Historic Day for Iranian Fintechs: Six Firms Authorized

Shaparak Company, the Central Bank of Iran’s arm for operating the country’s payment network, on Saturday signed an agreement with six major fintech firms– the first such firms to work within CBI’s new legal framework. 

It came a week after the release of the latest version of the first part of the bank's legal framework for the operation of fintech companies, which elaborates on prerequisites for payment facilitators. 

Rayan Parsi, Hedayat Houshmand Gharn, Jahan Houshmand Neka and Karen, as well as the two more familiar names ZarinPal and Bahamta, became the first Iranian fintech companies to receive Shaparak’s technical approval. 

"The authorization of fintech firms’ operations would help address many key challenges of innovators," Milad Jahandar, the co-founder of Bahamta and the former head of Iran Fintech Association, told Financial Tribune.

 “It will help address other supervisory authorities’ concerns about our services, along with tax and insurance problems that we were facing so far.”

He added that the move would also allay users' concerns about using fintech services.

The authorization would help fintech companies attract more investments.

“Investors, both foreign and domestic, had a shared concern: what if authorities block your applications and bar you from offering services,” he said.

In Jahandar’s opinion, the sector is very appealing to foreign investors compared to other business sectors. 

“Using foreign money could definitely help us make progress," he said, "although technical collaboration with foreigners is of higher importance at the current stage."

Framework vs. License 

The central bank in October 2017 had made it clear that it will neither establish a new institution for supervising fintechs, nor would it issue licenses for financial services providers. 

Speaking at Saturday's event, Shaparak’s CEO Mohsen Qaderi said, “We did not issue any permissions today. We only signed agreements to certify these firms’ legal and technical eligibility. 

 Qaderi noted that technological developments are inevitable, that’s why a quick and supportive approach was adopted toward innovative services, which aim to address key concerns of the players. 

“We're really happy about this … introducing a framework that will create the most efficient environment for development of startups,” Jahandar said. 

 “Issuing licenses will make it hard for new players to enter the market and the supervision would be less efficient. However, a framework will allow more players into the market. This will increase competitiveness in the market, which is more beneficial for users.”

Jahandar also praised the central bank for taking innovators’ point of view into account.

“We had several meetings with the central bankers last year … Both sides’ concerns were discussed."

Iran Fintech Association, as the united voice of fintech firms, played an influential role in preparing the framework. 

The association was formed last year at the behest of Nasser Hakimi, CBI’s deputy for innovative technologies. 

Win-Win Partnership With Bankers

CBI’s last October statement also required fintech companies to partner with banks or payment service providers. 

The partnership proved fruitful for Bahamta that joined hands with Saman Electronic Payment Company, Saman Bank’s affiliate PSP.

“It was a win-win collaboration. Their experience and legal support helped us make progress. We also helped them enhance their services, making them more user-friendly,” Jahandar said, hoping for the continuation of collaboration with SEP. 

The central bank is now expected to finalize work on the rules of operations for non-bank financial services, such as payment aggregators, payment initiators, crypto-based services, electronic wallets and account management facilities.

Banking experts also favor the new policy, as they find new measures helpful in diversifying electronic services offered by Iranian banks.