On 16 October 2024, Latvijas Banka announced that it has completed the necessary preparatory work to allow non-bank payment service providers, including licensed payment and electronic money institutions as well as credit unions, to join its Electronic Clearing System (EKS). This system is managed by Latvijas Banka and facilitates the execution of instant payments and other financial transactions across the Single Euro Payments Area (SEPA) and within the European Union and European Economic Area.
Previously, direct participation in the EKS was restricted to credit institutions and the Treasury. However, from 17 October 2024, this access will be expanded to include non-bank entities, allowing them to participate directly in the execution of payments and to support innovation in Latvia’s financial sector, promoting modern, user-friendly, and internationally competitive payment services.
In his statement, Mārtiņš Kazāks, Governor of Latvijas Banka, stated: “This is an important step towards facilitating the development of payment services in Latvia, giving equal opportunities to all payment service providers in Latvia, and expanding opportunities for the population and companies to use state-of-the-art and innovative payment services. An innovation-supporting infrastructure forms the basis for the development of state-of-the-art and user-friendly financial services. Allowing non-bank payment service providers access to the EKS is one of Latvijas Banka’s initiatives for the development of the fintech area. It aims to create an innovative and internationally competitive financial sector in Latvia, one that makes a significant contribution to economic growth.”
For non-bank payment service providers intending to join the EKS, Latvijas Banka outlined some requirements. First, providers must contact Latvijas Banka and conclude a formal agreement for participation. These institutions must also ensure that their systems meet the technical readiness standards, which will be verified through mandatory testing. Further details on the process for joining the EKS are available on Latvijas Banka’s official website, where comprehensive guidance on the necessary preparatory steps can be found.
On 14 October 2024, the Council of Latvijas Banka formally adopted amendments to the Regulation on the Participation Procedure in the Electronic Clearing System. These amendments grant non-bank payment service providers the legal right to become direct participants in the EKS, effective 17 October 2024. The legal changes are in line with recent amendments to the Law on Settlement Finality in Payment and Financial Instrument Settlement Systems and the Law on Payment Services and Electronic Money, which now provide for the direct participation of licensed payment and electronic money institutions across Latvia and other EU Member States in national payment systems.
Latvijas Banka has made the necessary technical modifications to the EKS in anticipation of these legislative changes. This includes ensuring secure communication channels and preparing the system for the onboarding of non-bank providers. Institutions seeking to join the EKS will also be required to configure secure information exchange mechanisms and complete a series of compliance checks to align with SEPA payment standards before they go live in the system.
An important area of potential interest is the inclusion of cryptocurrency payment systems in future developments of the EKS. While cryptocurrencies are not explicitly covered by the current framework, there is speculation that the evolving financial landscape could prompt future consultations with Latvijas Banka regarding the integration of digital currencies within the national clearing system. Such developments would, however, require thorough consideration by Latvijas Banka, with careful evaluation of how cryptocurrency payment systems could be accommodated within the existing regulatory structure and whether additional safeguards would be necessary. The inclusive approach promoted by Latvijas Banka is expected to strengthen the country’s fintech sector and provide enhanced payment services across the European Union.
