Financial Crime World

IRAQ’S ELECTRONIC PAYMENT SYSTEM: PROGRESS AND CHALLENGES

Overview

The Central Bank of Iraq (CBI) has made significant strides in developing the country’s electronic payment system since its implementation of the Cash Automated Clearing House and Real-Time Gross Settlement System in 2006. Despite progress, the sector still faces numerous challenges.

Recent Developments

  • In recent years, retail payment regulations were introduced, and the CBI implemented the Iraq Retail Payment System Infrastructure in 2016.
  • The authorization of mobile wallets such as ZainCash and AsiaHawala in 2016 has proven to be a vital tool during the COVID-19 pandemic.

Growth of Electronic Payments

  • The use of electronic cards has increased significantly since 2017, with over 9.7 million cards issued by the end of 2021.
  • Prepaid cards have gained popularity, with their ease of use and simplicity making them an attractive option for those without bank accounts.

Challenges

Cash-Driven Economy

The country’s reliance on cash remains a major obstacle to the development of the banking sector. Cash is still the primary store of value and instrument of economic exchange.

Lack of Public Trust

Many Iraqis prefer to keep their money in cash due to concerns about the security and availability of their funds during times of crisis. This lack of public trust in Iraqi banks and financial institutions hinders the growth of electronic payments.

Challenges Facing Islamic Banks

  • The absence of an Islamic financial market
  • Inadequate legal protection
  • Regulatory constraints

Recommendations for Overcoming Challenges

  • Increase the reach and number of bank branches across Iraq
  • Require banks to acquire modern electronic systems
  • Gain public trust through customer-centric services
  • Implement QR code payments to enhance adoption rates
  • Unify the operations of Islamic banks and finance according to Sharia law through legislation

Conclusion

While progress has been made in developing Iraq’s electronic payment system, the sector still faces numerous challenges that must be addressed to achieve financial inclusion and stability. Addressing these challenges will require a concerted effort from the CBI, banking institutions, and policymakers to create a more conducive environment for electronic payments to thrive.