Amount of payment transactions executed by electronic money and payment institutions and their income has almost quadrupled
In 2021, the electronic money institutions (EMIs) and payment institutions (PIs) sector continued its rapid growth. The income from licensed activities of EMIs and PIs, which form the backbone of the Lithuanian FinTech sector, grew 3.5 times in 2021 (unaudited data) to €504 million at the end of the year: 92% of this income was generated by EMIs and 8% by PIs. In addition, at the end of last year, the amount of payment transactions of EMIs and PIs stood at €194.57 billion, up 3.8 times compared to the end of 2020.
The income from licensed activities of ten largest institutions accounted for 77% of the sector’s income. Almost half of the total income from licensed activities, i.e. 49%, and 58% of the amount of all transactions, according to unaudited data, are attributable to a single EMI.
“The electronic money and payment institutions sector has continued its rapid growth. We aim to ensure that this growth is sustainable and that the maturity of the sector increases. Therefore, we continue to urge companies to focus their efforts and resources on important areas such as anti-money laundering, meeting the requirements for the protection of equity capital and customer funds, internal control and enhancement of compliance,” says Dovilė Arlauskaitė, Head of the Payment Market Supervision Division of the Bank of Lithuania.
At the end of 2021, one institution failed to meet the own funds requirements and two EMIs and PIs did so in the Q3 of the year. The Bank of Lithuania has assessed the unaudited financial statements of EMIs and PIs as at 31 December 2021 and contacted the EMIs and PIs with the own funds ratio approaching the minimum threshold to ensure that all EMIs and PIs monitor their own funds ratio and have effective controls in place to take early action to keep their own funds above the required minimum. At the end of 2021, the share of client funds of EMIs and PIs held with the central bank was 68%, up by 44 percentage points compared to 2020.
At the end of 2021, there were 141 EMIs and PIs (87 EMIs and 54 PIs) on the public lists, an increase from 132 (80 EMIs and 52 PIs) at the end of 2020. The Bank of Lithuania is currently processing around 30 licence applications of EMIs or PIs.
The position on the right of electronic money institutions and payment institutions to access bank accounts opened with credit institutions remains one of the areas monitored by the Bank of Lithuania. In Q4 of 2021, three notifications were received from credit institutions regarding the closure or restriction of accounts of EMIs and PIs, and the total number of such notifications received by the Bank of Lithuania in 2021 was 12.
Aiming to increase the maturity of the sector and ensure the compliance of institutions, the Bank of Lithuania sent the Dear CEO letter to the managers of EMIs and PIs in both 2021 and 2022, focusing this year on issues related to the implementation of business plans, provision of licensed services, changes in the business model, protection of client funds, internal audit and internal control, management of risks (including AML/TF, ICT and security risks) and reporting.
In 2021, the infringements found to have been committed by EMIs and PIs resulted in the revocation of 3 licences of institutions, imposition of 9 fines (totalling €785,000), issue of 1 warning and 5 public communications. In 2022, 5 sanctions were imposed on EMIs and PIs: 2 fines, 1 public communication of a legal infringement, 1 warning and 1 licence revocation.
The Bank of Lithuania publishes information on planned scheduled inspections of electronic money and payment institutions as well as their compliance with the annual and quarterly key performance indicators and prudential requirements.
In view of the sanctions imposed due to Russia’s aggression against Ukraine and aiming to protect the financial markets of Lithuania and the European Union as a whole, the Bank of Lithuania has cut off the payment infrastructure to Russia-linked payments and will make additional assessments of the links between financial market participants and Russia.