Lithuania, one of the Baltic States and a member of the European Union, is a jurisdiction having all necessary conditions for its FinTech ecosystem to grow and develop, namely support from the government, friendly regulation, favourable taxation system, progressive regulatory rules, talented workforce, innovative infrastructure and relatively low operational costs. Lithuania strives to become the number one FinTech hub in Europe by building innovative financial sector and accelerating e-government solutions. 

To become a Payment Service Provider (PSP) and provide payment services across Europe a company must obtain a Payment Institution license. One of the best options is the PI license issued by the Bank of Lithuania. A company holding the Lithuanian PI licence is authorised to provide the following services:

1. Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;
2. Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;
3. Execution of payment transactions, including transfers of funds on a payment account with the payment service provider of the payment service user or with another payment service provider: execution of direct debits, including one-off direct debits, execution of payment transactions through a payment card or a similar device and/or execution of credit transfers, including standing orders;
4. Execution of payment transactions where the funds are covered by a credit line for a payment service user: execution of direct debits, including one-off direct debits, execution of payment transactions through a payment card or a similar device and/or execution of credit transfers, including standing orders;
5. Issuing of payment instruments and/or acquiring of payment transactions;
6. Money remittances;
7. Payment initiation services;
8. Account information services.

In addition to payment services, it has the right to provide additional services that are closely related to these services, e.g. currency exchange. It is important to note that a payment institution cannot accept deposits from unprofessional market participants or issue electronic money, it is not authorized to hold the client’s funds for a longer period than is necessary for the payment transaction, in other words to store the funds on payment cards or electronic wallets. The license of the payment institution is not enough – in such case the License of the electronic money institution (EMI) or the Banking license is necessary. 

Lithuanian Payment Institution License (PI)

One of the main advantages of Lithuanian PI is that it can provide services in the countries that are members of the EU / EEA after after a notification procedure or so called 'passporting'. A PI has to notify the Bank of Lithuania (regulator) which will review the application and issue the relevant notification to the host state regulator. This process usually takes around 1-2 months.

The Bank of Lithuania elaborated on the limitations of content and functionality of payment accounts that can be provided by companies with the PI License. In a nutshell, Payment Institutions and small Payment Institutions cannot accept funds with no particular payment instructions to send it to a payee or another Payment Institution, such funds cannot be held for an indefinite period of time. Funds from the payment accounts should be transferred no later than on the next working day or at a later time when a client instructs to do so with a prior accompanying outward payment order.

The initial capital of a payment institution must at all times be no less than the larger of the following amounts:

• no less than EUR 20,000 where the payment institution intends to provide only money transfer services;
• no less than EUR 50,000 where the payment institution intends to execute only payment initiation services;
• no less than EUR 125,000 where the payment institution intends to provide full list of PI services.