of
trust in digital banking among some Jordanians. This is due to a number of
factors, such as the fear of fraud and the lack of understanding of how
digital banking works.
High cost of entry: the cost of establishing a digital bank
in Jordan is relatively high. This is due to the need to invest in technology
and infrastructure.
Cybersecurity risks: digital banks are more vulnerable to
cyberattacks than traditional banks. This is because they store data and
conduct transactions online.
Regulatory challenges: the Jordanian government is still
developing a regulatory
framework for digital banks. This could create
uncertainty for businesses and investors.
Benefits of digital banking
The legalization of establishing digital banks in Jordan is
a complex issue with no easy answer. On the one hand, there are a number of
factors that suggest that digital banks could be a positive force for the
Jordanian economy. Digital banks could help to increase financial inclusion,
improve the efficiency of the financial system. Digital banks could improve the
efficiency of the financial system.
Traditional banks have a lot of overhead costs, such as the
need to maintain physical branches. Digital banks do not have these costs,
which could make them more efficient and
less expensive to operate. This will
also reduce the cost of banking services. Digital banks could pass on their
lower costs to customers in the form of lower fees and interest rates, making
banking more affordable to everyone.
Disadvantages to digital banking
There are also a number of concerns about the potential
negative impacts of digital banks. For example,
digital banks could pose a
threat to the stability of the traditional banking system. Traditional banks
play an important role in the Jordanian economy by providing liquidity and
credit. If digital banks were to take a large share of the market, it could
destabilize the traditional banking system.
Digital banks do not have the same level of physical
security as traditional banks. This could make it easier for criminals to use
digital banks to launder money.
Moreover, digital banks could erode customer trust in the
banking system. Some people may be hesitant to trust their money to a digital
bank that they do not know or understand. This could erode customer trust in
the banking system as a whole.
Additional steps
Nevertheless, Jordanian government has taken some steps to
create a favorable regulatory environment. However, there are still a number of
transformation policies that need to be implemented in order to fully
legitimize the establishment of digital banks in Jordan.
First and foremost, the CBJ needs to put in place a
comprehensive regulatory framework for digital banks. This regulation should
strike a balance between protecting consumers and promoting innovation. It
should also address issues such as cybersecurity, anti-money laundering, and
consumer protection.
Secondly, the digital banks establishers need to provide
adequate technological infrastructure in place to support the operation of
digital banks. This includes ensuring that there is a reliable internet
connection and that there is a secure and scalable payment system in place.
Thirdly, the Jordanian government needs to promote digital
literacy among the population. This will help to ensure that Jordanians are
aware of the benefits of digital banking and that they are able to use digital
banking services safely and securely.
Furthermore, the CBJ needs to put in place strong consumer
protection measures for digital banks. This includes ensuring that digital
banks are transparent about their fees and charges, and that they have a fair
and efficient dispute resolution process in place.
In addition, The Jordanian government needs to collaborate
with the private sector to develop and implement the transformation policies
needed to legitimize the establishment of digital banks. This collaboration
will help to ensure that the policies are effective and that they meet the
needs of both consumers and businesses.
The potential benefits of digital banking are significant,
Jordan cannot afford to ignore them. The country is well-positioned to succeed
in this area. By implementing the transformation policies outlined above, the
Jordanian government can help to create a favorable environment for the
establishment of digital banks and reap the many benefits that they offer.
Hamza Alakaleek is a Corporate lawyer and tax consultant
with post-graduate degrees in international political economy, international
business law, and law and technology with a focus on internet of things,
artificial intelligence and data protection.
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