FinTechs Bolster Digital Banking Innovation in Turkey

Turkish banks have long had installment loyalty programs which enable customers to spread credit card payments over several months — similar to the buy now, pay later (BNPL) service that has grown in popularity in recent years.

But for merchants that want to offer this service to customers banking with different financial institutions (FIs), Nezih Sipahioglu said it means getting point-of-sale (POS) systems from multiple banks in the country, a time-consuming and friction-filled process that can negatively impact their bottom-line growth.

It’s a gap that Istanbul-based FinTech Sipay is trying to close with its single-API virtual POS solution, Sipahioglu, the firm’s founder and CEO, told PYMNTS in an interview. “Instead of going to 15 different banks, merchants come to us, and we sort out their online and offline payment processing.”

In addition to that card processing payment gateway, the payments company also offers a white-label digital wallet solution that enables retail brands to access services from multiple banks in a single app, whether comparing microcredit offers or applying for a credit card.

“It’s more like a platform marketplace. If you want to apply for a microcredit loan from SipPay, you can apply for it from four different banks,” he explained, adding that the firm is replicating services provided by firms like Stripe and Revolut in the local market.

Demand for the digital wallet solution has skyrocketed due to the growing eCommerce market, he said, as customers look to benefit from an open-loop payment solution that enables them to make payments at different locations from one centralized mobile wallet.

“We are the only company in Turkey that has all these solutions under the one roof,” Sipahioglu said, pointing to the success of its in-house Sipay brand and the 30-plus brands that are using its white-label solution.

The company, which holds a Turkish e-money license, processes nearly $200 million in monthly transactions and has a 10% market share in the payments space, he further noted. The firm also claims close to 1 million users of its white-label services and about 100,000 Sipay brand customers.

The next step now, he said, is to expand to the U.K. and other European markets by leveraging Sipay’s open banking license while increasing collaboration with banks to offer more banking services to their customers. “We are not going to be a classic super app with only one financial provider, we are going to be a financial super app with multiple banks integrated.”

Resolving Bank-FinTech Challenges

Despite the progress made to advance bank-FinTech collaboration worldwide, Sipahioglu said Turkish banks still see FinTechs as competitors, which has sometimes strained relations between the two sides.

“When I started [Sipay], it was a nightmare to work with the banks. Some banks even refused to open a bank for us even though we had obtained a license,” he noted, adding that the situation has improved over the years as the firm’s market share increased.

However, the challenge remains, and according to Sipahioglu, FIs need to recognize the value they stand to gain from partnering with FinTechs, which are increasing bank customers by offering banking services to their platforms.

“We are not their enemies,” he argued. “At the end of the day, any funds we are holding for merchants are held in the banks or we are acquiring POS services from banks and reselling them to the merchants.”

Moreover, unlike other FinTechs, he said Sipay is not looking to replace banks but is rather focused on strengthening collaboration with FIs. “There are already too many banks in Turkey that offer really good services, so our main focus is to get services from the bank and have customers use us as a single point for their financial needs.”

Moving forward, Sipahioglu predicts that Turkey’s faltering economy and the challenging global macroeconomic environment will lead to a wave of consolidation in the FinTech market, with smaller, money-losing firms increasingly absorbed by larger companies with deep pockets.

He noted that maintaining a positive EBITDA [earnings before interest, taxes, depreciation and amortization] will be key to keeping firms profitable at an operational level to survive in the cash-strapped local economy.

For Sipay, that goal is made easy by its multi-product strategy. “We are lucky to have business-to-consumer (B2C) and business-to-business (B2B) services on our platform as well as a B2B2C service through our white label. So, even if we have less clients on the consumer side, we can rely on our merchant business and vice versa,” he said.

Further reading: Türkiye Ready to Take Its Place as a Prime Market for Digital Goods and Services

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