TBY talks to Mete Güney, General Manager of MasterCard, on the development of the credit card market and contactless card payment options.
TBY Turkey has become one of Europe’s largest credit card markets. What are the reasons for this growth?
METE GÜNEY Turkey has been one of Europe’s biggest credit card markets for a long time. There are some underlying factors behind this. We have seen, especially after 2000, a significant increase in card usage. The first reason for this is the traditionally high inflation rate, meaning Turkish people have preferred to use their credit cards instead of cash or debit cards, allowing them to take advantage of the time-value of money. The quick evolution of the credit card business after 2000 is also partly attributable to the rapid issuance of multi-merchant loyalty programs. Looking back, the first credit card in Turkey was launched in the late 1980s. Back then, credit cards were mainly used only by high-net-worth customers. Only after 2000 did we see credit cards become more widely used. The main driver of this was loyalty programs. If you compare Turkey to the rest of the world, it is easy to see that the level of loyalty programs here is far higher than the levels seen in Europe or the US. Such programs offer instant cash back, interest-free installments, free entry to airport lounges, various discounts, and lots of other gifts and benefits. It therefore doesn’t make sense to use cash instead of a card. If we look at the market today, there are around 45 million credit cards and 65 million debit cards. In terms of usage, the two categories have more or less the same total volume, around €100 billion. However, a significant difference can be seen in terms of how they are utilized. For credit cards, 90% of the volume is on purchases. For debit cards it is very different, with 95% of the volume being ATM cash withdrawals. This is one of the main areas where Turkey is distinguished from the rest of the world.
On a shorter-term basis, how would you assess the market in 2010, and what are your expectations for 2011?
In terms of our business, Turkey has been a very successful double-digit growth country. What we have seen in 2010 is not very different from previous years in that respect. The market grew by 15% in terms of credit card volumes. This is still an attractive growth rate. It used to be higher, with figures as high as 25%, or 35% having been seen before. As most available segments get covered, a decline in the growth rate is expected. In 2011, I believe we will have more or less the same rate of growth.
To what extent has innovation been a driver in the market?
Innovation has been a superb driver for the market. Turkey has been a benchmark country for other European countries. Its loyalty programs have been praised and admired by many countries around the world, and although similar programs have not met with as much success elsewhere, comparable programs have been launched in various regions. Putting this type of innovation aside, technological innovation is also playing a huge role. Contactless cards have been launched in Turkey, and this was a first for Europe. Other “form factor” contactless methods, such as wristwatches, or stickers, have also been launched in Turkey. These are examples of how innovative Turkey has been in terms of payment tools. Following the 2006 launch of contactless payment cards, the system has been integrated into the transportation systems in major Turkish cities. We are also now progressing to the next phase, which is mobile payments, and this will be a totally unique payment platform. With a plastic card you are dependent on the point of sale terminal. The benefits of paying with a mobile handset are then obvious, and the possibilities from a marketing perspective are also superb. To further these aims, we have launched two programs with two major issuers in Turkey. One of them was with Garanti Bank and Avea, and it is a program that utilizes a specific tool that circumvents the need to have a Near Field Communication (NFC) enabled handset, which are currently rare on the market. The second program was with Bank Asya, with which we launched a similar application. It enables payments to be made with a mobile wallet application. These are the first steps in the mobile payment arena. In 2011 we have had similar requests to develop tools from other major issuers. This is the most exciting component of innovation for the moment. From 2012 onwards we will see an expansion of mobile payment tools across the country with many different applications.
In this race to the mobile payment arena, how does Turkey rank compared to other countries?
MasterCard initiated mobile payments in 2002, when PayPass was first introduced to the market. At that time it was just a pilot. To be able to make mobile payments, there need to be contactless readers in the country. So, in this respect, we launched PayPass in 2006 in Turkey, and we have around 3 million contactless cards in the country, and close to 45,000 readers. We have the infrastructure in place to move to the next step. Comparing Turkey to the rest of Europe, there are some pilot projects in different countries, but Turkey is leading the continent in the number of projects underway, and Turkey was the first country to launch these programs commercially.
Turkey is also leading many countries in terms of its retail banking innovations and the use of technology in the commercial arena. What do you believe are the reasons behind this?
Turkey is indeed leading many countries in terms of innovation. I believe that there are a couple of reasons for this. One is that Turkey has a huge, young population. The average age is around 27-28 years, and 60% of the population is below the age of 30. The younger generations are obviously more open to new technologies, and new types of gadgets. Adoption rates for new products in Turkey are very high. The second factor is the level of competition in the market. From a financial institution point of view, all the players have very advanced tools, with well-marketed products aimed at creating differentiation. These institutions need something to invest in, and this is technology and innovation. This kind of technological publicity strengthens brands, and attracts customers.
Istanbul is the regional headquarters for MasterCard. Why was it chosen to play this role?
We manage operations in 10 countries from our offices in Istanbul, including Turkey, Israel, CIS countries, and Malta. In terms of card payments, Turkey is a country that has been in the top three in Europe for a while. This means there are lots of interesting and useful developments here that can be exported to other markets. In my first role at MasterCard I was a project manager, and my role was to share know-how in Turkey with other countries in Europe. We used this know-how to launch new card programs, tools, and solutions with other issuers in Europe. Basically, this is a market that is a center of excellence in terms of card payments.
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