Digital Payments Spur FinTech Sector in Jordan

As it did in many countries around the world, the COVID-19 pandemic accelerated the adoption of electronic payment systems in Jordan and catalyzed a major digital transformation among the country’s businesses.

For the company that operates Jordan’s main electronic payment systems, Jordan Payments and Clearing Company (JoPACC), that means the past two years have been critical.

JoPACC, which is owned by the Central Bank of Jordan together with its 22 commercial banks, was established in 2017 to establish interbank payment networks and develop payment solutions for end users. The latest nationwide system set up by the company is the real-time payment scheme CliQ.

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When the pandemic arrived in Jordan, JoPACC was still testing CliQ, and as the company’s CEO, Maha Bahou, told PYMNTS in an interview, the entire process of connecting the infrastructure and rolling out the system across the country took place at the height of the country’s lockdown. .

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Due to the need to limit physical contact, the Jordanian government made a major push for digital payments in 2020 and began disbursing welfare payments electronically, further encouraging the use of digital wallets.

At the same time, smaller merchants who had previously relied on cash transactions found themselves forced to embrace new payment methods or risk losing business, Bahou added.

And in partnership with the central bank, JoPACC found itself in the critical role of helping equip these businesses with the tools needed to accept digital payments.

The combination of better infrastructure and increasing use of electronic payments meant “an exponential increase in access to formal financial services took place,” and in two years there has been more than a 200% increase in the acceptance of electronic payments, per Bahou.

Today, 86% of local people who were obliged to handle digital wallets or bank accounts to receive government support intend to continue using them even if they no longer have to, based on the results of an annual market survey conducted by JoPACC.

Related: 170 million US consumers received at least one cash payment in the past year

In another survey she referenced, the World Bank found that among the most vulnerable and poorest sections of Jordanian society, there was 99% satisfaction with digital payment methods, even among people who are typically less likely to embrace digital services.

JoPACC has also found that not only are more Jordanians adopting digital payment methods, but existing users are also increasing their use. For Bahou, one of the most important factors in the country’s digitization is that people choose to keep their money in electronic form and withdraw less, which contributes to greater “digital liquidity” in the ecosystem.

Payments: Frontier Towards More Financial Services

Of course, the pandemic presented challenges for Jordan that digitization of payments alone cannot solve.

See more: Startups drive payments innovation in Jordan’s new FinTech Hub

Calling payments “the frontier towards more financial services”, Bahou said Jordan was right to prioritize schemes like CliQ, but now that the infrastructure is in place, the next step will be to increase access to financial services which are “lagging behind”.

Foremost among these is access to credit and loans. She explained that while JoPACC cannot solve this problem alone, it works closely with lenders to help integrate payment systems and ensure they have the means to disburse loans and receive repayments electronically.

In Jordan, that means supporting the microfinance institutions that are critical to keeping the country’s micro, small and medium-sized enterprises (MSMEs) operating. And for the entrepreneurs who rely on microloans, Bahou said being able to receive payments straight to their mobile wallet instead of having to travel and collect money can have a “huge impact on their lives.”

Read more: FinTechs say traditional payment rails aren’t meeting SMB owners’ needs

Another lesson Jordan has learned from the pandemic is the importance of external onboarding, Bahou noted.

Back in 2020, JoPACC and the Central Bank of Jordan were able to support people setting up mobile wallets and opening bank accounts by implementing electronic Know Your Customer (eKYC) procedures and relaxing external identity verification rules.

JoPACC has since continued to develop remote onboarding technology, and earlier this year announced a partnership with Advanced Company for Detection Systems (ACDS) to work on a new eKYC project.

As Bahou explains, the project, now in its final stages, will connect banks’ applications to public data sources to allow digital validation of identity documents while giving consumers control over who can access their data.

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