Turkey has many of the components needed to produce a thriving fintech system, and the Interbank Card Center (BKM) is leading the way in putting them together, CEO Dr. Soner Canko said.
Established in 1990, BKM is charged with finding solutions to common industry problems and developing rules and standards for Turkey’s credit and debit card systems. Back then 13 Turkish banks joined forces to develop a domestic transaction system where they would accept each other’s cards, taking the step after major credit card systems did not show interest. Nearly 30 years later BKM has become for Turkey what Interac is for Canada and VISA/MasterCard are for the United States.
When institutions join the BKM network their transaction data is fed into a data warehouse hiding similar records from all other members. BKM reports on industry activity to regulators and publishes data on the card market in Turkey. While much of their, and everyone else’s, financial needs are met by BKM’s 27 bank members, five non-bank money issuers have also joined and are beginning to service the market.
“We’ve been running like a card association and banker’s association from the beginning,” Dr. Canko said.
That data is showing healthy growth in digital payments in a country with plenty of tech-savvy younger people, Dr. Canko said. Fifteen percent of financial activity is now digital. Not bad, but expect it to go higher soon, as Turkey has set a goal of becoming a cashless society by 2023.
Dr. Canko admits it’s an ambitious goal, but the country is heading in that direction as 38 percent of disposable household income is now transacted through credit and debit cards. And that growth has been helped but what had been until recently a long period of single-digit inflation that had people more confident about leaving their money in banks.
Because the Turkish population is so technically adept, Dr. Canko is confident they can make the transition to a cashless society. In the mid-2000s they successfully transformed to an EMV chip and PIN system. Banks were worried about losing customers but they did not. With Turks being dedicated smart phone users, he believes mobile banking will be similarly adopted while also attracting many unbanked who are not attracted to most mainstream institutional offerings.
While government is keeping a close eye on the banking system, Dr. Canko said it is already a very highly regulated sector. Laws established in 2007 strictly govern credit and debit card activity while another set enacted in 2013 set parameters for e-money companies.
“The government is keen on regulating the area, while creating opportunities for fintechs,” Dr. Canko said.
Any growth realized by Turkey’s fintech sector will be strong because it will be industry-driven, Dr. Canko said. What works will stay and what doesn’t will be tossed aside. Compare that with India’s move to a cashless society, which has been government driven so far, he said.
So many elements of a successful environment in support of a digital transformation are in place. A technically adept populace is complemented by strong central organizing authority for the financial institutions and fintechs. The industry does not also have to contend with the lack of trust like it does in the United States and parts of Europe, Dr. Canko said. There was no comparable crisis at the time in Turkey and the industry has done a good overall job of modernizing its technology.
And the modernization process continues, Dr. Canko said. In 2016, BKM established Fintech Istanbul, a platform dedicated to provided all the components Turkey’s fintech community needs to succeed. They have hosted conferences and meet ups with industry luminaries like Oliver Bussman, Chris Skinner and Eddy Travia, published interviews with key figures, developed a certification program for entrepreneurs, bankers and regulators, and are working to bring more talent and opportunities to Turkey.
“We want to make Istanbul a fintech hub,” Dr. Canko said.
Blockchain technology is a key component of Turkey’s fintech growth plan, Dr. Canko said. A conference will be held in 2019 and a blockchain technology organization has attracted 41 members, including IBM, Microsoft and Oracle, and features working groups focused on finance, legal, production and education.
Add everything together and Turkey is well-positioned for continued success in the finch sector, Dr. Canko insists.
“The ecosystem is good all along. BKM has good relationships with both online and offline retailers and is well-positioned to develop relationships around good use cases.
“It’s an open market for international players, but it is also a strong market in terms of domestic players as well. This is a vibrant market in terms of financial services.”
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