2019 J.P. Morgan Global Payment Trends

2019 Global Payments Trends Report - Turkey Country Insights

TURKEY INSIGHTS REPORT


As international merchants and logistics providers turn their attentions to the Turkish market, the outlook is good for this as-yet underdeveloped e-commerce sector. Rising smartphone penetration, and growing investment by domestic banks into digital payment infrastructure should also support growth. 

Introduction

 

Turkey’s rapid economic and social progress has slowed in recent years, creating issues with investor confidence. The excessive market volatility that characterized 2018 has created cautiousness, and any recovery will be gradual.1 Encouragingly, Turkey is entering a period of more than four years free of elections: this could provide an opportunity for politicians to implement long-awaited but politically costly structural reforms.2 At a domestic spending level, consumer sentiment has started to improve.3 This factor, combined with gross domestic product growth, should support Turkey’s double-digit e-commerce growth outlook.

This document is based on projected figures and is subject to change at any time.

A small, but rapidly expanding market

 

Turkey occupies a unique position, sitting in both the European and Asian e-commerce markets. However, given that its citizens have been relatively slow to adopt online shopping, the Turkish e-commerce sector more closely resembles an emerging market than a mature western sector. It is estimated to be worth $11.6 billion,14 and accounts for a relatively small share of overall retail spend in Turkey, at just 4.1 percent.15 From this low baseline, the country’s e-commerce market is expected to grow at a compound annual growth rate of 12 percent to 2021.16

The average per-capita online spend is $334 a year,17 significantly lower than most of the countries in our study, reflecting Turkey’s lower-than-average internet penetration (64.7 percent)18 and the ongoing dominance of the bricks-and-mortar retail industry. Access to the internet is expected to sharply increase, however, which will support e-commerce growth. The government has committed to boosting the country’s access to high-speed digital technology, which has resulted in improved internet speeds and a growth in good-quality information and communications technology infrastructure.19

When Turkish shoppers do venture online, popular sales categories include travel, which accounts for 35.1 percent of total sales,20 and clothing and apparel, which takes a 21 percent share of the market.21 Cross-border spending is low, at just two percent of total sales.22 In fact, only one in five Turkish online shoppers has even considered shopping from international e-commerce merchants, let alone completed a transaction.23 Of the few Turkish consumers who do shop from overseas merchants, China is the most-visited overseas online merchant destination, followed by Germany and Russia.24

 

International e-commerce players are making local acquisitions

 

Instead of encouraging cross-border sales, international merchants are beginning to focus their efforts on winning Turkish market share by acquiring domestic e-commerce retailers. For example, in 2016, eBay bought out Turkish rival GittiGidiyor and made it a subsidiary,25 and in June 2018, Chinese giant Alibaba announced the purchase of a 75 percent stake in Turkey’s largest e-commerce merchant, fashion platform Trendyol.26 Meanwhile, Amazon’s dedicated domestic Turkish site opened for business in September 2018.27

Turkey’s position as a gateway between Europe and the Middle East could help drive further international investment and growth in its e-commerce industry, as it can act as a regional hub for international delivery players. In December 2018, DHL announced plans to focus on developing its capabilities in the country. DHL is planning to establish a local hub at Istanbul airport, which should enhance domestic delivery speeds and services.28

International players should note that domestic legislation has been drafted to ensure that international merchants pay sales tax on revenues derived from items sold to Turkish consumers. This is intended to level the playing field with domestic merchants and prevent further losses to the economy from overseas shopping. The tax is applied at the point of purchase online.29

A nation increasingly willing to use smartphones to shop

 

Smartphone penetration in Turkey is at the lower end of the spectrum when ranking the countries included in this report series,* at 49.8 percent.30 Only Brazil, Mexico and India are lower. However, this is a figure that has risen quickly since 2015, and penetration will likely increase rapidly in the coming years. 

At present, an estimated 30 percent of e-commerce is carried out on a mobile device in Turkey,31 representing $3.5 billion in total transaction value.32 Looking ahead, there appears to be a strong appetite to adopt mobile payment methods, with 67 percent of smartphone users saying they want to use their device for online payments in the future.33

Brands which develop compelling mobile platforms and apps that push tailored offers, discounts and events to shoppers could capitalize on a willingness to shop during discounting events. Black Friday was a success in 2018, with e-commerce merchants reporting a strong uplift in sales. Local merchant Hepsiburada reported that the event represented its most active day of sales for the entire year, the majority of which were carried out via mobile.34

As smartphone adoption increases, mobile payments are likely to experience increasing uptake. As a result, Turkey has a strong mobile commerce growth prediction of 39.7 percent compound annual growth rate to 2021,35 by which point it is expected to become a $13.2 billion market.36

Cards win out in a society aiming to become cashless

 

Card is the dominant payment method when shopping online in Turkey, used for 64 percent of online transactions totaling $7.42 billion in annual sales.37 Debit is preferred over credit in Turkey, with 1.63 debit cards per capita, compared with 0.77 credit cards per capita.38 When it comes to a preferred card brand with which to shop online, Turkish consumers tend to treat Visa® and Mastercard® equally.39

At present, cash retains a small but not insignificant role in online e-commerce payments, taking 15 percent of all transactions.40 This is likely due to the ongoing availability of cash-on-delivery payments in the country. However, the government has indicated its desire to phase out the use of cash. Turkey has plans to become a cashless society by 2023, an ambitious goal that could help drive use of cards and additional payment methods including digital wallets.41

 

A high unbanked population could present challenges

 

This adoption of specific payment methods in Turkey will inevitably be influenced by the fact that a large proportion of Turkish citizens remains without a bank account – just over a third of the population is unbanked.42 The use of cash is particularly prevalent for ‘micropayments’ – small, daily expenditures such as newspapers, taxi journeys and coffees.43 The payment industry will have to work hard to migrate Turkish shoppers over to digital methods of paying for these items.

