Turkey: Countdown For Electronic Payment Services In Turkey: Reminder On The Regulatory Framework On Payment Institutions And Electronic Money Institutions

I. Introduction

A year ago, long-awaited secondary legislation of the Law on Payment and Securities Settlement Systems, Payment Services and Electronic Fund Institutions ("Law") structuring the details of payment systems and payment services, the Regulation on Payment Services and Electronic Money Issuance and Payment Institutions and Electronic Money Institutions ("Regulation") and the Communiqué on the Management and Audit of Payment Institutions and Electronic Money Institutions' Data Systems ("Communiqué") slightly relieved the sector players after its publication on June 27th, 2014.

The Regulation, in summary, outlines the procedures and principles regarding authorization, activities of payment institutions, electronic money institutions and payment services and e-money issuance while the Communiqué regulates the management of data systems used by these institutions in their activities under the Law as well as their audit to be executed by independent auditors.

However, the impact of this legislation on business practices still remains obscure. Despite the enactment of the secondary legislation, e-money and electronic payment regime still holds its mystery when it comes to blending practices with the regulatory provisions under Turkish law. While the system is commonly used in daily life, many of us are still uncertain about its consequences and effects in the regulatory world, particularly in terms of the strict criteria and measures imposed and brought upon sector players which have, to this date, conveniently been operating in a non-regulated environment.

These players are now counting down for the expiration of the time frame set for obtaining an operating license from the Banking Regulation and Supervision Agency ("BRSA") since the Law strictly prohibits payment and electronic money institutions from performing their commercial activities without holding an operating license: The time period of 1 (one) year set down for the receipt of the operating license from the BRSA pursuant to provisional Article 2 of the Law, started on June 27th,  2014 (i.e. enforcement date of secondary legislation). Therefore, the deadline to comply with the requirements set under the Law and its secondary legislation and to obtain a license for players desiring to operate as payment or electronic money institutions expires on June 27th, 2015.

As we countdown to June 27th, 2015 this article aims to offer a reminder on the regulatory measures set for payment and electronic money institutions by further focusing on the exemptions for the Law and the requirements to be fulfilled until the set deadline. 

II.  Description: Payment Institutions & Electronic Money Institutions

- Electronic money institutions;

Article 3 of the Law briefly describes electronic money institutions ("EMI") as the legal person that has been granted authorization to issue e-money under the scope of the Law.

To be more specific, the EMI, acting as an intermediary, allows its users to create an e-money account wherein the amount of the e-money is equivalent to the fund (e.g. Turkish lira) paid in return and to use the account for purchasing goods and/or services from providers that accept the issued e-money.

The Law outlines the liabilities of EMI in Article 20 in terms of issuance of e-money. In this respect, EMI shall (i) issue e-money at par value of funds that are received, (ii) convert the funds deposited by the user into e-money without any delay and have them accessible for use, and (iii) transfer the collected funds to a separate account before the banks regulated under the Banking Law No. 5411 and maintain them therein during the term of use. EMIs are also prohibited from issuing credits and providing the bearers of electronic funds with any interest or any other benefits in connection with the term of retaining such electronic funds.

- Payment Institutions;

In Article 3 of the Law, payment institution ("PI") is described as a legal person authorized for offering and providing "payment services" under the Law. Payment services are:

  1. all operations required for operating a payment account, including services allowing deposit of money to a payment account and withdrawal of money from a payment account,
  2. direct debiting transactions, including one-off transactions, which involve transfers by the payment service users of their funds retained by the payment service providers, payment transactions effected by payment cards or any other similar instruments, and fund transfers including payment orders,
  3. issuing or acquiring of payment instruments,
  4. remittance,
  5. payment transactions whereby consent is provided via an information technology or electronic communication device and payment is made to an information technology or electronic communication service provider acting solely as an intermediary between the payment service users and the supplier of the goods/services,
  6. services for mediating invoice payments.

