Iraq’s cashless push gaining pace but much more needs to be done, FinTech boss says

Iraq's shift from a cash-heavy economy to a digital one is gaining momentum, but policy implementation will play a crucial role, the chairman of the country’s largest FinTech company has said.

The Central Bank of Iraq has announced that all government payments will move to electronic channels by July 2026, part of a broader plan that includes a national instant-payment platform and potentially even a digital dinar.

“The ambitions are always there, but the real need is to focus on a well-crafted and a world-class plan and the execution of it,” Bahaa Abdul Hadi, chairman and co-founder of International Smart Card, which owns the Qi Card, told The National.

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Since early 2023, the Iraqi government has introduced financial and economic reforms, including the use of electronic payment systems by the government and private sectors. These also include regulations requiring electronic payment providers to tighten anti-money-laundering and cybersecurity rules.

The Central Bank of Iraq’s cashless mandate, point-of-sale incentives, e-Know Your Customer regulations, as well as other key components of this mandate “are all in place”, he said.

“What matters now is astute follow-through at the ministry level so that the Iraqi people actually reap the fruits of the mandate.”

Many Iraqis tap cards and phones instead of pulling wads of dinars from their pockets, a sign of changing payment habits. However, digital literacy remains the biggest challenge, Mr Abdul Hadi said.

“Teaching the Iraqi society why a tap or QR code scan is safer than a bundle of banknotes requires patient, empathetic education for millions of unbanked people.”

He says better incentives are needed to encourage more Iraqis to trust and adopt digital payment.

“I believe that when people experience real protection, they naturally switch from the banknotes to the digital payment,” he added.

From the government side, Mr Abdul Hadi said, the hardest challenge is managing timelines. “Regulators are juggling multiple reforms simultaneously, which often causes delays and sets us back to square one.”

Still, he is “extremely” optimistic about the future.

“Within the next five years, you will see a tipping point where digital solutions bridge the cash gap in urban Iraq. However, the rural areas may take about 10 years, but the direction is there and irreversible,” he said.

Cash could fall below 50 per cent of urban retail spending by 2030 “if the current momentum continues”. The tipping point will be universal QR payment acceptance and real-time open banking, both of which are in the pilot phase.

“A fully digital ecosystem in Iraq is therefore not a distant goal; it’s the trajectory we are actively pursuing,” Mr Abdul Hadi added.

From payrolls to fintech

Launched in 2007 by International Smart Card, the Qi Card began as a service to pay public-sector salaries and pensions electronically.

Today it claims to have more than 11 million users and a network of 23,000 point-of-sale terminals reaching every Iraqi governorate, including remote villages.

The company’s services have expanded beyond salary disbursement to retail and bill payments, remittances, buy-now-pay-later (BNPL), micro-savings and a smartphone app that accounts for the majority of transactions.

“Just five years ago, most Iraqis got to know us at a card terminal,” Mr Abdul Hadi said. “Today, six out of 10 Qi payments start from a personal smartphone wallet or with a QR tap.”

Qi Card is now exploring expansion in regional markets, including the UAE and Jordan. Its payment gateway application is in the final stages of approval by the Central Bank of the UAE. In Jordan, it has established a back office in Amman, which focuses on risk and compliance standards.

“Our top priority is serving the Iraqi diaspora in the GCC and Europe,” he said. “Beyond that, we see strong synergies in Jordan and Oman. The Levant is also on our radar, where we are exploring select markets where cash is still king – subject to the local regulatory approvals,” he added.

Misuse allegations

For the government and the central bank, the stakes are high. Moving millions of Iraqis from cash to cards and mobile wallets could curb corruption, widen financial inclusion and stabilise the dinar. Yet the same systems could also be exploited if controls fail.

In May, The Wall Street Journal alleged that Qi’s cards were exploited in dollar arbitrage schemes benefiting Iran-backed groups, allowing local salaries to be converted into hard currency overseas to help Iran circumvent US sanctions.

The WSJ alleged that cross-border card transactions by the Popular Mobilisation Forces, an umbrella paramilitary movement, surged from $50 million to $1.5 billion monthly between early 2023 and April 2023, generating an estimated $450 million in profits in 2023 alone.

Some commanders seized subordinates' payment cards, or created fake identities to obtain additional payouts, it added.

Mr Abdul Hadi firmly rejected the claims, saying Qi maintains “zero tolerance” for any illicit use.

“Whenever our system detects a red flag, we immediately off-board the suspicious account,” he said, adding that more than 3,000 accounts have been blocked. He did not elaborate.

“Where third parties have attempted to exploit the broader card ecosystem for arbitrage, we have actively collaborated with the Central Bank of Iraq, Visa and Mastercard – taking measures such as freezing accounts, capping cross-border volumes, and blocking thousands of suspicious cards,” he added.

The company uses biometric authentication, geofencing and real-time monitoring to detect abuse, he said. In June, it also signed a three-year partnership with US consultancy K2 Integrity to strengthen oversight.

None of the US agencies have contacted Qi Card to date over these allegations, Mr Abdul Hadi said.

“We have not received any warning or any enforcement notice,” he said. The company is “fully committed to co-operating with both US authorities and Iraqi regulators, should they request information through lawful channels”.

However, Qi Card has stopped disbursing salaries for the Popular Mobilisation Forces. “This decision was made in consultation with our risk and compliance advisers to ensure full alignment with international regulations and to stay away from the US pressure.”

The US has long warned that the PMF is strengthening Iran’s influence and undermining Iraq’s sovereignty. America has blacklisted several of the group's senior leaders, including its chairman Falih Al Fayyadh.

Under pressure from the US and other foreign powers, the Iraqi government also withdrew a contentious draft law for the PMF in August, which aimed to widen its powers and elevate its status to be on a par with the rest of the Iraqi military.