Latvia is a Baltic nation with a population of less than 2 million. It’s a member of both the European Union and the eurozone so it’s heavily influenced by regulations such as the revised Payment Services Directive (PSD2) and the General Data Protection Regulation (GDPR). Amid these regulatory structures, both traditional banking institutions and innovative fintechs present themselves as payment options for Latvians.

Businesses must understand local preferences, regulations, and technological advancements in Latvia to address the needs of customers while adhering to international standards of payment security and efficiency. Below, we’ll explore what businesses that want to operate in Latvia should consider, including:

• Embracing local preferences
  
• Following security and privacy regulations
  
• Creating a flexible customer experience
  

The state of the market

Latvia’s banking sector centers around several major institutions, including SEB and Swedbank—one of the largest banks in the Baltics. These banks have been influential in Latvia’s transition to a more digital and cashless society, providing online banking, mobile payment apps, and contactless payment options.

The Latvian financial sector operates under the supervision of several regulatory bodies, which work to certify stability and compliance within the industry. The Financial and Capital Market Commission (FCMC) serves as the primary regulatory authority, overseeing financial institutions, markets, and the protection of customers’ financial interests. Latvia’s commitment to regulatory compliance aligns with EU directives, and the country contributes to the development of European payment standards through its engagement with the European Payments Council.

The Latvian government has promoted electronic transactions over cash payments. Tax authorities have introduced incentives to encourage card payments to improve transaction transparency and combat fraud. Latvia has also imposed restrictions on the use of cash for certain transactions to lower the risk of money laundering. For instance, cash payments that exceed €7,200 are prohibited, with fines amounting to 15% of the total amount.

Latvia has a business-friendly environment and is seeking to boost its startup sector. The Fintech Latvia Association calls it “possibly the friendliest regulator in the world.”

Payment methods

As Latvia’s economy develops, it’s adopting more advanced payment options, albeit at a slower pace than some other countries. It also retains deep ties to tradition and, as a result, cash is still a common payment method.

Current usage

According to the Bank of Latvia, the average Latvian uses cash for 22% of their weekly transactions. Credit and debit cards combined accounted for 61% of cashless transactions in 2024. As in many other European countries, debit cards are used more widely than credit cards. However, both types of cards here are equipped with modern payment technologies: contactless transactions made up nearly 73% of all card payments in the country in the second quarter of 2021.

Popular B2C payment methods in Latvia

• Cash
  
• Credit and debit cards
  
• Bank transfers
  

Popular B2B payment methods in Latvia

• Credit and debit cards
  
• Cash
  
• Bank transfers
  

Emerging trends

The use of mobile payments is slowly increasing. According to data from the European Central Bank, mobile payments facilitated through digital wallets and dedicated apps accounted for 6% of point-of-sale (POS) transactions in 2022. Over a quarter of the country’s population uses smartphones to make payments every day.

Ease and friction of entry

The general oversight and standards of the EU provide a solid framework for any company that wants to do business in Latvia. However, this market does come with its own quirks and challenges. Here’s what to keep in mind.

Taxes

Value-added tax (VAT) is a common financial obligation for both customers and businesses in Latvia. VAT is generally applied at a standard rate of 21% for most goods and services. While customers directly pay VAT through their purchases, businesses have to collect and remit it to the government. Ensuring timely, accurate VAT remittance is important, as noncompliance can lead to substantial fines and penalties. This consideration is equally pertinent to customers as any association with noncompliant businesses could potentially result in audits or legal consequences.

Chargebacks and disputes

Latvia abides by EU regulations, which often favor customers in chargeback disputes. These include specific provisions of the Single Euro Payments Area (SEPA) that grant customers the right to request a refund for direct debit transactions within eight weeks.

Latvian businesses also operate under the country’s Consumer Rights Protection Law, which places the responsibility on businesses to prove the legitimacy of a transaction in disputes, especially unauthorized transactions. This customer-friendly attitude emphasizes the importance of comprehensive recordkeeping and transaction verification for businesses that operate in Latvia.

International payments

Because of Latvia’s EU member status, international payments are an important part of regular business. Here’s how international payments work in practice.

• Currency conversion
  Several third-party payment solutions are commonly used in Latvia for currency conversion, including Boursorama (a subsidiary of Société Générale), Currencies Direct, S Money, and Wise (formerly Transferwise). These platforms provide automatic conversion at the transaction point, depositing euros into the business’s account.

• SEPA transfers
  As part of the EU and the eurozone, Latvia is part of SEPA. This simplifies bank transfers in euros, making cross-border transactions within the eurozone less cumbersome.

• International trade relationships
  Latvia enjoys strong economic ties with other EU member states. These relationships enable easier cross-border payments and foster further economic integration. The country has especially strong relationships with its Baltic neighbors, Estonia and Lithuania, as well as with Sweden and Germany. Russia has historically been among Latvia’s top trading partners. However, international sanctions on Russia, imposed after its invasion of Ukraine in early 2022, have substantially weakened these ties.

