BANKING

and
FINTECH
DEVELOPING
A FINTECH ECOSYSTEM
IN ISTANBUL
L e a r n i n g L e s s o n s f ro m L o n d o n

Melike Belli
Supported by

startups
watch

65
BANKING
and
FINTECH
DEVELOPING
A FINTECH ECOSYSTEM
IN ISTANBUL
L e a r n i n g L e s s o n s f ro m L o n d o n

Melike Belli
Contents
List of Figures and Table
List of Abbreviations
Acknowledgements
About the Author
Introduction

1. Banking in the 21st Century................................................................................. 14

The Changing Needs of the Consumers and The Effect of Technology......................15

2. The Evolution of Financial Technologies ...................................................... 20

The Rise of FinTech..............................................................................................................21
The Impact of FinTech on the Banking Sector.................................................................30

3. The Analysis of the UK and Turkish FinTech Sectors............................... 32

Research Findings on London and Istanbul FinTech Sectors........................................33
The SWOT Analyses of the FinTech Sectors in London and Istanbul..........................44

4. Conclusions.................................................................................................................... 48
A Development Model for the FinTech Ecosystem in Istanbul.....................................49
Recommendations for Developing the FinTech Ecosystem in Istanbul......................50
Conclusion............................................................................................................................51

Appendix.................................................................................................................................. 52

References................................................................................................................................ 58
List of Figures
and Table
Figures
Figure 1. Adoption of Banking Technologies by UK Consumers.........................................................16

Figure 2. Do You Use Mobile Banking?....................................................................................................18

Figure 3. Global FinTech Financing Activity............................................................................................22

Figure 4. Five-Year Growth in FinTech Investment ($m).......................................................................23

Figure 5. Top Five European Regions for FinTech Investment Activity..............................................24

Figure 6. Willingness to Make Mobile Payments....................................................................................26

Figure 7. Who Are the Smartphone Users in Turkey?............................................................................26

Figure 8. Strategic Location of Istanbul....................................................................................................27

Figure 9. FinTech – Payments in Turkey...................................................................................................29

Figure 10. February 2001 Crisis Process....................................................................................................53

Figure 11. Restructuring Programme........................................................................................................54

Figure 12. Nonperforming Loans to Total Loans (percent)....................................................................55

Figure 13. Foreign Capital in the Banking Sector (TLbn).......................................................................55

Figure 14. Return on Assets (percent).......................................................................................................55

Figure 15. Total Assets (TLbn, percent).....................................................................................................55

Table
Table 1. Number of Banks and Branches in the System.........................................................................56
List of
Abbreviations
ATM Automated Teller Machine
B2B Business-to-Business
B2C Business-to-Consumer
BN Billion
BRSA Banking Regulation and Supervision Agency
CBRT Central Bank of the Republic of Turkey
CMB Capital Markets Board of Turkey
FINTECH Financial Technologies
GFC Global Financial Crisis
ICT Information and Communications Technology
IFC-I Istanbul Financial Centre Initiative
M Million
NY New York
P2P Peer-to-Peer
PR Public Relations
R&D Research and Development
SME Small and Medium-sized Enterprises
STP Science and Technology Park
UK United Kingdom
US United States
VC Venture Capital
Acknowledgements
I would like to offer my sincere thanks to Interbank Card Center (BKM) and Dr. Soner Canko, the
CEO of BKM, for enabling this book to reach a wider audience by publishing and distributing it. I
also thank to Ozge Celik, Prof. Dr. Selim Yazici and Serkan Unsal for their significant support and
contributions to this book.

I would like to thank to all the participants that I interviewed, who kindly agreed to share their
rich experiences. This book could not have been written without their valuable contributions.

I am grateful to Dr. Richard Simper, Reader in Financial Economics at Nottingham University

Business School, and Prof. Dr. Ozlem Ozdemir, Dean of METU Faculty of Economics and
Administrative Sciences, for encouraging and helping me to finalise this book.

My special thanks go to Ozlem Ozkan, who assisted me in the publishing process, and Gulistan
Senol, who designed the book cover and provided graphic design.

Finally, thanks to Zeynep Belli, Yassin Nahi, Maria Murphy, Didem Dalyan, and my parents for
supporting me throughout this process.
MELİKE BELLİ
About
the Author
Melike Belli graduated from the University of Nottingham in
2014 with an MSc in Banking and Finance. She was awarded the
Jean Monnet Scholarship by the Republic of Turkey Ministry for
EU Affairs to conduct her studies in United Kingdom. During her
Master’s studies at the University of Nottingham, Melike Belli
wrote a dissertation on the Impact of Financial Technologies
on the Banking Sector that has been transformed into this
book. She previously graduated from the Middle East Technical
University with a BS in Business Administration. As a Chartered
Banker, Melike Belli is currently living in London and has worked
for a dynamic FinTech start-up, Cybertonica, which is part of the
Startupbootcamp FinTech London 2015 cohort. She has always
been very interested in innovation, start-ups and women in
technology. Melike Belli is very passionate about FinTech and
currently involved in projects to develop the FinTech ecosystem
in Turkey.
Introduction
After the Global Financial Crisis in 2008, the financial technology (FinTech) sector has become one
of the fastest growing entrepreneurial areas in the world for start-ups that aim to disrupt traditional
banks. FinTech has been defined as a revolution in the financial services industry and many banks
realised that this development is an opportunity for them to integrate innovative solutions quickly
into their operations enabling better efficiency and customer service. The objective of this research is
to investigate how the FinTech sector disrupts and improves the banking industry by making it more
sustainable and efficient. My analysis concerns Turkish banking and the lessons that can be learnt
from cross-border knowledge sharing between one of the world’s centres of FinTech, London, and
the emerging sector in Istanbul. This research considers first and secondary sources that I obtained
enabling analysis of the two banking sectors.

As London has successfully embraced and developed a FinTech ecosystem, Istanbul has the
opportunity to learn lessons, and therefore enhance its ability in the creation of its own FinTech
ecosystem. This of course could significantly contribute to the competitiveness and efficiency of the
Turkish banking sector both nationally and also across Europe.

The discussions presented in this research were the results obtained through interviewing 14
individuals from influential financial services organisations in both London and Istanbul. My aim
is to significantly contribute to current published analyses of both country specific FinTech sectors
and particularly, the creation of an innovative research based development model applicable to the
Istanbul FinTech ecosystem. This is undertaken by providing recommendations concerning how the
major finance and technology centre of Turkey, Istanbul, can be inspired by London’s FinTech culture
and management practices enabling development of its own FinTech ecosystem.

I suggest this book to anyone who is interested in FinTech, FinTech ecosystems, and banking
industries and technologies in United Kingdom (UK) and Turkey. I hope you will enjoy reading it.

Melike Belli
@MelikeBelli
 BANKING AND FINTECH

Banking in the
21st Century

14
 Developing a FinTech Ecosystem in Istanbul

The Changing Needs of the Consumers

and The Effect of Technology
Developments in technology have been changing and transforming the way consumers conduct
financial transactions. Banks have been investing in and leveraging new technologies in order
to provide their customers with better products and services and increase customer satisfaction.
Moreover, thanks to the developing technology, banks are minimising their financial and regulatory
constraints which helps them gain competitive advantage.

Technology Developments in the UK Banking Sector

Current transformation in the UK banking sector is driven by the developing technology. Banks
realised that in order to acquire new customers, they have to develop innovative banking
technologies which enable people to conduct financial transactions easier and faster and in a
secure environment.1 In addition, UK banks utilise innovative banking technologies to offer special
services to their customers and communicate with them more effectively. On the other hand, UK
banking customers have been embracing alternative banking channels, such as mobile and online
banking, as these technologies provide them with greater flexibility in spending, moving and
managing their money.2

15
 BANKING AND FINTECH

Figure 1: Adoption of Banking Technologies by UK Consumers

6%
22.9 - decline in
branch transactions
in 2014
10.5
million
million - banking app log-ins
- number of each day
banking apps
downloaded
so far, a rise
of 8.2 million
9.6 million
in one year - daily log-ins to
internet banking
services in March 2015

Source: British Bankers’ Association (2015)

Mobile banking usage in the UK has been growing fast. The usage of mobile banking channels
by UK customers has increased from 21% to 27% between 2012 and 2014.3 Furthermore, 77% of
people in the UK think that with the help of mobile banking, they manage their money better.4
On the other hand, 75% of Gen-Y (Generation Y) consumers, who are aged between 25 and 34 and
have grown up with the internet, prefer using online banking and mobile banking applications
while 13% of these consumers prefer visiting a bank branch to make their transactions.5
According to the survey conducted by Avanade, 93% of UK banks believe that mobile is the
future while 36% of consumers from all age groups think that they will use their mobile to do all
banking transactions by 2020.6
The UK banking sector is taking relevant steps to adapt to changing behaviours of consumers.
For example, in 2012 Barclays launched its own payment application, Pingit, which allows sending
and receiving money by using a mobile number and without sharing bank account details. Pingit
also enables customers to purchase goods and services faster and easier by scanning a QR code or
using Pingit at the checkout without entering card details. Pingit has been downloaded more than
2.5 million (m) times by UK consumers.7

