What is a Payment Institution License?
A payment institution license signifies that a market participant is licensed by the Bank of Lithuania to issue electronic money and to provide payment services that are indicated in the license. This means that the participant can perform money remittances, payment transactions, direct debit or credit transfers, etc.
The provision of payment services is a licensed activity in Lithuania. Therefore, persons who undertake economic, commercial, financial, or professional activities in the form of a business without holding a license to engage in the activities may be subject to criminal procedures.
There are several types of licenses, but another key license of interest may be the e-money institutional license in Lithuania.
Benefits of a Payment Institution License in Lithuania
There are some core advantages to payment processing companies being licensed in Lithuania:
- The Lithuanian regulatory approach is much more flexible and business focussed when compared to other European jurisdictions. You will however be allowed to provide your services in all EU and EEA countries with your singular Lithuanian license after a notification procedure in the host country is executed by the Bank of Lithuania.
- Licensed financial institution maintenance and operational costs are significantly lower than in other European countries, primarily because there is no requirement to hire all local personnel, and the regulator allows for non-EU residents to be the top managers of a licensed financial institution with minimal local personnel in Lithuania.
How to Obtain a Payment Institution License
During the application process, the applicant must demonstrate the following to the Bank of Lithuania:
- The applicant has a high reputation and standing in the financial community
- Every person who is or will be a shareholder/director/head of the institution must be of good repute and possess relevant qualifications
- The applicant will have appropriate systems in place to manage risk
- Must be able to show via the business plan that you plan to provide financial services in a safe and sound manner
- The applicant must take adequate measures to safeguard users’ funds (EMBank can help you with opening Safeguarding Account to fulfill this condition.)
Electronic Money Institution and/or Payment Institution License Requirements
There are many documents that must be filled in to be accepted for a license, but the primary documentation which must be provided and certified in order to complete these documents are as follows:
- Application Form – Specific to either EMI or PI.
- Articles of Association – Including drafts if not yet incorporated.
- Business Plan – Detailed strategic, operational, and financial planning.
- Program of Operations – Describing the services to be offered.
- Proof of Payment of Stamp Duty – Confirmation of paid fees for license processing.
- Evidence of Initial Capital – Documents proving compliance with capital requirements.
- Description of Measures to Safeguard Customer Funds – Methods to protect customer funds.
- Governance Arrangements and Internal Control Mechanisms – Details about administrative, risk management, and accounting systems.
- Organisational Structure – Description of the organizational setup and responsibilities.
- Compliance Documentation – Professional indemnity insurance or equivalent guarantees.
- Questionnaires – Assessments of management, operational risks, and compliance with anti-money laundering regulations.
While the overall categories of documents are quite similar, the specifics of the documents may differ. Additionally, the actual content of the forms and annexes would have institution-specific questions and requirements, which reflect the operational nuances of EMIs versus PIs.
Important Reminder: The financial regulatory landscape is subject to change, and the specific documentation requirements can evolve. Therefore, it is crucial for applicants to verify the most up-to-date information directly from the Bank of Lithuania’s website or consult the specific legal regulations applicable at the time of their application. This ensures that the application process is handled correctly and in accordance with the latest regulatory standards.
The founder(s) of an e-money institution (EMI) must be willing to undergo an investor screening procedure with the National Security Commission, and there are also some initial capital requirements on top of the above-mentioned documentation requirements. The initial capital requirement for an EMI is 350,000 EUR. The initial capital for a PI (Payment Institution) differs from EUR 20,000 to EUR 125,000, depending on the services the PI is going to provide.
In terms of the structure of your institution, the management must be specified. This includes the company having a board, which consists of a minimum of three members and the CEO. When applying for the license, the company must provide details on the key personnel. This includes anti-money laundering officer(s) and information security officers. It is essential that you prove that the relevant employees have the necessary qualifications and experience.
How Can EMBank Help?
European Merchant Bank (EMBank) offers accessible financial products for fintech companies and local/regional SMEs across a variety of industries. Established in Lithuania and licensed by the European Central Bank, EMBank offers a total package consisting of a European banking license, a single API-based software, and the know-how to provide a truly embedded finance offering.
In a fintech-friendly approach with customized banking solutions, we provide a Banking-as-a-Service offering, combined with Safeguarding, Business, Payment, Accumulative account types as well as payment options through SEPA, Swift, and Target2.
Please keep in mind that the above information has been prepared or assembled by the EMBank and is intended for informational purposes only. Some of the information may be dated and may not reflect the most current legal developments.
Call us today on +370 700 11200. Alternatively, please send an email to [email protected] to arrange a telephone call.
