The document discusses Turkey's contactless and NFC ecosystem from Yapı Kredi's perspective. It provides an overview of Turkey's card payments market and NFC ecosystem involving customers, mobile network operators, banks, merchants, regulators and solution providers. It then details Yapı Kredi's contactless products, NFC architecture and two NFC products - MasterCard Mobile PayPass and Visa iCarte. The conclusion is that NFC adoption will take widespread contactless infrastructure and NFC-enabled phones before generating revenue, but can provide value through loyalty programs and expanded use cases.

1. Turkish Contactless & NFC Ecosystem
Yapı Kredi Perspective & Products
June 21, 2012
Burak ILGICIOGLU

2. Agenda
2
• Turkey Card Payments Overview
• Turkish NFC Ecosystem
• Yapı Kredi NFC Architecture & Products

3. About Yapı Kredi
3
• Owned equally by Koç Holding and UniCredit
• 17 K+ employees
• 900+ branches
• 2,500+ ATMs
• 7 M+ credit cards
• 7 M+ debit cards
• 450K+ POS Terminals

4. Turkey Overview
4
75 M
35 M internet users
30 M+ 1 M+
4 M+
Ranks 17th biggest
economy in the world17
14,615
USD GDP per capita
Member of
OECD & G20
1 out of 5 card user is
E-Commerce User

5. Turkish Card Payments Market Overview
5
Third in Europe Fourth in Europe
Average annual growth rate = 9%
0
20
40
60
80
100
120
140
2005 2006 2007 2008 2009 2010 2011
Credit Cards Debit Cards Total
Credit 51 M
Debit 82 M
Total 133 M

6. Turkish Card Payments Market Overview
6
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2005 2006 2007 2008 2009 2010 2011
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2005 2006 2007 2008 2009 2010 2011
Number of POS terminals
Number of ATMs
1,9 M
32,5 K
Average annual growth rate = 10%
Average annual growth rate = 14%

7. Agenda
7
• Turkey Card Market
• Turkish NFC Ecosystem
• Yapı Kredi NFC Architecture & Products

8. Turkish Contactless Market Overview
8
6 M
2005
14
60 K
Start of contactless projects Number of banks issuing
contactless products
Number of contactless
enabled POS terminals
Number of contactless cards issued

9. Turkish Mobile & NFC Overview
64 M
20083
87 %
Number of mobile subscribers Mobile penetration
Number of MNOs
Start of NFC trials

10. Turkish NFC Ecosystem
Customers
MNOs
Banks
NFC
Handsets
Merchants
Regulators
Solution
Providers

11. Turkish NFC Ecosystem - Customers
• 6 M current contactless card customers
• MNOs and banks share the NFC customers
• User experience for enrolling / installing /
transacting are the key issues
Customers

12. Turkish NFC Ecosystem - Handsets
• Very limited number of handset available
• NFC does not come with feature phones
• Low smartphone penetration
NFC
Handsets

13. Turkish NFC Ecosystem - MNOs
• All 3 MNOs are actively involved in NFC projects
• MNOs’ strategy is based on mobile wallets
• All 3 MNOs have their own TSMs
• No cooperation like ISIS
• MNOs consider NFC as a loyalty tool & value added
service, not as a revenue generator
• Multiple banks
• Not just for payment;
– Transport ticketing
– Access control
– Location based campaigns
– Couponing
– Smart posters
– Loyalty programs
Mobile Wallets
MNOs

14. Turkish NFC Ecosystem - Banks
• Enablers of contactless payment infrastructure
• Not just SIM centric model
• Mobile is more than just NFC;
– Mobile banking
– Mobile money transfer
Banks

15. Turkish NFC Ecosystem - Merchants
• Banks provide POS terminals and contactless readers
to merchants
• Essentially part of bank infrastructure
• Important component for contactless acceptance &
experience
• Limited awareness (no extra financial benefit) for
contactless
• Limited contactless reader penetration
Merchants

16. Turkish NFC Ecosystem – Regulators & Solution Providers
• Visa, MasterCard and BKM are actively involved
in NFC trials & projects.
• In close cooperation with banks & MNOs.
• Solution providers have required know-how and
technology for NFC
Regulators
Solution
Providers
• TSM
• National Switch
• Clearing House
• National Regulator

17. Turkish NFC Ecosystem – User experience & acceptance
• The most critical component of the
ecosystem
• Enrollment & installation differs from
bank to bank
• Contactless penetration is %12
• Contactless : low or high value?
• Contactless : online PIN?

