According to the Republic of Lithuania Law on Payment Institutions, the term Payment Institution license encompasses two types of payment institutions: Payment Institution (PI) and Payment Institution with a license for restricted activity (Small PI). However, based on the services a PI provides, it possible to differentiate between various types of PIs.
PSP Lab will help you to navigate in the complex world of legislation related to the Lithuanian Payment Institution license. Moreover, we can assist you in becoming a licensed company.
Payment Institutions in Lithuania
Currently, in Lithuania, 34 Payment Institutions are allowed to provide more than just money remittance, payment initiation or account information service. 1 Payment Institution is authorised to provide account information service only and it is a so-called Account Information Service Provider.
Services of Payment Institutions
PIs are Payment Service Providers (PSP) that in accordance with the Law of the Republic of Lithuania on Payments (LP) are allowed to provide payment services limited to:
- enabling cash to be placed on a payment account and withdrawn from it, as well as all the operations required for operating a payment account;
- execution of various payment transactions;
- issuing and/or acquiring of payment instruments;
- money remittance;
- payment initiation service;
- account information service;
- ancillary services closely related to payment services, such as currency exchange, custody, data collection and management;
- operation of payment systems.
Additionally, under specific limitation, a PI may grant credit related to
- the execution of payment transactions where the funds are covered by a credit line for a payment service user;
- issuing and/or acquiring of payment instruments.
Finally, a Payment Institution can also provide other services than merely payment services, if such services do not harm its financial soundness or the ability of the regulator to monitor compliance with the legislation.
Lithuanian PIs can provide services with or without a branch in the countries that are members of the EEA after the application for passporting out. After the changes brought by the Payment Service Directive 2 (PSD2), a PI has to notify the regulator (the Bank of Lithuania) which will have one month to review the application and issue the relevant notification to the host state regulator (e.g., in the Netherlands it is DNB). The DNB in our example will have one month to review the notification and communicate any concerns to the Bank of Lithuania which will make a final decision.
Payment account limitations
The Supervision Service of the Bank of Lithuania elaborated on the limitations of content and functionality of payment accounts that can be provided by companies with Lithuania Payment Institution License. Briefly, PIs and small PIs cannot accept funds with no particular payment instructions to send it to a payee or another PSP, such funds cannot be held for an indefinite period of time. Funds from the payment accounts should be transferred within no later than on the next working day or at a later time when a client instructs to do so with a prior accompanying outward payment order.
If the limitations above contradict business model that you have in mind, you should consider getting an Electronic Money Institution license in Lithuania.
Initial capital requirements for PIs in Lithuania
Initial capital requirements are based on the services a PI is willing to provide. The requirements are summarised below.
|Account information service only||not required but professional professional indemnity insurance or other comparable guarantee against liability is required
|Money remittance only||Eur 20.000|
|Payment initiation service only||EUR 50.000 + professional indemnity insurance or other comparable guarantee|
|Other services||EUR 125.000|
Types of Payment Institution licenses in Lithuania
There are commonly accepted English names for the types of licenses among the payment industry professionals. However, those names sometimes vary in different jurisdictions. Moreover, there are sometimes differences between various English translation of the laws and the information on the regulators’ websites. To avoid such confusion, we briefly explain the types of Payment Institution Licenses in Lithuania in the table below.
|Payment Institution providing only account information service||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||Payment Initiation Service 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||Authorised Payment Institution (API), fully licensed Payment Institution|
It should be noted that there is a separate application form provided in Annex 5 to the Bank’s of Lithuania Resolution on Authorisations Granted by the Bank of Lithuania to Electronic Money and Payment Institutions to apply for a license of a Lithuania Payment Institution providing only account information service (AISP) as there are fewer requirements and documents to be provided. The form for all other types of PIs is provided in Annex 2.
PI authorisation application fee
Before you make an application to get a PI license in Lithuania, you have to pay the State Tax Inspectorate (STI) a state levy of EUR 898.00 for the review of the application for authorisation, the same amount applies regardless of the services you wish to provide as a PI.
Small Payment Institutions in Lithuania
Сurrently, 11 Payment Institutions are holding a license for restricted activity (small PI) in Lithuania. Not a single small PI was authorised in 2019.
Small PIs can provide the same services as fully licensed PIs, except for payment initiation and account information services. Additionally, services can be provided only within the territory of Lithuania, meaning that services cannot be provided in other EEA countries.
There is a limit that small PIs cannot exceed without applying to be authorised as fully licensed PIs. In case of failure to upgrade the license to a full PI, the small PI license will be withdrawn. Small PIs cannot have the average of the previous 12 months’ total amount of payment transactions executed surpassing the limit of EUR 3,000,000.00 per month.
Certain Articles of the Republic of Lithuania Law on Payment Institutions do not apply to companies with Payment Institutions license for restricted activity. Firstly, it is Article related to the qualifying holding of the authorised capital and/or of the voting rights in a payment institution does not apply to small PIs. Secondly, Articles dealing with the initial capital and ongoing capital requirements are not applicable.
Before you make an application to get the small PI license in Lithuania, you have to pay the State Tax Inspectorate (STI) a state levy of EUR 693.00 for the granting of the license.
Why Payment Institution license in Lithuania?
In a nutshell, Lithuania is a jurisdiction with PayTech friendly regulation, progressive regulator and government, with a relatively cheap and talented workforce, quite low taxes and accessible connection to Target2 and SEPA with the Central’s Bank (the Bank of Lithuania) payment system CENTROlink. Lithuania pursues its goal to become the number one FinTech hub in the EU and therefore established favourable conditions for the growth of innovation in the financial services sector. There are quite a lot of conferences, hubs and accelerators, and other networking opportunities for such a small country.
Lithuania is famous for the number of EMI licenses issued; however, it does not mean that there are no opportunities presented by obtaining a PI license in Lithuania. You should think about a small PI license in Lithuania if you know the local business and are interested in Lithuanian market itself. You can also choose Lithuania as a country where you start or continue your payment business relatively cheaply and where the access to the necessary payment infrastructure is easier to achieve than in other countries.
Lithuanian PIs earn money, and you can also do the same. In Q3 income for payment services by small PIs and PIs totalled EUR 16.9 million with some companies showing more than a million in revenue.
How can PSP Lab help you to be authorised as a Payment Institution in Lithuania?
At PSP Lab, we provide licensing services in various jurisdictions. Lithuania is among the most popular jurisdictions for our clients. We help our clients based on their needs. There are clients that require support from the stage of pre-application meeting with the Bank of Lithuania until they decide to sell their business privately or decide to float. There are also clients who only need the review of documents that they have prepared. In such case, we can advise and help with fixing deficiencies in the documents. PSP Lab is flexible and can help you to understand what is the right scope of services for you.
If you contact us, we can explain to you the most current practical trends related to operating and licensing of Payment Institutions and E-money Institutions in Lithuania, UK and other EU and non-EU jurisdictions. We know plenty of industry insights that are not readily accessible. PSP Lab can help you to start or boost your payment business whether you want Lithuanian license or any other license.