16
 Developing a FinTech Ecosystem in Istanbul

On the other hand, NatWest and Lloyds Banking Group took a step to upgrade their existing
ATMs (Automated Teller Machine) and in-branch cash and deposit machines. They decided
to launch talking cash machines to provide blind or partially sighted people in the UK with
independence when they withdraw money from ATMs.8 At the same time, Barclays collaborates
with a charity in order to teach and train the older generation how to benefit from the internet and
smart devices to bank easily in their daily lives.9
In 2014, Barclays launched a pilot scheme to test the cheque imaging technology with the
support from the UK Government which enables banks to verify and clear a cheque from an image,
instead of using the original paper copy.10 With the new technology, customers are able to deposit
a cheque by taking its photo with a smartphone and send it to their bank.
Furthermore, Atom Bank, the UK’s first “digital only” bank, has obtained a banking license in
June 2015 and raised a total of £135m funding. The bank will provide all the products and services
any high street bank offers for their retail and business customers.11
Developments in banking technology explain the increase in bank branch closures in the UK.12
For instance, Clydesdale and Yorkshire Banks decided to close 28 branches and invest £20m to
boast mobile banking services.13 On the other hand, frequent information technology (IT) failures
related to their alternative banking channels led RBS to cut numbers of jobs in its retail banking
side in order to invest more in mobile and online services.14
With innovative solutions banks offer to their customers, bank branches have started to
become places where customers visit for important decisions requiring personal interaction, such
as applying for a mortgage. It is predicted that banking will be a less physical and more virtual
operation in the future as UK’s younger generation has grown up with the internet and online
access.15

Technology Developments in the Turkish Banking Sector

Turkey has transformed itself into a digital hotspot over the years which enabled banks to innovate
more and acquire new customers.16 The Turkish banking sector has been driven by innovation and
customers are provided with some of the most advanced products in the world, such as mobile
banking and payments applications.17
Banks, payment service providers and vendors believe that Turkey has a great potential for
mobile financial services and payments.18 According to the survey ING International conducted,
Turkey is identified as a future “hotspot” for mobile banking as it has the highest share of internet
users who use mobile banking.19 It is suggested that the growth of internet access has been leading
to an increase in mobile banking usage in Turkey. As of September 2015, the total number of
registered customers that logged in to their account at least once was 17m.20 Moreover, during
the July-September 2015 period, 10.4m of these customers (63% of total customers) used mobile
banking services.

17
 BANKING AND FINTECH

Figure 2: Do You Use Mobile Banking?

Percent who answered “yes” and “no, but I expect to use it in the next 12 months”.
Question was asked only to people who own a mobile device.

Already use mobile banking Expect to use mobile banking

European consumer 53% 19%

Romania 25% 33%

Czech Republic 39% 16%
Luxembourg 41% 12%
Belgium 43% 16%
Germany 47% 17%
Austria 48% 14%
France 49% 14%
Italy 50% 28%
United Kingdom 54% 16%

Poland 57% 22%

Netherlands 61% 10%

Spain 61% 20%

Turkey 65% 20%

Australia 54% 11%

USA 63% 10%

Sample size: 11,814

Source: ING International (2015)

18
 Developing a FinTech Ecosystem in Istanbul

The Turkish banking sector is a great example for innovation clusters where one organisation’s
innovation leads its competitors not only to adopt it but also to advance it. This situation creates a
rapid cycles of innovation within the banking industry.21
Banks in Turkey have been highly successful in using new technologies to reach and engage
with their customers. They are also very successful in adopting and launching innovative
technologies for the first time in the world. For instance, some Turkish banks offer digital wallets
which enable consumers to make online and mobile card payments faster and easier. Moreover,
some Turkish banks have talking ATMs specially designed for blind or visually impaired people
to withdraw money or control their balances while some banks have biometric ATMs. In addition,
Turkish banks provide their customers with digital banking services, and mobile applications that
enable consumers to send money to any card or mobile number from anywhere. They also utilise
wearable technology and provide banking applications on different mobile devices.

19
 BANKING AND FINTECH

The Evolution of
Financial Technologies

20
 Developing a FinTech Ecosystem in Istanbul

The Rise of FinTech

Definition of FinTech
After the Global Financial Crisis (GFC) in 2008, trust in banks was lost, and consumer experience
has become the heart of the banking sector as the decreasing consumer trust in banks led to an
increase in the number of consumers looking for alternatives to banks. As a result, an opportunity
for FinTech companies has arisen as banks realised that welcoming innovation and creating
relations with start-ups can help them increase customer satisfaction and provide them with the
competitive advantage they need to minimise their financial and regulatory constraints.22
The FinTech sector provides technologies and software for ensuring the smooth operations
of banking and financial services industries.23 These technologies are created by start-ups and
technology companies which are looking at disrupting the traditional operations of banks and
financial services organisations.
The definition of FinTech, simply the technology innovations supporting financial services
companies and their customers, has been changed recently.24 In the past, only back and middle
offices have used and benefited from financial technologies in order to save money while front
offices have been labour-intensive and relationship-based.25 However, nowadays FinTech covers
back, middle and front office operations. In addition, customer groups have extended and include
asset managers, advisors, hedge funds, big companies and small and medium enterprises (SMEs).
Banks and financial services organisations can utilise financial technologies in payments and
transactions, digital wallets, mobile and retail banking, peer-to-peer (P2P) lending, crowd funding,
digital and alternative currencies, trading and foreign exchange (FX), commodities markets, risk
and compliance, security and privacy, financial advisory services and insurance.26 Unlike traditional
banks which have considerable amount of overheads and commitments, FinTech companies are
able to generate savings through innovating and adapting. They are smaller, more agile and quicker
than banks. Therefore, FinTech companies can help banks strengthen their competitive advantage
by enabling them to reduce costs significantly.27
There are 4 main customer groups that FinTech companies have been serving.28 The first group
is identified under business-to-business (B2B) segment. This segment includes the large and long-

21
 BANKING AND FINTECH

established financial services institutions, which are governed by regulation and have complex
value chains and long sales cycles. The second group is also identified under B2B segment and
includes the customers of financial organisations, advisors, brokers, asset managers, corporates
and SMEs. The third group is identified under business-to-consumer (B2C) segment. This segment
includes small businesses which bank differently and seek for value and alternative capital sources.
The last group is identified under B2C segment and includes consumers who prefer online banking
over physical branches and who search for the best deal in the market for their financial needs.
Accenture’s recent report about the FinTech industry indicates that the global investment made
in FinTech companies tripled from $4.05 billion (bn) in 2013 to $12.2bn in 2014.29 In addition, it is
expected that the amount invested in FinTech companies will continue to increase globally. The
reasons for that are the new trends and continuous changes happening in financial services, which
have been triggered by the developing technology, changing consumer behaviour, regulatory needs
and necessity to decrease costs.
The governments and businesses around the world have started to understand that having a city
which attracts investment and FinTech investment in particular is crucial for becoming the next big
FinTech hub.30 Many countries around the world have initiated programmes to develop their FinTech
ecosystems and be more competitive in this sector. The Silicon Valley, London, New York, Berlin, Hong
Kong and Singapore are considered among the world’s leading and most successful FinTech hubs.

Figure 3: Global FinTech Financing Activity

14,000 800

12,000 700

600
10,000
Investment ($m)

500
Deal Volume
8,000
400
6,000
300
4,000
200
2,000 100

0 0
2008 2009 2010 2011 2012 2013 2014
United States Europe Asia-Pacific Other Global Deal Volume

SOURCE: Accenture and CB Insights

Source: Accenture (2015)

22
 Developing a FinTech Ecosystem in Istanbul

Overview of the UK FinTech Sector

Over the years, the FinTech sector in the UK has been growing rapidly. FinTech investment in the
UK and Ireland increased from $264m in 2013 to $623m in 2014.31 Furthermore, the UK and Ireland
accounted for more than 42% of the total FinTech investment in Europe, which was $1.48bn in 2014.

Figure 4: Five-Year Growth in FinTech Investment ($m)

2,500%

2,000%

1,500%

1,000%

500%

0
2009 2010 2011 2012 2013 2014
UK and Ireland Europe (ex UK and Ireland) Global Silicon Valley

SOURCE: Accenture and CB Insights

Source: Accenture (2015)

There are many successful FinTech start-ups in the UK including funding platforms like
Crowdcube and Seedrs, money transfer companies like TransferWise and Azimo and P2P lending
companies like Zopa and Funding Circle. According to UK Trade & Investment, the main strengths
of the UK in FinTech are having London as a global centre for financial services and a global trading
hub, a large and technologically sophisticated customer base, a good availability of business capital,
a supportive regulatory framework and an excellent financial services infrastructure.32
The UK has been chosen by investors throughout the years as it has a business-friendly
environment supporting innovation, highly talented workforce, competitive tax regime, global
links and strong information and communications technology (ICT) infrastructure.33 According to
the British Bankers’ Association, the UK has a huge potential for further innovation because it has
a very well-developed banking industry and high rates of digital penetration among consumers,
and is hosting the world’s leading FinTech and digital companies.34
UK policymakers are aware of the FinTech revolution taking place with FinTech companies
which offer alternative methods to traditional finance and develop tailored solutions to meet
the changing needs of customers and businesses. Therefore, the development and growth of the
FinTech sector is highly supported by the Government as the financial services industry is vitally
important to the UK economy.

