Cyprus, a country in the eastern Mediterranean, has a payment sector that uses traditional and emerging payment methods. Though cash still accounts for a majority of payments, digital payments are increasing. European Central Bank (ECB) data shows that contactless payments as a share of all card payments increased from 66% in 2019 to 88% in 2022, reflecting a shift toward modern payment methods.

Cyprus’s position between European and Middle Eastern markets shapes its economy. The country’s membership in the EU means the Cypriot payment sector follows a suite of directives, including the revised Payment Services Directive (PSD2) and stringent data protection laws. The country’s location also encourages economic ties with neighboring countries, influencing cross-border payment dynamics.

Cypriots value security and regulatory compliance, contributing to a market in which Strong Customer Authentication (SCA) is required and expected. Beyond traditional banking institutions, Cyprus also has a diverse financial services sector, featuring specialized providers and fintechs.

Cyprus is an important player in the global payment space. Below, we’ll explain what you need to know about payments in Cyprus, including:

• Embracing local payment preferences
  
• Complying with regulations
  
• Prioritizing security
  

The state of the market

Though certain sectors and segments of Cyprus’s population still rely on cash, the overall trend signals a transition toward electronic and digital payment alternatives. According to ECB data, in 2022, credit and debit cards accounted for 36% of point-of-sale (POS) transactions in Cyprus, while cash accounted for 59%.

Moreover, digital wallets and mobile payment methods are gaining traction, with the transaction value from these digital alternatives expected to increase by 19.35% annually from 2025 to 2030. This shift is, in large part, because of the convenience and speed offered by contactless payments and QR codes.

Cyprus benefits from a comprehensive regulatory framework that upholds the stability and integrity of its financial system. The Central Bank of Cyprus (CBC), responsible for monetary policy and banking supervision, is key to maintaining financial stability. The CBC oversees a large reserve of foreign exchange, increasing the country’s economic resilience. The Cyprus Securities and Exchange Commission (CySEC) is another prominent regulatory body that oversees financial markets, investment services, and the conduct of financial organizations. CySEC’s regulatory oversight extends to the operations of investment firms, enforcing compliance with EU directives.

Payment methods

Businesses that want to enter the Cypriot payment market should understand how Cypriots—other businesses and customers—use payment methods.

Usage

Cash is widely used for payments in Cyprus, but cards—particularly debit cards—are also popular. There is about one debit card per capita, compared with 0.23 credit cards per capita. In the past decade, debit cards have increased in popularity while credit card use has declined. Still, the total value of credit card payments in Cyprus reached about €1.62 billion in 2020. The prevalence of internet access in Cyprus, with 94% of households reported to have access in 2022, contributes to the increasing adoption of online shopping and online credit card payments.

Contactless payments have been steadily gaining traction in Cyprus, with an uptick during the COVID-19 pandemic. According to the ECB, 88% of POS card transactions were contactless in 2022, compared with 66% in 2019. This surge indicates a consumer preference for touch-free transactions that continues growing even as pandemic-related concerns have diminished.

Cypriot payments through mobile apps accounted for about 3% of POS transactions in 2022, ECB data shows. However, the transaction value from mobile POS payments is forecast to hit $1.73 billion in 2025. This projected growth reflects increasing customer acceptance and trust in the security of mobile payment solutions.

Popular B2C payment methods in Cyprus

• Cash
  
• Credit cards
  
• Debit cards
  
• Mobile payments (e.g., JCC Payment Systems)
  

Popular B2B payment methods in Cyprus

• Credit cards
  
• Direct debits
  
• Single Euro Payments Area (SEPA) transfers
  

Trends

Similar to markets such as Singapore and the UK, Cyprus is proactively embracing fintech solutions. For instance, its government and financial institutions show interest in harnessing blockchain technology for financial services.

Ease and friction of entry

Though Cyprus offers many opportunities for businesses, it’s worth studying the tax implications of entering the market and the country’s approach to chargebacks and disputes.

Taxes

In Cyprus, the value-added tax (VAT) rate is 19% for most goods and services. Though customers must pay VAT when making purchases, businesses are responsible for collecting and remitting the tax to the government. Failure to comply with VAT regulations can result in steep fines, audits, or legal repercussions.

Chargebacks and disputes

Cyprus’s approach to chargebacks and disputes reflects a customer-centric environment shaped by domestic legislation and EU directives. In Cyprus, chargeback mitigation efforts—including stringent transaction verification and thorough documentation—are important for businesses to minimize the financial impact of disputes.

Cyprus aligns with the European regulatory framework, which emphasizes safeguarding customer rights. The nation adheres to the Consumer Code, which requires businesses to prove a transaction’s legitimacy. This is particularly relevant in cases of unauthorized transactions. Unlike in the US, where customers often bear the burden of proof, Cypriot businesses must provide strong evidence to counter disputes.

Cyprus strictly adheres to PSD2, which mandates SCA. This heavily influences the resolution of chargebacks and disputes because the level of verification helps determine the outcome.

Cyprus is also part of SEPA, which includes rules for chargebacks related to direct debits. Under these regulations, customers are entitled to a refund for any direct debit transaction if they request it within eight weeks. This time frame provides another layer of protection for Cypriot customers when handling direct debits.

