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    It was back in 1994 when the Chairman of Microsoft Bill Gates said that “Banking is necessary, banks are not.” Perhaps only few understood what he really meant back then. But now, almost three decades later, traditional banking is in the midst of a digital transformation that will affect the lives of billions of people around the world. 

    Thanks to the introduction of new legislations and overhaul of regulations; Turkish FinTech sector aims to compete with key global hubs, such as Beijing, London Singapore and New York in terms of banking, technology usage and digitalization. 

    The numbers also seem to support this notion and the constant need for regulation in banking sector. According to the report “The State of FinTech Ecosystem in Turkiye” published by the Finance Office of Presidency, there are 82.8 million credit cards in Turkiye, placing it 7th globally for credit card usage. Moreover, in terms of the number of credit card transactions, Turkiye ranks 9th in the world. These statistics places Turkiye as one of the leading countries in terms of banking, supported by 1.7 million POS devices, a 48% in-store contactless payment ratio, 52,100 ATMs, and 70.3 million active digital banking customers. 

    As of December 2021, there are 520 active FinTech start-ups and 56 accredited payment and e-money companies in Turkiye. 

    The rapid growth in the sector encourages banks actively seek opportunities for cooperation, investment and acquisitions of FinTech start-ups which would help the FinTech sector to emerge as one of the most popular choices for investors.


    FinTech and Banking 

    Terms such as ‘FinTech’, ‘digital banking’ that were almost non-existent just a decade ago, are now part of our daily language. So, before we go any further, let’s take a step back and look closely what FinTech really means. 

    The word “FinTech” is simply a combination of the words “financial” and “technology.” The word signifies the use of technology to deliver financial services and products to consumers. 

    In fact, The Bank of England provides the following definition: 

    “The word ‘fintech’ is simply a combination of the words ‘financial’and ‘technology’. It can be defined broadly as technology-enabled financial innovation that could result in new business models, applications, processes, or products with an associated material effect on financial markets, institutions and the provision of financial services.”

    From digital payments to alternative lending, FinTech companies changed the world of finance by introducing new services for banking. These include smart chip technologies, biometric sensors, trading, foreign exchange, crowd funding, risk and compliance, online transactions, branchless banking, customer service chatbots, artificial intelligence (AI), e-wallets and mobile banking. 


    Regulatory Landscape

    Regulatory landscape offers full of new developments. 

    The scope of FinTech sector is widening and it will need to be accompanied effective regulation and supervision. 

    To that end, Turkish government’s efforts to push new legislation in this field reveals that Turkiye is seeking to play an important role in the legislative front:


    • The Regulation on the Operating Principles of Digital Banks and Service Model Banking ("Regulation"), which sets out the principles for the concept of branchless banking published in the Official Gazette dated 29 December 2021 and numbered 31704 issued by the Banking Regulation and Supervision Agency came into force on 1 January 2022. 
    • The Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers ("Regulation on Payment Services and Electronic Money") has been published and entered into force after being published in the Official Gazette dated 1 December 2021 and numbered 31676.
    • Regulation Amending the Regulation on Payment Services and Electronic Money Issuance, Payment Service Providers ("Amending Regulation") has been published in the Official Gazette dated 25 November 2022 and numbered 32024 and entered into force as of the publication day.
    • The Law 5464 on Bank Cards and Credit Cards (“Credit Card Law”) sets out the principles in relation to credit and bank cards.
    • The Banking Law 5411 and the Regulation on Support Services Procured by Banks regulate the principles and procedures of ensuring confidence and stability in financial markets, the efficient functioning of the credit system and the protection of the rights and interests of depositors.
    • Turkish Competition Authority’s Survey Report on the Financial Technologies Providing Payment Services ("Turkish Competition Authority Report on FinTech") which was published on 08 December 2021 specifically aims to evaluate the market dynamics within the competition law framework. 

    Regulation aside, governmental authorities who oversee the implementation of such regulations happen to be just as important because the sole purpose of these institutions is to strengthen the financial and information security in the sector.

    Turkish Banking Regulation and Supervision Agency (“BRSA”), The Central Bank of Turkiye (“CBRT”), the Capital Markets Board (“CMB”), the Ministry of Treasury and Finance, the Revenue Administration (“GIB”) and the Financial Crimes Investigation Board (“MASAK”) regulate the financial institutions emerge as the key players on this front. 


    Recent Developments in the UK and USA 

    From a comparative law standpoint, in the "FinTech Sector Overview from the KPMG Perspective" report, Turkiye ranks 18th in the European continent after Poland with 139 million USD funding in 2020. The first three places on the list are the United Kingdom with 13.6 billion USD, France with 5.3 billion USD, and Germany with 5.1 billion USD. This volume, when only the Middle East countries are taken into account, Turkiye ranks 3rd (KPMG, 2021: 8). The United States continues to hold steady and lead the way as the biggest FinTech industry. 


