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Issuers in the growing but highly regulated Turkish credit card market will need to restructure their operations and focus on customer service to maintain profitability, a report from Celent LLC says.

According to the report, which was issued last week, Turkey had about 40 million credit cards by April, and transaction volume in the country has increased about 650% in the last six years, to $13.3 billion in May.

But the market's growth potential has been stunted by the Turkish government's decision to "stringently" regulate the market and cap card rates, according to Celent, the Boston financial research arm of Marsh & McLennan Cos.

Turkey has lowered the maximum monthly interest by 133 basis points in the past two years, to 4.39% in June, and it recently proposed a further decrease to 2.7%.

These cuts will create "significant impediments to profitability," which "will require banks to fundamentally restructure their credit card propositions," according to the report.

Issuers hoping to remain profitable in Turkey will need to "focus on cost reduction … while improving their customer management to attract customers toward more profitable products and services."

Perrine Fiorina, an analyst with Celent's banking group and a co-author of the report, said in a press release that banks will have to shift their strategies from increasing the number of cards they issue "to a more nuanced approach, where identifying and nurturing customer segments and relationships becomes a paramount concern."

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