Ioannis Georgoulas: "I anticipate that the EMI market will consolidate much sooner than expected"

Ioannis Georgoulas, Chairman of the Association of Electronic Money and Payment Institutions (ACEMPI), recently talked to GOLD magazine about the changing EMI scene and what the future holds as society and technology evolve.

Among other things, Georgoulas spoke about the new Directorate for the Supervision of Electronic Money and Payment Institutions, the comparison between Payment Services Directive (PSD2) and PSD3, EMI market consolidation and the role of generative AI in the payments space.

Following the recent creation of the Directorate for the Supervision of Electronic Money and Payment Institutions, how do you see the EMI scene changing in Cyprus? Where are we and is there room to grow more?

The creation of the new Directorate for the Supervision of Electronic Money Institutions (EMIs) and Payment Institutions (PIs) is going to enhance the efficiency and effectiveness of the Central Bank of Cyprus. It is important to note that there will be a dedicated team monitoring the sector, leading the way to a more specialised approach towards regulated institutions. We hope that, from now on, enforcement actions will be timely and adequately resourced and the new Directorate will demonstrate a commitment to maintaining a level playing field for all market participants. As a result, we expect it to reinforce trust in the regulatory framework and in the Central Bank’s ability to safeguard market integrity and consumer interests.

What is ACEMPI doing to help expand digital banking and EMIs in Cyprus?

We engage with regulators, legislators and policymakers to discuss new laws and regulations that affect the electronic money and payments industry. We provide analysis and insights of our sector and we promote literacy for electronic money and payments. At the same time, we act as a collective voice for our members, ensuring that their interests are represented in regulatory discussions and public forums. All of these activities showcase our interest in enhancing the understanding of digital banking in Cyprus.

Do you see EMIs eventually expanding the services that they provide, including those currently offered by traditional banks?

We believe that we are at the beginning of the evolution of the sector and yes, we do feel that we will soon be able to offer a broader range of financial services. There can be opportunities to partner with non-financial services companies, to target underbanked and unbanked populations, to develop affordable and accessible solutions tailored for individuals without access to traditional banking and to offer financial education and innovative digital tools to attract younger users accustomed to technology-driven services. At the same time, we can also collaborate with traditional banks to offer hybrid services that combine the strengths of both institutions. If the traditional banks realize the benefits of such collaborations, what is already happening in other places around the world can happen in Cyprus as well.

What were the shortcomings of the Payment Services Directive (PSD2) and what do you expect to change with the PSD3?

With regard to PSD2, I think that the most important shortcoming concerns its inconsistent implementation across EU member states. PSD3 will address all the shortcomings of PSD2 and adapt to the evolving financial and technological landscape. PSD3 is going to streamline licensing requirements for payment service providers across EU member states. It will Introduce improved mechanisms to combat fraud in payments, including new obligations for Payment Service Providers (PSPs) to detect and prevent unauthorized transactions. At the same time, PSD3 will Increase the transparency of fees, especially for cross-border payments, and will require PSPs to provide more detailed information to consumers. We are going to see enhanced customer authentication requirements, new rules for third party providers and stronger governance and supervision.

According to last year’s data, there are around 650 EMIs in Europe. Do you see the market consolidating at some point?

Yes, and I anticipate that the market will consolidate much sooner than expected. The increasing stringency of compliance requirements is likely to drive up operating costs for many EMIs. Smaller institutions, in particular, may struggle to meet these demands, leading them to either shut down or seek mergers with other entities. The industry remains highly competitive, compelling EMIs to invest heavily in innovation and customer service to maintain relevance. Furthermore, while traditional banks are making efforts to become more innovative, their progress is comparatively slow. This creates a window of opportunity before major players can offer services comparable to those of EMIs. Collectively, these factors strongly point to an accelerated consolidation within the market.

In what kinds of use cases can we expect to find generative AI in the payments space?

I can name two major use cases of generative AI in the payments space. The first and most important is fraud detection and prevention, where algorithms can detect unusual transaction behaviours in real-time and flag potentially fraudulent activities. The second is the customer service and experience, where AI financial advisors and assistants will have a major role in our future transactions. AI is still at the beginning but, because of this technology, we are going to experience historic changes in the payment sector.

This interview first appeared in the January edition of GOLD magazine. Click here to view it.