In 2018, Digital and Mobile Payment Systems in Turkey

PTT Bilgi Teknolojileri A.S.
PTT Bilgi Teknolojileri A.S.Consultant and Speaker on Blockchain, Payment&E-Money, Fintech and Digital Transformation
Digital / Mobile Payments in Turkey
Agenda
● Regulations in Turkey
● E-Commerce Highlights
● Fintech Highlights
● Cashless Society (2023 vision)
● Payment Ecosystem
● Customer Segments
● Strategy Plan
● Payment Trends
Regulations
# Law Law Topic
5411 Banking Law
5464 Bank Cards and Credit Cards Law
5491 Check Law
5549 Law on the Prevention of Laundering Proceeds of Crime (Money Laundering Issues)
5651 Internet Law
5809 Electronic Communications Law
6493 Law on Payment and Securities Reconciliation Systems, Payment Services and Electronic Money
Institutions
6502 Consumer Protection Law
6563 Electronic Commerce Law
6698 Protection of Personal Data
6362 Capital Market Law (+Crowdfunding added)
19
E-Commerce Highlights
E-Commerce highlights like; market revenues, annual growth rate (CAGR), market segments, user penetrations,
average revenue per user (ARPU) figures through tangible and intangible product and service to the customer via
omni-channel (physical and digital channels)
TUBISAD E-Commerce Report
● Online Retail Volume: Which grew by an average 34% between 2013 and
2016, reached a volume of 17.5 billion TL ($5 billion) by 2016.
● Online Retail Penetration: Online’s share in total retail sales was 3.5% in
2016 (World average of 8.5%), Turkey still has a long way to go.
● Mobile: Smartphone penetration 65% in 2016 (World average 60%. Mobile
E-Commerce in Turkey is still at 19% levels (World average 44%), there is
serious potential in Turkey with smartphone penetration is above world. By
2022 this number is expected to be 49%.
● Traditional Retailers and SMEs: So far, Turkey's E-Commerce growth has
been mostly triggered by pure-online players. Currently, traditional retailers,
who make up for 97% of total retail volume and more than 99% of
employment, make up for only 30% of online retail volume. For next leap
traditional retailers need to accelerate their digitalization and e-retailing.
TR E-Commerce Hightlights
● Revenue in the “E-Commerce" market amounts to US$6,605m in 2018.
● Revenue is expected to show an annual growth rate (CAGR 2018-2022) of
12.0 % resulting in a market volume of US$10,408m in 2022.
● The market's largest segment is "Electronics & Media" with a market
volume of US$2,428m in 2018.
● User penetration is at 41.0 % in 2018 and is expected to hit 48.3 % in
2022.
● The average revenue per user (ARPU) currently amounts to US$196.40.
TR E-Commerce Revenue Statistics
TR E-Commerce User Growth Statistics
TR E-Commerce ARPU
The average revenue per user (ARPU) in the “E-Commerce" market amounts to US$196.40 in 2018.
E-Commerce Revenue Global Comparison
With a market volume of US$599,995m in 2018, most revenue is generated in China.
19
FinTech Highlights
Turkey’s FinTech ecosystem, landscape and highlights with future figures
Turkey FinTech Highlights
● Transaction Value in "FinTech" market amounts to US$18,658m in 2018.
● Transaction Value is expected to show an annual growth rate (CAGR
2018-2022) of 15.5 % resulting in total amount of US$33,185m in 2022.
● The market's largest segment is “Digital Payments” with a total
transaction value of US$16,824m in 2018.
● From a global comparison perspective it is shown that highest
transaction value is reached in China (US$1,558,841m in 2018).
Turkey FinTech Transaction Statistics
The "FinTech" market is expected to show a transaction
value growth of 17.4 % in 2019.
Turkey FinTech Potential Users
In the "FinTech" market the number of potential users is expected to amount to 65.3m by 2022.
FinTech Total TX Value Global Comparison
With a total transaction value of US$1,558,841m in 2018, the highest value worldwide is reached in China.
19
Cashless Society
Turkey is moving to be Cashless Society in 2023
Turkey is Cash-light Economy
Turkey is among the few cash-light economies with a cash circulation volume of 5.3% of GDP
BTK(Information&Communication Tech. Authority) Internet & Mobile
We are moving to wholly mobile world, nowadays mobile banking TXs surpassed web banking TXs
# Fixed-line Subscriber is
slightly decreasing, mobile first
even for house holders.
1
# Total Mobile Subscriber are
increasing more than 3 million
every year
2
# Broadband Subscriber is
incerasing 15% every year
3
Even # Fix-line Subscriber is
descreasing but also ARPU is
increasing
4
# Mobile ARPU is incerasing
more than 10% every year
5
TBB(The Banks Association of TR) Digital Banking
In just 9 months, Digital Banking figures rose like rockets
# Active Personal Customer
jumped from 27,5 mil to 30,6 mil in 9
month
1
# Active Corporate Customer
increased 3,2% from 1,48 mil to 1,53
mil in 9 month
2
# 0-17 Ages Customer
increased about 60% in 9 month3
# 18-25 Ages Customer increased
16% (5,7 mil to 6,7 mil) in 9 month4
# 26-35 Ages Customer increased
8% (9,6 mil to 10,5 mil) in 9 month5
# 36-55 Ages Customer increased
11,5% (10 mil to 10,4 mil) in 9 month6
# 56-65 Ages Customer increased
12% (1,36 mil to 1,5 mil) in 9 month7
# 66+ Ages Customer increased
6.8% (407K to 434Kl) in 9 month8
TBB(The Banks Association of TR) Internet Banking
Internet Banking figures were descreasing because of mobile UI/UX unique experience
# Non-Financial TXs (product and
service applications, payment
intructions, others) increased
1
# Money Transactions nearly stable
in last year because of new PF
(Payment facilitators) with 6493
2
# Payment Transaction
decreased because of new PF
(Payment facilitators) with 6493
3
# Investment TXs (funds, FX, bond,
stocks, gold, term deposits)
increased also
4
# Credit Card TXs decreased
because of new PF (Payment
facilitators) with 6493
5
# Other Financial TXs decreased
because of new PF (Payment
facilitators) with 6493
6
# Product Sales increased from
scratched to 227.000 in 9 months7
# Active Internet Banking Customer
dropped 18,7 mil. (2016 3Q) to 12,8
mil. (2017 3Q)
TBB(The Banks Association of TR) Mobile Banking
Mobile Banking figures rose like rockets because of mobile UI/UX and frictionless experiences
# Non-Financial TXs (product and
service applications, payment
intructions, others) increased 58%
1
# Money Transactions increased by
81%, mobile UI/UX and easy2
# Payment Transaction
increased by 74%, mobile UI/UX
and easy
3
# Investment TXs (funds, FX, bond,
stocks, gold, term deposits)
increased like rockets 121%
4
# Credit Card TXs increased by
73%, mobile UI/UX and easy
5
# Other Financial TXs increased by
101%, mobile UI/UX and easy
6
# Product Sales increased from
scratched to 774.000 in 9 months7
# Active Mobile Banking Customer
rose like rockets 60% from 16,6 mil. (2016
3Q) to 26,5 mil. (2017 3Q)
BKM(Interbank Card Center) POS, ATM, Card
We are moving towards to Cashless Society, hope to be in 2023
# POS machines are being
consolidated because of new
ÖKC (smart/connected) models
1
# ATMs are replacing branch
offices (48K to 49K in one year)2
# Credit Cards were nearly
reached to 76% penetration
(58,7m to 61,2m)
3
# Debit Cards ownership are
increasing every quarter (114,7m to
127,3m)
4
# BKM CEO: By end of 2017, #purchases with debit
cards left behind number of cash withdrawals.