23
 BANKING AND FINTECH

As a reaction to rapid growth in the FinTech sector, the Financial Conduct Authority (FCA) has
initiated the Project Innovate in order to support start-ups and established businesses to develop
innovative solutions for the UK financial services sector.35 By building an Incubator and an
Innovation Hub, Project Innovate aims to provide companies innovating new models and products
with assistance and advice.
On the other hand, a new trade body Innovate Finance has been created with 53 member
companies to represent and promote the UK FinTech sector globally.36 Founding members include
FinTech companies, large financial institutions and banks such as Barclays, HSBC, RBS, Santander
and Lloyds. One of the main goals of the organisation is to become a single point of access for
FinTech firms, financial organisations, customers, investors, talent, finance and international
marketplaces.37

The FinTech Capital of the UK: London

The UK FinTech sector generates £20bn in revenue annually and has been growing due to the total
effect of digital connectivity, customer dissatisfaction with banks, and a lack of innovation and
investment by incumbent providers.38 Recently, the biggest share of Europe’s FinTech deals and
financing has occurred in the UK, mainly in London.39

Figure 5: Top Five European Regions for

FinTech Investment Activity
Bubble: Total Deal Volume

800
Total Investments ($m), 2014

700
600
500
400
300
200
100
0
0 10 20 30 40 50 60

Total Deal Volume, 2014

UK and Ireland Nordics Germany Russia Netherlands

SOURCE: Accenture and CB Insights

Source: Accenture (2015)

24
 Developing a FinTech Ecosystem in Istanbul

London has become one of the global centres for FinTech as it serves as a financial and
a technological hub. The location of London and its time zone enable companies to access
international markets easily and allow them to conduct their international operations smoothly.
There are 251 foreign banks and 588 foreign financial services organisations in London, making the
city one of the largest financial centres in the world with a truly international client base.40 Thanks
to these established financial services companies in London, FinTech companies have an access to
key resources including talent, customers, suppliers and competition.41 On the other hand, many
banks have realised that having a FinTech cluster in London provides great opportunities and
advantages for their businesses.42
Besides being a financial centre, London is the technology hub of Europe and actively supports
start-ups and fast-growing firms. London is a home for the Tech City, which has attracted over 1,300
high tech companies to date and is the fastest growing technology hub in Europe.43 In addition to
the technology industry, the presence of the creative sectors helps London’s FinTech companies
produce user-friendly, imaginative and sustainable technologies. London’s leading players in
marketing, design, media and advertising also help FinTech companies promote and market their
solutions successfully.44
London’s FinTech sector is getting stronger as the industry attracts the world’s brightest talents,
ranging from fresh graduates to senior executives. For example, London has four universities
which are listed in the world’s top 40 universities ranking.45 Moreover, there is a growing transfer
of knowledge and expertise from the top level financial executives to dynamic FinTech companies
in London.46
There are 4 main FinTech accelerators helping FinTech start-ups and companies develop
and grow in London: Accenture FinTech Innovation Lab, Barclays Accelerator, Level39 and
Startupbootcamp FinTech. These accelerators mainly provide funding, office space, mentorship
from senior level bank executives, venture capital (VC) and angel investment firms and technology
entrepreneurs, networking sessions and workshops. Furthermore, they are supported by the UK
Government and major banks and financial services organisations such as Barclays, HSBC and
MasterCard.
Despite the growing FinTech ecosystem in London, the difficulty to access venture capital and
an insufficient number of investors have been creating barriers for FinTech start-ups.

Overview of the Turkish FinTech Sector

The Turkish FinTech sector has been developing and shaped by the growing young population,
internet usage and mobile and smartphone penetration across the country.
Turkey is one of the countries that have high percentages of young population. This young
population in Turkey is enthusiastic about using internet and mobile technologies. In addition,
they use these technologies for meeting their financial needs. According to MasterCard, young
population (aged 15 to 34) in Turkey is more willing to use mobile payments.47

25
 BANKING AND FINTECH

Figure 6: Willingness to Make Mobile Payments

50%
Willingness is highest among
consumers aged 15 to 34

40%
Willingness Increases

e
om
Inc
30%

20%

Age
10%
Age and Income Increase

Source: MasterCard

At the end of the third quarter of 2015, there were 73.2m mobile phone subscribers in Turkey,
with a penetration rate of 94.3%.48

Figure 7: Who Are the Smartphone Users in Turkey?

Feature Phone Smartphone

59% Male 21%
62% Female 17%
46% Ages 16-24 30%
53% Ages 25-34 24%
63% Ages 35-44 16%
78% Ages 45-64 9%

Source: Nielsen

26
 Developing a FinTech Ecosystem in Istanbul

Current developments in Turkey have also been contributing to the growth of the Turkish
FinTech sector. Turkey has the potential to become a regional ICT hub with its growing economy,
favourable investment climate, and high-quality business resources and infrastructure.49 Moreover,
Turkey has been attracting start-ups with its strategic location between Europe, Asia and the Middle
East. The Government aims to increase the ICT sector spending to 8% of GDP (Gross Domestic
Product) with the Turkish National Technology Foresight Programme, Vision 2023.50
In 2009, the Turkish Government launched the Istanbul Financial Centre Initiative (IFC-I) with the
objective of making Istanbul a global financial centre by 2023. The relevant steps have currently
been taken to transform Istanbul into an international financial centre which will be hosting banks
and financial institutions from all parts of the world.
After the Government enacted a law to bring the Turkish financial markets closer to the
European Union (EU) and the United States (US) markets and to attract international trading
companies, the Istanbul Stock Exchange, Gold Exchange and Turkish Derivatives Exchange were
merged in 2013 under one organisation named Borsa Istanbul. Thereafter, Borsa Istanbul created a
partnership with Nasdaq OMX in order to build a highly sophisticated technological infrastructure
and access to its wide range of trading technologies.51

Figure 8: Strategic Location of Istanbul

ISTANBUL

SOURCE: Istanbul Development Agency

Source: Borsa Istanbul (2014)

27
 BANKING AND FINTECH

On the other hand, the Turkish version of London’s Canary Wharf financial district has currently
been built on the Asian side of the Bosporus.52 Furthermore, Turkey’s first thematic Science
and Technology Park (STP), called the Finance Technopark, will be created in Istanbul with the
partnership of the Borsa Istanbul and Bogazici University.53 The STP will conduct research and
development (R&D) activities and create value-added financial technologies for domestic and
international markets. The Turkish Government is also working on moving the Banking Regulation
and Supervision Agency (BRSA) and the Capital Markets Board of Turkey (CMB) from Ankara to
Istanbul.
By 2023, Turkey aims to become the world’s first cashless society and country where all
transactions are made with payment systems. In order to achieve this goal, industry players are
promoting the usage of alternative payment systems and educate the Turkish society about the
features and benefits of these systems over cash payments. As a result, the efforts to make Istanbul a
global financial centre and become the world’s first cashless society by 2023 have been contributing
to the development of the Turkish FinTech ecosystem.
There are successful FinTech companies providing payments, retail and mobile banking, mobile
technology and information systems solutions in Turkey. The following map (Figure 9) presents
some of these FinTech companies which are mostly specialised in payments.
A significant value will be created for the Turkish FinTech ecosystem if the number of firms
entering the FinTech sector increases. Competition within sub-sectors and across the whole of
FinTech sector will create more awareness and encourage further disruption.54 Moreover, by
growing with and nurturing from a competitive ecosystem, FinTech companies will become more
powerful within the financial services industry.

The FinTech Capital of Turkey: Istanbul

Thanks to its strong internet infrastructure and user base, Turkey has been offering many
opportunities to innovative technology companies. In addition, Turkey has a diverse, young, well-
educated and tech-literate talent pool including people that studied and worked across Europe
and the US returning to their home country. As a result, Turkey has been capable of meeting the
growing demand for digital media, innovative online ecosystems and new business models.55
Istanbul is the start-up hub of Turkey. The start-up sector in Istanbul, which is called Digital
Bosporus, has continued to grow in 2011 but experienced the challenges of growth and the first
failures in 2012. However, these difficulties have helped the sector change its attitude towards
failure and encouraged entrepreneurs to embrace failure instead of being afraid of it. On the other
hand, VC financing is growing and the start-up scene in Istanbul is attracting young people to
achieve entrepreneurial success in a city best known for e-commerce.56

28
 Figure 9: FinTech – Payments in Turkey

FINTECH - PAYMENT IN TURKEY Credit Card Billing (VPOS) Mobile Operator Billing Powered By
Remittance

Collection
3pay
Paratika
PayU 3pay
POS Analytics
Order Screening (B2B)
N Kolay Invoice Management & Accounting

Paytr Compay
Paytrek Game Sultan Fonzip
Iyzico Faturamatik
D-odeme Mempera
Micros
Mysys Uzaypara Payguru Apsiyon Raklet Wallet
Turkpos Mypat
iPara BuradaÖde
Cash Register Vega Yazılım Akınsoft Smart Fatura PayPal
Cardtek Gpay Pratik İşlem
Paramara
POS Payguru Netahsilat Uzman Vergi Fastpay
Sambapos Omni Jointpos Papara
Ingenico Rop Paynet Paraşüt iGaranti
Jetşube
Protel + 20 more Basit Kobi Bircüzdan Parakod
FÖY
Verifone Paynet Mikrokom
Ads Luca Moka Ininal
Infoteks + 35 more Fit Solutions Offline
Paybyme Mobilexpress
Mepsan Hugin + 47 more Payment
Vera Enpos
FINTECH 
 BKM Express Obigarson
Mikrosaray Inpos + 10 more Mobikasaba
IN 
 Hesap Al Öde Al
Monitise TURKEY
Veripark Metamorfoz Tegmos
T.mob Menulux
Smart Order
Plusoneminusone Wallie Order
Tradesoft Finanscepte Screening
Application Banksoft Global Payment Dijital Kumbara
Hesapkitap (B2C)
Provider Belbim
Softtech Globit Provus Finansal Ajanda
Ibtech Fineksus Asis Ininal Enuygun Cardeşim
Asseco Cardtek Verisun Tekkredi
Şeker Bilişim Param Cardgusto
Upt Hangikredi
C-Bilişim Innova Ekent
Troy Ödeme T. Mangır Kart Budget Management
Minova BKM Express Hesapkurdu
Garanti Teknoloji / Saving
Cardtek Cointurk Kredico Akıllı Harçlık
Kentkart Findeks Turk Elektr. Para
Banking Coinkolik Maxipara
Nakito Akbank Direkt
Visa Discount Cards
Cemete Es Paracard
Amex UnionPay
Mastercard Paysafecard Credit Consolidation
PayPal PayPal & Selection
Card Schemes
Gönder-al Prepaid Card
Turkish Skrill
Startups Transportation v1 .9 - January 28, 2016
Ban ries
ks & ubsidia
S News Money Transfer
Foreign Ventures
CreditScoring Check blog.startups.watch for updates Fintech-insurance and fintech-investments are not covered

Source: Startups.watch (2016)

Developing a FinTech Ecosystem in Istanbul

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These developments have been helping Turkish FinTech start-ups in Istanbul receive
attention from foreign companies and attracting some foreign FinTech players to enter or grow
in the Turkish market. Over the last few years, some Turkish start-ups offering payment and
mobile solutions to the market were acquired by foreign companies that aim at expanding their
operations to Europe, the Middle East and Africa.

