Non-Card Payment Methods in the Offing

EghtesadOnline: Electronic payment companies in Iran are working on alternative ways to replace debit cards with non-card payment methods, including through personal cellphones and biometric methods.

News ID: ۷۴۸۸۷۵

04 November 2019

Mohammad Mehdi Sadeq, managing director of Sadad Electronic Payment Company affiliated to state-owned Bank Melli Iran - made the announcement on Sunday, anticipating that the change will be welcomed by customers given the possibility of banks to raise payment fees in the near future.

Biometric payment is a point of sale (POS) technology that uses biometric authentication to identify the user and authorize the deduction of funds from a bank account. Fingerprint payment, based on fingerscanning, is the most common biometric payment method.

Sadeq said Sadad has already launched a QR code payment system, which makes payment possible without the need to use a debit card, according to Financial Tribune.

To use this service, customers should install a relevant application on their cellphone, Sadeq said, adding that this payment instrument is appropriate for retail payments.

QR code payment is a contactless payment method where a payment is performed by scanning a QR code from a mobile app. This is one alternative (so far) to the transfer of funds electronically using point of sale (POS) payment terminals.

According to Sadeq, the platform has been activated in 5% of POS machines in shops, which is expected to rise to 20% by the end of current fiscal year in March 2020.

Fee Factor

Underscoring the possibility of a change in Iran’s banking fee system in the near future, the CEO said the higher fees will further encourage use of non-card payment means.

“With change in the banking fee system, paying via mobile phones is estimated to rise by 20%-30%,” he said, adding that the plan is on the agenda but has not been finalized.

The idea of raising bank charges has been around for years but has been on the periphery because of the perceived public negative response to higher banking costs.

As per banking rules, lenders are allowed to charge customers in proportion to the total cost of the services they offer. But banks have largely waived the fees to be able to compete in the market saturated with banks.

At present, banks receiving and making payments bear the bulk of fee payments because when a payment is made with a bank card, the bank receiving the payment has to pay a fee to the bank whose card has been used. This is over and above the charges banks pay as rent and support fees for each POS device to payment service providers.

Furthermore, banks have to pay another fee when submitting transaction orders for paying bills and purchasing phone credit recharges.