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Introduction to Turkey
An overview of Turkey's currency, population and key statistics.
Turkey's official currency is the lira, denoted by the symbol ₺ and the code TRY. It is available in both banknotes and coins. Banknotes come in denominations of 5, 10, 20, 50, 100, and 200 lira, while coins are available in denominations of 1, 5, 10, 25, and 50 kuruş, as well as ₺1 coins. One lira is subdivided into 100 kuruş.
Turkey is set to introduce a central bank digital currency, integrating it with its digital identity system and the FAST payment service. This initiative is a cornerstone of the ongoing Central Bank Digital Turkish Lira R&D Project. The Central Bank of the Republic of Turkey (TCMB) has already started initial trials of the digital lira and plans to continue testing in 2023. Launched in September 2021, the project primarily aims to establish a robust financial sector that can efficiently meet the real sector's financing needs at minimal costs.
With a population of approximately 85.82 million in 2023, Turkey ranks 18th among the world's most populous countries, accounting for 1.07% of the global population. Turkey has a population density of 112 people per square kilometre (289 per square mile) and a total land area of 769,630 square kilometres (297,156 square miles). Notably, 77.1% of Turkey's population, or approximately 66.16 million people, live in cities. The median age in the country is 31.8 years.
Turkish is the official language, and the vast majority of the population speaks it. The country also recognizes several minority languages, including Kurdish (Kurmanji), Arabic, and Zazaki. The 1923 Treaty of Lausanne and the 1925 Turkey-Bulgaria Friendship Treaty designate Armenian, Bulgarian, Greek, and Hebrew as official minority languages. Furthermore, a 2013 court ruling extended the minority rights granted by the Lausanne Treaty to Assyrian people and the Syriac language.
Turkey's economy ranked 19th in the world in 2022, with a gross domestic product of $905 million. In the same year, GDP per capita was approximately $10,600.
Turkey's real GDP growth is projected at 4.0%, accompanied by a high inflation rate forecast to reach 51.2%. Amid these challenges, economic growth is expected to slow to 3.6% in 2023, owing primarily to a drop in exports. However, domestic demand continues to be a significant driver of growth. Turkey's unemployment rate is expected to be around 10%, reflecting the country's broader economic challenges and dynamics.
Internet & mobile phone trends
In January 2023, Turkey boasted an impressive 71.38 million internet users, a figure projected to experience steady growth over the next five years. Between 2024 and 2028, the country's internet user base is expected to grow by 6.7 million, representing a 9.57% increase. This expansion will further elevate Turkey's internet penetration rate, which stood at a robust 83.4% at the start of 2023.
With over 80 million smartphone users in 2023, Turkey's mobile phone usage mirrors the country's internet adoption trends. This figure is expected to rise to around 88 million by 2028, cementing Turkey's position as a mobile-first nation. The country's mobile penetration rate, currently at 91.4%, further underscores the widespread adoption of mobile technology in Turkey.
With an estimated market value of $18.67 billion, Turkey's e-commerce industry is poised for significant growth. The market is expected to grow at a compound annual growth rate of 13.6% between 2023 and 2027, reaching a staggering $31.18 billion by 2027. Online shopping is rapidly gaining traction in Turkey, with approximately 64% of the population engaging in e-commerce in 2022. This user base is expected to grow significantly across all segments by 2027. Demonstrating this surge in popularity, e-commerce transactions in Turkey witnessed a remarkable 37% increase in the last quarter of 2022 compared to the same period in 2021. The e-commerce sector currently accounts for 6.5% of total retail sales in Turkey, but it is expected to grow to 7.1% by 2027, representing a 2.1% annual growth rate. Moreover, the Turkish e-commerce market is expected to generate a revenue increase of 26.0% in 2023, contributing to the global growth rate of 9.6% for the year.
How people pay in Turkey
An overview of how people in Turkey choose to make payments.
Traditional payment methods
The primary traditional payment methods used in Turkey
A Visa credit/debit card is a financial payment card issued by banks or financial institutions. It allows users to make purchases, and withdraw cash and can be used online and in person. Visa's processing network can handle over 65,000 transaction messages per second.
Mastercard is a worldwide payment network that links financial institutions, merchants, and individuals, facilitating seamless transactions. This renowned company provides a range of credit and debit cards issued through partner banks. Customers may enjoy supplementary benefits such as rewards programs, cashback offers, and insurance coverage depending on the specific bank.