The Impact of FinTech on the Banking Sector

The financial services industry is so large for FinTech start-ups to have a viable business.
However, the FinTech companies consider this large industry as a big cake, and each of them
have been getting a slice of it. By focusing on one thing banks do and making an entire business
out of that small slice, FinTech start-ups are slowly getting a share of the banks’ businesses
with their innovative solutions. Banks and financial institutions, which have understood that
disruptive innovations will change their businesses, are collaborating with and investing in the
FinTech industry in order to adapt and refresh their core infrastructures.57
On the other hand, banks which do not react to the changes in the ecosystem driven by
technological developments and partner with FinTech start-ups will experience the failure of
their legacy systems and lose their customers in this very competitive environment. As big
banks cannot take the same level of risks and move as quick as start-ups can, they should
contribute to the development of start-ups and stimulate an innovative ecosystem.58
Partnering with or supporting the FinTech sector can have cultural impacts on banks and
help them create an innovative culture within their organisations. A lot of things can change
within a bank with the mentorship provided to FinTech start-ups by the bank’s employees.
On the other hand, banks can help improve the products and services of FinTech start-ups by
providing feedback about their technologies and assessing customers’ needs for these solutions.
Big banks in the UK have recognised the need for disruptive technologies in order to gain
strategic advantage over their competitors and recently started to invest in the UK’s growing
FinTech sector. For example, Zapp (a new mobile payments system developed by a FinTech
start-up) enables consumers to pay with their smartphone in shops and restaurants by turning
their bank accounts into an electronic wallet.59 Major UK banks including Barclays, HSBC and
Santander signed agreements to make Zapp available in their mobile banking applications.
On the other hand, Santander recently established a $100m VC fund for investing in FinTech
companies with the aim of keeping up with a rapidly evolving financial services market.60
Santander also partnered with P2P lending company, Funding Circle, in order to refer business
customers that it rejected to Funding Circle while acquiring technology know-how to serve
its customers better with the latest technology. In addition, HSBC has decided to invest up to
$200m in FinTech start-ups in order to advance its own technology systems.61

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Major banks in Turkey have also understood the value of partnering with the FinTech companies
in order to be more competitive and innovative. For instance, some FinTech companies have been
developing secure online and mobile banking solutions and branchless banking services for major
Turkish banks in order to improve their mobile services and increase customer satisfaction by
enhancing their accessibility. On the other hand, some Turkish banks organise FinTech hackathons
in order to access to innovative solutions which will make banking easier. In these hackathons,
banks aim to encourage entrepreneurs, developers, students and also customers to develop creative
and user-friendly internet banking, digital banking, mobile payments and FinTech solutions with
the mentorship of banking experts. Lastly, some financial services organisations in Turkey provide
FinTech companies with funds, which will help them improve their business models and achieve
growth.

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The Analysis of the

UK and Turkish FinTech
Sectors

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 Developing a FinTech Ecosystem in Istanbul

Research Findings on London

and Istanbul FinTech Sectors
FinTech is very country specific, and depending on a specific country, the needs of the FinTech
industry are very different. Therefore, what may suit the UK right now could be different from
what suits other countries such as Turkey, Germany or the US.
However, as London has successfully embraced and developed a FinTech ecosystem, Istanbul
has the opportunity to learn lessons, and therefore enhance its ability in the creation of its own
FinTech ecosystem. This of course could significantly contribute to the competitiveness and
efficiency of the Turkish banking sector both nationally and also across Europe.
This part focuses on understanding the impact of financial technology adoption on the banking
sectors in the UK and Turkey. By investigating the factors making London a FinTech hub and the
technology perceptions in the Turkish banking sector, this part analyses what Turkey needs to
accomplish in order to develop its FinTech sector and how Turkish banks can embrace innovative
technologies and engage more with FinTech companies for improving their operations and
consequently the banking sector as a whole.
In order to identify the dynamics of the FinTech and banking sectors and gain deeper and
better industry insights about the development of financial technologies, interviews have been
conducted with 14 individuals from influential financial services organisations (banks, payments
companies, FinTech start-ups and accelerators, governmental and banking organisations) in the
UK and Turkey. The following part presents the findings from these interviews under relevant
headings.

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Interview Findings: United Kingdom Organisations

The Rise of UK FinTech

The UK’s FinTech sector has been catalysed a lot by and developed after the GFC in 2008.
One of the reasons why FinTech has emerged as a big opportunity is the decreasing consumer
trust in banks after the GFC which led to an increase in the number of consumers looking for
alternatives to banks. Before 2008, banks were saying “Well, we do it fine, why do we need
this new technology?” when asked. However, as trust in banks was lost during the GFC,
banks are now rebuilding trust by demonstrating that they are innovating. In addition, UK
banks are interested in meeting smart FinTech companies to win their customers back.

The UK Government’s Role in FinTech

A crucial part of the UK Government’s plan for the economy relies on technology, innovation
and FinTech. In order to maintain the UK’s position as a main global financial services centre,
the Government aims to make the UK synonymous with FinTech. They are supportive and
helping FinTech organisations in the development of FinTech start-ups.
The Government’s role in developing the FinTech sector in London is also growing. They
are trying to figure out how to develop proactive policies so that FinTech companies can
flourish in London. They are asking the right questions, heading to the right direction and
more than any other location they are listening to the voice of the FinTech community to
understand what they need to do to be more supportive.

The UK’s Strengths in FinTech

The UK attracts FinTech companies because it has an access to buyers, funding and talent. The
UK spends more per capita over the internet and the adoption of mobile devices is quicker
than anywhere else. They have got big banks in the UK and they have also got consumers who
are fed up with the banks and looking for something new. Moreover, there is enough capital
and VC financing is growing. The UK Government manages to develop an infrastructure for
innovation including universities, which are creating programmes to develop skills not just
in FinTech but in technology, accelerators and VCs. This creates a great magnet for talent and
a network effect as more people are coming to the UK.
On the other hand, the regulatory risks, which are one of the main risks when developing
a FinTech company, are being reduced in the UK and investors like risk reduced. In addition,
the cost of setting up a business is low, technology is cheap and there are plenty of co-working
spaces across the country.
The UK has three main communities which are key to the development of financial services
in general and FinTech specifically. These include a financial services cluster which has huge
amount of expertise in financial products; a tech community, including the Tech City, which
has created a lot of technology talent and expertise; and the supportive regulatory authorities

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(including the Treasury). These three communities are close to one another and can easily
interact with and talk to each other for supporting the development of new business models.
As being one of the UK cities providing a supportive ecosystem for FinTech companies,
London is unique compared to its competitor New York (NY) as the financial services cluster
is in NY, the regulator is in Washington and the tech community is mostly in the west coast.

London as a Global FinTech Hub

London is one of the hotspots for start-ups as it is an amazing hub of ideas and right people at
the right time. There are VCs and angel investors which make entrepreneurs come to London.
The start-up community in London is quite active and VC firms are investing heavily in
Europe with London as the hub.
Secondly, London is one of the financial capitals of the world with a good political
environment. FinTech is dependent on having links with the financial services industry, and
FinTech companies in London have the City (London’s financial district) just next door. There
are a lot of banks, which are easily accessible. London also has European financial centres next
door thanks to its geographic position. People can fly all over Europe very easily from London.
On the other hand, a lot of FinTech entrepreneurs are ex-bankers or having a background and
expertise in the financial services sector, which means that they know the industry they are
disrupting very well. Having a good mixture of former entrepreneurs who bring different
insights and people possessing fantastic experience in banking, retail and payments sectors
in the company helps start-ups to be taken seriously and get the relationships with the people
they need to sell to.
Thirdly, having a fun community around FinTech in different co-working spaces and
different accelerator programmes that promote the sector by bringing a lot of mentors,
investors, policymakers and government decision makers together is one of the advantages
London has over other cities. By going to couple of events, FinTech start-ups can easily meet
with other people and start to build their network. There is also a collaboration culture among
FinTech start-ups in London. For example, companies can introduce each other to potential
clients without expecting any incentive; it’s a favour and may be a favour back in the future.
Moreover, FinTech start-ups can receive mentorship from some other FinTech entrepreneurs
who have established their businesses successfully and want to give back and help new
generations. Furthermore, FinTech organisations help start-ups grow as they aim to build a real
and authentic FinTech community. They do things for the development of FinTech start-ups
in collaboration with a wide range community which include banks, mentors, VCs and angel
investors. Moreover, they partner with domestic and foreign organisations to contribute to the
development and growth of FinTech companies both in and outside the UK. These FinTech
organisations welcome competition from similar organisations and are happy that they are in
the market. They believe that competition will help the sector receive more attention and grow
faster while improving the ecosystem and promoting London as a FinTech brand.

