Payment Institution License in Lithuania

Evaluation of submissions

Primary documents are verified and evaluated by Bank of Lithuania Supervisory Service specialists as part of the provision process. Their conclusions on authorization are based on a common understanding. During the evaluation process, the following processes are carried out:

• The applicant firm should be kept in regular communication and be able to meet (if necessary).
• Payment institutions are responsible for rectifying deficiencies identified by the Oversight Service.

Depending on the amount of services the applicant company plans to provide, the examination of the documents will take a certain amount of time. Applicants for a license of a payment agency can be evaluated more quickly if fewer documents are provided and applications are not submitted for all services that can be provided by the agency.

Currently, 311 companies have successfully obtained the Payment Institution in Lithuania license

Company in Lithuania UAB can help your company obtain a financial license in Lithuania, necessary for providing Payment institution services, and is ready to accompany your company at all stages of application. Contact us and ask your questions today.

Types of PI Licences in Lithuania

Depending on your resources and scope of intended activities, you can effectively choose one of the payment institution (PI) licences offered by the Bank of Lithuania.
Whether you’re a startup looking for reasonable market entry conditions, or a more mature company preparing to offer your payment services to the entire European continent, the Lithuanian regulator has a solution for you.

The Bank of Lithuania offers two types of PI licences:

•  Regular Payment Institution Licence
• Payment Institution Limited Activity Licence

The Regular Payment Institution Licence is suitable and more accessible to established financial companies that are capable of meeting and continuously
maintaining initial capital requirements varying from 20,000 EUR to 125,000 EUR. Compared to other EU countries, this range is very competitive. The licence allows
its holders to provide a broad range of payment services in Lithuania and the EU, a single market with a vast and diverse customer base.

The Payment Institution Limited Activity Licence has been designed for Lithuanian and foreign startups with fewer resources. It’s based on a sandbox principle which means that the licence provides financial startups with access to a controlled environment where they can test new payment products, services, or business models with reduced regulatory constraints.

The main difference between a payment institution engaged in restricted activities and a regular payment institution is that the payment institution engaged in restricted activities isn’t subject to the minimum initial capital requirement. However, the Payment Institution Limited Activity Licence is valid solely in Lithuania and allows its licensees to provide only the payment services specified in Article 5(1- 5) of the Law on Payments.

Advantages of the Lithuanian PI Licence

Lithuania has established itself as a fintech-friendly hub, promoting innovation within the financial services sector. The regulatory framework is supportive of fintech startups, which makes it an ideal location for businesses focused on digital payments and financial technology. The Bank of Lithuania has recognised the importance of keeping pace with the rapidly evolving fintech industry and is always willing to work closely with innovative businesses. It offers a supportive and agile regulatory framework, where innovation is encouraged by allowing for experimentation and exploration while effectively protecting customers. Moreover, you can expect to join such fintech initiatives as clusters where fintech businesses, investors, and other stakeholders come together to collaborate and share resources.

The Bank of Lithuania has streamlined the application process for payment institution licences, which leads to quicker approval and entry into the market, compared to some other EU countries with lengthier regulatory procedures. If your application is successful, you can obtain a Lithuanian licence within three months. This early entry can help you capture market share and establish a strong foothold before your competitors. Shorter licensing times also translate into lower costs associated with the application process, including legal and compliance costs, application fees, and ongoing expenses while waiting for the licence.

If you succeed in obtaining the Regular Payment Institution Licence, the passporting principle will enable you to offer your products and services in other EU member
countries, provided that you notify the Bank of Lithuania and the appropriate authorities of those countries. Needless to say, obtaining a single licence in Lithuania can be more cost-effective than applying for separate licences in every country of operations. This means that you can invest more in the expansion and cross-border operations, and significantly accelerate your business growth.