Contactless transaction limit will be extended from 50 TL
to 90 TL by March.
● Payment amount w/Cards increased 15% 677 bil. TL
● Credit Card ownership increased 6% to 62.4 million.
● Debit Card ownership increased 12% to 131.6
million.
BKM E-Commerce
Domestic and International Cards transaction (TX) number and revenues are enormously increasing year by year
After #TROY (Turkish Payment
System), domestic cards usage is
increasing
1
#Local E-Commerce TXs are
increasing around 30%2
Domestic Cards volume (000.TL) on
local and international E-Commerce
are increasing 56%
3
Local E-Commerce volume (000.TL)
with domestic and international
cards increasing more 58%
4
Payment Ecosystem
Within Turkey, BDDK (Banking Regulation and Supervision Agency) and TCMB (Central Bank) are
regulating and operating sector under 6493 Electronic Money and Payment law, so they are giving
the 3 levels licenses (Payment Service Provider / Payment Facilitator / Payment Aggregator,
Electronic Money Institution and System Operator)
Turkey Fintech
Ecosystem
Turkey Payment Ecosystem
Payment Ecosystem Players
A Payment Service Provider (PSP) is a
company that provides merchants with
individual merchant accounts and helps
them with underwriting and payment
processing but does not fund merchants
directly. This is done by the acquire
1
A Payment Facilitator (PF) acts similar to
a PSP. Every merchant has its own
Merchant Identification Number (MID)
through which payments are processed,
but it funds merchants directly.
2
A Payment Aggregator works with small
businesses and uses a single MID to
process payments for all of them.
3
Advance/
Loyalty
Insurance/
Healty Lifestyle
Communication
Retail
Transportation
/ Entrance
Fuel-oil
Entertainment/
Tourism
Payment Game Stake Holders
E-Money
Money
Transfer
Payment/Collection
(VPOS)
FinTechs
InsurTechs
RegTechs
TechFins
Operators/ASPsSmartCity ASPs
14
Customer Segments
We need to start to extend customer base through traditional money transfer and payments area to
omni-channel (Physical and Digital) vision services
Market Potential Pools
62.2 M
15.5 M 29 M
12 M 41.5 M
Domestic Money
TransferDijital Payment
Customers
International
Money Transfer
/year
130 M Credit Card
Holder7 M
8.5M
Expatriate
Smartphone
Owner
15-40 ages
Internet & TV
Owner
1.6
M
Tradesmen /
Craftsmen
Debit Card
Holder
Digital & Traditional Payment Segments
Segment
Population
Less-touched
Segments
Source*: Euromonitor data and Deloitte custom report for banks and payment company
Digital Game
30 million
E-Commerce Category
23 million
Association&
Charity
1.75 million
Household Expenses
22 million
Rent
Payments
5.5 million
Direct
Marketing
3.2 million
Affiliate Networks
3.5K Advertisers
11K Publisher
International
Money Transfer
7 million
School/Student
Expenses
17.5 million
19
Strategy Plan
If you decided to have any 6493 license, you need to have major activities, deliverables, dependencies and
responsibilities to fulfil your value proposition to stake-holders and share-holders.
Payment Institution Strategy Plan
MONEY TRANSFER
* Core System setup
* Back-office integration
* Corridor integration
* Agent system
* Bank integration
* Digital channels
* Field expansion
* Launch and advertising
activities
* Omni‐channel marketing
ACCOUNT
MANAGEMENT
* Bank Payment and Corporate
account integration
* Accounting and Reconciliation
* Corporate, Customer and sub-
accounts, account types and limit
manage
* Remittance, EFT, Card, Branch,
Affiliate/Agency, Partner, ATM
cash‐in, cash‐out apps
* Distributor, Credit, Subscription
collection
PAYMENT & TOP-UP
* Bill (GSM, Electricity,
Water, Natural Gas,etc.)
payments through Branch and
Agencies
* Top-ups (GSM, Game,
Membership, Subscription, etc.)
