A Lithuania payment institution licence has become the most popular route for UK-based fintech firms seeking to re-establish EU market access following Brexit. Since 1 January 2021, UK-authorised payment institutions have lost the ability to passport payment services into the European Economic Area, meaning any firm wishing to serve EU customers must obtain a separate licence from an EU member state regulator. Lithuania and Ireland are the two most frequently chosen jurisdictions. This article provides a detailed, practical comparison to help firms make an informed jurisdiction decision based on commercial objectives, speed requirements and regulatory strategy.
What Is a Payment Institution Licence?
A payment institution licence is the regulatory authorisation required to provide payment services within the European Economic Area under the Payment Services Directive 2 (PSD2), transposed into national law by each EU member state. Regulated payment services include money remittance, payment execution, payment initiation services (PIS), account information services (AIS) and merchant acquiring. The licence is issued by the national competent authority — the Bank of Lithuania (Lietuvos bankas) in Lithuania and the Central Bank of Ireland in Ireland. Once authorised in either jurisdiction, a firm can passport its services across all 27 EU member states and the three additional EEA states (Norway, Iceland and Liechtenstein) without obtaining separate national licences. The passport is automatic upon notification to the host-state regulator.
Who Needs an EU Payment Institution Licence?
This requirement typically applies to:
- UK-authorised payment institutions that lost EU passporting rights following Brexit and need to serve EU customers
- Fintech companies providing cross-border payment services within the EEA
- Money remittance businesses operating across EU member states
- Payment initiation service providers accessing EU bank accounts under PSD2
- Account information service providers aggregating data from EU-based banks
- Merchant acquirers processing payments for EU-based merchants
- Non-EU firms establishing a regulated presence within the EEA for the first time
The choice between Lithuania and Ireland is not a question of regulatory standard — both apply PSD2 requirements in full. The decision turns on speed, cost, substance expectations, regulatory style and the firm's target market positioning.
Key Regulatory Requirements: Lithuania vs Ireland
Capital requirements. Both jurisdictions apply PSD2 minimum capital requirements identically. Money remittance services require €20,000 initial capital. Payment initiation services require €50,000. Payment execution and merchant acquiring require €125,000. Neither regulator routinely imposes additional capital above PSD2 minimums at the point of authorisation, although both may require additional own funds based on projected transaction volumes and risk profile following a capital adequacy assessment.
Local substance. This is the most significant differentiator between the two jurisdictions. Lithuania requires a Lithuanian-incorporated company with a registered office in Lithuania, at least one local director who is resident in Lithuania, and a local compliance function. The Bank of Lithuania has pragmatic substance expectations for early-stage firms — it accepts that a newly licenced PI will start small — but requires genuine decision-making and oversight to occur locally. Ireland's Central Bank applies substantially more demanding substance requirements. The Central Bank expects multiple locally resident directors (typically at least two), a physical office in Ireland, local operational staff, and demonstrable evidence that governance and strategic decision-making occur in Ireland rather than being directed from a UK or other parent entity. Ireland is explicit that it will not authorise entities that function as shell companies or brass-plate operations.
Regulatory process and language. Lithuania conducts its entire licensing process in English through the Bank of Lithuania's electronic LLTA (Licensing, Legislation and Technology Application) portal. The regulator is commercially engaged and responsive, with dedicated fintech liaison officers. Ireland's Central Bank also operates in English but adopts a more formal, structured engagement style. Information requests from the Central Bank tend to be more detailed and granular, and the regulator may conduct formal interviews with key personnel during the assessment process.
AML framework. Both regulators require a comprehensive AML/CFT programme compliant with EU Anti-Money Laundering Directives. Lithuania's Financial Crime Investigation Service (FNTT) conducts a parallel AML assessment during the licensing process, which can extend the timeline if AML documentation is inadequate. Ireland integrates AML review within its main authorisation assessment. Both require a tailored risk assessment, CDD procedures, ongoing monitoring, SAR processes and sanctions screening.
Safeguarding. Both jurisdictions require safeguarding of client funds through segregation in a dedicated account at an EEA-authorised credit institution, or coverage by an insurance policy or comparable guarantee. In practice, access to safeguarding bank accounts is generally easier in Lithuania — the country has developed a substantial PI banking ecosystem with multiple banks experienced in servicing payment institutions. In Ireland, opening safeguarding accounts can take longer and some Irish banks are selective about accepting PI clients.
Banking partner access. Banking relationships are critical for operational viability. Lithuania offers a range of banks experienced with PI clients, including local banks and specialist EMI/PI-focused banking providers. Ireland provides access to major international banks with Irish operations, and an Irish licence can carry stronger reputational weighting when approaching Tier 1 banking partners in other jurisdictions.
The Licensing Process: Step by Step
Step 1 — Jurisdiction selection and regulatory strategy. Evaluate both jurisdictions against commercial objectives, target markets, speed requirements and budget. Consider group structure implications — some firms establish entities in both jurisdictions. Timeline: 2–4 weeks.
