PSD3 / PSR: The final compromise text

PSD3 re-authorisations and beyond: what PSPs and EMIs need to know now

The European payments framework is entering a significant period of change. PSD3 reshapes key service definitions, recalibrates capital and own-funds rules, tightens safeguarding mechanics, and formalises winding‑up planning—while aligning operational resilience expectations with DORA. Firms preparing for re‑authorisation should assess their permissions, capital planning, safeguarding set‑up, governance and wind‑down readiness in light of the developing Level 2 framework.

1. Service scope reshuffle: mapping your permissions

PSD3 rationalises Annex I services with targeted mergers and splits that will affect how firms describe and permission their business models. Placing and withdrawing cash are merged into a single regulated activity, simplifying categorisation for cash‑handling propositions. Execution of transactions—whether or not covered by a credit line—is grouped together, reducing fragmentation of execution permissions. At the same time, issuing payment instruments and acquiring are split into standalone activities, which may require more granular permissions strategies for issuers and acquirers. Money remittance and PIS remain substantively unchanged in definition, preserving continuity for providers focused on these verticals. AIS is expanded to capture models where account information is provided to a third party with user consent and remains subject to a “lighter” registration regime, which may broaden the perimeter for data‑sharing propositions. Crucially, the issuance of e‑money is integrated into PSD3 as payment service No. 8, replacing the separate EMD2 construct and centralising permissions under a single framework.

2. Re‑authorisation focus areas and DORA alignment

Re‑authorisation applications are expected to centre on compliance with conditions in Article 3(3) PSD3, including initial capital and own funds, safeguarding, governance and risk management, and formal winding‑up plans, with detailed requirements to be developed in EBA RTS and guidelines. Governance expectations will align with DORA by incorporating ICT risk management frameworks, incident management and reporting, and robust ICT continuity, response and recovery planning into re‑authorisation materials and day‑to‑day arrangements. The EBA’s RTS package is expected to further harmonise application pack requirements across the EU, raising the importance of early readiness and documentary consistency.

3. Capital: higher floors and accumulation across tiers

Initial capital thresholds are revised. For money remittance, the minimum rises from €25,000 to €40,000, while cash placement and withdrawal increases from €125,000 to €150,000. The accumulation principle continues to apply, requiring firms that provide services across different tiers to add minimum capital amounts together, which will be central to multi‑service business planning. E‑money issuance carries a €250,000 initial capital under PSD3, focused on issuance only, rather than the EMD2 approach that bundled payment services, altering the calculus for combined EMI/PI models. For example, EMIs may face an effective increase to €400,000 when combining €250,000 for issuance with €150,000 for execution of transactions.

4. Own funds: method changes and likely switches

For payment institutions that do not issue e‑money, Method B (average monthly payments volume) becomes the default own‑funds calculation, with Methods A or C reserved for specific low‑volume, high‑value models to be defined in EBA RTS. Firms currently using Methods A or C should anticipate either a transition to Method B or the need to obtain approval to continue under RTS‑defined criteria. For EMIs and PIs that issue e‑money, Method D remains for the e‑money component, while Methods A, B or C apply to non‑e‑money payment services, with Method B again as default and extended across services (1) to (5), regardless of linkage to e‑money issuance. This architecture may increase own‑funds or require dual calculations for institutions combining issuance and payment services.

5. Safeguarding: tighter timelines, clarified mechanics, and RTS to come

Safeguarding timelines for e‑money tighten materially: funds received for issuance must be safeguarded by the end of the next business day after e‑money is issued, replacing the more permissive five business‑day window in EMD2 and increasing pressure on models that issue in anticipation of receipt. PSD3 clarifies that relevant funds must as soon as possible cease to be commingled with non‑PSU funds after receipt, acknowledging that receipts may initially include non‑PSU funds and permitting segregation post‑receipt. The end‑point for safeguarding is refined: funds not delivered to the payee or another PSP by close of the next business day must be safeguarded, with explicit recognition that transfer to an intermediary PSP is sufficient, aiding flow‑of‑funds design and reconciliation logic.

Investment criteria for safeguarding assets remain the “secure, liquid, low‑risk” standard and are now formally extended to PIs, reflecting common supervisory practice and offering continuity for treasury policies. Eligible safeguarding counterparties are expressly limited to EU‑authorised credit institutions and insurers, aligning law with the prevailing approach in many Member States. Diversification is framed as an advisory obligation: firms should avoid concentration risk where appropriate and endeavour not to safeguard all funds with one bank, with proportionality and a carve‑out where safeguarding is via insurance, implying additional banking relationships and operational complexity for many institutions. The option to safeguard at a central bank, in a separate account distinct from settlement, is maintained but remains subject to central bank discretion and is not presently available across the Eurosystem to non‑bank PSPs. Critically, PSU funds held in settlement accounts within designated payment systems are deemed compliant with safeguarding if not commingled, which could materially enhance non‑bank PSP participation and reduce liquidity drag previously caused by parallel safeguarding requirements.

An EBA RTS on safeguarding risk management frameworks is expected to set detailed standards for segregation, designation, reconciliation and calculation, diversification criteria with proportionality, and handling of user funds in payment‑system settlement accounts, making early target‑operating‑model design prudent.

6. Winding‑up plans: formalised expectations

Applicants will have to submit a formal winding‑up plan adapted to their envisaged size and business model, including the return of safeguarded funds in a disorderly wind‑up, and the EBA may further elaborate these expectations in RTS on authorisation applications. Firms should align wind‑down analysis, triggers, operational playbooks and customer communications with safeguarding unwind mechanics.

7. Limited Network Exclusion: scope, process and value

PSD3 refines the LNE. The “Limited Network” condition explicitly includes an issuer’s online stores, moving beyond physical‑premises constraints and reflecting omnichannel commerce. The “Limited Range” condition is clarified to include instruments restricted to B2B transactions, offering greater certainty for corporate programmes. Social and tax instruments are prohibited from cash conversion, tightening consumer‑protection guardrails. The EBA will replace current LNE guidelines with RTS to promote harmonisation, and Member States may make LNE notifications optional, while NCAs retain powers to request information on LNE services, potentially irrespective of the €1 million threshold . These adjustments may alter the cost‑benefit of relying on the exclusion in particular sectors.

Practical next steps

• Map current permissions to PSD3 service definitions and identify any re‑authorisation deltas .
• Re‑forecast initial capital and own funds under the revised floors and default methods, including accumulation effects and potential dual calculations for issuers that also provide payment services .
• Redesign safeguarding policies to meet next‑day e‑money timelines, non‑commingling, diversification, and reconciliation standards, and plan for EBA RTS uplift .
• Update governance, ICT risk, incident reporting, and continuity frameworks to demonstrate DORA‑aligned compliance in re‑authorisation materials .
• Prepare a proportionate winding‑up plan with executable safeguarded‑funds return mechanics .
• Reassess any LNE‑based offerings in light of scope clarifications, procedural changes, and forthcoming RTS .

How we can assist

If you would like a tailored PSD3 re‑authorisation readiness review, including capital modelling, safeguarding design and wind‑down planning, please get in touch with an FM key contact.