Digital Wallet Era Begins in Türkiye

Recent developments

The Regulation Amending the Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers (“Regulation“) prepared by the Central Bank of the Republic of Türkiye (“CBRT“) was published in the Official Gazette on October 7, 2023. You can access the Regulation here.

What’s new?

The Regulation added the definition of digital wallet to the regulations in the field of payments for the first time and regulated the procedures and principles regarding the provision of digital wallet services. In this way, it aims to popularize the use of digital payments in an easy and cost-effective manner through digital wallet applications.

a. What is a digital wallet?

The Regulation defines a digital wallet as an electronic device, online service or application that stores information about the payment account or payment instrument used by the client, and enables the client to perform payment transactions using this information.

b. What is not a digital wallet?

The following will not be considered digital wallet: services (i) provided by persons who store sensitive client data on behalf of the merchant or payment service provider within the limits permitted by the legislation within the framework of their contractual relationship, who are not a direct party to any legal transaction with the client in this respect, and who do not create the impression to the client that the payment transaction is carried out through the storing legal entity; (ii) where the storing legal entity does not own the funds subject to the payment transaction at any stage of the payment transaction and (iii) where the rights and obligations regarding the activity carried out are clearly defined in the agreement between the parties. Those who provide these services will not be required to be established as payment service providers.

c. Who can offer digital wallet services?

The Regulation provides the following:

• Payment service providers can offer digital wallet services. Payment service providers that will offer this service must have an operating license limited to issuing payment instruments.
• If the digital wallet is used as a means of payment at merchants and the funds related to the payment transaction are transferred through the institution providing the digital wallet service, the institution providing the service must be authorized to issue electronic money.
• For the payment account or payment instrument added to the digital wallet to be used directly in the payment transaction to be carried out at the merchant, if the digital wallet service provider provides the necessary payment services to the merchant and the funds for the payment transaction are transferred through the digital wallet service provider, the service provider will not be required to be authorized to issue electronic money.
• If the digital wallet is valid as the payment account with another payment service provider added to the digital wallet, or the payment instrument issued by another payment service provider is used directly in the payment transaction at merchants, the service provider must be authorized to initiate payment orders.

d. When is the deadline to obtain an operating license to offer digital wallet services?

Persons who were offering digital wallet services before October 7, 2023, the date that the Regulation was published, and who can be included in the category of payment institution or electronic money institution but do not have an operating permit must apply to the CBRT and obtain the necessary permits by October 7, 2024.

Payment service providers that were offering digital wallet services before this date must comply with the regulations by October 7, 2024.

Conclusion

The Regulation includes the definition of digital wallet for the first time in the field of payments and introduces important regulations for the widespread use of digital wallet services.