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How to Get a Payment Institution Licence in the EU in 2026
At a glance
1. Start with the payment service, not the country. PSD2 treats account services, execution of payments, acquiring, money remittance, payment initiation and account information as distinct activities. [1]
2. Initial capital for a fully authorised payment institution (PI) is generally EUR 20,000 for money remittance only, EUR 50,000 for payment initiation, or EUR 125,000 where the business provides any of the payment services in Annex I points 1–5. These are regulatory floors, not launch budgets. [1]
3. A PI handling funds for services in Annex I points 1–6 must safeguard relevant customer funds. It also needs an operating model for governance, financial crime, security, complaints and outsourcing. [1, 2]
4. PSD2's three-month authorisation decision period runs from receipt of a complete application or all information needed for a decision. An EBA review reported a 9.5-month median from submission for PI and EMI applications in its EEA sample, excluding an outlier member state. [1, 3]
5. A PI licence does not itself authorise the company to issue electronic money or take deposits. A fully authorised PI can use PSD2's cross-border notification route for the services in its licence; a small-PI exemption is different. [1, 5]
“How do we get a payment institution licence in Europe?” is often asked while the product is still described as “a wallet”, “an IBAN app” or “a payment gateway”. Those labels are too broad for an application. The regulator needs to know who receives funds, who owes the customer, who executes each payment, which partner holds the account, and what happens when a transaction fails.
This guide turns those questions into a licensing sequence. It uses the current EU framework under the revised Payment Services Directive (PSD2), while recognising that each member state applies its own filing process and supervisory judgement. [1, 2]
1. Map the payment service before choosing a licence
PSD2 Annex I lists the regulated payment services. The same customer interface can hide very different legal roles: an app may initiate a payment at a customer's existing bank, transmit money between parties, operate payment accounts, acquire transactions for merchants, or issue electronic money that customers spend later. Each model produces a different licence perimeter. [1, 5]
| Product description | Regulatory question | Likely starting route |
|---|---|---|
| Money arrives and is sent to a recipient without a reusable balance | Is this money remittance under Annex I point 6, or another payment service? | PI analysis; EUR 20,000 floor only if the firm provides money remittance alone. |
| Business opens payment accounts and executes transfers for customers | Who operates the account, receives funds and executes the payment? | PI analysis under Annex I points 1–5; EUR 125,000 floor. |
| App starts a transfer from the customer's account at another provider | Does it provide payment initiation without holding the funds? | Payment initiation service analysis; EUR 50,000 floor and professional indemnity cover. |
| App only retrieves consolidated account data with customer consent | Is it solely an account information service? | PSD2 registration route, not the ordinary PI authorisation route. |
| Customer prepays a balance usable with third-party merchants | Does the balance meet the legal definition of electronic money? | EMI analysis; a PI licence alone does not authorise e-money issuance. |
This is an indicative screening map. Mixed services, agency arrangements and the precise flow of customer funds can change the conclusion. Draw one diagram for every material product flow before commissioning application documents. The boundary with e-money is explained in our EU EMI licence guide. [1, 5]
2. Calculate the capital floor for the actual service mix
PSD2 Article 7 sets three initial-capital thresholds for a fully authorised PI. The often-quoted EUR 20,000 figure applies to a business providing only money remittance. A firm providing any of the services in Annex I points 1–5 has a EUR 125,000 floor, even if its marketing calls the product “remittance”. A payment initiation service has a EUR 50,000 floor. [1]
| PSD2 service scope | Initial-capital floor | Common business example |
|---|---|---|
| Money remittance only (Annex I point 6) | EUR 20,000 | Transfer money from payer to payee without a payment account in the payer's or payee's name. |
| Payment initiation (Annex I point 7) | EUR 50,000 | Initiate a transfer from an account held with another provider at the user's request. |
| Any services in Annex I points 1–5 | EUR 125,000 | Operate payment accounts, execute transfers, issue payment instruments or acquire transactions. |
Article 8 adds an ongoing own-funds requirement: the firm must hold at least the higher of its Article 7 floor and an amount calculated under the supervisory method applied under Article 9. The selected method may reflect fixed overheads, payment volume or a relevant income indicator. The authority may adjust the calculated amount within the directive's limits. Model the requirement against forecast activity, not only the first day's capital. [1]
The floor is separate from the cost of building the business. A credible budget includes people, compliance, external legal work, audit, technology, payment infrastructure, safeguarding or insurance arrangements, and losses before break-even. If the product scope grows from remittance to payment accounts, revisit capital and authorisation before launch.
