In the European region, Lithuania is the new hotspot for fintech businesses.

As a fintech-friendly region, Lithuania offers businesses numerous advantages, including a clear legal framework, a stable business environment, and a stable political climate.

The Bank of Lithuania regulates the fintech industry in Lithuania, facilitating the licensing process within three to six months. Whether you're a start-up or an established company, company maintenance is affordable.

Lithuania is an attractive jurisdiction for companies facing difficulties due to Brexit in the European region. It is easy to open segregated accounts for SEPA payment IBANs at the Bank of Lithuania because of its friendly banking environment.
EU E-Money & Payment Regulatory Compliance

E-money and Payments Regulatory Compliance in Europe

Due to Lithuania's willingness to facilitate innovation and growth in the fintech sector, it is an attractive destination for businesses seeking to expand into Europe.

Lithuania's payment infrastructure is future-proof, providing direct technical access to SEPA and the possibility to issue own IBANs via the Bank of Lithuania API. The start-up-friendly environment and institutional advice and assistance further enhance Lithuania's appeal as a destination for fintech companies.

As a country, Lithuania ranks fourth for promoting fintech according to "The Global Fintech Index 2020." According to "Fintech Landscape in Lithuania 2019-2020," 39 Payment Institutions and 74 E-Money Institutions operate in Lithuania as of March 2021.

As of 2020, Lithuania issued five licenses for Payment Institutions and 15 licenses for E-Money Institutions, showing steady growth in the fintech industry. To make the sector more competitive and flexible, new regulations and initiatives are planned for 2021.

The Bank of Lithuania is developing a new framework for addressing digital financial service risks.

Types of Licenses for E-money Regulatory Compliance in Lithuania

  • License for Authorised Payment Institutions in Lithuania
  • Lithuanian license for an Authorised E-money Institution
  • License for small e-money institutions in Lithuania
  • Lithuanian license for small payment institutions

License Process of Emoney Regulatory Compliance in Lithuania

If you are planning to obtain an EMI license in Lithuania, it is important to understand the authorization process. The process consists of the following steps:

Step One

Firstly, a pre-application meeting is held between the applicant's representatives and the Bank of Lithuania to discuss the proposed financial services and address any questions or concerns.

Step Two

After the meeting, the applicant submits an application form to the Supervision Service of the Bank of Lithuania. Within five business days, the Supervision Service reviews the application and notifies the applicant if any additional materials are required.

Step Three

Once all the necessary materials are submitted, the Board of the Bank of Lithuania assesses the application and accompanying documents. Based on their analysis, they make a decision to issue or refuse the EMI license.

Step Four

Finally, if the application is approved, the license is issued, and the applicant can begin operating their business. However, the entity will be informed of the decision if the application is denied.

Terms of E-money Regulatory Compliance in Lithuania

A license can be issued within three months to an authorized EMI or PI and within two months to a small EMI or PI. The timeframe for EMI, PI, and small PI may be extended up to an additional three months if all required documents still need to be submitted.

E-money License Fee in Lithuania

The fee for an e-money license in Lithuania is EUR 1,463, while a small e-money license is EUR 1,235. The license fee for a PI is EUR 898, and for those providing only account information services, it is EUR 693. The fee for a small PI license is EUR 682.

Requirements of Emoney Regulatory Compliance in Lithuania

Founders:

The founder(s) of an e-money institution must undergo a separate investor screening procedure with the CCSSO in addition to the licensing procedure.

 

Personnel:

The company's management structure must include a board of at least three members and a CEO. Key personnel, such as anti-money laundering and information security officers, must also be identified and possess the necessary qualifications and experience.

Initial capital requirement:

EMIs must have an initial capital of EUR 350,000, and the Bank of Lithuania requires a capital buffer based on business plan calculations. Small EMIs are exempt from the minimum capital requirement.
The initial capital requirement for PI depends on the types of services provided, ranging from EUR 20,000 for money transfer services to EUR 125,000 for other services.

 

Partnership agreements::

Before submitting all documents for a license, companies must have a clear technical solution, such as accountants, drafted outsourcing agreements, and agreements with parties involved in the payment service provisioning process.