To help make this happen, both domestic and international companies are investing heavily in fintech,44 and local institutions are joining together to drive card use and acceptance. In 2017, for example, 13 domestic banks launched Troy, the country’s first major domestic card scheme, which has been designed to convert citizens from cash use to cards linked to bank accounts.45

Such schemes are also expected to drive the use of bank transfer payments online. At present, bank transfers take a 10 percent share of the e-commerce payments market.46 The use of bank transfers is set to grow in the years to 2021, when they are expected to take a 21.2 percent share of the market.47

As noted above, Turkey’s youthful population – 85 percent of the population is aged under 55 – will also drive the shift towards digital payments.48 However, some major digital wallet brands are missing from the payments landscape: PayPal® exited Turkey in 2016 after failing to gain a local payments license.49 Local digital wallet brands include BKM Express and iPara. Integrated with 15 banks, BKM Express became the first domestic digital wallet platform to launch in Turkey as early as 2012.50

Education the key to improving fraud rates  

 

The predominant type of payment fraud in Turkey is card-not-present fraud, although new initiatives are being introduced to protect consumer confidence. The use of 3D Secure, for example, is mandatory for all debit card payments in Turkey.  With a large number of unbanked citizens, payment providers may need to take particular care to educate and assure new e-commerce customers of their payment security and anti-fraud measures.

 

Key takeaways

 

Although the Turkish e-commerce market is growing at a healthy rate, it may present challenges for international merchants. Cross-border spending is minimal, and relatively few Turkish consumers access international e-commerce platforms. Instead of relying on cross-border sales, international merchants have sought to gain market share by acquiring domestic e-commerce retailers. Cards are the dominant payment method when shopping online in Turkey, making up almost two thirds of online transactions.

 

Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

*J.P. Morgan 2019 Payments Trends – Global Insights Report series includes the following countries: Australia, Brazil, Canada, China, Hong Kong, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Singapore, Thailand, Turkey, U.S., Vietnam.

 

For more information, please contact:

Your J.P. Morgan Relationship Manager or visit: https://www.jpmorgan.com/country/US/en/merchant-services/payment-insights

 

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1 Economic Research, J.P. Morgan Chase Bank, February 2019.

2 Economic Research, J.P. Morgan Chase Bank, February 2019.

3 Economic Research, J.P. Morgan Chase Bank, February 2019.

4 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

5 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

6 World Bank Open Data. ‘Turkey.’ Accessed February 2019.

7 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via E-commerce Foundation, Turkish Infomatics Industry Association, 2017.

8 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Turkish Card Payment Report, 2017.

9 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Turkish Informatics Industry Association, 2017.

10 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

11 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, New Zoo Global Mobile Market Report, 2017.

12 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

13 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Turkish Card Payment Report, World Bank, 2017.

14 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via E-commerce Foundation, Turkish Infomatics Industry Association, 2017.

15 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Turkish Informatics Industry Association, 2017.

16 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2017.

17 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

18 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

19 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, BKM Cashless Turkey Report, 2017.

20 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Turkish Informatics Industry Association, 2017.

21 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Turkish Informatics Industry Association, 2017.

22 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Global E-commerce Foundation, 2017.

23 ThePaypers.com, 2019. ‘Cross-border Ecommerce - The Paypers.’ Accessed February 2019.

24 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Global E-commerce Foundation, 2018.

25 Nikkei.com, July 2018. ‘Alibaba and eBay try their luck in Turkey's e-commerce market.’ Accessed February 2019.

26 Nikkei.com, July 2018. ‘Alibaba and eBay try their luck in Turkey's e-commerce market.’ Accessed February 2019.

27 Cross-BorderMagazine.com, September 2018. ‘Amazon Turkey has launched.’ Accessed February 2019.

28 Ecommercenews.eu, December 2018. ‘DHL to focus more on ecommerce in Turkey.’ Accessed February 2019.

29 Ecommercenews.eu, September 2017. ‘Global ecommerce firms to be liable for Turkey tax’. Accessed February 2019.

30 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, New Zoo Global Mobile Market Report, 2017.

31 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Turkish Informatics Industry Association, 2017.

32 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Turkish Card Payment Report, 2017.

33 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Global Payments Report (2017) and Turkish Card Payment Report (2017).

34 DailySabah.com, January 2019. ‘Zweig still Turks' favorite, Istanbul Turkey's most well-read city for 2018, shopping data shows.’ Accessed February 2019.

35 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

36 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

37 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

38 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Turkish Card Payment Report, World Bank, 2017.

39 Eshopworld.com, 2017. ‘Turkey eCommerce Insights.’ Accessed February 2019.

40 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

41 BankingTech.com, January 2018. ‘Turkey: the next cashless society.’ Accessed February 2019.

42 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

43 Pymnts.com, September 2018. ‘Cash Still Has A Long Future In Turkey.’ Accessed February 2019.

44 BankingTech.com, January 2018. ‘Turkey: the next cashless society.’ Accessed February 2019.

45 BankingTech.com, January 2018. ‘Turkey: the next cashless society.’ Accessed February 2019.

46 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

47 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2018.

48 ThePaypers.com, 2019. ‘Cross-border Ecommerce - The Paypers.’ Accessed February 2019.

49 TechCrunch.com, May 2016. ‘PayPal to halt operations in Turkey after losing license, impacts ‘hundreds of thousands’.’ Accessed February 2019.

50 BKM.com.tr. Turkey; An exceptional Market for Payment Innovations. Accessed March 2019

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