* Co-exist campaigns
* Express / Scratch Card (Money,
Game and E-Commerce card)
CARD & E-MONEY
* Brand Card/Wallet
* City Card/Wallet
* University Card/Wallet
* Food Card/Wallet
* Hotel Card/Wallet
* Game Card/Wallet
* Loyalty/Discount Card/ Wallet
* Mile Conversion Card/ Wallet
* E‐Commerce Card/Wallet
VIRTUAL POS
* Marketplace
* E‐Commerce services
* Create synergy with resellers
and dealers
* FinTech & TechFin Apps
* E‐Bill/E‐Signature/E‐book
conversions
* Tradesmen / SME applications
* Money Transfer
* Top‐up services
Extra VAS: ✓ Loyalty Program ✓ Cross-brand campaigns
PHASE
1
PHASE
2
PHASE
3 PHASE 5PHASE
4
Payment Game Marketing Plan
PHASE
1
PHASE
2
PHASE
3 PHASE 5PHASE
4
LAUNCH & DIGITAL
MARKETING
* Bus. Partner&Inter‐launch
* Special campaigns and
promotions for ethnics
* Web, mobile & SM channels
promotion
* SEO/SEM
* Display
* Remarketing
* E‐Mail marketing
* Affiliate & Lead Generation
* Social Media Marketing
ATL / BTL
* Outdoor and digital board
* Local & Ethnic Radio ads
* Insert, brochure and flyer
* Satellite TV and Music
channels
* Local and Ethnic Newspaper
and Magazines
AFFILIATE SITES
PARTNERSHIP
* Affiliate ads network
* Chat services
* Community and da/ng
services
* News and Magazine sites
* Sport Clubs, Forum and
Community/Social
* Video Service and Portals
* Game Services
BRAND PARTNERSHIP
* Operators
* Retail institutions
* Tourism and Visa institutions
* Airlines Miles
* Money Transfer
* Banks
* Flower and Food sites
* Credit Card Program
partnership
MOBILE MARKETING
* Cross campaigns with GSM
and Transportation Operators
* Operator Authorized and Opt-in
database campaign
* Discount to the brand with Mobile
Marketing agencies / free
membership to use coupons
* Coupon service traffic partnership
• Local ethnic community (church, residential sites, etc.), special offers and local promotions. Georgian, Azeri days)
• A detailed study and planning needs to be done on the marketing forecasts.
• Brand alliances for Mobile Marketing and Sponsorship important. Brand loyalty card members can be made to free campaign
Notes:
Time Line
New Payment Institutioon needs to write it’s own story in Turkey, now they may integrate traditional
sectors in to digital world of the future.
Day 0
Soft
Launch
Public
Launch
Versioning
Market
Expansion
New
investment
Abroad
Expansion
2018
Payment
Trends
Trend 01: Banks retain payments’ role
Trend Overview
● Regulatory and industry initiatives push for open
data in Europe and US - combined with advanced
payments technologies - are leading to more
collaboration between stakeholders
● Banks are opening their infrastructures and services
with open APIs and instant payments
● Leading banks started to adapt their platform to
facilitate interactions between producers and
consumers of banking and payment services
● Banks platforms based on client accounts, FinTechs
(PSP/PF/PA) produce services on platform while
merchants,corporates&end-users are consumer
Implications
● Collaborative-platform model helps banks to
generate new revenue streams with customer data
and API&VAS
● Model will enable customer centricity by giving more
control to customers to choose providers&products
● FinTechs can achieve scale -w/ minimal customer-
acquisition costs- by ecosystem broad customers
● Stakeholders must open systems to competition to
maintain interoperability & stay relevant
Network effects between producers & clients, are
central to success of a bank’s platform model
Trend 02: Intermediaries consolidation
Trend Overview
● Payments infrastructure is expected to converge
through M&A to expand reach of payments firms,
increase value proposition, expectations and
solutions
● Payment schemes and intermediaries are looking for
infrastructure rationalization to be able to provide
services in niche and high demand areas of data
analytics, cloud and Digital Customer Experience
(DCX)
Implications
● Regulators are working on rationalization of different
payment systems
● Global initiatives such as Global Payments
Innovation (GPI), Blokchain solutions; Ripple,
KlickEx, Stellar and Bankchains brands (Paxos and
Euroclear) are expected to lower costs for cross-
border transactions, fx netting where uniform
payments clearing and settlement system.
● This will bring more agility and reduce go-to-market
period to bring latest offerings to customers
Payments infrastructure become faster & more
inclusive to new players that will launch valuable
offerings for retail and businesses
Trend 03: Banks & TPP benefit from each other
Trend Overview
● Regulatory promotes open banking and data sharing have led
to a scenario where TPPs can potentially bypass
intermediaries (acquirer and card schemes)
● Digital payments & E-Commerce are attracting more entrants
into payment space, which is increasing competition and
forcing payment services vendors to consolidate to capitalize
on economies of scale
● Ex: Fiserv recently acquired Monitise and PCLender to provide
broader range of customer offerings, banking players Misys
and FIS are considering benefits of integrating operations
Implications
● Payments vendors w/ advanced digital capabilities could
become acquisition targets as incumbents look to scale up
● Payments processing is becoming commoditized, players are
looking to expand offerings in various VAS
● Most consolidation case; acquiring new technology, talent or
access to customers, but key concern has been to minimize
costs and to optimize resources
● w/ image & voice technology expected to drive payments
innovation, most payment players will ensure systems remain
nimble to adapt to new offerings based on such technologies
Bank benefits from TPP partnerships, TPP gain access to
seasoned banking expertise and large client bases, which are
likely to fuel convergence across all players
Trend 04:Open APIs enable stakeholder collaboration
Trend Overview
● APIs combine functions and procedures to enable 2-
way data sharing between banks and 3rd parties in
secure, scalable, and accelerated manner
● APIs are pivotal to collecting information from different
banks, which helps in development of new and
improved customized services
● Main benefits from PSD2; API-based solutions of
TPPs, which will deliver value to customers and
simplify merchant services
○ Banks will be obligated to share customer data
○ Data can be accessed by TPPs
○ Opened doors to stakeholders such AISP & PISP
Implications
● Open APIs are expected to provide opportunities for
new payment service providers
● However, concern regarding lack of harmonization due
to absence centralized API infrastructures developed
in silos by banking communities such as Berlin Group-
challenge yet to be addressed:
○ Collaborative ecosystem’s lack of accountability
could threaten sensitive customer data, especially
with opening up of banking infrastructure
PSD2 fosters partnership opportunities between
banks and other industry players w/ open APIs acting
as collaboration-enabling catalysts
Trend 05: Alternate payment channels
Trend Overview
● w/ widespread use of smartphones, mobile banking
and payment apps have gone mainstream, and
wearables provide convenient access to apps
● By 2021,15 bil.M2M &consumer electronic devices
● w/ increased focus on IoT-enabled payments (IoP),
leading banks such as Bank of America are looking to
incorporate IoP into their digital offerings
● Alternative payments benefit saving time, frictionless
payments and efficiency with day-to-day tasks.
