1.Introduction

The globalization of the payment services sector has led to the emergence of payment and e-money institutions (“Institutions”) that provide services internationally, the desire of large merchants to carry out their collections all over the world through a single Institution has resulted in global Institutions developing different solutions to provide services in different countries.

Provision of payment services is subject to strict legislative regulations in Türkiye. The Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions (‘’Law‘’) is the main regulation for providing payment and electronic money services and in accordance with the Law; institutions that are willing to provide payment and electronic money services in Türkiye are required to obtain a license from the Central Bank of the Republic of Türkiye (“CBRT”). 

Payment services legislation in Türkiye is much stricter than many other countries' regulations. Normally, an Institution must complete a difficult licensing process in order to provide services in Türkiye.

In this article, we will examine the "international cooperation" model regulated under the Turkish law, which offers a model regarding a global Institution to provide payment services in Türkiye.

2. International Cooperation Within Scope of the Regulation

The Regulation on Payment Services, Issuance of Electronic Money and Payment Service Providers (“Regulation”) introduced innovations regarding payment and electronic money services, and one of these innovations was the regulation regarding foreign cooperation, which is included in Article 19 of the Regulation.

The international cooperation regulation covers only payment services to customers resident in Türkiye together with Institutions located abroad (hereinafter shall be referred as “foreign Institutions”). Cooperations within this scope can only be made limited to payment services where at least one of the sender or recipients is located abroad. In the cooperations within the scope of this article, a foreign Institution and a Turkish Institution will be able to collaborate. This regulation makes it possible for foreign Institutions that are wishing to provide services in the Turkish market to operate in Türkiye by going through a much easier process without being subject to the licensing process which regulated in the Turkish legislation. Finally, in accordance with the first paragraph of the above-mentioned article, it is emphasized that foreign Institution must obtain approval from the Central Bank in order to provide services through international cooperation.

Below, we will explain the general process and scope of the obligations required for foreign Institutions to cooperate with Turkish Institutions and provide payment and electronic money issuance services in Türkiye without obtaining an operating license.

2.1.Services to be Provided Within scope of International Cooperation 

An Institution that is officially authorized outside Türkiye may provide payments services within the scope of various business models in Türkiye by cooperating with a Turkish Institution within scope of Article 19 of the Regulation.

The scope of such cooperation is defined in the legislation as “the provision of payment services within the scope of the activities of the institution in Türkiye to customers residing in Türkiye together with the institution abroad”. It must be mentioned that a payment service where both the sender and the receiver are resident in Türkiye cannot be offered under this article.

It should be also noted that cooperations that are established between a foreign Institution and a Turkish Institution and where the is no direct or indirect customer relationship between the Turkish Institution's resident customer and the Foreign Institution in transactions to be carried out within this scope, will be considered outside the scope of Article 19. These cooperations must be reviewed and evaluated separately in accordance with their own terms and conditions.

2.2. General Rules to be applied to Internation Cooperation

Article 19 of the Regulation stipulates certain limitations and obligations to ensure the security of payments and the protection of customers. The main limitations and obligations can be listed as follows:

a)       Status of the Foreign Legal Entity in the Country of Establishment

According to the Article 19, only Institutions that are licensed by the relevant authorities of the country in which it is established to provide payment or e-money services may enter into cooperation relation with a Turkish Institution. In other words, an unlicensed entity that is not authorized to provide payment and e-money services in its own country will not be able to provide services within the scope of Article 19 and these applications will be rejected by CBRT.

b)       Restriction on Marketing Activities

Article 19 also introduces rules regarding the promotion of services to be provided within the scope of international cooperation, the visibility of these services in the Turkish market, and the advertisements to be made by foreign Institution and Turkish Institution regarding the cooperation.

According to these rules, foreign Institution cannot be the only visible face of the service provided to the customer within the scope of an international cooperation regulated under the scope of Article 19. In addition, foreign Institution cannot use brands and logos in any documents, announcements, advertisements or public statements used within the scope of the cooperation in a way that would create the impression that the foreign Institution is authorized to operate in Türkiye. Finally, it has been regulated that foreign Institution cannot establish a website for customers residing in Türkiye.

