Value of payment transactions by electronic money and payment institutions exceeded €150 billion
In Q3 2021, the value of payment transactions by electronic money institutions (EMIs) and payment institutions (PIs), which constitute the foundation of the licensed FinTech sector in Lithuania, increased 6.3 times year on year, whereas their income from licensed activities grew 4.8 times. However, compliance with own funds requirements remains a major issue for some market participants.
“According to the data of the sector’s self-assessment analysis, more than 80% of the institutions consider themselves to be compliant with the Bank of Lithuania expectations raised for them. Unfortunately, in reality some institutions do not comply with all requirements. Therefore, we will continue to focus on compliance with fundamental requirements, such as those related to anti-money laundering, own funds, the safeguarding of customer funds, ICT and security risk management and internal control. We will not tolerate violations of these requirements and will apply respective enforcement measures,” says Dovilė Arlauskaitė, Head of the Payments Market Supervision Division.
In the period under review, the total value of payment transactions by EMIs and PIs amounted to €157.6 billion. This value increased by 29.4% in Q3, compared to Q2, and 6.3 times year on year. The companies earned the income of €333.6 million from licensed activities – a year-on-year increase of €264.8 million (4.8 times). EMIs earned 94% and PIs earned 6% of this income. One market participant held the market share of 51% in terms of income from licensed activities and 63% in terms of the value of payment transactions.
Financial performance results for Q3 2021 demonstrated that two market participants did not comply with own funds requirements, however, they have already taken action to ensure compliance. In Q2, all EMIs and PIs complied with this requirement. The Bank of Lithuania reminds EMIs and PIs that they have to comply with the established own funds requirement at all times. The central bank has emphasised this aspect many times and has described it in detail in its Dear CEO letter. The Bank of Lithuania notes that financial market participants are required to take urgent action and measures to ensure financial soundness of their operations, if they face a sudden and significant shortage of funds or capital.
Seeking higher maturity of the FinTech sector, the Bank of Lithuania organised a series of consultation events to discuss the most important issues, as well as the discussion on key issues for the FinTech community. Currently, the central bank is performing 18 individual and thematic inspections and analyses of the FinTech sector’s compliance with the requirements related to money-laundering risk management, customer knowledge and fraud risk management, own funds and the safeguarding of customer funds as well as its implementation of internal audit and internal control procedures. By December 2021, the licences were revoked for 3 institutions, a temporary prohibition of the provision of services to legal entities was imposed on 1 institution, 5 fines were imposed and 5 announcements on violations of legal acts were published.
In addition, the Bank of Lithuania continues to closely monitor whether credit institutions follow the Position on the right of electronic money institutions and payment institutions to access bank accounts opened with credit institutions. In Q3 2021, 3 account closure or restriction notifications were received. Since 2019, the Bank of Lithuania received 48 notifications of such kind in total.
At the end of September 2021, the public list of EMIs and PIs included 139 institutions (85 EMIs and 54 PIs), compared to 121 institutions (73 EMIs and 48 PIs) in the respective period of last year. The Bank of Lithuania is currently examining around 30 applications for EMI and PI licences.
The Bank of Lithuania publishes information on the planned inspections of electronic money and payment institutions, as well as annual and quarterly indicators of compliance with the key operational and prudential requirements for each of them.