As the first anniversary of the Iran nuclear agreement approaches in July, the international business and finance community has identified an enormous market of opportunity in Iran, and believes the time is rapidly approaching that open trade with Iran will become a reality.
Anticipating that opening, the financial sector has hosted a series of conferences and summits analyzing the Iranian market. These include a Financial Times one-day summit entitled Exploring Opportunity and Risk in a Potential Economic Powerhouse, a May 19 get-together in London hosted by the Euromoney Iran Conference, and a two-day conference in Frankfurt produced by the Iran International Banking Forum.
Tradestreaming’s Andrew Friedman caught up with Christine Duhaime, a Canadian legal expert on anti-money laundering and terrorism financing and the Executive Director of the Digital Finance Institute, to talk about the opportunities and challenges facing Iran and the international community as Iran re-enters the global financial community.
Where are the opportunities in the financial sector for technology to step in?
Now that Iran is getting connected to the international financial system, there are all sorts of fintech opportunities that did not exist before. But Iran’s banking system is actually quite modern and the use of debit cards is very pervasive and modern. Their anti-money laundering laws are quite advanced and unique – another unknown fact – because the central bank in Iran has assumed the role of compliance for the opening of all new accounts as the account information holder. No other country does this, and it relieves the regulatory burden from bank branches to some extent and allows fintechs to create technologies at the banking sector level without the same level of regulatory burdens that fintech companies face in other countries.
Could you give a general overview of the technology sector, and the fintech market in particular, in Iran?
There seems to be a misconception of Iran as not being tech advanced or tech savvy because of sanctions and their economic isolation from the world. But in reality, Iran is incredibly advanced in technology. There are world class technology universities in Iran and more students, including more women per capita, studying in STEM than anywhere else. There are approximately 40 students in tech per 1,000 university students in Iran and there are close to five million students per year enrolling in STEM in Iran. People thought sanctions would cripple Iran, and perhaps it did [in the short term]. But in the long run they actually united Iranians and fostered a drive to succeed, and to be so self-sufficient and achieve more than other countries with technology as a response to ensure that the world could never harm them again.
Is there a robust startup culture?
Yes, Iranians naturally are entrepreneurial and there are cultural expectations on children to be successful, if not through university education, then through business. That is driving a large part of the startup culture today. No question, Iranians are ambitious. President Rouhani started a program where they give low interest loans to over 1,650 startups a year to jumpstart the entrepreneur system in Iran. It’s the hot thing in Iran to have a startup, especially a tech start-up, and so, people are getting into startups in droves.
Is there a good way to profile mobile/internet use in Iran? Are Iranians tech savvy?
Yes, there is high internet penetration, and they are definitely tech savvy. Some areas of internet are spotty and some areas have better internet speed than others. It’s not like Canada or the US where there is high speed internet access everywhere but it’s getting better.
Is there high demand for new tools? What do users in Iran expect from their financial services providers?
Iranians are interested in everything new, modern and techie. In terms of their financial services, at the moment, they are looking for services that will allow them to bank outside of Iran as a primary concern, with the sustained ability to send money oversees to children studying overseas, and to receive funds. There’s also a huge need to be able to pay for things on the internet when it comes to foreign purchases.
How does Iran coordinate technology innovations such as online lending with the requirements of Sharia (Islamic law)?
The whole of Iran’s financial services sector, including lending whether online or not, has to comply with Sharia law. But that hasn’t and doesn’t impede innovation. It’s innovation-neutral.
Does the introduction of technology aid things for the industry, or complicate matters?
It definitely helps many industries – one area where I think Iran will beat us all shortly is artificial intelligence, and specifically, artificial intelligence in banking and finance. AI is going to wipe out hundreds of thousands of bank employees, mostly tellers and compliance personnel in a few years, both globally and Iran. I have no doubt that Iran will lead in this area by virtue of the sheer size of its population, their ambition, drive and the numbers of students who are studying STEM. No country will be able to compete.
The Iranian rial has tanked in recent years. What impact on fintech investments do you envision as a result?
I think investors look at Iran as an inexpensive place to invest and when you look at the incredibly low salaries for MBAs, lawyers, or other well-educated Iranians who studied at the best schools in North America or the EU, it’s incredibly advantageous for an investor. It means the costs of the investment goes way further and they can obtain incredibly bright, well-educated young employees engaged in a startup.
Is there local money to invest in technology, or will the sector be heavily dependent on foreign money?
It’s a bit of both — there is local financing and also a huge dependence on foreign investment, with the expectation that more investment will come to Iran. Part of the reason we did the first FinTech Conference, as Canadians in Iran in 2015, was to help to light the flame of fintech in Iran with foreign interest. Hopefully it had an impact.