In recent years, Turkey has witnessed a significant rise in financial technology (fintech) companies. Consequently, this revolutionized the way financial services are delivered. In fact, fintech sector, driven by innovative technology solutions, has gained momentum. Consequently, fintech law started to develop as well. Moreover, this attracted considerable attention from both local and international investors. An illustration of this can be seen in BKM Express. To clarify, its a cashless payment platform jointly established by multiple banks in 2012. Today, it serves as a trusted solution for over 200 fintech companies and banks operating in Turkey.
Over the years, the Turkish fintech market has experienced steady growth, with an impressive annual expansion rate of 14%. As a result, the market has reached a substantial valuation of USD 15 billion, showcasing its immense potential and attractiveness for investors and innovators alike.
Due to the growing market, the Turkish government has taken proactive measures to establish a robust legal framework to regulate fintech activities, ensuring consumer protection, market stability, and economic growth. This article delves into the key aspects of fintech law in Turkey, exploring the regulatory landscape, opportunities, and challenges.
What is the Regulation for Fintech in Turkey?
The regulatory environment for fintech companies in Turkey is governed by various laws rather than one homogenous law. Therefore, we will cover the most important regulations about Turkey’s fintech ecosystem. Although there are other regulations under the laws that we will discuss below, we have found it appropriate to mention only the important laws in this article.
Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions Law no. 6493
Mainly Central Bank of the Republic of Turkey (“CBRT”) governs Law no 6493. CBRT is responsible for enforcing and overseeing compliance with the provisions set forth in Law 6493. The law was entered into force on June 27, 2013. Since then,there were subsequent amendments to adapt to evolving market conditions and align with international standards. Moreover, amendments aim to enhance consumer protection, strengthen anti-money laundering measures. In addition, it aims promoting competition, and facilitating innovation in the payment and electronic money sectors.
The Bank Cards and Credit Cards Law no. 5464
It establishes the legal framework governing the issuance, use, and regulation of bank cards and credit cards within the country. Certainly, it enacted to protect consumer rights and ensure the integrity of card-based transactions. Moreover, this law sets out provisions related to card issuance, cardholder obligations, and liability for unauthorized transactions. It also addresses matters such as interest rates, fees, and penalties associated with credit card usage. Thus, it aims to promote transparency, fair practices, and responsible lending in the credit card industry. In addition, it safeguards the interests of both cardholders and financial institutions.
Prevention of Laundering Proceeds of Crime Law no. 5549
The law imposes stringent obligations on fintech companies operating in Turkey to implement robust AML measures and comply with KYC requirements. Fintech firms are required to establish effective systems and procedures to identify and verify the identity of their customers. Moreover, they need to monitor transactions for suspicious activities, and report any potential money laundering or terrorist financing activities to the relevant authorities. Therefore, it led to increased emphasis on digital identity verification solutions and innovative KYC technologies within the fintech industry.
Banking Law no. 5411
This law establishes a comprehensive regulatory framework for banks in the country. Moreover, it encompasses provisions related to capital adequacy, risk management, governance, consumer protection, and operational requirements. Consequently, the law promotes stability, integrity, and efficiency of the banking sector. At the same time, it ensures compliance with international standards. In short, it plays a crucial role in fostering a secure and trustworthy banking environment.
The Regulation on Procurement of Support Services by Banks
Accordingly, banks are obligated to establish robust procurement processes to ensure the reliability and quality of the services obtained. The regulation covers various aspects, including the evaluation and selection of service providers, contract management, and risk assessment. Moreover, it emphasizes the importance of due diligence and ongoing monitoring of the service providers. Consequently, its aim is to ensure compliance with legal and regulatory requirements.
Insurance Law no. 5684
Enacted to regulate the insurance sector, provides a comprehensive legal framework that governs the establishment, operation, and supervision of insurance companies in the country. Therefore, this law covers various aspects, including licensing requirements, solvency margins, risk management, policyholder protection, and dispute resolution.
