When we look at the world of ecommerce, payment systems have taken a step behind, as a sub-ecosystem of ecommerce. The payments ecosystem has evolved and has rapidly grown during the last 10 years. For instance, let us consider giant ecommerce players and their payments products, such as eBay’s PayPal, Amazon’s Amazon Payments, Alibaba’s Alipay and the Groupon’s Breadcrumb.
In Turkey, especially after 2011, payment systems have become an emerging market, which is mostly driven by banks and telco companies.
Before analyzing the chronology and breakdown of payment systems, lets take a closer look at the overall figures and numbers which make up ecommerce and payment systems very popular in Turkey.
The Overall Figures
According to the Interbank Card Center (BKM)’s reports (1), transaction volume of card payments over internet, excluding MO/TO payments, are:
End of Q1 2012 – EUR 1.99 Billion
End of Q1 2013 – EUR 2.76 Billion (38.2% YOY)
End of Q1 2014 – EUR 3.46 Billion (25.7% YOY)
On the 1st of February of 2014, the Banking Regulation and Supervision Agency (BDDK) published a new regulation to restrict the use of installments based on electronics containing SIM, food, gold, fuel etc. As a result, the growth rate decreased slowly.
Compound Annual Growth Rate (CAGR) has been over 35% since 2008. According to the Interbank Card Center (BKM)’s reports (2), there are 57.2 million credit cards, 100.8 million debit cards, 2.3 million POS devices in Turkey which ranks second in Europe considering credit cards penetration rate.
Unlike Europe and the US, Turkish people prefer to use their credit cards instead of debit or prepaid cards to make installments for online purchases. In the Webrazzi Payment Systems’ 13 Conference, I published Otto Group Turkish private shopping company limango’s payment distribution and 67% (3) of people were choosing installment payments.
According to the Turkish Statistical Institute (TUIK)’s statistics (4), the population of Turkey is 76.67 million and the average age (5) was 30.4 at the end of 2013.
According to the Information and Communication Technologies Authority (BTK)’s report (6), at the end of March 2014, there were:
70.1 million mobile subscribers. By excluding the number of population aged between 0 and 9, mobile penetration rises to over 100%.
51 million 3G subscribers.
35 million internet subscribers. By excluding the number of population aged between 0 and 9, mobile penetration rises to 49%
It is estimated that there are 10 million ecommerce users in Turkey.
Turkey has an excellent geographical advantage and there are many highly skilled B2C logistics players that guarantee the delivery time commonly between 1 business day and, the worst, 2 business days.
Turkey ranks 6th for Facebook (7) users, 11th for Twitter8 users
As a summary, there are many reasons (young and early adaptor population, high card penetration, excellent logistics infrastructure, internet and 3G/mobile usage, online banking infrastructure, payment systems, social media usage etc.) to describe why ecommerce is so popular in Turkey. For more information, check out the Sina Afra’s great article: “Why Turkey is hot – 2013 update.
Nowadays, the dynamics and breakdown of ecommerce (marketplaces, classifieds, e-retailers, private shopping, verticals, group buying, price comparison, etc.) is well known, it is not rocket science any more. But the opportunity lies in the payment systems. Let’s look at the chronology and the breakdown of payment systems in Turkey.
Chronology
In Turkey before 2011, talking about payment systems is very limited and the conversation was based on only card payment systems. However, after acquisition of the largest payments infrastructure provider EST (Elektronik Sanal Ticaret) by Asseco SEE in 2010, payment systems became quite popular and new players have emerged. And there will be more.
Breakdown
When we look at the breakdown of payment systems in Turkey, there are asynchronous payment solutions such as Cash on Delivery and EFT / wire transfer; synchronous payment solutions such as digital wallets, mobile wallets and SMS based solutions, PSP’s which supply virtual POSses, and gateways which supply APIs for merchant to process payments.
The major difference between asynchronous and synchronous payment systems is the completeness time of the payment transaction. In the asynchronous payment systems, customer commits that they will pay the money therefore the payment transaction is completed after a period of time of order such as in 6 hours or in 3 days (for wire transfer or cash on delivery) after order time.
Therefore asynchronous payment solutions are not commonly used, since they have operational limitations and costs and they have higher abandoned rate. In synchronous payment systems payment transaction is completed with order at the same time. Since you got the money, you process the order. They are secure, easier and faster, available 24/7, they don’t require any commitment and they have lower abandoned rate.
Alternative payment systems are seen as a payment option in the checkout page. You can pay via BKM Express, PayPal or iGaranti. Alternative payment systems offer 3 value propositions in general: Fast, Easy and Secure payments, but the challenge is to acquire new customers. Since users are comfortable and experienced in card payment systems, it’s not easy to convert and change user behavior. Nobody knows the exact distribution of payment systems but in general 90% of payments are made by credit cards, 5% of payments are made by CoD and EFT / wire transfer, 3% of payments are made by alternative payment systems, and 2% of payments are made by prepaid and debit cards.
In conclusion
Considering the ecommerce CAGR, there is a great potential in payment systems in Turkey. Since the market is still new, and not saturated yet, there will be new players and new opportunities. Don’t be late to invest in payment systems in Turkey while you still have a chance to be a first mover.
References
(1) Ecommerce Transactions: http://www.bkm.com.tr/istatistik/sanal_pos_ile_yapilan_eticaret_islemleri.asp
(2) Number of POS, ATM and Cards: http://www.bkm.com.tr/istatistik/pos_atm_kart_sayisi.asp
(3) Overview of Turkish Payment Systems: http://www.slideshare.net/hakanerdogan/turkiyedeki-odeme-sistemlerine-genel-bakis-webrazzi-odeme-sistemleri13
(4) TUIK Population: http://www.tuik.gov.tr/PreIstatistikTablo.do?istab_id=1590
(5) TUIK Median Age: http://www.tuik.gov.tr/PreIstatistikTablo.do?istab_id=1589
(6) BTK Report: http://www.btk.gov.tr/kutuphane_ve_veribankasi/pazar_verileri/ucaylik14_1.pdf
(7) Facebook Statistics: http://www.socialbakers.com/facebook-statistics/
(8) Twitter Statistics: http://www.mediabistro.com/alltwitter/twitter-top-countries_b26726
General References
(1) Digital Bosphorus: The State of Turkish eCommerce 2013 - Sina Afra: http://www.slideshare.net/sinaafra/turkish-e-commerce-2013-sina-afra-public-edition
(2) Turkish Industry and Business Association (TUSIAD) Report: http://www.tusiad.org/__rsc/shared/file/eTicaretRaporu-062014.pdf
About the Author
Hakan has 7 years of experience in Payment Systems in different views and accomplishments, such as core software development and management positions.
He began his career in 2005 at Eteration A.S. as Software Engineer based on JavaEE and SOA consultancy. He has worked as Senior Software Engineer (2007-2008), as Software/Product Development Manager (2008-2012) at GittiGidiyor/eBay and as IT Director (2012-2014) at limango/Otto Group for the last 7 years.
He is sharing his experiences as an author in his Turkish Payment Systems blog odemesistemleri.org, and as an instructor in various programs and lectures.
Company Description
Optimist Payments Consulting was established in April 2014 by Hakan Erdogan after 7 years of experience in Payment Systems. Our core mission is to help companies with payment solutions, basket conversion optimization, payment systems integration, architectural infrastructure setup, training and mentoring who accept payments over internet. We also help all kinds of businesses to decrease their payment processing costs and increase efficiency.
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