After Ban PayPal Halts Operation in Turkey

paypalIn a strange sequence of events, we read that Paypal has been unsuccessful in securing a payments processing license in Turkey. This means that it will not be able to send or receive money for Paypal customers in Turkey. Furthermore, existing payment funds will have to be paid back to Turkish bank accounts. This does not bode well for Paypal, other global payments systems or the cross-border processing of payments in Turkey and Europe overall.

Why is this? It seems that the BDDK (www.bddk.org.tr), i.e. the Turkish Banking Regulation and Supervision Agency introduced a law (June 2013) that required Paypal and others to base their IT systems in Turkey.

We all recognise the need and support for individual markets to protect themselves with appropriate controls, particularly in processing ‘sensitive data’, but requiring all operators to process and retain all data ‘locally’ in Turkey, seems overly reactive and more of a deliberate way of preventing international players from operating in the Turkish market. This will force ‘new’ international entrants to the market to take a more local presence in Turkey – both for governance and for where the IT systems are based. And what about other existing non-compliant entities?

It appears that Paypal have been very gallant and relatively quiet publicly about this situation in commentary since the decision; so it begs more questions:

a) With Turkey’s ambitions to join the EU (negotiations started in 2005), is this really going to help in the spirit of economic collaboration and delivering global commerce?

b) Turkish authorities have enough bigger challenges – so can they really want this to further hinder their campaign?

c) Who else will this impact? Will other and existing companies that are not complying with the same requirements be required to leave the country if they do not meet the requirements that IT systems be located in Turkey?

d) Did no one at Paypal see this coming?

e) Has no-one in the European monolith raised this as an issue with Turkish authorities and explained to them how far away from the spirit and intent of the EU marketplace this really is?

Kevin Smith, author of the news is Joint Chief Executive at AIRFA, and director of RiskSkill. He is highly experienced and independent payment services, risk management and compliance consultant. For more information visit website www.airfa.net

Source: Banking