Capital Market Law no. 6362
It covers a wide range of areas, including securities issuance, trading, market supervision, disclosure requirements, and investor rights. The law establishes regulatory bodies, such as the Capital Markets Board, responsible for overseeing market operations and ensuring compliance with the law. Moreover, it fosters the development of efficient and well-regulated capital markets, encouraging capital formation, investment, and economic growth.
The Communiqué on Equity Based Crowdfunding No III-35/A-1
Communiqué provides a legal framework for crowdfunding platforms and participants. It outlines requirements for crowdfunding activities, including licensing and registration procedures, disclosure obligations, investor protection measures, and reporting standards.
Which Governmental Authorities are Regulating the Fintech Market in Turkey?
As in the case of legislation, when it comes to Fintech, instead of a single overarching government agency, we see the existence of multiple official institutions regulating the different areas that Fintech touches. We will briefly mention some of these official institutions below.
Central Bank of the Republic of Turkey (“CBRT”)
Although the regulatory duties and powers of Law No. 6493 were initially vested in the Banking Regulatory and Supervisory Authority (BRSA) in 2013, the BRSA’s powers were transferred to the CBRT following the amendment of the law in 2019. With this, the CBRT has become the most important institution playing a key role in electronic money and payment systems.
The Capital Markets Board of Turkey (“CMB”)
CMB plays a crucial role in regulating and supervising the country’s capital markets. As the primary regulatory authority, the CMB is responsible for overseeing the fair and efficient functioning of the markets. Its duties encompass a wide range of areas, including licensing and authorization of market participants, monitoring compliance with regulations, and ensuring investor protection.
Banking Regulatory and Supervisory Agency of Turkey (“BRSA”)
As an independent regulatory body, the BRSA is responsible for ensuring the stability, integrity, and soundness of the banking system. Its duties encompass various aspects, including granting licenses to banks, supervising their operations, and enforcing prudential regulations. The BRSA conducts regular inspections, assessments, and audits to monitor compliance with banking laws and regulations, risk management practices, and capital adequacy requirements.
Financial Crimes Investigations Board (“FCIB”)
FCIB’s primary duties include investigating and preventing money laundering, terrorist financing, and other financial crimes. It has the authority to collect information, conduct inspections, and request relevant documents from financial institutions and other entities to uncover suspicious transactions. Turkey’s FCIB also collaborates with domestic and international stakeholders, such as law enforcement agencies, regulatory bodies, and international organizations, to exchange information and coordinate efforts in combating financial crimes.
What are the Legal Services that Turk Fortune Offers for Financial Technology Companies regarding Fintech Law?
Below are the services offered by attorney Kaan Beylen and attorney Ece Özlü Beylen from Turk Fortune for companies seeking to provide financial technology services in Turkey:
Business Analysis in Fintech Law:
Analyzing the business model based on the provisions of Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions, along with relevant legislation, to create a strategic roadmap.
Advising on the appropriate company structure and ensuring compliance with Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions, and related regulations.
Contract Drafting regarding Fintech Law:
Assisting in the preparation of contracts and providing guidance for outsourced organizations and legal entities involved in representation relationships.
Addressing written and verbal inquiries from clients regarding compliance with Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions, Law No. 5549 on Prevention of Laundering Proceeds of Crime, and other applicable regulations.
Data Protection and Payment Services in Fintech Law:
Developing systems, procedures, and policies to align with the Law on the Protection of Personal Data and payment services legislation, ensuring comprehensive compliance from the outset.
Assistance with Permit Application:
Providing expert advice throughout the permit application process before the Central Bank of the Republic of Turkey (CBRT).
Legal Consultancy regarding Fintech Law:
Offering guidance on all legal matters related to the preparation of the permit application file, including necessary documents and required information for the operating license application.
Ensuring that contracts align with the business model and comply with the provisions of Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions, and relevant legislation, and incorporating them into the application file.
Technical Policies and Procedures:
Providing opinions and consultancy on the development of technical policies and procedures in accordance with applicable regulations.
Application Monitoring in Fintech Law:
Overseeing the application process with the CBRT until the operating license is obtained, ensuring a smooth and efficient procedure.
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