    • The United Kingdom 

    Like other popular international hubs, FinTech investments in the United Kingdom grew by 9.1 billion in the first half of 2022, a 24 percent increase from the same period in 2021 – making the UK the second largest destination for FinTech investment, after the United States. 

    The FinTech sector in the UK is comprised of over 1,600 firms, a number that is projected to double by 2030. The sector and over 76,000 jobs to the UK economy which is expected to be 105.5 thousand by 2030.

    There is no single regulatory framework that governs FinTech in the UK. The key regulation on this sector is the Financial Services and Markets Act 2000 (“FSMA”) and the sector is overseen by the Bank of England (“BoE”) through other regulators such as the Financial Conduct Authority (“FCA”) or the Prudential Regulation Authority (“PRA”).

    Most recent significant development was the UK’s Competition and Markets Authority (“CMA”) has announced the completion of the Open Banking Roadmap, having determined that six of the nine largest banking providers in the UK including Barclays, HSBC, Lloyds, Nationwide, NatWest and Santander have now fully implemented all the requirements. Open Banking Roadmap was published back in 2017 by the CMA. 

    Open Banking enables consumers and businesses to share their transaction data securely with trusted third parties, who can provide customers with applications and services which save them time and money.


    • The United States of America  


    Across the Atlantic, the situation is the same. The numbers are staggering. U.S. Fintech market has achieved a USD 4 trillion market size in 2022. It is expected that by 2025, the U.S. will account for more than 62% of the global fintech transaction value. 

    Like other financial services around the world, FinTech is also regulated both on the state and federal level. Major regulators include the Federal Deposit Insurance Corporation (“FDIC”) and the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (“FRB”) are some of the major regulatory bodies. 



    Potential Benefits and Pitfalls

    FinTech is a game changer and it promises many great innovations that will benefit the banking sector. For example, the new technology applications might help to reduce costs and provide better value for customers and especially benefit the lower income families. Another notable example would be robo advisors which can help to speed up service levels and provide better overall efficiency in financial services.

    One, however, needs to be mindful of the risks posed by such new technologies that may have profound effect on commercial transactions. One of the most pressing matters in this sector has been the issue of money laundering. According to the UN, the amount of money laundered globally in a year is estimated to reach between 2% and 5% of global GDP, or between $800 billion and $2 trillion in current US dollars. Such a loss has compelled countries to take additional measure. For example, the U.S. government has strengthened the anti-money laundering (“AML”) regulations several times. 


    Outlook and Concluding Remarks

    Mankind has seen many innovations over the past few hundred years all of which had profound effect on how we live our lives. But these innovations did not really change human beings themselves. One could argue that disruptive technologies such as artificial intelligence, smart chips as well as advancement in genetics gradually changing how we perceive things and improves our capacity to think. Through such cutting-edge technological advancements, we enhance our capacity to live better lives and become much more powerful mentally. FinTech is one of those disruptive technologies which will help us shape our future for the better. 

    There is no doubt that in today’s world technology and finance are closely interlinked. Due to this close interaction, FinTech will continue to have implications on the banking sector and it will require constant regulation and compliance. 

    This will not be an easy task from a regulatory standpoint. Law makers and regulators need to remain agile in responding to ever changing FinTech sphere. This is particularly important in order to provide stability and protection to both banking sector and public at large. Therefore, we will continue to see developments of new regulations in this sector. 

    Developments in other jurisdictions indicate that the FinTech industry will continue to expend rapidly throughout the world. Though relatively immature, same positive remarks can also be made for Turkish FinTech banking industry. With nearly 42 million digitally savvy young people, Turkiye holds tremendous potential. That being noted, developments within the legal and regulatory framework demonstrate Turkiye’s commitment to FinTech banking sector which will undoubtedly have a positive impact upon the upcoming transactions in this sector. 

    It is, therefore, crucial for companies to be aware of what is new, how they should take action and by when in order to comply with the new and upcoming regulations.

    The London Institute of Bank and Finance. How New Technology Can Change The Future of Banking. Accessed 29 Jan. 2023.https://www.libf.ac.uk/news-and-insights/news/detail/2020/05/11/how-new-technology-can-change-the-future-of-banking

    2 Stanton Chase, Fintech Turkey: A New Vision. Accessed 30 Jan. 2023. https://www.stantonchase.com/wp-content/uploads/2014/10/Stanton-Chase-Turkey-FinTech-Research.pdf

    3 Presidency of the Republic of Turkey, Finance Office of Presidency, The State of Fintech Ecosystem in Türkiye. p. 4, Accessed 29 Jan. 2023. https://www.cbfo.gov.tr/sites/default/files/2021-12/the-state-of-fintech-ecosystem-in-turkiye-2021.pdf 

    4 Presidency of the Republic of Turkey, Finance Office of Presidency, The State of Fintech Ecosystem in Türkiye. p. 5, Accessed 30 Jan. 2023. https://www.cbfo.gov.tr/sites/default/files/2021-12/the-state-of-fintech-ecosystem-in-turkiye-2021.pdf 

