The Journey to Zero Value Authentication in Turkish Market

OPENING

In the early 2000s, when cash was still king, the weather was scorching, just like today. I, a 7-year-old, slightly chubby boy, had my 5 Turkish lira paper money that bigger than my palm, ready to buy my favorite lemon stick, running barefoot to the nearest local shop, the excitement bubbling inside me like a cold soda on a hot day.

As I reached the shop, the familiar fresh bread greeted me, handing the paper money to the local shop owner, or 'bakkal,' I watched as he took it with both hands, stretching it out as if it were some ancient artifact, held it up to the light, rubbed it between his fingers, his face unreadable and checked if that paper money was real or fake. I can’t even describe the anxiety that rushed through me—what if the shop didn’t accept the cash? The world outside the shop faded away, it felt as though the entire shop was holding its breath, waiting for his verdict, if the money was real or fake.

Looking back, that was my first experience with what we now call zero-value authentication, though I had no idea at the time.

THE CHALLENGE
According to iyzico's 2023 E-commerce Ecosystem in Türkiye report here here:

• Nearly 6 billion e-commerce transactions were conducted in Türkiye in 2023.
• The market is projected to experience a compound annual growth rate (CAGR) of 25.8% from 2022 to 2030.
• This growth is driven by Türkiye's rapid digital transformation, strategic location near key markets, and a young, tech-savvy population.

Closer look to Turkish Ecosystem in 2023;

1. Market Growth:
   • Mobile commerce, in particular, has seen remarkable growth, with a large percentage of transactions now conducted via smartphones.
2. Consumer Behavior:
   • The demand for convenience, product variety, and better deals continues to fuel this trend.

3. Payment Innovations:

   • Installment payment options are popular among consumers, making high-value purchases more accessible.
   • The TROY card scheme, Türkiye's domestic card network, has join up the competition with MasterCard and Visa, emerging as an innovative leader in the Turkish banking industry.
   • And TROY strive to include every age group in this transformation, recently releasing a special agreement for retired people, who tend to be more cautious with online payments.

4. Logistics and Delivery:

   • There is a growing emphasis on faster, more reliable delivery options to meet rising consumer expectations.
   • For instance, with Amazon, you can place an order before going to sleep and have it delivered by the time you're sipping your morning coffee—no matter where you are in Türkiye.

5. Challenges:

   • Cybersecurity remains a critical concern, with ongoing efforts to protect consumer data and transaction security.

6. Error codes:

   • Based on our databases and majority of online shopping contributors, most known three error codes, relatively:
     • Insufficient funds
     • Fraudulent transactions
     • Expired cards

We understand:

• Insufficient funds are a reflection of the rapidly growing economy.
• Fraudulent transactions, while concerning, are somewhat expected.
• But expired cards?

One of the major problems of merchants was lack of customer verifications. Merchants could not verify customers while they were adding their cards whereas in other countries (i.e. EU, US), cards can be verified with zero value verification transitions.
In TR, merchants were not able to use this service. Hence, they either do not verify or charge TRY 1 and release it quickly by hoping customers will not see.
Zero value verification also helps to reduce expired card declines significantly as cards can be verified with the new card through tokens.

This anomaly was our primary motivation on zero value authentication, leading us to embark on a mission to significantly reduce errors related to expired cards.

SEARCH FOR SOLUTIONS
With a clear target in mind, we set out to create a game plan with an entrepreneurial mindset:

• We started with extensive research, spending hours studying card schemes and fintech API documentation. We reached out to business partners, connected with people on LinkedIn, talked to our merchants, and held face-to-face meetings. We made our problem clear:
  • "We want to reduce expired/invalid/unknown card errors. Can we collaborate?"
• Unfortunately, the response was as empty as zero value authentication—no positive outcomes.

TURNING POINT
But wait a second, an entrepreneurial mindset means embracing failure and pivoting when necessary. After our initial failure, we turned to our trusted business partners. We revisited our strategy and decided to shift our focus. Instead of just defining the problem, we needed to find a real business issue that cross with zero value authentication on the way.

Like anyone nursing a broken heart, we turned to those closest to us—in this case, our strongest business partners.
That’s when Amazon shared their issue and questioned why TR payment ecosystem do not support zero value authentications.
The solution was within reach, like a mountain we were ready to climb.

COLLABORATION
With our new strategy in place, the next step was clear: reach out to the top voices to talk about zero value authentication in the fintech market on LinkedIn. This is where our luck turned in our favor when Mustafa Aktaş from BKM (Interbank Card Center) replied and agreed to meet for coffee. That meeting was the second brick on the wall. Mustafa recognized the significance of the problem and offered his support, opened the door for us to connect with every acquirer and issuer in the market.
We sent emails to the major issuer banks, and incredibly, all 67 issuers agreed to implement zero value authentication on their cards in the next quarter. I was over the clouds with happiness; we were making real progress. At that point, we had:

• A merchant eager to use the product.
• The issuers on board.
• The final piece of the puzzle was finding a domestic acquirer to process zero-value payments.

After numerous meetings with various acquirers, we finally connected with Semih Özenoğlu from YKB, one of the largest acquirers in the Turkish market. Semih took major role during 3DS 2.0 changes already on their previous company at Turkish market and Semih's vision aligned perfectly with ours. They believed in our project and proudly agreed to be the first bank in Türkiye to accept zero-value authentications.
In just six months, we turned our business case from a triangle to a solid square.

OUTCOME
So today at iyzico;

• We are committed to serve zero value authentication to all our merchants and significantly reducing the number of expired and invalid cards in our wallet solution by 2026.
• We anticipate that the majority of PSPs will follow suit, reducing the issue of expired cards across our ecosystem by 2030.

I would like to extend my heartfelt thanks once again to Zeynep from Amazon, Mustafa from BKM and Semih from YKB for their incredible support.

And as for me, that 7-year-old boy from the early 2000s, I wear the same proud smile as when the bakkal accepted my money. I now look forward to my next journey, inspired by the famous words of Nasreddin Hodja about a lake: “Ya tutarsa?” (What if it works?)