Licensing of Fintech companies and Finance Institutions in single European market

06.09.2017

Fintech companies, banks, payment service providers, electronic money institutions, insurance companies, investment funds and investment managers, securities and forex brokers, crowdfunding and peer-to-peer platforms, other finance institutions in Europe are subject to higher regulatory requirements.

Licensing of the Finance Institution in one of the member states within the European Union (EU) opens business opportunities to act and provide services in all other EU and EEA (European Economic Area) countries enjoy benefits of a Common Market and advantages of Single Euro Payments Area (SEPA) of more than 500 million consumers, over 20 million businesses and European public institutions.

Fintech Company or other Finance Institution registered in Lithuania provides significant competitive advantage and opens up European financial market at significantly lower incorporation and operational costs. Lithuania and primarily its capital Vilnius became a new hub for the Finance Institutions focused on European and international financial markets. Favourable regulatory and tax environment, excellent infrastructure, fastest internet and quality talent pool makes Vilnius attractive for large international companies as well as Fintech start-ups.

From 2009 UK giant Barclays Bank operates Barclays Technologies Centre Lithuania in Vilnius, offering IT and other services to Barclays businesses across the world. Operator of the world’s first electronic stock market NASDAQ has a strong presence in Lithuania establishing NASDAQ Technology and Business Support Competence Centre in Vilnius. NASDAQ Stock Exchanges in Tallinn, Riga and Vilnius form the Baltic Stock Market. NASDAQ is operator of Central Securities Depositories in the Baltics, providing high-level depository services.

UK fastest growing payment service provider REVOLUT known as “Hooligan of Banking” provides Lithuanian IBAN format account numbers for REVOLUT clients in 42 countries and uses SEPA MMS payment system managed by the Bank of Lithuania (regulator).

Global financial advisor deVere Group secured electronic money institution license in Lithuania. deVere Group issues prepaid cards for global clients and process global payment transactions from its Vilnius office. ECOVIS ProventusLaw provided legal advice throughout the licensing and business incorporation process.

Lithuanian regulation allows non-banks have direct access to SEPA through SEPA-MMS payment system managed by the Bank of Lithuania (Regulator). It also allows non-banks getting own sorting codes for client IBAN account generation. The Bank of Lithuania creates an infrastructure for instant payments that according to European Instant Payments Initiative guarentees pan-European reach.

Types of licenses issued by the Bank of Lithuania:

PAYMENT INSTITUTION Perfect solution for pan-European payment processing. Equity capital – from EUR 20 000 to EUR 125 000. Licensing time – up to 3 months. More information

ELECTRONIC MONEY INSTITUTION Ideal solution for payment cards issue and payment processing of pan-European reach. Equity capital – EUR 350 000. Licensing time – up to 3 months. More information

SPECIALISED BANK / BANK Prestigious pan-European banking license opening wealthy European banking market of 500 million consumers. Equity capital of Specialised Bank – EUR 1 mil., Bank – EUR 5 mil. Licensing time – 6 months. More information

INVESTMENT MANAGEMENT AND INVESTMENT FUNDS Pan-European licensing solution for investment advice, investment fund management and distribution of investment funds all around Europe. Equity capital – EUR 125000. Licensing time – 6 months. More information

SECURITIES BROKER Pan-European license of investment services, securities trading, Forex and investment products distribution. Equity capital – from EUR 50000. Licensing time – 6 months. More information

CROWDFUNDING PLATFORM collects monetary contributions from a large number of investors for investment project. Helps lenders find businesses need financing. Modern alternative to bank financing. Permit (license) issue time – 1 month. Equity capital – from EUR 40 000. More information

PEER TO PEER (P2P) LENDING PLATFORM helps lenders finding consumers need financing. Modern alternative to bank financing. Permit (license) issue time – 1 month. Equity capital – EUR 40 000. More information

INSURANCE COMPANY or INSURANCE BROKERAGE Pan-European insurance license. Insurance/Reinsurance Company license issue time – 6 months. Equity capital – EUR 1 000 000. Insurance Brokerage Firm license issue time – 4 months. Equity capital – EUR 18760.

Regulation
The Bank of Lithuania combines functions of a central bank and the financial supervisory authority (regulator). The regulator comes out from the watchdog’s role and simplifies regulatory procedures avoiding unnecessary paperwork. Getting most popular Payment or E-money Institution license within less than 3 months in Lithuania is reality. In most of the European jurisdictions, such process usually takes much longer.

Specialized Bank license introduced in 2017, allowing provide almost all traditional banking services in EU/EEA markets having only EUR 1 000 000 equity capital. Unique “light” banking license of Lithuanian Specialised Bank opens large European banking market at significantly low cost and allows new players to challenge traditional banks in large national markets, such as UK, Germany and France.
Latest regulatory initiative raised by the Bank of Lithuania is special license for testing of new innovative financial products in real market conditions with real clients.

“We understand what kind of dangers licensing of small foreign financial technology companies might have, nevertheless the process will not be stopped due to that”

Chairman of the Board of the Bank of Lithuania Mr. Vitas Vasiliauskas in his interview to the business newspaper Verslo Zinios on 9 December 2016.

Business oriented regulatory behaviour and significantly lower finance institution incorporation, licensing and maintenance costs is what makes Lithuania preferred jurisdiction for the finance business people from around the world.

The reasons why Lithuania is one of the top jurisdictions in EU for Finance Institution licensing:

  • No particular requirement for company management to reside in Lithuania or Europe.
  • Application for a license submitted without establishing a company. Incorporation of the company starts only after the decision to grant the license is taken.
  • Fast licensing process. Issue of Payment or E-money institution license within period of 3 months and even faster.
  • Licensing documentation can be submitted in English and amended “on the go” instead of formal writing forth and back.
  • Possibility for non-banks get own sorting codes for IBAN client accounts generation.
  • Non-banks have direct access to SEPA through SEPA-MMS retail payment system managed by the Regulator.
  • Remote client verification. Innovative “know your customer” processes for remote client verification allows open client accounts without physical presence of the client.
  • Fast and easy license passporting procedure in to the other EU jurisdictions, taking 1 month. Regulators in other EU jurisdictions cannot raise additional requirements.
  • No regulatory sanctions for the first year. The Bank of Lithuania is committed to support start-ups and not to punish them during the first year of operation for minor infringements.
    Start-up visa. Special visas for the citizens of non-EU/EEA countries running innovative businesses in Lithuania.
  • Companies licensed in Lithuania allowed being direct members of the stock exchanges, depositories and clearinghouses registered in any other EU jurisdiction.

This is why the industry leader WireCard Bank AG recommends Lithuania and ECOVIS ProventusLaw as a gateway to European financial markets.

“From our perspective, they fully handle all aspects of financial or corporate matters with a highly professional dedicated team. Their knowledge of the financial services industry within their local market is supporting us in our efforts across Europe. I would not hesitate in recommending ECOVIS ProventusLaw as a strong and reliable law firm for any dealings with the regulatory body in Lithuania and as a gate for the international financial services companies to Europe.”
Mr. Oliver Bellenhaus, WireCard Bank AG

More about Fintech at ecovis.lt/fintech

 

Attorney-at-Law in Lithuania
Inga Karulaitytė – Kvainauskienė
Partner, Attorney-at-Law
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ECOVIS ProventusLaw (Vilnius)

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LT-01133 Vilnius
Tel.: +370 5 212 40 84
Fax: +370 5 212 27 41
E-Mail: vilnius-proventuslaw@ecovis.com
www.ecovis.com/lithuania