Around 100 financial institutions (FIs) have applied for an electronic institution license in Lithuania, according to Reuters.
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A quarter of these companies are coming from the UK, and they’re likely applying to ensure they can continue offering their services in the EU after Brexit. Other countries have also seen a surge in applications from UK companies, such as Ireland, which is currently processing over 100 applications as a result of Brexit, per Reuters.
As of January this year, Lithuania issued a total of 83 licenses, second only to the UK among EU countries. Companies including Google and UK neobank Revolut have successfully obtained a license from the country in the past.
Lithuania is known for its fintech-friendly environment and there are two key reasons why interest in obtaining a license in the region has surged:
- The country can process license applications faster than many other countries.The Bank of Lithuania overhauled its license application process last year, when it introduced a new e-licensing tool to make the submission of information required for an operating license easier and more efficient. It takes the country only three months to process an electronic money institution license application — and the bank says it can take other EU countries up to a year to do so. This streamlined application process likely makes Lithuania an attractive country to receive regulatory approval.
- With the outcome of Brexit still very uncertain, FIs are looking to get regulated outside the UK. The UK is supposed to leave the EU at the end of March; however, no deal between the two parties has been struck yet. This means there’s a possibility that FIs currently operating under a UK license could lose the right to offer financial services outside the country. The UK has issued the most licenses in the EU, so there are likely many companies that rely on it to operate in the region. Applying for a license in Lithuania will help these companies ensure they can continue to operate in their markets of choice in the EU post-Brexit.
These factors can lead to an emergence of new fintech centers, but they could struggle to handle the demand. The sudden increase of applications is no easy task for the Bank of Lithuania. It doesn’t have the resources to process all of the applications, says Marius Jurgilas, member of the board at the central bank.
As such, it has now opted to “pick-and-choose” applicants, with priority going to the "least risky" candidates. FIs that rely on a license from Lithuania to hedge any outcome of Brexit may see disruptions in their services if there is no deal, should they not get regulated in time.
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Source: Business Insider