A country under international sanctions means many things. All connections to the outside world is limited, and that includes banks and financial institutes. Due to the fact that Iranian banks are not connected to other international banking systems and their services like Swift, credit cards, direct money wiring and even third party transferring methods like Paypal. But how come there are payments coming from inside Iran? One of the key problems of sanctions was that Iranians weren’t able to purchase from payment portals that required credit cards, non-Iranian debit cards and Paypal.
With every crises comes opportunities. Iranian Companies like Payment24, TehranPayment, PayBarg, BazarGardi, Mihan Pay, and (believe it or not) dozens of others, saw this golden opportunity called international sanctions and took action. The opportunity to charge your account with local currency Rial and withdraw from your account from dollars to rials something that is really felt for many Iranians especially the ones that need to buy an online service or even get paid by international clients. This comes really handy for startups in the time of sanctions.
But the unique services that these companies provide are not limited to transferring money with Paypal. You can easily order a prepaid credit card in your name, and charge it directly with Rials and withdraw easily. The third party companies even take care of the registrations. Though it is not viral, it is quite shocking to see credit cards in Iranian hands without having any bank accounts outside of Iran. Just by googling, tens of companies pop up providing these features.
We got curious and we looked into it. It was obvious that these companies were somehow attached to banks and financial institutes outside of Iran. The functionality of the companies that provide service for your Paypal account are quite simple. They have offices outside of Iran in countries like the Emirates, Azerbaijan, Armenia and now mostly in Iraq that work vice versa with their office/partners in Iran. Charging a Paypal account is not hard, it’s as simple as having a middle man in another country taking care of money transactions. But how do you get prepaid credit cards in your name. We asked one of these companies about this. For a prepaid Visa cards in your name (in the online panel) a fee of $110 was required in order for you to get the card. They take a fee depending on your the amount you want to be transferred to your account. From $100 dollars to $500 the service fee would be $12, and for $500 to $10k a service fee of $50 will be charged. By partnering with banks and financial institutes in Iraq these companies can provide prepaid credit card for Iranian users.
The revenue mechanism of the companies that help you in your Paypal needs are quite simple. Essentially you pay bit more of the currency price to charge your account, and logically you receive a bit less than the currency price of Dollars compared to Rials in that day. To take an example, on the 31st of December 2015 the Dollar price compared to Rials was 36,500. For each dollar to charge your account through these third party companies you had to pay 38,000 Rials. And to withdraw money each Dollar will be calculated and given to you with the value of 35,000. One of the other services some of these companies provide, is that freelancers can get paid easily through freelancer that come and get their income in rials using these companies. Customers are quite satisfied with these pricing models and given to the rough competition in this field, these companies need to get that competitive advantage by providing the best price possible.
This way Iranians can pay and get payed easily even when the sanctions are at effect. These third party companies have made good sum of cash because of the sanctions, and they sure have helped Iranians that needed a way to have international transactions. It seems these companies have limited time of functioning and once the sanctions get lifted they might have to think of providing different services.
Nonetheless once the sanctions get lifted we would see the headache of online money transferring gone for startups that want to target international customers.