Registration vs. Licensing under PSD3 and PSR – What Financial Institutions Need to Know Now

With PSD3 and the new Payment Services Regulation (PSR), the EU intends to further tighten and harmonise the regulation of payment institutions and e-money institutions. For established players as well as FinTechs and new entrants, one key question is decisive: Will a simple registration with the supervisory authority be sufficient in the future – or will a full licensing procedure be required? The answer not only determines the regulatory requirements, but also the time and cost involved in market entry, the ongoing obligations during operations, and ultimately the strategic direction of the business model.

PSD3 and PSR: A new regulatory framework for payment services in Europe

The planned Payment Services Directive 3 (PSD3) and the accompanying Payment Services Regulation (PSR) represent the next stage of European payment services regulation. While PSD3 as a directive must be transposed into national law, PSR will apply directly across all EU Member States. This creates a more consistent legal framework, designed to reduce fragmentation and establish a level playing field.

Core objectives include:

• greater transparency
• enhanced consumer protection
• strengthening of digital resilience

For institutions, this means stricter requirements on governance and compliance, new rules for handling customer data, and a clearer distinction between activities that are subject to registration and those requiring a full licence.

Registration requirement: Fast market access with limited rights

Under PSD3 and PSR, registration will remain relevant primarily for market participants providing supporting or technical services in payments, without managing customer funds or offering regulated payment services themselves.

Typical examples include:

• A FinTech offering APIs for account information services (AIS), helping customers to aggregate account balances across different banks within one app
• A technical service provider that develops software infrastructure for payment processing, but never initiates payments itself
• Start-ups covering only specific steps in the payment process, such as fraud detection systems or identity verification solutions

The advantages:

• Timeline: typically 2–4 months to complete a registration
• Costs: significantly lower (usually under EUR 50,000 for full preparation and submission)
• Less extensive documentation and evidence required
• The supervisory authority only reviews basic information about the company, without assessing the full organisational setup, capital base or the fitness and propriety of senior management in detail.

The downside: Registered entities have restricted rights and may only operate within a clearly defined scope. Offering services beyond the registration could constitute unauthorised regulated activity – with significant legal and financial risks.

Licensing requirement: Comprehensive authorisation with high standards

The licensing requirement under PSD3 and PSR applies to firms intending to provide regulated payment services or e-money activities in full scope.

Concrete examples:

• A FinTech offering an e-wallet where customers can hold balances and make payments
• A payment service provider offering merchants full payment processing including receipt and forwarding of funds
• Traditional payment institutions and e-money institutions that hold customer funds or process transactions end-to-end

Unlike registration, these institutions must undergo a full licensing procedure with the competent supervisory authority (e.g. BaFin in Germany).

Typical requirements include:

• Minimum capital requirements and a sound financial base
• Fit & proper assessment of senior management
• Organisational and governance structures including risk management, compliance and internal controls
• Evidence of a viable business strategy

Timelines and costs:

• Procedure: 9–18 months (longer for more complex business models)
• Overall costs: often EUR 200,000–500,000 or more including advisory, documentation, capital and preparatory work
• Lead time: at least 6–12 months of preparation before filing

The benefits are clear: Licensed firms gain full market access, can operate across the EU under passporting, and enjoy greater legal certainty and reputation. The drawback: The process is resource-intensive, requires early planning and specialist expertise.

Practical relevance: What do PSD3/PSR mean for payment institutions and FinTechs?

For banks, payment institutions and FinTechs, the distinction between registration and licensing is not just a legal technicality but a strategic success factor. Misclassification can result in unauthorised provision of payment services – with consequences such as cease-and-desist orders, fines and reputational damage.

FinTechs and start-ups often benefit from registration when providing only technical services in the payments ecosystem. This allows for quicker market entry, though with limited scope for expansion.

Payment and e-money institutions, on the other hand, usually require a licence. This demands time, capital and a solid compliance setup – but also offers EU-wide market access through passporting and a foundation for sustainable growth.

With PSD3 and PSR, the distinction will become clearer: Firms should assess early which requirements apply to them and whether licensing is mandatory. Early planning helps to manage costs, reduce risks and enable constructive dialogue with supervisors.

Conclusion and recommendations for market participants

The distinction between registration and licensing will gain further importance under PSD3 and PSR. While registration offers a quick and cost-efficient route to market, only licensing provides full access to the European payments market – albeit with extensive regulatory requirements.

For firms, the key actions are:

• Analyse early whether the business model falls under registration or licensing
• Make strategic decisions to allocate time, capital and resources realistically
• Engage with the supervisory authority to avoid uncertainties and delays

Misjudgement can have severe consequences – from cease-and-desist orders to reputational loss. Firms that prepare professionally at an early stage, however, create a solid foundation for sustainable growth and regulatory certainty.

As a specialised consultancy, we support payment institutions, e-money institutions and FinTechs in analysing regulatory requirements, preparing authorisation procedures and developing strategies to leverage the opportunities offered by PSD3 and PSR.