New Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers Entered into Force

Summary

We have summarized the significant amendments brought by the Regulation for you below:

New regulations regarding commercial agent and limited network exception have been introduced

• The institutions which are out of the scope of the Regulation as they take advantage of the "commercial agent" and "limited network" exemptions are now obliged to make an annual notification in case the transaction amount they have realized in the last 12-month period exceeds 50 million TL. Therefore, each year in January, the information and documents regarding such transactions must be submitted to the CBRT. Following the aforementioned notification, the CBRT may decide whether the activities of such institution constitute payment service and may require obtaining an operating license accordingly.
• ·As per the Regulation, prepaid instruments benefitting from the limited network exception within the scope of Law No. 6493 must be issued to be valid only in purchases made from a certain store or chain of stores. Prepaid instruments issued to be valid in all business places that can be added to the limited network will not be able to benefit from the exception.

Principles regarding open banking activities have been regulated

• The principles regarding “Account Information Service Providers” and “Payment Initiation Service Providers” and the principles regarding open banking activities have been regulated. In addition, as in many EU member countries, Regulation obliges payment service providers (including banks) to provide account services to the requesting payment service provider on similar terms as such services provided to their other customers in case the account services it offers are requested by another payment service provider. The principles regarding the execution of such payment services, as well as the technical and operational requirements to be complied with by the parties of such payment transaction, will be determined by the CBRT on a later date, and Interbank Card Center (“ICC”) will determine whether these technical and operational requirements are complied with.

New regulations regarding obtaining operating license have been introduced

• An obligation has been introduced that requires payment and electronic money institutions to make a preliminary application to the CBRT and deposit 500.000 TL as an application fee in order for such institutions to use the phrases of payment institution or electronic money institution, which should be included in their trade names, before the trade name is registered in the trade registry.
  
• The application for an operating license has been divided into two stages, namely the "informative review stage" and the "final approval stage". It has been regulated that the second application should be made within 120 days at the latest with the documents requested for second stage applications after obtaining approval in the first stage. In addition to the application documents required by the repealed regulation, it has been stated that some new application documents must also be prepared (e.g., documents regarding fulfillment of professional liability insurance or collateral obligation). It has been regulated that those who have already made an application are obliged to submit the missing information and documents requested at the informative review stage to the CBRT until June 30, 2022 otherwise such applications will be rejected.
• Furthermore, the institutions have been obliged to notify the CBRT and pay a license fee of 1 million TL within ten days after starting its operations.

Collateral requirement has been introduced

• Requirements regarding the initial capital amount have not been amended, but institutions have been required to hold collateral at the CBRT. While holding collateral is not obligatory for organizations providing account information services; the base amount of collateral that is required to be held by payment institutions providing only intermediary services for bill payments is 2 million TL and 3 million TL for other payment institutions. For electronic money institutions, the base amount of collateral is 5 million TL. However, institutions may have to hold collateral in higher amounts depending on the number of customers.

New definitions have been made within the scope of the Regulation

• With the Regulation, definitions "prepaid instrument" and "anonymous prepaid instrument" have been made for the first time.

Prepaid instrument has been defined as a physical or non-physical payment instrument loaded with funds that are transferred by the customer to the payment service provider issuing the payment instrument prior to spending and allows funds to be used in payment services in an amount equivalent to the amount transferred.

Anonymous prepaid instrument, on the other hand, has been defined as a prepaid instrument that is not linked to a payment account in any way and that no identification or identity verification carried out and that can be used after prepayment or preloading, and that is issued with or without the possibility of reloading, and that allows the payments to be made up to the amount equivalent to the loaded balance. It has been determined that anonymous prepaid instruments can be used in payment transactions made at physical workplaces, payment transactions regarding purchases of goods or services from service providers and intermediary service providers with a trust seal and bill payment transactions.

• Definitions of many terms such as explicit consent, framework agreement, card-based payment instrument, card-based payment transaction, qualified shareholder, customer, issuance and acceptance of the payment instrument, trust seal, sensitive customer data have been made.