3. Design safeguarding and banking around the funds flow
For services in Annex I points 1–6, PSD2 Article 10 requires a PI to safeguard funds received from users or another payment provider for executing payment transactions. The directive provides a segregation route or an insurance/guarantee route. Under segregation, funds may need to be placed in a separate account at a credit institution or invested in permitted assets if they are still held at the relevant time. National law must protect them against other creditors. [1]
That requirement is not solved by writing “client funds are segregated” in a policy. The applicant needs a consistent diagram of when funds arrive, where they are held, who can instruct the account, how the ledger reconciles, and what happens to a payment that is delayed, returned or disputed. The safeguarding partner must understand the transaction types, customer base, currencies and geographies before the model is finalised. [1, 2]
A payment initiation provider that never holds users' money has a different exposure. PSD2 requires professional indemnity insurance or a comparable guarantee for payment initiation, and likewise for account information registration. These are specific liability protections, not substitutes for an Article 10 safeguarding setup where the firm does hold relevant funds. [1]
Banking feasibility should be checked early. A licence does not compel a bank to support the proposed flows. Our guide to bank-account rejections explains the due-diligence questions that frequently delay payment firms.
4. Choose a home member state for a workable operation
A national competent authority grants PI authorisation. The EBA's central register is useful for checking authorised firms, but it does not itself grant licences. The application must show where the firm is managed and how the home authority can supervise the actual business. [1, 2]
Compare possible home states against operational facts: where the management team and control functions will work, where safeguarding and settlement partners are available, what local application materials are required, and which markets the firm will serve first. Published fees are only one part of the decision. The EBA has found continuing supervisory differences around governance, controls and local substance, so a paper presence is a weak basis for a licensing plan. [3]
If the company already has a legal entity or banking relationships in one state, test whether those assets support the proposed activity. A jurisdiction comparison should result in a concrete operating chart and partner list, not a ranking based solely on advertised processing times.
5. Build a PI application that describes a launchable product
PSD2 Article 5 and the EBA authorisation guidelines require a programme of operations, a business plan with three-year forecasts, capital and safeguarding evidence, governance arrangements, risk and security measures, information about owners and managers, and other service-specific material. The authority assesses the file as a whole. [1, 2]
| Workstream | What the file should demonstrate |
|---|---|
| Licence perimeter | Each PSD2 service, customer journey, contracting entity, partner role and transaction flow. |
| Financial viability | Capital evidence, three-year forecasts, own-funds method, stress cases and funding runway. |
| Safeguarding and settlement | Fund-flow and account diagrams, safeguarding method, reconciliation and exception handling. |
| Governance and people | Ownership, fit-and-proper evidence, reporting lines, compliance, risk and internal-control responsibilities. |
| Financial crime and conduct | AML/CFT and sanctions controls, onboarding, transaction monitoring, complaints and customer disclosures. |
| Technology and outsourcing | System architecture, ICT risk controls, incident and continuity plans, third-party contracts and oversight. |
Digital Operational Resilience Act (DORA) requirements have applied since 17 January 2025 to payment institutions within scope. Technology and outsourcing descriptions should therefore match the real ICT control framework, including relevant incident and third-party processes. [4]
Test the application with a transaction walk-through. Start at customer onboarding, then follow a payment through initiation, authentication, receipt of funds if applicable, execution, settlement, reconciliation, refund and complaint. If the business plan, contracts and safeguarding procedure disagree about who controls the money at any step, fix the model before filing.
6. Plan for the full timeline, not only the statutory decision window
PSD2 Article 12 requires an authority to tell an applicant whether authorisation is granted or refused within three months of receiving the application or, if incomplete, all information needed for the decision. Preparation, completeness review, questions and the applicant's response time are not a three-month guarantee from the first meeting. [1]
In its December 2025 follow-up peer review, the EBA reported a 9.5-month median from submission for PI and EMI applications across its EEA sample, excluding one outlier member state. It linked many delays to incomplete or poor-quality files and the time taken to remedy deficiencies. The figure is a historical aggregate, not a promise or prediction for a specific regulator. [3]
A practical launch plan separates four stages: decide the service perimeter and partners; prepare the application and recruit key people; respond to the authority's review; then complete any post-authorisation notifications and operational launch work. Commercial contracts should allow for those stages rather than assuming approval on a fixed date.
