Electronic money and payment institutions: the amount of payment transactions tripled and exceeded €50 billion in 2020
In 2020, the number of electronic money institutions (EMIs) and payment institutions (PIs), which comprise a significant share of Lithuania’s FinTech sector, and their income continued to rise, whereas the amount of their payment transactions exceeded €50 billion.
“The growth of the electronic money institution and payment institution sector in 2020 was determined not only by higher importance of electronic payments due to the pandemic, but also by new participants: a part of the United Kingdom’s enterprises moved their operations to Lithuania due to Brexit. We expect growth this year as well. During this dynamic sector’s supervision in 2021, we will focus on ensuring that electronic money and payment institutions establish appropriate priorities, especially concerning governance, internal control and compliance with anti-money laundering and other legislative requirements,” said Rūta Merkevičiūtė, Director of the Financial Services and Market Supervision Department of the Bank of Lithuania.
According to the unaudited data of Q4 2020, the value of payment transactions performed by EMIs and PIs increased more than three times year on year and amounted to €51.1 billion.
The value of EMI and PI payment transactions
In 2020, the institutions earned the income of €138.5 million from licensed activities, an increase of €72.4 million (2.1 times), compared to last year. Income of EMIs amounted to €114.5 million and increased 2.6 times over the year, while that of PIs grew moderately, increasing by €1.3 million over the year to €24 million.
At the end of 2020, the public list of electronic money institutions and payment institutions included 132 entities: 80 EMIs and 52 PIs (67 EMIs and 48 PIs at the end of 2019). The Bank of Lithuania is currently examining more than 40 applications for EMI and PI licences.
At present, 23 EMIs and PIs operating in Lithuania have connections with the United Kingdom as the origin of their capital.
Number of EMI/PI licences and income from licensed activities
The financial results for 2020 show that 3 institutions did not comply with the own funds requirement (9 in Q1 2020, 3 in the first half of 2020 and 2 in 9 months of 2020), however, they have already taken actions to ensure that their own funds are adequate. In 2020, 82% of EMIs and PIs subject to the own funds requirement exceeded the own funds indicator (it cannot be lower than 1), as it was higher than 1.1 (78% in Q1 2020, 84% in the first half of 2020 and 86% in 9 months of 2020).
Own funds indicators
The Bank of Lithuania continues to closely monitor whether banks follow the Position on the right of electronic money institutions and payment institutions to access bank accounts opened with credit institutions. The aim of the position is to ensure the right of EMIs and PIs to open bank accounts for keeping customer funds and use them in such a manner and to such an extent that would allow EMIs and PIs to provide payment services to their customers efficiently and without disruptions.
From the beginning of 2019, banks are obliged to notify the Bank of Lithuania about the cases when they refuse to open, restrict or close accounts of EMIs and PIs and indicate the reasons for such decisions. The total of 39 notifications were received so far, 3 of which in the fourth quarter of 2020. Notifications that EMIs and PIs exceeded the level of risk that banks wish to assume comprised 39%, notifications on requests of correspondent banks – 13%, notifications on deficiencies of money laundering and/or terrorist financing controls applied by EMIs and PIs – 13% and notifications related to various other reasons (unclear or unsubstantiated source of funds of beneficiaries) – 35% of total notifications. The Bank of Lithuania constantly analyses these notifications and provides to banks the assessments of justification of respective actions and recommendations on the improvement of practices.
To draw attention of EMIs and PIs to the quality of their governance and internal control, the Bank of Lithuania plans a number of training events and consultations on these issues. Moreover, the inspections and thematic reviews that the Bank of Lithuania intends to conduct in 2021 are dedicated to the improvement of risk management.
The Bank of Lithuania publishes on its website the inspection plan covering EMIs and PIs as well as the key annual and quarterly performance indicators and indicators of compliance with prudential requirements for each electronic money and payment institution.