Economy, Business And Markets

Global Reconnect Kindles Iran Payment Industry

Global Reconnect Kindles Iran Payment IndustryGlobal Reconnect Kindles Iran Payment Industry

Banks in Iran can again conduct cross-border transactions with international counterparts, thanks to the withdrawal of international sanctions in January. The latest report from Timetric’s Cards and Payments Intelligence Center (CPIC) sets out how Iran’s re-engagement with international financial messaging system, SWIFT, the reopening of payment flows from global players and the cashless initiative are promising healthy growth for the payments market.

Iran will now regain access to its overseas financial assets worth billions of dollars as well as increase oil exports. International sanctions were tightened in 2012 over the dispute over the nuclear program. The sanctions hit Iran’s economy hard, with severe consequences on foreign trade and oil exports, which cost the country an estimated  $160 billion.

“The re-engagement with international banks and card scheme providers along with the government’s push for electronic payments is expected to boost the market for payment cards,” said Kartik Challa, analyst at Timetric.

Banks across the world are now keen to work with their Iranian peers and expand their involvement in the country's banking system. Austria's Raiffeisen Bank International, for instance, was the first bank to announce its plan to set up a branch in Iran after the sanctions were lifted. South Korea’s Woori Bank opened a representative office in May. Similarly, the National Bank of Kazakhstan signed a memorandum of understanding (MoU) for the expansion of banking ties with Iran, in April 2016.

“A similar trend can be seen in the country’s payment cards market, with international payment companies lining up to explore opportunities in Iran,” said Challa. For example, global payment giants such as MasterCard, Visa, Japan Credit Bureau (JCB) and China UnionPay (CUP) are in negotiations with the Central Bank of Iran to start operations in the country.

Despite the international sanctions, the payment cards market continues to thrive, supported by government initiatives to promote electronic payment. Consumers are being charged supplementary fees for paying utility and mobile bills in cash. All banks have long stopped processing bill payments in cash, forcing consumers to use cards. Also in 2014, the central bank introduced new electronic cheques to replace the paper-based cheque system.

Shaparak, the domestic payment and settlement network, hosted a total of 940 million successful transactions with a total worth of 994.2 trillion rials ($32.3 billion), during the month ending May 20. Data shows that the total number of transactions and their value grew by 19.3% and 21.6% respectively, compared with the same period last year.

The network also recorded about 115 million failed transactions during the said period. Users accounted for 87.4% the total failures, while banks 10% the failed transactions.