Developments in FinTech Iran
Reeling under the economic sanctions imposed by the Western powers, the economy of Iran has found it difficult to transition from a resource-based economy to knowledge-based. However, the economic climate is rapidly changing.
Lately, a group of Iranian FinTech companies formed an umbrella association for FinTech businesses in Iran – Iran’s Fintech Association (FinTech A) – under the idea mooted by the Central Bank of Iran. The forum intends to identify the challenges involved in enabling implementation of FinTech solutions, liaison with the regulators, and identify the best possible approaches to tackling the problems. FinTech companies among the founding members include:
- ZarinPal – The first payment gateway in Iran, which promises to speed up the payment process.
- Bahamta – A P2P transfers without the need for card or account numbers.
- PayPing – The first P2P money transferring platform to launch in Iran.
- Mehrabane – Crowdfunding platform for charity, social, humanitarian and non-profit projects.
The Iranian Advantage
The demographics of Iran include a young population of 80 million with more than half of the population being under 35 years old, who are well-educated in science and technology. The education levels coupled with lower labour costs put Iran at the higher-end of the productivity curve.
Another significant advantage that Iran has over any other nation is the penetration of Islamic Banking. Iran, apart from Sudan, is the only country that has the entire financial industry functioning as per the principles of Sharia Law and accounts for the 37% of the total Islamic banking assets worldwide – significantly higher than that of its peers such as Saudi Arabia (19%), Malaysia (9.30%), and the UAE (8.10%).
The portfolio and popularity of Islamic banking variants provide FinTech (Shariah- / Islamic- focused banking technology – SharTech) companies in Iran as a potential opportunity to leverage such data to provide customised customer offerings. It provides enormous potential for growth and investment and most importantly a potential future hub for SharTech.
Overall, the structure of Iran’s financial industry offers a vast untapped market when it comes to the engineering of financial products, and with SharTech sector itself being at a nascent stage, there is only an upside from here for firms.
Developments in Iranian FinTech
Certain measures have been undertaken by the Iranian government as well as the industry to promote FinTech at an enterprise-level. The steps taken are as follows:
- Hosting of FINEX 2017 exhibition – a platform wherein 250+ entities from the banking/finance sphere interacted with each other and potential investors.
- Iran Fara Bourse (IFB), second-largest Iranian equity market, was authorised by the Securities and Exchange Organization (SEO) to dedicate a separate space for emerging FinTech companies.
- The Central Bank of Iran is researching Blockchain technology and cryptocurrencies like Bitcoin for transfer of payments.
- Iran is scheduled to implement a FinTech Regulatory Framework by the end of this year wherein FinTech firms are recognised as legitimate e-commerce entities; thereby, providing a legal backing and structural support for upcoming and existing FinTech companies in Iran.
These measures are a step in the right direction to enable the transformation of Iranian FinTech industry from mere ideas to implementation. The emergence of innovative technologies and their applications are not frowned upon, but rather welcomed with a keen interest in an economy heavily influenced by Sharia Law.
The Iranian economy is taking significant strides in moving towards a knowledge-based economy. SharTech provides an avenue for the government and financial players to usher in digitisation, technological changes, and change in consumers’ habits. With proper structure and an enabling framework, the SharTech sector in Iran is at a cusp of being the new ‘oil’ of the financial industry.