The Regulation on Payment Services, Electronic Money Issuance and Payment Service Providers (“Regulation”) has been published in the Official Gazette by the Central Bank of the Republic of Turkey (“Central Bank”).
Aiming to introduce provisions in line with Payment Services Directive 2 (PSD2)1 of the European Commission, the Regulation brings in thorough changes and new requirements for electronic money issuers and service providers, including an overhaul of rules and procedures concerning payment services, especially in the context of mobile payments. In addition, since these services are provided through payment accounts used exclusively for payment transactions, the Regulation specifies that no interest can be accrued on behalf of customers and no benefits in relation with periods or total sum can be offered by the institutions providing the service. In other words, the Central Bank is aiming to preclude any usage of such accounts for lending and investment purposes.
The regulation is intriguing as it expounds many procedural matters, including but not limited to issuing electronic money and repayments. Similarly, requirements for obtaining institutional permits for companies which will engage in the activities within the scope of this Regulation are also set forth therein, such as minimum capital requirements, equity and balance sheet requirements, ownership and transfer of shares, with the latter being subject to the approval of the Central Bank in certain conditions. Article 13 is especially interesting in this regard, as it enables veil-piercing for the purpose of determining indirect ownership of an institution.
Matters related to cross-border payments and operations are also regulated by specific provisions. In situations where one of the parties is not based in Turkey, the Regulation offers an exception to transactions made with foreign currency. With regard to the cross-border operations, the Regulation enables collaboration between legal persons based outside of Turkey and institutions subject to the provisions of the Regulation. This comes forward as a welcoming reform, as it aims to bring in foreign enterprises or operations to Turkey and promote cross-border transactions. Again, the Regulation is quite strict as to the “collaboration” nuance, and explicitly prohibits operations in which the foreign institution would act alone. Moreover, the foreign institution shall be licensed as a payment service provider or electronic money issuer in the country where it is based & shall comply with the aforementioned minimum requirements concerning company capital and equity (vis-à-vis the balance sheet). Although a bit limiting, this new provision can lead to growth in the payment services market by promoting cross-border transactions and collaboration between foreign payment service providers and Turkish service providers.
Please do not hesitate to contact our Banking & Finance Team if you would like to have more detailed information on e-money and payment services in Turkey, or have any other queries.
1DIRECTIVE (EU) 2015/2366 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC