Tuesday, August 6, 2024
How has the payments ecosystem in Türkiye evolved in recent years?
Türkiye presents an extensive, yet rapidly evolving, payment landscape. In recent years, particularly in the post-pandemic era, Türkiye has experienced rapid expansion in ecommerce transactions and values. This impressive growth can be attributed to increasing competition among merchants, leading to an improved customer experience, alongside advances in digital technology.
Türkiye's payment landscape continues to be dominated by cards, with growing trends toward domestic issuers and instalments via loyalty programs. To be a serious ecommerce player in Türkiye, ecommerce businesses need to offer all these options efficiently to drive usage and conversion.
With over 300 million cards issued (406.7 million if prepaid cards are included according to BKM), Türkiye is one of the world's leading card payment markets. The total number of credit and debit cards issued has grown 51 percent between 2019 and 2023.
Another hugely significant development within the payments sector has been the rise in Turkish government regulation to protect its economic sovereignty. Such changes have necessitated forward-thinking international ecommerce enterprises to seek alliances and partnerships that can help them navigate these, often choppy, waters and ensure seamless operational performance.
What factors are driving digital commerce growth in Türkiye?
Türkiye's relatively young population is certainly a key factor in driving the country's digital commerce market. With around 39 percent of the country's population aged between 15 and 44, this age group is the most likely to make online purchases – with the 18 to 44 age group representing 75 percent of the country's ecommerce users.
The growth in Türkiye's online purchasing volumes mirror the country's continuing digital transformation in all areas of economic and social life. According to BKM, In the first quarter of 2024, the number of seamless payments increased by approximately 1.5 times compared to the first quarter of 2023, reaching 2.6 billion transactions.
The share of internet-based card payments now comprises 29 percent of the total. In the first three months of 2024, the total card payment volume increased by 131 percent compared to the same period of the previous year, reaching 3.16 trillion TL. This impressive growth looks set to continue as ecommerce user penetration in Türkiye is forecast to rise from 40 percent to 48 percent by 2029.
Which industries and demographic groups are most active in the region?
While the payments ecosystem is seeing rapid expansion across almost every market sector, Worldline is seeing particularly strong demand for advanced payment solutions within the retail, digital services, gaming & media, and travel & hospitality businesses. In terms of demographics, Türkiye's young and increasingly affluent population is driving the rapid rise in ecommerce transactions and values.
What trends and payment preferences are prevalent in B2B and B2C commerce?
The challenge for companies looking to serve the Turkish online payment market is that it is relatively localized and fragmented. Local cards and instalments play a pivotal role, but each local acquiring bank only has access to closed-loop cards or instalment plans. This means that each bank can access only a limited network of cards, and that each loyalty program offers instalment plans only in combination with a specific set of cards within its network.
Credit, debit and prepaid cards account for around 80 percent of online payments by value. For example, the popular Troy card issued by a consortium of 13 Turkish banks has seen its usage dramatically rise in recent years.
According to BKM, in the first quarter of 2024, the transaction volume for Troy cards increased by 69.6 percent compared to the previous quarter, reaching 365.1 billion TL. Over the same period, the number of transactions increased by 67.1 percent, totaling 311.4 million. This local card is also heavily supported by the government.
As such, the potential growth from exploring different online payment methods within this market is promising and relatively untapped.
Furthermore, these local payment products are available only through domestic acquiring. Given the complexity of Türkiye's payment landscape, international online businesses wanting to provide complete offerings to their Turkish customers need to offer local cards, together with instalments via loyalty programs.
How are regulatory developments impacting cross-border commerce?
In recent years, Türkiye has implemented stringent regulations to safeguard its economic sovereignty, particularly within the payments and ecommerce sectors. These measures have included restricting the operations of certain foreign entities to foster the growth and stability of domestic enterprises.
This regulatory environment highlights the importance for global ecommerce businesses to partner with entities that possess deep local insights and compliance capabilities. Successfully navigating these complexities is crucial for sustaining growth and ensuring seamless operations.
Worldline, in collaboration with Lidio, has effectively followed the new regulatory framework to legalize its partnership for processing cross-border payments involving Turkish customers and enterprises.
This development exemplifies how strategic partnerships can unlock opportunities in tightly regulated markets, supporting global businesses in adapting to and thriving within diverse regulatory landscapes. This underscores the need for collaboration with knowledgeable partners to drive innovation and economic resilience in the evolving digital economy.
What strategies do you recommend for mitigating currency fluctuations?
To be truly successful in Türkiye it is important to be able to transact business like a local. This requires having the ability to navigate local regulations and to be able to offer payment solutions that meet the true needs and preferences of local consumers.
The reduced fees associated with local processing and exchange of Turkish lira, at a guaranteed rate with settlement funds in a preferred currency, will mean that enterprises can stay ahead of their competitors.
Given the historic volatility of the Turkish lira, it is extremely advantageous to have the ability to offer dynamic currency conversion for those businesses that price goods and services in that currency, in order to protect their income and enable them to reduce FX fees for their customers. In addition, the importance of cross-border remittance, that is, the ability to settle funds in your home currency, should not be underestimated.
What are additional considerations for merchants and service providers entering this market?
Apart from understanding the local payment landscape, another important aspect of doing business in Türkiye lies in local acceptance of foreign payment methods. Payment processing must be done domestically through local acquiring banks if access to Türkiye's local card scheme and instalment options is to be achieved.
Additionally, the high volatility of the Turkish lira presents a risk that must be considered when dealing with foreign exchange rates. 
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