Page 70 - bne magazine February 2022_20220208

70 I Central Europe bne February 2022
Lithuania now hosts over 230 fintechs – half of them Lithuanian-owned.
Lithuania looks for quality, not quantity in fintech
expectations for electronic money and payment institutions in a letter to fintech managers.
“The Bank of Lithuania will pay particular attention to strengthening the compliance culture, i.e. how financial market participants comply with
the requirements for the prevention
of money laundering and terrorist financing, equity capital, protection of client funds and quality of services, and seek greater personal responsibility
of managers,” says Simonas Krepsta,
a board member at the Bank of Lithuania.
Following a boom in new entrants over the past few years, there was a slight correction last year as the new tighter rules came into effect. In 2021, 28 licences were granted to new fintech market players, while eight lost their licences, two over money laundering concerns. This compares with 35 licences granted in 2020 and 28 in 2019. By the end of 2020 (the latest figures available) the bank says there were 230 operating fintechs in Lithuania. It says it is currently assessing 40 applicants for licences.
Balancing growth with compliance
The central bank says it wants to balance growth with compliance. “The most important thing for us is for market participants to match business growth with compliance,” says Sniukas.
But market players worry that the new tighter rules could remove Lithuania’s competitive advantage and restrict its future growth.
Airidas Puodziunas, general manager at Contis, a B2B banking and payment solutions provider, told bne IntelliNews: “Lithuania regulators have to get the balance right between heavy-handed regulation that protects customers and the country at large, and a lighter touch that will allow a competitive fintech environment to thrive.”
Lithuania has two sandboxes that enable fintech companies to test their innovative solutions in a supervised and regulated environment before introducing them to the rest of Europe, and then to the rest of the world.
Linas Jegelevicius in Vilnius
Fintechs have been popping up in Lithuania like mushrooms after warm summer rain. But now the country – one of the biggest fintech hubs in Central and Eastern Europe – is pushing on the brake pedal.
The central bank is implementing tighter standards following a major international scandal involving a Lithuanian fintech. German prosecutors allege that UAB Finolita Unio, a fintech registered in Lithuania’s capital Vilnius, was used to steal more than €100mn from Wirecard in March 2020 just before the German payments company collapsed.
The Bank of Lithuania, under new broom Gediminas Simkus, stripped Finolita of its licence in June 2021, saying it had treated anti-money- laundering and counter-terrorist financing rules “irresponsibly”, and had failed to assess the risks of its customers.
The scandal sparked international criticism of Lithuania’s allegedly ‘light touch’ regulation, though the central bank pointed out that it had rejected more than 100 applications for a fintech licence in 2020.
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Giedrius Sniukas of the Bank of Lithuania says the money laundering scandals were an “alarm call”. The central bank is now going to pay closer attention to fintech, he says, given
the expected further expansion of the sector and the coming into effect of
a unified EU regulatory measure in November 2021. The Bank of Lithuania says that the quality, not quantity, of fintechs will now be its main concern.
Lithuania is already the EU leader in the number of fintechs, partly because it only requires a minimum capital of €1mn.
It now hosts over 230 fintechs – half of them Lithuanian-owned – most of which are small firms focused on payments, financial software, digital banking and lending activities. Big foreign names with significant operations include Revolut, the London-based neobank, for which Lithuania is its EU base.
Among more general measures, the central bank has already tightened borrowing rules and in 2020 it established the public-private Centre of Excellence for Anti-Money Laundering. It says it is now forcing new fintech entrants to meet higher quality standards. The bank has set out its