EghtesadOnline: Iran’s banking sector, for a variety of reasons, has failed to keep up with the rapid pace of technological advancement in most countries since early 2000. However, lenders have resorted to some new approaches towards banking and financial technologies in their quest for not being left too far behind. But much more needs to be done.
Experts and financiers normally ask: What aspects of financial technologies need to be prioritized by bankers in the short term?
Way2Pay, a local media focused on payment and e-banking sectors, has recently talked to well-known experts asking their opinion about the foremost technological needs of the lethargic banking system. The responses include a wide range of technological innovations; however, open banking, RegTech, and intelligent solutions were the areas experts believe that must be addressed sooner rather than later.
Redefining banks' relations with customers via open banking reforms should be the foremost short-term goal of bankers, says Muhmmad Ali Torabian, board member of Fanavaran Hooshmand Behsazan Farda, a major holding company founded by Bank Mellat as its technological arm, Financial Tribune reported.
Open banking enables personal customers and small businesses to share data securely with other banks and with third parties, enabling them to manage their accounts with multiple providers through a single digital app, to take more control of their funds (for example avoid overdraft charges and manage cash flow) and compare products on the basis of their own requirements.
Emad Irani, technical deputy of Faash Company, however, says bankers should forget about (directly) entering the realm of technology, instead inviting them to "act as providers of structures and platforms."
Role of APIs
In his opinion "Banks should play the role of financial facilitators mainly through development of APIs, and fraud detection systems," he says, "Banks should be providers of raw financial services and supervise transactions."
Offering common banking services on open platforms creates more space for the growth of financial services, he notes.
Faash Company, affiliated to Shahr Bank, is a provider of banking and security solutions.
API, or application programming interface, is a technology protocol that allows diverse software components to interact. More to the point, it also allows non-experts to develop applications that make use of whatever software components a given API taps into.
Open banking, enhancing ties with fintechs, modification of bankers' mindset over their relations and knowledge sharing should be the main focus of banks, says Mohammad Sadeghi, ENBank's deputy for IT affairs.
Valiollah Fatemi Ardakani, founder of Tosan Company, says lenders need to focus on intelligent solutions in the short term. "Using operational intelligence, business and management intelligent solutions is indeed vital for lenders…Unfortunately, at the moment most of the decisions are made personally without drawing on analytical reports, models and risks."
Tosan is one of the leading providers of banking software solutions in Iran.
In Ardakani's view bankers are, and must be, capable of replacing traditional management models with intelligent options within a short period.
Nima Amirshekari, head of e-banking department at Monetary and Banking Research Institute, points at RegTech as a key priority for the sector.
"More attention must be paid to supervision, anti-money laundering tools and fraud detection… Expansion of a network goes hand in hand with increase in the number of fraud cases."
RegTech emphasizes regulatory monitoring, reporting and compliance, and aims to enhance transparency, standardize regulatory processes and present clear interpretation of ambiguous regulations.
Joint-venture and partnerships was the key focus of Morteza Torktabrizi, Bank Mellat's IT deputy. "Lenders should be able to identify suitable business partners within the industry, so that they can create added value and reduce costs. This is crucial considering the wrong model of fee payments, high cost of banking in Iran and lenders reluctance to reduce the number of branches."
Blockchain-based services, big data and collaboration with fintechs were among other issues pointed out by experts.