Turkish Competition Authority (TCA) revoked the individual exemption granted in 20161 to BKM Express, the joint digital wallet service of 13 leading banks, operated by The Interbank Card Center (BKM2). TCA also mandated the termination of this activity in 60 days after declaration of reasoned decision3. This is a landmark antitrust intervention of Turkish antitrust watchdog, addressing the rising competition concerns in the newly emerging fintech markets in order to ensure a competitive market structure and pave the way for innovative fintech startups to enter the market and operate effectively.
TCA evaluated the business model and operations of BKM Express in detail with respect to requirements of individual exemption set out in the Article 5 of the Turkish Competition Act. Accordingly, any agreement between competing undertakings can be exempted from the sanctions in case they fulfill following conditions: (a) Ensuring new developments and improvements, or economic or technical development, (b) Benefitting consumers, (c) Not eliminating competition in a significant part of the relevant market, (d) No limiting competition more than what is compulsory for achieving the goals.
As per the reasoned decision, the assessments of the Authority for each provision can be summarized as below:
a) Ensuring new developments and improvements, or economic or technical development:
BKM Express provide various technical improvements but these comes true as a result of integration provided by member banks that cannot be achieved by any single payment institution. TCA focus on three improvements:
- Sharing only first 6 and last 4 number of the credit cards,
- Updating expiration date automatically,
- Providing SMS- OTP which are special to BKM Express.
TCA determined these 3 improvements arise from cooperation among banks and BKM has the privilege to achieve any required information from the member banks. SMS-OTP of BKM Express is accepted as the equivalent of 3D secure but SMS verification of other payment institutions is not accepted as so. That's why in case of any problem, the related institution has to make the refund. Therefore, no economic or technological development specific to BKM Express is found by TCA and first condition of exemption is not fulfilled.
b) Benefitting the consumer
BKM listed several consumer benefits such as; free service, transactions without card, transactions with QR Code, choosing easily between system-defined cards and transferring money to other cards. TCA came to the conclusion that they are not specific to BKM Express, since all other digital wallets could provide these services. Another accentuated point was the consumer perception that the service provided by BKM Express is safer. However, TCA considered this perception stemming from the structure of BKM as joint service of member banks
c) Not eliminating competition in a significant part of the relevant market
BKM and the member banks are competing undertakings in digital payment services. According TCA, joint digital wallet service reduces the motivation of member banks to compete and member banks depend on consumer choices passively without any active competitive behavior.
The Board focused on 5 issues as differences between BKM Express and other digital wallet services:
- Integration with Banks,
- Integration of Card-acceptors,
- Budget of Advertisement and Campaign,
- Advantages gained over Domestic Exchange and Calculation Activity ("DEA") for BKM
Other payment institutions are deprived of efficient integration among banks and this causes market entry barriers and also makes it difficult to compete in the market. BKM has the ability to cross-subsidize this activity by the profits from markets where it has a market power. BKM is able to reach strategic information of member banks within the scope of DEA. Based on these evaluations, TCA comes to conclusion that competition had disappeared in the large part of the market.
d) Not limiting competition more than what is compulsory for achieving the goals:
It is necessary not to limit competition more than what is compulsory for achieving requirements which are listed in Article 5 [sub-paragraphs (a) and (b)] of the Act. As per the evaluations above, BKM Express do not fulfill those requirements. Therefore, the Authority determined that competition is limited more than compulsory.
As a result, TCA found the joint digital wallet service of banks anti-competitive and decided to revoke the individual exemption given in 2016 and ordered the termination of this activity in 60 days. BKM announced in response that the operations of BKM Express are planned to be brought in compliance with the TCA decision. A few days remained to see the new strategy of BKM Express.
1. TCA Decision - 23.09.2016 16-31/525-236
2. BKM is a joint venture established by 13 public and private Turkish banks in 1990, for the purpose of dealing with common problems and developing the rules and standards of credit and debit cards in Turkey.
3. TCA Decision - 30.05.2019, 19-20/291-126
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