Economic Innovation in Iraq: The Shift to a Cashless Payment Landscape

Attributed to Mario Makary, Cluster Manager for Levant, Visa
The adoption of digital payment systems is revolutionizing the business landscape worldwide. This shift towards a ‘digital lifestyle’ is making waves in countries like Iraq, where cash has traditionally dominated the financial system. Despite having one of the globe’s lowest financial accessibility rates, with a mere 19% of adults possessing a bank account, Iraq has taken notable strides towards financial inclusion.
However, the Central Bank of Iraq (CBI) has introduced several initiatives in its second Strategic Plan for 2021 to 2023 to tackle this challenge. We have seen great reforms taking place, such as incentivizing digital financial services, mandating the usage of Point-of-Sale (POS) in financial transactions, reducing merchant fees, mandating linkage of bank accounts and introducing incentives to promote POS usages. These initiatives are aimed at accelerating the pace of transition to cashless payments so that businesses and individuals can fully reap the associated benefits.
Merchants, with their ability to sway consumer purchasing habits, are crucial actors in this transition. By shifting their payment models to digital platforms, merchants can not only transform their businesses, but also contribute to a profound change in the overall economy. With security and transparency, merchants can impact financial reform within the population, by adopting POS systems and embracing the digital culture. Unfortunately, several merchants face challenges in terms of education and awareness when it comes to establishing and utilizing digital payment systems. The absence of proper acceptance training and financial literacy hinders both merchants and consumers, often restricting them to the conventional realm of cash transactions.
A growing digital payment ecosystem has the potential to significantly increase financial inclusion and boost economic growth in emerging markets like Iraq. Digital transactions are faster and easy to track, while giving merchants relevant insights into their sales and future budgeting. Such payments carry lower risk as compared to cash transactions. With adequate infrastructure in place and local/in-market payment providers, digital payments can provide the right platform for merchants to grow their business organically.
In Iraq, the government understands fully that that digital transformation is vital for fostering scalable economies. Recent policies issued by the CBI and the Government of Iraq aimed at promoting digital payments are due for implementation this year. Furthermore, according to Statista, the total transaction value in the digital payments market is projected to reach $10 billion in 2023. There are several e-payment platforms in operation in the country with the CBI issuing 17 licenses to date. Fintechs and telecom providers within Iraq are joining forces to offer consumers a seamless and secure digital experience to facilitate e-payments. At Visa, we collaborated with our partners last year to launch a variety of payments products to serve Iraq’s underbanked population. Such efforts underscore the potential for expansion of banking services and bring consumers under the umbrella of financial inclusion.
The future appears increasingly cashless as technology continues to weave itself into every facet of our lives. As the world continues to evolve in the digital age, financial education and the implementation of stringent digital security measures will be crucial in facilitating a smoother transition to a cashless economy. The transition promises to increase efficiencies in the financial system and provide all-inclusive access to financial services, especially for the underbanked and unbanked populations.
Fostering financial literacy plays a pivotal role in complementing this transition and ensuring that individuals can fully utilize the benefits of these digital financial solutions. To help driving the financial literacy efforts in the market, we have identified couple of partners to work with in order to deliver content that can help in building knowledge and help individuals improve their understanding of financial concepts and services. These partnerships will play a pivotal role in nurturing a comprehensive digital payments ecosystem that empowers Iraq’s economy to thrive in the digital age.