Turkey has a young population who embrace technology and new products, which has made Turkey a center of innovation within financial services. The banking sector, in terms of asset size, has grown at an annual compound rate of 20 per cent over the past 15 years. Fifteen years ago, only 9 per cent of total household consumption was incurred through payment cards. Today this ratio has reached almost 40 per cent. Today, Turkey has over 120 million debit cards, 59 million credit cards, and 2.3 million POS machines in the market and is one of the largest card payment markets globally.
In April 2016 BKM – the Interbank Card Center of Turkey – announced TROY, the Turkish domestic card scheme. EDC’s Peter Sidenius met with Soner Canko, CEO of BKM, and Cenk Temiz, MD of TROY and EVP Strategy BKM, to discuss TROY.
Who were the key drivers behind the development of a national payment scheme in Turkey?
Soner: “The concept of TROY was initiated by the banks under the umbrella of BKM. BKM has served as the payment service provider at the core of card payments in Turkey for the past 27 years; all issuers and acquirers in Turkey are BKM members. BKM, however, is not only a clearing and settlement service provider but also an incubation center for innovation in card payments for Turkey.
The issuers and acquirers collectively decided to develop a domestic card scheme and BKM as the existing inter-bank organisation with deep expertise in payments was the logical place to assess and incubate the idea of the national payments scheme.”
What was the strategic imperative behind TROY?
Cenk: “91 per cent of Turkish-issued cards are never used abroad and 97 per cent of card transactions are domestic. The need for a national scheme was becoming more and more apparent. In addition, there was a growing need for alternative payment solutions which could meet local requirements. Given their reach and size, global schemes respond to local needs at varying speeds. There are many local alternative payment methods around the world that successfully serve their home markets. When we evaluated these examples and the requirements of the Turkish market, we concluded that a local solution would bring the independence and the economies that are required for innovation in Turkey’s fast-moving payments market.
With this rationale and building on advanced payments technologies, secure infrastructure, and knowhow, Turkish banks combined forces to create a national payment scheme able to address local requirements, shorten time-to-market for innovative products, and increase cost effectiveness.”
How long did it take to develop TROY and what were the key challenges?
Soner: “TROY was announced to the public in April 2016 with the first transaction executed after a 3-year development, ranging from undertaking a detailed feasibility study to developing the implementation plan and executing against this. TROY is a joint project initiated by the Turkish banks and the vision for TROY is shared across the banking sector. This helped build common and shared infrastructure for TROY. Nevertheless, it has been a long and challenging journey.”
Cenk: “The joint vision is also seen in TROY having achieved nearly 100 per cent acceptance at all POS terminals (over 2.3 million), ATMs, and e-commerce sites in Turkey within 7 months of launch. This shows how all the stakeholders in the Turkish payments ecosystem, from issuers/acquirers to regulators, have faith in and provide support to TROY as a national payment solution. The ubiquitous acceptance is what differentiates TROY from other new national schemes around the world and gives TROY the edge to grow in a competitive market like Turkey.”
What are your plans for international acceptance?
Soner: “As mentioned, international usage of Turkish-issued cards is limited. However, our aim from the beginning has been to add international acceptance to our value proposition. For that, we have been in talks with an international card scheme (ICS) and I am delighted to announce that an alliance agreement has been reached. This alliance will not only enable acceptance of TROY co-badged cards in 185 countries, but also allow our ICS partner to rapidly build acceptance in the Turkish payments market. We believe this agreement is beneficial to all our members. It will enable our members to co-badge with our preferred partner but they will remain at liberty to work with any international scheme of their choice should they prefer to.”
You recently ran an advertising campaign to raise the profile of TROY. How did that go?
Cenk: “We launched the TROY consumer campaign in May 2017. It was a nationwide campaign focused on raising awareness amongst cards users. Since TROY is the national card payments scheme of Turkey, we decided to use Turkish cultural elements and celebrate TROY’s launch with a traditional Turkish dance as the theme.”
“We are very pleased with the results of the campaign. Consumer brand recognition was increased and the amount of social media posts and the e-mails received increased significantly. The first reactions were overwhelmingly positive; people were proud of the fact that TROY was developed in Turkey, “by Turkish engineers”. We also received feedback on how we can improve TROY in terms of value proposition, sales channels communications, etc.”
What are the latest developments for TROY?
Cenk: In terms of card issuing, as of today 26 financial institutions are members of TROY. Of these, 16 (15 banks and 1 non-bank) are ready to issue debit cards, prepaid cards, and credit cards under the TROY scheme. There are already nearly 350,000 TROY cards in consumer wallets, a 12-fold growth since the end of 2016.
From a service perspective, we have developed a secure payment platform-similar to 3D Secure named “GO-Güvenli Öde/Pay Secure”, which can also be used by other card schemes in Turkey. Our in-house team developed and delivered the solution in only 6 months. In addition, TROY will add mobile payments to its portfolio in 2017.
Finally, the TROY Innovation Center has been created to develop and test new cards and terminals and to spearhead TROY’s development of new payment solutions and services for the Turkish market.
Looking forward 3 to 5 years how do you see the Turkish electronic payment market develop and what will TROY’s role be in this?
Soner: Today there are over 180 million cards in the Turkish market. According to our projections, this number will reach 200 million in three years. Given the growth potential of the Turkish payments market and the dedication of the stakeholders to the TROY scheme, we expect the near future will witness a thriving TROY – reaching 10% market share in three years. TROY will also provide the infrastructure for payments innovation and Fintechs going forward.
On the consumer side, the growth of TROY will increase financial inclusion among the unbanked population, but also improve the overall financial literacy of the Turkish population. TROY will be instrumental in increasing card usage and realizing Turkey’s vision of “having a cashless society by 2023”.