Over the last decade, challenger banks have emerged in all corners of the world disrupting the banking industry as we know it. But what does the fintech market look like in Eastern Europe? Evie Rusman speaks to Turkey’s largest fintech Papara

The fintech market in Turkey is not very saturated. Meanwhile, the gap between traditional incumbents and fintechs is considerably smaller than in other parts of the world; Turkey’s largest bank by assets ZiraatBank serves nine million mobile banking customers, and Papara, Turkey’s largest fintech by transaction value, has five million registered users.

In comparison, in the UK, HSBC is the largest bank by assets with around 40 million clients. Whereas, the UK fintech Revolut serves around nine million customers. The difference here is significant and maybe explains why Papara is having such an impact.

Serving the underbanked

Since its launch in 2016, Papara has facilitated over $5.5bn worth of money transfers and made over 70 million money transfer transactions. Its aim is to provide financial freedom to the underbanked and underserved across Europe.

Speaking to RBI, Ahmed Karslı, CEO and co-founder of Papara, discusses the journey to its launch.

“I came up with the idea back in 2015. At the time there were no official reports, but we found out that more than half of the adult population in Turkey was unbanked,” he says. “We created Papara to serve those people – who were generally ignored by traditional banks.

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“There are also many people in Turkey who do not have a bank account because of religious reasons, as well as due to living in rural areas. We mostly decided to focus on underbanked people – those who do not have an account because of their age. The average age to open a bank account in Turkey is 23 – we tend to open accounts when we find a job and receive our first salary.”

He continues: “As a result, we shifted our focus to teenagers and youngsters, who have financial needs and may need to pay for services such as Spotify and Netflix. After launching the product, we discovered that serving underbanked people is quite a long-term investment because they do not spend enough money for us to cover transaction costs. Because of that we decided to compete directly with banks and acquire their users.”

Karslı also mentions how banks in Turkey will charge users who do not have money in their bank accounts for every transaction, but those who have money in their accounts will not be charged a fee.

He adds: “We decided to create the opposite of this, a product that doesn’t segment any users. We do not have a premium account or anything – it is the same for every user.”

Papara products

Papara offers services for both consumers and business. Its core product for consumers is its money transfer capability, which is free and enables users to transfer currencies to anywhere in the world. According to the fintech, this is a first in Turkey.

For businesses, Papara offers a range of services, including mass payments which allows businesses to pay multiple employees online simultaneously.

The fintech also boasts a low CPA, and 80% of Papara’s customers do not pay for Papara’s services.

“Our products are all about user experience,” Karslı says. “For the last 18 months, we have launched a new feature every two weeks, so we are extremely fast. We understand the Turkish population and know what they want. Launching a new feature every two weeks helps to drive our performance.

“So far, there hasn’t been much competition in Turkey because we were the first mover and we have that network effect that eliminates any potential competition. For the last five years, our product has been the best in terms of sending money to anyone. It was also the first product of its kind in Turkey.”

Western expansion

Following its success in Turkey, the fintech is now setting its sights on the West. Last month, Papara applied for an e-money licence in Lithuania, its first point of expansion.

After this, the fintech plans to launch in Germany and will then extend its product to France, Belgium Austria and Switzerland before the end of 2021.

Speaking on the reason behind Papara’s western expansion, Karslı says: “We have many global merchants who are interested in Papara’s mass payments product. But also, if you are Turkish and living in a European country like Germany, the options for you to send money to Turkey or get paid from Turkey are very limited.

“Most of these Turkish people still use cash transfer services like MoneyGram and Western Union, which are extremely costly. We are planning to reduce that kind of cost by 90%.”

Countries including Saudi Arabia, Egypt and Azerbaijan are also on the fintech’s radar – Karslı describes them as having “extremely similar conditions to Turkey”. He says: “Banks in these regions dominate money transfer markets, making services costly and limited.”