Transitional provisions have been regulated

• It has been regulated that organizations in operation as of the date of Regulation's entry into force must comply with the provisions newly introduced by the Regulation, which were not in the previous regulation, within one year from the publication of the Regulation.
• Institutions that cannot benefit from the limited network exemption as the prepaid instruments they issue are not used only for purchases from a particular store or chain of stores are obliged to comply with the provisions other than the provisions regarding the safeguarding account within one year and the provisions regarding the safeguarding account as soon as possible.
• ''Data sharing service” services, the technical requirements of which have not yet been determined, will continue to be provided using non-standard services until such requirements are determined. After the technical and operational requirements are determined by the CBRT, such services must be carried out in compliance with the requirements within one year at the latest. However, the CBRT has been authorized to extend this period for a period not exceeding six months.
• It has been regulated that the agency agreements signed before the Regulation came into force will remain in effect as long as they meet the minimum requirements to be determined regarding agency agreements. The agency agreements made with prohibited institutions such as foreign exchange offices will be valid until the expiration date of the agreement but will expire on December 31, 2022 at the latest in any case.
• It has been regulated that if a cooperation has been established with a legal person residing abroad as of the date of entry into force of the Regulation, the institution residing abroad must apply for a permit to the CBRT within six months from the publication of the Regulation. 

Other significant matters regulated in the Regulation:

• In the previous Regulation, the minimum amount of equity was 1 million TL for payment institutions exclusively providing intermediary services for bill payments, 2 million TL for other payment institutions and 5 million TL for electronic money institutions. New Regulation requires payment institutions exclusively providing intermediary services for bill payments to have 3 million TL, and other payment institutions, excluding institutions that exclusively provide account information services to have 5 million TL and electronic money institutions to have 13 million TL as equity. As in the previous Regulation, it has been stated in the New Regulation that these base amounts may vary according to the payment processing volume of the payment institutions. It is also stated in the Regulation that electronic money institutions are obliged to hold equity equal to 2 percent of the average electronic money liability. Although the minimum amount of equity that should be kept by institutions that exclusively provide account information services is not specified, such institutions have been obliged to take out a professional liability insurance with a minimum coverage of 1 million Turkish Liras or to hold 1 million Turkish Liras as collateral at the CBRT.
• With the Regulation, it has been allowed to charge overnight interest on payment funds in the safeguarding accounts of payment institutions. However, no interest can be charged on the funds in the electronic money safeguarding account.
• The procedure for the appointment of agents has been changed and the documents to be submitted by agents are clearly defined. In addition, institutions are obliged to register their agents with the Association of Payment and Electronic Money Institutions of Turkey (“Association”). It has been regulated that the main framework of agency agreements will be determined by the Association after obtaining the approval of the CBRT. Also, some organizations, such as exchange offices and jewelers, will not be able to become agents. The Regulation also regulates that in cases where payment institutions or electronic money institutions are agents of each other, the agents of the agent institution will not be considered as sub-agents.
• Payment and electronic money institutions residing in Turkey have been allowed to cooperate with legal entities residing abroad. It has been stated that such cooperation can only be made if the legal entity residing abroad has obtained permission from the CBRT and at least one party of the payment transaction is abroad.
  
• The conditions regarding payment institutions and electronic money institutions acquiring shares in other companies (e.g., electronic money issuer or payment services institution) have been determined.
• Business place is defined as a natural or legal person who agrees to sell goods and services with a payment method within the scope of payment service. In addition, regulations have been made regarding the registration principles of business places to the business place registration system to be created by ICC. Within this scope, it has been regulated that a specific business place code will be given to the business place that provides goods and services with a payment method within the scope of payment service. It has been stated that payment methods of payment service providers cannot be used in business places that do not register with business place registration system. ICC is expected to establish the business place registration system by 30 June 2022 (unless the CBRT does not extend the deadline).
• It has been determined that the exception regarding bill payment institutions to sign contracts with bill issuing institutions will be applied in agreements signed not only with banks but also with all payment service providers.
• ·        Provisions regarding single payment transactions, single payment transaction terms and pre-transaction notification issues have been amended and new provisions regarding such as single payment transactions to be made via means of tele-communication have been included. Similarly, regulations regarding the framework agreements to be established by means of tele-communication have been included among the provisions regarding framework agreement. Provisions related to individual payment transactions to be realized within the scope of the framework agreement have been detailed.
• The payment service provider has been obliged to notify the consumer of its rights.
• It has been determined that in cases where the funds regarding the payment service and electronic money service are transferred through a credit card, refunds can only be made to the credit card or to the bank account if the credit card has been cancelled.
• Arbitration committees will be formed by the Association for the resolution of disputes between individual payment service users and institutions.