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Challenges for the UK FinTech Sector

Despite these favourable conditions, regulation is a big challenge or a huge barrier for FinTech
start-ups in the UK. However, the UK regulators are very supportive and keen to engage and
understand what they need to do in order to support the development of the sector. They do this to
make the UK, and London, an attractive place for FinTech which will help start-ups receive more
interest from investors worldwide.
On the other hand, there are three main facts about London which cause difficulties for FinTech
companies. Firstly, the fact that London is an expensive city creates an entry barrier for FinTech
start-ups from other countries. Secondly, the UK immigration laws might potentially pose a
problem for some foreign FinTech companies. Moreover, it’s quite hard for start-ups coming from
other countries to set up a bank account in the UK. Finally, for FinTech companies, availability of
VC is limited in London compared to Silicon Valley.

Banking Technologies in the UK

Increasingly, the UK has been considered among the world leaders in banking technology and UK
banks care a lot about what other banks do in this area. For instance, even it is hard to be the first
one to innovate, if one player in the market launches an innovative technology, competition leads
other banks to introduce the same service for their customers. In addition, banks want to have the
best technology they can possibly have. Banks know that they’ll lose customers if they don’t have
the best technology since customers can easily switch banks in the UK.
For a bank, there is always a dilemma over whether to outsource or develop in-house
technologies. Major British banks have very competitive in-house development teams. However,
the smart players in the financial services industry know that in addition to develop technologies
internally, the way to stay ahead is to stay engaged with the start-up scene either through venture
plans, accelerator programmes or activities to help growing start-ups.

UK Banks’ Attitudes towards FinTech

There is definitely a demand coming from UK banks to engage with FinTech companies in order
to benefit from innovative technologies which are core to their business operations. Banks want
to have inside information about what innovation is coming up in the market and be the first
customers of FinTech companies by acquiring innovative technologies before other banks, with
a good price. Moreover, some banks consider further strategic investment opportunities which
include the acquisition of successful FinTech companies. These help banks to be more innovative
and efficient as an organisation.
UK banks are very interested in making their own internal systems and processes better.
By cooperating with FinTech companies banks expect to improve their Know Your Customer
(KYC) compliance, B2C applications and branch operations while developing themselves in B2B,
compliance and payments areas. Furthermore, cyber security, which takes different forms from
authentication to protecting data, is a hugely popular area in which UK banks want to work with
FinTech companies.

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Challenges in Working with UK Banks

Working with UK banks provides its own challenges for FinTech start-ups. Banks are large
organisations which are not flexible and do not move fast or quick enough to embrace any sort of
innovation to create a big impact on their bottom line. Moreover, they have a lot of road maps and
products they want to deliver while having their own challenges to mitigate risks. UK banks are
also dealing with very sensitive information and have security concerns when buying the products
and services of FinTech companies. In B2C side, ensuring the security of customers is something
that the industry still needs to think about. Therefore, UK banks want to be sure that innovative
solutions provided by third parties are as secure and convenient as possible. Furthermore, big
banks have different types of customers and they want to make sure that these solutions meet
their customers’ requirements. However, convincing consumers to use their innovative solutions is
challenging for UK FinTech companies as it is hard to change the consumer behaviour. Due to these
reasons, a threat for FinTech start-ups which target banks might be the decreasing commitment of
banks after they showed interest to start-ups’ solutions.
In conclusion, UK FinTech companies are facing an industry which is very defensive and
difficult to deal with. However, how the financial services industry is going to integrate with
FinTech which is going to change it, regardless whether they want it or not, is just a question of
time. It’s one of those things that will happen, the same as the music and publishing industry were
disrupted by technology. It’s now the financial services industry’s turn.

Interview Findings: Turkish Organisations

Banking Technologies in Turkey

The banking sector in Turkey has a high growth potential. Turkey’s population is 77m and 50% of
this population are under the age of 30. Moreover, banking customers are quick adopters of new
technologies. As the Turkish population is young and welcoming disruptive technologies faster
than other countries, technology adoption in Turkey has accelerated. Turkey is also more advanced
than many other western countries in terms of internet speed and smartphone penetration.
Thanks to the growing young population and internet usage in Turkey, the Turkish banking
sector is very successful in leveraging new technologies. For example, the increasing usage of
mobile banking products in Turkey is a result of banks’ efforts to gain young customers. As the
internet generation in Turkey, the people born in the 90s, has actually started to graduate from high
schools or universities and earn their own money, they will be using payment technologies more
often to spend and manage their incomes. It is expected that there will be a significant increase in
the mobile and electronic payments usage driven by this generation.
On the other hand, the unbanked and the underbanked population in Turkey are still high.
Currently, banks are trying to reach this population, especially the people living in underdeveloped
regions, through developing innovative banking technologies.
Therefore, Turkish banks need to create value propositions for the digital natives and the
unbanked and underbanked population.

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The financial services sector in Turkey is among the most technologically advanced and
innovative sectors. Banks are quick to adopt and really keen on developing new technologies.
Turkish banks’ products, offerings and the usage of technology are surpassing their competitors all
around the world. There are some examples where they advance European or US banks in terms
of launching online and mobile banking technologies.
Turkish banks consider technology and innovation as competitive differentiators. Thanks to
their high profit margins, they have invested heavily in technology and kept their systems at the
leading edge of operational and digital excellence for decades. In addition, banks and technology
suppliers to the banking sector are constantly trying out new ways to improve the existing
solutions and testing new technologies. Banks are open to innovation and spare no expense in
investing in new technologies even though there is not enough demand for them. They use the
latest technologies mainly to reach their customers through multiple channels and with reduced
costs.
Turkey is also one of the most innovative and competitive payment markets in Europe. For
instance, it was the first country in Europe to issue contactless cards. The implementation of
payments in instalments and loyalty schemes (mile and cash bonus collection practices) triggered
the rapid growth of innovative payment technologies and fierce competition in Turkey. Currently,
card penetration is very high with 112m debit cards and 58m credit cards, making Turkey the
Europe’s biggest debit card and credit card market.
Accordingly, the financial technologies sector is also well-established and provides more
advanced and innovative solutions compared to their competitors in Europe. Considering
the difference between the conservative consumer behaviour in Europe against the tech-savvy
consumers in Turkey, this advancement is easy to justify. Also, the volatile business and financial
environment push financial institutions to use technology as much as possible for better efficiency,
risk management, customer onboarding and public relations (PR) practices.

Banking Regulation in Turkey

Thanks to the BRSA, the Turkish banking sector is regulated in terms of technology and technology
related vendors. With the regulation and legislation changes, instead of having separate service
level agreements with vendors, banks can use some existing regulations. This protects banks and
decreases the risk of partnering with third parties.
Besides, Turkey has a closely regulated card market with some gaps compared to Europe.
However, there have been some improvements in the regulation. Recently the Government, the
Central Bank of the Republic of Turkey (CBRT) and the BRSA introduced a new legislation which
regulates the e-money institutions and payment services. It is Turkey’s version of the European
Payment Services Directive which was missing in the Turkish legal system. This new legislation
is considered as critical for the growth of e-commerce, payment services and electronic money in
Turkey.

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The Turkish Government’s Role in the Financial Services Sector

The nature of the sector and highly regulated financial environment create some difficulties for
banks to enjoy the advantages and flexibility that new technologies provide. Sometimes new
technologies become invalid for Turkish banks as it is not possible to try new technologies without
mitigating risks. However, the banking sector is negotiating with regulatory authorities that can
ease regulations in implementing new technologies.
Furthermore, the payments sector has close relations with the Turkish Government. For example,
the industry players can easily explain the sector’s needs and try to find solutions together with
the Government. Similarly, the Government includes payments organisations to their consultation
and cooperation process.
The Turkish financial institutions have a vision to create a cashless society by 2023, and all the
industry players are very committed to this objective. However, the main challenges for Turkey to
become a cashless society are the development of infrastructures, the large unbanked population
and the habit of cash usage.

Turkish Banks’ Investments in Technology

Turkish banks have invested a lot of money into the payments business to strengthen their value
positions and enhance customer loyalty and profitability. As a result, Turkey is in a better position
in mobile payment technologies compared to the rest of the world, and all industry players are
trying to make these technologies work from different angles. For example, besides payments
companies, mobile network operators came up with their own digital wallets and there are also
some start-ups supporting this technology.
Turkish banks also invest primarily in mobile applications as these applications reduce their
expenses. They have started to give importance to the usage of mobile applications within their
organisations as well.

Turkish Banks’ Attitudes towards Innovative Technologies

The Turkish banking sector mainly prefers developing technologies in-house as they possess
the relevant resources. Most of the banks have technology subsidiaries in which they invest
considerable amount of money. However, there is an opinion that Turkish banks shouldn’t create
technology subsidiaries within their organisations. As they are banks, not technology companies,
they do not need to invest to create such technology subsidiaries. Instead, with the help of
outsourcing and special agreements with the right vendors, Turkish banks can easily create a
technology environment within their organisations and differentiate themselves.
When Turkish banks have their technology subsidiaries, they should hire the best talents in
different domains, such as internet banking, mobile banking, core banking etc., which is very
difficult. There are many expert companies in Turkey which serve the banking sector for their
technology needs. Therefore, working with the experts for each sub-area can be a better solution
for banks than creating their own technology subsidiaries.

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In addition, customer expectations and behaviours are changing due to new technologies. In order
to adapt market conditions, Turkish banks should be open to new models and collaborations with
other parties. Otherwise, they might lose their customers or more importantly the customer data.
Most Turkish banks are aware of these changes and take action accordingly. They have
started working with disruptive FinTech start-ups as they are more agile and innovative than
traditional technology companies. For example, the trend is using in-house resources to develop
payment solutions but recently it has been seen that Turkish banks are leveraging third parties
to develop these platforms, software and solutions. Moreover, these third parties started to sell
their products in other markets, which is very important as they are able to grow their business
significantly.

