Continued rapid growth of electronic money and payment institution sector led to closer supervision
The Bank of Lithuania published the audited data of electronic money institution (EMI) and payment institution (PI) sector for 2021: the institutions had almost 10 million customers and revenues grew 3.5 times. In the context of supervision of the sector, the central bank assessed the growing risks and focused on individual inspections and sectoral analyses, which covered around 70 market participants.
“Our aim is to strengthen risk management and compliance in the sector which underlies FinTech and to ensure that business development grows only in tandem with compliance maturity. We are working hard on this issue in cooperation with market participants and our joint efforts translate into analyses and recommendations that help to strengthen the sector,” says Dovilė Arlauskaitė, Head of the Payment Market Supervision Division of the Bank of Lithuania.
In 2021, the number of EMIs and PIs operating in Lithuania grew by 7% and amounted to 141 (87 EMIs and 54 PIs) at the end of the year. With a significant increase in the volume of activities of the sector’s institutions, the Bank of Lithuania focused on monitoring compliance with anti-money laundering and counter terrorist financing (AML/CTF) requirements, protection of equity capital and customer funds, internal control requirements and strengthening compliance.
In 2021, the Bank of Lithuania carried out more than 30 inspections, sectoral analyses or visits. 18 sanctions were imposed for infringements of legislation. More than half of all customer complaints received by the Bank of Lithuania were related to payment services provided by EMIs and PIs. The most common issues were related to account restrictions, termination of business relations due to the application of AML/CTF requirements. Complaints were also received in relation to the commissions applicable to a payment account and refusal of a market participant to open an account.
In 2021, EMIs and PIs had nearly 10 million active customers. Around 370,000 of them were Lithuanian residents. The largest turnover of payment transactions was generated by payments made by legal entities, while payments between Lithuania and EU countries (Ireland, Germany) and the UK dominated in terms of the value of payment transactions.
40% of payment services provided by the EMI and PI sector consisted of direct debit and credit transfers as well as payment transactions using payment cards. One third of payment services consisted of payment instrument issuance and incoming payment processing services. Open banking services such as payment initiation and account information services were also popular. The number of initiated payments increased almost 2.5 times over the year to 15.1 million payments, while the number of accounts accessed by account information service providers was over 2 million.
At the end of 2021, the number of payment transactions amounted to €194.7 billion, up 3.8 times year on year. Revenues from licensed activities increased 3.5 times in 2021 and stood at €502.1 million at the end of the year. 92% of these revenues were generated by EMIs and 8% by PIs.
The interest in obtaining an EMI or PI licence issued by the Bank of Lithuania remained strong. Approximately 60 potential market participants contacted the Bank of Lithuania and expressed an interest in EMI and PI licences. The greatest interest was shown by companies operating in the UK and the US.
The Bank of Lithuania regularly updates the sections of its website dedicated to financial market participants covering frequently asked questions, training and recommendations to institutions and publishes positions and analyses on individual topics.