With Friends Like These: Banks’ Tactic Toward Fintechs

Iranian fintech firms and startups have been in the spotlight in recent months, with bankers expressing interest in forging partnership with them. Some experts, however, are concerned about the real intention behind the lenders’ overtures.  

Nasser Hakimi, director of IT Department at the Central Bank of Iran, believes fintechs are perceived as a threat to banking operations and payment service providers, which are mostly affiliated with banks. 

“The banks’ first approach is to ignore innovative firms. However, they would acquire fintechs if they find any of them profitable,” he was quoted as saying by Way2pay.ir during the Eighth Conference on Development of Investment and Financing Systems held in Tehran on Sunday.

Hakimi noted that the era of banks’ dominance [in financial services] has come to an end, as banks are wary of sharing their profits with fintechs.

The regulator will support fintechs, said the central banker, because they managed to revive the notion of payment fees in Iranian banking system.

“The regulator also praises fintech innovations for attracting customers who would not otherwise use the banking system and payment network,” he said.

Rostam Shah-Gashtasbi, chief executive of Beh Pardakht Mellat, Iran’s leading PSP affiliated with Bank Mellat, was also present at the meeting.

He rejected Hakimi’s comments, saying that his firm fully supports fintechs and their innovations.

“Iranian PSPs, or so-called payment giants, are not acquiring fintechs,” he said. “I think the regulator should come up with a set of rules for the operation of fintechs, like what happened for PSPs.”

Back in December, the Central Bank of Iran announced that it was working on a “heavy project” to develop a safe and healthy environment for the operation of innovative firms. It was also announced that a new regulatory body will be formed specifically for fintech firms.

Back in December, the Office of Vice President for Science and Technology Affairs and Ministry of Communications and Information Technology announced that they were working on development of a framework for the operation of fintechs. 

Measures taken by a large number of top-tier bodies have posed a new challenge to the financial sector.

  Friends of Banks

Mostafa Naqipourfar, a senior director at Fanap ICT Company affiliated with Bank Pasargad Iran, said fintechs are the trump card of banks that should hand over some of their services to fintechs.

“Banks are always blamed for avoiding payment of small loans to startups,” he said, adding that crowdfunding could be used as an alternative solution to help finance fintech startups.

Naqipourfar also opposed the regulation of fintechs, saying regulations would repress innovation. 

“The regulator should play a more active role in the industry mainly to raise public trust in fintechs and remove concerns about their operations,” he said.

“People will start using foreign fintechs, in case we neglect the development of domestic ones.” Unofficial reports show more than 50 fintech firms are operating in Iran, all of which have developed in the past three years. They have managed to keep up with global trends, offering services like peer-to-peer lending, personal finance management, saving services and insurance facilities.