This article address the legal framework of FinTech in Turkey. Fintech” is a portmanteau of two words: “financial” and “technology.” It refers to the use of technology to provide innovative financial services and solutions. Fintech companies leverage cutting-edge technology, data analysis, and digital platforms to improve and automate various aspects of financial services, making them more efficient, accessible, and user-friendly.

The Turkish financial services sector is still dominated by traditional banks. However, due to their innovative solutions and – for payment facilitators – lower commission charges, fintech companies are becoming increasingly attractive to both consumers and small and medium -sized enterprises. Therefore, fintech is a growing sector in Turkey.

Understanding the Meaning

Here are some key points to understand about fintech:

• Technology-driven: Fintech companies use technology as a core component of their business models. This can include mobile apps, websites, artificial intelligence, blockchain, big data analytics, and more.

• Diverse Services: Fintech covers a wide range of financial services, including digital payments, online lending, robo-advisors for investing, peer-to-peer lending, crowdfunding, insurtech (technology-driven insurance solutions), regtech (regulatory technology), and more.

• Accessibility: Fintech often aims to make financial services more accessible to a broader audience. It can help underserved populations gain access to banking, investing, and other financial services without the need for traditional brick-and-mortar institutions.

• Efficiency: Fintech solutions can streamline processes, reduce paperwork, and lower costs for both consumers and businesses. For example, digital payment platforms can eliminate the need for physical cash or checks.

• Innovation: Fintech companies constantly seek to innovate and disrupt traditional financial services. They look for ways to improve existing services or create entirely new ones.

• Data-driven: Fintech companies rely heavily on data analysis to make informed decisions and provide personalized financial services. They use customer data to offer tailored solutions and mitigate risks.

• Regulation: Fintech operates within the regulatory framework of the financial industry, and compliance with financial regulations is essential. Regulatory technology (regtech) is an emerging field within fintech that focuses on helping companies meet these requirements efficiently.

• Global Impact: Fintech has a global reach and has transformed financial services on a global scale. It has the potential to address financial inclusion challenges and drive economic growth.

Overall, fintech represents a fundamental shift in how financial services are delivered and accessed, offering greater convenience, efficiency, and accessibility to consumers and businesses alike. It continues to evolve rapidly as technology advances and consumer needs change.

Regulatory and supervisory bodies

Turkey has been experiencing significant growth in the fintech sector in recent years, with numerous startups and established companies offering innovative financial services and solutions. To ensure the stability, security, and legality of these services, several regulatory and supervisory bodies oversee the fintech industry in Turkey. Here are the key organizations responsible for regulating and supervising fintech activities in the country:

• Banking Regulation and Supervision Agency (BRSA): The BRSA, or “Bankacılık Düzenleme ve Denetleme Kurumu” in Turkish, is the primary regulatory authority for banking and financial services in Turkey. It oversees the licensing and regulation of banks, financial institutions, and non-bank financial institutions, including fintech companies. BRSA plays a crucial role in ensuring the stability and integrity of the Turkish financial system, which includes fintech entities.

• Capital Markets Board of Turkey (CMB): The CMB, or “Sermaye Piyasası Kurulu” in Turkish, is responsible for regulating and supervising capital markets and related financial services in Turkey. Fintech companies involved in activities like crowdfunding, peer-to-peer lending, and robo-advisory services often fall under the jurisdiction of the CMB. The CMB ensures that these activities comply with securities regulations and safeguards investor interests.

• Central Bank of the Republic of Turkey (CBRT): The CBRT, or “Türkiye Cumhuriyet Merkez Bankası,” is responsible for monetary policy and the regulation of payment systems in Turkey. Fintech companies offering payment services and digital wallets are subject to the CBRT’s oversight. The CBRT ensures the efficiency and security of payment systems while promoting innovation in the sector.

• Information and Communication Technologies Authority (ICTA): The ICTA, or “Bilgi Teknolojileri ve İletişim Kurumu,” oversees the telecommunications and information technology sectors, which are integral to fintech operations. It plays a role in ensuring the security of digital transactions and data privacy.