Lithuania is also part of the Single Euro Payments Area (SEPA), an initiative that enables easy cross-border euro payments and enhances the convenience of providing payment services to EU customers. Customers across SEPA countries benefit from fast, low-cost, and standardised euro payments. For Lithuanian PI licence holders, this contributes to an improved customer experience, and in turn, allows them to grow and maintain their customer base. It’s also worth noting that Lithuania has an appealing taxation environment, featuring one of the EU's most favourable Corporate Income Tax rates at 15%. This allows payment institutions to retain a more significant share of their profits for reinvestment, business expansion, and day-to-day operational costs. The Ministry of Finance aligns itself with a growth-friendly tax policy that includes a range of significant tax incentives available to eligible businesses. The incentives include a triple-deduction of R&D costs and the Innovation Box where taxable profit from inventions created through R&D activities is taxed at a reduced 5% tax rate.

PI Regulations in Lithuania

Lithuanian payment institutions operate within a robust but agile framework, enforced by the Bank of Lithuania. It consists of national and EU regulations that primarily focus on ensuring prudent operations, customer protection, and unhindered growth. While navigating this framework is relatively easy, and you’ll receive plenty of support from the national institutions and from within the industry itself, we strongly recommend consulting with our legal team who can analyse your unique situation and ensure that your initial steps towards the launch of your payment institution don’t cause unwanted legal implications.

The main Lithuanian legislation and regulations governing the operations and licensing of PIs in Lithuania:

•  Republic of Lithuania Law on Financial Institutions
• Republic of Lithuania Law on Payment Institutions
• Republic of Lithuania Law on Payments
• Republic of Lithuania Law on Companies
• Republic of Lithuania Law on Banks
•  Law of the Republic of Lithuania on the Prevention of Money Laundering and Terrorist Financing
• Resolution No 03-83 of the Board of the Bank of Lithuania of 24 May 2018 on the approval of the regulations for the calculation of initial capital and own
  funds of electronic money institutions and payment institutions and the forms of the report on the calculation of initial capital and own funds of electronic money institutions (payment institutions)

The following EU regulations, inter alia, are also applicable:

• The Payment Services Directive 2 (PSD2)
• The Sixth Anti-Money Laundering Directive (AMLD6)
• General Data Protection Regulation (GDPR)
• Market Abuse Regulation (MAR)

Choosing Between a New PI Licence and a Ready-Made Company with a PI Licence in Lithuania

When launching a payment institution in Lithuania, one of the fundamental decisions that you must make is whether to apply for a new PI licence or to consider the acquisition of a ready-made company with an already existing PI licence. Each path has its own advantages and drawbacks, and the choice can significantly impact the launch and operations of your payment institution in Lithuania and beyond. Whichever way you choose, we have legal experts specialising in both, licensing and acquisition of a payment institution.

First, consider the following aspects of obtaining a new PI licence in Lithuania:

•  Obtaining a new PI licence allows you to build your payment institution from the ground up in accordance with your vision, as you’ll have complete control over its structure, policies, and operations
• By building your payment institution from the ground up with robust regulatory compliance in mind, you can ensure a strong foundation in this crucial aspect which will prevent you from unwanted legal implications
• New payment institutions don't carry the legacy issues or liabilities that can be associated with existing companies
• The process of securing a new PI licence can be more time-consuming and resource-intensive as it involves detailed regulatory investigation, extensive
  documentation, and a period of waiting for approval

Then, take into account the main aspects of buying a ready-made company with a PI licence in Lithuania:

• Once the company is acquired, you can enter the market almost immediately and you can hit the ground running by launching your operations and serving customers without the wait associated with a new licence application
• Ready-made payment institutions usually come with existing operational infrastructure, such as client relationships, systems, and processes which can save a lot of time and resources
• Such companies can also offer opportunities for mergers and expansion strategies, allowing you to consolidate or diversify your presence in the market
• Acquiring an existing company with a PI licence can be expensive, as you’ll need to cover the purchase price, due diligence costs, and potential liabilities

Key Requirements for PI Licence Applicants in Lithuania

To be able to apply for a Lithuanian PI licence, you first have to establish a local company that meets initial capital requirements and has a local registered office.