American Express cards encompass a range of payment cards provided by the multinational financial services corporation, American Express Company. The Amex card portfolio includes diverse options like credit cards, charge cards, and prepaid cards. Renowned for their broad acceptance among merchants, these cards grant cardholders access to various advantages, including perks, rewards programs, travel benefits, and dedicated customer service assistance.
The TCMB has implemented the Fast and Continuous Transfer of Funds (FAST) System, which allows for instantaneous money transfers between accounts at different banks 24 hours a day, seven days a week. Launched on January 8, 2021, this system also incorporates the Easy Addressing System, allowing payments through phone numbers, ID numbers, or email addresses. The system had 15.5 million registered users as of 2023. Furthermore, the central bank has seamlessly integrated the system into purchase and sale transactions, allowing TR QR Code transactions of up to ₺10,000 per transaction. This simplifies instant purchase payments by scanning business QR codes with mobile applications.
Alternative payment methods (APMs)
Alternative payment methods
BKM Express is a digital wallet developed through a collaboration between the Interbank Card Center (BKM), banks, and prominent e-commerce companies. Its secure and efficient features streamline the online shopping experience. It allows users to make quick purchases without revealing their credit card information, and it secures transactions with a personalised password. Furthermore, BKM Express provides flexible payment options such as instalments and reward programs. Users can also seamlessly transfer funds via the mobile application and donate to civil society organisations via the BKM Express website.
Paycell, a digital wallet developed by Turkcell Bilişim Servisleri A.Ş., offers a comprehensive suite of financial services and features. Users can enjoy fast and secure transactions within a unified platform after registering with their phone numbers. Paycell also provides a contract-free Paycell Card for those who prefer flexibility. It further facilitates money transfers via its mobile apps and supports QR code-based contactless payments. Users can also accumulate points with the Paycell Virtual Card, which can be redeemed in the Paycell Gift World. Moreover, the Paycell Card functions as a prepaid card, providing users with convenient payment options.
Google Pay is a digital wallet and payment service developed by Google. It allows users to make secure payments using their mobile devices or computers. It supports various payment methods, offers compatibility across different devices, and provides features like loyalty program integration and transit ticketing. Google Pay prioritises security and convenience with tokenisation and biometric authentication. It has expanded to include digital banking services and continues to evolve.
Afterpay, a global buy now, pay later (BNPL) service, empowers customers to make instant purchases and settle them in four equal instalments over six weeks. Exclusively accessible through its app, this service is widely adopted by merchants worldwide.
Accepting payments in Turkey
A guide to accepting payments in Turkey
How to accept online payments in Turkey
Before accepting online payments, you must determine which methods you prefer. Then you can choose a payment gateway provider, a service that authorises and processes online payments with their specific system.
Although there are plenty of payment gateway options in Turkey, the general process for online payments typically involves an acquirer, issuer, retailer, and cardholder in the following steps:
1. The cardholder initiates a payment by presenting their payment card to the retailer to purchase goods or services.
2. The retailer sends the payment details to the acquirer, who processes the payment request and sends it to the payment scheme (such as Mastercard or Visa).
3. The payment scheme sends the payment request to the issuer (such as a bank or licensed issuer) who issued the card to the cardholder.
4. The issuer checks if the cardholder has enough funds to complete the transaction and approves or declines the payment request. If the payment is approved, the issuer sends an authorisation code to the payment scheme.
5. The payment scheme sends the authorisation code to the acquirer, which then sends it to the retailer, completing the transaction.
How long does an international payment from Turkey take?
The payment processing time may vary depending on the method and the recipient's bank. For instance, online money transfers through platforms like PayPal can quickly and conveniently send money to multiple destinations.
Bank debit/credit cards: International payments with bank debit or credit cards may take a few minutes to a few hours, depending on bank processing times.
Online money transfers: Platforms like Google Pay can process international payments within minutes to hours, depending on the service and destination country.
Wire transfers: Traditional bank-to-bank transfers or wire may take one to five business days or longer, depending on the destination country, intermediary banks, and transaction requirements.
Merchant fees for online payments in Turkey can vary depending on the payment method and the merchant services provider used. Here are some examples of typical merchant fees for online payments in Turkey:
Credit and debit cards: Merchant fees for accepting online credit and debit card payments can range according to the transaction amount. It also varies depending on the type of card used and the merchant services provider.
Bank transfers: Bank transfer fees can vary depending on the bank used, with some banks charging a flat fee per transaction and others charging a percentage of the transaction amount.
