rising incomes and a young and growing population concentrated
largely in the major cities are creating the right conditions for
card market growth for domestic and foreign players. Sarah
Following years of economic turmoil, Turkey is now reaping the
benefits of a more stable economy and the domestic credit card
market has been experiencing a period of rapid growth. The country
is seen as a good testing ground for many card products and
schemes, particularly due to its large, youthful population.
Foreign issuers have been attracted by a quickly growing market and
high interest rates, and have moved to establish links with local
Turkey has been the setting for a number of innovations in the
cards market in recent years. For example, in July 2006 MasterCard
announced the launch of the first European MasterCard PayPass
contactless credit programme, in partnership with Garanti Bank.
Garanti reissued 25,000 cards incorporating PayPass contactless
functionality to its Bonus cardholders. Starbucks, Burger King and
Turkish cinema chain Cinebonus have already signed up to accept
PayPass in the country.
More recently, in May 2007, MasterCard announced that it was
launching Europe’s first watch equipped with MasterCard’s
contactless PayPass technology, again in partnership with Garanti
Bank. For its part, Visa announced in May 2007 that its payWave
technology will be implemented in Turkey for the first time by Visa
and Denizbank on Sea&Miles cards.
Prepaid cards are also starting to make inroads into Turkey,
with, for example, the introduction of Efes Pilsen, Coca-Cola and
Gillette prepaid cards in 2006.
There are many more POS terminals in Turkey (1.3 million as of
the end of the first quarter of 2007) than merchants (just under
875,000). Due to intense competition to sign up merchants, some
merchants have as many as seven POS terminals.
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In October 2005, Turkey entered into full European Union (EU)
membership negotiations. Although Turkey is not currently a member
of the EU, Visa Europe has decided to launch V Pay, its debit
solution for the Single Euro Payments Area and wider European
space, in Turkey. It took this decision primarily because Turkey
receives a large tourist influx from the eurozone region. The V Pay
Steering Committee held its first meeting in Frankfurt on 26 April
and at the same time Visa Europe announced that it had signed up a
number of acquirers across Europe. Confirmed V Pay merchant
acquirers in Turkey are AK Bank, Isbank, Garanti Bank and Yapi
Kredi Bank (YKB).
With 32.9 million credit cards in issuance as of the first
quarter of 2007, Turkey is the third-largest credit card market in
Europe, after the UK and Spain. However, card ownership is
concentrated among a relatively small proportion of the population
and multiple card ownership is widespread. Professional people and
other high earners often have cards with different due dates in
order to juggle their personal finances between pay cheques.
The Interbank Card Centre (known as BKM), an association of
Turkish banks whose remit is to address card payment issues,
estimates that the average Turkish cardholder has 1.8 credit cards.
This implies that there are approximately 18 million credit
cardholders in a population of just over 71 million.
The Turkish credit market was late to develop compared to most
Western European countries. The economic crises and high inflation
episodes of the Turkish economy in the past have been cited as
factors that delayed the adoption and widespread usage of credit
cards until recent years.
As Turkey’s economy has stabilised and incomes have risen, card
usage has increased. The number of credit cards in circulation grew
at a compound annual growth rate (CAGR) of 20.2 percent between
2002 and 2006 (see Figure 1). The number of transactions
rose by 21.0 percent CAGR between 2000 and 2006, while, at 52.9
percent, the value of credit card transactions in new lira terms
increased at an even greater pace (see Figure 2). The
average value of a credit card transaction at the POS was YTL77.90
($60.30), representing a CAGR of 26.4 percent between 2000 and
By June 2006, the total amount of credit that had been extended
to people via credit cards had reached YTL61.8 billion. Turkish
bank customers used on average 31.4 percent of their credit card
limits, up from 29.1 percent in 2005. Credit card debts increased
27.3 percent year-on-year to reach YTL19.4 billion.
In March 2006, the Turkish government introduced a new law that
governs bankcards and credit cards and effectively restricts banks’
ability to take on new credit card customers.
For example, soliciting credit card applications in public
places has been banned and new applicants may be granted a line of
credit equivalent to only twice their monthly salary. There appears
to be limited price-based competition between Turkish credit card
issuers in terms of interest rates. After the financial crisis of
2001, other consumer lending products in Turkey such as auto loans
came down in cost, so that interest rates were more closely aligned
with central bank rates.