7. Understand passporting, small-PI exemptions and the EMI boundary
A fully authorised PI can provide its licensed services in another member state through PSD2's Article 28 notification procedure. It must give its home authority the host states, services and, where relevant, details of agents or branches. The authority-to-authority process is not identical for every operating model, and a firm should not market a new host-state service as already available before the applicable steps are complete. [1]
PSD2 Article 32 allows member states to exempt certain small providers of services in Annex I points 1–6 from some authorisation conditions within statutory limits. The exemption depends on national implementation and does not provide the standard cross-border passport. For a business planning immediate EU-wide reach, the fully authorised route usually needs to be evaluated from the outset. [1]
Finally, a PI licence is not an EMI licence. If users prepay a stored value that is a claim on the issuer and can be spent with third parties, the EMD2 definition of e-money may be met. Read our EMI application guide before building a wallet around a PI-only assumption. [5]
Payment institution application readiness checklist
- List every Annex I payment service performed by the actual product.
- Confirm whether the model issues e-money, uses an agent or depends on a licensed partner.
- Calculate initial capital and forecast ongoing own funds for the intended service mix.
- Map customer funds, safeguarding, settlement and reconciliation end to end.
- Identify the people, systems and outsourced providers responsible for each control.
- Prepare a three-year plan whose transaction volumes, costs and capital match the operating model.
- Confirm the home-state route and sequence any host-state notifications after authorisation.
Frequently asked questions
How much capital is needed for an EU payment institution licence?
PSD2's initial floors are EUR 20,000 for money remittance only, EUR 50,000 for payment initiation, and EUR 125,000 where any Annex I points 1–5 services are provided. Ongoing own funds and the full operating budget can require more. [1]
Can a payment institution issue e-money?
Not on the strength of a PI licence alone. Issuing e-money is governed by the separate EMI framework. Whether a specific wallet balance is e-money depends on its legal and operational features. [5]
Does a PI licence allow IBAN accounts?
The label “IBAN account” is not a licence category. A PI may provide relevant payment-account services within its authorisation, but account identifiers and payment-rail access also depend on scheme and banking arrangements. Map the promised customer experience to the licensed service and infrastructure before advertising it. [1]
Does an account information app need a full PI licence?
A firm providing only the account information service in Annex I point 8 follows PSD2's registration route under Article 33, with applicable requirements including professional indemnity cover or a comparable guarantee. A mixed model may need a wider authorisation. [1]
How long does the licence take?
PSD2 gives an authority three months to decide once it has the necessary information. The EBA reported a 9.5-month median from submission in its 2025 PI/EMI peer-review sample, excluding an outlier state. Treat that as context and allow for the chosen authority's process and the quality of the file. [1, 3]
Can a small payment institution passport across the EU?
The Article 32 small-PI exemption does not confer the standard passport that follows full PI authorisation. The domestic exemption and full route should be compared against the actual geographic plan. [1]
Related DM Strategy guides
- How to Get an EMI Licence in the EU — assess a product that issues stored monetary value.
- EMI vs CASP — separate fiat payment and crypto-service permissions.
- Why Crypto and Payment Businesses Get Rejected by Banks — prepare the bank's due-diligence file.
- Latvia EMI and CASP Licensing Guide — review a specific national route for related activities.
Key primary sources
| Ref | Primary source |
|---|---|
| 1 | PSD2, consolidated Directive (EU) 2015/2366, especially Annex I and Articles 5, 7–12, 28, 32 and 33. |
| 2 | EBA Guidelines on authorisation and registration under PSD2. |
| 3 | EBA follow-up peer review on PI and EMI authorisation, December 2025. |
| 4 | EBA on DORA application to payment providers. |
| 5 | Electronic Money Directive 2009/110/EC, especially Article 2's e-money definition. |
Disclaimer
This article is for information only and is not legal or regulatory advice. The correct authorisation, prudential calculation and filing requirements depend on the product, service mix and home member state. Check current EU and national rules before applying.
DM Strategy helps founders map the payment-service perimeter, capital, safeguarding and banking arrangements behind an application. If you are planning an EU payment business, contact DM Strategy before committing to the licence scope or build.
