Download - Innovative Services in Retail Payments & Regulatory Experience fileActors in the Retail Payments Area Retail Payments Landscape in Turkey 4 1) CommonRules 2) At least3 participants

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


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


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)


Crit

ica

llyim

po

rta

nts

yst

em

sIm

po

rta

nts

yst

em

sIm

po

rta

nts

yst

em

so

n a

lim

ited

sca

le

6


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


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


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


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


49

Roles of the CBRT in the Payments Area

Overseer

System Operator

Settlement Institution

RegulatorParticipant

Lender of Last Resort

Licensing

Catalyst


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


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


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 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 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



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



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



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


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


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


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


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 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



� 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



� 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: [email protected]

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