However, this did not happen in the credit card market and most
issuers tend to offer the same rates. Issuers tend to prefer
non-price competition through their loyalty programmes or by
offering interest-free payment periods of up to 18 months.
For example, by 2005 the inflation rate in Turkey had been
reduced to single digits, yet the average annual percentage rate
for the credit cards was still over 100 percent per annum. Banks’
profitability has been boosted by such high rates: at Garanti Bank,
credit cards contributed 52 percent to its commission income in
In January 2005, in an attempt to improve transparency, the
Banking Regulation and Supervision Agency started to announce
credit cards rates, helping credit card customers to compare
interest rates of all the credit issuers in Turkey.
There were over 56 million debit cards in issue at the first
quarter of 2007. The number of debit cards in issue grew at a CAGR
of 11.1 percent between 2002 and 2006 (see Figure 3). The
number of transactions rose by 55 percent CAGR between 2000 and
2006; transaction value outpaced this at 91.2 percent CAGR over the
same period (see Figure 4).
Debit cards are still used overwhelmingly for cash withdrawals
rather than purchases. Even as recently as 2003, a research study
conducted by Visa Europe found that most Turkish consumers aged 16
to 50 used their Visa Electron cards almost solely to withdraw cash
from ATMs and many did not know that they could use their debit
cards at a POS.
There were only 50.1 million POS debit card purchases in 2006,
compared with 1.27 billion POS credit card transactions. Numerous
attempts have been made to increase the use of debit cards in the
generally cash-based Turkish economy. In October 2004, for example,
the BKM launched a campaign using the slogan ‘Debit card means
cash!’ to raise the profile of debit card usage.
Most major banks, as well as Visa and MasterCard, supported the
three-month campaign. A later, second stage of the campaign then
readdressed the issue, with an additional emphasis on the
transition from ‘old TL’ to the new ‘YTL’ currency (in which six
zeroes were removed from the country’s currency).
EMV and loyalty
Turkish banks have been issuing chip-embedded credit cards and
PINs to their customers to accompany the move to EMV. Since 31
March 2006, customers with credit cards that have embedded chips
have been required to enter their four-digit PIN to receive
approval for their payments.
The changeover appears to have gone smoothly – a survey carried
out in mid-2006 suggested that chip and PIN awareness had already
reached 68 percent. Of those who were aware of the new technology,
90 percent felt it was superior to previous methods. Terminals are
generally owned and operated by the acquiring banks and BKM’s
acquirer members are responsible for their own terminal
Turkish banks have had great success with sophisticated
chip-based loyalty schemes, and are now turning their attention to
instant issuance of chip cards. Adoption of EMV technology to
differentiate cards is seen as a way for issuers to make cards more
attractive to both merchants and consumers.
Turkey has a small number of large banks and a large number of
much smaller banks. The three largest private-sector banks, YKB,
Akbank and Garanti, account for about 60 percent of the credit card
market in terms of card transaction volume. (See Figure
5.) All now have foreign strategic shareholders
(YKB/UniCredit, Akbank/Citibank, Garanti/GE).
The combination of size (both current and potential) of the
Turkish cards market and the high interest rates charged to
cardholders has attracted foreign players to the industry.
HSBC entered the market by buying the Advantage Card credit card
network. GE Money established a presence in Turkey in December 2005
through an equal partnership with Dogus Group, one of the leading
local conglomerates, and investing in Garanti Bank, the
third-largest private bank in Turkey and second-largest issuer of
Citigroup, too, views the country as a key market and has made
inroads into the Turkish banking sector; it operates in nine major
cities and had recently opening its 45th branch. In January 2007,
Citigroup and Akbank announced that Citigroup’s acquisition of a 20
percent stake in Akbank had been completed.
Within debit cards, Visa has a 49.6 percent market share in
terms of issued cards, MasterCard has 49.3 percent and the
remaining 1.1 percent of debit cards come from other
brands/marques. In terms of credit cards, 54.9 percent of issued
credit cards are Visa-branded and 45.1 percent are MasterCard, with
a negligible amount from other brands/marques.
