PayPal.jpg
Photograph: Photo by W Xi, used under CC BY-SA

PayPal ceased operations in Turkey as of Monday, after the country's banking watchdog rejected the company's license, saying it failed to comply with localization regulations.

The move is being decried by small business owners who depend on the money transferring service for nearly all their transactions. For many, PayPal is the only option for doing business globally.

"This is huge. This is economically devastating to many, many people," said one small business owner who sells Turkey-focused items, such as bathhouse towels and coffee grinders, via online platforms.

The businesswoman, who has revenue streams of about 8,000 dollars a month, asked not to be identified as she has rerouted her transactions through brokers, the only way to get around the shutdown.

This method raises the cost of doing business as there are additional transaction fees and the transfers take longer.

Artisanal products, such as art and ceramics, are often sold from Turkey to Europe using platforms like Etsy, a peer-to-peer marketplace, or Ebay.

Shoppers at these online bazaars prefer PayPal as it offers insurance against fraud and does not require handing over credit card details.According to PayPal, Turkey wants the company to "fully localize" its systems.

"We respect Turkey’s desire to have information technology infrastructure deployed within its borders," the company said in a statement issued to the website TechCrunch last week.

"However, PayPal utilizes a global payments platform that operates across more than 200 markets, rather than maintaining local payments platforms with dedicated technology infrastructure in any single country."

The Turkish Banking Regulation and Supervision Agency (BDDK) was quoted by the state-run Anadolu news agency as saying the license was rejected as PayPal declined to comply with a law stipulating banking institutions localize their primary and secondary systems.

Turkey's run-in with tech companies is not limited to PayPal. The country has shut down Twitter and YouTube in the past and bans tens of thousands of websites. Numerous social media users have their accounts blocked in the country.

Critics say the government under President Recep Tayyip Erdogan, accused of growing increasingly authoritarian, is cutting into free speech.

More than 1,850 people are facing criminal charges over “insulting” the president, and journalists have been sentenced to jail time.

Turkey's economy last year showed surprising resilience, but the tourism sector is tanking. Last month, there was a 30-per-cent drop in the number of foreign visitors because of terrorism concerns and a row with Russia.

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