Cyprus Mail 24 December 2022 - by Nick Theodoulou
Cypriots still choose cash over cards – ranking amongst the top three nations in EU for cash use – but cards and other cashless instruments are quickly catching up.
The Central Bank of Cyprus’ report on the landscape of retail payments between 2014-2021 found that card transactions more than tripled from €39 million in 2014 to €124 million in 2021.
The report also noted that for alternative payments to cash Cypriots clearly favour cards – accounting for 70 per cent of such transactions compared to 52 per cent amongst the rest of the EU.
The core message is that Cypriots still rely heavily on cash payments (88 per cent of the volume and 72 per cent of the total value). The average EU inhabitant used cashless payments 1.6 times more often than the average Cypriot.
It also found that digital payments have increased by 40 per cent since 2019 in Cyprus compared to just 18 per cent in the EU.
That may be in part as access to cash is no longer as easy as it was in 2014 – with bank branches down 42 per cent (from 615 to 260) and a reduction in ATMs from 526 to 451.
Contactless payments were made easier in 2020 when the limit without entering a PIN was raised from €20 to €50.
The report says that e-commerce transactions using payment cards are gaining popularity and have increased by more than 5 times in volume and in value terms from 2014 up until 2021.
The report emphasised that the value of cashless payments is mainly generated by credit transfers at 86 per cent, for bulk payments – such as salaries, pensions, various payments to the state (e.g. VAT, tax payments).
That was sped up in 2017 following an initiative between the tax department and the CBC along with other banks, which saw the government substitute the biggest part of the use of cheques with digital payment instruments. Credit transfers and card payments account for the largest share the government’s receipts in value terms.
Notably, Cyprus is one of the few European countries in which cheques are still used – with it even ranking second in terms of value at eight per cent; the EU average is just 0.7 per cent.
The cabinet in June 2021 approved a finance ministry decree obliging doctors, lawyers and retail businesses among others to accept plastic money in a bid to fight tax evasion. The inland revenue reiterated in October that those who fail to comply are subject to fines of up to €4,000.
Aside from digital use through credits cards, the next big thing will be the digital euro, which is set to see cash further phased out. Country reports by the European Central Bank earlier this year found that most of the general public in Cyprus, and even the tech-savvy “had not heard of the digital euro and did not know what it was”.
The report found that among the general public, younger professionals and students were more likely to use digital payment methods like mobile apps and smartphone-based payments, while older individuals and blue-collar workers tended to use more traditional payment methods such as credit/debit cards, cash, and online banking.
It was worth mentioning, the ECB said, that some in Cyprus had used mobile wallet applications from local banks but had then abandoned them as they were not widely accepted, “highlighting the importance of acceptance in this market”.
Those under 55 were the most open to a new payment method, while those aged 55+ and those lower on the socio-economic scale were resistant, as they were satisfied with current methods and did not see how this digital wallet would be better at serving their needs.
Others in Cyprus viewed the digital euro in a completely negative light, saying it would give excessive oversight to governments and central banks to monitor all transactions made by private entities. There were also ‘Big Brother’ fears associated with the use of personal data on transactions and that the control of digital money might lead to political control.
This was particularly prevalent among the unbanked population who did not see any need for technological innovations in their payment methods.
