The Central Bank continues to advance its banking reform strategy at a steady pace, with a primary objective of achieving digital transformation in the banking sector. This initiative, initiated in 2016, has clear phases laid out in its first, second, and third strategy plans.
In the past two years, the collaboration between the Central Bank and the government has been further strengthened, with the Prime Minister personally leading the Digital Transformation Committee. This partnership represents a crucial step in promoting and accelerating the transition to a digital government, transitioning from a monetary economy to a digital economy. The focus has been on enhancing domestic payment systems and leveraging technology to improve financial inclusion, develop information technology, establish digital banks, and incorporate artificial intelligence into banking services. Additionally, modern technologies are being utilized for loan management, compliance risk management, anti-money laundering, counter-terrorism financing, and combating bank fraud.
Data from 2023 and 2024 indicate a significant uptick in electronic payment transactions and the implementation of modern banking technologies. Digital transformation and electronic payment adoption surged to 48.5%, up from 20% in previous years. These results affirm the success of the implemented plans and procedures, marking a substantial transformation driven by the concerted efforts of the Central Bank, the government, banks, and electronic payment companies. Their collaboration has facilitated the development of an advanced infrastructure capable of accommodating various electronic payment tools and financial services.
The ongoing banking reform has now entered a pivotal phase focused on the transformation to digital banks. The Central Bank is currently assessing approximately 70 applications for new digital banking licenses, which adhere to rigorous controls and conditions established by the Central Bank. This marks a promising beginning for technological advancement in Iraq’s banking sector, addressing the technical gap in comparison to global standards. The move aims to provide smart banking services, mitigate fraud and corruption risks, and enhance data integrity in transaction monitoring and compliance.
As such, digital banks represent a new phase in the evolution of digital transformation and banking reform. The Central Bank is expected to initiate the licensing process for digital banks that successfully meet the established criteria. In alignment with the Central Bank’s strategic objectives, the Governor recently emphasized that the future of digital transformation in Iraq is now, highlighting significant advancements in the electronic payment system. The number of ATMs has exceeded 4,000, over 17 million electronic cards have been issued, and there are 63,000 point-of-sale devices. Moreover, financial inclusion has risen to 40%, up from 20% two years prior, indicating a qualitative shift in Iraqi banking operations, especially as banks transition from traditional institutions to smart digital platforms.
Consequently, the financial and banking system is poised to witness a gradual reduction in reliance on physical cash, as central banks embrace digital payments. The Central Bank is advancing efforts to create its own digital currency, paralleling trends observed in several global central banks. Plans are also in motion to establish a data center in Iraq, modeled after major centers worldwide, which is essential for a robust digital economy grounded in artificial intelligence, data analytics, and the Internet. The Central Bank of Iraq has initiated steps toward realizing this vision.