18. Turkish NFC Ecosystem – Main Barriers for NFC
• Low contactless reader penetration (3%)
• Consumers still need to be tech-savy to setup
and activate (setups not convenient)
• Lack of NFC enabled handsets
• Lack of single customer experience
• Standardization is still an issue

19. Turkish NFC Ecosystem – Critical Success Factors for NFC
• Development of entire ecosystem by the main
players and expanding contactless/NFC POS
• More smartphone penetration
• Enabling high value payments for NFC
• Expansion towards P2P for complete
ecosystem and user experience
• Campaigns & customer education for NFC
• More use cases for NFC other than payment

20. Agenda
20
• Turkey Card Market
• Turkish NFC Ecosystem
• Yapı Kredi NFC Architecture & Products

21. Yapı Kredi Contactless Overview
21
• One of the market makers in Turkey
• Yapı Kredi started issuing contactless credit cards
in 2009
• Full range of credit card products have contactless
feature
• 1 M+ contactless cards have been issued
• 14 K+ contactless readers are deployed with %25
market share

22. Yapı Kredi Contactless Overview
22
• Contactless as enabler of faster and better user
experience
• Active engagement for contactless
• Strong campaigns for contactless (1 out of 4
contactless transactions is credited back)

23. Yapı Kredi NFC Overview
23
• NFC positioned as an extension of current contactless
product line up
• PayMobile : branding for mobile product portfolio
• Customers are encouraged to try the mobile payment
products
• Works closely with all MNOs in Turkey
• Two NFC products are commercially available now:
– MasterCard Mobile PayPass
– Visa iCarte for iPhone
• Two more NFC projects are in the pipeline for commercial
launch

24. Yapı Kredi NFC Products : MasterCard Mobile PayPass
24
PayMobile MasterCard SIM product on
Turkcell Cep-T Cüzdan

25. Yapı Kredi NFC Products : MasterCard Mobile PayPass
25
• MasterCard Mobile PayPass v0.91 (1.0 coming
soon)
• N-Flex antenna and NFC enabled phones are also
supported
• Transactions below 35 TL are processed offline
• Online transactions over the contactless interface
is possible
• Both MNO wallet and STK have UI’s for accessing
the payment application

26. Yapı Kredi NFC Architecture for Mobile SIM based products
26
Core Card
Management
NFC Gateway
Internet
/Telephone
Banking
MNO Sales
Point
(via EFTPOS)
TSM
Online
Application
Process
Online
Application
Process
MNO OTA
3G/EDGE/GSM
Perso file
Eligibility
Check
Personalization
MNO
Total personalization time is between 3 – 25 minutes
Life cycle & counter
reset scripts
Personalization
Issuer Scripting

27. Yapı Kredi NFC Products : Visa iCarte
27
• Awarded Visa Europe’s Most Innovative Product of 2011
• VMPA 1.3.1 is used on iCarte’s SE
• Online only profile
• Personalization is initiated by
the customer
• Works with iPhone 3G, 3GS,
4 and 4S
• Users can save personal
notes on transactions
(merchant name, merchant type,etc)

28. Yapı Kredi NFC Architecture for iCarte
28
Core Card
Management
NFC Gateway
Internet/SMS
TSM
Batch
Application
Perso file
Personalization
iCarte app
installation
Mobile Gateway
Passcode Change Script
Personalization
Issuer Scripting

29. Conclusion: Towards a New Era
29
• NFC products are not intended to generate revenue in the
short run for both banks and MNOs
• NFC will not drive high usage volume before contactless POS
terminals become widespread and NFC handset penetration
reaches critical mass
• MNOs consider NFC products as a loyalty tool as well as a
value added service for subscribers
• Yapı Kredi’s perspective on NFC is to position its NFC
products as part of the mobile payment portfolio, which
includes;
– Location based services
– Campaigns & loyalty program integrations
– Expansion towards other P2P network
– Expansion in POS network

30. PayMobile Ads
30
Newspaper & Magazine Advertorial

31. PayMobile Ads
31
Poster for Branches
Newspaper & Magazine Ad

32. PayMobile Ads
32
Web content

33. 33
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