PSD3: What Happens to EMI and Payment Institution Licenses in the EU

PSD3 abolishes the standalone EMI license. Once the Directive enters into force, EMD2 is repealed and electronic money institutions become a sub-category of payment institutions, "payment institutions authorised to issue e-money." Existing authorisations are not cancelled: institutions may continue operating for up to 27 months from entry into force while demonstrating compliance with the new requirements, with a further three-month extension available at the NCA's discretion in exceptional cases. Publication of the final texts in the Official Journal is expected in the second half of 2026, which puts the outer transition deadline at approximately Q1 2029. Equilex supports EMI licensing in Malta and Lithuania, payment institution licensing in Malta, and SPI registration in Poland.

#What Are PSD3 and the Payment Services Regulation (PSR)

PSD3 and the PSR form a single reform package that performs two different functions. PSD3 is a directive covering authorisation, prudential supervision, and licensing criteria for payment institutions; as a directive, each of the 27 Member States still transposes it into national law in its own way. The PSR is a regulation that applies directly across the EU without transposition, and it carries the conduct-of-business side of the reform: strong customer authentication, fraud liability, refunds, open banking API performance, and Verification of Payee. The split exists because PSD2's directive-only structure let Member States implement the same rules differently, fragmenting the market; the PSR removes that room for divergence. Proposed by the European Commission on 28 June 2023, the package reached political agreement between the Council and Parliament in November 2025, with Council-level compromise texts published in April 2026 and formal adoption still pending. For a refresher on what PSD2 itself changed, see PSD II: Key Changes for Payment Service Providers in Europe.

#How PSD3 Merges EMI and Payment Institution Licenses

Under the current regime, payment institutions are licensed under PSD2 and e-money institutions under EMD2, two parallel tracks with their own capital requirements, safeguarding rules, and authorisation criteria. PSD3 collapses that split: EMD2 is repealed, e-money issuance is reclassified as the payment service listed in Annex I, Point 8, and every EMI becomes a "payment institution authorised to issue e-money," a sub-category of PI rather than a separate license type. E-money issuance remains a regulated activity; it simply moves under the PI license. Because a PI authorised only for e-money issuance now covers a narrower scope than an EMI could under EMD2, its initial capital requirement is lowered to EUR 250,000; a PI that combines e-money issuance with other payment services needs at least EUR 400,000, up from the EUR 350,000 EMD2 sets today. Capital thresholds for other payment services are also indexed upward, generally to EUR 40,000, EUR 50,000, or EUR 150,000 depending on the service, compared with EUR 20,000, EUR 50,000, or EUR 125,000 under PSD2. A PI that wants to add e-money issuance later will need to notify its NCA and submit supporting documentation rather than file a fresh application from scratch. The reform also touches the Settlement Finality Directive: PIs and EMIs gain the right to participate directly in designated payment systems, closing a structural advantage banks have held until now.

How re-authorisation works. Existing EMIs and PIs will not start from scratch, but they do need to submit the information their NCA requires to assess compliance with PSD3, and they must do so in time for the NCA to complete that assessment by the 27-month mark (the window runs from entry into force). Firms that demonstrate compliance are deemed authorised under the new framework; some NCAs may grant automatic authorisation where they already hold sufficient evidence. Where an institution submitted its information on time but the NCA has not completed its assessment before the deadline, the NCAs must grant an exceptional extension of up to three months. Expect to prepare an updated programme of operations, a three-year business plan, evidence of initial capital, governance arrangements covering fit-and-proper assessments and outsourcing policies, ICT security controls aligned with DORA (applicable since 17 January 2025), and a winding-up plan. The existing own-funds calculation methods survive the reform: Method B becomes the default for payment institutions generally, Methods A and C remain available for low-volume or high-value business models subject to NCA approval, and Method D continues to apply to the portion of own funds attributable to e-money issuance.

Safeguarding gets stricter. PSD3 requires payment institutions to avoid excessive concentration risk, in practice discouraging reliance on a single credit institution to hold all client funds; the EBA will issue technical standards specifying when diversification is required. A new option also allows client funds to be held with a central bank, at that central bank's discretion. Eligible safeguarding assets are defined at EU level rather than left to national variation, and institutions must disclose to users which safeguarding method they use, where funds are held, and which Member State's insolvency law would apply. For e-money issuers specifically, funds must be safeguarded no later than the end of the business day following the day they are received, a tighter standard than the five business days EMD2 allows today.

#PSD3 Transition Timeline: Key Dates from Publication to Compliance

All dates below run from entry into force, expected shortly after Official Journal publication in H2 2026; treat them as estimates to be rechecked once the final calendar is confirmed.

