ISTANBUL — An Istanbul-based payments startup says it has signed a deal that smooths the way for companies seeking to follow it into Iran’s US$400 billion (S$563 billion) economy.

Iyzico’s agreement with Tehran-based electronic payments platform PECCO lets its customers process transactions from some 230 million payment cards that were, until recently, disconnected from any financial system outside of Iran, according to Iyzico’s German-Turkish CEO, Barbaros Ozbugutu. The deal is the first of its kind, he said in an interview in Istanbul.

Since visiting Tehran last year, the founders of the World Bank-backed company have been working on expanding there, said Mr Ozbugutu. That gives them a foothold in a country that has been so far untapped by American-based competitors PayPal Holdings Inc and Stripe Inc.

“We’re fulfilling the role PayPal was providing in places like Germany, where they were the preferred provider during that country’s digitalisation phase,” said Mr Ozbugutu of Iyzico’s home market. It made sense to expand to Iran because there are “two major markets in the region with high card penetration, and they’re Iran and Turkey”, he said. “Both have populations of 80 million, a very young population and quite high Internet penetration.”

While PayPal’s website says it is active in more than 200 markets, Iran is not one of them. San Francisco-based Stripe also says it does not support transactions in the Iranian rial.

Iyzico signed the deal after restrictions excluding Iran from the SWIFT banking system began to be dismantled as part of an agreement over its nuclear programme. In Iran, all banks are integrated into one unitary clearance system, called Shetab, which means Iyzico’s clients can sell to any card holder in the nation without establishing relationships with individual Iranian banks, said Mr Ozbugutu. BLOOMBERG