Step 2 — Entity incorporation and local infrastructure. Incorporate a local entity, appoint directors, establish a registered office and open a corporate bank account. Lithuania: 2–4 weeks including company registration and director appointments. Ireland: 4–8 weeks, reflecting more complex company law requirements and director residency arrangements.
Step 3 — Application preparation. Draft the programme of operations, business plan, AML framework, financial projections, governance documentation and individual fitness assessments. The documentation requirements are substantively similar for both jurisdictions. Timeline: 6–10 weeks for a well-prepared firm.
Step 4 — Submission to the regulator. Lithuania: applications submitted through the LLTA portal. Ireland: applications submitted to the Central Bank's Authorisation and Supervision Division.
Step 5 — Regulator review and determination. Lithuania: 3–6 months typical review period with 1–2 rounds of information requests. Ireland: 6–12 months with multiple rounds of detailed queries, potential interviews and more granular scrutiny of substance and governance arrangements.
Common Mistakes in EU PI Licence Applications
The most frequent mistake is underestimating substance requirements. Firms that plan to operate a Lithuanian or Irish PI as a remote shell — with no genuine local presence, no local decision-making and all activity directed from the UK — face refusal or significant delays. Both regulators have tightened substance expectations considerably since 2022, driven by ESA (European Supervisory Authority) guidance on letterbox entities.
Second, firms often underestimate the time required to establish banking relationships. Opening corporate and safeguarding accounts can take 4–12 weeks depending on the jurisdiction and the bank's own due diligence requirements. This should be initiated in parallel with the application preparation.
Third, submitting AML documentation that is UK-centric rather than adapted to the EU regulatory framework. EU AML requirements differ from UK MLRs 2017 in certain areas — firms must ensure their AML programme references the correct EU directives, local implementing legislation and the relevant national Financial Intelligence Unit.
What Firms Should Do Now
- Assess whether your business requires EU market access — if you serve or intend to serve customers in any EEA member state, a separate EU licence is required post-Brexit.
- Map your target markets, customer types and transaction corridors to determine which jurisdiction best aligns with your commercial strategy.
- If speed is the priority, initiate Lithuanian company incorporation immediately — it can be completed in under two weeks.
- If reputational positioning or Tier 1 banking access is the priority, begin early engagement with Irish corporate service providers and potential Irish directors.
- Prepare a single comprehensive application pack that can be adapted for either jurisdiction, ensuring AML documentation references EU rather than UK legislation.
- Begin safeguarding bank discussions early — approach at least three banks in your chosen jurisdiction to manage onboarding timelines.
Regulatory Context and Outlook
The European regulatory landscape for payment institutions continues to evolve. The European Commission's PSD3 proposal, published in June 2023, will merge the Payment Services Directive and the Electronic Money Directive into a single Payment Services Regulation (PSR) with direct applicability across all EU member states. This is expected to take effect in 2026–2027 and will further harmonise licensing and operational requirements. Both Lithuania and Ireland will apply the new framework. Firms authorised under PSD2 will transition to the new regime under transitional provisions. The key implication for firms making jurisdiction decisions now is that the underlying regulatory requirements will converge further — the primary differentiators will remain speed, substance expectations and the commercial ecosystem in each jurisdiction.
Regulatory Counsel advises firms on EU jurisdiction selection and manages payment institution licensing applications in Lithuania, Ireland and other EEA member states. Our team has direct experience of both the Bank of Lithuania and Central Bank of Ireland application processes and provides end-to-end support from jurisdiction assessment through to authorisation. Firms seeking specialist support with EU payment institution licensing can contact Regulatory Counsel for a free initial consultation. See our licensing and authorisation service for details.
Frequently Asked Questions
The Bank of Lithuania typically processes payment institution applications within 3–6 months from submission. The total timeline including entity incorporation, documentation preparation and application drafting is typically 5–9 months from initial engagement to authorisation.
Yes. A payment institution authorised in any EEA member state — including Lithuania or Ireland — can passport its services to all 27 EU member states plus Norway, Iceland and Liechtenstein. Passporting is automatic upon notification to the host-state regulator and does not require a separate application.
Yes. The Bank of Lithuania requires a registered office in Lithuania and at least one locally resident director. The regulator expects genuine local substance — while expectations are pragmatic for early-stage firms, a letterbox arrangement with no real local presence will not be accepted.
Neither jurisdiction is objectively better — the choice depends on the firm's priorities. Lithuania offers faster licensing (3–6 months vs 6–12 months), lower setup costs and a commercially engaged regulator. Ireland offers stronger reputational weighting, easier access to Tier 1 banking partners and a more established financial services ecosystem. Firms prioritising speed choose Lithuania; firms prioritising brand positioning choose Ireland.
Both Lithuania and Ireland apply PSD2 minimum capital requirements: €20,000 for money remittance, €50,000 for payment initiation services, and €125,000 for payment execution and merchant acquiring. Neither regulator routinely imposes additional capital above these minimums at the point of authorisation.