Shafaq News/ US Ambassador to Iraq Alina Romanowski commended Iraq for its official ratification of an electronic payment system at the end of April.

Romanowski considered this step "paves the way for a modern financial system and economic growth."

The Iraqi Cabinet has issued a regulatory update concerning electronic payment services for funds. Published in the Official Gazette on April 29, 2024, the new regulation aims to enhance the efficiency, security, and transparency of the financial sector.

This update replaced the previous regulation established in 2014, introducing a range of changes and enhancements designed to modernize the financial system. 

The new regulation mandates that entities offering electronic payment services must obtain a license from the Central Bank of Iraq and comply with its standards and regulations. These licenses, valid for ten years and subject to renewal, are exclusively regulated by the Central Bank, which also oversees third-party-operated electronic payment systems.

Service providers and the Central Bank are required to maintain records of electronic payment transactions for at least five years, ensuring transparency and accountability. Financial guarantees or liquid assets are also mandated to guarantee financial stability.

Non-compliance with the regulation may result in penalties such as warnings, financial fines, or license suspension/revocation. 

Days after the regulation was published, Iraqi Prime Minister Mohammed Shia al-Sudani ordered a series of measures to promote the use of electronic payments and point-of-sale (POS) systems in the country.

The measures aim to limit cash transactions, establish a joint committee to address security concerns and reduce mobile payment fees, and enhance security by tasking relevant authorities to address electronic payment fraud, according to a statement issued by his bureau.

To encourage adoption, educational institutions, medical facilities, hotels, restaurants, and other businesses must adopt e-payments to renew their licenses, said the statement.

However, the push towards electronic payment systems has encountered resistance from many workers who fear the impact on their livelihoods.

Oil expert Govand Sherwani told Shafaq News Agency in an interview last February that challenges hindering the implementation of this system in Iraq may be "the lack of adaptation by ordinary citizens, especially those with limited education or self-employed individuals, as well as the fees imposed on every purchase or sale using these cards."

He called for "keeping the commission low to incentivize citizens to adopt the cards without hindrance, as card adoption is a preliminary step towards electronic banking without the need to visit the bank and deal with paper currencies, whether for withdrawals or deposits."

"Getting used to these cards will be a preparatory step for citizens who are not accustomed to visiting banks to open accounts, conduct commercial transactions, and even receive salaries, as mentioned in the smart card and key card, electronically transferring salaries to any point or agency for the key card anywhere in Iraq."

Sherwani noted that "employees are accustomed to this system, but non-employees, such as self-employed and traders, may find this new. However, with time, they will realize the benefits of electronic payment."

It's worth noting that the Central Bank of Iraq's Board decided on December 13 last year to establish the "National Company for Electronic Payment Systems" nationwide.

According to the Central Bank, this step comes in parallel with the rapid growth in electronic financial services and products and the increasing number of users, aligning with the Government's program to support and adopt advanced electronic payment systems.

Additionally, the Iraqi Banks Association revealed, on December 12, a growth in bank accounts, bank cards, and electronic payment devices following the significant support provided by Prime Minister Mustafa Al-Kadhimi and the Central Bank of Iraq to the banking sector. This support included activating electronic payment in government and private institutions and reforming mechanisms for financing foreign trade.

The Board's chairman, Ali Tariq, stated in a press release that bank accounts grew by 14%, reaching 10.02 million by the end of September 2023, compared to about 8.79 million accounts at the end of 2022, which indicates the creation of more than 1.2 million accounts within nine months.