    5 Central Bank of Ireland. What İs “Fintech” And How Is t Changing Financial Products? Accessed 29 Jan. 2023. https://www.centralbank.ie/consumer-hub/explainers/what-is-fintech-and-how-is-it-changing-financial-products

    6 Jamie Evans and Steve Browning, House of Commons Library. Fintech: A Guide to Financial Technology. Briefing Paper. Number 9150. Accessed 29 Jan. 2023. https://researchbriefings.files.parliament.uk/documents/CBP-9150/CBP-9150.pdf

    7 Yazici, S., (2019). The analysis of fintech ecosystem in Turkey. Journal of Business, Economics and Finance (JBEF), V.8(4), p.188-197. If it interests the reader the full text is accessible at: http://doi.org/10.17261/Pressacademia.2019.1162

    8 Karaömer, Y. (2021). An Overview Of Financial Technology Sector İn Turkey. Journal of Politics, Economy and Management, 4(2), 128-139.

    9 Brown, Stephan, United Kingdom - Country Commercial Guide. Financial Technology (FinTech). 11.09.2022. Accessed 30 Jan. 2023. https://www.trade.gov/country-commercial-guides/united-kingdom-financial-technology-fintech#:~:text=The%20FinTech%20sector%20in%20the,jobs%20to%20the%20UK%20economy.

     10 Brown, Stephan, United Kingdom - Country Commercial Guide. Financial Technology (FinTech). 11.09.2022. Accessed 30 January 2023. https://www.trade.gov/country-commercial-guides/united-kingdom-financial-technology-fintech#:~:text=The%20FinTech%20sector%20in%20the,jobs%20to%20the%20UK%20economy.

    11 Statista Research Department, Estimated Growth in Fintech Employment Numbers In The UK 2017-2030 Accessed 30 Jan. 2023. https://www.statista.com/statistics/871459/number-of-people-employed-fintech-industry-united-kingdom/

    12 Brennan, David, Kuner, Sushil, Holland, Samantha. Global Legal Insights. Fintech Laws and Regulations 2022. Accessed 30 Jan. 2023. https://www.globallegalinsights.com/practice-areas/fintech-laws-and-regulations/united-kingdom

    13 Practical Law. Financial Services. Fintech: UK Financial Services Regulatory Overview. Accessed 30 Jan. 2023. https://uk.practicallaw.thomsonreuters.com/w-0146806?transitionType=Default&contextData=(sc.Default)&firstPage=true

    14 Press Release. Millions Of Customers Benefit As Open Banking Reaches Milestone. Accessed 31 Jan. 2023. https://www.gov.uk/government/news/millions-of-customers-benefit-as-open-banking-reaches-milestone

    15 Competition and Markets Authority, Retail Banking Market Investigation Order. Accessed 31 Jan. 2023. https://www.openbanking.org.uk/wp-content/uploads/2021/04/Notice_of_proposed_changes_to_the_open_banking_roadmap_-_web_publication_-_cma_gov_uk_-_May_2020_-.pdf

    16 Mordor Intelligence. United States Fıntech Market- Growth, Trends, Covıd-19 Impact, And Forecasts (2023 - 2028) Accessed 30 Jan. 2023. https://www.mordorintelligence.com/industry-reports/us-fintech-market?gclid=Cj0KCQiA8t2eBhDeARIsAAVEga2Tb7mr74R8xFElS3VKNzk-waOeL9ysAG9CY00Kpgroh8MOBKHgJzsaAjUZEALw_wcB

     17 Mordor Intelligence. United States Fintech Market- Growth, Trends, Covıd-19 Impact, And Forecasts (2023 - 2028) Accessed 30 Jan. 2023. https://www.mordorintelligence.com/industry-reports/us-fintech-market?gclid=Cj0KCQiA8t2eBhDeARIsAAVEga2Tb7mr74R8xFElS3VKNzk-waOeL9ysAG9CY00Kpgroh8MOBKHgJzsaAjUZEALw_wcB

    18 Greg Buchak, Gregor Matvos, Tomasz Piskorski, Amit Seru, Fintech, Regulatory Arbitrage, and the Rise of Shadow Banks Accessed 31 Jan. 2023.

    19 United Nations. Money Laundering.  Accessed 31 Jan. 2023 https://www.unodc.org/unodc/en/money-laundering/overview.html

    20 U.S. Department Of The Treasury. Treasury Announces 2022 National Illicit Finance Strategy. Accessed 31 Jan. 2023. https://home.treasury.gov/news/press-releases/jy0779

    21 Mastercard. Report on the The Future Of Fintech. Smart, Scalable, Collaborative. Middle East And Turkey p.26 Accessed 31 Jan. 2023. https://newsroom.mastercard.com/mea/files/2022/10/The-Future-of-Fintech-Smart-Scalable-and-Collaborative-Middle-East-and-Turkey.pdf