Digital transactions continue to grow rapidly in Cyprus, as citizens and businesses increasingly turn to electronic payments, mobile banking and fintech applications. This trend is reinforced by the general digitalization of the economy, but also by European developments around the digital euro and new payment technologies.
In recent years, dozens of fintech startups have been established, while, at the same time, traditional banking institutions are investing in digital services.
An important role in the development of the sector is played by the Central Bank of Cyprus, which closely monitors technological developments and attempts to create a secure operating framework for new financial services.
The European Central Bank sees fintech as a key driver for the modernisation of the European financial system, but at the same time insists that innovation must be accompanied by strong supervision, cybersecurity and consumer protection.
Fintech, i.e. the utilization of innovative digital technologies in financial services, is emerging as one of the fastest growing industries worldwide. Digital wallets, online lending, investment applications, artificial intelligence and blockchain technologies are creating a new banking ecosystem, which promises faster transactions, lower costs and greater flexibility for consumers and businesses.
The term Fintech is an abbreviation for the words Financial Technology, which refers to the technology applied to the services and products of banks and other financial institutions. Within a period of a few years, Fintech has created tremendous changes in the banking sector, with results expected to be even more significant in the future.
As the ECB explains, FinTech companies put technology-based innovation at the heart of their business activities. They may be particularly active in areas such as payment services, credit scoring and automated investment advice, using artificial intelligence, big data or blockchain technology.
According to data from the European Central Bank, 77.7 billion cashless transactions took place in the euro area in the first half of 2025, an increase of 7.7% compared to the previous year.
The ECB reports that card payments are the most widespread means of electronic payment, accounting for 57% of all cashless transactions. At the same time, contactless payments continue to grow, which shows that consumers prefer quick and easy solutions for their daily purchases.
In Cyprus, the use of cards is even more intense. According to data based on ECB data, card payments in Cyprus accounted for 74.5% of cashless transactions in the first half of 2025 in the first half of 2025, ranking the country at the top of the eurozone in terms of the use of electronic payments.
Risk management
Fintech companies are, ostensibly, a threat to traditional banks, as, according to estimates, these non-traditional players have captured between 4% and 8% of total bank revenues in the Eurozone region, rapidly reducing the profitability and market share of traditional banks.
Fintech services enjoy much lower overhead costs and can de facto afford to charge lower transaction fees, compared to traditional banks, which still have fees and commissions as their main source of revenue. Digital banking, blockchain (digital data recording and storage technology), artificial intelligence and automation are fundamentally changing how we trade, invest and save. However, this rapid growth also comes with challenges: job losses due to automation, cyberattacks, over-reliance on algorithmic investments and the risk of over-indebtedness are issues that require attention.
The regulatory environment remains a key factor in the functioning of the banking system. Banks are required to comply with strict rules on capital adequacy, consumer protection and risk management. In contrast, many fintech companies operate within a less strict framework, which creates imbalances in competition. At the same time, increased digitalization amplifies cybersecurity risks.
Protecting data and ensuring the integrity of transactions are critical priorities. Investments in security systems and fraud prevention mechanisms are now essential to maintain customer trust. Despite the intensity of competition, banks maintain a strong advantage in the area of reliability. Their long-standing presence in the market and oversight by regulatory authorities enhance customer confidence, particularly in matters related to deposit management and large transactions. Banks are transforming into platforms for providing integrated financial services, while fintech companies continue to drive innovation in individual sectors.
Peer-to-peer payments
The world of trading is constantly changing. The latest example is direct electronic money transfers, peer-to-peer payments (P2P payments) which are digital money transactions made directly from one person to another, without the need for a physical presence at a bank or the mediation of traditional payment processes.
Simply put, it is the ability to send and receive money via mobile phone that the special app has, without an IBAN and only using a mobile phone. The IRIS system (P2P service) for instant money transfers between individuals using only the phone number currently operates in Greece.
In Cyprus, the process for the creation of a similar system is underway in collaboration with JCC and the Greek company "Interbank Systems (DIAS)", but without clarifying when this project will be completed with the participation of all banks. When implemented, it will allow the transfer of money between all bank customers instantly, without the need to exchange IBAN numbers, using only the recipient's mobile phone number.
However, the rapid spread of P2P payments also comes with concerns about cybersecurity, privacy, and dealing with online fraud. Experts point out that strong user identification and anti-money laundering regulations are critical considerations for the secure development of the sector.
Despite the challenges, analysts estimate that peer-to-peer payments will continue to grow in Cyprus as consumers increasingly turn to fast, easy and digital forms of transactions, gradually reducing the use of cash and traditional banking processes.
