Catalyst Award: Bank of Lithuania

When one thinks of technological advancement, Lithuania is not usually the first country to spring to mind. For fintech, however, the country has become a hub of innovation. Authorities at national and municipal levels have shown a strong commitment to the sector, creating a fintech‑friendly regulatory environment. And the central bank is no exception. 

Through the Bank of Lithuania, fintech firms have been granted direct access to the Single European Payments Area, and can therefore issue International Bank Account Numbers. The central bank is also in the process of launching a blockchain‑based regulatory sandbox and has streamlined the licensing process for fintechs. For these reasons, the central bank has claimed this year’s Central Banking FinTech & RegTech Catalyst Award. 

One of the biggest hurdles for fintech firms looking to enter the market is obtaining a licence, which can require jumping through a number of regulatory hoops – it can be long, arduous and costly. In some European Union countries, this can take 12 months, but in Lithuania it takes just three, thanks to the central bank’s new approach. In 2017, the central bank began a newcomer programme allowing start-ups and investors to meet with the regulator to understand whether their business plans are in line with the applicable regulatory environment. They can then apply for a licence through the new e-licensing tool. 

Currently, the tool allows institutions to apply for two types of licence: a payment system provider licence and an electronic money licence. The central bank is also now making ‘enhancements’ that will allow other licence types and further features. Via the new platform, firms are able to specify which licence they wish to apply for. The system then automatically generates a list of mandatory documents that need to be submitted, alongside guidance relating to disclosure.

Fintechs looking to offer banking services in Lithuania are also not hindered by capital requirements. The central bank mandates firms have €1 million in capital – the smallest requirement in the eurozone.

Around 30 ‘electronic money’ institutions were granted licences by the Bank of Lithuania in 2017; in 2016, this number was just 12.

The Bank of Lithuania’s sandbox, meanwhile, will give start‑ups a launchpad from which to learn about national regulation and ensure they are compliant before going to market. Fintechs can develop services and products in a real‑world environment with real customers while being overseen by the regulator. Recently, the central bank has made tweaks to its sandbox. Specifically catering for firms looking to build financial services around blockchain, the central bank has built its own – LBChain – which firms can use to test their products and services. This new element of the sandbox will go live in 2019.

Read the full Central Banking FinTech RegTech Global Awards 2018 Winners In Focus report