...according to the newly published Decree on Confirmation and Collection of Taxes (Details on the Enforcement of the Obligation to Accept Payment by Card) 2021 of the Cyprus Ministry of Finance (Issue No 5548), countless industries will now be obliged to both provide credit card payment services but also inform customers that payment via cash and card will now be available.
The importance of card payments and electronic transactions for the Cyprus economy and its business environment.
It can be stated, without a doubt, that over the last couple of decades technological advancements have brought immense changes to the lifestyle and daily activities of people around the world. The financial sector has by no means lacked behind any other industry. In fact, technological changes within finance have allowed the provision of countless new services and financial products that would otherwise seem impossible in the 'only cash' and 'bank branch' era. Starting from the simple provision of ATMs and credit cards, to currently moving towards the full digitalisation of payments, all these technological improvements have made the access to financing and speed of transactions much faster and efficient.
As in many other countries, financial laws and regulations that are introduced by the Cypriot government to accompany advancements within the realm of finance, are just as important. Such regulations ensure that financial services are widely accessible to all people and that they are provided in an ethical and fair way.
In such sense, when it comes to the speed and variety of payments and transactions, Cyprus has recently made another step forward in making the life of the local community much easier. In particular, according to the newly published Decree on Confirmation and Collection of Taxes (Details on the Enforcement of the Obligation to Accept Payment by Card) 2021 of the Cyprus Ministry of Finance (Issue No 5548), countless industries will now be obliged to both provide credit card payment services but also inform customers that payment via cash and card will now be available. Such industries include, but are not limited to, retail services, merchant services, hospitality, financial services, legal services and even education. Even though in the eyes of many this may look like an unnecessary and unexciting new regulation, it is actually an instrumental step for the future of the island.
Why are electronic transactions and card payments so important for the economy? How can the local community benefit from the availability of card payments?
The answer is in fact simple but extensive as there are countless benefits of such electronic transactions. In addition, even though some concerns exist when it comes to the transition towards card payments, with the optimal amount of regulation and back-up strategies these issues can easily be solved. The following are only the most important benefits that Cyprus and its economy can gain, and has been gaining, from the incorporation of card payments and electronic transactions in all industries:
- Starting of simply, replacing cash with card payments when it comes to the purchase of expensive goods or services implies that the risk of theft or loss of money is significantly reduced. Holding large amounts of money in cash has always been risky. On the other hand, a stolen credit card will need a pin to function for large transactions and more importantly, it can be deactivated with a click of a button or a simple phone call to the bank.
- Moving towards more electronic transactions and allowing cash to account for a smaller proportion of total transactions within the island, will lead to a reduction in tax evasion and will shrink the so called 'shadow economy'. As cash payments make evading tax much easier, eliminating cash will in turn reduce the presence of the 'shadow economy' in Cyprus.
- Another obvious benefit is that of time efficiency and reduction of pointless trips to the bank. This is a perk that will be and has been enjoyed by both consumers and vendors/suppliers of goods and services. Not only does this reduce the amount of times consumers have to visit the Bank or the ATM to take out cash, card payments also reduce the excursions of shop owners to the Bank in order to deposit cash from the sale of goods or services.
- Increasing card payments and electronic transactions also implies that all transactions are recorded in some kind of electronic platform. Consequently, this allows both businesses and consumers in Cyprus to be able to fully track their transactions and know exactly when and where money is going in or out of their accounts.
- In non-pandemic times, Cyprus is a tourism hub and usually receives over 3 million international tourists per year. Forcing all merchant, hospitality, and retail services to provide card payment services will likely create an additional incentive for tourists to choose Cyprus over other destinations as they will not need to worry about converting their own cash to the local currency. Instead, they will simply use their own credit or debit cards.
Nevertheless, it must be stated that technological progress is always accompanied by certain concerns and vulnerabilities. As such, there are certain areas where card payments and electronic transactions can prove to be worrisome, and this is therefore why the government, financial institutions and financial regulators need to be in constant cooperation in order to ensure that nothing goes terribly wrong. Below are some of the primary threats that accompany this transition to digitalised payment systems and should therefore be constantly monitored by the appropriate agencies in order to avoid large scale failures of the island's financial system:
- Potential failure of bank legacy systems and their online payment platform. If such an issue hits one of Cyprus's big banks, and is not resolved swiftly, it could lead to a large proportion of the island's economy freezing up as people will be unable to buy or sell anything using their credit cards.
- Data breaches and identity theft are an issue that has been on the rise and directly correlated with the rise of technology. This is no different when it comes to financial transactions and it is therefore important to protect the data and money of customers as they move towards the world of card payments and digital banking.
All and all, although certain concerns exist in the transition towards card payments and electronic transactions, the step the government of Cyprus has taken is an essential one if the island wants to keep up with the financial efficiency and variety of financial services that other developed nations provide. At A. G. Paphitis & Co LLC we pride ourselves in being fully up to date with all current and new laws and regulations in Cyprus. Our team of legal professionals are therefore the ideal people to contact when it comes to businesses trying to understand whether their industry is affected by this regulation and if so, what can be done in order to comply with the new law and therefore avoid the hefty fine of 2,000 Euros that will be imposed on firms choosing to disobey the new provisions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.