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Case study

Key facts about payments industry in Turkey

Wednesday 15 February 2017 | 08:24 AM CET

Kilian Thalhammer, iyzico: Even though it is close to other European countries, Turkey has a personality of its own when we talk about customers and online paying habits

Due to its geographic location and history, Turkey’s payment environment is rather special, and tends to be very different from other countries, therefore, it`s worth to take a closer look:

Key facts and market overview:

The payment environment in Turkey is mainly driven by a highly technologically-aware population. The ecommerce market in Turkey is one of the fastest growing in the world, with a market size of about USD 2.9 billion in 2015 and an expected turnover of USD 41 billion in 2019. In this scenario mobile payments are expected to be 4 times higher by the end of the period from 2015-2019. Transferring money within Turkey is the main driver of this growth, and shopping on international websites is increasing as well, with about USD 1,5 billion spent on foreign websites in 2015.

It is expected that cards to keep their dominant role as a payment method. Their current market share is about 59%, followed by mobile payments with a market share of 37%. E-wallets have a market share of 2% and prepaid cards and bank transfers about 1% each. Prepaid cards are growing especially for consumers who are under 18 years old.

More than that, for online payments, the Turkish population prefers credit cards over other payment methods to make installments, which is very different to other European countries.

Internet penetration through the Turkish population is almost 50% and smartphone penetration is nearly 30%. With the increase of mobile penetration in the last few years, the preferences of payment methods used for digital purchases have changed slightly. 75% of the Turkish population prefer mobile payments for the purchase of digital goods.

Different than in other European countries “synchronous” payment systems are widely adopted and therefore these systems are the commonly used payment systems. This implies that transactions are completed within the same time, providing increased security and speed with a 24/7 availability.

According to the Interbank Card Center (BKM), there were 57,7 million credit cards in Turkey in 2016, which is about 0.5 million less than in 2015. By contrast, debit cards show a growth of about 15% compared to 2013 with 114,7 million cards in 2016.

The number of POS terminals has also decreased since 2013 and is now only 1,8 million, compared to 2,3 million in 2013. According to BKM, the number of ATMs through Turkey has grown by 15% since 2013 and is now 48K.

Moreover, Turkey’s economic growth is at 4-8% per year which will have a major effect on payment and transaction volumes. This, therefore, makes Turkey a very interesting market for payment services.

Policies and regulations for payment providers in Turkey:

In 2016 PayPal has quit operations in Turkey due to new policies which were established by the Turkish financial regulator BDDK (Banking Regulation and Supervision Agency). These policies require that IT systems need to be housed within the countries borders.

The shutdown of PayPal’s activities in Turkey left a huge vacuum for new payment systems to refill.

The BDDK is in charge of regulations concerning the overall market access for payment companies like PSPs, banks, merchants, etc.The main regulators for payment companies are the already mentioned BDDK and the CBRT (Bank of the Republic of Turkey). The CBRT regulates the customer payment systems as well as the monetary situation in Turkey.

The principles and procedures which apply to payment as well as e-money institutions in Turkey are regulated under Law and the BRSA (Banking Regulation & Supervision Agency). These regulations are partly based on the European Electronic Money Directive.

The Payment Environment in Turkey

The majority of Turkish customers prefer to pay via installments and in most cases uses the local method available. These payment methods are not processed via Visa/ MasterCard network and therefore require a direct connection for international merchants with the banks. For online purchases payment with installments has a share of 55%. Local providers of these payment methods are World, Axess, CardFinans, etc.

Especially due to an increased number of banks and an increased number of integrations the environment became very complex. A specialty for Turkish banks is their loyalty programs in combination with their credit card offerings. So customers are able to pay with loyalty points in cooperation with stores and ecommerce marketplaces.

“Troy” is Turkey’s national payment system which has been rolled out in 2016. The idea behind Troy is to boost electronic money and reduce the use of cash. Familiar with already established systems like the one in Canada, India or Italy, Troy is supposed to lead Turkey into a cashless society with decreased inflation. Although most of the card transactions are domestic, banks are allowed to cooperate with other card schemes for international payments.

Conclusion & key takeaways

Market size, growth, mobile penetration, and regulation are the factors rendering Turkey one of the most promising targets for international payments players and merchants to enter in 2017.

Multiple local payment cards, installment options and the different banking and payment infrastructure are the consideration factors for an international merchant to work with a strong local PSP as a partner.

Being connected to multiple card acquirers and the deep understanding of the unique banking infrastructure in Turkey, a strong local PSP can tweak its payment solution periodically to fit all these requirements, which results in higher acceptance rate. An international merchant can offer “installments” to the Turkish users resulting in an increase of sales volume.

About Kilian Thalhammer:

Over 15 years in payments, fintech, ecommerce and loyalty make Kilian an expert when it comes to serious product, strategy and business development issues. After being Director Solutions for the Swiss Post he joined RatePay (Otto Group) as CPO and was global CPO of PAYMILL (Rocket Internet) until 2014. Kilian is a Business Angel (i.a. Lodgify, Loyaltyprime, Savedroid) in the fintech-field and works as SVP International for iyzico.

About iyzico: 

iyzico is a payment service provider (PSP) for online businesses and enterprises, particularly ecommerce platforms. iyzico’s payment system is easy to integrate, provides fast onboarding in less than 24 hours, PCI-DSS and BRSA (Banking Regulation and Supervision Agency) certified to ensure maximum security. It offers online businesses and enterprises the ability to collect payments in their local currency through installments. Founded in 2013, iyzico has over 8.500 live merchants and 160.000 seller accounts under marketplaces.

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