By the end of 2006, Akbank had 219,621 merchants and 233,520 POS
terminals. This represented a year-on-year increase of 19 percent
in merchants and a 16.2 percent merchant market share. Akbank has a
23.3 percent market share in foreign credit card merchant
As a part of member merchant activities in 2006, a new product
called PosNet was offered to customers. PosNet enables member
merchants to use the internet to make single payments with credit
cards and to collect instalment payments with Axess credit cards
without the need for a POS terminal. In 2006, Akbank’s net fee and
commission income jumped 28.6 percent over 2005.
Akbank has turned its attention to Turkey’s large population of
young people. Youth banking, which is carried out under the brand
name of exi26, is one of the basic building blocks of Akbank’s
long-term customer relations. It is aimed at customers between the
ages of 16 and 26. Among the services offered are smart cards
co-branded with universities. Other innovations include Mobile
Phone Credit, a system that enables customers to get loans,
including loans on credit cards, approved instantly by mobile
Garanti Bank claims to have the fastest-growing card business in
Turkey and to provide the country’s most creative financial
In October 2006 Garanti became the only Turkish bank to be a
member of the MasterCard management board. Garanti is known for its
approach to co-branding and loyalty. Its BonusCard was the first
multi-branded credit card based on an EMV-compliant system in
Turkey, and has a loyalty programme with over 1,000 partner
merchants and 100,000 POS terminals linked to it. Garanti claims
that its BonusCard is Europe’s largest multi-branded loyalty and
credit card programme.
In June 2007, Garanti Bank signed an agreement with China’s
largest payment system, China UnionPay (CUP), to issue credit cards
in China, becoming the first European bank to do so. Tourists and
business executives visiting China will be able to use their Bonus
Business, Bonus Personal and Garanti Paracard credit cards under
the new agreement between Garanti and CUP, while Chinese tourists
and business executives visiting Turkey will be able to use their
credit cards at all Garanti ATMs. Within the framework of this
agreement, the first of its kind in Turkey, cardholders’ slips can
be printed in Chinese at the POS terminals and a menu in Chinese
has been added to all ATMs.
The bank has a licence agreement with Denizbank, which is
allowed under the terms to use the brand and merchant network.
Garanti recently acquired the rights to exclusively distribute
American Express’s super-premium Centurion cards. In January 2007,
Garanti introduced the American Express card and the premium
American Express Gold and Platinum cards. Within its private
banking operations, Garanti has the Masters credit card and the Phi
card for customers with assets of $1 million or more.
Garanti Bank’s share of the debit card market was 6.2 percent as
of end-2006, based on number of cards in issue. The bank has 8.8
percent of total ATM numbers.
Over 2006, Isbank increased the number of its credit card
customers to 3.74 million (up from 3.30 million in 2005). The
bank’s total credit card transaction volume approached YTL14.5
billion in 2006, up from YTL11.6 billion in 2005.
Isbank’s main credit card brand is Maximum, which has become
what the bank calls the “keystone” of its retail banking business
line. When making the move to the chip and PIN system, Isbank
introduced special service modules such as POS devices with special
software and interactive telephone steps so that its customers
could learn and change their PINs. Isbank has a range of 14 credit
card products for different customer segments. Its rewards
programme, MaxiPuan, offers rewards points at merchants and is
largely aimed at encouraging the use of debit cards to make
In 2006, Yapi Kredi Bank and Koçbank completed the biggest
merger in the history of the Turkish banking sector. The resulting
bank is majority-owned by UniCredit.
YKB’s credit card system is called World and both Visa- and
MasterCard-branded cards are issued. Credit cards under the brand
include Worldcard, Worldgold, Worldplatinum, World Signia, Virtual
Worldcard, World-university, Visa Business Card,
Worldcard-Turkcell, Worldgold-Turkçell and Cagdaskart, each
addressing the various needs of different types of consumers.
The bank has introduced a twist in private pensions, whereby
customers can pay their premiums with Worldcard. Worldpoints earned
through purchases made with Worldcard can then be transferred to
the private pension system as a contribution.
YKB also provides POS merchant services for company clients.
YKB has the largest number of credit cardholders in Turkey.
Credit cards receivables amounted to YTL5.25 billion in 2006. Fee
and commission income on credit/debit cards was YTL531.2 million in
the same year, up from YTL105.7 million in 2005.