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Ammon News - The Central Bank of Jordan (CBJ) is soliciting comments from local banks over the potential introduction and licensing of digital banks, the Jordan News Agency (Petra) has learned.

In a communiqué sent to local banks recently, a copy of which was seen by Petra, the CBJ said the introduction of fully-digitized banks requires a multidirectional approach and deep understanding of the digital bank model.

The Central Bank clarified that the digital bank model, in its comprehensive sense, means the automation of all front-end, back-end and middle-end operations, and the need to constantly update the relationship between traditional banks and digital banks in the transitional stages and in the future.

The bank stressed the need to understand and define the nature of the target customers and the outcomes that banks aspire to achieve in a rapidly-growing financial technology landscape.

In its response to Petra's inquiries, the Central Bank stated that the information technology revolution was reflected in all aspects of life, indicating that technologies and innovations in the financial technology space increased individuals' access to financial and banking services and removed any temporal or spatial restrictions.

The bank stressed that digitization has become an urgent necessity and not a luxury that can be overlooked, saying that the growing trend towards greater finance-technology synergy promises new products capable of fundamentally changing the way financial and banking institutions conduct their business.

The Central Bank indicated that digital transformation is not limited to the deployment of modern technologies in the institution only, but rather it is a comprehensive and integrated program that affects the institution and its overall business model, including product introduction and delivery.

The bank added that integrated digital banks have become a hallmark of digitization in any country, which calls for the CBJ to team up with the Jordanian banking sector to keep abreast of developments in this field consistent with the royal visions of transitioning to a digital and knowledge economy.

In this regard, the Director-General of the Association of Banks in Jordan, Maher al-Mahrouqi, said that the shift towards digital banks has become a necessity in a rapidly-evolving FinTech ecosystem, and the fact that non-banking institutions have become key competitors to traditional actors in the banking domain.

Al-Mahrouqi told Petra that digital banks will help increase the number of banking service providers in the Kingdom, which will increase competitiveness, reduce concentration, and ultimately benefit customers. He indicated that digital banks are supposed to strive to provide an advanced banking offering that will suit a wider segment of customers, mainly tech-savvy youths.

He explained that the controls proposed by the Central Bank focus on the digital bank being wholly owned or controlled by a licensed bank in the Kingdom. The goal, according to Al-Mahrouqi, is to protect the Jordanian economy and the banking sector, and to guarantee the funds and rights of depositors on the one hand, and for digital banks to operate in accordance with the controls applied to traditional banks on the other hand.

(Petra)