On October 28, 2022, the Banking Regulation and Supervision Agency ("BRSA") published the Draft Regulation Amending the Regulation on Debit Cards and Credit Cards ("Draft Amendment"). The Draft Amendment proposes certain amendments to the Regulation on Debit Cards and Credit Cards ("Regulation"), the details of which are summarized below.
In this context, the Draft Amendment does not allow the card schemes of card system institutions that are not authorized to operate in Türkiye to be included in debit or credit cards to be issued in Türkiye. The card schemes of these institutions can only be defined in the said cards provided that the card scheme of a card system institution that has obtained an operating license in Türkiye is also defined in the said cards. Within this framework, various obligations have been imposed on the card issuing institutions and acquirers, which will be explained below.
The aforementioned obligations, which are closely related to the activities of those headquartered abroad and opening a representative office or branch in Türkiye to provide debit or credit cards to domestic customers, card system institutions that have not obtained an operating license in Türkiye, and the activities of acquirers located abroad towards Turkish residents, are briefly summarized below.
- CARD SCHEME
With the Draft Amendment, the concept of a "card scheme", which was not previously regulated in the aforementioned legislation, has been included within the scope of the Regulation, and accordingly, the following provision has been added to Article 4 of the Regulation which defines "Card Scheme" as "body of rules, practices, guidelines and standards that enable card payments, also covering the organizational structure, management and executive bodies responsible for the operation of a card system operator independent from the infrastructure and payment systems of such card system operator".
- NEW OBLIGATIONS FOR CARD ISSUING INSTITUTIONS
1) Considering the European Union Regulation No. 2015/751 and international practices on the use of card schemes of two or more card issuing institutions, it is regulated that card issuing institutions may not issue cards to be used domestically by their customers with the card scheme of a card issuing institution that is not authorized to operate in Türkiye defined on its own. Card issuing institutions will be able to link the cards they issue to the card scheme of a card system operator that does not have an operating license in Türkiye only if such cards are also linked to the card scheme of a card system operator that has an operating license in Türkiye. In addition, by adding a provision to Article 21 of the Regulation with the Draft Amendment, it has been clarified what is meant by the domestic use of a debit or credit card; and it has been regulated that the use of a debit or credit card at the POS of an institution authorized to operate in Türkiye as an acquirer will be accepted as the domestic use of the card.
2) In case a card scheme brand is included on the card, it is obligatory to include all card scheme brands that the card is defined with. On the other hand, card issuing institutions are obliged to provide the following information during the card application;
- Providing the customer with the right to prefer which card scheme of the card system institution will be used to issue the card, complying with this choice, and informing the customer clearly and objectively about the functions, security features, costs and customer rights of the card scheme options, including the domestic and international use of the card,
- In the implementation of the aforementioned preference right, not force customers to prefer more than one card scheme brand at the same time and to provide the customer with the opportunity to determine which scheme will be applied to the card in priority if the customer prefers to use more than one card scheme at the same time before the card allocation; and to fulfill this request within fifteen days at the latest if the customer requests to change the priority card
3) If acquirers located abroad carry out activities for Turkish residents, card issuing institutions may approve transaction confirmation requests from POSs allocated to these acquirers, provided that these requests come only from the POS of an institution that is authorized to operate as an acquirer in Türkiye.
If the Draft Amendment enters into force in its current form, the new regulations that card issuing institutions will be obliged to comply with are as above. A transitional provision is envisaged for the cards issued by card issuing institutions before the date of entry into force of the said amendments, and it is regulated that these cards will be exempt from the obligations and limitations listed in the first and second articles above, whereas in case the said cards are renewed after the entry into force of the said amendments, this exemption will end, and in this case, the renewed cards will also be subject to the said obligations and limitations.
Therefore, if cards issued by card issuing institutions before the date of entry into force of the Draft Amendment are renewed after the entry into force of the amendments, it will not be possible to issue cards defined to the card scheme of a card system institution that does not have a license to operate in Türkiye without also including the card scheme of a card system institution that has a license to operate in Türkiye. Card issuing institutions will also be required to comply with all other obligations outlined in points one and two above, such as the issues to be taken into account when including the card scheme brand and offering customers the right to prefer priority of card schemes.
When the Draft Amendment is evaluated as a whole, particularly the obligations imposed on card issuing institutions, it states that card system institutions that have not obtained an operating license in Türkiye in terms of debit or credit cards to be used in Türkiye after it enters into force; their card schemes can't be included in the said cards alone unless they have obtained an operating license. In addition, considering the fact that the customer has the right to determine and change the primary card scheme, it seems that the customer will either have to choose to have its card scheme included in the cards together with the card scheme of a card system institution that has an operating license in Türkiye or instead obtains an operating license as a card system institution in Türkiye. From this perspective, it can be said that the Draft Amendment encourages obtaining an operating license as a card system organization in Türkiye.
- ACTIVITIES CARRIED OUT BY ACQUIRERS RESIDING ABROAD FOR PERSONS RESIDING IN TÜRKIYE
As mentioned above, as per the new provisions planned to be added to Article 21 of the Regulation titled "Card issuance and related obligations", if acquirers located abroad are engaged in activities directed to residents in Türkiye, card issuing institutions may only approve transaction confirmation requests from POS allocated to these acquirers located abroad, provided that they are made through the POS of an institution that has a license to operate as an acquirer in Türkiye. In addition, the Draft Amendment also specifies the cases that will be considered as "activities carried out by acquirers residing abroad for persons residing in Türkiye". Accordingly, if any of the aforementioned businesses open a place of business in Türkiye, establish a website in Turkish, and engage in promotional and marketing activities directly and/or through Turkish residents concerning the goods and services offered, the activities will be deemed to be directed to Turkish residents. In addition, the Draft Amendment authorizes the Banking Regulation and Supervision Agency to determine additional criteria for determining that the activities in question are directed to Turkish residents and to determine the procedures and principles regarding the implementation of the said provision.
- OBLIGATIONS IMPOSED ON INSTITUTIONS CONCLUDING ACQUIRER AGREEMENTS
If the Draft Amendment enters into force in its current form, the institutions concluding acquirer agreements are obliged to ensure that the card schemes of all card system institutions that have obtained permission to operate in Türkiye are defined on the POSs to be used by their acquirers. If more than one card scheme of more than one card system organization is defined on the accepted card and all of these card schemes are defined on the POS, the cardholder will automatically be allowed to use the preferred priority card scheme unless the cardholder indicates otherwise. On the other hand, if the cardholder prefers to use a different card scheme, the card issuing institution shall be obliged to use the other card schemes defined on the card in accordance with this preference.
The provisions of the Draft Amendment of the BRSA, which are explained in detail above and will enter into force 3 months after the date of publication, will encourage card system institutions to obtain an operating license. In addition, card system institutions that operate/will operate in Türkiye by obtaining an operating license will be widespread and thus service diversity will be ensured. It is aimed to develop the card payments ecosystem. Comments on the Draft Amendment can be sent via e-mail to firstname.lastname@example.org.
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.