Why Türkiye is set to become a digital payments powerhouse

Why Türkiye is set to become a digital payments powerhouse

The economy of Türkiye is operating in high gear. The country’s GDP cracked $1 trillion for the first time in 2023, buoyed by strong household spending and growth in the construction and financial services sectors. 

Türkiye is modernising rapidly, with high broadband penetration and a tech-savvy young population. The economy has been further boosted by an influx of migrants, including refugees and asylum seekers. About 90% of Turkiye’s four million refugees are from Syria, who contributed $500 million to the economy in 2020 by running small businesses.

Turkish consumers have grown accustomed to paying digitally, raising the total value of digital payment transactions to nearly $63.5 billion in 2022 — a figure expected to double by 2027.

The rapid integration of digital payments has opened the doors to new business opportunities, strengthened the country’s trade links to international markets and provided healthy economic prospects for domestic companies. 

In this article, we’ll examine:

  • Overview of Türkiye’s economy
  • The digital commerce space
  • The expansion of real-time payments 
  • The growth of digital wallets 
  • Banking-powered innovation
  • The gaming industry in Türkiye
  • The gig and freelancer economy
  • Remittances and cross-border payments

Overview of Türkiye’s economy

Türkiye, located at the intersection between Europe and Asia, has long served as a vital trade artery between the two continents.

Türkiye, the 17th largest economy in the world, is a key exporter of commodities and industrial goods such as vehicles, machinery, industrial raw materials, mineral fuels, textiles, and apparel.

In recent years, its economy has faced significant challenges. Faced with high inflation and unemployment rates, the country enacted monetary policies to rein in inflation and rebuild investor confidence. Additionally, Türkiye has strengthened its transport infrastructure and manufacturing capacity. 

These factors, combined with generous tax incentives and the recent Red Sea crisis, which  forced companies to diversify their trade routes, have contributed to Türkiye’s emergence as an alternative European supply chain hub.

Türkiye’s affordable and advanced medical services are another economic driver, particularly for dentistry, cosmetic surgery and hair transplantation. This has led to the growth of a thriving medical tourism industry that generated $1 billion in revenue in 2021.

Türkiye’s booming digital commerce landscape 

While traditional businesses form the bulk of Türkiye’s commercial activity, digital commerce space is blossoming. In 2021, the number of new digital businesses in Istanbul alone rose by 60,000. 

Online shopping is surging. Nearly 64 per cent of Turkish people shopped online in 2022, with one-fifth of retail sales volume occurring via e-commerce.

To accelerate digital economic activity, the Turkish government plans to establish a “Digital Silk Road”, facilitating digital trade and technical cooperation between China and Türkiye.

Key payment trends in Türkiye

Türkiye has a mature and vibrant financial ecosystem. The country’s credit penetration rate ranks 7th globally, and around 40 per cent of Turkish people own two to three credit cards.
Government and private sector efforts have spurred digital payment adoption — over 65 per cent of Turkish consumers use mobile payments to pay.  This has ushered in greater financial inclusion for Türkiye’s unbanked residents, who comprise 30 per cent of the population.

1- State-empowered digitalisation

The Turkish government has played an active role in driving financial innovation. In 2020, the Central Bank of Türkiye (CBRT) launched QR code standards in an effort to establish interoperability between payment service operators in the country as well as accelerate the use of cashless payments. 

In 2022, CBRT launched an open banking infrastructure to encourage data sharing and collaboration between financial services, enhancing its digital payments ecosystem and improving customer service experiences. 

Fintech regulation in Türkiye has also been harmonised with EU regulations, ensuring ease of operation across the region.

2- FAST real-time payments (RTPs) take off

Instant and Continuous Transfer Fund System, or FAST, is Türkiye’s real-time payments (RTP) system, launched by CBRT in January 2021. 

FAST offers instantaneous settlement, 24/7 availability, bank-to-non-bank transactions, P2P and merchant settlement. Other features, such as Request-to-Pay and Escrow Overlay, are currently being developed. 

FAST payments can be initiated as long as customers have the recipient’s phone number, email address or Turkish ID number. Currently, the maximum transaction amount is TRY 5,000 ($155). However, for business payments, the maximum is TRY 10,000 ($415).

Since its launch, FAST has been met with an enthusiastic response. There are over 15.5 million registered users to date, with over 3.5 million transactions processed daily. According to a FICO survey, more than 45 per cent of Turkish consumers use RTPs five times per month. The government also plans to link FAST with cross-border payment arrangements, vastly expanding RTPs’ utility.

3- Digital wallets supporting financial inclusion

Digital wallet adoption in Türkiye is on the rise. There are many different players and the market is highly fragmented. Many consumers use multiple wallets.

International e-wallets such as PayPal and Apple Pay are unavailable in Türkiye due to banking laws, but domestic players have filled the gap.

