6 October 2015

Head office employees of FBME Card Services have moved to the newly-constructed FBME building on Georgiou Griva Digeni in Nicosia, becoming the first part of FBME to have done so. Formerly, Card Services occupied premises on Archbishop Makarios III Avenue.

Construction of the FBME building started in 2010 and was scheduled to be completed ready for occupation at the end of 2014. The imposition of Resolution measures on FBME by the Central Bank of Cyprus (CBC) in July last year caused considerable delay to the project by hampering the release of funds.

The same order forced FBME Card Services to suspend operations on 7 August 2014 due to the freezing of its accounts at the Cyprus branch of FBME Bank, a decision that has never been explained by the CBC and which was actually disallowed by its own rules. This action also flew in the face of European Central Bank rules and the Basel Guidelines, which stress that Resolution measures against a failing bank – which FBME Bank clearly wasn’t – should be taken carefully to ensure that there is no harmful effect on other finance sector businesses.

Unable to access its funds and so continue operations FBME Card Services was compelled to make 72 staff redundant, with 3 more at a later date. The core of the executive complement remains, however, and they have now moved to the new building.

Despite the suspension of its operations, FBME Card Services continues to be active in the complaint being heard by the Cyprus Commission for the Protection of Competition against JCC Payment Systems, its shareholders and other banks. In April 2014 the Commission announced a preliminary decision against JCC for monopolistic and anti-competitive practices and conducted further hearings in February and March of this year. A formal verdict is awaited.

Background on the Card Processing Market in Cyprus

JCC was founded in 1989 and was originally owned by 10 financial institutions. Today, the Bank of Cyprus has a 75 percent shareholding of the business and the rest is held by a consortium comprising Hellenic Bank, National Bank of Greece, Piraeus Bank and Alpha Bank. Originally, JCC had a monopoly of the Cyprus card acquiring market and the level of its fees charged to merchants reflected this. They were high, among the highest in the EU and had a serious knock-on effect on the prices paid for goods and services in Cyprus.

What changed this was IMSP, a subsidiary of FBME Card Services – which started to provide a competing acquirer service to merchants in 2008. Formed by a group of young Cyprus businessmen, IMSP was a radical start-up and made immediate inroads by offering better technology such as terminals at point of sale, cutting fees charged to merchants to half JCC’s level, and introducing a much better next-day settlement service, rather than the sluggish three days that it took JCC.

JCC responded by slashing its own rates and stepping up its service quality. Given that fees are often passed on to the card user, it is likely that the launch of IMSP led to the saving of millions of euros for consumers in Cyprus. Competition showed what competition always shows: benefits all around in a much healthier retail environment.

But with the suspension of FBME Card Services due to the CBC cutting off of access to its bank accounts the acquiring market in Cyprus reverted to a JCC-monopoly. Merchant fees and consumer prices are understood to have increased as a result.