New road map for Turkish fintech ecosystem
The Turkiye Fintech Guide is a resource for fintech start-ups and investors as well as a document to introduce the Turkish fintech ecosystem. It consists of two main sections: ‘Why Turkiye?’ and ‘Turkiye Fintech Ecosystem’. In the first section, indicators such as a 5.54% annual economic growth and US$225 billion in exports are exhibited. In the second section, information is provided on business models, regulatory agencies, regulations, associations and communities, and incentives and supports. Financial and organizational obligations for each fintech business model, or vertical, are specified.
The Turkiye Fintech Guide provides detailed information about the legislative infrastructure, licensing types and basic regulations regarding regulatory authorities. It also includes the basic indicators of establishing a fintech start-up, providing a roadmap to entrepreneurs interested and wanting to operate in the field.
Turkiye received a start-up investment of US$1.6 billion in 2022 and was included in the Super League category, where countries with an investment of US$1–10 billion are listed. According to data, Turkiye ranks third in the MENA region.
Islamic fintech
Although there is no direct regulation on financial technologies for Islamic finance, it is possible to be a third-party provider with digital Islamic banking and banking as a service through Islamic banks in Turkiye. In other business models, Islamic finance compliance can be achieved with the preference of the fintech company. Islamic finance compliance can be obtained through the Advisory Board of the Participation Banks Association of Turkiye and the advisory committees authorized by the board.
| Israel | 8.3 (435) |
|---|---|
| UAE | 2.5 (157) |
| Turkiye | 1.6 (300) |
| Saudi Arabia | 0.7 (70) |
| Egypt | 0.6 (132) |
| Bahrain | 0.1 (6) |
Source: https://www.cbfo.gov.tr/en/turkiye- Fintech-Guide-web
With the regulation on the Operating Principles of Digital Banks and Service Model Banking published at the end of 2021, the Banking Regulation and Supervision Agency (BRSA) granted permission for the establishment of three new participation-based digital banks: Hayat Finans Participation, Kasa Participation and TOM Participation Bank in 2022.
Hayat Finance and TOM Participation Bank have just obtained operating permits from the BRSA and Kasa Participation Bank is also expected to start operations. With the inclusion of these digital participation banks in the system, it is aimed to increase the market share of participation banks in the Turkish banking industry and also enhance financial inclusion from the perspectives of product and service diversity as well as customer and distribution channels.
Fintech investments in Turkiye break record in 2022
The strong banking sector and technological infrastructure in Turkiye pave the way for an increase in the rate of digitalization and accelerate the
development of the start-up ecosystem. In 2022, Turkiye ranked 10th in Europe and third in the MENA region in investments made to start-ups. While
a dynamic ecosystem is being created with the impact of the investments, fintech is among the most prominent verticals. In Turkiye, there are 637 active fintech companies as of March 2023
and the payment area stands out with 255 fintechs. Fintech investments in Turkiye in 2022 reached an all-time high with US$89 million and broke a record, contrary to the global declining trend.
Roadmap for National Fintech Strategy
The Finance Office of the Presidency of the Republic of Turkiye is planning to create a regulatory sandbox for fintechs to develop their products and services in a protected area. The National Fintech Strategy Document is a roadmap for promoting the Turkish fintech ecosystem to stand out in the international arena and reach the place it deserves. It is expected to be shared with the public soon.
Fatma Cinar is the director of the Participation Banks Association of Turkiye (TKBB). She can be contacted at fatmacinar@ tkbb.org.tr. Murat Kibarogullari, the advisor on financial technologies at TKBB, assisted in authoring this report. He can be contacted at [email protected].
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