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Earlier this week, the Central Bank of Iran released the latest draft of the "Regulations for Establishment, Operation, Supervision, and Dissolution of Payment Facilitator Companies." This draft was published to gather feedback from experts and stakeholders within the industry. Ali Amiri, co-founder of ZarinPal, told Digiato, "The released documents are excessively conservative and restrictive. If this approach persists, only a limited number of payment facilitator companies will be able to operate officially by next year, which would lead to a more monopolised and constrained market." Conversely, Mehdi Ebadi, CEO of Vandar, shared a different perspective with Digiato, calling the document a significant step forward in creating transparency within the payment facilitation sector, though he acknowledged that the document is not without challenges.
The Central Bank has now decided to take a more active role in regulating and organizing various fintech-related sectors. The first published draft addressed cryptocurrency brokerages, while the most recent document concerns the establishment and operation of payment facilitator companies. The goal of these drafts is to crowdsource feedback from the public, economic stakeholders, and industry organizations for refining the regulations. Digiato spoke to payment facilitation industry professionals to gauge their reactions.
Concerns Over Monopoly vs. Hopes for Transparency
Amiri expressed concern about the sheer volume of rules and the high level of oversight envisioned for payment facilitator companies, suggesting that these firms are being treated as though they were on par with large financial institutions. "It seems unlikely that payment facilitator companies possess operational dimensions requiring this level of supervision and procedural formalities," he said. "The Central Bank appears intent on directly involving itself in processes such as the selection and approval of CEOs and board members for these companies, which would naturally demand significant time and resources."
On the other hand, Ebadi, who also serves as Vice President of the Fintech Association, views the document as comprehensive and beneficial for fostering transparency. "[The document] addresses all key concerns, and I haven’t seen any critical industry issues overlooked," he said. Ebadi highlighted that previous ambiguities in the payment facilitation sector had deterred investors from supporting companies in this space. "This document could provide the necessary transparency and clarify relationships between payment facilitators, the Central Bank, and Shaparak. Once these ambiguities are resolved, investor interest in this sector will likely grow."
Nonetheless, Ebadi acknowledged that the regulations would impose certain limitations and challenges on companies, noting that such restrictions are natural whenever regulatory frameworks are implemented.
Will Innovation in Payment Facilitation Be Sacrificed?
One major concern raised by industry experts is the lack of innovation within the payment facilitation sector, often attributed to restrictive policies from the Central Bank. The question remains whether the new framework can address these barriers to innovation. Ebadi told Digiato, "Naturally, the purpose of this document isn’t to promote innovation; it is focused on other priorities. To answer your question, no, it won’t directly foster innovation. However, I believe that by resolving ambiguities and attracting investment, the resulting influx of resources could indirectly drive innovation in the sector."
Amiri, however, has a more pessimistic outlook, arguing that the stringent regulations could further hinder fintech innovation. "The innovation ecosystem in this sector has faced limitations for quite some time, and this isn’t a new issue. Over time, conditions for innovative activities have only become more challenging," he said. He also pointed out that certain requirements, such as the need for a registered capital of one trillion tomans for cryptocurrency companies - part of which must be held in reserve - could render such ventures economically unviable, potentially pushing industry players toward informal or underground activities.
While Ebadi predicts that larger payment facilitator companies will adapt to these requirements over time, he believes newer firms may face greater challenges. "I think established payment facilitators - those classified as Type II - will be able to align themselves with the document’s requirements within a reasonable timeframe," he said. "However, Type I facilitators, which are smaller or newly established companies, will likely encounter more hurdles."
Two-Phase Licensing: Bureaucracy or Stability?
Ebadi also commented positively on the document’s two-phase licensing process, which grants an initial one-year license with the possibility of renewal for up to two years for Type II payment facilitators. He believes this approach addresses previous ambiguities and could benefit businesses in the sector. "In the past, companies had to renew their licenses annually, a lengthy and challenging process. With the option of receiving a two-year license, the administrative burden on payment facilitators will be significantly reduced," he said. "This change could bring greater stability to the sector and increase investor interest."
However, Amiri highlighted the importance of balancing regulatory oversight with market needs, technological capabilities, and supervisory demands. "While regulation is essential, the ability to strike a balance between market dynamics, technological capacity, and oversight requirements is even more critical," he said. "This balance seems lacking in the cryptocurrency guidelines and appears overly conservative in the payment facilitator framework."
Amiri questioned the rationale behind imposing such stringent oversight on payment facilitators, asking why they wouldn’t simply apply for PSP (Payment Service Provider) licenses if subjected to similar restrictions.
The Future of Payment Facilitation: Restricted or Secure?
Amiri concluded that while clarifying the operational boundaries for fintech companies is a positive step, the excessively conservative and restrictive nature of the current regulations could limit the number of officially operating companies. "If this approach continues, we’re likely to see only three to four payment facilitator companies and around ten cryptocurrency companies operating officially by next year, leading to a more monopolized and restricted market," he predicted.
Ebadi, on the other hand, remains optimistic about the document’s potential to provide clarity and attract investment. "This document could create transparency and clarify the roles of payment facilitators with the Central Bank and Shaparak," he said. "Once these ambiguities are addressed, investor interest in the sector is likely to grow."
