Post on 29-Aug-2019
INNOVATIVE SERVICES IN RETAIL PAYMENTS AND REGULATORY EXPERIENCE
Workshop and Seminar on Innovation in Retail Payment System: Issues, Challenges and Policies
Yogyakarta, 14 November 2017
Betül Üzer
Outline
� Retail Payments Landscape in Turkey
� Best Practices
o BKM Express
o TROY
o İyzico
o Paycell
o Akbank – Ripple Integration
� The Legal Background
� The Regulatory Experience
2
Retail Payments Landscape in Turkey
3
Actors in the Retail Payments Area
Retail Payments Landscape in Turkey
4
1) Common Rules
2) At least 3 participants
3) Clearing&settlement infrastructurefor fund transfers
Participant A Participant B
Participant C Participant D
System Operator
Customer A
(Payer)
Customer B
(Payee)
Payment System
Payment service provider
• Banks• Electronic Money Institutions• Payment Institutions• Postal and Telegraph Corporation
Central Bank of the Republic of
TurkeyCBRT
Banking Regulation and
SupervisionAuthority
BRSA
Retail Payments Landscape in Turkey
5
Mobile payment service providers
• Banks
• Payment Institutions
• E-Money Institutions
• Postal and Telegraph CorporationPa
ym
en
t se
rvic
e
pro
vid
ers
Pa
ym
en
t sy
ste
ms
Customer Payment System
Interbank Check Clearing Houses (ICH)
Interbank Card Center (ICC)
Garanti Payment Systems (GÖSAŞ)
Interbank Check Clearing Houses (ICH)• Check payment system• Multilateral netting (t+2)• Participants: Banks• Trans. vol. (2016): 454 bn TL
Mastercard Paym. Trans. Serv. Turkey (MPTS) • Card payment system• Multilateral netting (t+2)• Participants: Cyprus banks,,PTT, prepaid card issuers• Trans. vol. (2016) : 6 m TL
Garanti Payment Systems (GÖSAŞ)• Card payment system• Multilateral netting (t+2)• Participants: Banks issuing Bonus branded cards• Trans. vol. (2016) : 21 bn TL
Interbank Card Center (ICC)• Card payment system• Multilateral netting (t+2)• Participants: Banks, MPTS• Trans. vol. (2016): 263 bn TL
The Central Bank of the Republic of Turkey• EFT (Banking Payment System and Retail Payment System) • RTGS • Participants: Banks• Trans. vol. (2016): EFT 56 tn TL (BPS 45 tn TL + RPS 11 tn TL)
Retail Payments Landscape in Turkey
Crit
ica
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le
6
Retail Payments Landscape in Turkey
7
Card POS
78M population
32M unbanked
176 M Payment Cards
1.7M POSs
48K ATMs
73M subscribers
%95 mobile coverage
%56 smartphones
ATM
Population Banking& Payments GSM Sector
42% of population is stillunbanked
Higly terminalised paymentmarket but %60 of the consumer
expenditure with cash
Fast increasing smartphonepenetration
Source: BKM and Turkcell
Retail Payments Landscape in Turkey
8
Web Mobile
2x Global Average
‘Mobile Device Usage Rate on Online Shopping’
%12
2014
1,675 B $
2018
2,982 B $
Global
%21
Turkey
%23
2014
19 B ₺
2018
63 B ₺
%43
Online Shopping – Transaction Value
Source: Turkcell
9
Retail Payments Landscape in Turkey
Source: BKM
Debit and Credit Card Numbers (Million)
25,0 26,1 28,6 31,0 31,8 34,4 34,7 34,9
21,626,9
30,1 32,4 34,941,5
45,0 48,044,4 47,051,4 54,3 56,8 57,0 58,2 58,8
64,769,9
81,9
91,3
100,2105,5
112,4117,0
0
20
40
60
80
100
120
2009 2010 2011 2012 2013 2014 2015 2016
Total Active Credit Card # Total Active Debit Card # Total Credit Card # Total Debit Card #
10
Retail Payments Landscape in Turkey
Source: BKM
POS and ATM #
1,71,8
2,02,1
2,32,2 2,2
1,7
23,8
27,6
32,5
36,3
42,0
45,648,3 48,4
0
10
20
30
40
50
0,0
0,5
1,0
1,5
2,0
2,5
2009 2010 2011 2012 2013 2014 2015 2016
POS # ATM # (right axis)(Million) (Thousand)
Innovative Examples in Retail Payments
11
Payment System Innovation
Payment Institution
Mobile Payment Service Provider
Blockchain Use Case
National Card Scheme
Best Practices
12
Interbank Card Center (BKM)
� Established in 1990
� 10 shareholders, 30 members
� Payment service provider to all Turkish card issuers & acquirers
� Important payment system licensed by Central Bank in 2015
� Regulatory authorities: CBRT and BRSA
13
BKM Express
� Launched in 2012
� Easy payment without card information
� Fast payment even when your card is not present
� Secure payment with user password and SMS
14
BKM Express
Internet payments Online mobile payments
P2P money transfer In-store payments
15
BKM Express
Face-to-face payments
16
Gas StationsTotal Oil allows users to pay without leaving their car.
