Potential Impact of Recent Regulatory Developments on Turkish Banking Industry

In a highly regulated industry like banking, regulations certainly have a strong impact on the industry dynamics. Turkish regulators have been working on incentivizing competition and innovation in the banking industry as other regulators across the world.

For this purpose, there has been numerous high-impact regulations recently announced by various government bodies and regulators. Some of the more impactful ones can be seen below:

Digital customer onboarding: Through amendment introduced for electronic contracts for financial transactions; banks, credit and debit card institutions, payment institutions and financial leasing, factoring and financing companies are now authorized to build relationships with clients without requiring any physical paperwork and wet signature
Open Banking: By way of authorizing CBRT as the supervising authority on data sharing between payment service providers within the scope of the payment initiation and account information services, an important step has been taken in terms of open banking in line with PSD2. The legislation is expected to be published at the end of Q2 2021
Digital banking license: Draft Regulation that was published in August 2021 introduced the rules for digital / branchless banking

These regulatory changes coupled with the impact of COVID-19 has been and is expected to continue to have an impact on the industry around a number of key topics:

Regulatory arbitrage: Banks and fintechs take advantage of regulatory arbitrage opportunities (e.g. exemption from MSC cap for PSPs, ability for banks to send money to cryptocurrency exchanges as opposed to fintechs)

Fintechs in payments: Fintechs are increasing penetration both on issuing (e.g. digital wallets, prepaid) and acquiring (e.g. PSPs) in payments

Intensifying competition: Competition in the industry is continuing to intensify as importance of branches decrease

Emergence of neobanks: Introduction of a digital banking license, remote onboarding and COVID-19 will increase feasibility for neobank business models

Emergence of ecosystems: VUK-507, Open Banking and changing consumer behaviors are supporting the emergence of ecosystems (e.g. superapp)