Other fees surrounding online payments in Turkey include charges incurred by merchants, payment processors, and financial institutions involved in the payment processing chain. Below are some common fees:
Interchange fees: Interchange fees are charges paid by merchants' banks to cardholders' banks to cover the costs of processing card transactions. These fees are usually based on a percentage of the transaction value and can vary depending on the type of card used and the merchant's industry.
Payment gateway fees: Payment gateway providers charge a fee for processing transactions on their platform, which may be a percentage of the transaction value or a flat fee per transaction.
Cross-border fees: If a merchant accepts payments from customers outside the country, they may be subject to additional fees for cross-border transactions, including currency conversion fees and international processing fees.
Merchant discount rate: A processing fee that merchants are charged for transactions made using credit or debit cards. This fee generally falls within 1% to 3% of the total transaction amount.
Security challenges of online payments in Turkey
Online payments in Turkey face several security challenges, similar to other countries:
Data Security: A major challenge for instant payments is ensuring data security and standardisation, particularly the adoption of the ISO 20022 standards.
Interoperability: While many countries have developed real-time payment systems, they differ and are primarily domestic. Achieving international interoperability is a key challenge.
Fraud: Online transactions are susceptible to fraud, including identity theft, phishing scams, and data breaches.
Regulatory Compliance: Adhering to the Law on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions, effective since June 27, 2013, poses a compliance challenge for online payment providers in Turkey.
Key sectors & industries in Turkey
An overview of Turkey's market.
Driven by a vision to become one of the world's top five agricultural producers, Turkey has set ambitious targets for its 2023 centenary. These goals include achieving a staggering $150 billion in gross agricultural domestic product and expanding agricultural exports to $40 billion. Renowned for its diverse agrarian ecosystems, Turkey produces a rich array of high-quality foods, raw materials, and organic products. The country is a world leader in the production of hazelnuts, fresh and dried figs, apricots, grapes, and bulgur, demonstrating its agricultural prowess on a global scale.
Turkey's travel and tourism market is poised for significant growth, with projected revenue of $9.36 billion in 2023, rising to $9.90 billion by 2027 at a 1.41% annual growth rate. The hotel market dominates the sector, with a projected volume of $5.36 billion in 2023.
Driven by the government's ambitious 2023 Turkish Tourism Strategy, which aims to attract 50 million tourists annually, the industry is expected to generate $50 billion in revenue, solidifying the country's position as a global tourism powerhouse. Tourism revenues reached a record high of $20.23 billion in the third quarter of 2023, a 13.1% increase from the corresponding period in 2022, demonstrating the industry's resilience and growth potential.
The manufacturing sector is poised to play a pivotal role in the nation's economic growth in 2023, with its GDP contribution projected to reach 18.83%, steadily progressing toward the ambitious target of 21% by 2023, as outlined in the 2023 Industry and Technology Strategy. The automotive and aviation industries are driving the sector, particularly in advanced manufacturing, with significant investments earmarked for Industry 4.0 technologies totalling $1 billion to $1.5 billion per year. Currently, medium- and high-tech products account for 36% and 3% of Turkey's manufacturing exports, respectively, with ambitions to increase these figures to 44% and nearly 6%. However, industrial production growth has slowed, particularly in manufacturing sectors such as food, automobiles, and textiles.
Turkey's automotive industry is known for its extensive manufacturing capabilities, strong engineering, and impressive design prowess. In 2021, the sector reached a production milestone of nearly 1.3 million vehicles, accompanied by significant investments totalling $662 million, the majority of which was directed toward the development of new models. The momentum continued in September 2023, marking a 13-month streak of growth, while exports increased by 15.8% in the first quarter, totalling $8.6 billion. Beyond its economic contributions, the industry serves as a substantial employer, offering opportunities to over 500,000 individuals.
Turkey's machinery industry played a critical role in the economy in 2023, with its GDP share increasing to 18.83%. The ambitious target is set to reach 21% by 2023, aligning with the objectives outlined in the 2023 Industry and Technology Strategy. Notably, Turkey is committed to an annual investment ranging from $1 billion to $1.5 billion for the integration of Industry 4.0. On the export front, the sector demonstrates a significant composition, with 36% of manufacturing exports categorised as medium-tech and 3% as high-tech. Ambitious targets have been set to raise these figures to 44% and nearly 6%, respectively. The industry's growth trajectory is clear, with a 5% CAGR over the past decade.
