Electronic money and payment institutions registered in the EEA and the UK

We can see that the fintech industry recovery is back on the agenda. He gradually recovered from the pandemic and gained momentum to push businesses forward.

According to the State of Fintech Report (CB Insights, 2021), global fintech funding reached a record $132 billion in 2021, twice as much as in 2020, and represents a dollar of capital -risk out of five (about 21%) . Most of the major fintech categories reached record funding levels in 2021, signaling that the true fintech boom is driven by growing market interest and increased investment in the fintech industry.

According to the report, banking transactions and financing hit record highs last year. If we compare 2021 funding to 2020, it has increased by 128% and real business by 14%. Overall, payments funding reached record levels in 2021, up 124% year-on-year and transactions up 34% year-on-year.

We cannot obtain information without analyzing the statistics of electronic money and payment licenses received in 2021 and 2020.

Table 1, Number of IP & EMI licenses issued (2020-2021)

Considering the statistics in the table above, we can see that 178 payment institutions and 84 electronic money institutions were registered in the EEA and the UK. The total number of payment and electronic money institutions registered in 2021 in the EEA reached 110 or 71 payment institutions and 39 electronic money institutions. While in the UK, the total number of registered payment and e-money institutions was 152 (PI – 107, EMI – 45).

The total number of EEA and UK licenses increased by 60 or 30% in 2021 (compared to 2020). However, if we analyze the EEA countries in more detail, we can conclude that the number of licenses increased by only two licenses, while the UK recorded a growth of 69% or 62 licenses.

Table 2, Number of PI & EMI licenses issued (calculated together 2020-2021)

A total number of PI & EMI licenses issued in 2020 and 2021_Advapay

Besides general licensing statistics, it is important to investigate the top nine jurisdictions of 2020 and 2021 (countries that issued more than five licenses). Norway and Ireland left the 2021 ranking, and eventually Malta and France took their place with 7 and 8 licenses issued as a result.

The UK has seen incredible growth. But, of course, we understand that this growth has been fueled by Brexit and the end of the transition period when EEA companies had to secure their positions in the UK. But that’s not the only reason the UK has succeeded. While the majority of European regulators have decided to tighten their requirements in terms of local teams and the physical presence of a company in the region, the United Kingdom remains open to international companies.

Lithuania had initially served as the European leader after the United Kingdom, but it began to lose ground. The number of licenses is gradually decreasing from year to year. It showed a 35% decrease compared to 2020 (from 20 licenses to 13) and a 25% decrease year-on-year for 2019-2020 (from 27 licenses to 20). The country, which was claimed to be the best jurisdiction for payment and e-money businesses, is gradually tightening licensing requirements. This affects both aspects – the duration of reviewing applications and the number of licenses issued.

The other country, which experienced a negative growth rate, is Ireland. Last year, the Irish regulator issued only two licenses (for comparison, in 2019 – Ireland issued 15 licenses, in 2020 – 6 licenses). The regulator changed the conditions for obtaining a license, which caused such a decrease. For example, now all of the company’s top management must be based in Ireland and the team (of seven to ten people) must be identified at the license application stage.

Against the backdrop of Lithuania and Ireland, Malta turned out to be a surprise in this ranking. With a reputation for being a difficult jurisdiction (only one license in 2020), the jurisdiction issued seven licenses in 2021, coming close to major countries more influential and larger than Malta. What is interesting? All licenses issued in Malta are EMI. Do you have any idea what this means in the long term? Does Malta want to become the “new Lithuania”? Only time will tell..

Other countries like Germany, Sweden, the Netherlands and Spain remain active in the industry. However, when considering openness to startups and international companies, Spain can be ranked as one of the most scrutinized jurisdictions.

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