A New Era of Divergence and Competition

The Turkish banking sector is navigating the 2024-2025 period, shaped by two pivotal forces. On one hand, a profound “divergence” is deepening, driven by interest rate policies and varied balance sheet structures. On the other, a relentless tsunami of digitalization is reshaping the entire industry landscape. The forecast that this “divergence will continue” highlights not only the widening profitability gap between investment and deposit banks but also the competitive chasm separating the digitally adept from the laggards. The destiny of a bank is no longer written solely by its ability to gather deposits, but by the digital experience through which it manages them.

Digitalization: No Longer an Option,

but a Necessity

The statistics paint a clear picture of this transformation. The number of active digital banking customers, which surpassed 119 million by the end of 2024, is on track to exceed 121 million by mid-2025. Over 92% of this massive user base now interacts with their bank exclusively through mobile devices. This signals the end of the “mobile-first” era and the dawn of a “mobile-everything” reality.

Transaction volumes further underscore this shift. In the final quarter of 2024, transactions via mobile channels exceeded 37 trillion TRY, dwarfing the 15 trillion TRY processed through traditional internet banking. The fact that even complex products, such as investment transactions, now see 22% of their volume originating from mobile devices demonstrates that customers have crossed a critical threshold of trust and habit. Foundational infrastructure initiatives by the Central Bank of the Republic of Türkiye (CBRT), like the Instant and Continuous Transfer of Funds (FAST) and the TR QR Code systems, are fueling this cashless, real-time economy and fundamentally altering the rules of the game.

A Shifting Battlefield

On this digital terrain, the sector’s traditional players face distinct challenges.

≈ Deposit Banks: Grappling with margin compression due to the high cost of deposits driven by stringent monetary policy, their vast branch networks are increasingly becoming significant cost centers. For them, survival hinges on boosting operational efficiency through digital channels.

≈ Development & Investment Banks: With access to long-term and international funding, they are better insulated from the storm of high deposit costs. This advantage allows them to lead in financing sustainability and large-scale investment projects, enabling them to achieve positive divergence in profitability.

≈ Participation Banks (Islamic Banks): They are steadily increasing their market share, buoyed by growing interest in interest-free finance and participation in state-supported projects. Their targets for the end of 2025—a 9% share in loans and 10% in profits—testify to the permanent diversification of the sector.

However, the most seismic impact is coming from a new generation of digital-native banks. The licensing of these fintech-driven institutions by the Banking Regulation and Supervision Agency (BRSA) in 2024 is redefining competition. Some new mobile banks have acquired 1 million customers in just nine months by converting retail ecosystems into “service points” and offering innovative products like on-account credit solutions.

This proves that finance is no longer confined to bank buildings but is initiated within the flow of life, at the very moment of purchase. These are among the first concrete manifestations of the embedded finance revolution in Türkiye.

Key International Trends

Globally, banking is undergoing a radical transformation. Digital screens have replaced physical branches as the primary point of interaction. Next-generation institutions are moving beyond payments and deposits to integrate investments, insurance, and budget management into a single “life assistant” application. Fueled by regulatory support, Open Banking and embedded finance models are proliferating, shifting the role of banks from product sellers to infrastructure providers.

Consequently, cybersecurity and digital identity have become paramount, serving as key competitive differentiators in an environment of rising fraud risks. Furthermore, digital banking is a powerful tool for financial inclusion, while sustainability-focused products that measure carbon footprints or promote green investments are opening new competitive frontiers.

The Road Ahead

The immediate future of Turkish banking will be shaped at the intersection of macroeconomic divergence and digital disruption. Five key theses stand out:

≈ Artificial intelligence will enable banks to move beyond analyzing past spending to proactively predicting customer needs, effectively becoming financial advisors and lifestyle assistants.

≈ Banks will increasingly offer “Banking as a Service” (BaaS) not just to end-users but to other corporations, allowing financial services to be integrated into any platform.

≈ Retailers, e-commerce giants, and telecom companies will become formidable competitors by offering tailored financial solutions to their existing customer bases.

≈ As digitalization accelerates, so will cybersecurity risks and data privacy concerns. The BRSA’s prudent capital and identity verification regulations will remain a crucial safeguard for systemic stability.

≈ A fierce race for efficiency will unfold between lean digital banks and traditional banks that successfully automate their operations. Market share will be won by those who deliver the best service at the lowest cost.

In conclusion, the traditional metrics of banking—branch counts and grand headquarters—are being replaced by the speed of APIs and the simplicity of a mobile app. In this challenging yet exciting new era, the institutions that place the customer at their core, leverage technology intelligently, and manage risk prudently will be the architects of tomorrow’s banking.