Tag Archives: Regulation

Ininal’s e-money license

Ininal, a digital banking service where we’re investors, received its electronic money (e-money) license from the Banking Regulation and Supervision Agency (BDDK) of Turkey earlier this week.

What this means in practice is that Ininal’s existing digital wallet will be able to offer its users many new capabilities that it has so far been unable to offer due to regulatory requirements.

For example, Ininal wallet users will be able to make digital payments to individuals and institutions alike all from within the Ininal app. This effectively transforms Ininal into a digital bank which directly offers its users all banking services short of lending and investing. In the past, the Ininal app’s functionality was limited to creating new accounts, monitoring your balance, transferring money to other Ininal users, and seeing nearby top-up locations.

The e-money license also places Ininal on secure regulatory footing as it introduces new and innovative services to the market. The Ininal API is a great example of such a service.

Fintech companies bring new approaches to traditional services like banking and payments. However, like the traditional banks offering these services, they also deal with a sensitive asset like money. As such, it’s essential that they operate within existing regulatory frameworks while simultaneously working to adapt these regulations to accommodate the new services that their technologies make possible.

With its e-money license, this is exactly what Ininal is doing.

E-commerce and international transactions using Turkish bank cards

I recently read that the Banking Regulation and Supervision Agency (BDDK) of Turkey is closing all debit and credit cards issued in the country to e-commerce and international transactions beginning on August 17, 2017. I confirmed the accuracy of this news with several entrepreneurs and unfortunately it’s accurate.

The new regulation will apply to both existing debit and credit cards which will be closed to e-commerce and international transactions on August 17, as well as to new cards issued after this date. Card owners will be able to open their cards to e-commerce and international transactions by requesting that their banks do so. So this isn’t an outright ban on e-commerce and international card transactions but a change in the default state of card owners.

It’s a switch from a default state of free use which you need to take action to opt out of to a default state of restricted use where you need to opt in to gain the right of free use. And unfortunately defaults influence user behavior.

If this regulation is applied, existing e-commerce and international purchasers will purchase less, and new e-commerce and international purchasers will be less likely to emerge. So e-commerce and international transactions will take both a short-term hit and a likely even bigger long-term hit.

Proponents of the regulation claim that it will lower card fraud. However, there’s a problem with this claim. Specifically, rather than address the root cause of the problem, the regulation addresses an innocent bystander. Rather than attempt to lower the incidence of fraud through a combination of technology to identify and penalties to punish those perpetrating the fraud, the regulation punishes innocent card owners, e-commerce sites, and international merchants. Two wrongs don’t make a right.

In fact, if it accomplishes anything at all, this regulation shifts the burden of responsibility in the event of card fraud from the perpetrators of the fraud to its victims. This will further motivate fraudsters and may even increase the incidence of fraud.

Fortunately, there remain about 5 months for this misguided regulation to come into effect. If you’re an e-commerce site or an international merchant, that’s plenty of time to let the regulatory agency behind the proposed change, the BDDK, know of its harmful effects and unintended consequences.

If enough people speak up, the BDDK just might correct its course. And if not, you’ll have supported a just cause.