Mobile payment services (MPS) are now considered the next evolution in the financial payment sector. The accessibility and the security these services provide surpass most established payment methods, whereby payments are more secure and done with a click of a button. As smartphone penetration increases across Iraq, MPSs have naturally increased in reach and are gradually becoming a preferred platform for financial transactions, filling in the gap of a solid banking sector.
Mobile Payment Services are the Future
Our methods of financial transactions has evolved in human history from trading goods, gold ,and silver, to trading paper based on numbers. After Fiat currency came to being and the 1971 decoupling of the US gold standard, all money value comes from trust in numbers given by governments (an interesting side effect of which, is the cryptocurrency market, which is fueled by speculation and suspicion towards the Fiat standard). The move towards number-based finances combined with the dawn of the internet in the 1990s made electronic payment more desirable.
Payment cards were great and worked for most of us for a long time, yet it has been subject to increasing fraud. In 2018 alone, $24.26 Billion was lost due to payment card fraud worldwide. A great example of the potential of MPS to take payments to the next level, with more security and greater accessibility, is M-Pesa.
M-Pesa is a mobile payment company launched in 2007 by Vodafone Group and Safaricom, the largest mobile network operator in Kenya. Only 19% of the Kenyan population has a bank account, but the service grew considerably as it allowed its users to transfer money without fees and to register for the service using just their mobile number. Today, M-Pesa provides over 42 million people with reliable mobile solutions and retail banking services offering a safe, secure and affordable way to send and receive money, top-up airtime, bill payments, salaries, short-term loans and more. According to the Vodacom Group’s half-year interim results in 2020, the M-Pesa platform generated transaction volumes worth $20.5 billion a month.
Mobile payment systems work well in Western countries, too. But where they hold most potential is in countries with low financial inclusion and a lack of legacy systems to compete against. So what do such mobile payment systems look like in Iraq?
The Sector in Iraq
After the 2003 US invasion and the collapse of the already small banking sector in the country, Iraqis were left with very few options as only 23% of the population had access to financial solutions. Low financial inclusion combined with a high smartphone penetration rate has established an IT infrastructure that covers even the remotest areas of Iraq. These factors have made Iraq a fertile ground for MPSs to launch and grow. Many local and international companies are competing to gain domination over the Iraqi market.
Why Do Mobile Network Operators (MNO) Control the Sector in Iraq?
It’s difficult to overlook a pattern of MPSs in Iraq being either directly or indirectly owned or supported by Mobile Network Operators (MNO). This is due to a number of reasons:
- An important advantage of MNOs running mobile payments is their advanced network of agents, partners and sellers, pushing coverage to encompass most of the country at a faster rate. New players would need years to build such a network and reach this level of coverage.
- MNOs have the ability to provide incentives to users by providing them with unique offers on mobile and data plans when users opt-in to for mobile payment services.
- The initial goal of MNOs is user retention – not profit. Once users start utilising MPS features and have their money on the platform, they are less likely to change their mobile provider because their money is tied up.
- Mobile payment services naturally become more trusted among the wider public when being offered by established companies with household names.
- MNOs operate at a large-scale and can leverage business partnerships with other companies which further incentivises the public to use mobile payment services in Iraq. For example, ZainCash’s partnership with Delivery company Toters delivers the ZainCash wallet card for free to customers. NassWallet also lets you purchase Careem credit and integrates Arbela Store, an online shopping platform, into its app.
- MNOs have advanced IT infrastructure and the expertise required for setting up mobile payments, which offer smoother processes for integrating new mobile payment services.
The mobile money e-wallet business worldwide is being served from MNO’s because they have a good customer base, their IT infrastructure is well-equipped, they have good knowledge of the customer experience, and they have the trust of the users, which they got from years of service.Waleed Barzani, CEO of NassWallet
Banks vs Mobile Payment Services
With the advancement in mobile technology and infrastructure and wide adoption by the public, the ball is in the banks’ court. Are they willing to embrace mobile technology or risk losing a huge part of their retail sector? in Kenya, the introduction and fast adoption of M-Pesa meant that mobile payments took over much of the retail banking sector, prompting many to abandon the need for a traditional bank account. Can a similar trend be expected in Iraq?
