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Electronic Banking and Payment Systems in Iraq: Challenges and Opportunities

BAGHDAD - In a bid to revitalize its banking sector and keep pace with global trends, the Central Bank of Iraq (CBI) has been implementing various electronic payment systems over the past decade. The country’s financial landscape is witnessing significant changes, driven by the increasing adoption of mobile payments, prepaid cards, and online shopping.

The Rise of Electronic Payment Systems

Since 2017, the number of issued electronic cards has grown steadily, with prepaid cards being particularly popular among Iraqis. Over 9.7 million cards were issued by the end of 2021, a testament to their ease of use and simplicity. However, the lack of sufficient ATM and POS infrastructure is hindering the widespread adoption of these systems.

Dependence on Cash

Despite the growth of electronic payment systems, cash remains king in Iraq’s economy. The country’s reliance on oil revenue means that the CBI has limited control over the money supply, leading to a dominance of cash transactions. This cash culture is also fueled by the public’s distrust of banking institutions and concerns about financial security.

The Lack of Public Trust

Iraqis do not trust their banks, citing limited services, high interest rates, and demanding collateral requirements as major turn-offs. The country’s tumultuous history has also led to a preference for keeping cash at home rather than in bank accounts. This lack of trust is hindering the growth of the banking sector.

Islamic Banks: A Growing Concern

In a largely Muslim nation like Iraq, Islamic banks are becoming increasingly popular due to religious reservations about conventional commercial banks. However, the absence of an Islamic financial market and inadequate legal protection are major challenges facing these banks.

Recommendations

To address these challenges, experts recommend:

  • Increasing the reach and number of bank branches across Iraq
  • Requiring banks and electronic payment service providers to acquire integrated and modern electronic systems
  • Gaining public trust in the Iraqi banking sector through customer-centric services and diversification of offerings
  • Increasing the rate of POS and ATM implementation to keep pace with electronic payment adoption
  • Legislation of specialized laws for Islamic banks and finance

The Future of Electronic Banking in Iraq

As the country continues to evolve, the potential for electronic payment systems is vast. With the widespread use of smartphones and the introduction of QR code payments by ZainCash, the stage is set for rapid adoption of this method. However, addressing the challenges facing the banking sector and promoting public trust will be crucial to unlocking the full potential of these systems.

Read the full report to learn more about the state of electronic payment systems in Iraq and what the future may hold.