PayPal to Exit Turkey After Regulator Denies Payments License
May 31 2016 - 3:30PM
Dow Jones News
ISTANBUL—PayPal Holdings Inc. is suspending its operations in
Turkey after the local banking regulator ordered it to cease
payment transfers in a move that is likely to reverberate across
the country's nascent but fast-growing online marketplace.
The San Jose, Calif., digital payments company said late Monday
on its Turkey website that the Banking Regulation and Supervision
Agency denied PayPal's payments license application eight years
after the company first started operating in the country.
"We have no choice but to suspend processing payments in
Turkey," a PayPal spokesman said Tuesday in emailed comments to The
Wall Street Journal. "We have not encountered this situation before
and we will continue to explore opportunities to gain the necessary
approvals to recommence our services in Turkey."
PayPal will stop executing transactions starting June 6, and
told Turkish users to withdraw any balance from their accounts with
a week to the deadline. The company, whose Nasdaq-listed shares
were down almost 1% at $37.79 on Tuesday, said ending its
operations in Turkey "will not have a material impact on PayPal's
business."
Turkey's banking regulator and government didn't respond to
requests for comment.
The decision to prevent PayPal from operating in Turkey comes
amid a tug of war between Turkish officials and Western technology
firms led by social-media companies, which have emerged as leading
platforms for opposition activists as President Recep Tayyip
Erdogan pushes to consolidate power.
But unlike Twitter Inc., Facebook Inc. and Alphabet Inc.'s
video-sharing site YouTube, where Turkish dissidents vent their
anger at the government, PayPal played a key role in Turkey's
economy: greasing the wheels of its burgeoning online market
ranging from Airbnb bookings to soaring retail sales.
Turkish e-commerce expanded by 35% to 18.9 billion liras in
2014, or about $8 billion at the time, according to Turkey's
Informatics Industry Association, TUBISAD. By 2020, revenue from
online transactions is projected to reach $11.5 billion, according
to German internet statistics firm Statista. Online purchases by
international buyers from Turkey is already around $400 million
annually and are forecast to soar to as much as $3 billion annually
in the coming years, according to a Turkish website sponsored by
PayPal.
After servicing hundreds of thousands of local customers,
including tens of thousands of merchants since 2009, PayPal now is
caught in the same quandary that bedevils social-media companies:
localization of information technology systems, said a person
familiar with the firm's license denial in Turkey.
Turkish authorities have been pressing Western companies to move
data centers inside the country to facilitate more efficient
compliance with government and court orders to block content, and
to generate tax revenue.
Twitter, YouTube and Facebook, which grappled with blackouts in
recent years as antigovernment protesters took to the platforms to
criticize Mr. Erdogan and his administration, so far have refused
to place their servers inside the country.
Turkey has been one of the most aggressive countries world-wide
in requesting social-media sites to remove content, topping
Twitter's list with 2,211 requests that accounted for almost half
the company's total from July to December of 2015.
To be sure, PayPal's travails in Turkey aren't about free
speech. But demands that it localize its infrastructure to continue
operating highlight challenges and risks to doing business in
Turkey, where the government has made controlling the web a policy
priority.
PayPal didn't respond to a request for comment on whether
Turkish demands for localized operations affected its license
application. The company operates in more than 200 markets,
executing transactions in more than 100 currencies, with revenue
outside of the U.S. and the U.K. accounting for 37% of its total
last year, according to PayPal's website and annual report.
Large retailers and e-commerce sites that can handle bank
payments can overcome PayPal's shuttering in Turkey, industry
insiders said. But the same may not hold for small online
businesses that rely on PayPal's no-cost transactions to keep their
trade alive.
"I have two shops at Etsy and this is my job," the owner of
Kafika, an Istanbul-based jewelry store, posted on the
Brooklyn-based website's message boards. "I haven't any other
solution, I should put on vacation my shops."
Write to Emre Peker at emre.peker@wsj.com
(END) Dow Jones Newswires
May 31, 2016 15:15 ET (19:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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