Doing Business in Türkiye: FinTech

Payment services and e-money institutions

Law No. 6493, governing Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions, serves as the primary regulation for entities operating in payment systems, security settlement systems, payment institutions and electronic money institutions in Türkiye. Additionally, the Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers provides detailed information on licensing, operational standards and compliance requirements applicable to these entities.

E-money Institutions

E-money institutions are the organizations that enable customers to conduct payment transactions with third parties using the electronic money transferred from the customer to electronic money accounts. Additionally, electronic money institutions capable of generating IBANs can issue prepaid cards in compatibility with card system organizations. Customers make their payments using payment instruments such as cards, mobile phones and passwords.

Financial requirements applicable to the e-money institutions are briefly as follows:

• Minimum Paid-In Capital: ₺5m
• Minimum Equity Capital: ₺25m
• Minimum Collateral: ₺5m
• Application Fee: ₺500k
• License Fee: ₺1m

Payment institutions

Payment institutions are the organizations that provide the infrastructure for customers to perform transactions such as depositing and withdrawing money from their payment accounts and conduct all necessary operations for the operation of the payment account. These institutions also facilitate fund transfers made with credit cards, bank cards, prepaid cards and handle regular payment order transactions. Payment institutions also provide physical POS and virtual POS infrastructure services for transactions conducted in-store and online by businesses. Payment institutions can offer payment services in areas defined by relevant legislation, such as money transfers, mobile payments, bill payments, account information services and payment initiation services. A payment institution, upon obtaining permission for a specific payment service, is authorized only to conduct the activities related to that payment service or services.

Financial requirements applicable to the payment institutions may vary depending on the type of license and the activity. However, in general, the following financial requirements shall apply:

• Minimum Paid-In Capital: ₺2m
• Minimum Equity Capital: ₺9m
• Minimum Collateral: ₺3m
• Application Fee: ₺500k
• License Fee: ₺1m

Digital banking

As digital banks gain global momentum, traditional banks face challenges from these new players that offer simple, user-friendly products, data-driven interactions and quick loan approvals, often eliminating fees and commissions. With its tech-savvy population, Türkiye is no exception to the worldwide shift in customer preferences toward digital platforms. The long-awaited Regulation on Operating Principles of Digital Banks and Service Model Banking (the "Regulation") finally came into effect on January 1, 2022 to address this accelerating trend.

The Regulation outlines the procedures and principles for (i) branchless banks that exclusively provide services through electronic channels such as internet banking, mobile banking, telephone banking, ATMs and WAP-banking; and (ii) banking services provided to financial technology companies and other businesses via a Banking-as-a-Service (BaaS) model. The Regulation holds significance for allowing entities without banking licenses to establish digital banks, by introducing an exclusive license for digital banking.

In line with general principles, digital banks can perform all activities allowed for credit institutions, while adhering to both the Regulation and other legal provisions applicable to credit institutions. These activities vary according to their classification as deposit or participation banks. Likewise, digital banks are subject to same conditions for establishment and operation as traditional banks, as set out in the Regulation on Transactions of Subject to Authorization and Indirect Shareholding ("Authorization Regulation"). Additional provisions from the Regulation, however, apply to digital banks without prejudice to the provisions of the Authorization Regulation. Such additional provisions also include a TL1bn minimum capital requirement to be paid in cash without any kind of collusion, and conditions regarding digital banks' management, operating program and business plan and the adequacy assessment of information systems.

The Regulation further introduces restrictions for enabling a smoother integration of digital banks into the Turkish banking landscape and maintaining the distinction between business models. Accordingly, digital banks can only engage with financial consumers and small and medium-sized enterprises, but may extend loans to large-sized enterprises and other banks. Although digital banks must open a physical office and may receive support services from support service organizations, they cannot operate branches. This restriction furthermore includes correspondents, agencies, representation offices and other similar units and excludes the general directorate and associated service units. Digital banks must also apply income-based limitations when offering unsecured consumer loans and face monetary limits if the income cannot be determined. To lift some of these limitations, digital banks may apply to the Banking Regulatory and Supervisory Authority (BRSA) after increasing their minimum paid-in capital, ₺1bn to ₺2.5bn.

Crypto assets

Interest in crypto assets has been steadily growing over the past 10 years. In 2020, Türkiye ranked 14^th among cryptocurrency investors around the world according to a report from the Information and Communication Technologies Authority. The heightened interest in crypto assets and crypto trading in Türkiye has caught the attention of global crypto exchange platforms. In 2021, numerous global crypto asset exchange platforms opened local operations. 

In 2019, the Parliament passed the 11th Development Plan, which outlines, among other things, the implementation of a blockchain-based digital central bank currency and the establishment of the Association of Payment Services and Electronic Money Institutions. In April 2021, the Regulation on the Disuse of Crypto Assets in Payments, Türkiye’s first legislation relating to crypto assets, entered into force. 

The Regulation defines crypto assets as “intangible assets virtually created by use of distributed ledger technology or a similar technology and distributed over digital networks but not classified as fiat money, registered money, electronic money, payment instrument, security or other capital market instrument.” The Regulation does not prohibit crypto assets out right, nor does it prohibit the purchase, sale, offering, transfer or custody of crypto assets and the platforms providing such services (i.e. crypto asset exchanges). 

The Regulation does, however, prohibit:

1. the use of crypto assets directly or indirectly in payments;
2. the development of business models by banks, payment institutions and electronic money institutions that directly or indirectly use crypto assets; and 
3. payment institutions and electronic money institutions from acting in intermediary activities for platforms providing for the purchase, sale, custody, transfer or offering of crypto assets.

Additionally, following amendments made to the Anti-Money Laundering Regulation in May 1, 2021, crypto asset service providers and saving finance companies are deemed to be obligors within the scope of the legislation on the prevention of laundering crime proceeds and financing of terrorism. These service providers are now liable for the fulfilment of the obligations stipulated under the Anti-Money Laundering Regulation and other relevant legislation. Obligations include conducting know-your-customer procedures, notifying suspicious transactions, periodic reporting, and retention and submission of information to the Financial Crimes Investigation Board of Türkiye.

It was recently announced by the Presidency that a draft bill regarding the detailed regulation of crypto assets and platforms has been submitted to the Parliament for review and development. It is expected that a major piece of legislation on crypto assets will be introduced in Türkiye in the very near future.