29 May

In an increasingly globalized world where the consumer habits manifest changes almost on a daily basis the payment mechanisms have to keep abreast with such rapid developments. A world where the conventional methods of payment based on physical exchange of papers such as banknotes or checks are being replaced by paperless payment methods based on digital proceedings is a world where new payment mechanisms have to evolve constantly. In 2013 almost USD$ 1 billion worth of transaction took place only by proximity mobile payment methods. The figures are expected to grow exponentially to reach USD$ 20 billion in 2016. Currently small scale purchases like habitual daily coffee consumption consists the majority of the transactions that are taking place by the mobile payment methods. However the future prospects point a trend toward more substantial purchases like consumer electronics spending.

The change is taking place in a pace in which the formerly cutting edge considered technologies like payments through computers connected to the internet are now being considered outdated and increasingly replaced by even more state of the art digital payment methods through mobile devices. Such mobile payment mechanism are even buttressed by systems that can keep track debit and credit card purchases in real time and convey instant notifications once the transaction is completed.

Different Payment Mechanisms

Several different payment methods are in use around the globe. However five of them are widely employed by the companies for online and mobile payment purposes. Wireless Application Protocol, WAP, is the most commonly adopted method of payment by the companies. In this method the payment is simply done through a displayed web page or by an application downloaded to a mobile device. Another method is the one called the online wallet method where the consumers login to their own page through their own passwords to customize their own online shopping charts and to enter their shipping addresses as well as their credit card details. Such a method is usually exploited by online shopping sites such as Ebay or Amazon. Direct operator billing is another payment method adopted by the companies. This method provides the mobile phone providers with the opportunity to apply charges on customers’ mobile phone bill. The collected payment then is remitted to the business. Near Field Communication payment method is another payment mechanism. This method is usually exploited by the retail stores. Here the system requires a specific mobile phone equipped with a smart card to enable the customers to make the due payment through a device installed to the sale point. In this method the sum is deduced from a pre-paid account of the merchant. Finally the method that approaches most to the well established conventional payment mechanisms is the credit card payment method where the credit card details are inserted in to a web page or in to a mobile application which later convey the payment related with the transaction to the business.

Legal Framework At A Glance: UK and Turkey Comparison

In 2011, the Second Electronic Money Directive (“2EMD”) changed the electronic money market structure under the governance of Financial Services Authority (“FSA”) in UK . The mainstream of these new regulations is increasing information security of customers as well as additional authorization standards for e-money operations. New amendments are expected to preclude use of e-money issuing for personal benefits and protect the customer rights. In line with these objectives, new regulations brought limitations to e-money institutions for use of e-money with the intent of provide interest gains. Although minimum capital requirements reduced, it is still valid for all types of e-money institutions.

In Turkey, the legislation connected to electronic payment systems has been come into force in 2013 covering all electronic money organizations and principals of payments systems together with operational license requirements. Enacted Law numbered 6493 (the “Law”) will intend to provide regulatory compliance in Turkey. In accordance with this law, e-money institutions are required to grant permission from Banking Regulation and Supervision Board (the “Board”) in Turkey. Besides, several requirements including transparency,  minimum initial capital amount and information security of customers shall be met by projected e-money institutions. Pursuant to the new legislation, minimum paid in capital of e-money institutions shall be TRY 5 million whereas UK law permitted to small e-money institutions whose operations do not exceed EUR 5 million. All in all, e-money transactions shall be under monitoring of authorized bodies upon regulatory framework which is necessary for security of customers transacting through new payment methods.


Herdem Law Firm, Istanbul Turkey

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