Neobanking and branchless digital banking based on participation principles: An overview of the Turkish banking sector

Türk Bankacılık Sektörüne Bir Bakış

Abstract

With the rapid advancement of digitalization, traditional banking services have increasingly fallen short in meeting evolving user expectations. This development has strengthened the trend toward branchless banking and given rise to a new business model in the banking sector, commonly referred to as neobanking. First emerging in the United Kingdom between 2007 and 2009, the neobanking concept gained significant global momentum during the COVID-19 pandemic. The growing market share of branchless digital and participation banks has prompted entrepreneurs to develop innovative solutions in this field. Although terms such as digital banking, virtual banking, and internet banking are often used interchangeably in everyday language, there are fundamental structural differences between digital banking and neobanking. Neobanking represents a new generation of banking characterized by a fully digital infrastructure, the absence of physical branches, and a user-centric approach. Rapidly expanding in Türkiye, this model has also secured a notable presence in countries such as the United States, China, Germany, Singapore, and France. Furthermore, new regulations issued by the Banking Regulation and Supervision Agency (BRSA) in 2021 have enhanced the security and regulatory framework of Türkiye’s digital banking infrastructure.