Banks, Direct Speech, Financial Services, Lithuania, Markets and Companies

The chairman of the Bank of Lithuania's board said in an interview with BNS that Lithuania is actively positioning itself as a country favorable for setting up and operating fintech businesses and it is also seeking to become a center for payments between China and the European Union.

"We have been very actively advertising Lithuania as a jurisdiction. With some companies searching for alternatives in the light of Brexit, there has been a noticeable interest in Lithuania," he told BNS.

Lithuania presents itself as a payment center and takes active efforts to attract Chinese investors into this area. Why?

Vitas Vasiliauskas: Lithuania is a small but ambitious and hungry nation. When you are a member of the euro area, you can do everything all other central banks in the euro area can, but if you want to compete, you have to do something differently, something to stand out. I believe that the EU-China relationship has prospects for development. Trade relations are developing dynamically, and where there is trade, there is also financing and payments. I do not see why Lithuania could not be a point between the two reserve currencies. This is the area we are working on.

Poland has received considerable Chinese financial sector investments, including conventional and investment banking.

V.V.: The banking sector normally follows its clients. Chinese companies are active in the Polish market, which makes it interesting to Chinese banks, too. This is China's state policy. Our nation is too small for the Polish model to work here. We can only be intermediaries. We should all understand that.

Another strong commercial bank was expected to come to Lithuania. Can we still expect this to happen?

V.V. Let's be realistic. The Baltic market is not large. So, it is these new innovative players, mobile, online banking (providers) that we can expect to come to our countries.

One of these players is Britain's Revolut, which has declared intentions to obtain a specialized bank's license. How is it doing?

V.V. To our knowledge, they are still in the stage of intention. They are interested but have made no headway yet. The idea of a specialized bank is appealing. We do have many of those interested in it. Our specialists meet almost every week with interested parties from foreign countries, who are interested in setting up a business in Lithuania and developing it all across Europe. The number of those contacting us has increased several times, particularly as regards investors from abroad.

When could this interest translate into a breakthrough?

V.V.: We can see that the message about Lithuania has been spreading at a fast rate. Foreign financial sector associations recommend us to their members and so do companies that have already obtained or are considering obtaining a license here; we are drawing interest from the foreign media. We are currently examining 15 applications for setting up fintech or other financial institutions that would compete, in one or another way, with conventional banks. More than a half of them are foreign investors -- starting with Israel, Germany and Britain and ending with Singapore and other countries. I believe we can expect some new players to come this year.

Banks in Lithuania left the initiative of creation an instant payment system to mobile operators. How do you explain their decision?

V.V. I'd highlight several aspects. Instant payments are a hobby-horse of banks, at least in some Scandinavian countries, but the habits of their population differ from ours, too. Also, many banks operate in all three Baltic countries, not to mention the Scandinavian countries, which makes it difficult to find any horizontal solution, especially given that the banking groups are trying to make all processes as horizontal and universal as possible. I'd say that mobile operators are simply more flexible in this.

Do you think the system that is being developed in Lithuania could also become a common standard in Latvia and Estonia?

V.V. I think everybody would benefit if we had some kind of horizontal solutions for all three Baltic countries. What is good is that the same operators are present in all Baltic countries; on the other hand, it will be easier to speak to Latvians and Estonians when we have a ready product. In the meanwhile, the test lab is here in Lithuania. In the area of supervision, we do cooperate with the neighbors. Certainly, we should speak about having a single standard, because creating parallel structures in such a small market as Lithuania or all Baltic countries is too costly.

New opportunities lead to the emergence of new risks.

V.V. They certainly do. New technologies are primarily related to cyber risks, customer identification, and the admission of the non-banking sector, new intermediaries in the payment systems. We see those risks and invest in preventing them, but I also have no doubt that we will have some incidents. We need to get ready for this, not to be afraid of communicating this to the public, and to be transparent about this.

We live in an exciting era of transformation and what seemed inconceivable yesterday becomes a reality today. Could anyone have imagined five years ago that cars would be able to drive themselves? Probably not. The same holds true for the financial sector. A revolution is underway. Earlier, we perceived ourselves as spectators at the cinema. What we need to understand now is that we are among the actors.