Turkey Proposes Changes To Payment Card Rules

November 21, 2022
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Turkey’s Banking Regulation and Supervision Agency has published a draft amendment to its payment card regulations aimed at incentivising international players to partner with local processors in the country.

Turkey’s Banking Regulation and Supervision Agency (BRSA) has published a draft amendment to its payment card regulations aimed at incentivising international players to partner with local processors in the country.

The proposal, published at the end of October, would amend Turkey’s Bank Cards and Credit Cards Law 2006 and would require foreign businesses that sell to Turkish customers to use the point-of-sale (POS) terminal of a locally licensed acquirer when they accept a payment card issued by a Turkish bank.

The obligation applies to foreign businesses that have an office in Turkey, have a Turkish website or market their activities in Turkey.

The document says the proposed changes are aimed at encouraging card system companies to apply for a local licence and increase the variety of services in the local card payments ecosystem.

“This regulation, which aims to prioritise Turkish merchant acquiring businesses, will likely reinforce trends of multinational corporations localising their acquiring processes within given markets,” Katharine Evans, an economist at payment consultancy firm CMSPI, told VIXIO.

Co-badging

The proposal also establishes that only licensed issuers can issue exclusively badged cards and issuers that are not licensed in Turkey must co-badge their cards with a locally licensed card issuer’s brand.

However, the proposal lays down that no issuer can force the customer to apply for an exclusively badged card and it is the customer’s right during the card application process to choose which card system scheme they want to use on the card.

When consumers consider the different schemes, banks must properly inform the customer about the functions, costs, customer rights and security features of the various options, under the proposed amendments.

In case the customer decides to use more than one scheme on the card, the issuer must ensure that the customer can determine which scheme has priority during the use of the card and the POS terminals must be able to process all the card schemes of licensed operators.

In the case of co-badged cards, the acquirers must also ensure that the POS processes the payment in the scheme of the customer’s preference and allows the customer to potentially choose between the schemes in each transaction.

According to Evans, it is “noteworthy that card issuers will be required to give consumers choice of not only the schemes their cards are issued with, but also the preferred order of use — while it is merchants who will see the cost effects of these choices”.

TROY, the domestic alternative

Turkey has one of Europe’s largest payment card markets, according to VIXIO analysis. Card payments, particularly credit cards, are very popular and different issuers compete through offering highly lucrative bonus programmes. Currently, around 87 percent of non-cash transactions in the country are card-based.

In an effort to compete with international giants Visa and Mastercard, Turkey launched a domestic card scheme called TROY in 2016.

The system is operated by the country’s Interbank Card Center (BKM) and, despite policymakers’ efforts, it has gained a limited market share since its launch.

According to BKM data, there were around 237m credit and debit cards issued in Turkey at the beginning of the year, while there were only 12m TROY cards circulating in the country at the same time.

In early October, Russian news agency TASS speculated that TROY could be used as an alternative to Russia’s Mir card after Turkish banks started to refuse the Russian card.

In addition to Visa and Mastercard, American Express, JCB, UnionPay and Diners Club are also licensed payment networks in Turkey.

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