The Central Bank of Iran's long-awaited plan for reforming retail e-payment fees is in the final stages and should reportedly reduce the share of accepting banks by charging merchants instead.
A report by the way2pay website said unlike the current mechanism the new system requires shops, where POS terminals are used, to pay a fee for each transaction they process.
CBI officials recently held a meeting with fintech CEOs where the new model was presented and discussed.
So far banks receiving and making payments bear the bulk of payment fees because when a payment is made with a bank card, the bank receiving the payment has to pay a fee to the bank whose card has been used. This is on top of the amount banks must pay as rent and support fees for each POS device to payment service providers.
Under the current system banks bear the entire cost of transactions with no fees charged to merchants or retailers. As a result, banks seek to attract more resources, while payment service providers (PSPs) aim for higher transaction volumes. This has created a conflict between the two parties. In the new system merchants are also included in the fee payment system.
Reza Qorbani, the head of the Financial Technology Committee of Tehran ICT Guild, says that, "In the new model all three parties will bear the cost, namely the merchant, issuing bank and the acquiring bank even though banks are still responsible for the big portion of the costs."
Acquiring banks pay between 500 to 2,500 rials for each payment transaction. Once the new system comes into force, acquiring banks will pay 0.0005 worth of each payment transaction as fee.
CBI research shows that implementation of the new model will reduce bank costs by 48% and instead be paid by retailers.
A review of the average fee acquiring banks must pay for transactions shows that small monetary transactions add to their costs.
Data released by Shaparak show acquiring banks pay 98 rials per every 100,000 rials of transactions. Study of the average value of transactions by banks found that higher number of small transactions incur higher costs.
Based on the new fee model, merchants will pay a fixed fee of 1,200 rials for transactions below 6 million rials and 0.0002 (two-thousandths) of the transaction amount up to a cap of 40,000 rials for transactions worth above 6 million rials.
The current transaction ceiling is 1 billion rials; therefore, under the new plan, a merchant will have to pay a maximum fee of 40,000 rials for a 1-billion-rial transaction while (debit card) issuing banks will pay a fixed amount of 240 rials for each transaction.
The latest measure follows calls from market players for reforming the fee system -- a subject under discussion for several years. In late 2022, Mehran Mahramian, CBI's deputy for innovative technology, said reforming the commission system was a priority.
Government plans to revise upwards bank charges has been in the making for years but was put on hold apparently due to the perceived negative response of the public, particularly at a time when most households at the lower end of the economic ladder are already saddled with high and rising cost of living.
Studies, however, show that the new model will not burden e retailers with big bills. According to Qorbani "CBI expects that more than 41% of retailers pay less than 10,000 rials per day in payment fees."
"The daily fee for nearly 62% of the shops will not exceed 20,000 rials simply because such retailers have a high number of small transactions," he said.
However, acquirers with larger payment transactions, such as currency exchange shops, gold shops and financial service providers will be charged with higher fees.
According to CBI officials, the new model is set to be implemented in phases and some businesses such as supermarkets and bakeries will be exempt from paying fees in the initial stages.
