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Cyprus Embraces Instant Payments Revolution Starting January 9, 2025

Cyprus is poised to enter the era of instant payments on January 9, 2025, according to a press release from the Association of Cyprus Banks (ACB). From this date, interbank and cross-border transactions will be processed within 10 seconds, operating 24/7 across all banks in Cyprus and the SEPA zone—encompassing EU member states, the UK, and other participating countries.

A Leap Forward In Payment Speed

The ACB highlighted the transformative impact this change will have for bank customers. Transactions that currently take one to two days will soon be completed in a matter of seconds, irrespective of the destination country. This new system is set to cover all 27 EU member states and nine additional countries, ensuring seamless, real-time payment capabilities across the SEPA region.

Enhanced Security Measures Under New Regulation

This advancement is being rolled out under the European Direct Payments Regulation, which mandates banks to enhance their digital systems with robust security measures. These safeguards are designed to prevent errors, combat fraud, and flag suspicious transactions effectively.

One notable feature is the “Verification of Payee”, slated for implementation by October 9, 2025. This provision ensures that payers can confirm the beneficiary’s name matches the provided IBAN before finalizing an instant payment. By offering this confirmation, banks aim to reduce errors and thwart fraudulent attempts.

Additionally, banks will individually determine the transaction limits for instant payments, as the regulation does not set a uniform cap.

Equal Fees And Optional Features For Convenience

Starting January 9, 2025, banks will also be required to ensure that fees for instant payments do not exceed those for standard transfers, leveling the playing field for customers.

To further enhance convenience, banks have the option to develop complementary services. One such innovation under consideration is a unified platform, potentially in the form of a mobile app. This tool would allow customers to send money instantly using a recipient’s phone number or email address instead of an IBAN. While still in the planning phase, this platform could be launched in mid-2025, provided development proceeds smoothly.

Aiming For Speed, Security, And Accessibility

The Association of Cyprus Banks emphasised that the goal of this regulation is to deliver faster, safer, and cost-effective payment solutions for individuals and businesses across SEPA countries. The initiative promises significant benefits without imposing higher fees than those of traditional bank transfers, marking a milestone in the evolution of digital banking in Cyprus and beyond.

AI Spending Is Complicating The Fed’s Fight Against Inflation

Silicon Valley leaders have long argued that artificial intelligence will make technology and services dramatically cheaper. OpenAI CEO Sam Altman has described a future where intelligence becomes extremely inexpensive, while Tesla and SpaceX CEO Elon Musk has predicted that AI and robotics will create greater abundance and drive down costs.

So far, those benefits have yet to materialise at scale. AI adoption remains relatively slow, while the enormous investment needed for data centres and AI infrastructure is putting pressure on electricity prices, supply chains and other costs. For the Federal Reserve, this creates a difficult balancing act: AI could eventually boost productivity and reduce inflation, but its current buildout is contributing to higher prices.

OpenAI chief economist Ronnie Chatterji said AI needs to be adopted by organisations and generate measurable value before its broader economic impact becomes visible in productivity statistics.

AI Adoption Remains Uneven

Capital spending on AI infrastructure in the U.S. is expected to reach $581 billion this year, according to Goldman Sachs Research, with global investment potentially reaching $1 trillion.

Despite the scale of spending, adoption remains far from universal. A May survey by the U.S. Census Bureau found that 17% to 20% of U.S. businesses reported using AI, with adoption significantly higher among large companies.

Companies that have implemented AI at scale also highlight the challenges. Julie Averill, former CIO of Lululemon, said successful deployment requires changes in employee behaviour and trust in the technology. OpenAI has observed a similar divide: its most advanced business users deploy AI at around eight times the rate of average companies.

Why Productivity Gains May Take Time

Economists point to the limits of automation. AI can perform individual tasks effectively, but many jobs combine tasks that are difficult to automate.

Stanford professor Charles Jones refers to these as “weak links”. Radiology, for example, involves interpreting scans but also communicating with patients and working with colleagues. AI can automate part of the job without eliminating the profession itself.

As a result, the full economic impact of AI may not become clear until businesses adopt the technology more broadly and reorganise their operations around it.

AI Adds To The Fed’s Policy Challenge

AI’s economic impact has become part of the Federal Reserve’s policy debate. Fed Chairman Kevin Warsh has argued that AI could eventually become a significant disinflationary force by increasing productivity and strengthening U.S. competitiveness.

Other officials are more cautious. In July, the Fed kept interest rates at 3.5% to 3.75%, while some officials expressed concern that AI infrastructure spending could add to inflationary pressures.

Minneapolis Fed President Neel Kashkari pointed to massive data-centre investment as a new source of demand. Household electricity prices rose 10% in the two years through July, compared with a 6.2% increase in overall consumer prices. Meanwhile, shortages of chips and other AI components are pushing up costs. JPMorgan Chase estimates that DRAM prices could rise 400% by the end of 2026 compared with 2024.

Warsh has consequently adopted a more cautious tone, saying that while AI investment is laying the groundwork for future growth, the timing and scale of its economic effects remain difficult to predict.

For the Fed, the challenge is clear: AI could eventually deliver major productivity gains, but the cost of building that future is already showing up in the economy.

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