Introduction to payments
What are payment services?
The relevant Cyprus law regulates the authorisation, operation and supervision of payment institutions carrying out the provided regulated services, which include:
- Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account.
- Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account.
- Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider:
- execution of direct debits, including one-off direct debits.
- execution of payment transactions through a payment card or a similar device.
- execution of credit transfers, including standing orders.
- Execution of payment transactions where the funds are covered by a credit line for a payment service user:
- execution of direct debits, including one-off direct debits.
- execution of payment transactions through a payment card or a similar device.
- execution of credit transfers, including standing orders.
- Issuing of payment instruments and/or acquiring of payment transactions.
- Money remittance.
- Payment initiation services.
- Account information services.
FAQs – Payment and Electronic Money Institutions
Cyprus permits the provision of payment services by Payment Institutions (PIs) and Electronic Money Institutions (EMIs), which must be licensed and authorised by the Central Bank of Cyprus (CBC) before offering any payment services. PIs and EMIs authorised by the CBC can effectively offer their services throughout the EU under the “passporting” conditions of their authorisation.
To be authorised by the CBC, applicants must demonstrate and detail their organisational structure and internal mechanisms, effective and adequate controls ensuring proper risk and security management. The must also adhere to specified capital requirements and restrictions on the holding own funds.
Cyprus has fully adopted all EU Directives and Regulations that govern the operations of PIs and EMIs.
Payment services in Cyprus are mainly regulated by the Provision and Use of Payment Services and Access to Payments Law of 2018 and the Electronic Money Law of 2012, which are both aligned with the EU regulatory payments law framework.
The difference between PIs and EMIs is that, in addition to the list of payment services that a PI can conduct, EMIs can also issue electronic money.
Electronic money (e-money) is a digital alternative to cash. It allows users to make cashless payments with money stored on a card or a phone, or over the internet.
The Cyprus Payments Law implements the provisions of the second Payments Service Directive (EU) 2015/2366 (PSD2), which replaced the previous framework and expanded the scope of the internal payments market, offering the legal conditions for more effective, transparent, secure and innovative payments and payment services.
PSD2 provides for new regulated services – Payment Initiation Services and Account Information Services – and introduces open banking by requiring banks to permit open access for their clients’ banking data to authorised Third Party Providers (TPPs). In this way, PSD2 opens the payments’ market to new providers and unlocks the opportunity for the development of more innovative and data-driven payment services.
The Cyprus Electronic Money Law implements the provisions of the EU E-Money Directive 2009/110/EC (EMD), which sets out the rules for the business practices and supervision of e-money institutions. The directive aims to lay the foundations for a single market for e-money services in the EU.
The EMD has provisions to:
- align EU requirements for e-money services and put in place coherent set of requirements for obtaining a licence as an e-money institution.
- facilitate access for newcomers to the e-money market by ensuring prudential rules are proportional to the risks faced by e-money institutions. This includes reducing the initial capital requirement to €350,000 and new rules on calculating own funds.
- Banks licensed by the CBC or by a competent supervisory authority of another EU member state
- Cooperative societies that have been licensed by the Authority for the Supervision and Development of Cooperative Societies or by the competent supervisory authorities of other EU member states
- EMIs that have been licensed by the CBC or by competent supervisory authorities of other EU member states
- Post office giro institutions that are entitled under national legislation to provide payment services
- The European Central Bank and national central banks when not acting in their capacity as monetary or other public authorities
- EU Member states or regional or local authorities, when not acting in their capacity as public authorities
- PIs that have been granted and maintain a valid authorisation to operate by the competent supervisory authorities of other EU member states. These institutions may either exercise the right of establishment or the right to provide services on a cross - border basis, provided that the competent authorities of the home member state submit a notification to the CBC.
- Authorisation for the operation of a PI or EMI is only granted to legal persons that have been incorporated and have their head office in Cyprus. Management and control of a PI or EMI must be exercised from the head office.
- A PI or EMI must register its office in Cyprus and carry out at least a part of its payment or electronic money service in Cyprus.
- A PI or EMI is required to have a minimum of two executive directors and two non-executive directors. However, the CBC usually requires a minimum of five directors, at least two of which must be executive directors. These executive directors must reside in Cyprus and be able to demonstrate their capabilities and experience in the banking and fintech sector.
- A PI or EMI is required to have at least two shareholders of the company. They must provide proof to the CBC and confirm that they have sufficient funds to sustain the EMI or PI during the first three years of operations.
