PayPal to halt operations in Turkey after losing license, impacts ‘hundreds of thousands’

Turkey has been making moves to bring tech business in the country under more localised control, and today big U.S. online payments company PayPal became the latest casualty. The company announced that it is suspending business operations in Turkey effective June 6, after failing to obtain a new license for its services.

The closure, PayPal told TechCrunch, will affect tens of thousands of businesses and hundreds of thousands of consumers.

A spokesperson confirmed the closure and also the reason behind it in two separate statements to TechCrunch.

The first statement closely follows the message in Turkish on PayPal’s local site regarding the denial of a license from the financial regulator BDDK.

“We are sorry to announce that PayPal is suspending its business operations in Turkey,” the company noted in a written note. “Effective from June 6, 2016, our customers in Turkey will no longer be able to send or receive funds with PayPal. Customers will still be able to log in to their PayPal accounts and withdraw any balance on their accounts to a Turkish bank account.

“Supporting our customers is very important to PayPal. However, we have no choice but to suspend processing payments in Turkey as our application for a Turkish payments license has been denied by the local financial regulator and we have been instructed to suspend our Turkish business operations.”

Asked why the license was denied, the spokesperson said that it was a result of new rules that require IT systems to be localized in the country. PayPal distributes its IT across several global hubs.

“Our suspension of services is a result of new national regulations overseen by the BDDK that require PayPal to fully localize our information technology systems in Turkey,” the spokesperson said. “We respect Turkey’s desire to have information technology infrastructure deployed within its borders, 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.”

It’s not clear how many data centers PayPal — which split from parent eBay in 2015 and is valued at $46 billion — has globally, or which hub handles its Turkish business. We have asked the company and will update as we learn more.

Turkey has been in the tech spotlight in recent months, but not for particularly positive reasons. In April, personal data for some 50 million Turkish citizens (more than half of its population of 80 million) was leaked online, seemingly by an activist (or activists) who were releasing the data to highlight the country’s ageing IT infrastructure, blaming the problem on President Recep Tayyip Erdogan and his tech policies.

It’s not all about tech, of course. Turkey has been a target for terrorist attacks, and that appears to be at least one reason that some believe Erdogan is justified in his iron fist approach.

Erdogan’s government has been trying to exert more power on the tech sphere than his predecessors, and one area where that has been very apparent up to now has been in social media: sites like Twitter, Facebook and Reddit in connection with a censorship law in the country that gives the regulator permission to block sites if they host content related to, among other things, porn, drugs, terrorism, illegal file sharing, or anything negative/questionable related to Mustafa Atatürk, the first president of Turkey.

Twitter has gone so far as to file a lawsuit in the country protesting the fine it’s been asked to pay over some of the tweets it has refused to remove.

We’ll continue to monitor this story and see how and if other companies are being affected. One local competitor, Iyzico, is still online.