Iran's First Neobank Launch Next Year

EghtesadOnline: One or more neobanks will start operation in 2021, the Central Bank of Iran's deputy governor for innovative technologies said.

News ID: ۷۸۵۶۱۹

09 September 2020

"Robotic process automation and neobanks are among the latest innovative technologies adopted by banks across the world. Neobanks have no physical branches and their services are offered exclusively online," Mehran Moharramian was quoted as saying by way2pay. He did not provide details.

Neobank is a new type of bank available to customers only through mobile applications and personal computer platforms. These financial institutions are reinventing the practices and processes associated with traditional banking.

Financial services offered by these innovative lenders, mostly via a mobile app, are in accord with customers' needs mined largely from data on consumer behavior.

Offering the latest in innovation and access, these entities also meet the needs of underserved market segments such as the unbanked and underbanked, immigrants, freelancers, independent contractors and small businesses.

Many regulators across the board have defined neobanks and have regulations where banks are allowed to deliver services with a restricted license. The CBI seems to be in the process of creating space for much-needed innovation in the dysfunctional banking and financial systems.

According to Moharramian, the prospects for neobanks are being studied by a special working group, as a part of CBI plans to bring about a major transformation in the banking system long lacking a stellar performance.

He called on fintechs to embrace the open banking services, saying that the CBI, as the regulatory body of financial market, is developing a framework for authentication of bank customers to help foster the work of fintechs using open banking platforms.

Open banking, one of the areas experts insist needs to be addressed by Iranian lenders sooner rather than later, enables personal customers and small businesses to share data securely with other banks and with third parties.

This enables them to manage their accounts with multiple providers through a single digital app, to better control their funds (for example, avoid overdraft charges and manage cash flow) and compare products as per their own requirements.

CBI's five-year roadmap also includes benefitting from artificial intelligence (AI), the official said. "At the moment, a group of bankers and academics are working to map out potentials in AI-based technologies."

Iran’s banking sector for over two decades has failed to keep up with innovation and technological advancement in most countries. However, some are resorting to new approaches to update their technology and not be left far behind.

An estimated 30-35 million people use e-banking services across the country and the number is projected to grow in the near future.