Jordan has made significant strides in the development of
its financial sector, embracing technology.
Finance and technology or better known as fin tech helps to
improve and automate financial services.
اضافة اعلان
While the sector is growing, laws and regulations must keep
up, and unfortunately there are still gaps in the legal framework in the
Kingdom, which inhibits growth of fintech.
CBJ, a major fintech legal framework
One of the major fintech legal frameworks in Jordan is the
Jordanian Central Bank’s Instructions for Electronic Banking Operations,
Payment Systems, and Electronic Payment Services No. (23) in 2017.
This framework provides regulatory oversight over the
electronic banking operations of the traditional carriers, payment systems, and
electronic payment services rendered by payment service providers.
The framework combines the provisions of the Electronic
Transactions Law and the Banking Law to govern payment service providers and
other electronic payment institutions.
This lack of clarity can create uncertainty for fintech companies operating in Jordan, as they may not know what rules they need to follow or what licenses they need to obtain.
CBJ has also issued regulations for electronic payment
services, which are an important part of fintech.
A regulatory sandbox
These regulations set out requirements for companies that
provide electronic payment services, including licensing requirements, capital
requirements, and rules around customer protection.
Equally important, one of the key developments in the
Jordanian legal system is the establishment of a regulatory sandbox by CBJ,
established in 2019.
The sandbox allows fintech startups to test their products
and services in a controlled environment without having to comply with all of
the usual regulatory requirements.
This allows them to innovate more quickly and bring new
products to the market faster.
Promoting fintech in the Kingdom
In addition to these regulatory developments, there have
been other initiatives aimed at promoting fintech in Jordan.
For example, the government has launched a program called
"FinTech Oasis" which provides support and resources for fintech
startups.
Challenges of fintech in the Kingdom
There are also several incubators and accelerators focused
on fintech in Jordan.
Despite these positive developments, there are still some
challenges facing fintech in Jordan.
One of the main challenges facing fintech in Jordan is the
lack of a comprehensive regulatory framework.
While there are some laws and regulations that apply to
certain aspects of fintech, such as electronic payments and money transfers,
there is no specific legislation that governs the industry as a whole.
This lack of clarity can create uncertainty for fintech
companies operating in Jordan, as they may not know what rules they need to
follow or what licenses they need to obtain.
It can also make it difficult for regulators to monitor and
enforce compliance with existing laws.
Even though, the sandbox provides some flexibility for
startups, it is not clear what will happen once they graduate from the sandbox
and need to comply with all of the usual regulations.
Data protecting, a key legal issue in fintech
Another key legal issue facing fintech in Jordan is data
protection.
Fintech companies collect and process large amounts of
personal data from their customers, including financial information and other
sensitive data.
However, there is currently no specific data protection law
in Jordan that applies to fintech companies.
While there are some general provisions related to data
protection in other laws, such as the Electronic Transactions Law and the
Personal Data Protection Law, these do not provide comprehensive protection for
consumers’ personal information.
This lack of clear regulation around data protection can
create risks for both consumers and fintech companies.
On the other hand, consumers may be at risk of having their
personal information stolen or misused by hackers or other malicious actors.
Fintech companies may face reputational damage if they are
found to have mishandled customer data.
Cybersecurity, another major legal issue
Relatedly, cybersecurity is another major legal issue facing
fintech in Jordan. As more financial transactions move online, the risk of
cyberattacks increases.
Fintech companies must take steps to protect their systems
from hacking attempts and other cyber threats.
However, there is currently no specific cybersecurity law in
Jordan that applies to fintech companies.
This lack of clear regulation can make it difficult for
fintech companies to know what measures they need to take to protect their
systems and customers’ data.
It can also make it difficult for regulators to monitor and
enforce compliance with existing cybersecurity standards.
Intellectual property
In addition, intellectual property is another legal issue
facing fintech in Jordan. Fintech companies often rely on proprietary
technology and software to provide their services.
However, there is currently no specific law in Jordan that
governs intellectual property rights related to fintech.
While there are some general provisions related to
intellectual property in other laws, such as the Copyright Law and the Patents
Law, these may not provide adequate protection for fintech companies’
proprietary technology.
While there are some laws and regulations that apply to certain aspects of fintech, such as electronic payments and money transfers, there is no specific legislation that governs the industry as a whole.
This lack of clear regulation can create risks for fintech
companies that may have their technology stolen or copied by competitors. It
can also make it difficult for investors to assess the value of a fintech
company’s intellectual property asset.
Furthermore, the absence of a dedicated fintech governing
authority in Jordan could hinder the attention and support the sector needs to
grow.
One of the challenges facing fintech companies in Jordan is
the lack of clear regulatory guidelines specific to fintech.
In addition to the CBJ, other regulatory bodies also oversee
certain aspects of fintech activities. For example, the Jordan Securities
Commission regulates crowdfunding platforms and investment activities.
Lastly that there is a lack of awareness among consumers
about fintech products and services. This can make it difficult for startups to
gain traction and build a customer base. Another challenge is that there is
still some uncertainty around the regulatory environment for fintech in Jordan.
Final thoughts
While fintech is a rapidly growing industry in Jordan, there
are several legal issues that need to be addressed in order to ensure its
sustainability and growth, including stronger data protection laws, clearer
cybersecurity regulations, and better protection for intellectual property
rights.
Addressing these issues will require collaboration between
regulators, industry stakeholders, and policymakers in order to create a
supportive environment for fintech innovation in Jordan.
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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