PayPal bin Turkish customers over regulatory issues

Turkey FlagPayPal is to shut down its service in Turkey on the 6th of June. From that date Turkish residents will no longer be able to send or receive money with PayPal. All they’ll be able to do is to withdraw any remaining funds in their PayPal account to a Turkish bank account.

Apparently, according to a PayPal statement, the local Turkish regulatory authorities, the Banking Regulation and Supervision Agency (BRSA), rejected PayPal’s license application.

This means no Turkish citizen will be able to buy and sell or send money to friends and family with PayPal. For merchants who rely on the Internet for selling it’s going to be a right pain. Pretty much every western consumer has a PayPal account and they won’t be wanting to open an account with a random Turkish payment provider just to make one purchase.

If you currently sell to Turkey on marketplaces including eBay, you may wish to rethink as you won’t be getting paid via PayPal. Negotiating an alternative payment method for an eBay purchase may simply be more trouble than it’s worth.

It goes deeper than trade however – there are so many services which users pay for with PayPal. When the Greek banks blocked overseas payments people were losing their websites as they couldn’t pay for hosting. Fortunately the Turkish situation isn’t quite that bad, it’s just PayPal that the Turks won’t be able to use – they’ll still be able to pay for services with bank cards… Just so long as they remember that their yearly or monthly subscriptions won’t be paid with PayPal after the 6th of June.

It looks like the reason PayPal’s Turkish license was rejected is because their IT infrastructure isn’t located in Turkey. Sounds a bit daft, but apparently the Turkish rulers want companies operating in their country to have their datacenters located in Turkey. That’s not going to happen any time soon with PayPal who operate in a couple of hundred countries around the world and thus have to have a global IT network.

Perhaps PayPal will stick a couple of servers in Turkey at some point in the future, which sounds easy enough. It’s not just physically locating them in Turkey that’s the issue though, it’s having a full security set up (both electronic and physical) to keep the data secure. It’s not just Turkish accounts that PayPal have to worry about, it’s their 184 million active customer around the world and 269 million credit cards registered with Braintree that need to be secure.

It looks like PayPal have, at least in the short term, stuck two fingers up at Turkey and decided it’s simply too expensive, inconvenient and impractical to do business in Turkey. It’s a strange stance to take for a country who are making all that noise about being desperate to join the EU.