Call for Balancing Banking Fees

Banks receiving and making payments in the Iranian banking system bear the bulk of payment fees, meaning that striking a balance between the costs and benefits of these payments has emerged as one of their most important challenges.

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 to make the payment and that 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 100,000-rial ($2.3) transaction. 

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.

Data pertaining to the eight Iranian month of Aban (Oct. 23-Nov. 22) show that the state-owned EDBI paid 33.45 rials for each 100,000-rial transaction, registering a slight decrease of 2.4% when compared to the previous month.

On the other hand, the private-owned Middle East Bank paid 283.17 rials for the benchmark transaction amount in the aforementioned month, indicating a 6.88% rise compared to the previous month.

Shaparak’s data also show that all receiving banks in the Iranian banking system paid an average of 118.91 rials for each 10,000-rial transaction in the form of fees to banks making the payment in the eight month of the current fiscal year, registering a 5.48% rise compared to the seventh month.

Along with EDBI, Bank of Industry and Mine, Bank Ghavamin, Bank Ayandeh and Bank Sarmayeh constitute the top five banks in terms of paying transaction fees.

But as lenders have to pay up fees in the form of rent and after-services support to PSPs as well, their cost of transaction also goes up. After taking into account 300,000 rials ($7.14) as average rent for each POS device, the top of the list remains almost untouched, but the bottom of the list of banks that have paid the highest amount undergoes a number of changes.

In the aforementioned month, EDBI paid 96.46 rials for each 10,000-rial transaction, including additional costs to retain its status as the bank with the least amount of paid fees. Bank Ghavamin, Bank of Industry and Mine, Bank Ayandeh and Bank Sarmayeh followed.

However, Bank Hekmat Iranian ranked last and paid 739.05 rials for each benchmark transaction, while Bank Parsian handed out 701.18 rials in fees. The average amount for all banks stood at 285.58 rials for each benchmark transaction during the eight month of the current fiscal year, indicating a 4.14% increase compared with the month before.

The results are telling of the importance of the amount banks pay in rents and support fees to PSPs. If they cannot balance what they pay in fees and for services to PSPs, conducting payments through POS devices will not ultimately prove affordable and/or profitable.

“Selecting effective receiving banks with a sufficient flow of balance to make up for the cost of banks is of utmost importance to the way they and payment service providers conduct their marketing,” Shaparak concluded in its data analysis.