Banking Faces Rapid Change Amid Geopolitical and Technological Shifts

The 13th Banking, Payments and Fintech Forum opened with remarks highlighting how the financial world is being reshaped by both global uncertainties and rapid technological innovation. Amid rising geopolitical tensions and complex economic conditions, the euro area and Cyprus have both shown strong resilience, but face challenges that demand adaptability and proactive engagement from the financial sector.

Key insights from the address underscore the growing risks outlined in recent reviews, such as volatility prompted by geopolitical shocks, the interconnectedness between the banking and non-bank financial sectors, and rapid market changes—particularly those associated with artificial intelligence. While inflation in the euro area is gradually aligning with targets and unemployment rates remain low, the need for continued vigilance is clear. The transformation of the European banking sector is being driven above all by technology, with digital banks and new payment solutions changing the competitive landscape. The introduction of a digital euro is positioned as a major initiative to modernize payments, maintain monetary sovereignty, and provide innovation while upholding privacy and security; importantly, it aims to complement existing forms of money rather than replace them.

In Cyprus, the economy continues to outpace the euro area average, fueled by services and tourism, and the banking sector boasts strong capital and liquidity positions. The local financial services landscape has become more diverse, with digital payment providers and digital banks adding new competitive pressures that drive further innovation and efficiency.

Special attention is given to the disruptive nature of artificial intelligence across financial services, where it enhances efficiency but also introduces new risks and dependencies. All stakeholders are urged to embrace these changes with robust risk management and sound governance to ensure resilience and stability in the sector, especially as the pace of transformation accelerates.

The swift evolution of finance, combined with mounting external risks, makes maintaining public trust in money and financial institutions more important than ever, reinforcing the need for collaboration and ongoing innovation within a secure regulatory framework.