Payment systems started playing a significant role in our lives. People have started using non-cash payment methods in their daily commercial and financial transactions by means of various payment applications created in line with the developing technology. Variation of payment instruments (namely cellphones or similar personalized instruments) and increase in the number non-bank financial intermediary institutions involved in payment systems and electronic money sector have created a need to form a legal basis for this sector.

The Law on Payment and Security Settlement Systems, Payment Services and Electronic Money Institutions (the "Law") has entered into force on 27 June 2013. The Law governs the principles and requirements for setting up securities and payment settlement systems1, payment systems and payment services, as well as establishment and licensing of payment institutions and electronic money institutions (collectively the "Institutions"). The Law also assigns the Banking Regulation Supervision Authority ("BRSA") as the regulatory authority of this sector. The Law did not address the details of the system, its implementation of and the licensing requirements and left these items to be dealt under the secondary legislation. BRSA has recently issued the Regulation on Payment Services and Issuance of Electronic Fund and Payment Institutions and Electronic Money Institutions (the "Regulation") and the Communiqué on Management and Supervision of Information Systems of Payment Institutions and Electronic Money Institutions (the "Communiqué").2

The Regulation has introduced the process and principles on authorization and operation (including principles on corporate governance) of the Institutions, as well as rules on payment services and issuance of electronic money in Turkey. The Communiqué has introduced the procedures and principles on management of information systems used by the Institutions and supervision of the Institutions by independent audit firms.

The payment services (e.g. transactions necessary for payment account's operation, wire transfer, issuance and acceptance of payment instruments, intermediary services for invoice payments) must be provided either by (i) banks, (ii) payment institutions or (iii) electronic money institutions.

The Institutions must be licensed by BRSA in order to provide payment services or issue electronic money. The Institutions must be established as joint stock corporations. The controlling shareholders3 and the shareholders holding, directly or indirectly4, 10% or more shares in the share capital of the Institution are required to meet the qualifications under the Banking Law for founders of banks. The commercial title of the Institutions must bear the wording indicating whether it is a "payment institution" or an "electronic money institution". The minimum share capital required for payment institutions is TRY 2,000,000.5 The minimum share capital required for electronic money institutions is TRY 5,000,000.

There are certain restrictions in terms of the activities to be carried out by the Institutions. The following table briefly shows these restricted activities:

Payment Institutions Electronic Money Institutions
  • engage in commercial activities other than (i) providing payment services under the Law, (ii) carrying out exchange transactions for providing payment services, or (iii) operating payment systems
  • engage in commercial activities other than (i) issuing electronic money, (ii) carrying out exchange transactions for providing payment services, or (iii) operating payment systems
  • charge interest on payment accounts
  • charge interest for the funds received in return for electronic money
  • provide benefit to payment account holders or issue payment instruments linked to payment accounts
  • provide benefit to electronic money users
  • advertise by giving a false impression that they act in the capacity of or on behalf of a bank
  • advertise by giving a false impression that they act in the capacity of or on behalf of a bank
  • grant loans
  • grant loans
  • make instalments for intermediated funds
  • make instalments for intermediated funds

The payments systems and electronic money sector have started to take a shape with the recent legal developments. Considering that this sector is rapidly growing in line with the technological innovations, the practical needs of the sector may lead to further legal developments.

Footnotes

1 This e-bulletin does not focus on the activities and supervision of payment and securities settlement systems and the system operators.

2 The Regulation and the Communiqué were published in the 27 June 2014 dated and 29043 numbered Official Gazette.

3 "Control" is defined under the Regulation.

4 "Indirect shareholding" is defined under the Regulation in a detailed manner.

5 The minimum share capital required for the payment institutions providing intermediary services for invoice payments is TRY 1,000,000.

© Kolcuoğlu Demirkan Attorneys at Law, 2014

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.