Digital banking professional say innovative credit services, namely lendtech and BNPL (buy now and pay later), will dominate Iran's fintech ecosystem this year, thanks to the galloping inflation.
The issue was discussed at a meeting in Tehran on ways and means to improve innovation in the key banking/payment industries.
Mohammad Farjoud, head of Bank Tejarat's Technology Holding Company, referred to clients increasing need for credit.
"Services aimed at expanding credit to users are expected to gain traction. We are concentrating on a new service that provides users with credit at the point of purchase," way2pay quoted Farjoud him as saying.
He called for concerted efforts to boost fintech platforms aimed at financing large numbers of businesses in need.
"Banking and payment technologies are making rapid progress and using their solutions is crucial," he said. "This is indeed creating a major shift in the role of stakeholders in the banking ecosystem."
Elaborating the point, he added, "Traditional banks, in the way that we see today, are set to be consigned to history come 2025.”
BNPL is a type of short-term financing that allows consumers to make purchases and pay at a future date, often interest-free. Such credit schemes are often easier to get approval compared to traditional credit cards or other lines of credit.
The consultancy firm Ilia recently published a report on the public’s expectations from banks and credit services, revealing that 83% of the respondents were unhappy with the financial services banks offer.
Unreasonable and controversial demands from those seeking loans, especially in relation to putting up collateral, was a key complaint of the large majority against the banks, both private and state-owned.
The report said 15% of borrowers regretted taking bank loans while 64% of the users of innovative lending platforms were satisfied with the service.
According to the report, about 4.5 million people in Iran have used innovative lending solutions, including BNPLs.
Snapp Pay, DigiPay, WePod and AzKiPay are major providers of BNPL services.
The annual report of Digikala, Iran's largest electronic retail platform, shows 5.5% of the purchases were made using BNBL in the last calendar year that ended in March 2022.
Snapp!, a major Iranian tech firm, claimed in its annual report that it made the BNPL service available to 4 million users last year.
According to a recent report "Poverty in the Access to Financial Services" by Ministry of Labor, Welfare and Cooperatives' Office for Poverty Studies, banks failed to provide credit, microloan and credit cards despite “sufficient numbers of branches, ATMs and POS terminals.”
In the rare study, the ministry said, "In the absence of credit cards, unlike other countries, Iranian households are forced to go through cumbersome processes if they need a loan.”
The total number of credit cards, with at least one monthly transaction, increased 15% to June 20. The Central Bank of Iran earlier said that it supports the growth of BNPL services because of its positive impact on the economy.
Mehran Mahramian, the CBI deputy chief for innovative technology, said the regulator’s main concern is the interest rate on credit to users of BNPL platforms, way2pay quoted him as saying.
"BNPL platforms are gaining popularity because of the credit rating system…The link to a credit rating system addresses the concerns of the regulator vis-à-vis BNPL services," Mahramian said.
Last year, the CBI published rules for setting up credit rating firms. They must scrutinize the financial records of clients and report on the credibility of individuals and corporates by assigning scores on a scale of "very poor", "poor", "average", "good" or "very good".
Ratings are determined after assessing the financial performance of the customer within a fixed period plus solvency, ability and willingness to pay. Scores indicate credibility and discipline in meeting debt obligations.
The move was a part of the CBI’s measures to promote credit cards and small loans.
The CBI official noted that banks want to sell credit cards because it would increase their revenues, however "allocating credit, either as BNPL or credit card, must be within the regulatory framework."
