The demise of Amex in Cyprus is seen as a harbinger of the future where charges-driven traditional banking will be as extinct as the dinosaurs replaced by digital rivals.
Amex is moving out of Europe but Dr George Theocharides, the chairman of the Board of Cyprus Blockchain technologies told the Financial Mirror that this may also be a sign of the times.
“Although it is clear that the primary reason behind Amex’ decision is the change applied by the EU, institutions such as American Express, Mastercard and Visa, and the banking system, in general, are faced with serious competition from alternative banking and payment methods, with online banks and digital wallets,” said Theocharides.
“There is an ever-growing trend of younger generations using alternative payment methods, with traditional payment methods such as cash and even cards being phased out,” he added.
Payments through digital wallets, mobile payments, or through social media applications and digital currencies are on the rise, said Theocharides.
He said that due to the Fintech and Blockchain technologies behind them, these transactions are faster and cheaper for users at both ends.
Theocharides said that as these methods aim to remove any intermediaries, they remove also the charges imposed by them.
“The ultimate goal of the pioneers of these technologies is to reach a stage where banks will no longer be needed.”
These developments are disrupting the traditional ways the market has been functioning until recently.
“These methods of payment are the future of transactions, but it will take time before they will be able to wipe out cash and cards altogether,” said Theocharides.
He said that banks are seeing their market shares shrink as people turn towards payments made with digital cards of online banks.
“Online banks are gaining popularity and are revolutionising the banking sector and exercising serious pressure on conventional banks as they offer faster, safer and cheaper alternatives for banking procedures.”
One of the different banking institutions gaining ground in Cyprus is Revolut, a digital banking alternative that includes a pre-paid debit card (MasterCard or VISA). Having launched their latest product, the Revolut Metal card in cooperation with Mastercard, Revolut aims to pick up an even bigger market share on the island.
“Our aim is to revolutionise the way payments are carried out and in turn the whole of the banking system,” said Dimitris Litsikakis, Revolut Country manager for Cyprus, Greece and Malta.
“We already have 20,000 users of our cards in Cyprus, with our first loyalty Visa card in cooperation with Primetel doing exceptionally well.”
No hidden costs
But what is attractive about alternative banking is that it does away with various charges and hidden costs when dealing with a traditional bank.
Litsikakis said, transactions made through their online payment platform or by using a card connected to a digital account at their online bank, there are no charges in the event clients wish to pay in a different currency.
As accounts are digital, transferring money from one account to another is also free said Revolut’s Cyprus manager.
“Parents with children studying in the UK for example, can send their children their tuition money without being charged any fee,” said Litsikakis.
Litsikakis said that Revolut card users also have access to cryptocurrencies as they can convert, or make payments using one out of 5 available cryptocurrencies without any further charges.
Revolut’s cards also offer benefits like conventional credit cards. “We have built a network of businesses which are included in our cards’ benefit schemes, while consumers enjoy a 1% cash return on every transaction they make anywhere in the world,” said Litsikakis.
“Our payment platform can also detect when a user is abroad and automatically sends a message to users offering them full insurance for 1 EUR per day. The insurance covers claims up to EUR 6 mln,” he added.
Revolut argues that alternative methods of payment are overtaking the traditional banking system, leaving them “miles behind”.
“It is unacceptable that while someone can make a payment through a social application within seconds, transferring money to another country through a bank, takes longer than it would if someone got on a plane with a suitcase and took the money to the desired destination on his or her own,” said Litsikakis.
He explained that money transfers with conventional ways have become both expensive and time-consuming, while alternative banking platforms like their own offer clients with the possibility to transfer the money just by pushing a button.
Litsikakis said clients also have the possibility to invest in equities of high-tech companies without the need of an intermediary who will charge them fees which make investing an expensive sport.
“We want to see the democratisation of investments and give everyone the opportunity to invest regardless of their wallet size.”