Challenges of Banking Infrastructure in Syria and Obstacles to Digital Transformation in the Post-Conflict Phase

After the fall of the Assad regime, Syria entered a transitional phase requiring a comprehensive restructuring of financial infrastructure and broader reforms of electronic banking services. However, the reality faces many significant difficulties and obstacles that hinder the achievement of a genuine banking renaissance. Here, we discuss the most important of these obstacles and provide a glimpse of possible proposals based on local studies and recent news.

First: Obstacles and Difficulties

1. Electricity and Communications Outages and Weak Digital Connectivity

Syria suffers from severe instability in basic infrastructure: frequent power outages, weak communications, and lack of stable, high-speed internet. This directly affects banks' ability to provide reliable and smooth electronic services.

2. Liquidity and Cash Shortage

The severe financial crisis has pushed many transactions to cash or black-market dealings, weakening trust in banking sectors, especially electronic services.

3. Weak Digital Financial Legislation and Regulation

Despite some recent steps, such as the memorandum of understanding signed between the Central Bank of Syria and the Ministry of Communications to regulate digital financial institutions and set cybersecurity standards, legal frameworks remain incomplete or inefficiently enforced.

4. Technical and Operational Challenges

These include a shortage of hardware, weak technical infrastructure (servers, data centers, network connectivity), and difficulties in regular maintenance and outdated equipment.

5. Security Challenges

Cybersecurity risks, data protection, and digital identity reliability all pose significant challenges. In an environment lacking trust, the need for a strong digital security framework is imperative.

6. Social, Cultural, and Human Barriers

Low digital awareness among users, resistance to change, fear of electronic services, a lack of skilled banking personnel, and insufficient employee training are major barriers.

7. Economic Deterioration and Political and Security Impacts

Economic sanctions, international restrictions, severe inflation, and eroded purchasing power all affect banks’ ability to invest in modernization and development. Political stability is also crucial for attracting investments or technical assistance.

Second: Possible Proposals and Solutions

In light of the above challenges, several proposals can facilitate the development of banking infrastructure and enhance electronic services:

1. Upgrade Basic Energy and Communication Infrastructure

Invest in backup power stations (generators, renewable energy) to reduce outages. Improve internet infrastructure, expand connectivity between regions, and enhance fiber optic quality. Ensure affordable internet access for users.

2. Comprehensive Legislative and Regulatory Reform

Enact clear laws for digital financial services, defining consumer rights, data protection, digital identity, electronic clearing, and cybersecurity. Establish independent bodies for technical and security oversight. Adopt international standards for digital banking performance.

3. Enhance Human Capacity and Competence

Train banking employees in modern technologies and digital security. Conduct awareness campaigns for end-users to increase trust in electronic services, explain procedures, clarify fees, and simplify user interfaces.

4. Stimulate Innovation and Fintech Adoption

Encourage banks to collaborate with tech startups to develop electronic payment solutions, digital wallets, and banking apps. Simplify licensing and regulatory procedures, as recently done by eliminating some licensing requirements for digital applications in Syria.

5. Financial Support and Foreign Investment

Open doors to foreign investment or technical aid linked to financial infrastructure development. Create special financing funds for banks to update data centers, security supplies, and technology. Engage international organizations to support transparency and implementation of global standards.

6. Coordination Among Different Stakeholders

Foster cooperation between government, banks, telecom companies, and digital service providers to ensure infrastructure and regulatory alignment. Establish a joint task force to develop digital financial services and set policies and strategies (already initiated by the memorandum between the Central Bank and Ministry of Communications).

Summary

If Syria aims to transition from traditional banking services to a fully integrated digital economy, priority must be given to rebuilding physical and technical infrastructure, updating legislation, enhancing human capabilities, and improving societal trust in electronic services. Achieving this requires concerted efforts among state sectors, civil society, and local and international investors.