The Start-up Ecosystem in Turkey

The start-up ecosystem in Turkey has been developing rapidly in the last 5 years. Many companies
were founded in different sectors thanks to the economic stability, developing internet technologies
and increase in the number of VC companies (especially foreign ones), entrepreneurship centres
and incubators.
Istanbul is the hotspot for FinTech start-ups in Turkey. The key strengths of Istanbul are having
a young talent pool both in development and design areas, having cheaper labour costs compared
to other start-up communities around the world and its increasing brand value.
Turkish FinTech start-ups are mostly hiring people from the top universities, and a lot of their
employees have studied or worked abroad. There is also a reverse brain drain to Turkey which
creates an advantage for these start-ups.
As Turkey is located between Europe and Asia, it is a great gateway for European companies to
access the Middle East and Middle Eastern companies to reach Europe. For example, Istanbul-based
companies can access London, Paris, Dubai and Cairo with flights taking 3-4 hours. Therefore,
Turkey’s strategic location enables FinTech companies in Turkey to do business easily with the
companies in Europe and the Middle East. Furthermore, acquiring Turkish FinTech companies
can help international companies expand into the growing Middle East market. Also, a FinTech
company can be easily recommended to other banks in the Middle East or Europe by Turkish
banks and open branches in these regions.
The Turkish Government supports the development of Technoparks by collaborating with
universities to help science, technology and business integrate with each other. By being located in
STPs, which are governed by a legal framework managed by the Ministry of Science, Industry and
Technology, companies can have major tax advantages and incentives and exemptions from the
value added tax (VAT), corporate tax and income tax.
The Turkish Government also aims to stimulate entrepreneurship and SMEs creation and boost
productivity. For example, FinTech companies can receive support from the Government and
multiple public organisations for some of their R&D projects.

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Challenges for Start-ups in Turkey

Despite the advantages offered by Turkey, start-ups are facing major challenges.
Turkish start-up ecosystem lacks marketing and brand culture and institutional investors. On
the other hand, Turkish entrepreneurs mostly have economic concerns and desire to earn money in
a short period of time. Moreover, many entrepreneurs in Turkey have the fear of failure. These are
the biggest enemies of Turkish start-ups. However, they shouldn’t be afraid of trying to create new
technologies. Innovation and disruptive technologies are risky because companies don’t know
whether these technologies will work or not. Turkish start-ups need to try the new technology,
enhance it or maybe scrap it and start again from scratch. This will help them build a company
culture and well position their brands.

Challenges for FinTech Start-ups in Turkey

In particular, FinTech companies working with the financial services sector in Turkey have a major
weakness which needs to be eliminated: FinTech companies in Turkey have to create their own
ecosystems. For instance, a FinTech company providing solutions to different banks has to partner
with other vendors who can easily develop some functions on their products or services on behalf
of its customers.
Furthermore, existing business standards and managing customer relations are the
biggest challenges that FinTech start-ups face. The industry thinks that instead of enhancing
the incentives and support to Turkish start-ups, the related procedures and processes should
be improved as they are complex and long. Lastly, informing customers about innovative
technologies and explaining well their contributions to business processes are the continuous
challenges of FinTech start-ups.

Collaboration between Turkish Banks and FinTech Companies

Some Turkish banks have been visited by start-ups and domestic and international technology
companies who are interested in doing business with them.
Turkish banks give significant importance to the technical capabilities and previous successes
of FinTech companies when choosing to work with them. They access FinTech companies through
references, and many banks continue to work with them after the first project. On the other hand,
FinTech companies consider passing the procurement process and signing the contract as the
most important parts when working with banks. Banks’ policies and law departments conduct a
detailed assessment to finalise these agreements.
Considering the differences in corporate culture among banks, FinTech start-ups might need to
give special focus in communication until finding the best way of working together with Turkish
banks. The advantage of working in collaboration with banks’ engineers is that they act fast during
the service integration process. However, it can be difficult to reach these engineers as technology
subsidiaries of Turkish banks are located relatively far from business centres.

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Besides mobile banking solutions, Turkish banks demand wallet, Google Glass, beacon and
ATM projects from the FinTech companies. Nowadays, m-commerce has been taking the place
of e-commerce in Turkey which makes P2P money transfer more and more crucial. Innovations
related to P2P money transfer, such as paying through mobiles, watches and Google Glass, are on
the way for Turkish consumers.
On the other hand, some Turkish payments companies work very closely with the technology
vendors, entrepreneurs and different players within the ecosystem. They are open to work with
anyone willing to introduce a new solution and ready to support them with their own experience
and know-how. This is very important from a business perspective as they can identify the ideas
and companies which may succeed and contribute to their businesses.

Turkish Banks’ Attitudes towards FinTech

Turkish banks consider providing mentorship to FinTech companies in order to share knowledge
and provide them with network opportunities. On the other hand, some FinTech companies have
been mentoring and partially financing young start-ups through contests. They also coordinate
with the entrepreneurship centres at universities for encouraging and supporting new start-ups.
However, there is a lack of collaboration between banks and FinTech companies in developing the
FinTech ecosystem in Turkey.
Some Turkish banks are following the FinTech accelerators in London and open to get involved
in similar initiatives in Turkey. Also, established FinTech companies consider creating partnerships
with and/or providing mentorship to FinTech accelerator programmes that can be launched in
Turkey.
The FinTech sector offers a great opportunity, especially for young developers and young
entrepreneurs. Some Turkish banks plan to collaborate with universities in order to create an open
platform for young code developers and enable them to build innovative solutions for the banks’
business issues. Some Turkish FinTech start-ups have also formed partnerships with universities
to attract the top talents in design and engineering.

Summary of the Findings from the Interviews

The interviews have shown that banks in the UK and Turkey have some similarities in terms of
the way they perceive and leverage new technologies. However, it has been observed that there
are some differences between them in terms of the way they acquire and/or develop innovative
technologies.
Both the UK and Turkey are strategically important markets. Their large populations are
welcoming disruptive technologies faster than other countries. The internet usage and mobile
and smartphone penetration are getting higher, and banking customers are quick adopters of new
technologies in both countries.

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One of the reasons contributing to the emergence and development of the FinTech sector in
the UK is declining consumer trust to banks after the GFC in 2008. As consumers started to look
for alternatives to banks after 2008, UK banks realised that they have to innovate in order to win
their customers back.
Turkish banking customers are quick adopters of new technologies due to the demographic
features of the population. As a result of the growing young population and internet usage, the
Turkish banking sector is keen on and very successful in leveraging innovative technologies.
The banking sectors in both countries are advanced and tech-savvy. UK banks want to have
the best technology as they know that otherwise they will lose customers. For instance, if a UK
bank launches an innovative technology, competition leads other banks to introduce the same
service to their customers. On the other hand, the Turkish banking sector is very technologically
advanced and innovative, and banks provide better solutions compared to their competitors in
Europe. As a result of their high profit margins, Turkish banks can invest in new technologies
easily.
UK banks are very interested in making their own internal systems and processes better through
innovation while Turkish banks use these technologies for better efficiency, risk management,
customer onboarding and PR practices. Besides mobile banking solutions, Turkish banks also
demand wallet, Google Glass, beacon and ATM projects from FinTech companies.
Major British banks have very competitive in-house development teams. On the other
hand, Turkish banks prefer having technology subsidiaries in which they invest a considerable
amount of money. However, as customer expectations and behaviours are changing due to new
technologies, Turkish banks are recently leveraging third parties to develop platforms, software
and solutions to gain competitive advantage.
FinTech companies have been challenging UK banks and forcing them to engage with the
FinTech sector for better efficiency and more sustainability. UK banks are interested in FinTech
start-ups and want to engage with them. In addition, some UK banks consider further strategic
investment opportunities including the acquisition of successful FinTech companies. On the other
hand, the Turkish banking and financial services sectors are interested in providing mentorship
to FinTech companies and start-ups. They are open to share their knowledge and cooperate with
these companies in order to develop innovative solutions.
UK banks want to be sure that innovative solutions provided by third parties are as secure and
convenient as possible. Turkish banks give significant importance to the technical capabilities and
previous successes of FinTech companies when choosing to work with them.
The FinTech sector is expected to bring value to the UK’s economy and improve the financial
services industry by fostering competition. The UK Government aims to make the UK a global
FinTech hub, with London as the centre. The financial services cluster, tech community and
supportive regulatory authorities and the Treasury are contributing to the development of the
UK’s FinTech sector. These communities are constantly interacting with each other in order to
make the UK financial services industry more efficient and more sustainable. The infrastructure
for FinTech innovation, including universities, accelerators and VCs, is very strong in the UK

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and attracting top talents to come to the country. The UK has an access to buyers, funding and
talent. The regulatory risks have been reduced, and it’s also cheap to set up a business and access
to technology.
The start-up ecosystem in Turkey has been developing rapidly in the last 5 years. Many
companies were founded in different sectors thanks to the economic stability, developing internet
technologies and increase in the number of VC companies, entrepreneurship centres and incubators.
Turkey’s location also contributes to the development of a start-up ecosystem as Turkey is a great
gateway for European companies to access the Middle East and Middle Eastern companies to
reach Europe. Turkish population is well-educated and Istanbul has a young talent pool both in
engineering and design areas. The Turkish Government aims to stimulate entrepreneurship and
SMEs creation and boost productivity.
Regulation is challenging FinTech companies and start-ups in both countries. However,
regulatory authorities and the UK Government are very supportive. They are trying to understand
how they can help develop and promote the FinTech sector by listening to the needs of the FinTech
community. On the other hand, the Turkish banking sector is negotiating with the regulatory
authorities to ease regulations in implementing new technologies.