International payments

Cyprus’s payment market is intertwined with its global counterparts through common payment preferences, regulatory harmonization, and trading partnerships. Understanding these overlaps is important for businesses and stakeholders so they can handle the complexities of Cyprus’s financial environment and its connections to the wider world.

• Currency conversion: The typical exchange rate markups in Cyprus range from 1% to 3%, with some banks charging a flat fee for currency conversion. When travelers withdraw euros from ATMs using a foreign card, they might encounter a 2% service fee from their issuing banks. Some notable currency conversion businesses in Cyprus are Boursorama, Currencies Direct, S Money, and Crédit Agricole.

• SEPA integration: Like other EU member states, Cyprus follows SEPA rules. SEPA simplifies euro-denominated bank transfers and makes cross-border transactions within the euro area easier. This integration ties Cyprus closer to other European markets, facilitating economic interactions and cross-border trade.

• Major trading partners: Cyprus has strong trading partnerships with various countries and regions, particularly within the EU. The UK is also a major trading partner. Cyprus is geographically and financially situated as a gateway for investment in the Middle East and North Africa. Cyprus also has strong economic ties to Russia, including substantial foreign direct investment. Their governments have established favorable tax treaties to boost this partnership.

Security and privacy

Cyprus focuses on security, compliance, and regulatory factors within its payment space.

• Data protection laws: At the forefront of regulatory frameworks is the General Data Protection Regulation (GDPR). The GDPR sets the standard for safeguarding customer data, requiring explicit consent for data collection and granting individuals the right to request the erasure of their personal data—the “right to be forgotten.”

• CySEC: CySEC oversees financial markets and enforces compliance with financial regulations. The commission monitors and regulates payment service providers, protecting customers’ interests while maintaining market integrity.

• Anti-Money Laundering (AML): Cyprus adheres to EU directives related to AML and Counter-Terrorist Financing (CTF). Financial institutions are required to establish systems for monitoring and reporting suspicious activities. Noncompliance can result in severe penalties.

• PSD2: Cyprus prioritizes adherence to PSD2. This regulation mandates SCA, which requires two-factor authentication for most transactions to enhance security.

Key success factors

Accepting payments in Cyprus involves challenges including technology adoption, regulatory compliance, international transaction complexities, and dispute mitigation. Businesses operating in Cyprus must work through these challenges to be successful.

• Slow rates of digital payment adoption: Cyprus is gradually adopting emerging payment technologies, particularly mobile payments. By 2030, about 386,000 Cypriots are expected to engage with mobile payment options for POS transactions, out of a total population of more than 1.37 million. This slow adoption rate means businesses must accept multiple payment systems, increasing system complexity.

• Regulatory hurdles in data management: The GDPR introduces stringent data protection requirements that affect businesses in Cyprus. Noncompliance can result in severe penalties, including fines of up to €20 million or 4% of a business’s global annual turnover. These regulatory demands have necessitated investments in data governance systems, particularly within payment systems in which data sensitivity and the frequency of data exchange are top priorities.

• International transfers: Though SEPA rules have simplified cross-border payments within the euro area, transactions beyond it present challenges. These include exchange rate fluctuations, different regulations, and international payment complexities. According to the World Bank, the value of Cyprus’s exports totaled $4.4 billion in 2022, showing the need to address these challenges.

• Disputes: The ECB reports that about 0.01% of card transaction value is fraudulent, which can be significant given the large transaction volume. Managing these disputes effectively requires investments in sophisticated systems and legal expertise and proactive dispute resolution mechanisms.

Key takeaways

Businesses in Cyprus that want to refine the customer payment experience can use a few tactics to appeal to local preferences.

Embrace local payment preferences

• Use SEPA for simplified direct debits: SEPA direct debits are a popular choice for recurring payments in Cyprus. By adopting SEPA-compliant payment gateways, businesses can simplify recurring billing processes. This is especially valuable for subscription-based services and facilitates payments.

• Implement multicurrency options: Cyprus’s position as a tourist destination and its multicultural population make multicurrency options valuable. Letting customers pay in their preferred currencies increases convenience and satisfaction, potentially increasing sales.

Focus on compliance

• Comply with GDPR: Cyprus operates within the EU and adheres to its regulations, including the GDPR. Complying with these data protection laws is important for maintaining customer trust.

• Know the implications of PSD2: Banks and financial service providers in the country must follow the rules contained in PSD2, which include transaction signatures for authentication purposes.

• Follow other EU security guidelines: Adhere to GDPR, PSD2, and other EU directives and adopt cutting-edge security technologies to protect financial transactions within Cyprus.

Prioritize security

• Use advanced security tech: Payment service providers in Cyprus—including Stripe and local entities—operate in full compliance with local regulations. These providers often go beyond the minimum requirements, using advanced machine learning algorithms to detect fraudulent patterns and enhance the security of customer data.

• Follow PSD2: PSD2 mandates the implementation of strict measures to keep users’ data safe. The security requirements for online payments go further, calling for a dynamic link between the accounts of the payer and the payee to minimize fraud.

• Know about the Unit for Combating Money Laundering (MOKAS): This authority is responsible for enforcing AML and CTF measures in Cyprus. MOKAS actively investigates and combats money laundering activities, serving as an important component of Cyprus’s financial security apparatus.