FCMC open to discussions on FinTech

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Recently, Marine Krasovska, Director of Financial Innovation Department of Financial and Capital Market Commission (FCMC), participated in discussions on the FinTech industry development in Latvia and licensing opportunities for payment service providers. Together with Renat Lokomet, co-founder of Venture Faculty Hub, and Ivan Zhiznevsky, CEO of FinTech company 3S.Money, they discussed following issues.

From regulators across Europe, FinTech community expects more efficient, less bureaucratic in timing licensing process and be more predictable in decision-making. The applicants expect to receive exact questions right from the outset, get structured guidelines on the information to be provided.

During the application process, we as the regulator prefer working directly with the applicant, where a lawyer also could be part of the discussion. Our aim is to evaluate sustainability of the business model, financial stability, offered financial services, IT security risks, business targets, etc. Any applicant for payment service provider or electronic money institution licence may enjoy free of charge services provided by the FCMC Innovation Hub. It is much more preferable to have a dialogue with your local regulator as it understands your needs better.

By completing clear requirements that are equal across the European Union (EU), such as the origin of funds, reputation of the members of the board, beneficiaries and compliance with AML requirements, it takes just 3 months to obtain approval for a licence in Latvia.

In the EU, the most popular destinations for FinTech business are still the UK, the Netherlands, the Baltic States. Many companies working in Estonia, UK, Lithuania are managed by Latvian entrepreneurs who use other jurisdictions due to access to licensing. Some competition is observed between the regulators for the most progressive market players. One may admit that Malta is more focusing on crypto assets, while Latvia on investment platforms. It could be explained by two reasons. Firstly, major strength of Latvia is accumulating professional experience in the financial sector, especially in banking. This allows launching unusual startups, which develop different financial solutions in payment, investment and banking using new technology. Secondly, easy access to very talented and smart people in the IT sector, who are referred themselves as professionals by established platforms for investments, payments and crypto business.

We see a huge potential in Latvia in payment technologies, neo-banking, micro lending business and peer to peer (P2P) investment areas by using new innovative technologies. Professionals of Latvian FinTech community are concentrating on P2P investments and lending areas, and less on payments; however, new players are welcome. The P2P or investment platforms represent another opportunity in Latvia for the development and scale business model in other countries and become international companies. It is observed by the growing interest from startups even during the COVID19 pandemic.

It is useful to note that a number of companies come to Riga and open the branches having licences from another FCAs, and establish back offices or middle offices to support business. Accounting, customers’ support services are the most popular back office functions due to easy access to business infrastructure and human resources. As positive side, the effect of such activities is an increasing trend in RegTech development. In last three months, the FCMC had been approached by four RegTechs companies, who specialized in automation of KYC and AML solutions for banks, payment institutions and other FinTechs. RegTechs are important supportive functions for the whole financial industry, by providing outsourcing services, cutting the costs and saving the time.


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