Documents Needed for EMI or PI License Application

  • Legal documents verifying the applicant's status.
  • Confirmation of the representative's rights.
  • A document that confirms the license was issued after stamp duty was paid.
  • An operational plan.
  • An outline of a business plan.
  • Provide evidence that the equity capital meets the minimum requirement specified in Article 22(2) of the Lithuanian Law on Electronic Money and Electronic Money Institutions.
  • An overview of the steps taken or to be taken to protect consumer funds.
  • An overview of the governance arrangements and internal control mechanisms, such as accounting, risk management, and administration.
  • An overview of the organization's structure.
  • Proposed acquisition notification.
  • Management body and key function holders' questionnaires.
  • Detailed documentation verifying other comparable liability guarantees and details, as well as the justification of the sum insured, are included with the professional indemnity insurance contract.
  • Assessing the operational risk associated with the applicant's activities through a questionnaire.

Required Documents for Small EMI And Small Pi License Application:

  • A copy of the applicant's legal status is required.
  • Documentation verifying the representative's authority.
  • For license issuance, proof of stamp duty payment is required.
  • An outline of a business plan.
  • An average of EUR 900k in outstanding electronic money is expected. The payment institution will also not execute more than EUR 3m per month in total payment transactions over the past 12 months.
  • Information about safeguarding consumer funds that have been taken or will be taken.
  • Organizational description.
  • Completed questionnaires for key function holders and management body members.
  • Applicants are required to complete a questionnaire on their operational risks.

Payment Institutions in Lithuania

Services of Payment Institutions

The Lithuanian Payment Institution (PI) law authorizes PSPs with PI licenses to provide payment services, with certain limits. Payment services offered by PSPs with PI licenses include:

  • Cash deposits and withdrawals from payment accounts.
  • Performing a variety of payment transactions.
  • Acquiring and issuing payment instruments.
  • Remittance of funds.
  • Service for initiating payments.
  • Information about accounts.
  • A variety of payment-related services, such as currency exchange, custody, data collection, and payment system operations.
  • Issuing and/or acquiring payment instruments with credit provided by a credit line on behalf of an entity providing payment services.
 

Following the application for passports, Lithuanian PSPs can operate with or without a branch in EEA countries. PSPs must notify the Bank of Lithuania in accordance with Payment Service Directive 2 (PSD2), which has one month to review the application and notify the host state regulator (e.g., DNB in the Netherlands).

The host state regulator has a month to review the notification and any concerns it may have should be communicated to the Bank of Lithuania, which will then make the final decision.

Payment Account Limitations

According to the Bank of Lithuania's Supervision Service, there are restrictions regarding the content and functionality of payment accounts offered by companies holding Philippine Payment Institution Licenses. In particular, PIs and small PIs are not allowed to accept funds without explicit instructions to transfer them to a payee or another PSP.

Any funds in the payment accounts must be transferred by the end of the next working day or as per the client's instructions. You may want to consider applying for a Lithuanian Electronic Money Institution license if these limitations are in conflict with your business model.

Initial Capital Requirements for Pis in Lithuania

Service Initial Capital
Account information service only Not required but professional indemnity insurance or another comparable guarantee against liability is required
Money remittance is only Eur 20.000
Payment Institution providing only money remittance service EUR 50.000 + professional indemnity insurance or other comparable guarantees
Other services EUR 125.000

Types of Payment Institution Licenses in Lithuania

For licensing types, payment industry professionals use commonly accepted English names to prevent confusion arising from differences in English translations of laws and information on regulators' websites. It is important to note, however, that these names vary from jurisdiction to jurisdiction.

We have provided a table below with brief explanations of the types of Payment Institution License Lithuania.

Name Equivalent names
Payment Institution providing only account information service Providers (AISP)
Payment Institution providing only money remittance service Company with money remittance License/ money transmitter license
Payment Institution providing payment initiation service The provider (PISP). The name is used for both firms that only provide payment initiation service and for firms that provide payment initiation service combined with other services.
Payment Institution or Payment Institution holding a Payment Institution license Authorized Payment Institution (API), a fully licensed Payment Institution.
 

Please note that there are two different application forms for obtaining a Lithuania Payment Institution license.
 

  • Annex 2 provides the application form for all other types of Payment Institutions (PIs), which requires more documents and requirements.
  • Annex 5 provides the application form exclusively for PIs that offer account information services (AISP), which require fewer documents and requirements.
  • Acquiring and issuing payment instruments.
  • Remittance of funds.
  • Service for initiating payments.
  • Information about accounts.
  • A variety of payment-related services, such as currency exchange, custody, data collection, and payment system operations.
  • Issuing and/or acquiring payment instruments with credit provided by a credit line on behalf of an entity providing payment services.


