Analysis of the Credit Card Industry in Turkey
1. Identify the main macro environmental forces currently affecting the Turkish Credit Card Sector
(a) Conduct a PESTLE ANALYSIS
(For this industry I didn’t consider “Environmental Factors” of relevance.)
Political • Government Stability
Currently at political equilibrium Turkey has historically been volatile and could return to same rapidly. The current Turkish government is very pro western and secular, however its divided religious loyalties, issues surrounding Greek sovereignty rights and fundamentalist groups threaten the expected 5 year stability of this administration. • Government involvement in banking
The Turkish Government has a history of involvement in banking affairs which is of concern to international investors. The Turkish state owns and finances a number of its banks and provides artificial stability to the banking system through state funded initiatives. The Government has also tailored wages in line with inflation rates e.g. minimum wages rates. With recent IMF intervention the long term plan for Turkey is still not absolutely clear.
• EU Membership
The Turkish Government is pro EU membership and this is potentially the biggest paradigm shift on the horizon for Turkey’s financial system, this factor is further dealt with as a key driver.
Economic
• Interest Rates
Low interest rates in Turkey fuel loan take-up and have caused increase in credit card issue. Historically higher interest rates led to more widespread loan default and meant that less switching occurred as consumers were “tied” to provider. • Buoyant Economy
Economic growth in Turkey, with higher levels of middle and upper income, urban dwelling professionals and better access to continuing education has undoubtedly increased credit card take-up. (This could also be construed as a social factor). • Global financial crisis
The effects of the global financial crisis will have a major effect on banking restrictions to lending and credit
(a) Conduct a PESTLE ANALYSIS
(For this industry I didn’t consider “Environmental Factors” of relevance.)
Political • Government Stability
Currently at political equilibrium Turkey has historically been volatile and could return to same rapidly. The current Turkish government is very pro western and secular, however its divided religious loyalties, issues surrounding Greek sovereignty rights and fundamentalist groups threaten the expected 5 year stability of this administration. • Government involvement in banking
The Turkish Government has a history of involvement in banking affairs which is of concern to international investors. The Turkish state owns and finances a number of its banks and provides artificial stability to the banking system through state funded initiatives. The Government has also tailored wages in line with inflation rates e.g. minimum wages rates. With recent IMF intervention the long term plan for Turkey is still not absolutely clear.
• EU Membership
The Turkish Government is pro EU membership and this is potentially the biggest paradigm shift on the horizon for Turkey’s financial system, this factor is further dealt with as a key driver.
Economic
• Interest Rates
Low interest rates in Turkey fuel loan take-up and have caused increase in credit card issue. Historically higher interest rates led to more widespread loan default and meant that less switching occurred as consumers were “tied” to provider. • Buoyant Economy
Economic growth in Turkey, with higher levels of middle and upper income, urban dwelling professionals and better access to continuing education has undoubtedly increased credit card take-up. (This could also be construed as a social factor). • Global financial crisis
The effects of the global financial crisis will have a major effect on banking restrictions to lending and credit
Bibliography: Monday, August 23, 2010 Istanbul, Hurriyet Daily Newspaper http://www.hurriyetdailynews.com/n.php?n=personal-loan-debts-in-turkey-get-ahead-of-credit-card-debts-2010-08-23 www.mckinsey.com/clientservice/.../Credit_Cards_in_Turkey.ashx “What will your credit card look like in 25,50,100 years time ?” Jay McDonald Published: February 17, 2009