● In UK,#contactless TX grew 174% in 2016 (2.86 bil.)
● Mobile & Wearable contact-less payments will be $95
billion Annually by 2018
● 240+ mil.units of wearables to be shipped in 2021
● Fitness trackers payments constitute 30% of market
by 2020, partner with MasterCard & Visa contactless
Implications
● w/ expanding acceptance of digital & mobile
payments, mobile wallets offer contactless solutions,
easy P2P TX and real-time payments grow steadily
● Adoption of contacless cards and mobile payments
increases, they could challenge traditional magnetic
stripe technology and EMV cards
Alternate payment channels fulfill customer demands
for convenience & speed & become mainstream
Trend 06: DLT transforms cross-border payments
Trend Overview
● Banks & FinTechs are looking at DLT (Distributed
Ledger Technology) as backbone of new cross-
border payments infrastructure to solve inefficiencies
(for faster and affordable services)
○ FinTechs Ripple, BTL and Wyre have build cross-
border payments and settlement infrastructure
leveraging DLT, and many incumbents partnering
w/ these or SWIFT
● To adopt DLT, scalability & lack of standardization
must be addressed
Implications
● DLT cross-border solutions will benefit banks by
reducing their credit risks, managing their costs,
improving compliance w/ regulatory requirements,
and enhancing customer’s payments experience
● It offers more secure, cheaper & faster services to
retail and corporate customers by eliminating
intermediaries and making use of robust algorithms
● Prof. services develop DLT based cross-border
clearing & settlement platform
● Government and regulatories must come together to
establish standards for increased adoption & efficient
functioning of DLT for cross-border payment
Sector is exploring blockchain techs for cross-border
payments for faster, inexpensive & efficient services
Trend 07: Instant payment processing
Trend Overview
● Banks are leveraging instant payments to connect TPP
to deliver better digital customer experience & provide
innovative products & services to retail and corporate
customers
● Corporates are demanding more agile solutions for
payment clearing and settlement that will allow to track
and manage intra and inter day liquidity
● Instant payment for corporate could be envisioned in
use cases of Just-in-Time Supplier payments and
short-term loan servicing payments
● PSD2 mandate within PSD2, merchants can be
become PISPs and they can offer instant payments to
retail and corporate customers
Implications
● Opportunity for banks to develop VAS on top of instant
payments infrastructure such as e-Invoicing
● Instant payments implementation will also bring banks
and FinTechs together to form collaboration
● For corporate adoption, it would require further
development of ecosystems; AML, Anti-Fraud, and
lack of harmonization related challenges
w/ wider adoption, instant payments have the
potential to emerge as alternative to checks & cash
for retail and corporate customers
Trend 08: Cyberattacks rise, focus on data-privacy
Trend Overview
● In H1 2017, 918 reported cybersecurity breaches exposed
over 1.9 bil. records.Recent attacks, Equifax,WannaCry&
Japan CryptoCurrency Exch. Market disaster ($500 mil.)
● Cyberattacks can cause personal and commercial data to
be lost or compromised causing financial institutions
financial& reputational loss: Cyberattacks cost global
economy 1% of annual GDP
● Regulators are bringing new cybersecurity regulations and
standards which could impose heavy fines, injunctions,
audits, even criminal liability on firms for a data breach
Implications
● Cyber insurance industry grew 35% in 2016, to $1.35 bil.
Corporates look to protect from liabilities
● Regulators are bringing in new regulations & standards for
ensuring cybersecurity and data privacy, with high
penalties for non-compliance
● Payments firms are expected to continue to invest in
latest technology measures to ensure their systems are
not prone to fraud and data breaches.
● Compliance costs for payment service providers could
rise sharply, bringing in new players who could provide
innovative and cost-effective solutions
Cyber-attacks & data breaches are rising (frequency &
intensity), regulators are focusing on compliance w/ laws
Trend 09: Machine learning helps PSP in fraud
Trend Overview
● With increasing digitalization, banks have become
vulnerable to payments fraud and cyberattacks:
○ Cards fraud alone resulted in loses of over $24
mil. In 2016 while cyberattacks could cost
businesses over $2 trillion by 2019
● Banks w/ RPA and ML can continuously check their
processing systems for possible threats, examine
previous attacks, monitor activities, apps, payments
● ML can used in anti-money laundering (AML)
Implications
● Industry players could focus on RPA to improve
security and reliability while driving down costs
● PSPs are expected to use behavior analytics, ML
and threat matrix to continuously monitor ecosystem
network
● Investment in ML solutions for fraud detection will
rise with 68% of Financial Institutions (FIs) citing ML
analytics as a high priority investment
Robotic Process Automation (RPA) & Machine
Learning (ML) are next-generation tools for payment
service providers in combating fraud and improving
cybersecurity
Trend 10: Advanced authentication technologies
Trend Overview
● Open APIs and increased collaboration could be an
increase in cybersecurity vulnerabilities
● Hackers exploit advanced technologies such as
brainwave signals to gain access to confidential data
of customers. Common one-time pass codes or
more complex passwords are not enough
● Multi-factor authentication involving requiring
multiple layers of defense it way to go to mitigate
cyber threats from hackers:
