In recent years, financial technology, or fintech, has revolutionized the financial industry. Fintech companies and applications enable people to manage their finances more easily and effectively, and it has also created new opportunities for businesses to offer access to financial services. 

According to CB Insights’ State of Fintech 2022 Report, fintech funding globally exceeded $75 billion by the end of 2022’s fourth quarter. Though this figure seems promising, it marks a 46 percent decline compared to 2021, as the year after the pandemic signaled people’s emerging digital transformation needs, marking it an exceptional year.

Fintech in Cyprus has been gaining significant traction as well. Companies choose to relocate or expand their presence to Cyprus for various reasons. Yes, the beautiful weather, beaches, mountains, and cuisine are among them. But more pertinent to businesses, is the fact that Cyprus acts as a bridge between regions and continents, the island is backed by the EU, and it has a supportive tax regime along with favorable regulations. There are also incentives in place which attract skilled talent to Cyprus, and a national effort for digital re-skilling of its workforce.

Aside from fintech companies establishing themselves in Cyprus like Hellas Direct, there have been several companies that chose to move to Cyprus including fintech giants eToro, Payabl, NAGA, Plum, and the long-standing trading platform, Murex.

Deloitte highlighted several crucial factors that lead to investors and founders favoring Cyprus, referring to Cyprus’ IP Regime, “80 percent of the profits qualifying for the regime are exempt from tax. With a corporate tax rate of 12.5 percent, this can result in an effective tax rate of as low as 2.5%”. For these reasons, establishing a company in Cyprus, especially in the fintech space is favorable as patents and copyrighted software programs qualify for Cyprus’ IP Regime, enabling business to increase profits while operating from the comforts the island offers.

Along with the favorable tax regime, Cyprus is home to several innovation hubs supporting the ecosystem. The Cyprus Securities and Exchange Commission’s (CySEC) innovation hub was established in 2018 to support fintech and regtech companies in Cyprus by providing accurate, reliable, and easy to access information on upcoming technologies and regulations that impact businesses and the industry as a whole. 

eToro, founded in 2007, found that CySEC’s regulatory efforts aligned with their efforts to expand their services to new customers. Their founding marked the start of a long journey to developing their eToro Money app, helping consumers have a clear overview of their spending habits and personal financial management. 

In a discussion with Invest Cyprus, eToro’s COO, Avi Sela, indicated that they expanded to Cyprus because CySEC “is a European regulatory authority, which enables us to responsibly provide clients across the EU with access to the diverse range of asset classes offered to retail investors around the world.” 

This ambition of providing retail investors with access to various asset classes and the ability to manage their finances through an app is shared with an additional fintech company that expanded to Cyprus; NAGA. The company was founded in 2015 and now boasts an all-in-one platform for users to navigate the various financial instruments that make personal financial management easier for retail investors. 

Similar to eToro, NAGA found the regulatory frameworks in the island to be the most favorable when selecting to establish their headquarters in Cyprus, as well as the existing talent in financial services, making the hiring process much easier for the company.

Keeping people engaged with their finances and sharing insights on better personal financial management is a large part of financial literacy. As we discussed in a previous article, Plum offers people the ability to automate certain personal financial management processes through Plum’s app. 

The mission to simplify money management is crucial, as it tackles the Cypriot population’s challenges in financial literacy. Further to this point, the Central Bank of Cyprus indicates the “insufficient knowledge of Cypriots in relation to basic financial concepts.” With businesses such as eToro and Plum, we may be expecting a rise in financial literacy among Cyprus’ population. A phenomenon likely not possible without the private sector’s innovation from fintech businesses.

Regarding trading platforms in Cyprus’ fintech space, Murex is one to note. Founded in 1985, Murex has been committed to delivering financial technology innovation for 35 years. They have accumulated €1 billion in investments over the past decade, and have expanded to employ 2,600 team members across 19 locations, now including Cyprus. Their decision to expand to Cyprus is premised on offering their services to the wider MEA region as a satellite to their Beirut office, and have operated in the island since 2021.

Licensed by the Central Bank of Cyprus, Payabl currently has their largest office in Limassol, along with their presence throughout Europe. The company focuses on providing payment services to businesses, including a merchant dashboard and risk management services to help businesses effectively manage their online payments. 

Payabl chose to move to Cyprus in 2011, just one year after its founding, making them a key player in the island’s fintech space, and has recently joined as a Visa Direct Preferred Partner giving them access to Visa’s support and insights.

Cyprus offers fintech companies access to the European market, strong and reliable regulatory frameworks, and a prominent financial services sector with extensive history, cumulatively offering businesses promising reasons to relocate to the island. However, while the island puts the “fin” in fintech, the “tech” piece of the talent puzzle currently lags behind.

As the fintech sector realizes a growing presence across the island, it is imperative to source talent within the ICT sector as Cyprus falls behind in this regard. According to Gleb Kozlov, CEO of Koronapay, Gleb Kozlov stated that, “companies must do more to attract prospective developers to the island. The financial aspect is not the only thing developers are interested in, so companies should look to offer an attractive technology stack, well-defined project specifications, and excellent working conditions.”

On the upside, access to networks provide founders and startups with the tools and resources to not only launch, but scale their services and offerings to the needs of the world. In doing so, Cyprus will continue to attract businesses to relocate to the island, as well as much needed skilled talent. Considering the tax and regulatory efforts in Cyprus, we can expect to see further growth and innovation within this sector.