We can help you to choose the most suitable and permissible legal form, such as a Private Limited Liability Company (UAB), and design a corporate structure that
matches your business goals. It only takes up to a week to register a new company in Lithuania, provided that your documents are duly prepared and correctly
submitted. This means that you can move on to the licence application process almost in no time.

We also want to emphasise the importance of having all necessary internal processes in place and thorough documentation. They will make your company prepared to provide financial services in a safe and sound manner at the time of authorisation which is a legal prerequisite. Among everything else, you’ll have to establish sound anti-money laundering and counter-financing of terrorism (AML/CFT) procedures, including customer due diligence, risk assessment, and internal controls to prevent illegal activities within your payment institution.

Another essential requirement is your consent to due diligence and background checks which company owners, shareholders, and key personnel must undergo. The
Bank of Lithuania conducts them rigorously to assess every applicant’s integrity, professional qualifications and experience, and the actual availability of the
required capital and resources to launch and maintain a payment institution and fulfill its financial obligations. You must be willing to cooperate with the authority
and disclose any information that’s required to assess your suitability to run a payment institution.

In addition to such financial requirements as initial capital, you’ll also have to demonstrate that your operations will be financially prudent right from the start of your business. Lithuanian payment institutions are required to segregate customer funds from their own operational funds in order to safeguard customer funds in the event of the institution’s insolvency or financial difficulties. Also, it might be essential to demonstrate the possession of capital buffers as a safeguard against unexpected losses and economic downturns and have effective liquidity management policies to help ensure that the institution can meet its financial obligations in a timely manner.

Requirements for the Buyers of a Ready-Made Company with a Lithuanian PI Licence

To acquire a ready-made company with a PI licence in Lithuania, you’ll first have to verify with the Bank of Lithuania and other relevant regulatory authorities that the proposed acquisition of the ready-made company complies with all legal and regulatory requirements. In some cases, you might even be required to submit a formal application for regulatory approval of the acquisition. This application should usually include detailed information about the buyer, the seller, the transaction terms, and the reasons for the acquisition.

Similarly to applicants for a new PI licence, buyers also have to undergo due diligence and background checks. The Bank of Lithuania conducts a thorough review of every proposed acquisition which includes an assessment of the buyer’s financial stability, reputation, ability to meet regulatory requirements, and the seller’s compliance history. Following this process, the authority may need to approve the change of control which is an essential step in ensuring that the PI licence remains valid and in compliance with regulatory standards.

If the acquisition is approved and goes through, you’ll be obligated to provide notifications to customers of the ready-made company about the change in ownership which will allow you to maintain transparency and ensure a smooth transition. The notification should be provided to customers well in advance of the actual change in ownership, and include details about the acquiring company, any changes in the acquired company's name or branding, and the expected timeline for the transition.

Ongoing Requirements for PI Licensees in Lithuania

Once you’re a proud owner of a fully licensed Lithuanian payment institution, there will be many ongoing requirements for your company to fulfil continuously in order
to ensure uninterrupted compliance with the regulatory standards and the smooth operations of the business. These requirements include a range of areas, including
regulatory reporting, customer protection, and risk management.

The main requirements you have to be aware of are the following:

• Maintaining the required capital at all times, and ensuring financial stability and the ability to meet financial obligations
• Maintaining detailed records of customer transactions, financial statements, and other documentation
• Submitting regular reports to the Bank of Lithuania and other relevant regulatory authorities to ensure transparency of the operations, financial health, and overall compliance with regulatory standards
• Maintaining operational resilience by ensuring that the critical operations and services are uninterrupted, even in the face of disruptions or crises
• Investing in cybersecurity measures to protect customer data and financial assets
• Constantly updating and maintaining the efficiency of internal AML/CFT policies, including staff training

If you think that Lithuania is the right European jurisdiction for your payment institution, our team here at the Company in Lithuania UAB can help you realise your business idea as swiftly as possible. With support from our dedicated legal advisors, business development professionals, and financial accountants, you’ll find
the process of launching a payment institution in Lithuania straightforward, transparent, and effective. Reach out to us today to arrange a tailored consultation,
where we’ll work with you to understand your specific needs and develop a custom-made roadmap for your business success.