Financial services are emerging as both a key market for Jordan’s IT sector and an important product line in the form of e-payment software and services. The financial industry is one of the most important buyers of Jordanian IT services, and one of the sector’s fastest-growing vertical niches, with opportunities existing in the general hardware and software segments as well as specialised services, such as compliance and credit risk management packages.
A number of companies, including recent start-ups, are also developing a selection of e-payment services, which range from bill payments to niches such as retail loyalty programmes.
The trend is part of the broader pattern of increasing specialisation within the IT industry. Mohammad Tahboub, the president and CEO of IT firm Savvytek, told OBG: “The previous national ICT strategy made progress on several fronts, including internet penetration, 3G development and infrastructure expansion. The sector has become more segmented – a sign of growing market sophistication.”
IT & BANKING: Industry statistics suggest that demand for Jordanian IT services from the financial services industry is growing rapidly, and that banking and insurance now represent two of the most important client sectors for the kingdom’s IT companies.
IT and IT-enabled services (ITES) sales to the finance and insurance sector stood at $102.5m in 2010, according to the Information and Communications Technology Association of Jordan (Int@j), or just under 14% of total IT and ITES revenues. Financial services is the second-most-important client industry for the IT sector (after the wholesale and retail industry, which accounted for 20% of revenues). In 2010 IT sales to financial services firms were up 131% year-on-year, from $44.3m in 2009, according to Int@j.
BEYOND BORDERS: Exports in the segment are growing particularly quickly, having risen from under $1m in 2009 to $20.3m (or 9.9% of Jordan’s total IT and ITES exports) in 2010. More than $82m of total 2010 revenues came from domestic financial institutions, up 85% on the previous year, and accounting for 15.5% of total domestic IT and ITES revenues.
The kingdom is emerging as a regional centre for the provision of specialised IT services to the financial industry, with a number of Jordan-based firms selling to the near abroad. Among these is business solutions and business process management services provider Pio-Tech, which was established in Jordan in 2003. One of the company’s specialities is the provision of compliance software to financial institutions to help them address reporting requirements (see Banking chapter). In addition to working with 80% of the kingdom’s banks, which are preparing to meet the Basel III regulations, the company operates in 15 countries across the MENA region and has offices in Lebanon, which it uses to target French-speaking markets, and Egypt, from where it target African markets. Rand Hashem, Pio-Tech’s managing director, said demand for such services is defying wider regional trends. “Despite the economic downturn, banks in the region are early adopters, and therefore they are still investing heavily in IT business solutions,” he said.
While the domestic IT industry is growing quickly and emerging as a potential investment opportunity, the kingdom also remains an important regional market for foreign IT firms selling to the banking sector, as Jordanian financial institutions continue to purchase software solutions from international providers. A recent example of this was the decision in April 2012 by Jordan Dubai Islamic Bank, which is based in the kingdom, to use SunGard’s Ambit package for its credit risk assessment needs.
E-PAYMENT: A key niche where the financial and IT industries overlap is e-payment. Companies that are currently active in the segment in Jordan include STS, which offers a software platform called PayOne for a variety of forms of e-payment such as credit cards and vouchers, and also carries out payment processing; and Middle East Payment Services (MEPS), a provider of card payment and ATM management services that also oversees a portfolio of 13 web and mobile application start-up companies. MEPS was created by an initiative from seven of the region’s leading financial institutions. “In the payment software business we are mostly competing with international companies,” Ramzi Zeine, the executive chairman of STS, told OBG. However, local firms, including recent start-ups, are increasingly entering the e-payment solutions arena more generally. These include Madfoo3at.com, which is building an e-payment network that will connect banks with billers for payments such as utility bills and school fees, and Gate2Play, which provides a number of online payment hub services.
REWARDS: In addition to money-based e-payment services, Jordanian IT companies are also looking at niches such as electronic rewards programmes. “There is lots of room to grow for the payment solutions segment, in particular with respect to products such as loyalty cards, pre-paid cards and e-vouchers,” said Zeine. Another Jordanian firm looking to exploit this gap in the market is epoints, which runs a service that allows businesses to offer customers loyalty points that can be exchanged for rewards, with a particular focus on the retail, banking and telecoms industries. “Young Jordanians are more aspirational and consumption-oriented than the older generations; however, retailers hoping to capitalise on the region’s youthful population will have to adopt more rewards programmes, mobile platforms and credit-card based services,” said Bashar Arafeh, the company’s CEO. “Rewards help companies to give back to their customers, fostering loyalty, and also to learn more about them.”
The growth of e-payment services in Jordan could play an important role in promoting development not only for the Jordanian IT sector but also the national and regional economy. “The payments industry supports development by bringing more people into financial markets and the formal economy, and by bridging service gaps between rural and urban areas,” Charles Gill, the COO of the Emerging Markets Payments Group (EMPG), told OBG. “In the coming decade, it is possible that the payments industry will have the same impact on economic development in the MENA region as the telecoms business had on the region during the 2000s.” The development of the segment can also help the government and Jordanian businesses struggling amid the economic downturn, said Abdul Malek Al Jaber, the chairman of MEPS. “Companies such as MEPS can make a real contribution to society by streamlining public service delivery and reducing government costs – a crucial issue locally given the current budget deficits that are facing Jordan. Moreover, e-infrastructure can allow for relatively cost-free business expansion for companies.”
CAUSE FOR CONCERN: However, many IT industry players argue that Jordanian e-payment systems and regulations need further development. “E-payment and e-commerce is the big challenge for Jordanian ICT firms,” Zaidoun Karadsheh, the managing director of web content developer Media Plus, told OBG. “There are no clear rules for e-commerce and not all banks are connected with e-payment systems. Furthermore, some of the systems in place are very outdated and not user-friendly.” The lack of a developed regulatory framework for e-payment systems is a region-wide problem, argue some. “Online and mobile payment systems in the Middle East face challenges, not least of which is the rigid and outdated legal structure to which most regional countries adhere,” said Al Jabbar. “The digital revolution is simply not reflected in the Arab world’s regulatory system.”
Industry figures argue increasing public awareness of the sector could facilitate its growth in the kingdom. “For the payments business to reach its full potential in Jordan and the Middle East, service providers, financial institutions and retail businesses need to work together to make the general public more aware of payments services,” Gill told OBG. One way to achieve this could be to promote e-payments for public services. “The government needs to pave the way in the segment and create the habit among Jordanians of making electronic payments by encouraging people through incentives to pay for parking tickets and government fees online, as some Gulf state governments have done,” said Zeine.
Jordan’s young population is a barrier to increasing credit card penetration – which is quite necessary for e-commerce to get off the ground – as young people are especially unlikely to have them in a country where usage is already low. Other industry players agree that the penetration rate remains a problem, with popular and cultural attitudes also playing a role, but believe this will gradually change, boosting the prospects for the segment. “Currently we are only looking at the business-to-business segment, as there is still a lack of trust in online credit card payments in Jordan and credit card penetration is low,” Nasser Saleh, the CEO and founder of Madfoo3at.com, told OBG. “However, the next stage will be business-to-customer, targeting both credit and debit card users.”