The SWOT Analyses of the

FinTech Sectors in London and Istanbul
The main objectives of this book are to investigate how the FinTech industry can improve and
transform the Turkish banking sector by making it more sustainable and efficient, and create a
development model for the Turkish FinTech ecosystem. Researching the banking and FinTech
sectors and interviewing 14 individuals from influential financial services organisations in the UK
and Turkey have significantly contributed to the goals of this book and provided valuable insights
on how to develop a FinTech ecosystem in Istanbul.
In order to understand what Istanbul needs to do for developing its FinTech ecosystem,
performing SWOT analyses of the FinTech sectors in London and Istanbul is very crucial. Therefore,
the following part presents a SWOT analysis of the FinTech sector in London and a SWOT analysis
of the FinTech sector in Istanbul, which are generated thanks to the findings from the market
research and interviews.

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 Developing a FinTech Ecosystem in Istanbul

SWOT Analysis of the FinTech Sector in London

Strengths Opportunities

• The UK Government’s plan to make London the global • Consumers’ increasing interest toward
FinTech capital FinTech solutions
• Having strong communication and collaboration • Banks’ and financial services firms’
between banking, financial services, technology and increasing interest towards FinTech
FinTech sectors, the UK Government and regulatory solutions
authorities to develop and promote London’s FinTech • Attracting more banks to use innovative
sector solutions of FinTech companies
• Having a continuously developing infrastructure for • The ability to attract talented and
fostering FinTech multilingual workforce, ranging from
• Industry body (Innovate Finance) for the FinTech sector, fresh graduates to senior executives
Tech City cluster, FinTech accelerators and university • Potential partnerships and
programmes related to technology and FinTech collaborations between universities,
• Developed and supportive start-up ecosystem financial services organisations and
• Availability of VCs and investors, the low cost of setting FinTech companies
up a business, wide networking activities and easy access • Creating a FinTech Technopark
to financial services and creative industries in London in collaboration with
• Tech-savvy banking sector and the increasing interest universities
among banks to engage with the FinTech sector • Creating partnerships between the
• The increasing competition within the FinTech industry universities and FinTech accelerators and
incubation programmes
• Fast adoption of internet, mobile phones and
smartphones • The increasing number of partnerships
with FinTech organisations in other
• Access to talented and multilingual workforce, ranging countries to promote London as a
from fresh graduates to senior executives global FinTech hub
• High brand value of London
• Convenient location to reach Europe and
other countries easily
SWOT Threats

• Strict regulations for FinTech companies

Weaknesses
• Restrictive immigration laws
• Lower availability of VCs compared to
• Strict regulations for FinTech companies Silicon Valley
• Restrictive immigration laws • Competitive in-house development
• Lower availability of VCs compared to Silicon Valley teams of major UK banks
• High costs of living and operational costs for companies • The decreasing commitment from banks
coming from other countries to the solutions of FinTech companies
• The difficulty of opening a bank account in the UK for • Security concerns of individuals and
companies coming from other countries businesses towards FinTech solutions
• The difficulty of ensuring the security of innovative • The low ability to attract talented and
solutions provided to end users and financial institutions multilingual workforce, ranging from
by FinTech companies fresh graduates to senior executives
• Other cities that attract FinTech
companies

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 BANKING AND FINTECH

SWOT Analysis of the FinTech Sector in Istanbul

Strengths Opportunities
• Economic stability in the past decade with steady growth • Creating an infrastructure to increase
• Strong and highly regulated banking sector since 2001 communication and collaboration
• Future objectives between industries to develop the FinTech
• Making Istanbul a global financial centre, developing the ICT sector
sector and becoming a cashless society by 2023 • Making Istanbul a global financial centre
• Burgeoning infrastructure in Istanbul to increase • Establishment of Finance Technopark,
communication and collaboration between banking, which is the first thematic technopark in
financial services, technology and FinTech sectors, the Turkish Turkey focused on finance
Government and regulatory authorities
• Developing an infrastructure to foster
• Having majority of the leading organisations from banking,
innovation
financial services, FinTech and technology sectors in Istanbul
• Transformation of Istanbul into a start-up hotspot • Increasing the number of start-up
• Increasing brand value of Istanbul in the global start-up acceleration and incubation programmes
scene, promotion of entrepreneurship in Turkey, increasing in Istanbul
government support for start-ups (e.g. incentives, tax • Increasing mentorships provided by banks
exemptions and funds), developing and growing start-up to FinTech companies
ecosystem in Istanbul and the increase in VC investments into • Banks’ and financial services firms’ interest
Istanbul start-ups towards creating or collaborating with
• The increase in the number of entrepreneurship centres, STPs start-up accelerators and incubation
and industry-university collaborations programmes in Turkey
• Tech-savvy and highly innovative banking sector and • Attracting talented and multilingual
(potential) interest among banks to engage with the FinTech workforce, ranging from fresh graduates to
sector senior executives
• Banks’ and financial services firms’ interest towards
• High unbanked and underbanked
collaborating with or creating (potential) FinTech accelerators population
in Turkey
• Access to a large, young and educated talent pool that have • Collaborations and partnerships with
international study and work experience (e.g. increase in the foreign FinTech organisations
reverse brain drain to Turkey) • Central location between Europe and the
• Having a large tech-savvy young population Middle East with a potential to become a
• High mobile phone and smartphone penetration rate regional FinTech hub
and the increasing usage of mobile banking services
• Central location between Europe and the Middle East
SWOT Threats
Weaknesses
• Highly regulated banking sector
• The existing need for developing infrastructure
• Historically high inflationary economy
• Highly regulated banking sector which has stabilised for a decade
• Lack of industry experts for Financial Services and ICT • Turkish banks’ preference for developing
sectors to support and promote these sectors innovative technologies in-house
• Low availability of VCs • Security concerns of individuals and
• Weak communication and collaboration between businesses towards FinTech solutions
technology companies and banks • Low ability to attract talented and
• Turkish banks’ preference for developing innovative multilingual workforce, ranging from
technologies in-house fresh graduates to senior executives

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 Developing a FinTech Ecosystem in Istanbul

Conclusion of the SWOT Analyses

It can be clearly seen that the SWOT analysis of the FinTech sector in London and the SWOT
analysis of the FinTech sector in Istanbul have provided important elements of healthy FinTech
ecosystems.
Based on these SWOT analyses, a development model for the FinTech ecosystem in Istanbul has
been created. The following part presents this development model and provides recommendations
on how to develop the FinTech ecosystem in Istanbul.

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 BANKING AND FINTECH

Conclusions

48
 Developing a FinTech Ecosystem in Istanbul

A Development Model for the

FinTech Ecosystem in Istanbul
The SWOT analysis of the FinTech sector in London and the SWOT analysis of the FinTech sector
in Istanbul have showed that there are four essential themes for developing an healthy FinTech
ecosystem in Istanbul. These themes are:

1. Collaborative Ecosystem
2. Interaction between the Communities
3. Well-developed Infrastructure for Innovation
4. Supportive Ecosystem for the Development and Growth of the FinTech Sector

Collaborative Interaction
Ecosystem between
the Communities

FINTECH
SECTOR

Supportive
Well-developed Ecosystem for the
Infrastructure Development and
for Innovation Growth of the
FinTech Sector

Based on this development model, recommendations for developing a FinTech ecosystem in

Istanbul are presented in the following part. These recommendations provide guidance about how
the major finance and technology centre of Turkey, Istanbul, can be inspired by what London does
and develop its own FinTech ecosystem, and attract Turkish banks to integrate with it for making
the banking sector, and the financial services sector as a whole, better, more efficient and more
sustainable.

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 BANKING AND FINTECH

Recommendations for Developing

the FinTech Ecosystem in Istanbul

the Communities
Interaction between
Collaborative Ecosystem
• The Turkish Government and regulatory authorities
• The Turkish Government and regulatory and financial services, technology, and FinTech
authorities should take the lead in developing companies should interact with each other more and
the FinTech sector in Turkey. develop close relations.
• The Turkish Government and regulatory • The Turkish Government’s plans to move the BRSA and
authorities should try to understand and CMB from Ankara to Istanbul should be accelerated.
identify the needs of the Turkish FinTech sector. • The importance and advantages of contributing
• The Turkish Government and regulatory to and collaborating or partnering with FinTech
authorities and financial services, technology companies should be promoted to the Turkish
and FinTech sectors should work closely banking sector.
together to develop a FinTech ecosystem in
Istanbul.
ment
Supportive Ecosystem for the Develop
• Banks and financial services organisations
should be encouraged to contribute to the Sector
and Gro wth of the FinTech
development of FinTech start-ups by providing
mentorships and partnering with (potential)
FinTech accelerators. • The regulation related to the FinTech sector should
• Banks and financial services organisations be improved.
should interact and collaborate with FinTech • FinTech companies should create and develop their
companies to develop innovative technologies. own ecosystems and collaborate with each other.
• An industry body for the Turkish FinTech sector • Turkish consumers should be trained more on how
which includes policymakers, regulators, banks, to use innovative financial solutions and educated
financial services and technology companies, about the advantages of using these solutions.
investors and universities should be created. • Istanbul should be promoted more as a financial
• Turkish banks should be open to do more centre to attract the leading financial institutions
business with FinTech companies and not and as a start-up hotspot to attract VCs to invest in
damage competition within the FinTech technology companies.
sector by investing heavily in their technology • The efforts to develop a supportive ecosystem for
subsidiaries. start-ups should be accelerated.
• Networking events should be organised for banks,
investors, financial services, technology and FinTech
Well-developed companies to build relations.
Infrastructure for Innovation • In order to access to and attract the talented and
multilingual workforce, career events promoting the
FinTech sector should be organised with universities.
• FinTech accelerators should be created by • Competition in the Turkish FinTech industry should
banks, financial institutions and FinTech be promoted.
companies.
• Established FinTech hubs, such as London, should be
• Infrastructures should be developed to support taken as an example and observed closely in order to
the IFC-I plan and ICT sector. learn lessons from their industry practices.
• The number of STPs in Istanbul should be • FinTech organisations in established FinTech
increased. hubs, such as London, which are willing to create
• The number of university programmes related partnerships with the Turkish FinTech sector
to technology and FinTech should be increased should be identified and contacted for building
across Turkey. partnerships.

