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Turkey Payment Regulation Keeps Cards In Check

01 May 2020
bridge across the bosphorous at night

Turkey's credit cards industry well placed as issuers worldwide prepare for a wave of delinquencies

Longstanding curbs in Turkey on rollover behaviour should stand the credit cards market in good stead as pressures on the economy grow, according to a new report from Verisk Financial Research.
That situation has arisen because of regulations limiting consumer debt and strict rules around minimum payments that make it difficult to rack up massive debt in the country.
The low revolve rate means that card-issuing banks should have less of a bad debt problem to worry about than in other markets: Turkey is, in fact, the second-largest cards market in Europe by the number of cards.
In the period under review in Verisk Financial Research's latest market update, billed volumes more than doubled from $71.2 million in 2013 to $156.2m in 2019, whereas outstandings merely ticked up from $15.9m to $26.0m in that span, a clear indication that borrowing had been effectively quashed.

"Strict regulation around credit cards has created a challenging operating environment for issuers", noted Elaine Maher, research analyst at Verisk Financial Research. "Nonetheless, they have prospered through the smart use of loyalty incentives and instalment plans. With the novel coronavirus crisis impacting economies everywhere, Turkish issuers may be better placed than most to absorb the shock".

turkey credit card outstandings chart
Turkey Credit Card Spend vs Outstandings, 2013-19

In addition, the authorities set caps on interest rates which saw margins squeezed close to zero as the benchmark interest rate spiked in 2018. Ordinarily, a credit card business wouldn't be commercially viable under such restrictions, but Turkey's unique ecosystem compensates issuers through interchange, which is calculated based on a formula which allows for funding costs.

Another ambitious feature analysed in this brand-new report has been domestic network Troy, which has been steadily growing market share. Debit card spends at the point of sale grew fivefold in the seven years before 2020. Contactless too is growing rapidly, with use spiking as viral awareness took hold during the pandemic. Driven by a combination of new commercial features and contactless development, debit card payments have outnumbered ATM withdrawals since 2017.

The new report on Turkey's cards and payments is one of 72 individual country reports, each with unique profit pool metrics and analysis, published by Verisk Financial Research. Leveraging data reaching back to 2010 – and forecasts up to 2022 – the unique data set features over 250 metrics per market.

Each report takes a consistent approach, with clear-sighted commentary and in-depth data providing comparable insight across markets. The Turkey country report is available for subscribers to download now, or to order online.

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