- The amount of the initial capital that PIs are required to provide at the time of the authorisation ranges from at least €20,000 for money remittance services only, to at least €125,000.
- The amount of the initial capital that EMIs are required to provide at the time of the authorisation is at least €350,000.
- PIs and EMIs must be fully staffed, and persons performing any of the key functions must be adequately experienced and/or qualified, as applicable.
FAQs – Payment and Electronic Money Institutions
Cyprus permits the provision of payment services by Payment Institutions (PIs) and Electronic Money Institutions (EMIs), which must be licensed and authorised by the Central Bank of Cyprus (CBC) before offering any payment services. PIs and EMIs authorised by the CBC can effectively offer their services throughout the EU under the “passporting” conditions of their authorisation.
To be authorised by the CBC, applicants must demonstrate and detail their organisational structure and internal mechanisms, effective and adequate controls ensuring proper risk and security management. The must also adhere to specified capital requirements and restrictions on the holding own funds.
Cyprus has fully adopted all EU Directives and Regulations that govern the operations of PIs and EMIs.
Payment services in Cyprus are mainly regulated by the Provision and Use of Payment Services and Access to Payments Law of 2018 and the Electronic Money Law of 2012, which are both aligned with the EU regulatory payments law framework.
The difference between PIs and EMIs is that, in addition to the list of payment services that a PI can conduct, EMIs can also issue electronic money.
Electronic money (e-money) is a digital alternative to cash. It allows users to make cashless payments with money stored on a card or a phone, or over the internet.
The Cyprus Payments Law implements the provisions of the second Payments Service Directive (EU) 2015/2366 (PSD2), which replaced the previous framework and expanded the scope of the internal payments market, offering the legal conditions for more effective, transparent, secure and innovative payments and payment services.
PSD2 provides for new regulated services – Payment Initiation Services and Account Information Services – and introduces open banking by requiring banks to permit open access for their clients’ banking data to authorised Third Party Providers (TPPs). In this way, PSD2 opens the payments’ market to new providers and unlocks the opportunity for the development of more innovative and data-driven payment services.
The Cyprus Electronic Money Law implements the provisions of the EU E-Money Directive 2009/110/EC (EMD), which sets out the rules for the business practices and supervision of e-money institutions. The directive aims to lay the foundations for a single market for e-money services in the EU.
The EMD has provisions to:
- align EU requirements for e-money services and put in place coherent set of requirements for obtaining a licence as an e-money institution.
- facilitate access for newcomers to the e-money market by ensuring prudential rules are proportional to the risks faced by e-money institutions. This includes reducing the initial capital requirement to €350,000 and new rules on calculating own funds.
- Banks licensed by the CBC or by a competent supervisory authority of another EU member state
- Cooperative societies that have been licensed by the Authority for the Supervision and Development of Cooperative Societies or by the competent supervisory authorities of other EU member states
- EMIs that have been licensed by the CBC or by competent supervisory authorities of other EU member states
- Post office giro institutions that are entitled under national legislation to provide payment services
- The European Central Bank and national central banks when not acting in their capacity as monetary or other public authorities
- EU Member states or regional or local authorities, when not acting in their capacity as public authorities
- PIs that have been granted and maintain a valid authorisation to operate by the competent supervisory authorities of other EU member states. These institutions may either exercise the right of establishment or the right to provide services on a cross - border basis, provided that the competent authorities of the home member state submit a notification to the CBC.
- Authorisation for the operation of a PI or EMI is only granted to legal persons that have been incorporated and have their head office in Cyprus. Management and control of a PI or EMI must be exercised from the head office.
- A PI or EMI must register its office in Cyprus and carry out at least a part of its payment or electronic money service in Cyprus.
- A PI or EMI is required to have a minimum of two executive directors and two non-executive directors. However, the CBC usually requires a minimum of five directors, at least two of which must be executive directors. These executive directors must reside in Cyprus and be able to demonstrate their capabilities and experience in the banking and fintech sector.
- A PI or EMI is required to have at least two shareholders of the company. They must provide proof to the CBC and confirm that they have sufficient funds to sustain the EMI or PI during the first three years of operations.
- The amount of the initial capital that PIs are required to provide at the time of the authorisation ranges from at least €20,000 for money remittance services only, to at least €125,000.
- The amount of the initial capital that EMIs are required to provide at the time of the authorisation is at least €350,000.
- PIs and EMIs must be fully staffed, and persons performing any of the key functions must be adequately experienced and/or qualified, as applicable.
Explore Corporate Services in Cyprus
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