While many leading economies are increasingly moving away from using cash in their transactions, many businesses in Iran insist on cash for a variety of reasons, despite reasonable levels of e-banking infrastructure in place.
Among myriad of businesses that shy away from electronic payment tools, the case of medical doctors has become public and highly publicized in recent months.
Evading taxes is apparently the main motive behind the aversion of medical doctors and similar businesses to use Point of Sale devices and other electronic payment tools in their offices.
The extensive use of cash has reportedly inflicted massive loss on the economy, according to a report published by the Iran Chamber of Commerce, Industries, Mines and Agriculture.
The Central Bank of Iran says the volume of liquidity (total value of banknotes and coins in circulation) was 657 trillion rials ($5.5 billion) by the end of the calendar month to June 22 – up 18.8% annually.
As per CBI protocols, the lifespan of banknotes is about five years and after this period the old banknotes should be destroyed and new ones enter the circle.
Reports indicate that the CBI destroys 600 million pieces of banknotes every year and puts in circulation 900 million new banknotes.
This is while in many countries people prefer non-cash payments using debit cards, credit cards, cellphone applications and near-field communication.
NFC is a contactless system that uses technology to exchange data between readers and payment devices.
Scandinavian countries -- Sweden, Denmark, Norway, and Finland -- are taking the lead. For example, only 19% of total payments in Sweden are in cash and the Norwegian government has announced that it would entirely eliminate cash payment in 10 years.
Helping Fight Corruption
Apart from cutting government expenses in printing new money, economic and financial experts say the non-cash economy can be instrumental in exposing rampant rent-seeking and corruption that has plagued the economy for decades with reports of embezzlement, fraud and money laundering in the press on a regular basis.
Abouzar Nadimi, advisor to head of the Plan and Budget Organization, says the government should increase efforts to help curb cash payments in routine transactions and promote electronic transactions to fight rampant corruption in which the state has visibly failed.
Given that the majority of people have debit cards and infrastructure for card payment is in place across the country, he proposes setting up a comprehensive system for directing liquidity toward banks.
The government can make the use of card payment mandatory in a staged process. “This will enable the government to fight bribery and track corruption,” he said.
Citing a CBI study, ICCIMA said in the absence of an efficient electronic payment system and inability of banknotes in circulation to meet the daily needs of the people, people would be more inclined to use checks.
A look at checks exchanged in Iran confirms this hypothesis. As per the CBI’s latest report 7.5 million checks worth 834 trillion rials ($7 billion) were issued in the sixth calendar month to Sep.22. This shows a 2.7% monthly increase in volume.
In promoting the card payment, the CBI study proposes expanding services for electronic purchasing using credit cards, creating comparative advantage for credit card use against traditional payment methods, imposing fees on traditional payment methods and expanding telecom and e-banking infrastructure.
Although the share of electronic payments has increased in recent years, experts say Iran is far behind developed countries in this regard.
Electronic payment instruments processed more than 2.26 billion transactions worth 2,534.9 trillion rials ($22 billion in the last calendar month to October 22, according to the Iran’s payment settlement network, Shaparak.
More than 87% of transactions were undertaken using POS devices in retail outlets and the share of payment through internet and mobile applications was 6.2% and 6%, respectively.
