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Turkey commits to going cashless

Turkey's Eastern Promise of a Cashless Economy

Turkey's Eastern Promise of a Cashless Economy

Turkey’s recent plunge into financial crisis may not mark the country out as a potential fintech hotspot, but its ambition to go cashless places it among the frontrunners as a destination for tech investment. Wendy Atkins reports.


Followers of global news will doubtless be aware of turbulent political times in Turkey in recent years, culminating in an attempted coup and the controversial re-election of Recep Tayyip Erdoğan as the country’s president earlier this year. Currently, the country also finds itself in the grip of a financial crisis, brought to a head by US sanctions and high levels of national debt.

Although such a challenging domestic environment hardly seems to provide an ideal backdrop for a startup, Turkey’s expanding population and focus on fintech mean that the country might yet be considered as a place to invest. Government plans for Turkey, to become a cashless society by 2023, announced before the current financial turmoil, might still yield a wealth of opportunities for new businesses in the fintech sector as Turkish lira notes and coins become a thing of the past.

Turkey has set ambitious targets for the country’s technology sector, to be reached in the year that the republic celebrates the centenary of its foundation. In addition to the plan to go cashless, key ICT targets for 2023 include:

» reaching the 30-million broadband subscribers mark;
» providing 1,000Mbps internet connections for 14 million homes;
» increasing the technology sector’s share of GDP from 2.9% to 8%;
» becoming one of the top 10 countries in eTransformation;
» having 80% of the population computer literate;
» expanding the number of companies in Technology Development Zones (TDZs)
to 5,500, employees to 65,000 and exports to US$10 billion;
» increasing the ICT sector’s worth to $160 billion and its annual growth rate
to about 15%;
» expanding the R&D expenditure-to-GDP ratio from 1% to 3%.

Istanbul Entrepreneur & Startup Networking – an opportunity to network, socialise and share best practice about new ways of building and running a business. Also organises events and workshops with the support of major companies and organisations

Turkey OpenStack Meetup – brings OpenStack users together to increase knowledge and expertise

Lean Startup Meetup Group – dedicated to lean startup thinking and building lean startup leadership

Mobil Istanbul Network – interaction and networking platform for mobile enthusiasts

eCommerce Meetup – for eCommerce enthusiasts in Istanbul who want to exchange ideas and generate synergies

Startup Founder 101 – brings together aspiring and experienced tech entrepreneurs and gives them the opportunity to meet local founders and investors, and participate in startup workshops

Spark Meetup – an environment where Turkish Spark users can solve problems they share together

According to Invest in Turkey, the country’s investment promotion agency, the total number of mobile subscribers reached 75 million in 2016, while the nation’s spending on ICT as a whole is projected to outstrip the world average. By the start of 2018, spending on hardware, software, IT services and telecoms services had already reached $35 billion.

Central to the cashless strategy is card payment system Troy, established by the Interbank Card Center of Turkey (BKM/Bankalararasi Kart Merkezi) – a partnership of public and private Turkish banks – to reduce cash usage throughout the country and to support the goal of achieving a cashless society by 2023.

Troy started life as a domestic card scheme, but has since partnered with Discover Global Network to provide its users with access to 41 million points of sale (POS) and 1.1 million ATMs around the world. It reached another milestone in January 2018, when it introduced Troy Mobile Contactless Payment, enabling users to make contactless transactions via mobile devices.

The Troy Turkish Card Payment Market Report reveals the state of the payments market in 2017. There were 194 million payments cards in Turkey (62 million credit and 132 million debit), compared with 158 million in UK and 114 million in Germany (2016 figures), making it the largest card market in Europe. Among a population of 80 million, there are at least 24.5 million individual credit cardholders, each with an average of 2.2 credit cards in their pockets. Unsurprisingly, card payments have risen steadily and accounted for 37% of household spend in 2017, while cash withdrawals fell to 22% of card transactions.

There’s also evidence of a change in consumer habits in the findings of the 2017 Card Monitor survey, commissioned by the BKM, which shows a shift towards a cashless society. According to the survey, 73% of the participants said they preferred to pay by card while shopping, compared with 65% just two years earlier.

The rate and scale of the country’s fintech market growth is also noteworthy. The Deloitte, BKM and FinTech Istanbul ‘FinTech Ecosystem in Turkey’ report
reveals that fintech investments grew by 175% over the four-year period to 2016 to reach $29 million. Venture capital and angel investment networks put a total of $53.2 million into fintech initiatives in the country during the same period.

The report’s authors forecast that Turkey’s fintech sector will continue to grow at an average annual rate of 14%, and that the country will be able to harness its geopolitical advantage of being at the crossroads of Europe and Asia to help turn it into a regional financial technology centre in the near future.

The government has set up the Financial Technologies Permanent Sub-Committee (Fintech Task Force) to back the growth of the sector and to help make Turkey a world leader in advanced fintech. The Task Force is currently bringing together the public and private sectors to support fintech startups and grow the industry. Organisations playing a key role in the Task Force include the country’s Central Bank, its Banking Regulation and Supervision Agency, its Treasury Undersecretariat, its Capital Markets Board and its Savings Deposit Insurance Fund.

Turkey’s demographics are in its favour when it comes to developing fintech
products and setting out on the road to a cashless society. The country has a young, tech-savvy population, was an early adopter of payments technology and served as a testbed for some of the earliest contactless schemes.  Investment in the finance and tech sectors is also increasing.

Turkey Cashless Government Policy

Business is ready to build on these foundations. Writing in Finance Digest earlier this year, Dr Halil Bader Arslan, Secretary General of the Turkish Exporters Assembly, explained that almost a quarter of Turks are younger than 14 and around half are under 30, providing a strong base of current and future consumers that will be eager to use the latest payment technologies. On the tech adoption front, Turkey has been ahead of many countries of similar size for some time, with a 2015 study from ING revealing that 56% of the Turkish population had used a mobile payment app, compared to just 25% in France and 23% in Germany at that time.

As other countries, such as China, India, Sweden and Kazakhstan, also seek to reduce or eliminate their populations’ reliance on cash in the relatively near future, the race to create the world’s first truly cashless society seems set to gather pace.

Turkey Cashless Government Policy

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