The digital age: Boosting the use of technology in the sector is a priority

In an increasingly competitive environment, Jordanian banks are embracing the latest internet and communication services to attract customers, deliver innovative products, protect client data and comply with new regulations. According to industry figures presented at the 2012 IQPC Banking Technology Summit in Amman, the kingdom’s banking sector has invested more than $100m in information technology (IT) infrastructure upgrades over the past three years, with many analysts predicting that both IT and information and communications technology (ICT) expenditure in the sector will rise further in the short to medium term.

ATTRACTING CUSTOMERS: According to Heathum Buttikhi, the assistant general manager of Jordan Kuwait Bank, one driving force behind technological adoption in the kingdom’s banking sector is the country’s youthful population. “Given that 70% of Jordanians are under the age of 34, retail banking divisions are in fierce competition over the younger generations,” he told OBG. “To capture this market, banks need to provide a wide range of online, mobile and social networking services.” Moreover, Buttikhi noted that Jordanians in general, and not just the young, are becoming more receptive to digital offerings. “Just a few years ago, very few customers were interested in using digital channels; instead, they preferred face-to-face interaction,” he said. “But due to rising internet and mobile phone penetration, more customers are not just using but demanding electronic banking products.”

SECURITY & COMPLIANCE: Another factor driving increased IT adoption is the need to safeguard user data. Although this is a growing concern all over the world, some argue internet banking security threats are highest in the Middle East, where consumer awareness is relatively low. According to a 2010 study carried out by Kaspersky Lab, a developer of content management solutions, online banking consumers in the region are among the globe’s must vulnerable to cyber attacks.

Banks are also pursuing IT upgrades to comply with the new Basel III disclosure requirements, which require highly sophisticated data management systems (see IT chapter). As an example, in January 2012 Arab Jordan Investment Bank signed an agreement with Amman-based software provider Pio-Tech for the purchase of Loxon Risk Management solutions. This was followed by several other deals between banks and ICT firms. In May 2012 Jordan Kuwait Bank (JKB) formed an IT partnership with ICS Financial Systems, a UK-based software firm that will provide JKB with a universal banking system. In the same month, Jordan Ahli Bank agreed to deploy core banking solutions from Temenos, a software provider headquartered in Switzerland.

GOING MOBILE: Jordanian banks are racing to offer the latest mobile services to clients, especially with mobile phone penetration reaching new heights. According to data from the Telecommunications Regulatory Commission, in the third quarter of 2011 mobile phone penetration in Jordan topped 120%, with the number of mobile subscribers reaching 7.45m, and the amount of 3G subscribers reaching 1.4m. By comparison, the mobile penetration rate was just 91% in 2008.

One of the most popular mobile banking offerings is the E-Mal service from Zain, which allows customers to send money and pay bills via mobile. According to Ahmad Al Hanandeh, Zain’s CEO, the service was introduced in 2011 and attracted more than 50,000 customers by year’s end. “There is a huge demand for the service and we expect a sharp increase in the numbers of users in 2012”, Hanandeh told press in January 2012.

The banking sector has seen progress in ICT adoption, but this is necessary in an increasingly competitive business environment. Continued technological progress will remain a vital means of product differentiation. “Every trend in the global and local banking industry points towards technological adoption as the key to future success,” Adli Kandah, the director general of the Association of Banks in Jordan, told OBG. “While advances have been made, financial institutions, like businesses in general, are always at risk of falling behind in the ever-changing digital economy.”