EU Payments Legislation in transition: where PSD3 and PSR stand now

The European Union has been laying the groundwork for a comprehensive regulatory reform of the payment and e-money sector for several years. In June 2023, the European Commission unveiled its long-anticipated proposals for a revised Payment Services Directive (PSD3) and a new Payment Services Regulation (PSR).

Following the European Parliament’s adoption of its position in April 2024, many market participants expected the final texts of PSD3 and PSR to be published in early 2025. However, negotiations within the European Council proved more time-consuming than anticipated, with its position only being formally agreed in June 2025, more than a year after the Parliament’s adoption of its position.

Although this has paved the way for trilogue negotiations between the EU institutions, it’s clear that the path to finalising regulations that will reshape the payments and e-money industry remains challenging. As the legislative process approaches its final phase, here is a brief look at where the EU institutions stand on some controversial key elements of PSD3 and PSR.

Commentary by Ellex in Estonia experts Anneli Krunks and Marion Müürsepp.

• Capital thresholds remain a point of contention. The proposed capital requirements have emerged as one of the areas of disagreement—somewhat unexpectedly—particularly due to the European Council’s diverging views. This concerns, in particular, e-money and money remittance service providers.

  For e-money service providers, the European Commission initially proposed a capital threshold of 400,000 EUR, which the Council has suggested reducing to 150,000 EUR. Conversely, for money remittance providers, the original proposal set the threshold at 25,000 EUR, while the Council has pushed for a significant increase to 150,000 EUR.These substantial discrepancies highlight the need for further negotiation and compromise among the EU institutions during the trilogue phase.

• Clarification needed on the use of agents by e-money service providers. The use of agents by e-money service providers remains an open issue requiring further clarification. The initial proposal introduced a distinct regulatory framework for using e-money distributors—covering both the distribution and redemption of e-money—and required e-money service providers to undergo a passporting procedure when engaging such distributors.The European Council, however, has significantly revised this approach by introducing an agent regime (similar as to payment service providers). Under this amended framework, e-money service providers would still be required to undergo passporting when using agents. However, the Council’s version limits the scope of agent activities to redemption only, explicitly excluding distribution of e-money from the agent’s functions.

  This change would substantially reduce the regulatory burden for e-money service providers, streamlining cross-border operations while maintaining oversight of key redemption functions.

• Passporting timeline remains uncertain. The timeline for passporting procedures remains unresolved. While the original proposal retained the current maximum deadline of three months, the European Parliament has advocated for a significantly shorter 30-day timeframe. In contrast, the European Council has proposed extending the deadline to four months.A compromise is likely to fall somewhere between these positions. It is widely acknowledged that a 30-day deadline may be unrealistic for some Member States, given administrative constraints. At the same time, market participants are unlikely to support any further extension beyond the current three-month period, due to concerns over regulatory delays and operational efficiency.
• Reapplication process still on the table. The initial proposal requires currently licensed payment and e-money service providers to reapply for authorisation within 24 months of new regulations entering into force, demonstrating compliance with the updated regulatory requirements.Notably, the European Parliament has taken a pragmatic stance by emphasising that supervisory authorities should request only the data and documentation newly required under the new regulations. The Parliament’s position also introduces the possibility of extending the transitional period, which has been positively received by industry stakeholders.

  Nonetheless, aside from these adjustments, the overall approach to reauthorisation has remained largely unchanged. As a result, greater responsibility now falls on supervisory authorities to establish a clear framework and step-by-step process to guide firms through reapplication efficiently and transparently.

• Fraud prevention remains a central pillar. The EU institutions continue to underscore the critical importance of enhancing fraud prevention within the payments sector. Reflecting this priority, both the European Parliament and the Council have proposed further refinements to the fraud prevention framework, going beyond the measures outlined in the Commission’s initial proposal. These developments reaffirm that fraud prevention will remain a core element of the upcoming regulatory framework under PSD3 and PSR.
• Diverging institutional views on the provision of payment accounts to payment service providers. The question of whether credit institutions must provide payment accounts to payment service providers has proven to be a contentious issue, with the European Parliament and the Council adopting significantly different positions.The European Commission’s initial proposal outlined specific circumstances under which a credit institution could refuse to open or could close an account. These included legitimate concerns such as suspected money laundering or a material breach of contract, but also broader and more subjective grounds—such as when the payment service provider’s business model is deemed too risky or the associated compliance costs are considered excessively high.

  The European Parliament, in its position, expanded the Commission’s proposal even further, granting credit institutions greater discretion to refuse or terminate access to accounts.
  By contrast, the European Council has taken a fundamentally different approach. It emphasises that payment service providers should have access to payment accounts on an objective, non-discriminatory, and proportionate basis. The Council’s position significantly narrows the grounds on which access can be denied or account terminated. Notably, it does not consider the perceived riskiness of the payment service provider’s business model or high compliance costs as valid reasons for refusal or closure.

  It remains to be seen which of these positions will ultimately prevail in the final text of the regulation.

Although the current expectation is to finalise the texts in the first quarter of 2026, the volume of proposed amendments to the original drafts may lead to further delays.