Demetris Taxitaris: “Cyprus can be the jurisdiction of choice for EMI/PI licenses”

As the company continues to secure payment and electronic money institution licenses from the Central Bank on behalf of its clients, Demetris Taxitaris, the CEO of Nicosia-based financial services consulting firm MAP S.Platis, tells CBN why the more competitive and reputable Cyprus becomes as a jurisdiction, the more business it shall attract, so long as it remains well-supervised.

MAP S.Platis Group has secured a number of payment and electronic money institution licenses from the Central Bank on behalf of your clients. What are some of the elements that you believe most attract your clients’ interest in setting up payment institutions in Cyprus?

A number of reasons make Cyprus an attractive jurisdiction for such firms including but not limited to the following:

- Cyprus maintains an updated regulatory framework in this field which is fully aligned with European Union (EU) law, facilitating the cross-border provision of services or the establishment of branches throughout the European Economic Area (EEA)

- The regulator understands the business and relevant concepts and can facilitate any needs arising from the emergence of new technologies provided they fall within the ambit of the law

- The estimated time to authorisation is comparable to other reputable EU jurisdictions, while we understand that there is an ongoing effort to shorten the timeframe further

- The financial services industry of Cyprus, comprising mostly investment firms, can be a target market for such firms and can facilitate business development

- There is a critical mass of people and consultants who are skilled and experienced and can work and support this industry, although demand keeps rising and supply is scarce globally

- The government has introduced relocation benefits including tax incentives for firms and their employees

Your company also has clients interested in being licensed to operate electronic money or payment institutions under Cyprus jurisdiction. Can you tell us more about this growing interest and what you consider to be the reasons behind it?

There is indeed high interest in this area which is evident from the current demand we experience from a lineup of clients in their pursuit for licenses and from other clients who have already embarked on this journey and already receive our support.

This global trend accelerated during the pandemic and favours the use of technology in the provision of financial services. It spans among others the execution of electronic payments, the use of cards including virtual cards and the maintenance and use of e-wallets of electronic money including the provision of virtual IBANs.

The trend is further accentuated by the growth in the development of applications for mobile devices and the growth in the development of online and contactless methods of conducting business including account opening. To this end, we have witnessed the rise of technologies like electronic know-your-client (eKYC) and identification, gateways for electronic payments, and various regulatory technologies, which are used for monitoring purposes and regulatory compliance and reporting.

In order for firms to be able to provide the aforementioned services they need to possess a license and an EMI or a PI license is simpler, faster and cheaper vs the more complex, slower and more expensive traditional banking license. EMIs and PIs are much simpler and cheaper to operate on an ongoing basis compared to banks as they require fewer resources – human and monetary – and they leverage the use of technology for the provision of their services and activities.

What do you consider to be some of the main neobank and digital bank global trends and how does the situation in Cyprus compare to how things are moving internationally?

A main global trend is to enable customers to take control of their finances, make transactions via payments and cards initially, via their own PC or even via an app on their mobile device. At the same time, many of these firms aspire to extend their services to include capabilities for customers to make investments in financial products, such as funds and stocks. Others take a more holistic approach, by attempting to create super apps, which allow a comprehensive management of customers’ finances.

Driving factors for these trends are the consumers themselves and their needs. Cyprus is no exception and is part of this global evolution in consumer trends. Having identified early on these trends, local banks are also undergoing a digital transformation, creating technologies which can keep them competitive in the changing landscape.

Further to the above, neobanks and digital banks can make a contribution to Cyprus’ growth. Can you tell us more about how they can contribute?

Firms involved in these services and activities need to obtain different licenses in different geographical regions to allow them to reach a critical and meaningful volume of customers. So they would typically attempt to obtain EMI/PI licenses for e-money/payment services or investment firm licenses to be able to provide investment services in various jurisdictions.

Cyprus can be the jurisdiction of choice for licenses for such firms within the EEA, allowing them to operate freely and giving them access to the EEA market. Having obtained such a license, firms are required to set up properly and maintain operations and substance on the ground.

In other words, they need to incorporate a company, have an office, and employ people or hire consultants. This means paying taxes, buying or renting offices and possibly residential property for relocated personnel, paying for professional services and utilities, and spending money on schools and living expenses, thus assisting the local economy and contributing to growth.

What more do you believe can be done in the public and private sector of Cyprus to best support growth and investment in the above-mentioned sectors (payment institutions, neobanks etc.)?

The more competitive and reputable we become as a jurisdiction, the more business we shall attract so long as we remain well-supervised.

From a regulatory standpoint, we should continue the effort to shorten the timeframe of reviewing and approving new applications, which is a significant factor considered by firms in their selection of the ideal jurisdiction. At the same time, we should ensure such firms remain well-supervised once licensed, in order to avoid any negative effects on Cyprus’ reputation.

In parallel, banks should maintain a constructive approach and consider these institutions as another segment of clients in my view rather than competitors. To this end, banks should try to work with them, always subject to each bank’s individual risk profile and appetite.

Factors which often impair our ability to attract more business include the lack of contemporary offices and the lack of international English-speaking schools for the children of people who relocate. There are various private initiatives which are underway to address these issues. The sooner we do, the sooner we shall tick these boxes and the sooner we shall be even more competitive.