The establishment of communities, sedentism, and the invention of money laid the foundations of our current financial system. As human history progressed, the growth of commerce and the creation of new financial instruments were inevitable. Tracing the historical development of the banking system, we see that money changer preceded financial institutions. Although our history with money dates back to antiquity, the term “bank” is said to have originated from the Italian “banco” tables on which money changers traded.1
Modern banking can be traced back to the Bank of Amsterdam in the Netherlands in the 17th century. Important milestones of today’s banking system included colonialism, the Industrial Revolution, nation-states’ creation, and capitalism’s conceptualization.
In the 20th century, technological advances and globalization enabled the creation of the first ATM and the first credit card, followed by rapid leaps in the sector, such as mobile banking, which became popular with the widespread use of the Internet.
Turkish Banking Sector
Banking in Türkiye dates back to the Ottoman period in the 19th century when Galata Bankers founded the first bank, Bank of Istanbul, in 1847. However, the Bank of Istanbul did not operate for long. Therefore, the Ottoman Bank, founded in 1856, is regarded as the first bank in the Ottoman Empire.2 In the republican era, the goal was to improve national banking to foster development across the nation and facilitate commercial activities. In the period up to the 2000s, when that private banks followed the establishment of public banks, government institutions were founded to govern capital and financial markets with the enactment of new regulations, and the banking system underwent structural transformations in response to economic crises while continuing to develop.
Digital Banking
A long-established industry, banking is also known for quickly adopting cutting-edge technologies and successfully integrating digital features into its current offerings. “Digital banking” may be a feature that enables customers to complete their transactions online without visiting the bank. Thanks to digital banking, customers can access different financial services such as money transfers, credit transactions, bill payments, card payments, donations, and insurance processing, whenever they want, without visiting a bank.
The Turkish Statistical Institution estimates that 82.6% of 16–74-year-olds will use the Internet in 2021. With the increasing usage of the Internet and robust financial systems, the number of people accessing digital banking services expanded from 35 million in 2017 to roughly 70 million by 2021. As for age groups, the top users of digital banking services and products were people between the ages of 36 and 55, followed by those between the ages of 18 and 25. 3
Meanwhile, growing competition in the banking and financial industries has given rise to Fintech companies, sometimes referred to as neo-banks, digital banks, etc., globally and are subject to various legislation in different jurisdictions. Offerings from Fintech companies include banking, electronic money, insurance, and payment systems. Fintech companies serve customers digitally, without a branch, and can obtain a banking license if permitted by the legal system of the relevant nation. Banks in Türkiye are rapidly integrating financial technology products into their services. At the same time, the regulatory authority has set up a separate category for digital banks that do not have branches and outlined the relevant licensing regulations.
To facilitate access to banking services and regulate financial innovations, the Banking Regulation and Supervision Agency published and enforced the “Regulation on the Operating Principles of Digital Banks and Banking as a Service Model” in Official Gazette no. 31704 in December 2021. The Regulation lays out specific requirements for digital banking, including the definition of a digital bank and banking as a service model, as well as the activities and operational limits of a digital bank, the conditions under which financial institutions may operate as digital banks along with the activities they may engage in, the scope of the business plan and the activity program that should be used, and physical service points for customer complaints. 4
Financial technologies maximize public use of economic tools while promoting commercial activity. In this framework, the Digital Banking Regulation has facilitated the broader use of financial capabilities by requiring that credit clients of digital banks exclusively consist of financial consumers and SMEs.
Financial inclusion is also encouraged in the “Regulation on Remote Identification Methods to be Used by Banks and Establishment of Contractual Relations in Electronic Environment,” published by the Banking Regulation and Supervision Agency in Official Gazette no. 31411 of April 2021. This regulation requires banks to take appropriate measures given potential cyber risks in the digital world.
The Turkish banking system embraces new generation banking and enhances customer experience thanks to its young population, efficient banking system, and rapid technological adoption. Public authorities enact regulations to maximize economic gain while minimizing associated risks in this context.
- Yetin, F. (2016), Bankacılığın Doğuşu ve Türk Bankacılık Sistemi, Niğde Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, Volume 9, Issue 2
- Yetin, F. (2016), Bankacılığın Doğuşu ve Türk Bankacılık Sistemi, Niğde Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, Volume 9, Issue 2
- The Banks Association of Türkiye
- Official Gazette, 29 December 2022, No: 31704