Security and privacy

Latvia’s EU membership means it must adhere to the bloc’s stringent security and privacy rules. While these might set higher expectations for businesses, they significantly benefit customers. Read more about these considerations below.

• Data protection laws
  Latvia places data protection at the forefront of its payment priorities. The GDPR is rigorously enforced, setting strong standards for protecting customer data. Entities that operate in Latvia must obtain explicit consent for data collection and respect customers’ right to be forgotten.

• PSD2
  PSD2 plays a key part in Latvia’s payment regulations. It mandates Strong Customer Authentication (SCA) by payments service providers, which usually comes in the form of two-factor authentication (2FA).

• FCMC
  The FCMC serves as the central regulatory authority in Latvia. It oversees various aspects of payment security and compliance, ensuring that financial institutions and payments service providers adhere to EU directives and local regulations.

• Anti-Money Laundering (AML) laws
  Latvia complies with EU directives on AML and Countering the Financing of Terrorism (CFT). Financial institutions that operate in Latvia must implement comprehensive AML and CFT safeguards to monitor for and report potentially suspicious activities. Strict penalties can be imposed for noncompliance.

• Financial Intelligence Unit (FIU) oversight
  The FIU operates as a key part of Latvia’s efforts to combat money laundering and other financial crimes. It investigates and scrutinizes suspicious financial activities, helping to increase security and regulatory compliance.

Key success factors

The Latvian payment sector presents its own challenges. Here’s what to remember when you develop a payment strategy in the country.

• Recognize the slow adoption of emerging technologies
  While Latvia is progressing in its digital transformation, it lags behind some other European countries in adopting emerging payment technologies such as mobile payments. This slower adoption means that businesses must accommodate numerous forms of payment, potentially impacting the checkout experience and increasing their costs.

• Manage data in accordance with EU rules
  As an EU member state, Latvia is subject to the GDPR. This regulation has increased the compliance burden on Latvian companies, including those in the payment industry. Failure to comply with the GDPR can result in substantial penalties of up to €20 million or 4% of a company’s global annual turnover. For payment systems that handle high volumes of sensitive data, adhering to GDPR requirements has necessitated large investments in data governance systems. Meeting these regulatory demands without severely affecting operations is an ongoing challenge.

• Prepare for complexity in international transactions
  Latvia has simplified some aspects of internal European payments with SEPA. However, transactions that extend beyond SEPA can come with complexities such as fluctuations in exchange rates and divergent regulations across countries.

• Be aware of geopolitical concerns
  Latvia has historically maintained trading relationships with Russia and the Commonwealth of Independent States, a regional intergovernmental bloc composed primarily of former Soviet states. These geopolitical realities have complicated overground shipping and trade, creating potential sanctions loopholes. While the majority of companies that conduct business in Latvia are unlikely to be affected, it’s wise to remember the full reality of the country’s economic and political situation.

Key takeaways

Businesses that want to enter the Latvian market should accommodate local preferences, prioritize compliance with the strong security mandates, and focus on the customer experience. Here’s what to remember as you create and execute on your business plan.

Embrace local preferences

• Use SEPA Direct Debit
  SEPA has simplified euro bank transfers within Europe. Nearly 277 million SEPA payments were sent from Latvia in 2022, according to the European Central Bank. Businesses with subscription-based models or recurring payments can benefit from SEPA-compliant payment gateways. SEPA Direct Debit is commonly used in Latvia for recurring transactions, making this an important feature for businesses to support.

• Include local payment methods
  While international card networks like Visa and Mastercard are widely used, accepting Latvian bank cards and offering online banking transfers makes the payment experience feel more familiar.

• Adapt to mobile payment preferences
  Although their growth is slower here than in other countries, mobile transactions are only increasing in Latvia. Businesses should update their payment systems to accommodate this mode of payment while still accepting more traditional options such as cash.

Follow security and privacy regulations

• Prioritize data privacy compliance
  Latvia, as an EU member state, adheres to strict data privacy regulations, including the GDPR. Businesses should ensure their payment processes comply with it. Handling personal and payment information with care and transparency builds trust with Latvian customers, who are increasingly conscious of the need for data protection.

• Secure online shopping data
  Latvia’s ecommerce market brought in about $773 million in revenue in 2024, showing that customers here are embracing online shopping. Creating a safe, secure online payment system will help you tap into this trend.

• Invest in security
  As part of the EU, the Latvian government and Latvian customers value data security. Businesses can build customer confidence by investing in advanced security measures, including 2FA and encryption.

Create a flexible customer experience

• Provide multilingual options
  Customers appreciate businesses that take the extra step to provide payment interfaces in Latvian, the nation’s official language, as well as Russian, which is spoken by a significant portion of the population.

• Accept multiple currencies
  Given Latvia’s size and frequent commercial intersections with other nations, providing multiple currency options can be advantageous. Allowing customers to pay in their preferred currencies increases convenience and customer satisfaction.

• Provide real-time customer support
  As more Latvians embrace online shopping, easily accessible online customer support can address payment-related issues promptly, leading to smoother payment experiences.