Regulation Amending the Regulatıon on Payment Services, Issuance of Electronic Money and Payment Service Providers

The Regulation Amending the Regulation on Payment Services, Issuance of Electronic Money, and Payment Service Providers (hereinafter referred to as “Regulation Amendment”) was published in the Official Gazette dated October 7, 2023, No. 32332, and entered into force.

To assess the need for the amendments and their scope, it is essential to examine the codification efforts initiated to address the demand for new payment methods. As a result, the Law No. 6493 on Payment and Securities Settlement Systems, Payment Services, and Electronic Money Institutions (“the Law”) was enacted.

The Law is designed to authorize, supervise, and regulate the activities of organizations providing electronic payment services. Additionally, the Law aims to protect the rights of customers of payment service providers and electronic money institutions while enhancing financial stability and security. The Law defines the infrastructure, oversight, and regulatory requirements necessary for ensuring the efficient and secure operation of payment systems.

Subsequently, to provide more detailed regulations regarding the payment services outlined in the Law, the Regulation on Payment Services and Issuance of Electronic Money and Payment Service Providers (“Regulation”) was enacted and entered into force with Official Gazette No. 31676 on December 1, 2021.

Under the Law (Article 12) and the Regulation (Article 4), Payment Services are defined as:

• Wire transfers,
• Services related to bill payments,
• Payment transactions carried out by a payment intermediary using an electronic communication device, with the customer’s approval for the payment process,
• Services necessary for the operation of a payment account, including the deposit of funds and withdrawals,
• Transactions involving the transfer of funds from a payment account held with a payment service provider,
• Services enabling the initiation of payment orders to another payment provider upon the request of the payment service user,
• Services that allow the presentation of aggregated information of one or more payment accounts under the consent of the payment user,
• Other payment-related services determined by the Central Bank of Turkey (“TCMB”) based on their total volume or impact in the payments sector.

As seen, payment services are not exhaustively listed, and additional services and transactions may be included under the scope of payment services by the TCMB. Payment services are provided by:

1. Banks under Law No. 5411,
2. Payment institutions authorized by the TCMB,

• Electronic money institutions,

6475. The Post and Telegraph Organization of Turkey (PTT) as per the Post Services Law No. 6475.

Regulation Amending the Regulation on Payment Services and Issuance of Electronic Money and Payment Service Providers
The Regulation Amending the Regulation, published on October 7, 2023, introduces several significant changes to the original regulation, including the introduction of the “Digital Wallet Service.” This service is regulated with specific procedures and principles.

A digital wallet is defined as a payment tool that stores information related to the customer’s designated payment account or instrument. It is presented as an electronic device, an online service, or an application that allows the customer to carry out payment transactions using the information associated with the payment account or instrument they have designated. With this regulation, the digital wallet is accepted as a payment instrument and regulated separately from payment institution services. To offer digital wallet services, a payment service provider must obtain specific authorizations. If the provider is authorized to issue payment instruments, they may also offer digital wallet services. However, if the provider offers other payment services along with digital wallets, they must also be authorized for those services.

Another innovation introduced by the Regulation is the possibility of making payments at merchant locations using digital wallets. However, if the funds for the payment are transferred through the institution providing the digital wallet service, the institution must be authorized to issue electronic money. Additionally, for those offering digital wallet services before October 7, 2023, but not yet authorized by the TCMB, they must obtain the necessary authorizations by October 7, 2024. Those authorized before this date must comply with the provisions of Article 4/A.

The Regulation also introduces a provision stating that when a payment service provider’s infrastructure is owned by another payment provider, the infrastructure provider must offer the service to other providers under the same conditions and pricing policy. This change aims to ensure fair competition between providers and regulate the pricing of services offered in the market. Furthermore, if a provider controls another payment service provider, the infrastructure provider cannot direct its controlled provider to offer services more advantageously than others or force its customers to use services from the controlled provider. It is also prohibited for a provider to create the impression in advertisements, announcements, or public statements that they are acting on behalf of the controlled provider.

Moreover, before the Regulation came into force, the acquisition or transfer of shares in payment and electronic money institutions required approval from the Ministry. However, the new regulation states that share acquisitions or transfers within the same corporate group, provided they do not directly or indirectly change the ultimate shareholders’ ownership percentage in the institution, are not subject to the Bank’s approval.

Additionally, before the Regulation, payment providers were required to use services for data sharing according to technical requirements. However, with the new regulation, it is not unlawful to use non-standard services until June 30, 2024, except for specific exceptions. This flexibility allows payment service providers to establish and solidify their structures, making it easier for them to expand and meet technical requirements.

Conclusion
The introduction of digital wallet services represents a significant regulatory development. Along with its widespread adoption, regulatory measures have been implemented to address potential gaps and ensure a proper mechanism and procedure for its operation. These changes enable payment service providers to remain competitive through regulation focused on specific needs, which is crucial for consumers to benefit from appropriately priced services. Additionally, the flexibility in the regulations concerning share transfers and technical requirements is valuable for determining company structures and ensuring proper development within the industry.