The Banking Regulation and Supervision Agency (“BRSA”) of Türkiye has recently published the Draft Regulation on Amending the Regulation on Debit Cards and Credit Cards (“Draft Regulation”) to the opinion of the sector by recently.

If the Draft Regulation enters into force as it is, the following two changes might be critical for card system institutions*.

*Card system institution refers to organizations which establish a bank card or credit card system and grants authorization to issue cards or enter into merchant agreements according to the said system,  namely the organizations known as payment schemes in the industry.

  • It will not be possible for a card scheme of a card system institution that does not hold an operating license in Türkiye to be included in the cards exclusively, and
  • Card issuers shall be obliged to provide the customer with the right to choose the card system institution with which the card will be issued, during the card application.

The regulations imposed by the Draft Regulation are first and foremost affecting card issuers' activities. However, since the real impact of card issuers' fulfillment of these obligations is expected be on card system institutions, card system institutions may need to reconsider their current cooperation and agreements in Türkiye.

Co-Badging Obligation for Card System Institutions That Do Not Hold an Operating License In Türkiye

According to the Draft Regulation;

Card issuers may not issue cards that are to be used by their customers in the country, in a way that that are solely defined on the card scheme of a card issuer that does not hold an operating license in Türkiye according to this Regulation. The fact that the card schemes of card issuers that do not hold an operating license in Türkiye can be displayed on cards to be used in the country would be possible only if the card scheme of a card issuer that holds an operating license in Türkiye is also displayed on the cards in question.

If the above provision in the Draft Regulation comes into force, issuers will be obliged to issue cards, related to card schemes of card system institutions that have not held an operating license in Türkiye, as co-badge cards.

Although the Draft Regulation on what should be done regarding the technical dimension of the subject does not provide details, it is considered that card system institutions that have not held an operating license in Türkiye will have two options;

  • To hold an operating license to become a card system institution in Türkiye, OR
  • To be included in the cards to be issued in Türkiye along with another card institution that has already held an operating license.

It should be noted that there is currently only one institution in Türkiye that has held an operating license from the BRSA as a card system institution. Card system institutions operating in Türkiye and headquartered abroad carry out their activities through the “branch” or “representative” mechanisms within the scope of the Regulation on Debit Cards and Credit Cards.

The Obligation of Issuers to Offer Preferences To The Customer

Another significant regulation imposed by the Draft Regulation is the obligation for card-issuing organizations to provide the customer with the right of preference regarding which card system organization to issue the card with the card scheme during the card application.

This rule seems to have been adopted from Regulation no. 2015/751 on interchange fees for card-based payment transactions of EU.

With the new rule, issuer organizations are obliged to give the customer the right of preference regarding which card scheme to issue and to inform the customer clearly and objectively about the functions, costs, customer rights, and security features of all card scheme options, including the domestic and international usage of the card.

In accordance with the Draft Regulation, if the customer prefers to use more than one card scheme at the same time before the card allocation, the customer has been given a choice to determine which schemes will be applied to her/his card primarily.

Last but not least, the Draft Regulation introduces rules for acquirers to comply with the above amendments. Thus, acquirers;

  • to ensure that the card schemes of all card system institutions that have obtained an operating license in Türkiye are defined on the POSs to be used by the merchants;
  • if the card scheme of more than one card system institution is defined on the accepted card and all of these card schemes are defined on the POS, the cardholder shall automatically have the card holder's preferred priority card scheme used unless the cardholder specifies otherwise,
  • in case the cardholder chooses otherwise, the cardholder is obliged to use the other card schemes defined on the card by the preference of the cardholder.

The Transition Period is Determined as 3 Months

This Draft Regulation shall enter into force after three months as of the date of its publication if it is accepted. In addition, cards issued by issuer organizations before the date of entry into force of the Regulation are exempted from the above provisions.

Considering that the main players in the card payments ecosystem are global organizations, only the 3-month adaptation period to these changes seems to be quite insufficient.

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.