E-commerce has seen a great widespread in Iraq with new businesses leveraging digital marketing and easy access to internet to increase their business sales. Trends of online shopping and internet penetration have been on the rise as well, supporting the business’ cause.
However, another factor that is important in analyzing the e-commerce in Iraq is the payment methods that are popular here. The most popular two options are Cash on Delivery and Credit Card payments.
Let’s dive into why and how people use either payment method and understand the pros and cons of each, understanding the reason for their success in Iraq.
Overview of Payment Methods
Cash on Delivery (COD)
COD, or Cash on Delivery, is the most popular method in Iraq for online shoppers especially. Cash on Delivery is used to pay orders by customers when they receive it at either their doorstep or a suitable pickup location.
Amidst all the paperless methods of payments, cash still remains king as consumers and buyers both trust it more than any other payment method.
Credit Card (CC) Payments
On the other hand are credit card payments. They are less common than cash payments, however, Iraq has been seeing a great rise in its use lately, especially for e-commerce purchases.
With CC payments, consumers fill in their card details when purchasing from an online store on the website. These websites have a payment gateway that accepts the most popular types of credit card payment, such as MasterCard, Visa, UnionPay, etc.
This method of payment has been seeing an increase in use mainly because it makes accessibility much easier. By just swiping your card through a machine at a retail store or sharing your card details on an online store, you can complete your purchases without the worry of handling cash.
Advantages and Disadvantages
Advantages of COD:
- Trustworthy Method: Customers feel more comfortable paying for a product after they have received it and seen it.
- More Accessible: There are still many people who don’t have access to bank accounts or credit cards.
Disadvantages of COD:
- Bad for businesses: With payments occurring after delivery, businesses suffer logistically for returns and canceled orders.
- Logistics costs: Accepting cash payments also increases the cost of operations for most businesses. CC payments are more cost-effective!
Advantages of CC Payments:
- Convenience: It is much faster and easier to pay using a Credit Card swipe or through an online store, rather than keeping cash for each purchase.
- Secure: Digital payments are more and more secure today, offering encryption, easy refunds, and fraud protection as well!
Disadvantages of CC Payments:
- Limited Use: Many people still either don’t have access to credit cards or are not comfortable using them online, restricting many CC payments.
- Transaction fees: Credit Card companies do charge fees for each purchase, which reduces the profit margin for businesses.
According to recent studies, while Credit Card payments are definitely on the rise, 85% of online shoppers in Iraq still prefer Cash on Delivery Payments.
Recent Trends and Insights
In recent years, it is pretty evident that consumers in Iraq have been changing their payment preferences. COD is still the most widely used payment method, however, young generations lean more towards using newer digital payment methods such as Credit Card Payments.
Another factor that makes Cash on Delivery less popular is the efforts of the Iraqi government which has been constantly working on promoting digital methods of payment and making banking and finance more and more convenient and accessible.
Some examples that have made credit card payments easier are mobile wallets and banking apps. As more and more consumers feel more comfortable using them, the rise in digital payments can be seen. However, the shift towards CC payments will still be called slow.
Impact of COVID-19 on Payment Methods
The COVID-19 pandemic was also a huge factor in changing the payment method preferences of consumers. Since contactless payment methods across all aspects of the world were promoted, digital payments were also encouraged to be used throughout Iraq. This helped the country see a rise in Credit Card payments.
Even people who were not comfortable with digital payments were more open to trying new payment methods. More and more mobile wallets were opened and credit cards issued and people started to realize how safe and convenient new payment methods can be.
However, the use of Cash on Delivery was still very popular.
Recommendations for Businesses
With the change in payment method preferences, businesses need to adapt to these new trends. Here are some good actionable strategies for businesses to make sure they don’t lose out on any potential sales:
- Offer both options: Instead of choosing just one, it’s better to invest and adapt your logistics to make sure you can accept both payments.
- Promote CC payments: If CC payments are more cost-effective for your business, offer discounts and promotions on them to increase their use.
- Build trust: Use the most popular payment gateways that are known to be secure and highlight the security measures you take + refund policy to ease customer concerns regarding CC payments.
- Monitor analytics: Stay updated on the shifts in payment trends and adapt those changes to your business strategy.
Read More: Which Payment Gateway Suits Your Business Best?
Preferred payment methods of online shoppers in the Middle East
| Payment method types | %age |
| Cash on Delivery | 64% |
| Credit Card | 46% |
| Debit Card | 11% |
| Direct Debit from Bank Account | 9% |
| Store-Specific Gift Card | 3% |
| Digital Payment Systems ( Paypal, Alipay) | 1% |
- Cash on Delivery order return rates are higher by 19% as compared to an 8% return rate for Credit Card orders
- More than 75.7% of Iraq’s total internet user base (regardless of age) used at least one social media platform.
- Meta’s advertising resources indicate that Facebook had 17.95 million+ users in Iraq in from 2023-24.
- YouTube had more than 24.30 million users in Iraq from 2023-24.
- Revenue in the E-commerce sector in Iraq is expected to show a compound annual growth rate (CAGR 2023-2027) of 12.8%, resulting in a projected market volume of US$7,371.8 million by 2027.
- The Central Bank of Iraq (CBI) has issued licenses for 17 companies to operate digital wallets, including notables like AsiaHawala, Zain Cash, NassWallet, and FastPay. Another 15 licenses have been issued for services related to e-payments
- Iraqi e-commerce platform Miswag, for example, online payments make up only 2% of the total transactions. Ali Hilli, the company’s head of marketing and communications, told that the remaining 98% are cash-on-delivery
- A considerable 51% of shoppers in the MENA region indicate that COD influences their decision when making an online purchase.
Conclusion
In Iraq’s evolving e-commerce landscape, payment methods play a crucial role in determining consumer behavior. While COD remains the preferred option for many, the shift towards CC payments is undeniable. Businesses need to be mindful of these trends to stay competitive and provide their customers with flexible, secure payment options. Understanding and adapting to payment preferences will be key to long-term success in Iraq’s e-commerce market.
FAQs
1. What is the most popular payment method for e-commerce in Iraq?
Cash on Delivery (COD) is the most commonly used payment method for online shoppers in Iraq.
2. Are credit card payments secure in Iraq?
Yes, credit card payments are generally secure when processed through trusted payment gateways with encryption and fraud protection.
3. Why do customers prefer COD in Iraq?
Many customers prefer COD because it allows them to inspect the product before paying, reducing the risk of fraud or dissatisfaction.
4. What are the advantages of offering CC payments in Iraq?
CC payments provide convenience, faster transactions, and appeal to tech-savvy consumers, especially with the rise of mobile banking.
5. How can businesses promote credit card payments in Iraq?
Businesses can promote CC payments by offering incentives like discounts, building trust with secure gateways, and educating customers about the benefits.
