From 2016 till March 2020 the number of Electronic Money Institutions (EMIs holding E-money license in Lithuania for non-limited activity) grew from 12 to 62. Hence, by the number of full EMI licenses, Lithuania holds the second place after the UK.
PSP Lab can help you if you want to secure access to the EU market due to Brexit or if you just want to start your electronic money and payment business in the EU via Lithuanian E-money license.
Lithuanian regulator, the Bank of Lithuania (Lietuvos Bankas) differentiates between two types of companies with Lithuanian Electronic-money license:
- Electronic money institution, holding a license issued in Lithuania for non-limited activity (equivalent to fully licensed EMI); and
- Electronic money institution, holding a license issued in Lithuania for restricted activity (equivalent to small EMI).
We describe the differences and peculiarities of each type of the Electronic money license below.
Electronic Money Institution license for restricted activity
Both Small EMIs and unrestricted EMIs are allowed to issue electronic money and provide payment services. Their authorisation and operation are regulated by the Law of the Republic of Lithuania on Electronic Money and Electronic Money Institutions. Furthermore, the Law of the Republic of Lithuania on Payments applies when EMIs provide services to their customers. When EMIs provide payment services, they are also mutatis mutandis are subject to certain provisions of the Law of the Republic of Lithuania on Payment Institutions. Both small EMIs and unrestricted EMIs may be only public limited liability companies or private limited liability companies.
Services provided by restricted EMIs
Generally, institutions with Lithuania E-money License for restricted activity can
- provide the same payment services as Payment Institutions (PI) in Lithuania except for payment initiation services and account information services;
- issue and redeem e-money as well as allow clients to hold funds (converted to e-money) on e-money account (e-wallet) until clients redeem electronic money/use funds for payments.
Small EMIs vs full EMI
However, Lithuanian small Electronic Money license is valid for the provision of services solely in Lithuania, meaning that small EMIs are not allowed to issue electronic money and provide payment services in other EU Member States.
Moreover, there are limits imposed on Electronic Money Institution, holding a license issued in Lithuania for restricted activity. Firstly, the average outstanding e-money of a small EMI must not go above the limit of EUR 900,000.00. Secondly, when a small EMI provides payment services not related to the issuance of e-money (e.g. acquiring) the average of the preceding twelve months’ total amount of payment transactions executed by the small EMIs (including its agents) is limited to EUR 3,000,000.00 per month.
Documents setting out policies and procedures proving that an institution will comply with the abovementioned limits must be provided together with an application to get a Lithuanian small EMI license.
There are more peculiarities of EMIs licenses for a limited activity that must be acknowledged. You should note that unlike for small EMIs in the UK, there is neither initial capital nor ongoing own capital requirements for institutions with Lithuania E-money License for a restricted activity. Furthermore, unlike fully licensed EMIs, Lithuanian small EMIs are not subject to provisions of Articles 24 and 25 of the Law of the Republic of Lithuania on Banks.
E-Money license in Lithuania for non-limited activity
Unlike small EMIs, so-called fully licensed EMIs, if permitted by the Bank of Lithuania, may provide all payment services including payment initiation services and account information services. Moreover, unrestricted EMIs, upon notification procedure in the EU Member State concerned, may issue e-money and provide payment services in the other EU Member States.
There are no limits imposed on such EMIs. However, to have the non-limited activity permission, a company must have EUR 350,000.00 of the initial capital and is subject to ongoing own capital requirements.
Usually, the attitude of a regulator is more stringent towards applicant for a full Electronic Money Institution because there are no limits, and they have so-called EU financial services passport (for payment and e-money services). Furthermore, the regulator may perform an on-site inspection of an applicant to check its readiness to issue electronic money.
Difference between Payment Institution license and E-money license in Lithuania
According to the official position of the Supervision Service of the Bank of Lithuania concerning funds held in payment accounts, the difference lies in the possibility of keeping the clients’ funds on the payment account for a longer period of time than is necessary solely for executing payment transactions.
Both Payment Institutions and E-money Institutions can open a payment account for their clients; however, legally allowed functionality of a payment account differs based on the type license of an institution opening such a payment account.