Not only PIs but also EMIs and banks are authorized to provide payment services under the Law. In practice, there are examples of corporations which provide e-money and payment services at the same time. For instance, mobile payment services provided by GSM operators are considered e-money services when the transaction is concluded via prepaid lines, whereas they are considered payment services when the transaction is concluded via postpaid lines.1

- Prohibited Activities

Article 10 of the Regulation lists the prohibited activities for payment service providers (i.e. EMIs, PIs and banks): (i) PIs shall not engage in any activity other than providing the payment services listed above, exchanging currency as a part of payment service and operating payment systems, and (ii) EMIs shall not engage in any activity other than the issuance of e- money, providing the payment services listed above and exchanging currency as a part of payment service and operating payment systems.

EMIs and PIs further shall not (i) serve as banks' representative, (ii) accept deposit or participation funds, and (iii) grant credits or make an installment plan for the mediated amount.

III. Conditions for Exemption from the Law

The Law brings exception for certain transactions which would not be considered as payment services and thus not be requiring a license.

As per Article 12(2) of the Law, transactions such as

  • cash payments made directly without a mediator,
  • payments through commercial representatives authorized for a sale-purchase transaction,
  • sale and purchase of foreign exchange in cash without being linked to a payment account,
  • collection and delivery of cash for non-profit organizations or for monetary aids,
  • transactions regarding the instruments which can be used to purchase goods or services only in the premises of the corporation issuing the payment instrument, or within the scope of a commercial agreement executed with the corporation issuing the payment instrument within a limited network of service providers, or for a limited good or service, and
  • withdrawal of cash from ATM machines operated by institutions that does not provide payment services
  • will fall outside the scope of Law.

This being said, neither the Regulation nor the Communiqué contains any language or clarification as to the exemptions under the Law which would allow providers to substantiate their position regarding the exemption.

In addition to the foregoing, the Turkish regulator, as the European Commission did the very same way for the E-Money Directive 2009/110/EC ("Directive"), confirms that prepaid instruments, used only in the store network of a corporation issuing e-money, used for the purchase of a specific product or service group, or used, as a result of an agreement, only in a specific service network, would fall outside the scope of the Law (Article 18(5) of the Law). However, it might be safe to state that by comparison with the Directive, the Law and the secondary legislation fall short on specifically drawing lines between the scope of Law and the exemptions thereof.  As a consequence, while there is a wide range of payment and e-money service providers in practice, engaging in various payment activities, for some providers their stance before the Law is still uncertain. For instance, for online hosting providers allowing take-out orders or issuers of meal and/or ready-to-consume service vouchers, it is not clear whether their services will benefit from the exemptions or be considered payment services pursuant to the Law, given the vague language on the concept of "limited network" which allows an exemption from the Law. Meanwhile, the Directive prevents potential confusions and explicitly excludes store cards, petrol cards, membership cards, public transport cards, meal vouchers or vouchers for services from its scope2, which might also be acknowledged in Turkey as well, through practice and time, given the tendency of the regulator to absorb EU practices for this specific regime.

IV.  Requirements to be Fulfilled until June 27th, 2015

As explained above, Provisional Article 2 of the Law obliges PIs and EMIs established under the Law to apply to the BRSA and obtain the necessary authorizations and render themselves compliant with the Law until June 27th, 2015.

Terms regarding their operation permits are specified under Article 8 of the Regulation, which  firstly lists the documents required for submission to the BRSA for operating license applications, and then specifies, in sub-article 4 that absent documents or information can be renewed and resubmitted to the BRSA within 6 (six) months following the receipt of the BRSA's notice. The operating license shall be rendered valid upon publication of the BRSA's decision on the Official Gazette (sub-article 5 of the Regulation).  (To this date, 5 entities have received their licenses from the Central Bank to operate as payment system operators or securities settlement system operators; none amongst these have licenses to operate as EMI or PI.)

