FinLego Blog

How to Launch a Fintech in Latvia: Practical Guide

2025-09-22 19:00

Intro: Latvia as a Gateway to the Baltic & EU Fintech Market

Latvia is rapidly establishing itself as a practical and well-connected gateway for fintechs expanding into the Baltic region and the wider EU. A focused national strategy, active industry bodies, and growing momentum around fintech events and initiatives have created an ecosystem where startups can test, iterate, and scale across borders from Riga and beyond.
Regulatory stewardship from Latvijas Banka (the Bank of Latvia) has become more fintech-friendly in recent years: the central bank runs innovation support programs, a formal fintech forum, and clear authorisation routes for payment and e-money providers, making the licensing path more predictable for applicants who come prepared. That clarity matters: it reduces time-to-market and improves the odds of successful EU passporting once authorised.
Beyond regulation, Latvia offers practical operational advantages. The country combines a competitive talent pool and growing startup support (accelerators, investor interest and public programmes) with cost advantages versus many Western European hubs, helping teams hire developers, compliance engineers, and product talent quickly. Recent local reports also show a maturing fintech scene with solid traction in payments, cross-border remittances, and crypto-adjacent services.
For founders considering how to launch a fintech in Latvia, this guide covers the specific, actionable items you’ll need: regulatory and licensing routes (PI / EMI / VASP/CASP specifics), capital and governance expectations, compliance and AML peculiarities, taxes and corporate forms, tech and talent realities, common pitfalls, and a checklist to move from incorporation to first transactions. We’ll also explain how FinLego can accelerate your Latvia launch with Estonia-grade speed but Latvia-specific integrations and compliance tooling.

Understanding Latvia’s Regulatory Framework

Latvia’s regulatory environment for fintech has matured significantly, especially since 2023, when the Financial and Capital Market Commission (FCMC) - previously the independent financial watchdog, was integrated into the Bank of Latvia. This centralization aimed to streamline supervision, reduce bureaucracy, and offer fintech applicants a more coherent point of contact for licensing and compliance matters.
As an EU member state, Latvia’s financial services regulation aligns closely with European Union directives, most notably:
  • PSD2 (Payment Services Directive 2): Governing payment initiation, account information services, and strong customer authentication requirements.
  • AMLD5 (Fifth Anti-Money Laundering Directive): Setting harmonized rules for AML/CTF compliance, including customer due diligence, beneficial ownership transparency, and risk-based monitoring.
  • MiCA (Markets in Crypto-Assets Regulation): Soon to be fully enforced across the EU, providing a unified framework for crypto-asset issuance, exchange, and custody.
Under the Bank of Latvia’s supervision, fintech companies have several licensing options, depending on their business model:
  • Payment Institution (PI): Authorizes payment services such as money transfers, merchant acquiring, and payment initiation without the ability to issue e-money.
  • Electronic Money Institution (EMI): Covers all PI activities and additionally allows issuing electronic money and providing stored-value accounts.
  • Virtual Asset Service Provider (VASP): For businesses offering crypto exchange, custody, or related services; these are registered with the Bank of Latvia and subject to enhanced AML/CTF scrutiny.
Latvia’s regulatory approach is pragmatic but thorough - applications must be complete, compliant, and backed by credible governance and risk management systems. While the framework mirrors EU-wide requirements, the integration of oversight into the central bank has made the process more centralized and predictable, a competitive advantage for founders targeting EU-wide passporting after initial licensing.

Licensing Requirements & Timelines

Launching a fintech in Latvia requires a clear understanding of the capital, governance, and procedural standards set by the Bank of Latvia. While Latvia offers an efficient licensing process compared to some other EU jurisdictions, preparation is key to avoiding delays.
1. Minimum Capital Requirements (in line with EU directives):
  • Payment Institution (PI): From €20,000 to €125,000, depending on the payment services provided.
  • Electronic Money Institution (EMI): €350,000 minimum fully paid-up share capital.
  • Virtual Asset Service Provider (VASP): No fixed capital threshold in law, but sufficient capital reserves must be demonstrated based on business scale and risk profile.
2. Local Presence & Governance
  • Management Board – At least one board member must be a resident of Latvia or demonstrate regular physical presence.
  • Compliance Officer (MLRO) – Must be based in Latvia with proven AML/CTF expertise.
  • Substance Requirements – The Bank of Latvia places strong emphasis on real operational presence rather than “letterbox” entities.
3. Key Documentation for Application
  • Detailed Business Plan – Including target market, product roadmap, and financial projections.
  • AML/CTF Policy & Risk Assessment – Aligned with AMLD5 and Latvian-specific requirements.
  • IT & Security Framework – Covering infrastructure resilience, cybersecurity controls, and GDPR compliance.
  • Internal Governance Documents – Shareholder structure, board member CVs, and organizational chart.
4. Licensing Timelines
  • Pre-application stage (informal consultation with the Bank of Latvia): 4–6 weeks.
  • Formal application review: Typically 3–6 months for PIs and EMIs; 1–2 months for VASPs if documentation is complete.
  • Approval & operational readiness checks: 1–2 months post-authorization.
In practice, a well-prepared fintech can secure authorization in under 6 months for PI/VASP licenses and 9–12 monthsfor EMI licenses. The Bank of Latvia’s consolidated supervision model has improved communication speed, but regulators expect thorough documentation and proof of operational readiness from day one.

