1©2007 TSYS. All Rights Reserved.

Payment Systems

Istanbul

3rd March 2009Presentation of Mr.Simon Jarvis to Bilgi University Students

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18 April 2023

Card Payment Cycle

Merchant

Settles Terminal

Purchase

Credit

Cash Advance

Acquirer

Merchant

Processor

Association

Vendor

Payment

Issuer

Cardholder

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18 April 2023

TSYS – Across The Payments Spectrum

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18 April 2023

Supported card product types

Credit Revolving

Charge

Debit

Corporate

Pre-paid

Instalments

Affinity Cards

Proxy / Virtual Cards (e-Card)

Private label (profiled cards)

Co-Branded Cards

Payroll Cards

Health Cards

Remittance Cards

Travel Cards

Gift Cards

Custom Electronic Purse

Support issuance of Magnetic stripe and Chip (VSDC/M/Chip) cards:

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18 April 2023

Turkish Market Dynamics

• Bank Consolidation– Number of banks has nearly halved

in last ten years

– Over 60% of credit cards issued by top 4 issuers

• Foreign Ownership– Increase in assets owned by foreign

banks looking to benefit from fast growing market and gateway to the Region

• Regulation– Increasing regulatory supervision

– Eye to European harmonisation

• High Growth– 3rd largest credit card market in

Europe by cards issued

– Credit card loans have quadrupled since 2002

– Activation lagging issuance

• Highly innovative products, especially around loyalty and co-branding

– Sophisticated products and segmentation strategies

– Technology maximised to deliver innovations quickly

– Largely in-house processing

Turkey is an exciting and dynamic credit card market

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18 April 2023

Financial Commentary

Global Cards Markets

0500

1,0001,5002,0002,5003,000

USA China Japan Brazil Russia UK India S Korea Canada Mexico

• Markets Typically Follow An “Issuance First” Lifecycle … Transaction Volumes Grow As Infrastructure Matures

• Issuance Volumes Of BRIC Markets Take Longer To Translate Into Card Usage Reflecting Investment In POS/Consumer Propensity to Migrate From Cash

Turkey is forecast to be the 11th largest market for card based transaction by 2011

Millions Of Cards In Market 2006 - 2011

2006

2011

010203040506070

Billions Of Transactions In Market 2006 - 2011

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18 April 2023

Creating scale: comparable growth markets

• Comparable markets in Brazil and Turkey have been showing average growth of 20-24%, compared to India’s growth of 17% p.a.

• Both the Brazilian and Turkish markets have shown periods of accelerated growth over the period of 2004-05, reaching growth rates over 30%, albeit at the expense of growth in neighbouring years

• Turkish market continues to exhibit growth, even given current size, reflecting market potential.

• Datamonitor forecasts Turkey will be 11th largest card market by transactions in 2011

Comparable transaction volume growth

Turkey represents sizeable market today, but also one with considerable growth potential

Source: Financial Cards in India 2008 paper; Lafferty

0%

50%

100%

150%

200%

250%

2001 2002 2003 2004 2005 2006 2007

Txn

vol

ume

reba

sed

2003

AAGR %

23.9%

20.8%

17.1%

Comment

India

Brazil

Turkey

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18 April 2023

• Turkey is the fastest-growing card market in Europe– An underdeveloped cheque clearing system has enabled banks to

leapfrog from cash directly to card payments– Debit cards are used almost exclusively for cash withdrawals– The vast majority of banks are dual issuers of Visa and MasterCard– Turkey is one of the leading markets for affinity and co-branding

• Very high inflation has helped drive preference for Credit cards by consumers (due to cost of carrying cash, and advantage of delayed payment) and banks (who have been averse to providing longer term loans)– Credit cards dominate the sector and multiple credit card holding is

commonplace with 2 cards per cardholder on average– All Credit cards offer a revolving facility and are the most popular form

of consumer borrowing– Charge cards are virtually non-existent– Banks are the almost exclusive issuers of Credit cards and Retailer

cards have not had been successful (unlike in most other European markets)

• High foreign ownership of the Turkish banking sector• Processing, acquiring and card issuing is in most cases

undertaken in-house by banks (or bank-owned subsidiaries)• Turkey has a single central switch, BKM, which provides very

comprehensive and publicly available data on card payments• Growth estimates for credit cards vary between sources from

10.3% (2006-11, Euromonitor 2006) to 12.3% (2007-11, Datamonitor 2007)

Overview of the Turkish card market

938

1,176

1,543

1,7661,892

2,144

2,407

2,676

2,969

3,275

0

500

1000

1500

2000

2500

3000

3500

2002

2003

2004

2005

2006

2007

e

2008

e

2009

e

2010

e

2011

e

Tra

nsac

tions

(m

)

