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Licensing of payment and e-money institutions in EU

Licensing of payment and e-money institutions in EU

In view of the fact that since upcoming years are very likely to see a significant expansion of the Payment services and E-money markets, it is necessary to present key points of these institutes in European Union. With introduction of the euro on 1 January 2015, Lithuania possesses a full tool kit to offer the investors of Payment and E-money Institutions to work in the whole market of European Union.

Key points of Payment Institutions

Payment Institution – a payment services providing economic entity, which is neither a credit nor E-money Institution and cannot accept deposits or other returnable funds from unprofessional market participants and issue e-money. Beside payment services, Payment Institutions have a right to provide additional services closely related with the payment services.

According to the European legislation, the payment services are not only payment operations through the banks but also money transfers carried out through a variety of agents of a Payment Institution, as well as payment transactions through a telecommunication network’s and information technology system’s operator, the issue of the means of payment and other related activities.

Since the Payment Institutions’ financial activity is specific and limited, they are subject to the less stringent requirements than other financial institutions (banks). Payment Institutions meet the same requirements as ordinary companies, with the additional special requirements related to the organizational structure, top management, internal control and risk management systems, registered share capital and other some aspects. The minimal initial share capital for Lithuanian Payment Institution is EUR 125,000.

In conclusion, Lithuanian licensed Payment Institution opens comprehensive business opportunities to act and provide services in the single European Union market of the payment services. Lithuanian registered Payment Institution provides you significant competitive advantage and opens for you all European market at significantly lower incorporation and operational costs.

E-money Institutions

E-money Institution – an economic entity which can issue e-money. E-money is the monetary value released into the circulation by e-money issuers (who received funds from the natural or legal persons) with the following characteristics: stored in electronic, including magnetic, storage; for executing payment transactions; accepted by subjects, who are not e-money issuers.

E-money has many advantages over the ordinary money: they are widely used as a practical, money-saving alternative of payment card and cash, guaranteeing consumer safety and anonymity. Physically e-money – the software equivalent of money, allowing sellers and buyers to exchange currency units. Developing such equivalents, paper money are changed by e-money and virtual money stored in the virtual space.

E-money issuers, received funds from natural or legal persons, issue e-money at nominal value. E-money issuers, upon the request of holders of e-money, must repurchase the e-money for nominal value. Detailed e-money redemption terms, and all the related fees should be described in a contract of issuer and holder of e-money. The holder must be informed about the conditions of the contract before committing to a contract or offer.

In order to become an E-money Institution the legal entity must obtain an operating license which is issued by the Central Bank of Lithuania, which conducts the supervision of E-money Institutions. It is not necessary to form a local subsidiary company in Lithuania before the company is entitled to submit application for the license.

An investor may act purposefully: it is not necessary to invest in the establishment of the company, which would cause a loss to the investor in the case of non-issuance of the license. The investor has a possibility to apply for the license firstly and then, if the Central Bank issues the license, the investor may allocate funds (initial capital) for the establishment of the company in Lithuania. However, it is necessary to form a company in Lithuania not later than six months after issuance of the license which should posses a minimum equity capital not less than EUR 350,000.

It should be noted that E-Money institutions may not only issue e-money, but also provide related services such as performing money transfers, payment transactions, opening a payment accounts, issuing payment cards, and etc. In addition, at the same time, E-money Institutions are able to carry out other activity not related to the payment services and e-money.

Therefore investment to such institution create an opportunity to act successfully in all European market at significantly lower incorporation and operational costs.

This article is published as well here.

Inga Karulaitytė – Kvainauskienė