Apart from the obligation to receive an operating license, EMIs and PIs should also fulfill the criteria displayed in the chart below:

PIs

EMIs

  1. should be incorporated as a joint stock company,
  2. shareholders owning ten percent or more of the capital and holding control are required to meet the bank founder qualifications under the Banking Law No. 5411,
  3. share certificates should be issued in exchange for cash and as registered share certificates,
  4. company's capital shall be paid in full, in cash and free from any encumbrances and should not be less than TRL 1,000,000,00 for PIs providing services for mediating invoice payments and not be less than TRL 2,000,000,00 for the rest of the PIs,
  5. are required to have diligent management, adequate personnel and technical equipment required for the performance of the transactions under the scope of the Law and departments handling complaints and objections,
  6. are required to take precautions required for the sustainability of the operations to be conducted under the scope of the Law and for preservation of security and confidentiality of the funds and information on payment service users,
  7. are required to have transparent and open shareholding structure and organizational management chart that should not constitute an obstacle for the efficient supervision of BRSA.
  1. should be incorporated as a joint stock company,
  2. shareholders owning ten percent or more of the capital and holding control are required to meet the bank founder qualifications under the Banking Law No. 5411,
  3. share certificates should be issued in exchange for cash and as registered share certificates,
  4. company's capital shall be paid in full, in cash and free from encumbrances and should not be less than TRL 5,000,000,
  5. are required to have management, adequate personnel and technical equipment required for the performance of the transactions under the scope of the Law and departments handling complaints and objections,
  6. are required to take precautions required for the sustainability of the operations to be conducted under the scope of the Law and for preservation of security and confidentiality of the funds and information on e-money users,
  7. are required to have transparent and open shareholding structures and organizational management charts that shall not constitute an obstacle for the efficient supervision of BRSA.

V. Sanctions

Sanctions for operating without license are severe: Real persons and officers of legal entities acting as a system operator, PI or EMI without an operating license will face an imprisonment sentence from 1 (one) year up to 3 (three) years and a judicial monetary fine of up to 5,000 (five thousand) days.

The Law takes the matter a step further and imposes the foregoing sanctions on real persons and officers of legal entities using expressions and words, which give the impression that they are acting as a system operator, PI or EMI, on their business names, all kinds of documents, announcements and advertisements or public announcements, without actually holding an operating license.

In case these operations are performed in workplaces without license, the workplace can be shut down for a period between 2 (two) to 6 (six) months and in case of recurrence, the workplace can be shut down permanently.

Engaging in the foregoing activities after the expiration/annulment of an operating license will also be sanctioned in line with Article 28.

VI. Conclusion

A year has passed after the enactment of the secondary legislation on payment and e-money systems and the countdown for compliance with the Law has nearly come to an end. Yet the regime still holds its mystery when it comes to blending practices with the regulatory framework and to this date, 5 entities have received their licenses from the Central Bank to operate as payment system operators or securities settlement system operators; none of which are licenses to operate as EMI or PI, while a considerable number of the players might hope to benefit from the exemption. Given the severe sanctions for non-compliance with the Law, stretching to imprisonment for officers, for those who failed to fulfill the foregoing liabilities in due time, it remains yet to be seen the BRSA's actions in return.

Footnotes

1 Report of Central Bank Of Turkish Republic, "Payment Systems – Payment Systems in Turkey", 2014, pg. 20. Full report can be found at: http://www.tcmb.gov.tr/wps/wcm/connect/a28ff0bd-1e9a-42be-8f7d-3249a1b3cf1c/OdemeSistemleri.pdf?MOD=AJPERES

2 Directive 2009/110/EC, Recital 5


Author: Gönenç Gürkaynak, ELIG Attorneys-at-Law, Çitlenbik Sok. No: 12, Beşiktaş, Istanbul, Turkey. Tel: 90-212-327-1724. E-mail: gonenc.gurkaynak@elig.com


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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions