The Challenges and Opportunities of Fintech in Iran

Financial Technology, nowadays better known under the term 'fintech', describes a business that aims at providing financial services by making use of software and modern technology.

Today, in most part of world, fintech companies directly compete with banks in most areas of the financial sector to sell financial services and solutions to customers. Mostly due to regulatory reasons and their internal structures, banks still struggle to keep up with fintech startups in terms of innovation speed. 

Fintechs have realized early that financial services of all kinds – including money transfer, lending, investing, payments, ... – need to seamlessly integrate in the lives of the tech-savvy and sophisticated customers of today to stay relevant in a world where business and private life become increasingly digitalized.

According to statistics published by International World Stats (IWS) until December 31, 2017, there are 56,700,000 Internet users in Iran, which is 69.1% of the population.

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However up to now, fintech companies had a very small share of market in Iran. Banks with their electronic services are pioneers in providing financial services.

The internet finance in Iran is now mostly PSP-based, which offers shops online services for accepting electronic payments by a variety of payment methods including credit card and bank-based payments.

Last week, Communications and Information Technology Minister Mohammad Javad Azari Jahromi wrote on his Twitter account that fintech will be used as a part of internet business in the country in the coming three months.

As per an approval by the cabinet of ministers, the central bank is obliged to end PSP (Payment Service Provider) monopoly and create a competitive space for fintech market, the tweet reads.

Radical banking system differences between Iran and Western countries, in which fintech companies are very active, should not be undermined.

Actually fintech services is not limited to payment services. Loans, crowdsourcing, crypto-currency, financial management, financing and insurance are other services provided by these companies.

Regarding these services, a financial infrastructure is needed for development of fintech in the country.

High rate of inflation and bank interest rates, the problems dealing with bank transaction fee, the connection between the national internet payment gateway system and financial market are some issues Iranian fintech companies deal with.

The absence of credit reference body in Iran creates challenges for some fintech services like peer-to-peer (P2P) lending, a method of debt financing that enables individuals to borrow and lend money without the use of an official financial institution as an intermediary.

Hence, Iran should find its own model for developing fintech according to its special characteristic market. 

One cannot undermine the role of government to connect banking network with other financial services in Iran and providing necessary infrastructure for this new technology.