On 3 February 2016, the Bank of Lithuania, as the financial supervisory authority in Lithuania, opened the way for a new payment service to strengthen competition in executing payments in e-commerce.
The revised Directive on Payment Services (PSD2) introduced regulation on payment initiation services. However, the PSD2 has not yet been implemented in Lithuanian legislation. As a result, some legal uncertainty has existed as to the legality of providing payment initiation services. The Bank of Lithuania’s decision on payment initiation services has clarified how this can be achieved until the PSD2 requirements come into force. The requirements laid down in the PSD2 will come into force from 13 January 2018. Meanwhile, during the transitional period, the service in Lithuania will be subject to general civil law provisions.
The Bank of Lithuania will prepare Principles of Best Practice for the Payment Initiation Service that providers of the service would undertake to follow on a voluntary basis.
PAYMENT INITIATION SERVICES
The payment initiation service mostly works on the following principle: a buyer is routed from the e-shop to a payment initiation service provider and not to a bank, as it is now. Payment initiation service provider helps to initiate a payment from the user account to the merchant account by creating a software “bridge” between the accounts, fills in the information necessary for a transfer (amount of the transaction, account number, message) and informs the merchant once the transaction has been initiated.
The buyer discloses to the service provider his one-off online banking login codes: one pair of passwords is designated to login to online banking, another one to confirm a payment transaction is originated. With the help of these codes, the payment initiation service provider, by creating a software bridge, logs in to the buyer’s payment account and originates a transaction designated to settle with the e-shop. The e-shop is notified of successful settlement, while the buyer is routed back to the e-shop to finish the purchase.