As far as EMIs are concerned, e-money is kept in e-media and can be kept in a payment account opened by an EMI only until the redemption of e-money. Additionally, e-money is allowed to be used for making payments. Payment account of an Electronic Money Institution is called an electronic money account (e-wallet).
At the same time, Lithuanian PIs have the least functional payment account. PIs are allowed to accept clients’ funds to the payment account set up by such PIs only together with an accompanying payment order which is supposed to be executed. The Supervision Service of the Bank provides that funds from the PI’s payment account should be credited to the account of the payee’s PSP no later than on the next working day. Alternatively, a PI and client can agree on the day when funds should be credited. If accounts opened by Payment Institutions are used in breach of the abovementioned rules, the Bank of Lithuania can revoke a PI license.
Why Lithuania for E-money license?
As it was said already, Lithuania is the second country in terms of number of licensed Electronic Money Institutions in the EU. After Brexit, Lithuania will be the first among all EU Member States by the number of EMIs. PSP Lab experience shows that many jurisdictions are reluctant to provide permissions to issue e-money, despite the regulatory requirements to either grant a license within three months if an application is complete or revoke the application. The problem is that some regulators are reluctant to supervise EMIs due to lack of skilled personnel, difficulties with understanding the business model, possible reputational risks, etc. Unlike other Member States, Lithuania is willing to supervise many institutions issuing e-money. The Bank of Lithuania is proving it by the number of issued licenses, the number of published guidelines, and a variety of initiatives aimed at developing FinTech sector. Furthermore, in order to be attractive for foreign businesses most of the information provided by the Bank of Lithuania is accessible in the English language.
As you can see from the Fintech Landscape in Lithuania Report, Lithuania is way ahead of other EU27 Member States.
One of the best things about Lithuania E-money license is that Lithuanian EMIs can easily connect to the Bank of Lithuania payment system CENTROlink. Firstly, it provides EMIs with a gateway to Eurosystem’s real-time gross settlement (RTGS) TARGET2, and as a result, an EMI can access more than 50,000 banks worldwide and have the ability to send and receive real-time payments via the TARGET2 system. Secondly, participants of CENTROlink can offer their clients SEPA credit payments (SCT), direct debit (SDD) and instant payments (SCT Inst). Finally, all operating and connected to CENTROlink Lithuanian Electronic Money Institutions provide dedicated IBANs to their clients, which is not that easy to organise if you are not connected to CENTROlink.
The Bank of Lithuania grants access to CENTROlink only to PIs and EMIs of impeccable reputation. PSP Lab can help your business to avoid being among 50 rejected applicants since 2016.
Lithuania is generally good for business, and World Bank’s Doing Business gave Lithuania 11th position. It now ranks 4th among the EU Members and is only behind such Member States as Denmark, the United Kingdom and Sweden. It is also a suitable country for providing financial services in terms of AML specialists, IT specialists, fixed costs (salaries, office space) and the corporate tax rate of 15%.
How can PSP Lab assist you?
PSP Lab can help you to prepare all the documents and application forms required to apply for an E-money license in Lithuania. Moreover, we can escort you during the pre-application meeting with the regulator, and be in charge of the whole communication process with the Bank of Lithuania.
PSP Lab can also help you to:
- register a company, find CEO or help you with all the requirements for directors of Lithuanian companies (e.g., safety at work exam);
- find local IT, support, compliance, accounting personnel;
- find an office suitable for your budget and personal taste;
- help you with safeguarding accounts, banking partners;
- connect you to CENTROlink, SWIFT after you get your license;
- provide other services as described in the following the link here.
If you are not sure if Lithuania is a suitable country for your endeavours, you can contact us to discuss the best possible jurisdiction and license. Not only does PSP Lab regularly secures EMI and PI licenses in the UK, but also it helps clients in other less popular jurisdictions such as Cyprus, Poland, Czech Republic, Ireland, and others. Additionally, we can help you to establish a bank (e.g., Lithuanian Specialised Bank), get a PSP license outside the EU (e.g., MSO license in Hong Kong) or buy an already licensed company.