At the top of the e-wallet pack is Turkish fintech giant Papara, which reports 18 million customers. Beyond payments, Papara users can also access a diverse selection of financial services, including insurance and even investment in precious metals.

Banks have also developed their own mobile wallets. And, other leading wallet brands include Maximum Mobile and fastPay. 

Paycell is another leading wallet; it enables users to conduct international money transfers from Europe and the UK 24/7. The platform currently has over 5 million users.

Turkish consumers who lack access to credit or debit cards and pay using their mobile phones can use lyzico, which inked a deal with TPAY MOBILE-owned digital wallet, Payguru, in 2021 to allow mobile-wallet top-ups via Direct Carrier Billing (DCB).

4- Banking-powered innovation

Türkiye’s financial institutions are world leaders in fintech innovation.

In 2006, it became the first country in Europe and the Middle East to offer contactless credit cards (Mastercard Paypass). Türkiye is also among the pioneers of instalment-based credit cards; today, over 40 per cent of credit card purchases are made in instalments. 

The country’s banks have rapidly digitised their offerings, resulting in over 91 million active digital banking customers today. This transition has resulted in a paradigm shift in consumer behaviour — around half of them no longer visit bank branches, preferring to rely on just digital banking platforms. Consumer loans distributed via digital channels have also risen, with mobile loans taking up the lion’s share. 

Banks like Garanti BBVA, the country’s second-largest private bank, have also integrated advanced tools, including AI and data analytics, to provide more personalised customer service. 

While Türkiye’s traditional banks have been adept at creating a moat through digitalisation, they face increasing competition from neobanks and other fintechs, which are touted to be more nimble and offer lower fees. 

The challenge neobanks posed to the incumbents received a significant boost when Türkiye’s Banking Regulation and Supervision Agency (BRSA) launched its digital banking regulation law in 2022, formalising the beginning of a new era of disruption in the banking sector.

To date, BRSA has granted digital banking licenses to five digital banks: Hayat Katılım, Kasa Katılım, T.O.M. Katılım, FUPS Bank, and Ziraat Dinamik. 

5- Gaming sector driving revenue

Türkiye’s gaming industry is powering up. 92 per cent of internet users in the country play games, with the mobile format taking up a substantial slice of the pie. Over 80 per cent of adults play at least one mobile game, and 72 per cent of them play mobile games daily. 

In 2020, mobile games accounted for half the country’s $880 million gaming market

Gamers in Türkiye actively watch others play, too. The live-streaming market revenue is projected to reach $143 million in 2024 and increase to 12.4 million users by 2027. Live-stream gamers in Türkiye command a massive following. wtCN, a Turkish live-stream gamer who plays popular games such as Valorant, has over 2.9 million followers.
With a large and voracious gaming population, Türkiye is home to the second-highest number of gaming studios in Europe. Today, more than five of these studios bring in US$100 million in annual revenue.

6- Fuelling the freelancer market

With the growth of e-commerce, on-demand delivery services and other freelancing platforms, Türkiye has seen a rise in gig economy workers. Some of the major delivery platforms in the country include on-demand shopping services Kapgel and Getir, which employ freelance couriers to deliver goods to customers. 

While there are no figures on the total gig worker population in Türkiye, approximately 30 per cent of the population is self-employed, which includes gig workers. In 2022, the number of registered gig couriers in Istanbul is estimated to be around 20,000. 

Türkiye also offers favourable conditions for digital nomads that work remotely in the country. 

7- Remittance and cross-border payments

The value of remittance outflows from Türkiye reached $731 million in 2022, with $1 billion of inflows in 2023, according to the World Bank.

Fintech platforms are helping to speed up remittance and improve the experience. These platforms include cross-border solutions such as Worldline and Isbank, which established a partnership with China-owned Super App, WeChat. 

Setting the stage for Türkiye’s next digital chapter

From e-wallets to neobanks, Türkiye’s financial institutions are accelerating fintech innovation, supporting greater connectivity to international markets, financial inclusivity at home and more economic prosperity for businesses. 

Thunes is a key payments player in Türkiye’s ecosystem. Our extensive payments network in the country facilitates collections and and payouts to link bank accounts, digital wallets and merchants. Using Thunes’ Pay and Accept network, Turkish consumers can make real-tme, cross-border payouts to banks and conduct transactions using digital vouchers.

Thunes has an extensive global reach, facilitating transactions across 130+ countries and supporting 90 currencies and more than 550 digital wallets. Currently, we process over 195 million transactions per annum.

By developing a conducive ecosystem for financial innovation, Türkiye has laid the ground for greater economic prospects for busineses and consumers. 

Speak with us to discover how you can leverage payments in Türkiye to supercharge your business expansion in the country.

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