Digital Banking has Arrived in Turkey With New Regulations

New rules that govern digital banks in Turkey went into effect on Jan. 1, Mondaq.com reported.

The regulations were designed as the long-awaited concept of branchless banking is becoming a new generation of banking in the country.

The Regulation on the Operation Principles of Digital Banks and Service Model Banking by the Banking Regulatory and Supervisory Authority was developed to determine the principles of branchless banking and service banking.

To do business as a digital bank, financial institutions must have at least $1 billion in capital; they cannot have physical locations other than their headquarters or service units linked to the HQ; they cannot open branches or use their HQ as one, the only exception is they have at least one physical office to handle customer complaints.

When it comes to digital bank clients, they must be consumers and small and medium-sized businesses (SMBs). The exception to this rule is digital banks may extend foreign currency loans to larger enterprises.

Cash loans extended to consumers, cannot exceed four times the average monthly net income of the client.

As for service model banking, the regulations prohibit banks from becoming interface providers, defined as providing customers the platform to link their bank servers and conduct online transactions.

The rules go on to say FinTech companies are prohibited from using payment service provider, bank, payment institution, electronic money institution titles or words or expression that may give the impression that they are operating as a bank payment service provider or that they collect deposits, participation funds or funds.

PYMNTS recently reported Western Union and Mastercard announced that they were expanding their 10-year digital partnership to broaden global customers’ cross-border payment options. The expanded collaboration will enable Western Union customers in 16 European markets, including Turkey, to leverage Mastercard Send to send money transfers in near real-time directly to their receivers’ Mastercard debit cards, accelerating and simplifying the process.