An attractive legal and technological environment, business minded and advanced supervisory authority open to financial market innovations, qualified and competitive workforce, opportunities to operate across the EU basing from Lithuania – that‘s what put Lithuania to one of the best places on the global FinTech map. Especially now, as Great Britain’s impending exit from the EU has put a “question mark” over the country’s attractiveness to FinTech firms, Lithuania is hoping to attract FinTech firms looking for a new European base and it has a huge potential to be at the forefront of financial technologies in the region and there are many reasons to believe about this success.
For most financial firms, the biggest threat from Brexit is either the collapsing value of the currency of the UK following last year’s referendum, or the possibility that UK-based FinTech companies will be probably unable to service continental European clients after 2019. Transferable, cross-border authorisation out of the UK can come to an end and this will would have a drastic impact on FinTech companies, if there will be no specific agreements as a part of the UK negotiation from the EU.
Without the passporting right, FinTech companies may need to seek authorisation in each of the countries where they wish to operate and so making the market access more expensive and heavily administrative. The European Central Bank (ECB) has also already prompted firms to hurry up with the relocation in the context of Brexit. At the beginning of the 2017 European Central Bank supervisor Sabine Lautenschlaeger noticed for the media, that banks based in the United Kingdom planning to do business in the European Union after Brexit should apply early for a licence to set up actual operations and not “empty shells”.
There is no doubt, there will be increased competition and other jurisdictions will compete for the title of the leading FinTech centre (hub in the world). The key to FinTech’s success in Lithuania has been the strategic and responsive decisions made by the Bank of Lithuania. According the Chairman of the Bank of Lithuania Vitas Vasiliauskas, FinTech sector may give further impetus to the EU Capital Market Union as well as generate new opportunities for economic growth in EU/EEA.
“Development of innovative financial instruments would reinforce capital markets in regions, where potential of these markets has not been fully exploited”, – says V. Vasiliauskas. He points out that Lithuania is now encouraging the FinTech sector to take advantage of its favourable regulatory arrangements and strengthen competitive edge on the EU and global level.
A range of other advantages are also on offer to FinTech companies choosing to set up in Lithuania. As notes Inga Karulaitytė-Kvainauskienė, attorney at law at ECOVIS ProventusLaw, a law firm is specialising in financial law and financial services licensing, payments, e-money, investment management law, a wealth of experienced talent, great quality of life at a really affordable cost, more and more spaces opening up in Lithuania offering a complete range of services for FinTech companies, from infrastructure and service packages to advice on starting and growing FinTech business, are also reasons, why Lithuania is receiving a significant interest from FinTech companies across the globe. “Positive attitude of the Bank of Lithuania and the public sector towards new technology-based business and its support is already widespread. Every day we receive requests from all around the world (China, Singapore, Israel, Sweden, Germany, USA, United Kingdom and etc.) about setting up a FinTech company in Lithuania”, – says I. Karulaitytė-Kvainauskienė.
The Bank of Lithuania jointly with other institutions in the country has already applied the following measures in order to establish a country as FinTech centre:
– Payment and electronic money agencies in Lithuania can access the Single Euro Payment Area (SEPA) through the infrastructure of the Bank of Lithuania, enabling them to avoid the broking services of many commercial banks.
– The Bank of Lithuania allows to submit all the documents required to obtain a license not only in Lithuanian, but also in English.
– There is no particular requirement for company management to reside in Lithuania or Europe.
– Application for a license submitted without establishing a company. Incorporation of the company starts only after the decision to grant the license taken.
– Fast licensing process. Issue of Payment or E-money institution license within period of 3 months and even faster.
– Remote client verification. Innovative “know your customer” processes for remote client verification allows open client accounts without physical presence of the client.
– No regulatory sanctions for the first year. The Bank of Lithuania is committed to support start-ups and not to punish them during the first year of operation for minor infringements.
– Start-up visa. Special visas for the citizens of non-EU/EEA countries running innovative businesses in Lithuania.
Against the backdrop of Brexit negotiations, all these advantages allow Lithuania to compete in attracting international financial companies leaving the UK. “The rapidly expanding FinTech sector in Lithuania brings us distinct advantages – a favourable regulatory regime may help our country to make its mark on the highly-potential FinTech map”, – says V. Vasiliauskas.
Discussing the development of the EU Capital Markets Union, the Chairman of the Bank of Lithuania emphasises its importance for Lithuania and other countries in the region whose economies are excessively reliant on bank lending.
Developed capital markets would enhance the resilience of the financial sector, allowing small and medium-sized enterprises to use more diverse financing sources. Currently, small and medium-sized businesses are still facing challenges when seeking a bank loan. That why establishing a common EU-wide FinTech regulation is essential fact. According to Mr. Vasiliauskas, first of all Lithuania should foster development and growth in this sector at a national level. This would allow distinguishing the best regulatory practices that could serve as a basis for constructing EU-level measures for containing relevant risks as well as preventing regulatory arbitration. Crowdfunding is one of the good examples of national regulatory practice, which could be the starting point for further discussions on pan-European regulatory arrangements.
The article is prepared on basis of the information published by the Bank of Lithuania – http://www.lb.lt/en/news/vasiliauskas-favourable-regulatory-environment-may-put-lithuania-firmly-on-the-global-fintech-map