1. Publication and Entry into Force (~H2 2026). PSD3 and the PSR are formally adopted and published, entering into force 20 days later and starting every deadline that follows.
2. Direct Access to Payment Systems (~Q3 2028, with transposition). The Settlement Finality Directive amendments are transposed together with the rest of PSD3, letting payment institutions participate directly in designated payment systems such as SEPA and TARGET for the first time.
3. EBA Technical Standards Released (~2027–2028). The EBA publishes technical standards covering authorisation information, safeguarding concentration risk, open banking interfaces, and other operational requirements, clarifying what documentation firms will actually need to submit.
4. Transposition and PSR General Application (~Q3 2028). Member States transpose PSD3 into national law and begin applying it, and most PSR provisions become directly applicable across the EU, both roughly 21 months after entry into force.PSD2 and EMD2 are repealed from the same date, and this is also the grandfathering cut-off: institutions authorised before transposition fall under the transitional regime.
5. Verification of Payee Goes Live (~Q1 2029). Around 27 months after entry into force, every payment service provider must check that the IBAN and payee name match before executing a transfer, at no cost to the user.
6. Grandfathering Expires (~Q1 2029). The same 27-month mark is the deadline for existing EMIs and PIs to have demonstrated compliance with PSD3. Firms that have not done are suspended from providing payment services until they submit the required information and the NCA verifies compliance (Article 44).
7. Exceptional Extension Window (up to ~Q2 2029). NCAs may grant a further three months where an institution submitted its compliance information on time but the assessment could not be completed by the deadline (Article 45A).

The practical message: institutions should not wait until 2028 to start. Governance, capital, safeguarding, outsourcing, and ICT readiness should be reviewed as soon as the final legislation is published, since the 27-month window includes the NCA's assessment time, not just the firm's preparation time.

#What PSD3 Means if You Are Applying for a License in 2026

Filing for an EMI or PI license under the current EMD2/PSD2 regime remains the right call today; there is no reason to wait for PSD3. An institution authorised before the PSD3's transposition date — the cut-off set by Articles 44–45, roughly 21 months after entry into force — will generally be able to rely on the transitional arrangements described above, though this should not be read as unconditional grandfathering, the institution will still need to submit the information its NCA requires and demonstrate compliance with the new requirements within the transition window. 2026 is also the window in which NCAs are still operating on familiar timelines; once PSD3 is published, regulators across the EU will absorb a wave of re-authorisation filings, and processing times are likely to stretch. This is particularly relevant for applications in Malta through the MFSA and Lithuania through the Bank of Lithuania, as well as Poland through the KNF's small payment institution (SPI) regime.

There is a separate wrinkle for crypto firms. Issuing an e-money token (EMT) as an authorised CASP does not automatically trigger PSD3 authorisation on its own, but providing payment services involving EMTs, transfers on a client's behalf, custody, exchange on the firm's own account, or using EMTs as collateral — such as transfers of EMTs on a client's behalf or custody and administration of EMTs, may require a PI license authorisation as a payment institution in addition to MiCA authorisation, and each service should be assessed on its own facts rather than assumed. The final text softens the dual-licensing burden: where a CASP already authorised under MiCA applies to provide payment services only with EMTs, the NCA must decide on the application within 60 business days, against the standard three months. CASPs that lack PSD2 authorisation cannot continue EMT-related payment services since the EBA's no-action letter transitional period closed on 2 March 2026. For more on how the end of MiCA's own transitional period is reshaping the market, see MiCA Grandfathering Ended: CASP Options, and for the anti-money laundering side of this overlap, see AMLR: What EMIs, PIs and CASPs Must Change.

If you are planning to apply for an EMI or payment institution license, or need to assess how PSD3 affects your existing authorisation, schedule a call with the Equilex licensing team to discuss your transition roadmap.

#FAQ

#Does PSD3 abolish the EMI license?

PSD3 repeals EMD2 and integrates electronic money institutions into the payment institution framework. EMIs become a sub-category: "payment institutions authorised to issue e-money." E-money issuance continues as a regulated activity but under a PI license, not a standalone EMI authorisation. Existing EMIs transition into this new category after demonstrating compliance, rather than filing a new application from scratch.

#How long do existing EMIs and PIs have to transition?

Existing institutions may continue operating for up to 27 months after PSD3 enters into force, provided the NCA receives the information it needs and completes its compliance assessment within that window. An NCA may grant a further three-month extension in exceptional cases where the information was submitted on time but the assessment was not complete. The outer deadline falls in early 2029.

#Should I wait for PSD3 before applying for an EMI license?

No. Applying under the current EMD2/PSD2 framework is the recommended approach. A license granted before the PSD3 cut-off will generally benefit from the transitional arrangements, though the institution will still need to demonstrate compliance with the new requirements rather than treat this as unconditional grandfathering. The current process is more familiar to NCAs, and processing times are predictable.

#Does PSD3 affect crypto companies licensed under MiCA?

Potentially. Issuing an EMT does not automatically require separate PSD3 authorisation where the issuer already holds MiCA authorisation, but providing payment services involving EMTs, such as transfers, or custody, may still require a PI license. CASPs without PSD2 authorisation cannot continue EMT-related payment services after the EBA's transitional deadline of 2 March 2026.