The Central Bank of Iran has stressed that cardholders should not pay any fees in the newly-unveiled model for electronic payment transactions.
“Charging customers for making transactions via POS terminals is illegal and there is no exception to the rule,” Mehran Mahramian, the CBI’s deputy for innovative services, said.
“In the new model, retailers, who accept payments via POS terminals, must pay a portion of the fees, not customers,” he added.
The new fee system for payment transactions came into effect on Sunday. Henceforth, retailers and shop owners who use POS terminals for e- payments will have to pay a portion of the cost of the service, IBENA reported.
In a press release posted on its website, CBI said despite the fact that retailers will pay a fee for accepting card payments, the banking system still cover a significant portion of the cost for e-payments.
It published a list of businesses exempt from paying fees until further notice, including bakeries, groceries, supermarkets, drugstores, hospitals, gas stations, handicraft shops, taxi services, schools, charities, bookstores, newsstands and utilities like electricity, water and natural gas.
However, it is unclear whether the unpreparedness was due to the banking network’s lack of infrastructure and technicalities.
CBI unveiled a long-awaited fee model for transactions, based on which retailers and shops will be charged for transactions via POS terminals.
Payments for services such as issuing bank cards, guarantee letters, cash transfers, interest-free loans and LCs are the main sources of income for banks. However, customers do not pay fee for making transactions in the Shaparak network, the domestic e-payment network.
Banks receiving and making payments via cards 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 is used. This was on top of the amount banks pay as rent and support fees for each POS device to payment service providers.
Three-Sided System
In the new model, three parties will bear the cost, namely the merchant, issuing bank and the acquiring bank, even though banks are still responsible for bearing the large portion of the costs.
Acquiring banks used to pay 500 to 2,500 rials for each transaction, whereas in the new system, acquiring banks will be charged 0.0005 rials as transaction fee.
CBI research shows the implementation of the new model should reduce bank costs by 48% that will instead be paid by retailers.
Based on the new formula, merchants will pay a fixed fee of 1,200 rials for transactions below 6 million rials and 0.0002 (two-thousandths) of the transaction up to a cap of 40,000 rials for transactions above 6 million rials.
The current transaction ceiling is 1 billion rials. Under the new scheme, 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 240 rials for each transaction.
CBI says almost 40% of retailers pay less than 10,000 rials per day in fees. The average daily fee for nearly 62% of the shops in the new system should not exceed 20,000 rials simply because such retailers have a high number of small transactions
However, acquirers with larger payment transactions, such as currency exchange shops, gold shops and financial service providers, will be charged more.
Banks had largely waived the fee over the past decades to compete in the bank-saturated market.
There are more than 10.84 million payment gateways in Iran. As is the norm, POS devices top the list of instruments with the biggest market share at 91%, followed by online payment gateways 7.71% and mobile instruments 1.13%.
Processing more than 3.4 billion transactions worth 7,984 trillion rials ($16.63 billion), POS devices accounted for 92.4% of the total transactions during the month ending May 22.
