Navigating Turkey's economic landscape with dLocal

A Conversation with Juan Martin Etcheverry

Juan Martin Etcheverry, based in Barcelona, leads the Sales Engineering team at dLocal. He's an expert in navigating the complexities of emerging markets, having previously managed relationships with top global merchants across Europe.

About dLocal

dLocal powers local payments in emerging markets, connecting global enterprise merchants with billions of high-growth market consumers across Africa, Asia, and Latin America. Through the "One dLocal" concept (one direct API, one platform, and one contract), global companies can accept payments, send payouts, and settle funds globally without the need to manage separate pay-in and pay-out processors, set up numerous local entities, and integrate multiple acquirers and payment methods in each market.

Could you describe the current economic environment in Turkey?

Juan: Turkey, for the last decade, has been facing a challenging macro-economic scenario, with high inflation (expected to close between 40-45% in 2024), high cross-border operational costs, and decreasing purchasing power for consumers. Added to this, recent natural disasters such as the 2023 earthquake are hindering Turkey’s recovery.

How does this economic environment influence payment strategies?

Juan: Pricing strategies have to be constantly updated in order to keep revenues constant when measured in USD/EUR. Companies transition their payment structures, favoring those methods that allow faster settlement periods in order to reduce exposure. 

Over the past two years, interchange rates have fluctuated, with the current credit card interchange rate at approximately 3.36%.

These high-inflation circumstances help new payment methods and tech disruptors to thrive, and global companies need to keep their payment offerings up to date. 

Also, with a high percentage of the population living in urban areas and the Turkish central bank in favor of digitalization, these new payment methods have additional tailwinds to scale and gain rapid adoption.

Are there hidden complexities companies might not anticipate?

Juan: Definitely. Turkey is a complex market given the macroeconomic situation, and the risk of something changing from one day to the next is higher than in other markets. Companies have to always be prepared for change and be resilient. One day it could be inflation, the next it could be increased acquiring costs, and the next FX access difficulties.

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Understanding Turkish consumers and payments

What are the preferred online payment methods in Turkey?

Juan: It depends on the industry, but we see credit cards as one of the most popular options, especially because of installments. However, we’re seeing that throughout the quarters, instant bank transfer payments and eWallets have been gaining more and more share in the total payments pie.

How do Turkish consumers differ from those in other markets?

Juan: Instalment payments are much more prevalent in Turkey than in Europe or the US. In that sense, Turkey is similar to other emerging markets, where we also see a rapid rise in the use of APMs and fintech solutions.

What are some key local nuances companies should be aware of?

Juan: I think there are two main things that, though mentioned previously, I can't emphasize enough. Turkey is part of Europe, and Europe can usually be considered as one huge block when it comes to payments, but when you start drilling down, you need to be able to offer a localized payment experience. If you’re not offering instalments, you might not challenge local competitors, and if you’re not thinking about offering bank transfers or wallets such as Papara, you’ll be at a huge disadvantage compared to what the market wants. To do that, you need to localize.

Are there specific regulations impacting international businesses?

Juan: Apart from the new update in Customs Tax imposed in August 2024, where the threshold for international goods spend is lowered, a merchant looking to process in Turkey needs to be aware that compliance in Turkey is quite strict, and some industries might be considered riskier than in other markets; such as gaming or Web Hosting services for example; and hence additional due diligence might be required.

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The rise of local payment disruptors

How do Troy and Papara influence the competitive landscape?

Juan: Troy is the local card scheme in Turkey. It has over 200 million cards issued and over 35 million active users, according to the latest figures from mid-2024. Troy transactions currently make up about 12% of all card payments, and they're aiming to reach 20% by the end of the year. Given the macroeconomic situation in Turkey and the rising interchange costs, Troy has become increasingly popular thanks to its lower fees.

Papara was a natural development in Turkey's evolving financial landscape. With strong banking networks and a digitally-savvy population, it's no surprise they've become a major player in the fintech space, offering a wide range of services beyond those offered by traditional banks.

As one of the largest card payment markets in Europe, how will dLocal adjust its market penetration strategy to align with this opportunity?

Juan: Our approach in Turkey is similar to how we operate in every market: minimize friction for our customers. We provide a single API, a single contract, and a single integration for payment processing, making it as seamless as possible. To ensure resilience and optimize performance, we connect to a wide range of local players and acquirers. This allows us to leverage our Smart Routing and Smart Chaining tools effectively. 

And just as importantly, our partnerships team is constantly communicating with local issuers and other key players in the ecosystem.

How does dLocal work with local players?

Juan: We’re partners, actually. dLocal has the global reach and connections to the largest companies in the world, while the local players have the best tech stacks for local payment processing. So we leverage each other's strengths in order to provide the best possible service to these global companies.

Any strategic plans for integrating with advanced Turkish banking products?

Juan: Definitely. As these banking products become more advanced, we're looking at how we can integrate with them to provide the best possible service to our clients. 

We believe QR code payments will become increasingly popular for both B2C and B2B transactions in Turkey. This technology offers faster access to funds and cheaper payment processing, which are important advantages for merchants.

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dLocal's solutions for the Turkish market

What solutions do dLocal and ProcessOut offer for the Turkish market?

Juan: The dLocal and ProcessOut partnership allows global companies to process payments easily in Turkey, including both cards and alternative payment methods. This is quite unique, as many providers only support one or the other. We also enable merchants to localize the payment experience by offering options like Troy cards and instalments.

Can you talk about the different ways dLocal has helped merchants achieve success in the Turkish market? What kinds of outcomes have you seen?

Juan: We always strive for win-win partnerships, especially with our merchants. 

They come to us with a variety of needs: some require access to specific payment methods, particularly in the B2B high-ticket space; others want to lower their processing costs; and others prioritize performance and speed. 

Success is different for every merchant. For example, we've helped some reduce processing costs by 2-4%, while others have seen conversion rate increases of 6-9 percentage points.

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The Future of payments in Turkey

How do you see the Turkish payment landscape evolving?

Juan: Given the macroeconomic landscape, increasing interchange costs and increasing cross-border acquiring costs, I believe that more and more merchants will put Troy acquiring within their payment strategy and will definitely look to offer APMs given the cheaper costs and faster settlement timelines, especially considering the high inflation context; this is crucial in order to avoid volatility risk.

To learn more about how dLocal can help your business succeed in Turkey and other emerging markets, visit their website at dlocal.com

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