Compliance Peculiarities in Latvia

Latvia has steadily strengthened its compliance environment, particularly in the wake of EU Moneyval evaluations and heightened scrutiny on AML/CTF practices. For fintechs, especially those dealing with cross-border payments, digital assets, or high-volume transactions, compliance readiness is not optional, it’s a market entry requirement.
1. Strong AML/CTF Enforcement
  • The Bank of Latvia applies strict anti-money laundering and counter-terrorism financing (AML/CTF) checks, in line with AMLD5 and upcoming AMLD6 rules.
  • Special attention is given to transaction monitoring, sanctions screening, and PEP (Politically Exposed Person) handling.
  • Firms must implement risk-based approaches that adapt to changing transaction patterns and customer behaviors.
2. FIU Latvia’s Role for VASPs
  • The Financial Intelligence Unit (FIU) Latvia supervises Virtual Asset Service Providers (VASPs) and crypto-related operations.
  • This includes vetting AML programs, verifying the fitness of management, and enforcing transaction reporting obligations for digital assets.
  • VASPs must maintain robust travel rule compliance when transferring crypto assets, ensuring sender/receiver identification.
3. KYC Obligations for EU & Non-EU Customers
  • Full KYC onboarding is mandatory, regardless of whether customers are located in the EU or third countries.
  • Enhanced due diligence (EDD) is required for higher-risk jurisdictions, customers with unusual transaction patterns, or crypto-fiat conversion services.
  • Onboarding must be combined with ongoing customer due diligence and periodic KYC refresh cycles.
4. GDPR & Data Protection Compliance
  • As an EU member state, Latvia strictly enforces GDPR principles—especially around data minimization, user consent, and breach notification timelines.
  • Fintechs handling sensitive financial or biometric data must appoint a Data Protection Officer (DPO) if required by activity scale.
  • Security measures should include end-to-end encryption, secure data storage in the EU/EEA, and multi-factor authentication for customer portals.
In short, Latvia’s compliance landscape is proactive, not reactive. Regulators expect fintechs to demonstrate compliance-by-design, embedding AML, CTF, and GDPR protocols into their core operations rather than treating them as add-ons.

Taxation & Corporate Structure

Latvia offers a business-friendly tax regime that is particularly attractive for fintech founders who prioritize reinvestment and operational scalability. The system mirrors aspects of its Baltic neighbors but has its own distinct advantages.
1. Corporate Income Tax on Distributed Profits Only
  • Latvia applies a 0% corporate income tax on retained earnings, meaning companies only pay 20% CIT when distributing profits (dividends).
  • This allows fintechs to reinvest revenue into technology, licensing, and market expansion without immediate tax leakage.
  • The approach is especially beneficial for early-stage and growth-stage fintechs focused on building market share.
2. E-Services for Company Management
  • While Estonia is famous for e-Residency, Latvia offers similarly advanced e-government services for tax filing, company reporting, and regulatory submissions.
  • Most corporate procedures, like filing annual reports, updating shareholder information, or submitting tax returns, can be completed online via the Latvian State Revenue Service (VID) platform.
3. Choosing the Right Legal Form
  • SIA (Sabiedrība ar Ierobežotu Atbildību): Private limited liability company; most common for fintech startups.
  • AS (Akciju Sabiedrība): Public limited liability company; suitable for larger capital requirements, fundraising, or going public.
  • SIAs require a minimum share capital of €2,800, while AS companies have higher minimum capital requirements but greater flexibility in attracting investors.
4. VAT and Financial Services
  • Standard VAT rate is 21%, with certain financial services (like payments or lending) exempt under EU VAT rules.
  • Fintechs offering mixed services (regulated and unregulated) must carefully assess VAT obligations for each revenue stream to avoid compliance gaps.
5. Double Tax Treaties & Cross-Border Operations
  • Latvia has double taxation agreements with 60+ countries, which is crucial for fintechs serving multiple jurisdictions.
  • The tax framework is aligned with OECD guidelines, making cross-border revenue structuring more predictable and transparent.
In summary, Latvia’s taxation model rewards reinvestment and operational efficiency, while its corporate framework supports both lean startups and investor-backed scale-ups.

