As emphasised today during the joint high-level seminar held by the Bank of Lithuania and the International Monetary Fund (IMF), financial technologies (fintech) have a vast potential to benefit consumers and boost economic growth, yet fintech development needs to be properly managed to ensure resilience to potential risks.
“Principles enshrined in the IMF and World Bank’s Bali Fintech Agenda have confirmed that the Bank of Lithuania has taken the right direction in terms of financial innovation – we are among the first countries to adopt the emerging international best practices, at the same time contributing to their formulation. Our approach is pragmatic: given high concentration in Lithuania’s financial sector, fintech has the most potential to reinforce competition and offer wider consumer choice, thus broadening access to financial services. However – and I cannot stress that enough – it may not come at a cost to quality and security,” said Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania.
He also noted that international recognition of Lithuania as a fintech-friendly jurisdiction is also evidenced by the fact that the IMF and the Bank of Lithuania are organising their joint high-level seminar in Vilnius.
“Recognising the opportunities and potential challenges that fintech brings, the IMF and the World Bank launched the Bali Fintech Agenda last fall. It brings together key issues for policymakers and the international community to consider as countries formulate their policy approaches. Fintech can support productivity and growth by strengthening financial development, inclusion, and efficiency, but may pose risks too. This seminar provides an unparalleled opportunity to exchange views on how these high-level considerations translate into the development of a vibrant fintech community and the policy framework to embrace it,” said Mr. Tao Zhang, Deputy Managing Director of the IMF.
Embracing the potential of financial innovations, the Bank of Lithuania has taken a number of measures to support fintech development and mitigate associated risks, primarily taking action to strengthen anti-money laundering compliance. Various regulatory arrangements not only promote growth within the sector but also help to ensure that the market remains open only to participants, products and services that maintain the highest quality standards. The country’s central bank also offers non-bank financial entities (payment and electronic money institutions) direct access to its payment system CENTROlink, thus boosting competition in the sector. The number of system participants has more than doubled since last spring. CENTROlink is currently used by almost 90 financial market participants, more than two thirds of which are payment and electronic money institutions.
Several years ago, the Bank of Lithuania also launched the Newcomer programme, a one-stop shop for meetings and consultations with potential market participants. Fintech companies developing innovative solutions can test them in the central bank’s regulatory sandbox, while RegTech solutions enable prospective market entrants to remotely apply for a licence in a faster, easier and cost-efficient manner.
To strengthen its international relations, the Bank of Lithuania has joined the global sandbox initiative and signed bilateral fintech cooperation agreements with the Monetary Authority of Singapore, the National Bank of Ukraine and the Astana Financial Services Authority. This year the Bank of Lithuania, together with eight other Lithuanian institutions, signed the Memorandum on Cooperation and Exchange of Information in Risk Management in Financial Innovation and Financial Technology.
Lithuania’s fintech sector has been rapidly expanding: based on preliminary estimates, the Lithuanian fintech cluster might welcome up to 100 new participants this year. The Bank of Lithuania has already granted authorisation to nearly 120 market players (crowdfunding and peer-to-peer lending platform operators, electronic money and payment institutions, specialised banks).