As a result, it should be stated that the services provided within the scope of the international cooperation are definitely provided within the scope of the cooperation with Turkish Institution, and all processes, including advertising and promotional activities within this scope, should be advanced by emphasizing the said cooperation.

c)       Documents, Records and Audit Logs

It is mandatory for the Turkish Institution to keep the documents and records related to the payment transactions to be carried out within the scope of the approval to be received from the CBRT regarding the international cooperation. 

In addition, provided that all transactions related to the service to be provided within the scope of the international cooperation pass through the information systems of the Turkish Institution and the audit trails are kept by the Turkish Institution, the information systems of the foreign Institution are not required to be located in Türkiye.

d)       Liability of Legal Entities 

The foreign Institution and the Turkish Institution will be responsible to the customers residing in Türkiye regarding the services provided within the scope of the international cooperation. Transactions carried out within this scope continue to be accepted by the CBRT as the transactions of the Turkish Institution. 

It is also mandatory for the Turkish Institution to fulfill the obligations arising from the relevant Turkish legislation regarding the services provided within the scope of the international cooperation.

2.3. Application to be made within CBRT

First of all, it should be noted that the application under Article 19 must be made directly to CBRT by the foreign Institution. The foreign Institution may give a PoA to a lawyer who will act on his behalf; however, the CBRT does not accept the Turkish Institution to conduct the process on behalf of the foreign Institution. It should be noted that CBRT accepts the foreign Institution as a separate interlocutor.

In the application to be made by the foreign Institution to CBRT, the following information and documents must be included:

a)       Detailed explanations regarding the co-operation to be made and a copy of the contract showing the rights and obligations of the parties,

b)       An activity program and business plan containing detailed information specified in the legislation,

c)       Examples of decisions taken by the competent bodies of the relevant institution regarding the activities to be carried out within the scope of cooperation in Türkiye,

d)       A copy of the authorization certificate obtained for the provision of payment services or the issuance of electronic money in the country where the institution is established, or a document obtained from the competent supervisory authority that it is not prohibited from operating or that there are no restrictions on its activities,

e)       The consolidated independent audit report of the institution for the last year and the report prepared by the rating companies, if any, containing the foreseen rating,

f)          A certificate from the competent supervisory authority stating that institution complies with international regulations on the prevention of laundering proceeds of crime and financing of terrorism and that no criminal proceedings have been taken in the country where it is established.

In this context, if CBRT decides that the activities to be carried out will contribute to the ecosystem, benefit the customers and that the institution has the capacity to carry out these activities, it may grant the necessary permission for cooperation.

It should be emphasized that CBRT has the final discretion to evaluate and decide on international cooperation issues. CBRT is also authorized to request additional information and documents as a result of the evaluations it will make regarding the applications. Finaly, it should be noted that CBRT may cancel the approval it has given regarding international cooperation and request the termination or limitation of the international cooperation.

3.Conclusion

International cooperation is a legal opportunity introduced by the Regulation that allows foreign Institutions to develop new business models together with Turkish Institutions.

Considering that obtaining an operating license to provide payment services in Türkiye is a very long and difficult process, international cooperation within the scope of Article 19 offers new opportunities in the Turkish market, especially for Institutions operating globally.

Since the number of applications approved by the CBRT within the scope of Article 19 is limited, the documents to be prepared in the process are only listed in the legislation very superficially, and the applicant shall prepare the application that will convince the CBRT, the application process may seem difficult. However, if you work with an expert, these are documents that can be prepared quickly.

As BBO, we provide services to many institutions with over 20 years of experience and our knowledge of payment and electronic money sectors. 50% of the international cooperation applications granted approval in Türkiye have been made by our law firm and there are also applications that our law firm is currently following.

For more information on this subject, please contact our attorneys, Mr. Gokhan Ugur Bagci and Mr. Ömer Büyüktosun.