TaxiBiTaksi is the leading application for taxi riding. WithBKM Express cashless payment is possible.
FashionAt Zorlu Center Vakko store, it is possible to shop with your mobile device.
Micro PaymentsÖdeal is an application allowing micro payments via mobile phonewith card information.
RestaurantsPay with BKM Express while ejoying a New York Style Pizza.
BKM Express
1 click payments
17
Add to basket Approvepayment
Transactioncomplete
Pick up Taxi Approve paymentAdd tip if you like
BKM Express
Donation
18
BKM Express
19
29,5429,84
0,47 0,55
0
5
10
15
20
25
30
35
Ma
y-16
Jun
-16
Jul-1
6
Au
g-1
6
Sep
-16
Oc
t-16
No
v-1
6
De
c-1
6
Jan
-17
Feb
-17
Ma
r-1
7
Ap
r-1
7
Ma
y-17
Mili
on
TL BKM Express Transactions
Payment Money Transfer
Best Practices
20
TROY
� TROY is the abbreviation of Turkey’s way of payment in Turkish
� National card scheme
21
TROY
� Market with only international card schemes
� Limitations for tailor made solutions
� Absence of local touch
� Lagging to meet stakeholders’ needs
22
Unfulfilled opportunities
for themarket !
TROY
This initiative has various advantages:
� Economic Benefit for Stakeholders: Reducing fees via a cost sensitive model
� Local Needs First Priority: Development of products and service aligned with
the needs of Turkish market
� Time to Market: Faster solution development
23
TROY
24
TROY
25
TROY
26
TROY
27
Visa88,37 millions
(%48,71)
Troy0,19 million
(%0,10)Special cards1,47 million
(%0,81)
Other1,22 million
(%0,67)
Mastercard90,18 millions
(%49,71)
Number of Cards for Card Schemes
Best Practices
28
Iyzico
� İyzico was established with the aim of providing a secure payment platform
for online companies of different sizes operating in different industries.
� 24 Million $ investment from companies such as:
29
Iyzico
� Credit Card Storage and 1 Click Payment
� Maximize Sales with Payment Forms
� Safe Shopping with 3D Secure
� BIN Control
30
Iyzico
31
Iyzico
32
Iyzico
33
Merchants
� can receive payments from all over the world.
� can accept payments with different currencies.
� are not restricted only to POS payment by credit card to receive
payments from abroad.
� take advantage of alternative payment methods.
Best Practices
34
Paycell
� Accesible to every consumer
� No bank dependency
� Supporting every major card type
� Smart phone capabilities
� Omnichannel integration possibilities
� Offering alternative payment methods
35
1 Turkcell Mobile Payment (DCB)
More than 4M customers 1.5 M Credit Cards in the system
Paycell Wallet (1 Click Payment)
2 Consumer Finance 3
Payment by Installments for more than 3.5M customers.
Paycell Card4 Paycell Digital Money
5
Payment tool for non-card users or insufficient card
limit owners.
Targets unbanked users
Turkcell Mobile Payment
36
� Since 2009 available as a Mobile Payment
solution of Turkcell
� 30 Million+ Users
� 2000 + Merchants
� 100 Most Reputable Brands
� Youth & Professional & Platinum Segments
� Online gaming is the leader category
Digital ContentsPhysical Goods
and Services
Fastfood
Transportation
Airport FastTracks
Parking Lots
Restaurants
Mobile Services
Online Gaming
SocialNetworks Membership
Mobile Apps
Retailers
Paycell Card
� Promoted to the customers both in traditional and digital channels‘Sold and refilled in 2.000 Turkcell Stores and purchased by 5 M Turkcell Digital App customers’
� Not only for shopping but also enriched with a mobile wallet ‘Providing money transfer, utility payments, transportation etc’.
