Lithuania is slowly becoming that vibrant hub for FinTech across the European Economic Area, leaving room for financial ventures to grow and expand. Once a company receives an EMI license, it can distribute its electronic money services in large volumes across the EEA, opening up access to the EU’s extended market.
The primacy of Lithuania as a Fintech Destination
Lithuania remains at the forefront of the fintech sector due to its progressive financial regulation, particularly by issuing EMI licenses. An EMI license in Lithuania is key to entering the large European market. Any company with an EMI license can issue electronic money, perform different payment services, or execute digital transactions safely and effectively. The well-built regulatory framework, business-friendly environment, and access to a vast pool of tech-savvy talent turn Lithuania into an attractive choice for every fintech company willing to expand operations in Europe.
EMI Licensing Regulations in Lithuania
Under the Law on Electronic Money Institutions, the Bank of Lithuania acts as the primary regulator and supervisor of EMIs. The central bank has the following main goals:
- Raise the reputation of Lithuania: Strengthen the Status of Lithuania as a Safe and Trustworthy Fintech Within the EEA.
- Supervising: To ensure regulatory compliance, transparency, and fairness for all interest holders within the marketplace.
- Regulatory enforcement: ensuring appropriate enforcement of the Electronic Money Institutions Law and other relevant sectoral regulations, in parallel to regulatory upgraded standards and integrity in the financial ecosystem.
- Licensing and Oversight: Licensing of the EMIs or the Payment Institutions (PIs) and supervision of their activities, with strict measures in non-compliance cases, including license withdrawal.
- Consumer protection: Consumer interest protection is achieved through the scrupulous practice of their regulation, ensuring higher security and reliability in the EMI sector in the Republic of Lithuania.
An extensive regulatory framework for obtaining an EMI license in Lithuania paves the way for the proper functioning of such institutions, which ensures the integrity and stability of any financial system.
Types of EMI Licensing in Lithuania
Lithuania has various types of EMI licenses, which are assigned subject to the business model and the scope of operations:
- Full EMI License: This is designed to be the license that an institution willing to issue electronic money and provide various payment processing services across the EEAs. It offers issuing and managing electronic money, processing payments, executing direct debits, transferring funds, issuing payment instruments, and acquiring payment transactions.
- Small EMI license: This is for firms with small operations, limited geographical scope, and low transaction volumes. On the regulatory side, reduced requirements translate to faster and easier licensing. However, it has limitations regarding the total value of electronic money issued, and services offered are limited. This license is suitable for fintech startups or smaller fintech startup companies.
- Payment Institution License: This license is not considered the same type as the EMI, yet it still grants an entity the right to execute any payment services without electronic money issuance. It provides for executing payment transactions, money remittance, and payment initiation services. This primarily suits those businesses involved in payment processing.
- Money Remittance License: The activities of a license holder include executing payment transactions, issuing and acquiring payment instruments, and executing credit transfers, whereby the mentioned activities are directly related to customers’ payment accounts.
- Payment Processing License: This includes all activities involving the limited scope license, money remittance and the performance of payment transactions ordered by telecommunication devices, digital, or IT devices. This will significantly fit the companies involved in the general dealings of more extensive payment services.
Regulatory Oversight
The Bank of Lithuania regulates both EMI licenses. It ensures licensees’ activities comply with all applicable requirements prescribed in relevant EU directives, including the Second Electronic Money Directive (EMD2) and the Payment Services Directive (PSD2). The regime is designed to provide safety and stability for the functioning of the financial system while ensuring an innovative and competitive fintech industry.
Services Under EMI License in Lithuania
Finally, with the license of EMI in Lithuania, it is possible to render the following services:
• Services enabling cash placement and withdrawals from a payment account.
• Payment transaction execution, including direct debits, payment card transactions and credit transfers.
• Issuing and acquiring payment instruments.
• Money remittance.
• Payment transactions are performed via telecommunications terminal equipment, digital, or IT devices.
• Account information services.
• E-money issuance.
By choosing the right type of EMI license in Lithuania, companies may align their regulatory obligations to their chosen business model and strategic aims to serve target markets.
Benefits of EMI License in Lithuania
An EMI license in Lithuania is a strategic and operational advantage for any fintech company. Here are the key benefits:
1. Access to the European Market
EU Passporting: A Lithuanian EMI license allows for operations to be carried out by companies in the EE Area without any extra licensing in each member state. It offers smooth expansion into an enormous market of more than 500 million consumers.
2. Favorable Environment relating to Regulation
- Pro-Business Climate: Lithuania has created one of the region’s most advanced and friendly regulatory environments, simplifying the licensing process and ensuring further compliance with ongoing regulatory requirements for a fintech company.
- Innovative approach: The application of new technologies in the activity of the Bank of Lithuania and the promotion of regulatory sandboxes encourages innovation and growth in the fintech industry.
3. Efficient Licensing Process
- Faster and More Transparent Procedure: Compared to other EU countries, the licensing process in Lithuania is relatively fast and more transparent, which lets a company start operations sooner than usual.
- Experienced Regulator: The Bank of Lithuania has solid experience and knowledge in supervising fintech companies, thus ensuring structure and expertise in the approach towards supervision.
4. Cost Advantages
- Lower Operational Costs: Lithuania offers competitive operational costs through lower salaries to highly skilled professionals and office space at low costs—bringing down the overall cost of doing business.
- Attractive Tax Regime: The Lithuanian corporate tax rate is relatively low at 15%, and there are different tax incentives and benefits, among them credits for R&D, targeting enterprises.
5. Skilled Manpower
- Highly Educated Talent Pool: Lithuania does have a large pool of highly educated and skilled professionals, particularly in IT and finance, providing businesses with access to top talent.
- Multilingual Ability: Most Lithuanians are multilingual, which eases communication and operations across borders in a global business environment.
6. Robust IT Infrastructure
Advanced Digital Infrastructure: Lithuania has one of the fastest internet networks in the EU and a well-developed digital infrastructure, necessary for the smooth operation of fintech services. Attention to Cybersecurity: Care for digital cybersecurity guarantees security within the environment of performance of digital financial transactions.
In such a way, by capitalizing on the advantages above, European-wide businesses could successfully be established and developed by fintech companies, offering innovative financial services while enjoying Lithuania’s supportive and energetic business environment.