Banks Suffering Losses in E-Transactions

Iranian banks’ revenues from electronic payment fees do not exceed 30 trillion rials ($681 million) each year and account for only 17% of their total earnings, the Central Bank of Iran’s deputy for innovative technologies announced.

“This is while banks have to spend about 70 trillion rials ($1.59 billion) for providing e-payment services to their customers, which indicates that they are suffering losses from offering electronic banking services,” Nasser Hakimi was also quoted as saying by IBENA.

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, which is on top of the amount banks have to pay as rent and support fees for each POS device to payment service providers. The ultimate cost of each bank in this regard is calculated based on the benchmark of how much they pay per transaction worth 100,000 rials ($2.3).

The CBI official pointed out that since the issue of nationalization of the country’s banks was raised, they turned into specialized institutions for attracting resources instead of operating in economic fields and created an intense competition among banks for attracting more resources.

 “This is while banking services were significantly expanding, so banks used them as a tool to attract more customers and resources, and did not ask for any fees for electronic transactions,” he added.

Hakimi noted that currently international banks compete for providing better electronic services to their customers, but they do not use it as a way of attracting resources “but our banks are still clinging to their old policies which definitely require reform”.

“Banks have engaged in a race to attract people’s investments while the total amount of investments in banking system has not marked a notable change so they are all trying to increase their share,” he said.

The CBI deputy said the competition among banks imposes heavy costs on them, pointing out that from 2001 to 2011, a few private banks charged fees for electronic banking services but state-owned banks declined to do so.

“The race for attracting investments might have some benefits for a lender during a short period of time but in the long term, all banks will be at a disadvantage because of the high cost of attracting resources,” he added.

Hakimi noted that banks are currently facing serious issues for gaining profit and if the trend of their losses does not stop, they will have to deal with even more harmful challenges which arise from unhealthy competition for attracting more investments.

“E-payment costs for banks are currently annoying banks but increasing the fees has social effects and is not something easy to change,” he concluded.  

Data released by Shaparak, the entity in charge of the nation’s payment system, indicate that in terms of the pure cost of transactions for each 100,000 rials, the Export Development Bank of Iran currently pays the least amount while Middle East Bank pays the most.