Key Facts for Iraq
- Primary real-time rails: Instant payment system, Unified government payment gateway, National switch.
- Typical settlement times: Settlement is described as instant, but no official service-level agreement is published.
- Common limits: Varies by institution.
What “real-time payments” means in Iraq
In Iraq, real-time payments are defined by the country’s instant payment system, which facilitates 24/7 money transfers with an emphasis on user convenience. The scope is extensive, covering personal and business use cases like in-store and online purchases, QR code payments, and domestic transfers. This system is a core component of Iraq’s financial modernization, integrating with a unified government payment gateway to increase transparency and support strategic programs like salary localization. Although the framework is operational, a formal legal definition for real-time payments has not yet been codified in Iraqi law.
The Central Bank of Iraq (CBI) is the lead regulator and operator driving this transformation. It is developing a national switch to support high transaction volumes with speed and stability, though specific subsidiary clearing houses are not publicly named. The underlying messaging protocol for the system has not been specified, but new national payment infrastructures are typically built using the ISO 20022 standard (industry norm) for its rich data capabilities and global interoperability. By developing its payment system in line with international standards, Iraq is positioning its economy for greater transparency and modernization.
Payment Rail Overview
Instant payment system
The instant payment system is the foundation of Iraq's modern financial infrastructure, facilitating immediate, around-the-clock money transfers. It is designed to provide a simplified user experience for a wide range of transactions, including peer-to-peer, retail, and online payments. While a specific launch date is not public, this system is a key part of the Central Bank of Iraq's recent push for digital transformation.
- 24/7 Availability: Operates continuously, allowing for economic activity outside of traditional banking hours.
- Real-Time Tracking: Gives users and businesses an immediate, clear overview of their financial activity.
- Broad Use Cases: Supports everything from simple QR code payments in-store to complex online business transactions.
- Pros: The system operates 24/7, supports key economic modernization goals, and is built on standards that could allow for future interoperability with networks like Lightning.
- Cons: Its success hinges on building public trust and driving widespread adoption, which requires significant awareness efforts.
Unified government payment gateway
The unified government payment gateway centralizes all state-related financial transactions into a single, secure system. Its primary function is to increase transparency and trust in public sector payments, from fee collection to disbursements. This gateway is a recent development, introduced as part of a broader strategy to digitize government services and reduce opportunities for manipulation.
- Centralized Processing: Consolidates all government payments into one portal for efficiency and oversight.
- Increased Trust: Designed to build public confidence in government financial operations through transparency.
- Anti-Corruption: Directly reduces opportunities for manipulation and fraud in the public sector.
- Pros: The gateway significantly enhances transparency in public finances and streamlines government services.
- Cons: Its effectiveness depends on achieving full cooperation and technical integration across numerous, often siloed, government bodies.
National switch
The national switch acts as the central nervous system for Iraq's payment ecosystem, connecting various banks and financial institutions to route transactions efficiently. It is engineered to handle high volumes of payments with speed, stability, and robust security. As a foundational piece of infrastructure, its development is a critical step in the country's financial modernization, though its official activation date has not been announced.
- High-Volume Support: Architected to process a large number of transactions without compromising performance.
- Speed and Stability: Provides a reliable and fast backbone for the country's entire payment network.
- Digital Sovereignty: Reduces Iraq's reliance on foreign payment processing systems and control.
- Pros: It creates nationwide interoperability between financial institutions and strengthens domestic control over the financial system.
- Cons: The primary challenge is the technical and logistical complexity of integrating every financial institution in the country onto a single platform.
Limits, Fees, and SLAs
- Operating Hours: The instant payment system enables 24/7 money transfers, allowing for continuous economic activity without specified cut-off times.
Compliance and Risk
KYC/KYB & AML
Iraq’s compliance framework is anchored by its 2015 anti-money laundering law, mandating customer due diligence and suspicious activity reporting. The new Electronic Payment Services Regulation of 2024 further requires fintechs to demonstrate robust AML systems to secure an operating license.
Fraud Controls
Fraud control is built into the AML framework and the 2024 digital payment regulation, which creates transparent transaction trails. Financial firms use secure authentication like OTPs and biometrics, alongside mandatory reporting of suspicious activity, to mitigate risk and combat scams.
Recordkeeping & Audits
Under the AML/CFT law, institutions must maintain comprehensive records of all customer data and transactions for at least five years. The regulation also mandates robust internal controls and regular, independent audits to verify compliance and ensure the integrity of financial reporting.
