January 2, 2019
When I travel around the world and meet with leaders in financial technology, they are frequently surprised to learn about the highly ambitious goal set by Turkey: to become a cashless society by 2023.
About 10 years ago, only 20% of total household consumption was conducted via cards. Today, this ratio is around 40%. Although Turkey is a cash-heavy country with a population of 80 million, the country is aiming to become fully cashless by 2023.
The benefits of going cashless are clear for Turks. According to recent research by Turkey’s Interbank Card Center, every 1,000 Turkish Lira (roughly USD$185) spent by credit card increases GDP by 1,750 TL (roughly USD $325) and that the economy gains 20 TL (USD $3.75) in tax revenue from every 1,000 TL (USD $185) spent by card.
Beyond economic gains, cashless societies also facilitate access to financial services for a greater number of people compared to their cash-heavy counterparts. Currently, less than 10% of micro and small merchants in the developing world accept digital payments, which represent $35 billion in transaction fees annually.
Banks have been highly enthusiastic about implementing new financial technology to reach and engage with their customers. Turkey was the first country to offer totally free installment options for credit cards, the first European country to offer a contactless card and to accept contactless cards for highway tolls. Additionally, Turkey was one of the first countries to finalize EMV migration.
Digital payments constitute the largest segment of the payment market in Turkey. In 2016, digital payments were estimated to have around $17.5-billion-dollar trading size. About 42.8 million people are expected to use digital payment methods in the Turkish market by 2020.
Turkey is ranked among the top middle-income countries that leaders in providing banking access to their populations, as well as boasting prolific e-commerce use among corporations and mobile users – the country shares the second place with Argentina, Costa Rica, and Mauritius following Chile (the first place). The Global Innovation Index 2018 ranked 16 of the 19 economies in Northern Africa and Western Asia region among the top 100 globally, including Turkey (50th).
Among the major reasons for the establishment of such an innovative environment is Turkey’s strong banking infrastructure (with the sector attracting $51 billion in the last 15 years), young population (with the largest youth population in the EU, half of which is under the age of 31), and a high adoption rate of new tech – according to Wirecard, between 2012 and 2016, $42.6-million-investments were made only in FinTech initiatives in Turkey, enabling the country to grow by 20% annually in the field of financial technologies. The number of active mobile banking users has increased from 400 thousand people to 34.3 million just in 7 years.
The collective power of the key stakeholders in the space will be the differentiating factor in Turkey’s mission to become cashless.
Since the 1990s, Turkish banks operating in the payments landscape have been collaborating in a unique display of unity. They have been collaborating to foster innovation and drive growth by providing innovative products and services for various payment systems, whilst providing switching, clearing, and settlements for card transactions. And in line with the cashless mission, two recently unveiled collective initiatives are already rapidly changing the payments landscape.
In 2016, a major national payments program called TROY was launched with the support of 26 financial institutions. TROY was established as a response to growing demand in the market for a local solution that better addresses the issuers’ and acquirers’ needs and shortens time-to-market in a cost-effective way. Today, TROY is the first and only Turkish card payment method valid both in Turkey and globally, which successfully meets market needs and in doing so, pioneers innovation and brings dynamism to the market. TROY’s value proposition has helped it penetrate the market in less than two years and achieve a market share of 21% since the beginning of 2017. The second platform is a digital wallet BKM Express, which is supported by 19 banks and has 1.6 million users. The functionalities of the BKM Express wallet include e-commerce and m-commerce, one-click payments, face-to-face, P2P transactions, and donations.
A number of initiatives have been launched to leverage the power of Turkish ecosystems. The Blockchain Turkey Platform (BCTR) is one of them – an initiative of the Turkish Informatics Foundation, an independent, non-profit organization that aims to create a strong blockchain ecosystem in Turkey.
On the whole, Turks have been getting on board with the cashless trend at an astounding pace in recent years. The total number of credit cards grew by over 5 million between June 2016 and June 2018, while the total number of debit cards skyrocketed by 21 million in the same period.
It was not long ago that Turkish society was highly skeptical about embracing the move away from cash-heavy commerce, and now we’re leapfrogging into the future – and heading toward becoming a fully cashless society.