November 24, 2020

In Fintech-savvy Lithuania the IT side of licensing is easier too

Fintech has done well amid the coronavirus pandemic as e-money use grows along with other forms of contactless living, and Lithuania, a European star of the industry where welcoming Fintechs is a national priority, continues to attract international players. That is largely due to the straightforward processes and the help that is available for getting licensed and up and running in the Baltic nation – including for often overlooked but vital matters of technological capabilities and compliance.


“The whole Fintech ecosystem here is so developed – business support networks, clear efficient regulation, lawyers who know the field inside out, and technology partners with just the right expertise and solutions,” says Anton Zujev, the Head of Business Development at Fininbox, a provider of IT platforms and related consulting services for financial institutions. 


“It’s hard to imagine how the process could be made any easier,” Zujev adds.


Fininbox’s own SaaS ‘banking system-in-a-box’ is used not just by banks and credit unions but also by electronic payment and money institutions and specialized banks. And the company’s expert handling of the IT and operations sides of licensing for Fintech clients is like icing on the cake for those who want to run a business out of Lithuania and access the EU market of 450 million people.


Recently Curve, the UK-born EMI known as a bank-card consolidator, chose the Baltic nation over the likes of Ireland and Luxembourg as its base for post-Brexit operations in Europe. In obtaining a license from the Bank of Lithuania in late October, Curve Europe joined a list that already includes Revolut, Instarem, TransferGo, Contis and a myriad of other diverse Fintech firms. 


Global leadership


Lithuania’s financial market supervisor is the cornerstone of the country’s Fintech-friendly climate.


“The Bank of Lithuania stands out among regulators for being so open and friendly and supportive when it comes to applying for a Fintech license and guiding companies through the whole process, and so transparent, also about the risks and about the requirements that companies need to meet to be eligible,” says Paulius Tarbūnas, the head of the industry association Fintech Lithuania.


Central Banking magazine recently gave the Lithuanian central bank the 2020 “Global Impact Award” for its work promoting financial innovation while also ensuring consumer protection. It cited strong pre-application advice and feedback for Fintech newcomers, unique regulatory and technology “sandboxes” with a blockchain focus, digitisation of licensing processes, and work now underway to reduce the reporting burden on Fintech firms by automating the collection of operational data.


Then there is the payment system operated by the Bank of Lithuania, CentroLink, which lets EMIs and PMIs directly access the Single Euro Payments Area (SEPA) just like banks. “That’s a big advantage. It means you don’t need to do your payments via a commercial bank,” Tarbunas notes. 


Speed in licensing decisions is another big plus. Once an applicant is ready with all documentation, the Bank of Lithuania commits to a timeline of 3 months for processing an EMI or PMI license application. That is two to four-times faster than is typical in other countries. 


No tech worries


Getting to the point of having all documentation ready is still a challenge, though. One area which is sometimes neglected until issues arise with the regulator is technology. 


Tech is of course a critical dimension of any financial technology company in terms of ensuring consumer protection, business continuity and compliance. And that is where Fininbox comes in with highly relevant expert assistance based on its own and its parent company’s long experience. 


“As a technical solution provider, we also provide the documentation to the regulator for licensing. We of course know our systems well, we know the Bank of Lithuania extremely well, and we work closely with all the law firms in Lithuania involved in licensing,” Zujev says. “We handle the IT part of the application but also other parts on risk management and operations since we know not just IT but also operations, the business itself. As a group we’ve been in the market for almost 30 years.”


Fininbox, based in Lithuania’s capital Vilnius, is part of the Forbis Group which develops and supplies IT platforms to financial institutions of all sizes and types and itself operates an EMI – Contomobile. 


“We have all the solutions for functionality and for compliance and we have all needed integrations with state institutions: the Bank of Lithuania’s payment system, the tax inspectorate, and so on. Clients come to us to get everything in one place to be able to get started quickly and focus on developing their business,” Fininbox’s Head of Business Development stresses. 


Life after licensing


Once a license is obtained, Lithuania remains a great base for running an international Fintech business, according to Tarbūnas. He cites a strong talent pool, competitive costs, and the well-articulated ecosystem. 


“There is quite nice cooperation among all the participants: Fintech Lithuania and other associations with active members, the Bank of Lithuania, the Ministry of Finance, the government agencies that promote foreign investment and support investors, the Agency for Science and Innovation…. It’s a living network with regular innovative events and, for instance, a popular monthly breakfast to share what’s cooking in each of the organizations and brainstorm together,” Tarbūnas details.


He adds that Lithuania handled the first wave of the COVID-19 pandemic remarkably well and is among the European Union countries that suffered least economically. “So, as has often been true in the past, now too we can say that Lithuania stands out for its stability – both in regulatory and in economic terms. It remains an extremely attractive location for setting up a business.”