A Panel discussion on the rise of Fintech in Iraq

On May 31st, 2022, Five One Invest hosted a Speaker Series session with Yazen Altimimi (Co-founder and CEO at Zain Cash), Ali Hilli (Marketing and  Communications Director at Miswag), and Abdurrahman Bapir (Founder of Kurdcoin). The panelists of three leading entities in the Iraqi fintech sector discussed the promising rise of technology in Iraq.

• CASH IS KING

Cultural Constraints

Fintech, a relatively new concept in Iraq, faces many challenges. One main obstacle facing the adoption of fintech is consumers' preference for cash. Due to the absence of trust in e-payment methods, in Iraq, cash is king. Ali from Miswag, the first e-commerce platform in Iraq, finds that although consumers have many payment options, people still prefer to pay in cash. He says, “When it comes to payment methods, cash is king in Iraq; even with 18 different financial licenses for wallets for the processors and after 75 different banks, they still use cash as the main element driving e-commerce.”

According to Yazen, another barrier to fintech adoption is the resistance of merchants to accept point-of-sale payments through cards or wallets. Yazen notes, “So if you go to any shop, you can’t pay by card. It's cash only.” The obstacle is getting merchants on board, a complicated endeavor. The onboarding process needs to start from the governmental level, from the prime minister’s level, to push government entities to adopt e-payments. Yazen believes that if the government takes the first step, people will be encouraged to use their cards more, banks will be obligated to provide better services, and merchants will slowly adopt e-payments at the point of sale. 

Ali predicts that a change in mindset will happen. When comparing the adoption of e-payment services in 2016 with 2022, there has been a considerable shift. He already slowly sees the change in mindset with the digitally literate generation Z and generation Alpha. Through the influence of social media, youth have gained awareness of the fintech space, albeit at a slow pace. Ali predicts that adoption figures will continue growing.

Garnering Trust

Yazen shares his insight into the chief hurdle faced by Zain Cash, a licensed digital e-payment company in Iraq. He says, “Our biggest challenge was finding use cases for consumers and small businesses and getting them to trust us.” Yazen explains how he tackled the problem through trial and error - “to fail out quickly and adjust quickly.” He explains, “We needed only a few use cases that became very successful, and as of today, we do around one billion transactions a year, and we are growing 100% each year at this rate”. Zain Cash’s strategy was undoubtedly successful, as they are one of the dominant players in the electronic wallet market. 

• ALTERNATIVE PAYMENT MECHANISMS 

Cryptocurrency

A new payment method on the rise in Iraq is cryptocurrency. Adburrahman, the CEO of Kurdcoin, one of the first cryptocurrency exchange platforms, believes that the lack of a strong financial system has led to the distrust of central authorities, banks, and financial institutions. Abdurrahman explains people’s distrust of financial institutions, “People think that the banks are taking control over their finances and personal information. Once you deposit money into the bank account, you don't have control over it even though it's your money.” Therefore, people are looking for alternative monetary options like digital currencies (such as cryptocurrency) to manage their finances. People need the assurance that their money is safe, and with cryptocurrency, people feel secure.

Regulatory Restrictions

Adburrahman adds that other deterrents facing the development of fintech are the Central Bank of Iraq’s regulations and policies. Fintech licenses from the central bank require a large amount of money. Adburrahman describes, “As opposed to the example, in a country like the UK, you can start a digital bank for half a million pounds. In Iraq, it goes up to $5M or a bit more than that, and it's not allowing smaller players to enter the market, making it less competitive.” 

• THE FUTURE IS OPTIMISTIC

Ali encourages ambitious entrepreneurs to keep an open mind when managing their businesses.  He believes that “things are moving forward, we need to be optimistic, we need to keep working on educating people about the benefits of a cashless economy.” 

Despite all the socio-economic challenges, the market has a lot of potential, especially a robust GDP, a large youth population, and positive consumer spending. Yazen expresses, “I encourage everyone to try. In the fintech industry, a lot is missing. We're always behind other countries, but there's a lot that we can do.”