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With non-EU providers increasingly dominating the user experience in Europe, a Bank of Lithuania official believes that modernised infrastructure, including the digital euro, is critical to payments sovereignty and growth.
In an interview with Vixio, Evaldas Ruzgys, the Bank of Lithuania’s payments chief, acknowledged that Visa and Mastercard’s dominance of European payments has become a significant issue, and that developing alternatives such as the European Central Bank’s (ECB) digital euro is becoming ever more important.
"Sovereignty is a huge issue for Lithuania and Europe. Besides Visa and Mastercard, the local payment scheme usage is decreasing,” he said.
“International schemes are increasing in use constantly and non-EU entities are taking over user experience. There is more and more uptake of American companies and this is a general trend across the continent.”
Ruzgys warned that with the rise of these firms, “it is a very valid question to consider who is in control of the European payments experience.”
“This is why there is so much discussion about solutions, and this is a debate that has expanded across Europe,” he added.
“The Baltic region is almost entirely dependent on Visa and Mastercard rails.”
Alternative solutions
Ruzgys suggested that local fintech is “thriving” in Lithuania, but cautioned that this is typically in niche markets such as gaming.
“Dependence is overwhelming and we are not on the Wero or similar solution’s roadmap. This is why we see the digital euro as more of a realistic solution for the region,” he said.
"We want alternatives to be built on SEPA infrastructure, as viable solutions are not at play currently,” he added. “What would challenge this is proper EU-wide solutions."
The ECB’s decision on the digital euro project’s next steps is due in October. Collaboration with member state central banks will be key to its success, and they will likely be involved in the communications.
Ruzgys believes that how those communications are undertaken will also be vital to its overall take-up and to fostering engagement with European citizens.
"For the digital euro, what we need to do is start conversations early,” the central bank official said. “General education needs to be achieved with consumers.”
People need to understand how this sort of payment is structured, and awareness should be increased before a roll-out takes place, he said.
“Otherwise, programmability and privacy concerns will tap into people's worries."
Fostering growth
The Bank of Lithuania is in a phase of new interventions, having announced in early September that it is making changes to its oversight with the aim of creating a more competitive, pro-growth environment.
For example, the central bank said it plans to streamline financial supervision to boost competition and align national rules with best EU practices.
Guided by a risk-based approach, it is easing requirements for low-risk activities, notably through July 2024 amendments to anti-money laundering (AML) laws that allow simplified customer identification and more flexible due diligence.
The bank has also updated rules on optional EU banking exemptions, enabling stricter oversight of riskier institutions, while relaxing requirements where risks are lower.
In addition, it has modernised licensing and application processes by reducing document certification and moving entirely to electronic submissions.
These changes follow a consultation inviting market participants to propose regulatory improvements. The central bank is now considering measures such as extended reporting deadlines for credit unions, reviews of inspection and licensing processes and potential simplifications for collective investment schemes.
