Banking Reform Blueprint Unveiled

The Central Bank of Iran has outlined an innovative, flexible and strong future for the banking system in its “2021 Roadmap”, the bank's deputy for innovative technologies said.

Addressing the Sixth Conference on E-Banking and Payment Systems held in Tehran on Monday, Ali Kermanshah added that the blueprint is set to define an appropriate role for fintech companies in the Iranian banking system.

“CBI plans to develop a number of electronic systems, mainly to upgrade Iran’s banking system and put customers at the center of banking services,” he said.

According to the CBI official, the roadmap requires the development of 12 new platforms for conducting banking operations and covering system support, six platforms for implementing monetary policies and eight platforms for promoting supervision.

“The central bank has also planned 16 new platforms for payment services and 12 platforms for enhancing ITC services,” he said, without elaborating on how the central bank plans to manage so many platforms simultaneously.

Kermanshah said CBI has been studying the similar experiences of other countries to prepare the grounds for the development of fintechs.

"The development of a competitive environment, which is open to new players, is a major challenge for promoting innovation in the banking sector," he said.

“Along with new business plans, this smart system for banking operations, modern payment tools and increased public trust would help renew the banking system.”

The official noted that CBI has mid- and long-term plans for improving regulations and making them more efficient.

“The long-term plans seek to implement reforms in regulations to bring them in line with international standards.”

"In its medium-term goals, CBI intends to set general rules for the operation of new players in financial markets instead of vetting each firm through a case-by-case process. The new ecosystem would operate separately from the payment industry."

Kermanshah said CBI also intends to take measures needed for reducing the risk of investments in fintech startups, like promoting venture capital funds.

The CBI had previously announced plans to launch a new regulatory body specifically for fintech firms.

Shaparak Company, a CBI-affiliated entity in charge of supervising payment networks, will help the CBI in training, implementing and supervising innovative firms.

Unofficial reports show that more than 50 fintech firms are operating in Iran, all of which have developed in the past three years.

A majority of fintechs offer payment services while newly-established startups are getting involved in other aspects of the industry like peer-to-peer lending, personal finance management, saving services and insurance.

Financial Hub of Region

Speaking at the same conference, Economy Minister Ali Tayyebnia pointed to the crucial role of the banking sector in Iran’s economy and said promoting the banking sector tops the country’s agenda and reforms should be implemented by using advanced technologies.

“Banks should make use of modern technologies to make Iran the hub of financial services in the region, as it is stipulated in our development plans,” he added.

The economy minister noted that the government has come up with a set of reforms to improve the banking and central bank regulations. “Promoting the transparency of banking operations and solving ambiguities regarding banking operations' compliance with Shariah are the main goals of the reforms,” he said.

Tayyebnia said specialized commissions are currently studying the plans in terms of legal issues.

Valiollah Seif, CBI's governor, also pointed to the considerable growth in the use of electronic banking services among the public and said each Iranian over the age of 20 conducted an average of 17.6 transactions through the Shaparak network during the seventh month of the fiscal year (ended Oct. 21).

“About 99% of total transactions during this period were successful,” he added.

Seif stressed that the central bank’s role in promoting innovation in the banking sector is important.

“Bringing regulations under a single roof, standardizing infrastructure, making the efficient use of resources and using global experiences are on CBI officials’ agenda for boosting innovative financial services,” he said.