Turkish Competition Authority (TCA) recently announced that it withdrew the individual exemption of BKM Express service of Bankalararası Kart Merkezi (ICC – Interbank Card Center). The reasoning of the decision is yet to be published, however, the presence of a decision in itself already tells so much. The withdrawal decision of the TCA mainly concerns the electronic payment systems market since the subject practice of the ICC, BKM Express, is an ancillary infrastructure service for electronic payment services. Hence, fintech companies operating payment service systems have greater interest in the TCA's withdrawal decision.
What is BKM Express service, and what was the TCA's previous decision saying?
ICC is the association of banks formed as a joint stock company for carrying out the settlements of the banks arising from credit card transactions. Turkish banks issuing credit cards are the members of ICC, while BKM Express is a service which is open for these members. BKM Express is a payment service including an electronic wallet system where customers can save their card information on, and use during online shopping without being have to submit the credit card information to the seller, hence, speeding up the shopping and securing the card information. Any bank member of the ICC is able to make use of BKM Express without a limitation.
Previously in its decision in 2016, which was granting individual exemption to BKM Express service, the TCA acknowledged the benefits of BKM Express and electronic wallet systems as they are enabling customers to save time and increase the security of card information. TCA also stated that BKM Express is not a banking service but rather an infrastructure service aiming to improve the banking or electronic payment services. Since ICC is an association of undertakings formed by the banks, directly or indirectly it is conducting its operations for the benefit of its bank members. Hence, in its previous decision, the TCA conducted a competitive analysis by keeping in mind of the potential competitors whom will be providing a similar infrastructure service.
In its analysis, the TCA acknowledged ICC's BKM Express scheme is a practice of an association of undertakings that may harm potential competition in the market, and stated that it is in the scope of the prohibition of Article 4 of the Turkish Competition Act. However, the TCA granted individual exemption to BKM Express since it ensures economic and technical improvement in the market, benefits the customers, not eliminate the competition in a significant part of the market, and not eliminate the competition for purposes of ensuring developments and benefiting the customers. Now, the TCA withdraw the individual exemption of BKM Express, which was granted by the decision stated above.
Since the reasoned decision of the TCA is yet to be published in the following months, one shall take caution when interpreting the post-effects of the decision. This is especially true when assessing the impacts of the decision on the banks' day-to-day business. The reasoning of the TCA regarding the withdrawal will act as a beacon for agreements benefiting or aiming to benefit from the individual exemption scheme set forth in Article 5 of the Turkish Competition Law, since the decision will likely to have an analysis weighing between the consumer benefit and competition.
However, there are other aspects, more visible even without the reasoning of the decision. The TCA increased its scrutiny over the market of banking and financial services, including the electronic payment services. Previously, upon the complaint of electronic payment institutions, the TCA withdrew individual exemption of Garanti Bonus scheme of Garanti Bank, credit card partnership program of another bank. In its Garanti Bonus decision, the TCA paved the way of electronic payment institutions by abolishing the clauses that are restricting the entrance of electronic payment institutions in the market. Previously, the TCA also decided not to grant individual exemption to credit card information saving system of ICC, by stating that card saving is a part of services where banks should be in competition.
By looking at the landscape, one can get that the TCA is paving the way of fintech businesses by extensively analysing the agreements of incumbents of the market, traditional banks. It seems that the banks will be in the radar of the competition agencies from both end of the competition analysis spectrum in the following term with the effect of increasing pressure of the fintech companies, along with the rising big tech banking discussions.
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