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Electronic Banking and Payment in Iraq: A Review of the Sector’s Progress and Challenges

Baghdad - The Iraqi banking sector has made significant strides in recent years, with a focus on revamping its infrastructure and adopting electronic payment systems. However, despite these efforts, the sector still faces several challenges that hinder its growth and adoption.

History of Revitalization Efforts

In 2003, the Central Bank of Iraq (CBI) embarked on an initiative to revitalize the country’s banking sector, aligning it with global trends. The CBI implemented:

  • Cash Automated Clearing House and Real-Time Gross Settlement System in 2006
  • Retail payment regulations in 2014
  • Iraq Retail Payment System Infrastructure in 2016

Progress and Challenges

In recent years, electronic payment methods have gained popularity, particularly among government employees who receive their salaries through direct deposit. However:

  • Only about 20% of issued cards are used for daily transactions, while the remaining 80% remain dormant.
  • The lack of public trust in traditional banking institutions remains a significant challenge.

Barriers to Adoption

The sector faces several challenges, including:

  • Dominance of cash in the Iraqi economy
  • Limited availability of modern electronic payment infrastructure (ATMs and POS)
  • Insufficient investment in education and agricultural sectors

Recommendations for Growth

Experts recommend:

  • Increasing the reach and number of bank branches across Iraq to enhance accessibility and promote financial inclusion
  • Requiring banks and electronic payment service providers to acquire integrated and modern electronic systems and automate all operations
  • Cultivating a culture of customer reliance and diversifying services to fulfill all demands
  • Legisating specialized laws for the operation of Islamic banks and finance in accordance with Islamic Sharia law

Conclusion

While Iraq’s electronic payment sector has made significant progress, it still faces several challenges that hinder its growth and adoption. To overcome these hurdles, it is essential to prioritize infrastructure development, increase public trust, and promote financial inclusion.