○ Multi-factor services market will grow CAGR 23%
from 2017-2021, was $2.4 billon in 2016
● Behavioural analytics combine w/ biometrics witness
by banks to monitor fraud w/o impacting UX
Implications
● Stakeholders will collaborate to form interoperable
set of standards such as Fast Identity Online (FIDO)
for simpler and stronger authentication using
biometrics and cryptographic techniques
● TPPs develop plug&play multi-layered authentication
tech. which integrated easily w/ banks’ solutions
● Advanced authentication tech. could be witnessed
by banks in coming years
Biometrics, digital identity, secure element, geo-
location, and interoperable cryptographic keys are
leading mechanism being employed by
stakeholders to provide robust authentication
● Startup.Watch
● fintechstartups.co
● BTK.gov.tr (Information and Communication Technology Authority)
● BKM.com.tr (Interbank Card Center)
● TBB.org.tr (The Banks Association of Turkey)
● TUSIAD.com (Turkish Industry and Business Association)
● ODED.com (Payment and Electronic Money Association)
● Statista.com
● Euromonitor.com
● CapGemini.com
● Deloittedigital.com
Content Sources
Onur B. Çağlar
Web: www.obcaglar.com
Mail: obcaglar@gmail.com
Contact Information
obcag00 obcaglar
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In 2018, Digital and Mobile Payment Systems in Turkey

  • 1. Digital / Mobile Payments in Turkey
  • 2. Agenda ● Regulations in Turkey ● E-Commerce Highlights ● Fintech Highlights ● Cashless Society (2023 vision) ● Payment Ecosystem ● Customer Segments ● Strategy Plan ● Payment Trends
  • 3. Regulations # Law Law Topic 5411 Banking Law 5464 Bank Cards and Credit Cards Law 5491 Check Law 5549 Law on the Prevention of Laundering Proceeds of Crime (Money Laundering Issues) 5651 Internet Law 5809 Electronic Communications Law 6493 Law on Payment and Securities Reconciliation Systems, Payment Services and Electronic Money Institutions 6502 Consumer Protection Law 6563 Electronic Commerce Law 6698 Protection of Personal Data 6362 Capital Market Law (+Crowdfunding added)
  • 4. 19 E-Commerce Highlights E-Commerce highlights like; market revenues, annual growth rate (CAGR), market segments, user penetrations, average revenue per user (ARPU) figures through tangible and intangible product and service to the customer via omni-channel (physical and digital channels)
  • 5. TUBISAD E-Commerce Report ● Online Retail Volume: Which grew by an average 34% between 2013 and 2016, reached a volume of 17.5 billion TL ($5 billion) by 2016. ● Online Retail Penetration: Online’s share in total retail sales was 3.5% in 2016 (World average of 8.5%), Turkey still has a long way to go. ● Mobile: Smartphone penetration 65% in 2016 (World average 60%. Mobile E-Commerce in Turkey is still at 19% levels (World average 44%), there is serious potential in Turkey with smartphone penetration is above world. By 2022 this number is expected to be 49%. ● Traditional Retailers and SMEs: So far, Turkey's E-Commerce growth has been mostly triggered by pure-online players. Currently, traditional retailers, who make up for 97% of total retail volume and more than 99% of employment, make up for only 30% of online retail volume. For next leap traditional retailers need to accelerate their digitalization and e-retailing.
  • 6. TR E-Commerce Hightlights ● Revenue in the “E-Commerce" market amounts to US$6,605m in 2018. ● Revenue is expected to show an annual growth rate (CAGR 2018-2022) of 12.0 % resulting in a market volume of US$10,408m in 2022. ● The market's largest segment is "Electronics & Media" with a market volume of US$2,428m in 2018. ● User penetration is at 41.0 % in 2018 and is expected to hit 48.3 % in 2022. ● The average revenue per user (ARPU) currently amounts to US$196.40.
  • 8. TR E-Commerce User Growth Statistics
  • 9. TR E-Commerce ARPU The average revenue per user (ARPU) in the “E-Commerce" market amounts to US$196.40 in 2018.
  • 10. E-Commerce Revenue Global Comparison With a market volume of US$599,995m in 2018, most revenue is generated in China.
  • 11. 19 FinTech Highlights Turkey’s FinTech ecosystem, landscape and highlights with future figures
  • 12. Turkey FinTech Highlights ● Transaction Value in "FinTech" market amounts to US$18,658m in 2018. ● Transaction Value is expected to show an annual growth rate (CAGR 2018-2022) of 15.5 % resulting in total amount of US$33,185m in 2022. ● The market's largest segment is “Digital Payments” with a total transaction value of US$16,824m in 2018. ● From a global comparison perspective it is shown that highest transaction value is reached in China (US$1,558,841m in 2018).
  • 13. Turkey FinTech Transaction Statistics The "FinTech" market is expected to show a transaction value growth of 17.4 % in 2019.
  • 14. Turkey FinTech Potential Users In the "FinTech" market the number of potential users is expected to amount to 65.3m by 2022.
  • 15. FinTech Total TX Value Global Comparison With a total transaction value of US$1,558,841m in 2018, the highest value worldwide is reached in China.
  • 16. 19 Cashless Society Turkey is moving to be Cashless Society in 2023
  • 17. Turkey is Cash-light Economy Turkey is among the few cash-light economies with a cash circulation volume of 5.3% of GDP
  • 18. BTK(Information&Communication Tech. Authority) Internet & Mobile We are moving to wholly mobile world, nowadays mobile banking TXs surpassed web banking TXs # Fixed-line Subscriber is slightly decreasing, mobile first even for house holders. 1 # Total Mobile Subscriber are increasing more than 3 million every year 2 # Broadband Subscriber is incerasing 15% every year 3 Even # Fix-line Subscriber is descreasing but also ARPU is increasing 4 # Mobile ARPU is incerasing more than 10% every year 5
