Vilnius Aims To Attract Companies Scared Of Brexit
London has always been considered as a centre of finance, not only for the banks but for fintech startups as-well. In 2014, fintech investment grew 136%. A total of $554 million raised in 2015 so far by UK fintech companies. But due to the Brexit – this might change.
The question “what’s next?” does not sound strange anymore. Up to now, United Kingdom was a heaven for financial institutions, as it had good legal laws and governments support to help investment in this fast-growing sector. Unfortunately, with a rise of uncertainty about the future, fintech companies, which are already based in the UK, are thinking of relocation. At this point, other European countries are competing to take United Kingdom’s spotlight and offer a better economical and political environment. Lithuania, and primarily its capital Vilnius, is one of those countries, which are moving step by step towards the favourable regulatory environment, good infrastructure and high-quality talent pool.
Easier payments and licensing strategies are on the go
Recently the Bank of Lithuania (which combines the central bank and the financial supervisory authority mandates in Lithuania) has introduced a paper on the National Payment Strategy. Its goal is to make contactless, instant and closely-integrated payment methods available to companies and residents. Also, the Bank of Lithuania has adapted its mindset to grow innovative ideas, find the right regulatory path instead of burying companies in the paperwork. All these regulation changes are made aiming to make Lithuania a preferred jurisdiction for fintech companies.
In addition to the National Payment Strategy, some other advantages in having a fintech company in Lithuania should be considered:
1. Payment or e-money institutions get licence fast
The Bank of Lithuania might issue the licence for payment or e-money institutions regulatory wise within 3 months. Compared to other EU jurisdictions, which are considered to be fintech-friendly, it is 5-9 months shorter term. Actually, as some practical examples show, with a good pre-licencing preparation you can get the licence within 2 months.
2. Easier access to SEPA
The Bank of Lithuania made it easier for payment and e-money institutions to access payment infrastructure in SEPA by introducing the possibility for them to get their own national sorting codes for IBAN accounts for their clients. Also, in the end of 2015, the technical access to the payment system was simplified. In comparison, United Kingdom has introduced such technical access only recently.
Further, the Bank of Lithuania is creating an infrastructure for instant payments (payments within seconds) that together with European Instant Payments Initiative will guaranty pan-European reach. This playground should attract technological companies providing tools for payments, such as e-wallets, to test their products.
3. No regulator sanctions for the first year (plus consulting and methodological assistance)
The Bank of Lithuania together with 45 other Lithuanian institutions, including State Tax Inspectorate, has committed not to apply any regulatory sanctions as well as to devote resources for consulting and methodological assistance to companies that are being supervised by the regulator for the first year.
Although the Bank of Lithuania has the right to apply sanctions when there are no other options how to prevent the community from damage, it is ready to educate and help developing business ideas as an equal partner of the company.
As it is stated in the paper on National Payment Strategy, the Bank of Lithuania supports the development of efficient market infrastructure, fair and intense competition among payment services providers. Also, the regulator agrees that it is a must to make the environment easier, as this will attract new market entrants and the introduction of new, convenient, innovative and reliable payment methods.
These and many more initiatives are led by the Bank of Lithuania and the Ministry of Finance:
• Regulation on peer-to-peer lending
• Equity and lending-based crowdfunding
• Payment initiation services
From the attorney’s perspective, legal environment and the infrastructure allows Lithuania to become one of the most advantageous jurisdictions for digital banking. As Arturas Asakavičius, co-head of Sorainen startup practice group discloses that “Lithuania is moving the right direction and at the law firm we see more and more foreign fintech companies doing road shows and searching for the best jurisdiction for them. The attitude of the Bank of Lithuania and the speed to get a licence are among the most decisive criteria for our clients when selecting jurisdiction”.
These initiatives should seed a thought in one’s mind where the new fintech jurisdiction should be mapped on the globe.
Good infrastructure is essential
Vilnius, a capital of Lithuania, is becoming a fast and open city to global financial and tech companies with special focus on Fintech industry. “Bitcoins, e-payments and other financial innovations are growing here fast. Even before Brexit we were building the city platform suitable for fast kick-off.” – states Remigijus Simasius, the Mayor of Vilnius. According to mister Simasius, Uber took 4 weeks to start their services, which the fastest amongst other 400 cities globally. Before their service launch, Uber already had their first IT development centre outside of Silicon Valley in Vilnius. “Now, especially with Brexit in mind, we are even more focused making a fast track for fintech companies to establish and develop their products in Vilnius easy and risk-free”. – Mayor of Vilnius adds.
Besides welcoming municipality, Lithuania recently was acknowledged in the “big waters” too:
• Lithuania is 1st in the European Union in terms of broadband speed and fibre-to-premises penetration.
• In 2015 the country was voted 1st globally for fulfilling business requirements for communication technology by the IMD World Competitiveness Yearbook.
• Vilnius ranks as the 3rd City (from mid-sized European cities) of the Future 2016/2017 for economic climate and business friendliness at fDi Markets rankings, which are ranked by the Financial Times.
Vilnius is ranked as Top 10 European cities best for ease of start and fast growth of the business by inc.
This article originally appeared on Forbes on July 5, 2016.