07-1102-06CAGR

13.2%25.4%Total

15.3%20.7%Pay now

12.3%27.8%Credit Card

Turkish card transactions by card type (2002-2011e)

Source: Datamonitor 2007

The Turkish market is the fastest growing in Europe (over 20% p.a. historically); this is forecast to continue, albeit at a reduced rate

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18 April 2023

• The ‘Big 4’ of Garanti, Kocbank, Akbank and IsBank make up 57% of credit card issuing

• The top 8 make up over 80% of credit card issuing

• All the banks issue both credit and debit/ATM cards, however some are more heavily weighted towards one than the other– 66.8% of Granati’s cards are credit

– Isbank is only half this (38.1%)

• BKM is local domestic switch, and offers the gateway to the international schemes

• Major banks are incorporated in an international banking group

• Major loyalty brands (World / Bonus) have licensed their loyalty programme to smaller banks

Overview of Turkish credit card issuing

5,625

5,000

4,008

3,741

2,600

2,170

1,883

1,494

1,203

926

749

2,850

66.8%

46.5%

38.1%

39.1%

77.9%

53.7%

8.8%

37.8%

21.3%

15.7%

0 1,000 2,000 3,000 4,000 5,000 6,000

Garanti Bankasi

Kocbank/Yapi ve Kredi

Akbank

Is Bankasi

Finansbank

HSBC

Vakiflar Bankasi

Denizbank

Ziraat Bankasi

Disbank

Halk Bankasi

Other

Card issued ('000)

Turkish credit card issuance by issuer, total = 32m(Credit cards as % of all cards issued)

Source: Datamonitor (2007)

N/A

N/A

Over 80% of issuing is controlled by the Top 8 banks; the largest 4 control nearly 60% of the market

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18 April 2023

• Acquiring and issuing are closely linked, driven by the sophisticated PoS loyalty systems in place

• The ‘Big 4’ acquired 88% of all transactions (2004), and issued 57% of credit cards (2006)

• Profitability is poor in the Acquiring market, but crucial for banks to the success of multi-brand loyalty schemes

• Acquiring is very competitive in Turkey and is mostly carried out in-house by the banks (approximately 20) or their acquiring/processing subsidiaries

• Competition is increasing due to the increased level of ‘on-us’ transactions due to loyalty/instalment programmes

• The market is dominated by 4 of the leading banks: YKB, Akbank, Isbank and Garanti bank; they are looking to leverage their control of the main loyalty schemes to take further acquiring market share, particularly from the smaller players

• Akbank is the exclusive acquirer of American Express (and issuer)

• Garanti (Turkiye Garanti Bankasi) represents JCB in merchant acquiring operations and processing. It also claims to have a 70% share of e-commerce transactions

Overview of the Turkish acquiring market

17.4%24.1%

15.5%

26.7%12.4%

21.4%

11.6%

15.5%

8.1%

6.7%

28.2%

12.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Credit cards issued (2006)Volume of acquired txns (2004)

Turkish credit card issuance by issuer(Credit cards as % of all cards issued)

Source: RBR (2004), Datamonitor (2007)

HSBC

Finansbank

Is Bankasi

Akbank

Kocbank/Yapi ve Kredi

Garanti Bankasi

Other

Self-acquiring is typical is the Turkish Market, particularly amongst the Big 4

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18 April 2023

Purchase

Customer makes purchase

TSYS authorizes using anti-fraud systems

Update

TSYS updates account and provides merchant clearing and settlement

Billing

At end of billing cycle, TSYS produces and mails statement

Account Creation

Customer applies

TSYS analyzes, creates account and issues plastic

What TSYS Does

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18 April 2023

Purchasing Behavior

Customers have unique buying patterns

TSYS analyzes using data analytic tools and informs the issuer

Loyalty

Customer uses card

TSYS provides processing, marketing, consulting and fulfillment services

CustomerService

Customer needs assistance

TSYS provides a workflow management system that profiles all the relationships issuers have with their cardholders

Collection

TSYS offers collections, debt, skip-tracing and bankruptcy management services

What TSYS Does

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18 April 2023

Future of Payments

• Further erosion into cash and other non card payments

• Need to ensure balance between parties to foster growth

• Risk will continue to be major concern

• Regulators will continue to oversee

• New technologies and channels– Mobile

– Voice

– Contactless

– E-payment

– Maximisation of the chip on the card

14©2007 TSYS. All Rights Reserved.

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