Market Opportunities & Competitive Landscape

Latvia’s fintech sector has evolved from a niche player in the Baltic region to a recognized hub for innovative financial services with a strong cross-border focus. For entrepreneurs, the market offers a combination of local demand, EU-wide reach, and untapped niches.
1. Key Fintech Segments on the Rise
  • Neobanking & Digital Wallets: Driven by underbanked segments and cross-border workers in the Baltics and Nordic region.
  • Lending Platforms & Alternative Credit Scoring: Particularly active in consumer lending and SME financing.
  • Cross-Border Payments & Remittances: High demand due to Latvia’s international workforce and trade ties.
  • Crypto & Tokenized Assets: Emerging VASP ecosystem, with regulators showing a cautious but open stance towards blockchain innovations.
2. Notable Local and International Players
  • Local leaders: Sun Finance, Mintos (peer-to-peer lending marketplace), and Twino (consumer lending).
  • International presence: Global PSPs and EMIs like Wise and Revolut operate in Latvia, creating a competitive but dynamic environment.
  • Banking partners: While some local banks have historically been cautious towards fintechs, the trend is shifting with Bank of Latvia encouraging innovation.
3. Partnership & Ecosystem Opportunities
  • Collaboration with local PSPs for acquiring services and payment routing.
  • Integration with Baltic and Nordic payment rails for faster settlements.
  • Government-backed innovation initiatives under the Latvian Investment and Development Agency (LIAA) supporting fintech expansion.
4. Competitive Advantages for New Entrants
  • EU Passporting: License once, operate across all EU/EEA countries without additional regulatory hurdles.
  • Strategic Location: Close ties with both Eastern and Western Europe, making it ideal for cross-border payment companies.
  • Skilled Workforce: Growing pool of developers, compliance specialists, and payment operations experts.
Latvia’s fintech market is competitive but far from saturated - there’s room for specialized solutions that cater to underserved niches, particularly in cross-border financial services, crypto, and SME-focused products.

Technology Infrastructure & Local Ecosystem

Latvia’s fintech-friendly environment is strengthened by a robust digital infrastructure and a supportive innovation ecosystem that makes it easier for startups to scale quickly and integrate with EU-wide systems.
1. Core Technology Requirements
  • Secure, Scalable Platforms - Whether launching a payment institution, EMI, or VASP, the backbone must handle real-time processing, multi-currency support, and compliance automation.
  • Cloud Adoption - Most fintechs operate on AWS, Azure, or local EU data centers to ensure GDPR-compliant data storage and high uptime.
  • API-First Approach - Essential for integrating with payment rails, banking APIs (via PSD2), and third-party compliance tools.
2. Local Integration Opportunities
  • SEPA & Instant Payments: Latvia is part of the Single Euro Payments Area and supports SEPA Instant Credit Transfers, enabling near-instant settlements across the EU.
  • Latvian Digital Signature (eParaksts): Enables secure onboarding, KYC verification, and legal document signing without in-person interactions.
  • State Information Systems Integration: Access to company registers, ID validation, and tax authority APIs can automate onboarding and compliance processes.
3. Availability of Skilled Talent & Outsourcing
  • Local Tech Talent - Latvia boasts a strong pool of software engineers, cybersecurity experts, and data analysts with fintech experience.
  • Outsourcing & Nearshoring - Startups can supplement local hiring by leveraging nearshore teams from Lithuania, Estonia, or Poland for cost efficiency.
4. Innovation & Support Ecosystem
  • Accelerators & Hubs - TechHub Riga, Startup Wise Guys, and Fintech Latvia Association connect founders with mentors, investors, and industry partners.
  • Government Support - LIAA offers grants and soft loans for innovative technology development and market entry.
  • University Collaboration - Partnerships with Riga Technical University and the University of Latvia feed talent pipelines for fintech companies.
Latvia’s combination of EU-grade infrastructure, instant payment capabilities, and supportive startup networksmakes it a highly attractive base for fintech operations aiming for regional or global reach.

