November 2022 / Sistem Global Newsletter Summary9 December 2022
December 2022 / Sistem Global Newsletter Summary11 January 2023
The Banking Regulation and Supervision Agency (BDDK) in Turkey recently published the Draft Regulation on the Amendment of the Regulation on Bank Cards and Credit Cards, which includes provisions related to the concept of a “card scheme” and the acceptance of card-based payments by foreign merchants. This regulation has the potential to significantly impact the way card payments are processed in Turkey, both for domestic and foreign merchants.
The concept of a “card scheme” is defined as a set of rules, practices, guides, and standards that ensure the realization of card payment transactions, regardless of the infrastructure and payment system that supports the operation. This concept is expected to change the functioning of Turkey’s a trade and service sector by providing supervision of card payment transactions. This includes the management and decision bodies responsible for the execution of card payment transactions, as well as the organizational structure of card system establishments.
The Draft Regulation also includes provisions related to the issuance of cards by card-issuing organizations. Card-issuing organizations will not be able to issue cards for domestic use to customers unless the card scheme is defined by an organization that has obtained an operating license in Turkey. Customers will have the right to choose which card system institution their card will be issued with, and card issuing organizations will be required to inform customers about the functions, costs, customer rights, and security measures of all card scheme options. This includes the domestic and international use of the card. Card-issuing organizations will also be required to offer customers the right to change the priority card scheme if requested and to fulfill this request within 15 days. Card issuing institutions will be obliged to offer the customer the right to choose which card system institution the card will be issued with during the card application and to comply with this preference right. In addition, it will be obliged to inform the customer clearly and objectively about the functions, costs, customer rights, and security measures of all card scheme options, including the domestic and international use of the card. Again, without prejudice to article 6, the customer cannot be forced to prefer more than one card scheme brand at the same time. Before the card allocation, if the customer prefers to use more than one card scheme at the same time, it will also be ensured that he can determine which scheme will be applied primarily to his card. In case the customer requests to change the priority card scheme, the request will be required to be fulfilled by the card issuer within fifteen days at the latest.
In addition to these provisions, the Draft Regulation includes provisions related to the acceptance of card-based payments by foreign merchants who conduct activities aimed at individuals in Turkey. These foreign merchants will only be able to accept card-based payments if they have a point-of-sale (POS) terminal from a domestic acquirer company and if the card issuer organization approves the transaction. The card issuer organization will be able to approve the transaction if it determines that the foreign merchant’s activities are aimed at individuals in Turkey, based on criteria such as the existence of a business in Turkey, a Turkish website, and promotional and marketing activities related to goods and services offered to individuals in Turkey.
However, there is a technical question mark about how the card issuer organizations will make this determination, as there is no contractual or commercial relationship between the issuer organization and the foreign merchant. It is important to note that the Banking Regulation and Supervision Agency (BDDK) may issue additional rules regarding the criteria and implementation of this provision in the Draft Regulation.
The Draft Regulation is open for industry feedback and will take effect three months after its publication in the Official Gazette. This regulation may affect businesses that receive card-based payments through POS terminals from foreign acquirer organizations, such as digital service providers, especially in SaaS industries and e-commerce. These businesses may be unable to receive payments if they do not have a POS terminal from a domestic acquirer company and if the card issuer organization does not approve the transaction.
In terms of how this regulation compares to others in Europe and the United States, it is important to note that the regulation of card payment systems and card issuer organizations differs between countries and regions. In the European Union, the Payment Services Directive (PSD2) and the Interchange Fee Regulation (IFR) regulate card payment systems and card issuer organizations. The Card Act of 2009 and the Dodd-Frank Wall Street Reform and Consumer Protection Act regulate card payment systems and card issuer organizations in the United States. The provisions of these regulations may differ from those in the Draft Regulation published by the BDDK in Turkey. Businesses and individuals need to understand the specific regulations and provisions that apply to their operations and comply with these regulations. In the case of the Draft Regulation published by the BDDK in Turkey, it will be important for businesses and individuals to understand the provisions related to the concept of a “card scheme” and the acceptance of card-based payments by foreign merchants, and to consider any potential impacts on their operations. It will also be important to provide feedback on the Draft Regulation if they wish to do so and to monitor the final form of the regulation and any additional rules issued by the BDDK once it is published in the Official Gazette.