Lithuania PI License

Lithuania Payment Institution License

The Bank of Lithuania provides licenses to payment institutions that permits the provision of payment services. The main goal is to promote higher confidence in the overall use of electronic payments while protecting the safety of consumers. This is also to create a favorable environment for both Lithuanian and foreign start-ups to engage in restricted activities.

Introduction

Under the Republic of Lithuania Law on Payment Institution, your business is required to secure the Lithuania Payment Institution License in order to provide the payment services below.

A person must have in force a Lithuania payment institution license to be entitled to carry on a business of –

1. An operating payment account where services provided include facilitating cash to be deposited or withdrawn from the payment account
2. Performing payment transactions from payment service providers with payment service users or another payment service provider.
3. Performing payment transactions where the funds are covered by a credit line for a payment service user
4. Issuance of payment instruments and/or acquiring of payment transactions
5. Money remittances
6. Payment initiation services
7. Account information services

Important Considerations

• For points 2 & 3 above, these include but are not limited to the following:

o Effectuating direct debits, including one-off direct debits, execution of payment transactions via payment cards or similar devices and/or performing credit transfer, including standing orders.

Threshold

• The ability to withhold clients’ funds only for the time necessary to accomplish a successful payment transaction.
• If your business exceeds the aforementioned threshold and requires providing clients the ability to hold funds in payment cards or other technical instruments such as an e-wallet, you will be required to apply for an electronic money institution or bank license.

The above diagram is obtained from Bank of Lithuania’s webpage on Authorisation of Payment Institutions.

Types of Lithuania Payment Institution licenses

Lithuania Payment Institution License can be categorized as follow:

• Payment Institution License: This license allows payment institutions to provide payment services within the European Union (EU) and European Economic Area (EEA), such as payment initiation services, account information services, money remittance, currency exchange, and other payment services.
• Payment Institution License with Restricted Activity (Small Payment Institution license): Small PIs can offer the same services as fully licensed PIs, with the exception of payment initiation and account information services. Moreover, services can only be offered on Lithuanian territory; they cannot be offered in other EEA nations.
• Electronic Money Institution License: This license allows electronic money institutions to issue electronic money and provide payment services, including payment initiation services, account information services, money remittance, and currency exchange. Electronic money institutions are also authorized to safeguard customer funds and offer prepaid payment instruments.

It is worth noting that both payment institution and electronic money institution licenses are subject to different regulatory requirements and obligations. Payment institutions are regulated under the Law on Payment Institutions of the Republic of Lithuania, while electronic money institutions are regulated under the Law on Electronic Money and Electronic Money Institutions of the Republic of Lithuania.

N5Bank’ team of licensing experts has expertise in the regulations and requirements of payment institutions in Lithuania to determine which type of license is suitable for your business and to ensure that you comply with the necessary regulatory requirements.

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Mandatory requirements for Lithuania Payment Institution License

• The application must be submitted by a company registered in Lithuania or a foreign branch registered in Lithuania, where there is at least 1 employee as a point of contact.
• The company structure should include:

o At least 1 Shareholder

o At least 1 Head of Administration / General Manager

o 3 supervisory board members

o 3 Board members

• Attainment of a professional indemnity insurance contract as well as other relevant documents confirming comparable liability guarantees with substantiation of calculation of the insured sum.
• A designated audit firm that is in compliance with the Law on Financial Institutions and of the Law on Audit of Financial Statements of the Republic of Lithuania.
• The payment institution should have an initial capital exceeding EUR125,000. Exceptions include the following stated below:

o If the payment institution intends to provide only money transfer services, initial capital should not be lower than EUR20,000.

o If the payment institution intends to provide only payment initiation services, initial capital should not be lower than EUR50,000.

Initial capital requirement for Lithuania Payment Institution license

• Entities applying for a Lithuania payment institution license are required to have an initial capital exceeding EUR125,000. Exceptions include the following stated below:

o If the payment institution intends to provide only money transfer services, initial capital should not be lower than EUR20,000.

o If the payment institution intends to provide only payment initiation services, initial capital should not be lower than EUR50,000.

