The Competition Council has ordered the Central Bank of Iran to revise regulations for licensing payment service provider companies to ease the entry of new players in the market and improve competitiveness, the head of the Iran Fintech Association said.
"Following Fintech Association's complaint against the CBI for monopolizing the payment services market, the council has ordered the CBI to remove the regulatory hurdles for launching PSP companies that have led to a [de facto] monopoly," Mehdi Fatemian was quoted as saying by the way2pay webiste.
Twelve PSPs have CBI license to operate in the domestic market. The central bank’s stringent regulations for setting up a PSP have so far disallowed the emergence of new players in the lucrative market.
The council's review attests to the fact that the central bank has issued no new license for PSPs disallowing newcomers into the growing market except for 12 firms almost all owned by commercial banks.
The council has required the CBI to rethink its regulatory requirements as per which banks must own at least 51% of the shares of payment service providers.
"As such, there is hardly any possibility for new companies not owned by banks to join the market but with high investments technological potential when some companies are backed by the state," reads an announcement on the council's website.
"This is while, it is necessary for the e-payment market to constantly improve and update with advanced technology to achieve such goals as a competitive market is vital where several businesses operate and users have a wide range of choices for using payment services," the council said.
Established in 2017, Iran's Fintech Association works to bring industry players under one umbrella, address their problems and help build innovators’ ties to regulatory bodies.
CBI Response
Responding to the council's position, the central bank denied any monopolization in the PSP market saying that new companies are already applying for the licenses.
In a talk with way2pay on Monday, Mehran Mahramian, the CBI deputy for innovative technologies, said the bank has announced a new mechanism for licensing the PSPs following a recent decision by the CBI executive board.
"There is no monopoly regarding the new measures," he said.
According to the official, there is a platform for applicants to submit their application for starting payment companies. "We have received several applications of which only four meet the eligibility criteria."
Mahramian provided no details about the platform nor the eligibility regulations.
There also was no clear information about the CBI's stance on banks' owning all the PSPs. "We first need to make it clear whether the PSPs want to be owned by the banks or not," said the official.
Mahramian said revising the fee mechanism of payment services is on the CBI agenda. "We will soon finalize the decision for revising the fee system."
Market Size
Nilson Report, a credible source of news and analysis of the global card and mobile payment industries, has ranked seven Iranian payment service providers among the ‘World Leading Merchant Acquirers’ in 2021.
Iran-based acquirers collectively processed 33.70 billion purchase (debit) card transactions last year. Transactions increased 21.3% and purchase volume was up 43.8%.
Saman E-Pay topped the list of Middle East and Africa's largest acquirers in terms of the number of transactions. The company processed more than 7.7 billion transactions in 2021 emerging as the world's 13th largest, according to Nilson Report. SEP climbed two places compared to 2020.
Behpardakht Mellat was 14th on the list with over 7.6 billion transactions down three notches since 2020 when it ranked 11.
Parsian E-Commerce Company, an affiliate of Parsian Bank, was 16th while it occupied the 17th slot last year.
Asan Pardakht Persian came in 26th with over 3.8 billion transactions. Iran Kish Credit Card Company took the 28th spot – improving slightly from last year’s 30th position in the Nilson Report.
Pasargad Electronic Payment, affiliated to Bank Pasargad Iran, retained its 36th position with more than 2.5 billion transactions. Payment services provided by Bank Melli, the nation’s biggest state lender through Sadad Informatics, was ranked 48th, with 1.49 billion transactions.
All Iranian PSPs handle only domestic-market Shaparak network card transactions.
"The largest merchant acquirers in the Middle East and Africa are in Iran, where neither Visa nor Mastercard cards are issued or acquired…There were seven acquirers in Iran that processed more card payments than the largest Visa and Mastercard acquirer in the MEA region," the report said.
