The Fintech Contender at the Crossroads of the World

A failed coup, a currency crisis, and tariffs on steel couldn’t keep these Turkish entrepreneurs down. And the tides are finally turning. By Paul Ust

When it comes to fintech, the next star of the developing world isn’t one of the BRICS countries. It’s Turkey. The country is a growing geostrategic power with an increasingly highly educated and western-oriented youth population. Setting Turkey back are years of simmering political issues, attempted coups and civil unrest, which isn’t good for any country trying to break out of a troubled past. As Turkey emerges into a modern market, entrepreneurs are finding opportunities to fortify the startup ecosystem.  

We talked to three Turkish tech entrepreneurs and investors following Fintech Istanbul to satiate our curiosity about the growing fintech startup scene. Cenk Bayrakdar is the Managing Director at Revo Capital, Turkey’s largest VC firm. Cenk was the CIO at TurkCell for 13 years and founded Revo Capital in 2013. Fevzi Gungor is the CEO of Odeal, a payment solutions fintech. Soner Casur is a founder of startups and an angel investor in the Turkish tech ecosystem. He has senior leadership roles at the Fintech Council and Ecommerce Council, which represent companies leading the startup ecosystem in Turkey. 

Archie: Has Turkey finally arrived as a fintech hotspot? 

Cenk Bayrakdar, Managing Director at Revo Capital

Cenk: $509 million was invested in 62 deals in the Turkish finance ecosystem last year. There are about 520 fintech companies in Turkey at the moment, of which 56 are e-money and e-payment firms - a growing trend given Turkey’s regulation-friendly environment. There are also 90 million credit cards in circulation in Turkey, making it the seventh largest country in the world in terms of credit card ownership. We have four million pre-paid cards, and almost two million POS (point-of-sale) spots in Turkey. Contactless payment accounts for half of transactions, and there are five established crowdfunding platforms.

Archie: What’s holding Turkey back?

Fevzi: In 2014, we had a failed coup, a currency crisis, and tariffs on Turkish steel and other items. There was also the political aftermath of a failed coup. It hurts us in the short-term--it stops capital inflow, and it makes for a lot of volatility of interest in the market. There will be a lot of interest one day and then the next day, no one answers my calls. But we survive it. Today, I’m living on the upside of it. The world is having challenging times, but we are always having challenging times here in Turkey. So, if you’re being challenged every day, it’s not a challenge to you anymore. We don’t listen to the crowd anymore. This is just what it’s like to be a Turkish entrepreneur. 

Cenk: When I first raised a fund in 2013, the exchange rate was 1.2 TL (Turkish lira) per US dollar. 

Last summer, I made a good exit and a great profit, but after the money was with me for five years it was at 8.6 TL per dollar, and now it is at 15 TL per dollar. With our currency situation here, even if you can grow the company several times, you are constantly swimming against the tide with your earnings. A consequence of this is that Turkish startups have difficulty hiring because top talent is looking to be paid in foreign currencies (dollars or euros).

Archie: I didn’t get an invite to Fintech Istanbul. How was it? 

Soner Casur, Angel Investor and Founder of Startups

Soner: This was the third iteration of the event. There were four key areas of focus: payments, crypto, digital banking, plus AI and indigenous tech protocol. The biggest discussion was on the crypto space in Turkey, including regulations here and worldwide. While there were mainly Turkish attendees, 20 percent were from Europe and the Middle East. 

Archie: What innovation is Turkey bringing to fintech?

Cenk: We have a leading online banking system in terms of mobile apps, even in comparison to what you would get in the EU, US and UK markets. Just as an example, BBVA (the 2nd largest Spanish bank) acquired Garanti bank – a Turkish bank - last November, thinking they (BBVA) would bring their technology to Turkey. Instead, BBVA ended up adapting the Garanti technology to take to other BBVA markets. Turkey also has more credit cards than any European country, offering massive credit card infrastructure.

Since many larger banks here are more reluctant to work with SMEs, they tend to go to the big enterprises. A lot of fintechs work in the B2B space in three key areas: buy now, pay later, e-invoicing—or credit providing based on e-invoicing—and now, crypto and blockchain. 

Soner: Fintech is one of the hottest areas in Turkey. Every investor in Turkey has fintech in their mandate. One of the reasons is the amount of successful exits we’ve seen. Neo-banks are also positioning themselves for SMEs because Turkey is predominantly an economy for SMEs.

There is intense competition amongst banks that are relying on innovative solutions to reach the market. Turkish market dynamics are changing, including the way payment processes are happening. The whole payments ecosystem is evolving from banks to payment services companies. 

Archie: You mention that crypto is particularly posed for success in Turkey. Why is that?

Fevzi Gungor, CEO of Odeal

Cenk: Investing in crypto has a much more favorable reputation here. Gaming is also huge in Turkey. Istanbul has more gaming companies than any city in the EU. A good portion of the investor funding for gaming in Turkey is closely related to NFTs and crypto.

Fevzi: Another aspect is that government-licensed gambling is rather slow, and illegal gambling is a big thing in Turkey. Here, betting and crypto are linked.

Archie: What’s the level of collaboration between Turkish startups and financial institutions?

Soner: This brings a smile to my face as I had lunch with a big bank director today. There is often resistance from the banks, but the government is in favor of less regulation and opening up opportunities for fintechs. Banks can’t compete with the fintech companies that can make quick decisions. Banks here need five companies, ten signatures and multiple processes to make any decision.

Fevzi: This is the case for the larger banks here, but the rest of the banks - smaller ones - are convinced that working with fintechs is the right thing to do now. So this is ‘the clash’ that we now see in the strategic competitive landscape.

Cenk: Smaller but more forward-thinking banks in Turkey like Fibabanka and QNB Finansbank have started their own venture funds and invest in other funds, seeking startups to add value to their banking proposition. They are very aware of the growing trends like SME banking opportunities, and the ‘buy now pay later’ models. Larger banks also have venture funds, and are trying to be helpful by opening up their customers and their connections, but are slowed down by the bureaucracies inherent in their structures. These banks are too big and try to do everything from the inside.

Archie: What Turkish startups should we keep an eye on? 

Cenk: Getir is Turkey’s best known unicorn startup (and has reached ‘decacorn’ level). This is an ultra-fast delivery system and our company, Revo, was its first investor. There is Midas, a retail investing startup, which in February received one of the largest seed investments in Turkey. PayCore provides card infrastructure for banks - it’s the only card in the world that Mastercard and Visa approved that does tap to phone as a POS machine. 

Soner: For an international audience reading this, I would say take a look at Birllesik Odeme and from a scaling perspective, Paycell. For a holistic perspective, I would look at Param-turkpara. Odeal is an online payment services for SMEs. TikTak is a car rental company, and Tiko, a real estate AI company, raised $65 million last year in Series A funding.

Archie: What’s one thing you’d like international readers to know about your country?

Cenk: That we’re evolving fast. In some of my earlier days, I was told by one prospective partner: “I love your solution, and we didn’t find any other solution working as well as yours. But when I think about Turkey, I think about Turkish delight and a holiday destination!” This type of response from investors or corporate partners outside of Turkey was typical before. But now, we have had huge success - we now have six unicorns, and we have built up the reputation of Turkish ingenuity.