Admission Criteria

The Bank of Lithuania has stated that they will consider the below criteria while assessing the issuance of the Payment Institution License.

• Type of entity and profile of the applicant.
• Stage of application’s proposition and operational readiness.
• Classification of regulated activity applicants intends to operate.
• Presence of holding company.
• Payment institution’s funding sources.
• Fitness and propriety of the controllers, directors and shareholders.
• Fitness and propriety of the heads of the payment institution, pertaining to having the necessary qualifications acquired.
• Anticipated staffing levels.
• Key outsourcing arrangements.
• Financial condition and track record of the company, more importantly the financial ability of the company to comply with the minimum capital requirement.
• Whether the public interest will be served by granting a license, and if the provided financial services is carried out in a safe and sound manner.
• Professional indemnity insurance coverage.
• Compliance with legal and regulatory requirements.

Associated timeline for attaining a Lithuania Payment Institution License

The Supervision Service of the Bank of Lithuania stated that there is no definite timeline for approving each license application. Submit an application and the Supervision Service will revert with the acceptance or the rejection of the application for consideration within 5 business days.

Each application will be reviewed individually, and they may revert asking for additional supporting documents or information. Only after receiving completeness of information, they will provide feedback regarding the license application.

The shortest possible time frame for application and issuance of the license is 3 months, assuming no deficiencies during submission. If you are applying for the payment institution license solely to engage in restricted activities, the timeframe of approval is a shorter 2 month period.

How to apply for Lithuania Payment Institution License?

• N5Bank will assist you to register a Lithuania company by providing a local company address, local nominee director and local company secretary. This process will take approximately 2 weeks. See this webpage for more information on the Lithuania incorporation process.
• After the company is registered, N5Bank will proceed to open a corporate bank account with a reputable Lithuania bank. This bank account will be used to deposit the minimum paid-up capital required to secure Payment Institution License the Supervision Service of the Bank of Lithuania. In 4 weeks, N5Bank will secure the bank account and internet banking token for our international clients.
• At the same time, N5Bank will assist you to prepare a comprehensive business plan and AML/CFT policies required for the Lithuania payment institution license application. This is to ensure the company adheres to the compliance, legal and regulatory requirements regulated by the Bank of Lithuania.
• N5Bank will ensure that the business plan is realistic and correspond to the capabilities of the company’s shareholders and directors. The main aim is for your newly established Lithuania Payment Institution to conduct business and provide financial services in a safe, sound and protected manner.
• Simultaneously, N5Bank will prepare internal policies such as technology risk management, management information and internal control system. These documents will include the administrative measures as well as the type of accounting system used. This is to ensure that your Lithuania Payment Institution has a detailed procedure in place prior to license approval.
• If you are planning to carry out payment initiation or account information services, N5Bank will assist you to source for professional indemnity insurance.
• If required at this stage, N5Bank will arrange for an initial meeting with the representatives from Bank of Lithuania. The aim of the meeting is to answer any queries that you may have. The meeting will be attended by at least two specialists from the Supervision Service of the Bank of Lithuania.
• Once the above is completed, N5Bank will submit the license application to the Supervision Service of the Bank of Lithuania for approval. All going well, we expect to receive feedback within 3 months upon submission. In the event additional documents are required, N5Bank will immediately prepare the same for submission so as to prevent any engagement delay.
• In total, N5Bank expects to register your Lithuania company, open a local corporate bank account and secure the Payment Institution License within 5 months.

Our services

Technical compliance:

Professional IT analysis to ensure that the software meets regulatory standards. There are proven software solutions such as BAAS or SAAS. We significantly often work with such platforms as SoftexLab, which is ready-made technical solutions for your future fintech business, which are audited by various regulators within the jurisdiction.

Card issuance:

We recommend a White Label solution with partners such as XBANKSY, which is aggregator of more than 30 different cards and BIN- sponsorship around the World. This is a faster and, most importantly, more profitable way than direct VISA or MasterCard membership.

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