Analysis of the Credit Card Industry in Turkey

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1. Identify the main macro environmental forces currently affecting the Turkish Credit Card Sector


(For this industry I didn’t consider “Environmental Factors” of relevance.)

• Government Stability
Currently at political equilibrium Turkey has historically been volatile and could return to same rapidly. The current Turkish government is very pro western and secular, however its divided religious loyalties, issues surrounding Greek sovereignty rights and fundamentalist groups threaten the expected 5 year stability of this administration. • Government involvement in banking

The Turkish Government has a history of involvement in banking affairs which is of concern to international investors. The Turkish state owns and finances a number of its banks and provides artificial stability to the banking system through state funded initiatives. The Government has also tailored wages in line with inflation rates e.g. minimum wages rates. With recent IMF intervention the long term plan for Turkey is still not absolutely clear.

• EU Membership
The Turkish Government is pro EU membership and this is potentially the biggest paradigm shift on the horizon for Turkey’s financial system, this factor is further dealt with as a key driver. Economic

• Interest Rates
Low interest rates in Turkey fuel loan take-up and have caused increase in credit card issue. Historically higher interest rates led to more widespread loan default and meant that less switching occurred as consumers were “tied” to provider. • Buoyant Economy

Economic growth in Turkey, with higher levels of middle and upper income, urban dwelling professionals and better access to continuing education has undoubtedly increased credit card take-up. (This could also be construed as a social factor). • Global financial crisis

The effects of the global financial crisis will have a major effect on banking restrictions to lending and credit availability in Turkey. Turkey’s export markets will be likely affected by the ongoing crisis which has a major effect on GDP which in turn affects spending power.

• Higher standard of living
Higher standards of living among consumers have a beneficial knock on effect for credit cards issuers. In Turkey 7.5% of GDP is invested back into education thus consumers are more financial savvy. • Urban/Rural Divide

Urban dwellers have a much higher likelihood of credit card use given their potential for access of issue and probability of a regular wage earning role. As the economy develops Turks are increasingly moving off the land from poorly paying seasonal work to the cities that offer a better chance of regular income and personal development.

• E –Commerce
Worth in excess of 2 billion euro to the economy and with 16 million people accessing the internet E-Commerce is a huge growth area and potential distribution channel for the credit card industry. It is also a medium for information driven purchasing through advertising potential and its access is furthered through telephone technology integration. • SMART Cards

The security afforded to the credit card industry through use of SMART cards has a beneficial affect on usage through; 1. Increased level of merchants accepting the facility 2. Security for use in Internet Cafes (here large numbers access the internet) 3. Security of service has become a battleground for competition among issuers Coupled with the above technologies, the explosion in EPOS facilities mean more access to products and services through credit card use, homogenising the myriad of potential transactions and benefiting both consumer and merchant. ATM’s also have further facilities to enhance the benefits of using plastic such as bill pay, mobile kiosks etc.


• Intervention of Government/Key official Institutions There have been widespread changes in the law in Turkey...
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