  • 19. TBB(The Banks Association of TR) Digital Banking In just 9 months, Digital Banking figures rose like rockets # Active Personal Customer jumped from 27,5 mil to 30,6 mil in 9 month 1 # Active Corporate Customer increased 3,2% from 1,48 mil to 1,53 mil in 9 month 2 # 0-17 Ages Customer increased about 60% in 9 month3 # 18-25 Ages Customer increased 16% (5,7 mil to 6,7 mil) in 9 month4 # 26-35 Ages Customer increased 8% (9,6 mil to 10,5 mil) in 9 month5 # 36-55 Ages Customer increased 11,5% (10 mil to 10,4 mil) in 9 month6 # 56-65 Ages Customer increased 12% (1,36 mil to 1,5 mil) in 9 month7 # 66+ Ages Customer increased 6.8% (407K to 434Kl) in 9 month8
  • 20. TBB(The Banks Association of TR) Internet Banking Internet Banking figures were descreasing because of mobile UI/UX unique experience # Non-Financial TXs (product and service applications, payment intructions, others) increased 1 # Money Transactions nearly stable in last year because of new PF (Payment facilitators) with 6493 2 # Payment Transaction decreased because of new PF (Payment facilitators) with 6493 3 # Investment TXs (funds, FX, bond, stocks, gold, term deposits) increased also 4 # Credit Card TXs decreased because of new PF (Payment facilitators) with 6493 5 # Other Financial TXs decreased because of new PF (Payment facilitators) with 6493 6 # Product Sales increased from scratched to 227.000 in 9 months7 # Active Internet Banking Customer dropped 18,7 mil. (2016 3Q) to 12,8 mil. (2017 3Q)
  • 21. TBB(The Banks Association of TR) Mobile Banking Mobile Banking figures rose like rockets because of mobile UI/UX and frictionless experiences # Non-Financial TXs (product and service applications, payment intructions, others) increased 58% 1 # Money Transactions increased by 81%, mobile UI/UX and easy2 # Payment Transaction increased by 74%, mobile UI/UX and easy 3 # Investment TXs (funds, FX, bond, stocks, gold, term deposits) increased like rockets 121% 4 # Credit Card TXs increased by 73%, mobile UI/UX and easy 5 # Other Financial TXs increased by 101%, mobile UI/UX and easy 6 # Product Sales increased from scratched to 774.000 in 9 months7 # Active Mobile Banking Customer rose like rockets 60% from 16,6 mil. (2016 3Q) to 26,5 mil. (2017 3Q)
  • 22. BKM(Interbank Card Center) POS, ATM, Card We are moving towards to Cashless Society, hope to be in 2023 # POS machines are being consolidated because of new ÖKC (smart/connected) models 1 # ATMs are replacing branch offices (48K to 49K in one year)2 # Credit Cards were nearly reached to 76% penetration (58,7m to 61,2m) 3 # Debit Cards ownership are increasing every quarter (114,7m to 127,3m) 4 # BKM CEO: By end of 2017, #purchases with debit cards left behind number of cash withdrawals. Contactless transaction limit will be extended from 50 TL to 90 TL by March. ● Payment amount w/Cards increased 15% 677 bil. TL ● Credit Card ownership increased 6% to 62.4 million. ● Debit Card ownership increased 12% to 131.6 million.
  • 23. BKM E-Commerce Domestic and International Cards transaction (TX) number and revenues are enormously increasing year by year After #TROY (Turkish Payment System), domestic cards usage is increasing 1 #Local E-Commerce TXs are increasing around 30%2 Domestic Cards volume (000.TL) on local and international E-Commerce are increasing 56% 3 Local E-Commerce volume (000.TL) with domestic and international cards increasing more 58% 4
  • 24. Payment Ecosystem Within Turkey, BDDK (Banking Regulation and Supervision Agency) and TCMB (Central Bank) are regulating and operating sector under 6493 Electronic Money and Payment law, so they are giving the 3 levels licenses (Payment Service Provider / Payment Facilitator / Payment Aggregator, Electronic Money Institution and System Operator)
  • 27. Payment Ecosystem Players A Payment Service Provider (PSP) is a company that provides merchants with individual merchant accounts and helps them with underwriting and payment processing but does not fund merchants directly. This is done by the acquire 1 A Payment Facilitator (PF) acts similar to a PSP. Every merchant has its own Merchant Identification Number (MID) through which payments are processed, but it funds merchants directly. 2 A Payment Aggregator works with small businesses and uses a single MID to process payments for all of them. 3
  • 28. Advance/ Loyalty Insurance/ Healty Lifestyle Communication Retail Transportation / Entrance Fuel-oil Entertainment/ Tourism Payment Game Stake Holders E-Money Money Transfer Payment/Collection (VPOS) FinTechs InsurTechs RegTechs TechFins Operators/ASPsSmartCity ASPs
  • 29. 14 Customer Segments We need to start to extend customer base through traditional money transfer and payments area to omni-channel (Physical and Digital) vision services
  • 30. Market Potential Pools 62.2 M 15.5 M 29 M 12 M 41.5 M Domestic Money TransferDijital Payment Customers International Money Transfer /year 130 M Credit Card Holder7 M 8.5M Expatriate Smartphone Owner 15-40 ages Internet & TV Owner 1.6 M Tradesmen / Craftsmen Debit Card Holder
  • 31. Digital & Traditional Payment Segments Segment Population Less-touched Segments Source*: Euromonitor data and Deloitte custom report for banks and payment company Digital Game 30 million E-Commerce Category 23 million Association& Charity 1.75 million Household Expenses 22 million Rent Payments 5.5 million Direct Marketing 3.2 million Affiliate Networks 3.5K Advertisers 11K Publisher International Money Transfer 7 million School/Student Expenses 17.5 million
  • 32. 19 Strategy Plan If you decided to have any 6493 license, you need to have major activities, deliverables, dependencies and responsibilities to fulfil your value proposition to stake-holders and share-holders.