� The World’s first prepaid card offering free mobile internet for shopping‘Shop 1 TL & Earn 1 MB free, automatically loaded mobile number’
37
Mobile Number for
activation
Paycell Card
38
Paycell Card Target Segments
Youngsters
Housewives
DigitalContent
UsersOnline
Shoppers
Unbanked
Tourists
Paycell Digital Money
39
SecureUser
Experience
7/24 Access
LargeMerchant Network
CustomizedBrand Design
EasyPurchase
Send as a Gift
FastActivation
For those whodon’t want toget physical
prepaidcard…
Paycell Wallet
40
One APP for All Products
Money Transfer
Direct Carrier Billing
Paycell Card
Bill PaymentE-Money
Financell
Paycell Wallet
� The most comprehensive one-click payment method ‘No bank or operator dependency’
� The most seamless experience with mobile capabilities‘Mobile number is your new account’
� Supported by Turkcell’s customer base ‘1.5 Milion Cards registered’
41
4
8
&MSISDN Forwarding
Powered by
Best Practices
42
Akbank
� One of the biggest commercial banks in Turkey
� 15 million customers, 840 branches
� 2,25 million internet and 1,4 million direct mobile transactions (monthly)
� First bank in Turkey using Ripple’s blockchain technology
� Joined the Ripple customer network recently to offer real-time and
low-cost cross border payments
43
Akbank
� Settlement is instant (few seconds)
� 24/7
� Full transparency
� Inexpensive
� Direct bank to bank settlement
� No central counterparty or record keeper
44
Akbank
Ripple interledger protocol is an open suite of protocols connectingledgers of all types:
� Digital wallets
� National payment systems
� Blockchains and beyond
45
Akbank
46
Akbank
47
The Legal Background
48
The Legal Background
49
Roles of the CBRT in the Payments Area
Overseer
System Operator
Settlement Institution
RegulatorParticipant
Lender of Last Resort
Licensing
Catalyst
The Legal Background
50
Legal Basis of the Payments Area
� Payment Systems Law No 6493
� Central Bank Law No 1211
� Capital Market Law No 6362
� Check Law 5941 (Abolished Law No 3167, Article 6)
� Bank Cards and Credit Cards Law No 5464
� Settlement Finality Directive (1998/26/EC)
� Payment Services Directive (2007/64/EC)
� Directive on E-Money Institutions (2009/110/EC)
� BIS-CPMI & IOSCO Principles
� Banking Act No 5411
� Turkish Commercial Code No 6762
� The Public Finance & Debt Management Law No 5018
� Prevention of Laundering Proceeds of Crime Law 5549
The Legal Background
Central Bank Law
Fundamental Duties and Powers of CBRT
� establishing payment, securities transfer and settlement systems,
� making regulations to ensure uninterrupted operation & oversight of the existing andfuture systems,
� determining the methods & instruments to be used for payments (including electronic
environment),
� acting as the lender of last resort, providing intraday or end-of-day credit facilities to
the payment systems.
51
The Legal Background
Law on Payment and Securities Settlement Systems, Payment Services
and E-Money Institutions (The Payment Systems Law)
� The Payment Systems Law came into force in June 2013.
� The aim of the Payment Systems Law is to regulate the procedures and principles
regarding the payment and securities settlement systems, payment services,payment institutions and e-money institutions.
� Reasoning of the Payment Systems Law was the need for a single andcomprehensive legal arrangement for payment and securities settlement systems,
new practices on payment services and e-money.
52
The Legal Background
The Payment Systems Law� Defines payment institutions and e-money institutions for the first time.
� Includes provisions on
o payment and securities settlement systems,o payment services,o payment service providers; particularly payment institutions and e-money institutions.
� Empowers BRSA to:
o license and supervise these institutions and develop secondary regulations,
o determine relations between service providers and beneficiaries,
o specify rights and obligations of both parties,
o take appropriate measures against potential problems in payment services.
53
The Legal Background
The Payment Systems Law
� supports financial stability,
� provides sound legal basis for the payment systems,
� aligns with international regulations (EU Directives) and standards (CPMI),
� contributes to financial inclusion,
� defines basic concepts on payments area.
54
The Legal Background
The Payment Systems Law
Licensing and Oversight of Payment Systems
� The Payment Systems Law empowers the CBRT for granting license to payment and
securities settlement systems which had no single competent authority previously for
licensing of these systems.
� The CBRT is authorized for the oversight of the systems established or to be
established in order to ensure their uninterrupted operation.
� “Regulation on Oversight of the Payment and Securities Settlement Systems” sets
forth detailed issues regarding the oversight of the systems.
55
The Legal Background
The Payment Systems Law
Payment Institutions and E-Money Institutions
The Payment Systems Law provides legal definition of Payment Institution, E-Money andE-Money Institution for the first time:
� Payment institution: Legal person granted authorization to provide and execute payment
services.
� Electronic Money: Monetary value which is issued in return of the fund accepted by electronic
money issuer and stored electronically to be used for payment transactions and accepted as
a means of payment by persons other than the issuer.
� Electronic Money institution: Legal person granted authorization to issue e-money.
56
The Legal Background
The Payment Systems Law
Payment Institutions and E-Money Institutions
� Only banks, and e-money institutions which are defined and licensed by the Law canissue e-money.
� Payment institutions are requiredo to be established as a joint stock company in Turkey,
o to have effective management, sufficient and skilled employee, technical infrastructure in order tofulfill its functions.