50
 Developing a FinTech Ecosystem in Istanbul

Conclusion
After the GFC in 2008, the FinTech sector has become one of the fastest growing entrepreneurial
areas in the world for start-ups that aim to disrupt traditional banks. While some banks consider
FinTech as a threat to their businesses, many others have realised that FinTech is an opportunity
for them to gain competitive advantage and integrate innovative solutions quickly into their
operations enabling better efficiency and customer service.
The objective of this research is to investigate how the FinTech sector disrupts and improves
the banking industry by making it more sustainable and efficient. My analysis concerns Turkish
banking and the lessons that can be learnt from cross-border knowledge sharing between one of
the world’s centres of FinTech, London, and the emerging sector in Istanbul.
The development model presented in this book would help Istanbul foster its own FinTech
ecosystem which will contribute to the development of the Turkish banking sector. As the analyses
suggest, Istanbul has the important elements to develop a FinTech ecosystem. Therefore, the Turkish
Government should put the goal of building a FinTech ecosystem in Istanbul on its agenda. In
addition, all the players in Turkey’s financial ecosystem, including the Government and regulators,
banks, payments organisations, financial institutions and FinTech companies and start-ups, should
collaborate with each other and the international players to foster a FinTech ecosystem in Istanbul.
The policymakers in Turkey can benefit from the recommendations that are presented in this
book to develop, strengthen and promote the Turkish FinTech ecosystem which will significantly
contribute to the objective of making the Turkish banking sector better, more efficient and more
sustainable.
The importance of embracing FinTech has been growing all around the world, and it is time for
Turkey to jump on the FinTech bandwagon.

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 BANKING AND FINTECH

Appendix

52
 Developing a FinTech Ecosystem in Istanbul

The Banking Sector in Turkey

The Turkish banking sector is divided into three major periods which are the pre-crisis period
(1992–1998), the crisis period (1999–2003) and the post-crisis period (2004–2009).62
The pre-crisis period was shaped by financial deregulation which led to an increase in the
number of banks and a decrease in market concentration. As a result of weak regulation and
discipline, the number of banks in Turkey rose from 66 in 1990 to 81 by the end of 1999. Moreover,
macroeconomic instability and global crises during the 1990s damaged the Turkish banking sector.
Before the occurrence of the biggest crisis in Turkey’s history, the financial system was
supervised by the Turkish Treasury, the CBRT, the CMB, Prime Ministry, and Ministry of Finance at
the same time. The multiplicity of regulatory and supervisory bodies created a lack of coordination
between these bodies. As Turkey’s economy became vulnerable and its financial services sector
was getting weaker, a significant need for a supervisory and regulatory body arose. In order for
one authority to supervise and regulate the entire industry, the BRSA was founded and started its
operations in 2000.63
As a result of weak economic growth, unsustainable domestic debt, high inflationary
environment and uncertainties in current account financing, the biggest twin crises occurred in
Turkey’s history in November 2000 and February 2001, which later created a systemic crisis in the
Turkish banking sector.64
Turkish banks were affected by three major shocks: The rise in funding costs due to the increase
in interest rates and maturity mismatch, capital losses as a result of mark-to-market decline in
the value of government securities holdings, and capital losses caused by the change in foreign
exchange rate and open foreign currency position.65
During the crisis, the banking industry lost 22.7% of its assets based in USD while the number
of banks, branches, and personnel were reduced significantly.66

Figure 10: February 2001 Crisis Process

The Change in Internal and External
Macroeconomic Effects Banking Sector Effects
Conditions

• The increase in political risks • Rising interest rates • The increase in funding loss due
• The increase in FX demand • Significant Turkish Lira to liquidity and interest risk
• Inversion in capital movements depreciation • Securities portfolio losing
• Rising tendency of inflation value
• The difficulty in internal debt
sustainability of real economy • FX loss due to FX short positions
• Credibility loss of prevailing • Weakening asset quality and
economic programme increase in credit risk

SOURCE: BRSA

Source: BRSA (2010)

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 BANKING AND FINTECH

The crisis period was shaped by re-regulation due to the rise in non-performing loans and
negative profits. Important structural changes had taken place in the Turkish banking sector in
order to create an environment with greater monetary and macroeconomic stability.
The Turkish Government took actions for removing the confidence crisis and financial
instability and adopted a new programme called Transition to a Strong Economy and based on
market-orientation and openness to world economy. Moreover, in order to transform the damaged
banking sector into a resilient and competitive one, the Banking Sector Restructuring Programme
(BSRP) was launched. BSRP focused on restructuring public banks and bringing healthy structure
to private banks, strengthening legal and institutional framework of banking supervision and the
resolution of banks through sales, mergers, liquidations or transfers.67

Figure 11: Restructuring Programme

Public banks will no longer be a
factor for the instability.

Strong Capital Structure

Real Banking,
Banking Sector Strong Economy and
Restructuring Cost Effectiveness
Sustainable High
Programme Growth Environment
Effective Surveillance and Supervision
Structure

Market Discipline and Transparency

• Strengthening of BSRP
• Structural Reforms
• Establishment of Asset Management Companies
• Macroeconomic Stability
• Istanbul Approach
• The Decrease in Public Borrowing Necessity
• Re-Capitalisation of Banks

Source: BRSA (2010)

With these new policies, Turkey has achieved macroeconomic stability. In addition, the Turkish
banking industry has become very sound due to its regulation and supervision and conservative
banking practices. The sector has been constantly growing since 2004 and managed to attract global
capital thanks to the positive developments in national and international environment after 2002.68

54
 Developing a FinTech Ecosystem in Istanbul

Figure 12: Nonperforming Loans Figure 13: Foreign Capital in

to Total Loans (percent) the Banking Sector (TLbn)
10 25
Advanced Economies
9
EU-27
8 20
Turkey
7
6 15
5
4 10
3
2 5
1
0 0
2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012
SOURCE: IMF-Financial Soundness Indicators SOURCE: BRSA-CBRT

Source: Aysan and Ermisoglu (2013) Source: Aysan and Ermisoglu (2013)

These structural reforms and political stability after the twin crises helped Turkey develop a
robust banking system. As a result, Turkey overcame the GFC in 2008 without a major damage
and recovered rapidly.69 During the GFC, none of the banks needed to bailed out. In addition, they
maintained their asset quality for a long time without major gaps as Turkish banks are profitable,
sound and well-capitalised.70

Figure 14: Return on Assets Figure 15: Total Assets

(percent) (TLbn, percent)
3,5
1,500 100
3
2,5 1,200 80

2 900 60
1,5
1 600 40

0,5 300 20
0
- 0
-0,5
2007 2008 2009 2010 2011 2012
2007 2008 2009 2010 2011 2012

Advanced Economies EU-27 Turkey Total Assests Total Assests/GDP (r.h.s.)

SOURCE: IMF-Financial Soundness Indicators SOURCE: BRSA-CBRT

Source: Aysan and Ermisoglu (2013) Source: Aysan and Ermisoglu (2013)

55
 BANKING AND FINTECH

The Turkish banking sector fully adopted Basel II framework in 2012 and most of the draft
regulations related to Basel III have been completed on time by the BRSA.
As of December 2013, asset size of the Turkish banking industry was TL1.732bn while loans
were composing 60.5% of total assets with TL1.047bn.71 Moreover, the sector’s profit was TL24.732m
while its return on assets and return on equity were respectively 1.6% and 14.2%. Also, the sector’s
capital adequacy standard ratio was 15.3% and nonperforming loans ratio was 2.7%.
According to the Banks Association of Turkey, as of January 2016, there are 47 banks operating
in Turkey.72

Table 1: Number of Banks and Branches in the System

2013 2014
Bank Branch Bank Branch

Deposit banks 32 10,981 34 11,182

State-owned 3 3,398 3 3,500
Private 11 5,338 11 5,455
SDIF 1 1 1 1
Foreign 17 2,244 19 2,226
Develop. and invest. banks 13 40 13 41
Total 45 11,021 47 11,223
* Including branches in the Turkish Republic of Northern Cyprus and branches abroad.
SOURCE: BAT

Source: Banks Association of Turkey (BAT) (2015)

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Developing a FinTech Ecosystem in Istanbul

57
 BANKING AND FINTECH

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58
 Developing a FinTech Ecosystem in Istanbul

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Table.1 The Banks Association of Turkey (2015). Banks in Turkey 2014. June 2015. ISBN 978-605-5327-57-6.

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Supported by

startups
watch

65
Over the last few years, FinTech has become one of the most
popular concepts for financial institutions all around the world
as a result of a massive technological revolution.

As BKM, with the vision of powering the future of digital

payments, we aim at providing a convenient environment that
enables to build a powerful FinTech ecosystem in Turkey.

Banking and FinTech tells the story of the UK’s accomplished

FinTech sector and draws a roadmap for building a sustainable
Turkish FinTech ecosystem by revealing the key success factors
based on the author’s FinTech experience, observations and
dissertation on the Impact of Financial Technologies on the
Banking Sector. We consider this book as a great opportunity
for the financial services industry in Turkey and hope it would be
beneficial for all parties.

Soner Canko (Ph.D.)

CEO, Interbank Card Center of Turkey (BKM)