  • 33. Payment Institution Strategy Plan MONEY TRANSFER * Core System setup * Back-office integration * Corridor integration * Agent system * Bank integration * Digital channels * Field expansion * Launch and advertising activities * Omni‐channel marketing ACCOUNT MANAGEMENT * Bank Payment and Corporate account integration * Accounting and Reconciliation * Corporate, Customer and sub- accounts, account types and limit manage * Remittance, EFT, Card, Branch, Affiliate/Agency, Partner, ATM cash‐in, cash‐out apps * Distributor, Credit, Subscription collection PAYMENT & TOP-UP * Bill (GSM, Electricity, Water, Natural Gas,etc.) payments through Branch and Agencies * Top-ups (GSM, Game, Membership, Subscription, etc.) * Co-exist campaigns * Express / Scratch Card (Money, Game and E-Commerce card) CARD & E-MONEY * Brand Card/Wallet * City Card/Wallet * University Card/Wallet * Food Card/Wallet * Hotel Card/Wallet * Game Card/Wallet * Loyalty/Discount Card/ Wallet * Mile Conversion Card/ Wallet * E‐Commerce Card/Wallet VIRTUAL POS * Marketplace * E‐Commerce services * Create synergy with resellers and dealers * FinTech & TechFin Apps * E‐Bill/E‐Signature/E‐book conversions * Tradesmen / SME applications * Money Transfer * Top‐up services Extra VAS: ✓ Loyalty Program ✓ Cross-brand campaigns PHASE 1 PHASE 2 PHASE 3 PHASE 5PHASE 4
  • 34. Payment Game Marketing Plan PHASE 1 PHASE 2 PHASE 3 PHASE 5PHASE 4 LAUNCH & DIGITAL MARKETING * Bus. Partner&Inter‐launch * Special campaigns and promotions for ethnics * Web, mobile & SM channels promotion * SEO/SEM * Display * Remarketing * E‐Mail marketing * Affiliate & Lead Generation * Social Media Marketing ATL / BTL * Outdoor and digital board * Local & Ethnic Radio ads * Insert, brochure and flyer * Satellite TV and Music channels * Local and Ethnic Newspaper and Magazines AFFILIATE SITES PARTNERSHIP * Affiliate ads network * Chat services * Community and da/ng services * News and Magazine sites * Sport Clubs, Forum and Community/Social * Video Service and Portals * Game Services BRAND PARTNERSHIP * Operators * Retail institutions * Tourism and Visa institutions * Airlines Miles * Money Transfer * Banks * Flower and Food sites * Credit Card Program partnership MOBILE MARKETING * Cross campaigns with GSM and Transportation Operators * Operator Authorized and Opt-in database campaign * Discount to the brand with Mobile Marketing agencies / free membership to use coupons * Coupon service traffic partnership • Local ethnic community (church, residential sites, etc.), special offers and local promotions. Georgian, Azeri days) • A detailed study and planning needs to be done on the marketing forecasts. • Brand alliances for Mobile Marketing and Sponsorship important. Brand loyalty card members can be made to free campaign Notes:
  • 35. Time Line New Payment Institutioon needs to write it’s own story in Turkey, now they may integrate traditional sectors in to digital world of the future. Day 0 Soft Launch Public Launch Versioning Market Expansion New investment Abroad Expansion
  • 37. Trend 01: Banks retain payments’ role Trend Overview ● Regulatory and industry initiatives push for open data in Europe and US - combined with advanced payments technologies - are leading to more collaboration between stakeholders ● Banks are opening their infrastructures and services with open APIs and instant payments ● Leading banks started to adapt their platform to facilitate interactions between producers and consumers of banking and payment services ● Banks platforms based on client accounts, FinTechs (PSP/PF/PA) produce services on platform while merchants,corporates&end-users are consumer Implications ● Collaborative-platform model helps banks to generate new revenue streams with customer data and API&VAS ● Model will enable customer centricity by giving more control to customers to choose providers&products ● FinTechs can achieve scale -w/ minimal customer- acquisition costs- by ecosystem broad customers ● Stakeholders must open systems to competition to maintain interoperability & stay relevant Network effects between producers & clients, are central to success of a bank’s platform model
  • 38. Trend 02: Intermediaries consolidation Trend Overview ● Payments infrastructure is expected to converge through M&A to expand reach of payments firms, increase value proposition, expectations and solutions ● Payment schemes and intermediaries are looking for infrastructure rationalization to be able to provide services in niche and high demand areas of data analytics, cloud and Digital Customer Experience (DCX) Implications ● Regulators are working on rationalization of different payment systems ● Global initiatives such as Global Payments Innovation (GPI), Blokchain solutions; Ripple, KlickEx, Stellar and Bankchains brands (Paxos and Euroclear) are expected to lower costs for cross- border transactions, fx netting where uniform payments clearing and settlement system. ● This will bring more agility and reduce go-to-market period to bring latest offerings to customers Payments infrastructure become faster & more inclusive to new players that will launch valuable offerings for retail and businesses
  • 39. Trend 03: Banks & TPP benefit from each other Trend Overview ● Regulatory promotes open banking and data sharing have led to a scenario where TPPs can potentially bypass intermediaries (acquirer and card schemes) ● Digital payments & E-Commerce are attracting more entrants into payment space, which is increasing competition and forcing payment services vendors to consolidate to capitalize on economies of scale ● Ex: Fiserv recently acquired Monitise and PCLender to provide broader range of customer offerings, banking players Misys and FIS are considering benefits of integrating operations Implications ● Payments vendors w/ advanced digital capabilities could become acquisition targets as incumbents look to scale up ● Payments processing is becoming commoditized, players are looking to expand offerings in various VAS ● Most consolidation case; acquiring new technology, talent or access to customers, but key concern has been to minimize costs and to optimize resources ● w/ image & voice technology expected to drive payments innovation, most payment players will ensure systems remain nimble to adapt to new offerings based on such technologies Bank benefits from TPP partnerships, TPP gain access to seasoned banking expertise and large client bases, which are likely to fuel convergence across all players
  • 40. Trend 04:Open APIs enable stakeholder collaboration Trend Overview ● APIs combine functions and procedures to enable 2- way data sharing between banks and 3rd parties in secure, scalable, and accelerated manner ● APIs are pivotal to collecting information from different banks, which helps in development of new and improved customized services ● Main benefits from PSD2; API-based solutions of TPPs, which will deliver value to customers and simplify merchant services ○ Banks will be obligated to share customer data ○ Data can be accessed by TPPs ○ Opened doors to stakeholders such AISP & PISP Implications ● Open APIs are expected to provide opportunities for new payment service providers ● However, concern regarding lack of harmonization due to absence centralized API infrastructures developed in silos by banking communities such as Berlin Group- challenge yet to be addressed: ○ Collaborative ecosystem’s lack of accountability could threaten sensitive customer data, especially with opening up of banking infrastructure PSD2 fosters partnership opportunities between banks and other industry players w/ open APIs acting as collaboration-enabling catalysts
