In September 2019, PSD2 went live in the EEA. Cyprus has established itself as a growing fintech hub andoffers open banking.
Open banking is banking practice that securely shares financial information such as consumer banking, transactions and other financial data to third-party financial service providers (Estevez, 2020). Sharing data is done through the use of application programming interfaces (APIs) and only with the consent of customers (The Balance, 2020). Open banking is the drive behind both innovation and competition in the financial industry (Cahill, n.d.).
PSD2 is a European Directive that regulates electronic payment services, was implemented in all EEA countries in 2016 and went live in September 2019.
Cyprus has established itself as a growing fintech hub with almost 250 fintechs offering services from real-time investment portfolio securitization to automated order processing (Laffaz, 2021). The country is recognised internationally as a financial centre due to its strong banking sector and well-established law system (Laffaz, 2021).
Cyprus has the optimal conditions for new and existing fintechs- the banking sector and FX industry in Cyprus are open to technological development and regulators take a pro-business approach to facilitating fintech activity (Laffaz, 2021). In regards to regulations, the CySEC has undertaken a sandbox-like initiation called the Innovation Hub to allow a transfer of information regarding regulation while promoting innovation (Laffaz, 2021).
With the aim to remain competitive, Cyprus is investing greatly in technology and innovation through EU-coordinated programs (DESI, 2020, 12). Furthermore, Cyprus is a member of the EuroHPC Joint Undertaking and has signed the Declaration of European Blockchain Partnership and the Declaration on Cooperation on Artificial intelligence (DESI, 2020, 12). Additionally, Cyprus signed a declaration, along with 19 member states, to develop and deploy a quantum communication infrastructure across the EU within the next 10 years (DESI, 2020, 12).
Of all Cyprian citizens using the internet, 47% use the internet for online banking, which is 19% below the EU average (DESI, 2020, 10). Additionally, on integration of digital technologies, Cyprus ranks 20th among EU countries (DESI, 2020, 11). Furthermore, Cyprus ranks 18th in the EU for digital public services (DESI, 2020, 13).
Cyprus has a total of29 banks, the largest of which include Bank of Cyprus and RCB Bank.
Open banking uses an API that allows financial institutions to exchange financial data, usually through a third party-developed application (Estevez, 2020). These applications are developed by up and coming FinTech companies with the mission to improve digital banking.
To access and use the open banking APIs in Cyprus, you will need to acquire an account information service provider license, issued by the relevant authority. Furthermore, you will require a relevant certificate (QTSPs or eIDAS), compliant with PSD2 requirements. Alternatively, you can use an open banking platform, such as Nordigen.
The Balance. (2020, October 11). What Open Banking Is and How It Will Affect You. https://www.thebalance.com/what-is-open-banking-and-how-will-it-affect-you-4173727
Cahill, H. (n.d.).InvoiceFair. The Evolution of Open Banking: Connectivity breeds digital competition. https://invoicefair.com/the-evolution-of-open-banking-connectivity-breeds-digital-competition-081118/
DESI. (2020). Cyprus.Digital Economy and Society Index (DESI) 2020, 1-14.
Estevez, E. (2020, August 27).Open Banking. Investopedia. https://www.investopedia.com/terms/o/open-banking.asp
Laffaz. (2021, March 18).How Cyprus is boosting its startup ecosystem and innovation to address global challenges. Laffaz. https://laffaz.com/cyprus-startup-ecosystem-innovation-global-challenges/
Nordigen is an authorised Account Information Service Provider. We provide free access to bank data and premium data insights, using regulated PSD2 connections.