Fintech/Payments/Places/

E-money “onslaught” hits Lithuania

The Baltic fintech hub struggles to keep up with Brexit-fuelled interest from international payment companies.

By Carly Minsky

Google has one. Revolut has one. All the cool kids seem to be vying for the latest regulatory bauble: a Lithuanian e-money licence.

Sifted has crunched the numbers and there are now 53 companies with an e-money licence in the small Baltic nation, allowing them to issue electronic money.

This is a 15% rise in just the past three months, and the numbers are likely to keep growing.

Many authorisations are for international companies — including Google Payment and Revolut — which have relocated or increased their presence in Lithuania.

This month Marius Jurgilas, board member at Lithuania’s central bank, said the regulator had received around 100 applications for such licences.

This may be at least in part because of Brexit, with UK companies hoping to secure a passport quickly in Lithuania to offer services across the EU once the UK has left the bloc (in principle on March 29).

“It seems that the companies, many of which are quite large, are behaving like a student who only starts worrying on the eve of an exam,” Jurgilas told Reuters.

But Lithuania’s favourable e-money approach is also part of a strategy to promote the Lithuanian fintech sector more generally. E-money authorisation in Lithuania takes just three months, compared to a year-long process in many other countries.

In a separate interview with the BBC, Jurgilas said: “We needed to find our competitive edge. We thought: we are part of the European Union, why not leverage that? Not just movement of people but movement of services too.”

At any rate, e-money licences for Lithuania seem to be booming. The data shows that overall there have still been many more filed in the UK — but at this rate, Lithuania has a real shot to come out ahead.

What is e-money?

Whenever you make a payment without using cash, credit or money from a bank account, chances are you are using electronic money.

Unlike cryptocurrency, e-money is a digital way of storing traditional currency, on prepaid cards — like public transport payment cards — and in digital wallets like PayPal.

More specifically, e-money is “monetary value” you can buy from an e-money issuer using ordinary payment methods, to then use for other transactions.

Until January 2018, it was not always clear whether an e-money issuer needed authorisation in Europe to offer its services, since many were exempt from these rules as “telecoms” operators.

But with the introduction of new regulation, e-money fintech startups have a clear obligation to hold a primary “home” licence in a European country where they have a significant presence.

Any authorised e-money company can apply for passports in other EU countries where it wants to offer services. Passporting was available for authorised institutions even before the new regulations, but now a greater number of fintech startups are eligible to take advantage of it.

On the flip side, the new rules around passporting involve stricter security obligations and require the foreign company to have a designated point of contact in any country where it operates.

Number of e-money authorisations granted per country

Country E-money authorisations
UK 155
Lithuania 53
Cyprus 16
Malta 15
France 11
Germany 7
Spain 6
Norway 6
Luxembourg 6
Belgium 5
Bulgaria 5
Austria 5
Sweden 4
Lichtenstein 4
Croatia 4
Italy 3
Denmark 3
Czech Republic 2
Ireland 2
Greece 2
Romania 2
Latvia 2
Slovenia 2
Netherlands 1
Portugal 1
Hungary 1
Slovakia 1