  • 41. Trend 05: Alternate payment channels Trend Overview ● w/ widespread use of smartphones, mobile banking and payment apps have gone mainstream, and wearables provide convenient access to apps ● By 2021,15 bil.M2M &consumer electronic devices ● w/ increased focus on IoT-enabled payments (IoP), leading banks such as Bank of America are looking to incorporate IoP into their digital offerings ● Alternative payments benefit saving time, frictionless payments and efficiency with day-to-day tasks. ● In UK,#contactless TX grew 174% in 2016 (2.86 bil.) ● Mobile & Wearable contact-less payments will be $95 billion Annually by 2018 ● 240+ mil.units of wearables to be shipped in 2021 ● Fitness trackers payments constitute 30% of market by 2020, partner with MasterCard & Visa contactless Implications ● w/ expanding acceptance of digital & mobile payments, mobile wallets offer contactless solutions, easy P2P TX and real-time payments grow steadily ● Adoption of contacless cards and mobile payments increases, they could challenge traditional magnetic stripe technology and EMV cards Alternate payment channels fulfill customer demands for convenience & speed & become mainstream
  • 42. Trend 06: DLT transforms cross-border payments Trend Overview ● Banks & FinTechs are looking at DLT (Distributed Ledger Technology) as backbone of new cross- border payments infrastructure to solve inefficiencies (for faster and affordable services) ○ FinTechs Ripple, BTL and Wyre have build cross- border payments and settlement infrastructure leveraging DLT, and many incumbents partnering w/ these or SWIFT ● To adopt DLT, scalability & lack of standardization must be addressed Implications ● DLT cross-border solutions will benefit banks by reducing their credit risks, managing their costs, improving compliance w/ regulatory requirements, and enhancing customer’s payments experience ● It offers more secure, cheaper & faster services to retail and corporate customers by eliminating intermediaries and making use of robust algorithms ● Prof. services develop DLT based cross-border clearing & settlement platform ● Government and regulatories must come together to establish standards for increased adoption & efficient functioning of DLT for cross-border payment Sector is exploring blockchain techs for cross-border payments for faster, inexpensive & efficient services
  • 43. Trend 07: Instant payment processing Trend Overview ● Banks are leveraging instant payments to connect TPP to deliver better digital customer experience & provide innovative products & services to retail and corporate customers ● Corporates are demanding more agile solutions for payment clearing and settlement that will allow to track and manage intra and inter day liquidity ● Instant payment for corporate could be envisioned in use cases of Just-in-Time Supplier payments and short-term loan servicing payments ● PSD2 mandate within PSD2, merchants can be become PISPs and they can offer instant payments to retail and corporate customers Implications ● Opportunity for banks to develop VAS on top of instant payments infrastructure such as e-Invoicing ● Instant payments implementation will also bring banks and FinTechs together to form collaboration ● For corporate adoption, it would require further development of ecosystems; AML, Anti-Fraud, and lack of harmonization related challenges w/ wider adoption, instant payments have the potential to emerge as alternative to checks & cash for retail and corporate customers
  • 44. Trend 08: Cyberattacks rise, focus on data-privacy Trend Overview ● In H1 2017, 918 reported cybersecurity breaches exposed over 1.9 bil. records.Recent attacks, Equifax,WannaCry& Japan CryptoCurrency Exch. Market disaster ($500 mil.) ● Cyberattacks can cause personal and commercial data to be lost or compromised causing financial institutions financial& reputational loss: Cyberattacks cost global economy 1% of annual GDP ● Regulators are bringing new cybersecurity regulations and standards which could impose heavy fines, injunctions, audits, even criminal liability on firms for a data breach Implications ● Cyber insurance industry grew 35% in 2016, to $1.35 bil. Corporates look to protect from liabilities ● Regulators are bringing in new regulations & standards for ensuring cybersecurity and data privacy, with high penalties for non-compliance ● Payments firms are expected to continue to invest in latest technology measures to ensure their systems are not prone to fraud and data breaches. ● Compliance costs for payment service providers could rise sharply, bringing in new players who could provide innovative and cost-effective solutions Cyber-attacks & data breaches are rising (frequency & intensity), regulators are focusing on compliance w/ laws
  • 45. Trend 09: Machine learning helps PSP in fraud Trend Overview ● With increasing digitalization, banks have become vulnerable to payments fraud and cyberattacks: ○ Cards fraud alone resulted in loses of over $24 mil. In 2016 while cyberattacks could cost businesses over $2 trillion by 2019 ● Banks w/ RPA and ML can continuously check their processing systems for possible threats, examine previous attacks, monitor activities, apps, payments ● ML can used in anti-money laundering (AML) Implications ● Industry players could focus on RPA to improve security and reliability while driving down costs ● PSPs are expected to use behavior analytics, ML and threat matrix to continuously monitor ecosystem network ● Investment in ML solutions for fraud detection will rise with 68% of Financial Institutions (FIs) citing ML analytics as a high priority investment Robotic Process Automation (RPA) & Machine Learning (ML) are next-generation tools for payment service providers in combating fraud and improving cybersecurity
  • 46. Trend 10: Advanced authentication technologies Trend Overview ● Open APIs and increased collaboration could be an increase in cybersecurity vulnerabilities ● Hackers exploit advanced technologies such as brainwave signals to gain access to confidential data of customers. Common one-time pass codes or more complex passwords are not enough ● Multi-factor authentication involving requiring multiple layers of defense it way to go to mitigate cyber threats from hackers: ○ Multi-factor services market will grow CAGR 23% from 2017-2021, was $2.4 billon in 2016 ● Behavioural analytics combine w/ biometrics witness by banks to monitor fraud w/o impacting UX Implications ● Stakeholders will collaborate to form interoperable set of standards such as Fast Identity Online (FIDO) for simpler and stronger authentication using biometrics and cryptographic techniques ● TPPs develop plug&play multi-layered authentication tech. which integrated easily w/ banks’ solutions ● Advanced authentication tech. could be witnessed by banks in coming years Biometrics, digital identity, secure element, geo- location, and interoperable cryptographic keys are leading mechanism being employed by stakeholders to provide robust authentication
  • 47. ● Startup.Watch ● fintechstartups.co ● BTK.gov.tr (Information and Communication Technology Authority) ● BKM.com.tr (Interbank Card Center) ● TBB.org.tr (The Banks Association of Turkey) ● TUSIAD.com (Turkish Industry and Business Association) ● ODED.com (Payment and Electronic Money Association) ● Statista.com ● Euromonitor.com ● CapGemini.com ● Deloittedigital.com Content Sources
  • 48. Onur B. Çağlar Web: www.obcaglar.com Mail: obcaglar@gmail.com Contact Information obcag00 obcaglar