IS 2020 THE CRITICAL YEAR FOR THE FINTECH ECOSYSTEM? - Kutay Yalınkılınç

Let’s address this question by examining the ecosystem and developments. As known, following the law nr. 6493; 18 e-money agencies, 34 paying agencies and PTT have taken their places in the financial technology area in addition to 48 banks. During the years between 2013-2015, the sector was not quite clear about what to do following the law, was waiting for the legislation close at hand and when the legislation entered into force, it has tried to achieve legislative harmonization in the speed of light (!).

The subsequent period has been a period when banks showed their claws to e-money and paying agencies, so to speak. Unfortunately, due to some e-money and paying agencies that have acted in a way affecting their reputation negatively in the ecosystem, banks have taken a tougher line. Thanks to the positive approach of companies towards banks as well as official authorities under the leadership of ÖDED, the association of e-money and paying agencies, the subject has lost its popularity after a while.

The last 2 years have been a period during which e-money and paying agencies have proven themselves and strengthened their place in the ecosystem. Developments such as the purchase of İyzico by PayU; the Birleşik Ödeme investment made by Fibabanka-Finberg which has brought together a bank and a licensed fintech company in the sector for the first time with respect to investment, and also the fact that the Night Transfer product of Birleşik Ödeme started to give services over the digital channels of banks have made important contributions to this period. And let’s talk about 2020. In fact, 2020 had started saying “I am coming” at the last quarter of 2019 for the fintech sector. Together with the law that entered into force in November 2019, the Central Bank of the Turkish Republic (TCMB) has been the new boss-so to speak- of 18 e-money and 34 paying agencies starting from 2020.

 

The same law also contained some articles that was winking at a model similar to PSD2 in Europe. As this was a positive development, the TCMB has been given the power to take some decisions that would affect the income of e-money and paying agencies. But as you know, although a law enters into force in our country, no subject becomes clear as long as the regulation and communique do not exist. Off course the same situation goes for this law and furthermore this regulation will be prepared by a new regulator i.e. the TCMB. The ecosystem expects that this subject becomes clear towards midyear. On the other hand, some radical decisions also started to be taken for banks starting from 2019. First, an upper limit has been brought to POS commission rates. Together with 2020, we got the news that the pilot scheme of TCMB launched with 9 banks in May on making 7/24 EFT will start being implemented in all the banks in the last quarter of the year. Then, as an answer to the question “Will e-money and paying institutions be included in this system?” let’s say “Unfortunately not this year, maybe in 2021”. Finally, there is the upper limit brought to remittance and EFT transaction fees of banks which has been declared at the beginning of February and will start being implemented in March. Then let’s start interpreting those developments. E-money and paying institutions were offering services cheaper than banks or during periods of time where banks could not give service, or they were offering solutions focusing on 7/24. In 2020, all the banks will start making 7/24 EFT for maximum 1 TL. Then how easy will it be to compete for e-money and paying agencies?
On the other hand, how much competitive can be the services sold by paying agencies providing POS service by adding a profit margin to the POS commissions fees they have taken from banks in a system where an upper limit is brought to POS commission rates applied by banks to member workplaces,. Above all, would it be a disaster scenario if an upper limit is brought on this subject to the service commission fees of paying agencies in the above-mentioned regulation expected by the TCMB?
Those are concrete examples; there are subjects leading to further question marks as we get into more details.


In this framework, the legislation expected from the TCMB becomes even more important. A legislation that paves the way for fintech institutions that bring fairness to competition would turn 2020 into a nice year. However, fintech institutions that produce original models in the ecosystem, that make business partnerships with global companies and thus make an expansion to the region will come into prominence in this period.

Kutay Yalınkılınç
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