Payment Services, Electronic Money Issuance And Business Models

The Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions (the “Law”) and the Regulation on Payment Services, Electronic Money Issuance and Payment Service Providers, which entered into force in 2021, define under specific headings the payment services that may be provided by payment and electronic money institutions (the “Institutions”) and regulate which activities may be carried out within the scope of a licence. In this regard, it is critical for Institutions to file licence applications that are aligned with their planned business models. This is because determining whether the business model qualifies as a payment service and identifying the relevant licence type for the business model constitute the basis of a properly structured and well-planned compliance process. At this point, the Guide on the Association of Business Models Offered in the Field of Payments with Payment Services (the “Guide”) published by the Central Bank of the Republic of Türkiye (the “CBRT”) serves as an important reference for matching business models frequently encountered in practice with the payment service types set out under the Law.

The payment services and electronic money issuance activities that are exhaustively listed under the Law and that may be carried out only upon obtaining a licence from the CBRT, as well as the business models developed within the scope of such activities, are summarised below.

1.      Activities Subject to CBRT Licence

1.1 Payment Services

• • All transactions  required  for  the  operation  of  a  payment  account (including cash deposits and withdrawals) - This service, which forms the basis of many business models, covers the opening of a payment account as well as the deposit of funds into and withdrawal of funds from such account.
  • Payment transactions involving the transfer of funds held in a payment account (including direct debits and transactions made through payment cards) and money transfers (including standing orders) - Transfers between payment service users and transfers to accounts held with another payment service provider fall within the scope of this service.
  • Issuance or acceptance of a payment instrument - These are services relating to the issuance to the Institution’s users of instruments such as cards, mobile phones, passwords and similar tools that are specific to the relevant user and through which payment orders may be given or to the acceptance of such instruments at merchant locations. As such, point of sale (POS) and prepaid card business models are directly tied to this payment service.
  • Money remittance - This refers to the transfer of funds without opening any account in the name of either the payer or the Its distinction from a money transfer lies in the absence of an account held in the name of at least one of the parties and in the fact that the funds are delivered directly to the payee or to the payment service provider acting on behalf of the payee.
  • Payment transactions where the payer’s consent is given through an information technology or electronic communication device and the payment is made to the intermediary operator - Commonly referred to as mobile payment, this service is a payment service based on the collection of the price of goods or services by reflecting it on the mobile phone bill for post-paid lines or by deducting it from the available balance for prepaid lines.
  • Payment Services related to intermediation in bill payments - These are services whereby Institutions intermediate, within the scope of agreements entered into with bill issuers, in the collection of fees for continuous services such as electricity, natural gas, water and communication services and in the transfer of such amounts to the relevant contracted
  • Payment initiation service - This is the service whereby a payment initiation service provider (PISP) initiates a payment order from the user’s account held with another Institution, upon the user’s request and with the user’s explicit consent.
  • Account information service - This is the service whereby an account information service provider (AISP) presents, upon the user’s request and with the user’s explicit consent, consolidated information via an online platform regarding multiple payment accounts held by the user with one or more Institutions.

1.2.            Electronic Money Issuance

Under the Law, electronic money is defined as a monetary value issued in return for funds, stored electronically and accepted as means of payment by real persons and legal entities other than the issuer. In this respect, although electronic money issuance is not one of the payment services listed under the Law, it constitutes a monetary value created for use in payment services.

2.      Common Business Models in Payment Services

For the payment service business models that Institutions intend to launch, determining the applicable licensing requirements has critical importance. The Guide explains how business models in the market should be matched with the payment services set out under the Law. Within this framework, the common business models in payment services may briefly be explained as follows:

• Payment Account Operation and Money Transfer: This model refers to the structure whereby an Institution opens a payment account in the name of the user and enables deposits into and withdrawals from such This model is often structured together with the money transfer model and enables Institutions to facilitate the transfer of funds between users or to third-party bank accounts. In recent years, the CBRT’s acceptance of Institutions as participants   in   the   Instant   and   Continuous   Transfer   of   Funds

 (Fonların Anlık ve Sürekli Transferi - FAST in Turkish) system has increased the prevalence of this business model.

• Virtual POS and Physical POS Models: Virtual POS refers to the software-based infrastructure that enables card payments to be accepted in e-commerce and remote payment scenarios, whereas physical POS refers to the acceptance of payments at a merchant location through the use of a card on a physical In both models, the legally decisive element is the Institution’s role in the process of the merchant’s acceptance of card payments and the transfer of funds to the merchant’s account.

POS services are directly related to the payment instrument acceptance service under the Law and, since they may in practice also include elements of fund transfer and account operation, the licences relating to the relevant payment services should be assessed together. In addition, within the framework of Law No. 5464 on Bank Cards and Credit Cards, the permission and assessment regime of the Banking Regulation and Supervision Agency may also become relevant.

• Payment Gateway: A payment gateway is a software/hardware-based solution used in digital payments to receive, process and transmit customer’s payment information to the Institution. Structures that do not at any stage hold the funds and that merely provide technical services may, as a rule, fall within the scope of the technical service provider exemption and therefore may not be deemed a payment service. Accordingly, a payment gateway is not, in itself, a type of payment service and is not separately classified in the Guide as a payment service business model. However, if the payment gateway is structured in a way that involves payment service elements, including holding and/or collection of funds or managing the payment flow to a merchant, the relevant payment service licence(s) may be
• Prepaid Card Models Associated with Electronic Money: Depending on the scope of the business model and the characteristics of the services offered, Institutions may issue prepaid cards under different licensing The key determining factor in assessing the applicable licence is the card’s intended use. In this respect, the Guide differentiates between scenarios where an electronic money issuance licence is required and those where it is not, primarily by reference to whether the prepaid card is used to pay for goods and/or services. Furthermore, within the scope of an electronic money issuance license, Institutions may also issue anonymous prepaid cards that are not linked to a payment account, that may be loaded prior to completion of customer identification procedures and that allow spending up to the available balance. Such cards may be structured as reloadable or single-use products.
• Mobile Payment: The mobile payment business model is a service that may only be offered by Institutions controlled by electronic communication operators and in which the consent relating to the execution of the payment transaction is given through an information technology or electronic communication device. Under this model, the user may make payments to providers of goods or services either by having the relevant amount reflected on the phone bill if a post-paid line is used, or by having the amount deducted from the existing balance if a prepaid line is used.
• Digital Wallet: Digital wallet is an electronic device, online service or application in which information relating to the user’s payment account or payment instrument is stored. For the provision of this service, a licence relating primarily to the “payment instrument acceptance” service referred to above under the heading of payment services in section 1.1. is required. However, depending on the variety of services to be offered within the scope of the business

 model, other payment service licences or an electronic money issuance licence may also be required.

• Open Banking: The payment initiation service and account information service, both referred to above under the heading of payment services in section 1.1., are the main payment services offered by Institutions within the scope of the open banking business model.

Conclusion

The legal and operational design of business models in the payment services field is critical, not only to ensure compliance with the applicable regulatory framework, but also to support long term business sustainability and to ensure that relationships with ecosystem stakeholders are built on a clear and reliable basis. In this context, matching business models with the relevant payment service categories is key to mitigate potential regulatory, operational and commercial risks at later stages.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.