Common Pitfalls When Launching in Latvia

While Latvia offers an attractive environment for fintech growth, founders must navigate several market-specific challenges to avoid costly delays or compliance setbacks.
1. Underestimating AML/CTF Scrutiny
Latvia has significantly strengthened its anti-money laundering (AML) and counter-terrorism financing (CTF) measures following EU recommendations. Regulators expect robust transaction monitoring, ongoing KYC, and enhanced due diligence for high-risk clients. Startups that treat compliance as a checkbox risk application rejections or license suspensions.
2. Misalignment Between License Scope and Business Model
Applying for the wrong license, such as opting for a PI instead of an EMI, can lead to restrictions on issuing e-money, holding client funds, or providing cross-border services. Founders must match their product roadmap with the licensing framework to avoid costly reapplications.
3. Weak Local Governance
Regulators require active, resident management board members with decision-making authority. Relying on nominee directors who lack operational involvement can slow down approvals and damage credibility during supervision audits.
4. Insufficient Tech Stack for Compliance Automation
Many new entrants underestimate the integration complexity of AML screening, transaction monitoring, and GDPR-compliant data storage. A fragmented approach using multiple unlinked systems increases both costs and regulatory risks.
5. Overlooking Market Competition & Differentiation
While Latvia’s fintech market is growing, certain niches, like payment gateways and crypto exchanges, are already competitive. Launching without a clear USP, strategic partnerships, or localization plan can limit customer acquisition.
Avoiding these pitfalls requires a combination of thorough market research, strong local compliance frameworks, and a scalable technology foundation from day one.

FinLego’s Fintech Launch Solution for Latvia

Launching a fintech in Latvia requires more than meeting licensing requirements - it demands a compliant, scalable, and market-ready infrastructure that’s tailored to the country’s evolving regulatory and technological environment. FinLego bridges the gap between vision and execution, enabling founders to launch faster while staying fully aligned with local expectations.
1. End-to-End Licensing & Regulatory Support
We guide you through the Bank of Latvia licensing process for Payment Institutions, EMIs, and VASPs, ensuring your application aligns perfectly with your business model. Our compliance experts prepare your business plan, AML/KYC framework, IT security documentation, and risk management procedures to meet both EU and Latvian standards.
2. API-First Modular Fintech Infrastructure
FinLego’s platform is built for flexibility. Our core banking, e-wallet, and multi-currency ledger modules support everything from fiat and crypto transactions to tokenized asset management - ready for compliance out of the box.
3. Intelligent Payment Gateway for Cross-Border Growth
Our payment orchestration engine allows you to connect to multiple acquiring banks and payment processors, intelligently route transactions to reduce fees, and optimize approval rates. We integrate seamlessly with local Latvian payment rails as well as international networks for EU passporting.
4. Compliance Automation & Risk Monitoring
FinLego’s real-time AML/CTF monitoring tools help you stay ahead of regulator expectations. With KYC/AML automation, sanction screening, and ongoing transaction analysis, you minimize risk while keeping operations lean.
5. Local Ecosystem Integrations
We provide ready-made integrations with Latvia’s national digital signature systems, secure banking APIs, and accounting tools, enabling smooth onboarding for local customers and businesses.
Key Benefits of Partnering with FinLego:
  • Faster Time-to-Market: Launch months ahead of traditional timelines.
  • Regulatory Peace of Mind: All compliance processes built into your core tech.
  • Scalable Architecture: Expand from Latvia to the entire EU with minimal changes.
  • Local Expertise, Global Reach: Deep knowledge of Latvia’s fintech ecosystem combined with global operational experience.
Ready to launch your fintech in Latvia? Let FinLego handle the licensing, compliance, and technology so you can focus on growth. Talk to our team →

Conclusion: Latvia - A Strategic Hub for Fintech Innovation in the Baltics

Latvia’s stable regulatory environment, integration of the Financial and Capital Market Commission into the Bank of Latvia, and clear licensing pathways make it an increasingly attractive destination for fintech startups. Coupled with a growing talent pool, evolving digital infrastructure, and strong EU market access, Latvia offers a unique launchpad for companies aiming to scale across the Baltics and the broader European Union.
However, succeeding in Latvia requires not only understanding complex compliance and licensing requirements but also leveraging modern, flexible technology infrastructure that supports regulatory demands and rapid market adaptation.
This is where FinLego’s comprehensive fintech launch solution stands out - offering end-to-end support from licensing and compliance preparation to API-first core banking and payment orchestration tailored for Latvia’s market.
By combining regulatory expertise with scalable, modular technology, FinLego empowers fintech founders to accelerate go-to-market, minimize risk, and confidently expand within and beyond Latvia.
Act now to capitalize on Latvia’s fintech momentum. Build on a solid foundation of compliance and innovation with FinLego as your trusted partner.
Ready to start your fintech journey in Latvia? Contact FinLego today →