• Data Protection Authority (KVKK): The KVKK, or “Kişisel Verileri Koruma Kurumu,” is responsible for data protection and privacy regulations in Turkey. Fintech companies that handle personal data, such as customer information, must adhere to KVKK regulations to safeguard individuals’ privacy rights.

• Financial Crimes Investigation Board (MASAK): MASAK, or “Mali Suçları Araştırma Kurulu,” focuses on anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts. Fintech companies are subject to AML/CFT regulations and are required to report suspicious transactions to MASAK.

These regulatory and supervisory bodies work together to create a regulatory environment that encourages innovation in fintech while ensuring the safety and security of financial services and protecting the interests of consumers and investors. Fintech companies operating in Turkey must navigate and comply with the regulations set forth by these organizations to conduct their business legally and responsibly.

Applicable Legislations and Regulations

The fintech industry in Turkey is subject to various legislations and regulations aimed at ensuring the safety, security, and integrity of financial services while fostering innovation and competition. Here are some of the key legislations and regulations relevant to fintech companies operating in Turkey:

• Banking Act (No. 5411): The Banking Law sets the legal framework for traditional banks and financial institutions in Turkey. However, it also applies to fintech companies involved in banking activities, such as digital banking and peer-to-peer lending. Fintech startups offering banking services often need to obtain a license from the Banking Regulation and Supervision Agency (BRSA) and comply with the requirements outlined in this law.

• Capital Markets Act (No. 6362): The Capital Markets Law regulates capital markets and securities activities in Turkey. Fintech companies involved in crowdfunding, equity crowdfunding, robo-advisory services, and other activities related to securities fall under the purview of the Capital Markets Board of Turkey (CMB). The statute stipulates registration and compliance requirements for such fintech entities.

• Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions Act (No. 6493): Commonly known as the “Payment Services Law,” this legislation governs payment services, electronic money institutions, and payment and securities settlement systems. Fintech companies providing payment services, digital wallets, and payment solutions are regulated by the Central Bank of the Republic of Turkey (CBRT) under this act. The statute outlines licensing, operational, and security standards for payment service providers.

• Data Protection Law (No. 6698): The Data Protection Law, or KVKK (Kişisel Verilerin Korunması Kanunu), focuses on the protection of personal data. Fintech companies that handle customer data must adhere to KVKK regulations to ensure data privacy and security. Compliance with data protection principles and obtaining necessary consents are essential under this law.

• Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Regulations: Fintech companies are subject to AML and CFT regulations aimed at preventing illicit financial activities. The Financial Crimes Investigation Board (MASAK) oversees AML/CFT compliance in the fintech sector, requiring fintech entities to implement robust AML/CFT programs and report suspicious transactions.

• Crowdfunding Regulation: The CMB has introduced specific regulations for crowdfunding platforms and activities, including equity-based crowdfunding. Fintech companies involved in crowdfunding must adhere to these regulations, which cover disclosure requirements, investor protection, and reporting obligations.

• Open Banking Regulation: Turkey has introduced open banking regulations that promote data sharing among financial institutions, including fintechs, with customer consent. These regulations aim to enhance competition and innovation in financial services by allowing fintech companies to access customer data held by banks.

It’s important for fintech companies operating in Turkey to thoroughly understand and comply with these legislations and regulations. Non-compliance can result in legal penalties and operational disruptions. Additionally, as the fintech sector continues to evolve, regulatory updates and changes are common, making ongoing compliance monitoring essential for fintech businesses in Turkey.

Legal Asistance

The fintech landscape in Turkey is dynamic and ever-evolving, presenting both immense opportunities and regulatory challenges. At Bicak, we specialize in providing comprehensive legal services tailored to meet the unique needs of fintech companies operating in Turkey. Contact us to discover how our expertise can empower your fintech venture while ensuring full legal compliance.