As an independent banking and payment consultant, I've encountered numerous clients eager to establish or expand their businesses in Cyprus. While the attractive tax and regulatory environment draws many, they often overlook one critical aspect: banking and payment processing. Choosing the right banking partner in Cyprus isn't just a checkbox task—it requires a deep understanding of the diverse landscape of financial services, which are tailored to various business needs.
Many entrepreneurs assume that all banks offer similar services and that the processes and fees are standardized. This assumption could not be further from the truth. Banks differ vastly in their offerings, risks, prices, and technologies.
magine an online business selling a product for €100. The selling price usually includes local consumer tax (VAT or GST), which can be 10-30% depending on the location. For this example, let's assume the consumer tax is 20%. The payment processing will be charged based on €120, not just €100. If we take an average payment processing fee of 3%, we see that when we apply this to the €120, it immediately becomes €3.60.
But the impact of this fee doesn't end there. Suppose the company has €80 in costs to produce the €100 product, leaving a 20% profit margin. When we consider the €3.60 fee compared to the profit, the result is shocking – in this example, the 3% payment processing fee eats up 18% of our profit! You must plan for such a significant cost and consider it before making operational decisions.
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