First Data Corp. has scrapped plans to build a retail ATM network in Turkey, one of the world’s fastest-growing markets for ATM deployments, because the country’s new regulations makes the venture financially unfeasible.

First Data, based in Atlanta, and Turk Ekonomi Bankasi Paribas (TEB-BNP) bank announced in November they would build over the next three years a network comprised of 1,250 ATMs deployed in convenient-merchant locations in Istanbul, Turkey’s largest city, and other major cities across the country. TEB-BNP, a partnership between BNP Paribas and Turk Ekonomi Bankasi, is based in Istanbul.

On Tuesday, however, First Data disclosed it had dropped plans to build the ATM network because of recently enacted legislation.

“The legislative changes announced in June by BDDK, Turkey’s Banking Regulation and Supervision Authority, mean that we are not longer able to process TEB’s ATM transactions outside of Turkey in Bratislava [Slovakia],” a company official said. “This was the basis of our business case when we engaged with TEB in 2009. As a result of the rule changes, it is not longer economically viable for us to deliver the TEB contract.”

First Data operates a regional ATM processing facility in Bratislava, Slovakia’s capital and largest city. “Since the announcement by the BDDK, we have carefully reviewed our options but the new requirement for processing to be carried out within Turkey is not aligned with our platform- consolidation strategy. This strategy is central to our efforts to build economies of scale and focus our investment where we can generate the best returns,” First Data officials said.

 First Data officials said it was a difficult decision to walk away from the business opportunity.

“The decision to withdraw from the Turkish market has not been taken lightly,” company officials said. “We recognize and regret the impact that this will have on our employees and the lost opportunity that this represents for our business."

Dominic Hirsch, managing director of Retail Banking Research, a London-based consulting firm, said Turkey's rule requiring ATM processing within the country, has discouraged other organizations from entering the market.

Nicole Sturgill, research director for TowerGroup, a Needham, Mass.-based consultancy, said the law does not surprise her.

"Turkey's banking sector is strong and this is a way to keep jobs and money in the country," Sturgill said. "I don't know who the existing processors are, but I have to assume that they have a strong-enough processing infrastructure that this new law isn't hampering growth. I doubt if they would do it otherwise."

Turkey is the sixth-largest ATM market, behind France, Germany, Italy, Spain and the United Kingdom, reports Retail Banking Research. At the end of 2008, Turkey’s banks had deployed 22,586 ATMs, a 20 percent increase over 2007.

Last year, Turkey added 3,768 new ATMs, making it the leading country for ATM deployments in Western Europe for the fourth consecutive year, Retail Banking Research said. Retail Banking Research includes Turkey among the countries of Western Europe, although geographically Turkey is located in Southeastern Europe and Western Asia.

Diebold Inc., the world’s third-largest ATM manufacturer based on annual shipments, announced in October that it would open a direct sales office in Turkey because of the growing ATM market. A Diebold spokesperson said the new law will not affect the manufacturer's expansion plans.

Diebold faces stiff competition from NCR Corp., the world’s largest ATM manufacturer, and Wincor Nixdorf AG, the world’s second-largest manufacturer.

Although First Data is primarily known as a transaction processor in the United States, the company is one of the largest owners and operators of ATM networks overseas.  The business manages ATM networks in Australia, Austria, the Baltic States, Germany, India, Slovak Republic, South Africa and The United Kingdom.

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