Cyprus turns to digital payments as fintech reshapes banking

Digital transactions in Cyprus are continuing to grow at a rapid pace, as consumers and businesses increasingly move towards card payments, mobile banking, electronic wallets and fintech applications. The shift reflects the broader digitalisation of the economy, but also the pressure being placed on Europe’s financial system by new payment technologies, artificial intelligence, blockchain and the planned digital euro. According to the European Central Bank (ECB), the number of non-cash payments in the euro area reached 77.7 billion in the first half of 2025, marking an increase of 7.7 per cent compared with the same period of the previous year. Card payments remained the most widely used electronic payment method, accounting for 57 per cent of all non-cash transactions in the euro area. Contactless payments also continued to rise, with the ECB reporting 29.6bn contactless card payments during the same period, up 12.8 per cent year-on-year. Cyprus appears to be moving even faster than the euro area average. Figures based on ECB data show that card payments accounted for 74.5 per cent of cashless transactions in Cyprus in the first half of 2025, placing the country among the eurozone’s strongest users of electronic payments. This growing appetite for digital transactions is also being reflected in the local fintech market. Dozens of fintech companies and startups have been established in recent years, while traditional banks are investing heavily in mobile banking, digital onboarding, instant payments and online customer services. The trend is being supported by Cyprus’ wider digital economy. According to the US International Trade Administration, the island’s digital payments market is expected to grow from $2.76bn in 2025 to $6.70bn by 2030, driven mainly by mobile point-of-sale payments. Fintech, short for financial technology, refers to the use of digital innovation in financial services. In practical terms, this includes digital wallets, mobile payment apps, online lending platforms, automated investment tools, credit scoring systems, artificial intelligence, big data and blockchain-based services. The ECB has repeatedly described fintech as a key part of the modernisation of Europe’s financial system. However, it has also made clear that innovation must be accompanied by strong supervision, consumer protection, data security and effective controls against fraud and money laundering. In Cyprus, the Central Bank of Cyprus (CBC) plays a central role in monitoring developments in financial technology. Its Innovation Hub is designed to support startups, licensed institutions and fintech providers that want to launch innovative products or services in the Cypriot market and beyond. At the same time, the CBC supervises payment institutions and electronic money institutions. Under the existing framework, electronic money institutions operating from Cyprus require authorisation, while applicants must meet conditions linked to governance, local presence, suitability and compliance with payment services legislation. This regulatory role is becoming more important as the line between banks and technology companies becomes less clear. Fintech companies have already become serious competitors to traditional banks. Their lower operating costs allow them to offer cheaper and faster services, especially in payments, transfers and investment applications. For banks, this creates pressure on fee income and market share at a time when customers increasingly expect financial services to be instant, simple and available through their phones. However, traditional banks still retain a major advantage in trust. Their long-standing presence, capital requirements and direct supervision by regulators continue to matter, especially when it comes to deposits, large transactions and more complex financial products. As a result, the market is not simply moving from banks to fintech. Rather, banks are increasingly turning themselves into broader digital platforms, while fintech firms continue to push innovation in specific areas such as payments, credit, wealth management and compliance technology. The risks, however, are also growing. Greater reliance on digital systems increases exposure to cyberattacks, fraud, data breaches and operational failures. Artificial intelligence and automated investment tools may also create new risks if consumers rely too heavily on algorithms they do not fully understand. Moreover, the rapid expansion of digital credit and buy-now-pay-later services in other markets has shown how easy access to finance can increase the risk of over-indebtedness if it is not properly supervised. This is why cybersecurity, customer identification and anti-money laundering checks are now becoming as important as speed and convenience. Another major change expected in the Cypriot payments market concerns peer-to-peer payments, commonly known as P2P payments. These allow users to send money directly to another person through a mobile phone, often without needing to exchange IBAN numbers. In Greece, the IRIS system already allows instant transfers using a mobile number. In Cyprus, a similar system is being developed in cooperation with JCC and the Greek company DIAS, although the timetable for its full launch with the participation of all banks has not yet been clarified. Once introduced, the system is expected to allow customers of participating banks to transfer money instantly using only the recipient’s mobile phone number. This would make everyday transactions, from splitting a restaurant bill to sending money to family members, much faster and simpler. At a European level, the next major step is the digital euro. The ECB says the project is intended to provide a public digital payment option that would be available across the euro area, complementing cash and existing private payment systems. The central bank said it aims to be ready for a possible first issuance of the digital euro in 2029, provided the necessary EU legislation is adopted during 2026.