Continuous technological progress has undoubtedly impacted the banking sector. This rise of financial technology (fintech) is a clear example, offering innovative solutions that improve the efficiency and accessibility of services, as well as the customer experience. As fintech companies capture a growing share of the market, traditional banks face both significant challenges and new opportunities to remain relevant in their processes, products and service offerings.
Cypriot banks must maintain high quality standards across all their processes, while also taking advantage of international trends and best practices adopted by other businesses and banks. This approach mirrors what fintech companies are doing, incorporating new technological developments and innovations to offer quick, personalised and user-friendly experiences.
For example, fintech companies have recently integrated artificial intelligence (AI) into customer service and fraud prevention. Early results suggest that the use of AI enhances customer satisfaction by providing direct, fast and accurate automated responses and issue resolution 24/7. Such integration is predicted to increase business revenues through a more efficient and customer-centric approach. Additionally, the launch of advanced fraud detection features has significantly reduced fraud rates by alerting clients to suspicious transactions and providing relevant information, thereby better protecting them from fraudulent activities.1
In the context of this modernisation of Cypriot banking services, the Central Bank of Cyprus launched a voluntary project in October 2023 aimed at streamlining and enhancing service processes. The project consists of three phases: the remote electronic submission and identification of new clients' data and their updating (Client Digital On-boarding & Reviewing), direct data capture through connections with government agencies (KYC), and exchange of identified data between credit institutions participating in the project (Information Sharing).2
It is encouraging to see many banks participating in this project. It demonstrates a willingness to cooperate in this area, both to create more user-friendly processes, without the need for physical presence, and to work with government agencies and with each other to upgrade banking services in Cyprus. The ultimate goal, after all, should be to modernise banking and financial services in Cyprus, benefiting individual customers and especially advancing business development.
Further, and in line with these modernisation efforts, it is interesting to note that discussions regarding the potential issuance of a digital euro have begun, with a recent presentation by the Central Bank of Cyprus on Tuesday, 9 July 2024. It was reported that almost all central banks worldwide are exploring this initiative, which promises significant benefits for the evolution of the currency in a digitized world. The Eurosystem is currently carrying out some preparatory work so once the European Commission's legislative package is finalised and deemed necessary, the issuance of a digital euro can proceed. This development is expected to benefit businesses by providing direct access to funds they receive and enabling them to negotiate lower fees compared to existing rates.3
For businesses, traditional Cypriot banks face the challenge of staying competitive in an evolving, modern environment that often offers greater capabilities, more services or lower fees. Although initial steps in the modernisation process are being taken, further action is needed to keep pace with rapid technological development and the integration of artificial intelligence.
Footnotes
1 Klarna AI assistant handles two-thirds of customer service chats in its first month | Klarna International Revolut launches AI feature to protect customers from card scams and break the scammers "spell" | Revolut United Kingdom
3 Central Bank of Cyprus - Παρουσίαση για το Ψηφιακό Ευρώ: το μέλλον του νομίσματος μας
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