The Central Bank of Iran (CBI) announced this month that it is in ongoing talks with foreign card companies to reconnect Iran’s payment systems to international networks.
The bank’s governor, Valiollah Seif said to Iran Bank and Economy News Agency, that “the CBI is building the necessary infrastructure [for foreign cards to re-enter the country]”.
Seif said in his interview that, “Negotiations have taken place with unnamed businesses that issue cards and problems relating to their entry are being finalised.”
Local media have speculated that this could mean that the likes of the US’ Visa and MasterCard and Japan’s JCB could make their official entry to the Iranian market in the coming months, but worries over US sanctions mean that it is more likely that Chinese card companies will seize a dominant position in this new market.
The path to plug Iran into the international card system has been a rocky one. The CBI has repeatedly pushed for foreign banking links since sanctions were removed in January. It even employed a foreign company to speed up efforts to bring in foreign card brands to the Islamic Republic but has since cancelled that contract.
Visa and MasterCard previously said that they had not held negotiations with Iran and that if their cards were issued in Iran this would breach the US’ continuing sanctions.
Meanwhile, other card companies such as China UnionPay have already set up operations in Iran and begun recruiting for local staff, according to a local job listings website. It was previously reported that UnionPay had signed a deal with the Tehran municipality-owned Bank Shahr (City Bank). However, no UnionPay-branded cards have been issued so far.
The central bank also previously stated that Japan’s JCB would enter the country at some point shortly.
The possible entry of foreign card companies would enable Iranians to use cards abroad. Currently Iranians have to take wads of dollars or euros.
The demand for plastic cannot be underestimated, as in September this year 30,000 Iranians applied for credit cards in the first three days of the country’s trial scheme, blowing away previous expectations of the likely demand.
For foreigners coming to Iran, of which there were an estimated 300,000 this year according to the Iran Cultural Heritage Organisation, cash is also currently the only option. For the elderly European cohort that comes to Iran, it can be a stressful experience carrying wads of notes.
However, after years of isolation which has left Iranians with only their own internal card system called Shetab, it is likely to take longer to get local banks to meet the standards foreign banks require.
Many foreign banks, especially major European ones, have also resisted calls by Iranian banks to partner with them in recent months fearing US sanctions. If one were to go ahead and was penalised for co-operating with Iran, it would kill any future bank contracts.