Turkey's mining production saw a 5.07% increase in 2023 compared with the previous year. Despite this expansion, the mining industry's revenue remained stable in 2022 at $711 billion, according to PwC's Global Mine Report 2023. The Turkish metals and mining sector is expected to expand further through 2025, driven by high commodity prices, favourable government policies, the implementation of new mining laws, the elimination of import duties on mining equipment, and the unrestricted export of mineral commodities.
In 2022, Turkey secured its position as the fourth-largest global textile exporter, accounting for over 4% of the world's total exports. The export value of textiles and clothing from Turkey has experienced remarkable growth, more than tripling since the year 2000. This surge is particularly notable in European markets, with Germany and Spain being primary destinations. Furthermore, the apparel and footwear market in the country exhibited positive growth throughout 2022. Projections show that this market will continue to grow by 1.41% annually to $9.90 billion in 2027.
The mineral fuels industry plays a crucial role in Turkey's economy, marked by substantial exports of mineral fuels, oils, and distillation products. Despite being a net importer of oil and gas, Turkey actively explores resources in the Thrace basin and offshore areas in the Mediterranean and the Black Sea, investing over $40 billion annually. In response to growing energy demand, the government has set a target to elevate the share of renewable energy to 30% of the total capacity. Concurrently, Turkey's mineral production has increased significantly, rising to 146 million metric tons in 2021 from 130 million tons in 2020.
Turkey was the world's 10th largest agricultural producer in 2020, with agricultural export value increasing by 521% since 2002. The nation's food market, valued at $141.90 billion, is expected to grow at 15.36% annually until 2028, with confectionery and snacks emerging as the dominant segment. Turkey aims to become one of the top five global agricultural producers by 2023, with a gross agricultural domestic product of $150 billion and agricultural exports worth $40 billion.
Turkey's coal imports, primarily from Russia, increased to a staggering $5.3 billion, with imported coal accounting for 20% of total power generation. This reliance on coal resulted in a $5.3 billion import bill in 2022. Turkey doubled its hydropower generation to offset the impact of reduced gas supply during the Iran gas crisis. Wind and solar power generation, particularly wind, are on an upward trend, with wind's share of power generation now exceeding that of G20 countries such as France and Italy. Determined to triple its annual solar installations, Turkey has outlined plans to invest a substantial $110 billion in the energy sector by 2023. This investment is distributed strategically across various energy sources, including nuclear, wind, hydroelectric, grid infrastructure, coal mining and coal-fired plants, solar power, gas-fired plants, and more.
Imports and Exports
Among Turkey's prominent imports are refined petroleum ($10.8 billion), scrap iron ($10.3 billion), cars ($6.98 billion), petroleum gas ($6.82 billion), and motor vehicle parts and accessories (categories 8701 to 8705), totalling $6.57 billion. These imports primarily originate from China (constituting 10% of total imports), followed by Germany (9%), Russia (8%), and the United States and Italy (each contributing 5%).
Concerning exports, Turkey's key items comprise cars ($10 billion), jewellery ($6.8 billion), refined petroleum ($6.53 billion), motor vehicle parts and accessories (categories 8701 to 8705) at $5.94 billion, and delivery trucks ($5.8 billion). Germany, the United States, the United Kingdom, Italy, and Iraq are the major destinations for Turkey's exports.
Regulation in Turkey
The regulatory environment of Turkey
Summary of the regulatory environment in Turkey
To maintain fairness and operational smoothness in business ventures in Turkey, entrepreneurs are required to comply with a range of laws and regulations, which include:
Company law: This includes regulations governing companies' establishment, operations, and dissolution.
Employment law: This includes regulations governing employment contracts, working conditions, and employee rights.
Product liability law: This includes regulations governing the legal liabilities and responsibilities of manufacturers, sellers, distributors, and other parties involved in the production and sale of goods.
Intellectual property law: This includes regulations governing copyrights, patents, and trademarks.
Competition law: This includes regulations governing competition and antitrust matters to promote fair competition.
Consumer protection law: This includes regulations governing the rights of consumers, product safety, and advertising standards.
Data protection law: This includes regulations concerning the collection, use, and storage of personal data.
In Turkey, a comprehensive regulatory framework governs various aspects of business operations, employment practices, and market competition. Product safety is meticulously regulated under Law No. 7223, with the Turkish Standards Institution meticulously overseeing import inspections. Companies seeking to enter the Turkish market must adhere to all applicable regulations. Employment practices are guided by Labor Law No. 4857 and the Trade Union Law, with labour courts adjudicating employment disputes. Additionally, certain provisions from the former Labor Law No. 1475 remain in effect. Import licensing is generally not required for most products, except for certain sensitive items. However, companies are responsible for providing evidence of compliance with relevant regulations. The Competition Authority safeguards fair market practices, guided by the Competition Law, which aligns with EU legislation to effectively prevent anti-competitive behaviour.