Lightning Network Integration as a Solution
The Lightning Network is a layer-2 protocol built on Bitcoin that processes transactions off-chain for superior speed and low cost. While local RTP rails modernize domestic finance, Lightning complements them by offering a universal settlement layer. It connects disparate real-time systems, creating a global network for money movement without requiring direct integration between them. This provides a bridge for international transactions where local systems are confined by national borders.
While both systems offer instant settlement, Lightning’s primary advantages are cost and reach. It provides near-zero fees, making microtransactions practical. More importantly, where domestic rails are limited by national borders, the Lightning Network operates as a borderless payment system. This allows for immediate, low-cost international payments, connecting economies in a way that siloed domestic systems cannot and opening access to new markets.
- Cross-Border Complexity: It bypasses traditional banking intermediaries, removing the high fees and settlement delays associated with international payments.
- Scalability Limitations: The network addresses blockchain congestion by processing transactions off-chain, supporting a massive volume of payments at a fraction of the cost.
- Liquidity Management: It uses pathfinding algorithms to route payments efficiently through a web of interconnected channels, optimizing the flow of funds across the network.
Exploring the Lightning Network opens a path to a truly global and efficient payment infrastructure.
B2B Enterprise Use Cases
- Supplier Payments – Businesses pay international suppliers instantly, bypassing correspondent banking systems and settlement delays.
Business value: Strengthens supply chain relationships with immediate, low-cost global payments. - Merchant Settlement – Retailers receive customer payments immediately, converting funds into a stable currency without batch processing waits.
Business value: Improves cash flow and reduces settlement risk for merchants. - Treasury Optimization – Corporate treasuries move funds between international accounts in real-time to manage liquidity and currency exposure.
Business value: Provides active control over global cash positions and working capital. - Payroll – Companies execute instant, low-fee salary payments to a global workforce, including contractors and remote employees.
Business value: Simplifies international payroll and gives workers immediate access to their earnings. - B2B Micropayments – Businesses pay for API calls or data services on a per-use basis with automated, real-time micropayments.
Business value: Creates new pay-as-you-go business models for digital services.
Cross-Border Transactions and Remittances to Iraq
Cross-border RTP to Iraq is difficult due to a restrictive regulatory environment. Reaching the country’s financial system requires navigating a complex web of anti-money laundering controls and geopolitical pressures. Concepts like rail bridging—connecting domestic payment systems to global networks—and establishing clear FX paths are complicated by intense U.S. oversight and bans on certain banks from using U.S. dollars. This forces reliance on slower, more bureaucratic banking systems for international trade and payments.
- Iran: This corridor is characterized by trade payments and financial flows that help Iran access hard currency, often operating in a gray area to bypass international sanctions.
- United States: A critical corridor for managing Iraq’s oil revenues, with over $100 billion held in the U.S. All transactions are strictly monitored by U.S. authorities to prevent money laundering and sanctions evasion.
- Turkey & Jordan: These corridors support significant regional trade in goods and services. Payments are typically processed through correspondent banks, which are subject to rigorous AML/CFT compliance checks.
The Lightning Network provides a powerful alternative, using Bitcoin for universal settlement. It bypasses the delays and high costs of traditional banking by creating a direct path for value, turning complex international transactions into instant, low-fee global payments.
How Lightspark Makes Integration Easy
Lightspark helps fintechs, digital banks, wallets, and exchanges integrate with the Lightning Network by abstracting away its underlying complexities. We provide a complete platform that manages liquidity and optimizes routing for reliable, high-success-rate payments. Our solution includes robust, built-in compliance screening and a full suite of developer tooling to accelerate your time to market. This allows you to offer your customers sub-second settlement globally with near-zero fees, connecting your platform to a universal payment network and expanding your reach. Talk to our team to get started.
Sources and Further Reading
- https://finintegrity.org/ifi-launches-financial-integrity-and-cross-border-payments-training-program-for-national-bank-of-iraq/ - Iraq banking integrity training program.
- https://www.iraq-businessnews.com/2025/08/09/iraqs-central-bank-advances-digital-payment-transformation/ - Iraq's digital payment transformation.
- https://www.lightspark.com/contact - Contact the Lightspark sales team.
- https://www.lightspark.com/knowledge/how-the-lightning-network-is-transforming-bitcoin - Lightning Network transforms Bitcoin payments.
- https://www.lightspark.com/knowledge/is-crypto-legal-in-iraq - Legality of cryptocurrency in Iraq.
- https://www.lightspark.com/knowledge/what-does-the-lightning-network-do - Explains the Lightning Network's function.
- https://www.lightspark.com/news/insights/what-are-lightning-payments - An overview of Lightning payments.
- https://www.reuters.com/world/five-iraqi-banks-be-banned-us-dollar-transactions-sources-2025-02-16/ - Iraqi banks banned from USD.