You can access Annex 5 through the link provided:

Resolution On Authorisations Granted By The Bank Of Lithuania To Electronic Money And Payment Institutions

Small Payment Institutions in LitSmall PIs are allowed to offer the same services as fully licensed PIs with the exception of payment initiation and account information. They are also restricted to providing their services only within the territory of Lithuania.

There is a limit of EUR 3,000,000.00 per month on the total number of payment transactions that can be executed by small PIs. If a small PI exceeds this limit, it must upgrade to a full PI or the license will be revoked.

There are certain regulatory exemptions available to companies with small PI licenses in Lithuania, including holdings and capital requirements. Applicants must pay the State Tax Inspectorate EUR 693.00 before applying for a small PI license in Lithuania.

Advantages of Obtaining The EMI License in Lithuania:

cLithuania offers several advantages for obtaining an EMI license, including a faster licensing process than other EU countries, access to payment systems, a test development environment, and remote client verification technology.

Additionally, Lithuania's growing economy, thriving tech scene, and favorable business climate make it an attractive destination for fintech companies.

Here are some advantages of obtaining an EMI license in Lithuania:

  • Unlike other EU countries, Lithuania provides a faster licensing process for electronic money services.
  • As Lithuania has payment system access, EMIs can operate and process transactions more easily.
  • Lithuania has a test development environment that allows fintech companies to test their products and services.
  • Additionally, Lithuania offers remote client verification technology for remote client onboarding and compliance with KYC/AML regulations.
  • Lithuania's economy is small but growing, allowing EMIs to expand.
  • Lithuania is known for its low tax rates, simple tax system, and stable political climate that encourages business.
  • According to the Doing Business Report, the government of Lithuania is committed to creating a business-friendly environment.

Stages of Obtaining The E-Money License in Lithuania

ABM provides assistance with the preparation, licensing, and infrastructure setup for Electronic Money Institutions (EMI) in Lithuania. The pre-licensing process includes:

  • General advice on the licensing process.
  • Initial infrastructure assessment.
  • Preparation of a business plan.
  • Financial projections.
  • Assistance with opening a bank account.
  • and Establishing a local company in Lithuania.
  • According to the Doing Business Report, the government of Lithuania is committed to creating a business-friendly environment.

ABM also assists with finding suitable premises and hiring necessary personnel.

In the licensing phase, ABM assists with preparing legal, financial, and IT documents, including compliance with AML/KYC/KYT regulations and IT procedures. ABM also represents and assists in the licensing process and payment of state duty.

Once licensed, ABM helps with setting up the necessary IT infrastructure, training staff on compliance procedures, and finding a banking partner to fulfill client funds segregation requirements and provide financial services.

ABM also offers ongoing support services, including accounting, auditing, and regular reporting to the Bank of Lithuania, as well as advice on emerging issues and expanding activities into other jurisdictions.

Cost Analysis of E-Money and Payment Regulatory Compliance in Lithuania

To set up an electronic money institution (EMI), the initial project costs may be around 50,000 euros, and you will need to contribute either 125,000 euros or 350,000 euros in authorized capital. However, these costs do not cover any additional expenses or capital requirements that may arise.

To apply for the EMI license, there will be state duties of around €1500, and legalizing necessary documents for company registration and licensing procedures may cost around €3000. The PSP-E money license also requires a capital contribution ranging from €125,000 to €350,000.

The cost of IT solutions for business tasks and their monthly maintenance will depend on individual cases. The general manager and staff's estimated monthly salaries are at least €6,000, and the office rent is around €600 per month. The costs for accounting and auditing will be determined individually, along with other representational expenses.

Benefits of Obtaining an E-Money License in Lithuania

License holders of the Electronic Money Institution license are able to provide a range of services to their clients, including:

  • Euro IBAN accounts for individuals.
  • CENTROlink offers instant SEPA payments.
  • Low-interest short-term loans.
  • Bank-to-bank cross-border payments outside the SEPA zone or in other currencies.
  • Safely store funds in multi-currency electronic wallets.
  • Payment processing services for credit and debit cards.
  • Banks and other payment systems offer better exchange rates
  • Providing prepaid/debit cards.

Lithuania's fintech industry is growing rapidly, with an increasing number of payment and E-Money institutions operating in the country. With the Bank of Lithuania API, the country can issue its own IBANs and access SEPA easily. The licensing process for E-Money Institutions and Payment Institutions is streamlined, and license fees are affordable.

At ABM we provide continuous assistance and guidance in various areas such as accounting, auditing, and regular reporting to the Bank of Lithuania. We also advise on current and upcoming challenges and opportunities for expanding business activities in other locations.

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