The Central Bank of Iran (CBI) planned to “tokenize” the online banking transactions, Financial Tribune reported on Saturday.
CBI is focused on creating new models of payment involving mobile phones and boost the security of existing ones, Davoud Mohammad Beigi, head of the bank’s Payment Systems Department, was quoted a saying.
Micro payment has emerged as one of the most problematic areas in the Iranian payment system, because almost all of it is processed online, which entails significant costs, Beigi said.
“At present, transactions are processed easily, but they mostly take place online as to safeguard the interests and data of customers, new models of payment must be put in place for mobile phones,” he said.
In light of the high penetration ratio of mobile phones as a widely available tool, the central bank aims to introduce payment based on tokenization in the next fiscal year that begins on March 21.
Tokenization, when applied to data security, is the process of substituting a sensitive data element with a non-sensitive equivalent, referred to as a token, that has no extrinsic or exploitable meaning or value.
“In order to expand and popularize these instruments, we need to create coordination between all beneficiaries and devise standards,” Beigi added.
The Iranian central bank will make a concerted move towards adopting the Europay, MasterCard and Visa technology, and making bank cards smarter, but according to Beigi, two major hurdles impede that goal.
“The first is that the banking system does not yet have the comprehensive infrastructure to support these payments and secondly the public and other beneficiaries must favor them,” he said.
The central bank will also announce its regulatory stance on two additional modes of financial technology firms, a move that will steer the country’s payment system towards further diversification, Beigi said.
The monetary regulator has envisioned an overarching path for fintechs and cryptocurrencies entailing six regulatory frameworks and guiding documents, which will be released by March 2019, he said.
Beigi stressed the necessity of banks and fintechs developing new electronic wallets that will reduce the need to carry bank cards for online and offline payments.
“But that does not mean that bank cards are to become obsolete in the near future, but that the customers will have more choices,” he added.