How card payments are regulated in Turkey
The TCMB and the Banking Regulation and Supervision Agency (BDDK) jointly oversee card payments in Turkey. To regulate the activities of payment and electronic money institutions, the Regulation on Payment Services, Electronic Money Issuance and Payment Service Providers was enacted in December 2021. This regulation establishes clear definitions for "prepaid" and "anonymous prepaid instruments" used in digital transactions. Electronic money is subject to strict regulations, mandating its issuance against fiat currency and ensuring its acceptance for payments beyond the issuing institution. The credit card market is closely monitored, with established interest rates, minimum payment requirements, and instalment plan guidelines. In July 2023, measures were implemented to curtail credit card spending and restrict loans in specific industries.
Do I need a licence?
Yes. Starting a business in the country involves registering at the Trade Registry Office, notarizing legal books, and obtaining a tax identity number for tax filings. Foreign companies establishing liaison offices need a licence from the Ministry of Industry and Technology, with the stipulation that these offices cannot conduct commercial activities in Turkey.
Payment solutions in Turkey
An overview of how to accept payments from customers in Turkey
Payment gateways and providers in Turkey
In the rapidly changing landscape of payment methods, businesses must prioritise a smooth payment experience for their customers. APEXX, a forefront payment technology company, offers a solution that consolidates payments from a spectrum of providers.
Anticipating the varied payment preferences of modern consumers, APEXX's Payment Orchestration Layer (POL) platform serves as a central hub, bridging various payment methods and financial institutions. The primary benefit of the POL solution is its capacity to handle multiple payment streams within one cohesive platform, supplemented by tools that elevate business efficiency.
One notable feature is Intelligent Routing. This function evaluates aspects like cost, risk, and currency to select the best payment channel for each transaction. Such precision reduces transactional errors and can decrease associated fees.
Integration of the APEXX POL with existing payment infrastructure is straightforward. The platform provides user-friendly plugins and adaptable APIs, facilitating its blend with a range of payment platforms, from e-commerce portals to POS systems.
As a prominent payment solution provider, APEXX assists businesses in Turkey and beyond, refining their payment processes. Leveraging its versatile payment orchestration platform, businesses can adeptly manage diverse payment methods, enhancing overall customer satisfaction.
Cheapest payment solutions in Turkey
To reduce fees in their payment stacks, merchants in Turkey can implement the following strategies:
Negotiate fees: Merchants should negotiate with their payment providers for better rates, which can include transaction fees, interchange fees, and monthly fees.
Choose a suitable payment provider: Merchants should research and compare different payment providers to select the one that offers competitive rates and low fees.
Use alternative payment methods: Merchants can reduce fees by using alternative payment methods such as e-wallets or bank transfers instead of traditional card payments.
Prevent chargebacks: To avoid chargebacks and additional fees, merchants can offer clear product descriptions, prompt customer complaint resolution, and refunds when necessary.
Implement fraud prevention measures: Merchants should adopt fraud prevention measures to prevent fraudulent transactions, which can lead to chargebacks and additional fees.
Monitor payment processing fees: Merchants should keep a close eye on their payment processing fees and use payment analytics tools to track their expenses and identify areas where they can reduce costs.
Merchants can also consider using payment aggregators such as APEXX, which allow them to accept multiple payment methods through a single platform, reducing the need for multiple payment providers and lowering costs.
BNPL in Turkey
The BNPL sector is rapidly expanding globally, and Turkey is actively contributing to this expansion. The global BNPL market is expected to be worth $309.2 billion in 2023, owing to the growing popularity of online shopping and this payment method as a convenient and accessible credit alternative.
In Turkey, the BNPL industry is regulated by the TCMB and the BDDK. These regulatory bodies establish the guidelines governing the authorization and operations of payment and electronic money institutions.
Turkey's non-performing loan purchasing market has seen a surge in activity, particularly between 2008 and 2020. During this period, banks and financial institutions offloaded approximately ₺62.6 billion in non-performing loans to asset management companies. This trend is expected to continue, with non-performing loan sales expected to total ₺73 billion between 2021 and 2023.
APEXX's solutions enable Turkish businesses to seamlessly integrate multiple payment systems, including popular BNPL options. This not only streamlines payment management but also elevates customer satisfaction.