� E-money institutions are requiredo to be established as a joint stock company in Turkey,
o to carry out their operations through banks,
o to issue e-money at equal amounts to the funds collected,
o to immediately convert deposited money to e-money and make it avaliable to the e-money user.
57
The Legal Background
As a legal mandate, the CBRT issued Secondary Regulations within ayear after the enactment of the Payment Systems Law
� Regulation on Operations of the Payment and Securities Settlement Systems
(June 2014)
� Regulation on Oversight of the Payment and Securities Settlement Systems
(June 2014)
� Communique on Information Systems Used in Payment and Securities Settlement
Systems (January 2016)
58
The Legal Background
Conducting Oversight� Based on the Payment Systems Law and Regulation on Oversight of Payment
Systems “Oversight Framework on Payment and Securities Settlement Systems” wasissued by the CBRT in November 2016.
� Oversight Framework includes ;
o scope of the procedures and principles regarding CBRT’s oversigt activities.
o classification criteria for systems in order to specify which system is responsible to complywith which PFMI standard.
� Within the Oversight Framework, the systems are classified into three maincategories;
o critically important,
o important,
o important on a limited scale.
59
The Legal Background
Oversight FrameworkAccording to the Oversight Framework, the payment and securities settlement systems inTurkey are classified as follows:
60
NAME OF THE SYSTEM TYPE OF THE SYSTEM SYSTEM OPERATOR CATEGORY OF THE SYSTEM
Electronic Securities Transfer System Securities settlement system CBRT Critically Important System
Equity Market Clearing System Securities settlement system TAKASBANK Critically Important System
Debt Securities Market Clearing System Securities settlement system TAKASBANK Critically Important System
Central Registry System Securities settlement system MKK Critically Important System
Turkish Lira Payments System of Interbank Payments Payment system CBRT Critically Important System
Turkish Lira Payments System of Consumer Payments Payment system CBRT Critically Important System
Cheque Clearing System Payment system ICH Important System
Domestic Clearing and Settlement System Payment system ICC Important System
Takasnet System Payment system GÖSAŞ Important System on a Limited Scale
CBRT: The Central Bank of the Republic of Turkey
TAKASBANK: Istanbul Settlement and Custody Bank Inc.
MKK: Central Registry Agency Inc.
ICH: Interbank Clearing House
ICC: Interbank Card Center
GÖSAŞ: Garanti Payment Systems Inc.
The Regulatory Experience
61
The Regulatory Experience
What has happened upto now?
� Formation of the legal background
o Law on Payment and Securities Settlement Systems, Payment Services and E-Money
Institutions (June 2013).
o Regulation on Operations of the Payment and Securities Settlement Systems
(June 2014)
o Regulation on Oversight of the Payment and Securities Settlement Systems
(June 2014)
o Communique on Information Systems Used in Payment and Securities Settlement Systems
(January 2016)
o Oversight Framework on Payment and Securities Settlement Systems (November 2016)
62
The Regulatory Experience
What has happened upto now?
� The CBRT granted operation licence to
o Central Registry Agency Inc. (MKK) as a securities settlement system in June 2015;
o Istanbul Settlement and Custody Bank Inc. as a securities settlement system in June 2015;
o Interbank Card Center Inc.(BKM) as a payment system in June 2015;
o Garanti Payment Systems Inc. as a payment system in June 2015;
o Interbank Clearing House (BTOM) as a payment system in June 2015;
o Mastercard Payment Transaction Services Turkey as a payment system in March 2017.
63
The Regulatory Experience
What has happened upto now?
� Onsite visits: The CBRT paid visits to MKK in December 2016 and BKM in June 2017.
The CBRT plans to visit Takasbank and Gösaş in November 2017.
� Oversight Reports: The CBRT published an oversight report on MKK in December 2016
and on BKM in June 2017. The oversight reports on Takasbank and Gösaş will be
published until the end of 2017.
� Unification of system data
� Licensing of e-money institutions and payment institutions
� Other operations of the systems
64
The Regulatory Experience
What has happened upto now?
� Financial Sector Assessment Program report published in November 2016
o PFMI Responsibilities – Observed for the CBRT.
� PFMI- Implementation Monitoring
o PFMI Responsibilities – Rating 4 in August 2013
o PFMI Principles – Rating 4 in May 2014
� ‘‘Objectives and Policies Regarding Payment and Securities Settlement Systems’’
published in October 2014
� Payment Systems Law Workshop in February 2017
� Distributed Ledger Technology
65
THANK YOU FOR YOUR ATTENTION !
For your future questions: betul.uzer@tcmb.gov.tr
66
INNOVATIVE SERVICES IN RETAIL PAYMENTS AND REGULATORY EXPERIENCE
Workshop and Seminar on Innovation in Retail Payment System: Issues, Challenges and Policies
Yogyakarta,14 November 2017
Betül Üzer