Traditional banking can’t play the same rules as we are playing due to strict regulations from the Central Bank of Iraq. Also, we can complete each other by providing different services to the end-user, but banks are not playing the retail banking role. Here, the wallet and PSP payment service provider can fill the gap, but still, there is a huge opportunity for traditional banking by offering B2B, corporate banking, and micro-loans, etc.Waleed Barzani, CEO of NassWallet
The Central Bank of Iraq is the sole authority regulating the work and issues licenses to mobile payment service providers (MPSP), and all such systems are required to abide by its rules and regulations. By regulating the work of MPSP, the bank aims to “achieve higher financial inclusion especially to the youth and to remote areas of the country”. The CBI regulations ensure the legal status of such services and prevents them from being used in illegal activities and money laundering schemes. This also gives assurance to the end-user that their funds are guaranteed by the central government. When mobile payment services are regulated and users are reassured, Iraqis have little reason to avoid conducting their financial transactions on their devices.
The Main Players in Iraq
There are multiple Mobile Payment Service Providers in Iraq competing in the mobile payment sphere and trying to replicate the success such systems have experienced in similar countries. Some of the most influential are:
Established in 2014 and licensed by the Central Bank of Iraq, the company aims “to be choice number one for any mobile financial transactions in the country”. With backing from mobile network operator AsiaCell, the company managed to establish itself as a key player in the mobile payment sector in Iraq. Offering a variety of services and wide reach utilising AsiaCell’s well-established agent’s network.
The company’s main services include but are not limited to:
- Wallet services
- Money transfer
- Cash-in and Cash-out
- AsiaCell Top UP
- Buying vouchers
- Flight reservation
- Merchant payment
- Banking integration (with two banks on board, National bank of Iraq and Al-Janoob Islamic bank)
As the oldest mobile payment service in the list, AsiaHallawa has the most experience in this field. Its vast agent network gives it an extensive reach across all regions in Iraq and an established reputation among the public.
Founded in 2017 by Mobile Network Operator FastLink, the company quickly established itself as a dominant player in the mobile payment industry in the Kurdish region of Iraq. Utilising FastLink’s network of agents and stores, FastPay was able to quickly grow in the region and is the only major player with a wide distribution of their POS devices. Another way the company managed to grow its user base is through its strong partnerships and providing exclusive vouchers through their platform.
The company’s services include, but are not limited to:
- Deposit and withdraw money
- Sending and receiving money
- Mobile recharge
- Internet recharge
- Purchase online cards
- Online shopping payment
FastPay has proven to be resilient and innovative in managing to control a large portion of North Iraq’s mobile payment sector and proving to be popular with the public.
Established in 2019, the app provides mobile payment services to the residents of Iraq with a heavy emphasis on intuitive user interface and strong backing from Mobile network Operator, Korek telecom. The app has been able to establish a strong user base in the Kurdish region and by using the Korek telecom and NassPay agent networks, its coverage soon expanded to include all Iraqi cities. Despite being one of the newest services in Iraq, NassWallet is already seen as a strong competitor in the field, especially in the Kurdish region.
The services provided by NassWallet include but are not limited to:
- Airtime top up
- Money transfer
- Add money
- Salary payment
- Pay bills (under development)
- M-Card (under development)
The rapid growth of NassWallet is a testimony to how far the sector has grown in the country. NassWallet is in a great position despite its late arrival to the sector as they benefit from subscribing late adopters.
Established in 2016, ZainCash is one of the early leaders in the industry with a loyal customer base and a vast array of partners and services making it the choice for many Iraqis. With over 8000 agents spread throughout Iraq providing services to ZainCash users, Zain Telecoms’ good reputation among Iraqis made the trust barrier easier to overcome in a country new to such services.
ZainCash provides a range of services including:
- Bank linking (currently only available for National Bank of Iraq (NBI) bank accounts)
- Cash in from Visa or Mastercard
- Digital goods
- Money transfer
- Cash-in and Cash-out from agents
- WalletCard (ZainCash is currently the only service that provides active Mastercard services tied to ZainCash)
- Imtiyaz (loyalty program for ZainCash users – Imtiyaz has been designed to reward high-value Zain customers. To be eligible, your annual spending must be 300,000 IQD or above.)
ZainCash is the only regional company with its services being offered in other countries. Zain’s experience on how to do business in the region has enabled a deep understanding of the Iraqi market and contributed to its remarkable growth.
Mobile payment services are a new revolution in the payment sector. It is slowly engulfing Iraq’s payment industry and many local and international companies are trying to get Iraq to be a cashless society.
Big steps are being taken to establish infrastructure for mobile payments. The Central Bank and government are growing more aware of the importance of such solutions for Iraqi mobile users. Despite the challenges of dealing with a public that has conservative views towards financial innovation, mobile payment services have had a positive record so far.