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PSD3 changes the capital rules for EU payment institutions and electronic money institutions (EMIs) in two ways. Initial capital is set by the services the institution provides and the amounts are added together, so firms combining several services hold more than under PSD2. And because the Second E-Money Directive is repealed, e-money issuance becomes one service among others, with its own initial capital of EUR 250,000 and its own ongoing own funds method.
Most institutions already hold well above the minimum. The work is in recalculating correctly and evidencing it in the file every existing institution must submit to keep its authorisation. Our PSD3 re-authorisation guide explains that process.
Article 5 of PSD3 sets the minimum capital an institution must hold at all times, based on the services listed in Annex I.
| Service | PSD2 or EMD2 | PSD3 |
|---|---|---|
| Money remittance only (point 5) | EUR 20,000 | EUR 40,000 |
| Payment initiation (point 6) | EUR 50,000 | EUR 50,000 |
| Core payment services (points 1 to 5) | EUR 125,000 | EUR 150,000 |
| Account information only (point 7) | No capital; insurance required | No capital; insurance required |
| Issuing e-money (point 8) | EUR 350,000 | EUR 250,000 |
The core payment services are placing cash on and withdrawing cash from an account, executing payment transactions, issuing payment instruments, acquiring payment transactions and money remittance, where money remittance is not the only service.
Under PSD2, an institution's initial capital was the highest amount required for any of its services. Under PSD3, the amounts are cumulative where the institution provides services in more than one band. That is a change in principle, though in most cases the effect is modest.
| Business model | PSD3 initial capital |
|---|---|
| Money remittance only | EUR 40,000 |
| Payment initiation only | EUR 50,000 |
| Cards and transfers | EUR 150,000 |
| Cards and transfers plus payment initiation | EUR 200,000 |
| E-money only | EUR 250,000 |
| E-money plus remittance only | EUR 290,000 |
| E-money plus payment initiation | EUR 300,000 |
| E-money plus cards, transfers or acquiring | EUR 400,000 |
| E-money, core services and payment initiation | EUR 450,000 |
A typical EMI today, issuing e-money and providing related cards and transfers, holds EUR 350,000 under EMD2 and will need EUR 400,000 under PSD3. An EMI that issues e-money only will need less than today.
Initial capital is a floor. The ongoing requirement, own funds, depends on the size of the business. Article 7 of PSD3 keeps the three PSD2 methods and makes method B the default.
An institution's own funds must never fall below its initial capital. Regulators can require a different method in some cases and can adjust the result within limits based on the institution's risk profile.
Article 8 of PSD3 sets the ongoing requirement for e-money issuance at 2% or more of average outstanding e-money, the same as EMD2 method D. An institution that issues e-money and also provides payment services not linked to e-money holds own funds for both: method D for the e-money and the applicable method for the payment services.
For EMIs with large e-money balances, method D will usually be the bigger figure. An EMI with average outstanding e-money of EUR 50 million needs at least EUR 1 million of own funds for that activity, well above the EUR 250,000 initial capital.
A money remittance business. Today it holds EUR 20,000 initial capital. Under PSD3 the floor doubles to EUR 40,000, and method B applied to its payment volume will often be higher. Small changes in the floor matter most to businesses that have operated close to the minimum.
A card-issuing EMI. It issues e-money and provides card payments and transfers, with average outstanding e-money of EUR 20 million. Initial capital rises from EUR 350,000 to EUR 400,000. Own funds for e-money are at least EUR 400,000 under method D, plus own funds under method B for payment services not linked to the e-money.
A payments group adding pay by bank. A payment institution providing acquiring adds payment initiation. Initial capital becomes EUR 200,000, against EUR 125,000 today.
A prepaid programme issuer. An EMI issues e-money for gift and expense cards through a network of distributors and provides no other payment services. Its initial capital falls from EUR 350,000 to EUR 250,000. With average outstanding e-money of EUR 30 million, method D requires own funds of at least EUR 600,000, so the ongoing requirement, not the floor, decides how much capital the business holds. The lower floor matters mainly at launch or for programmes with small balances.
In each example the figures are minimums. Regulators expect a buffer above them, and banking partners often ask for more.
As under PSD2, own funds for payment institutions and EMIs follow the definitions used for banks in the EU Capital Requirements Regulation. In practice, the core is ordinary share capital, share premium and audited retained earnings. Losses, intangible assets and certain deferred tax assets are deducted. Subordinated loans can count in limited circumstances and within limits, and interim profits generally count only once verified.
Two points come up repeatedly in reviews. Capital used to meet the requirement must not be counted twice within a group, so a parent cannot rely on the same funds for two regulated subsidiaries. And funds held as own funds are not safeguarded customer money: the two must be kept and reported separately.
Account information service providers continue to need no initial capital under PSD3. Instead they hold professional indemnity insurance, or a comparable guarantee, covering their liability to account providers and users. Payment initiation service providers hold EUR 50,000 of initial capital, and the agreed texts also require cover for their liabilities. An institution that adds account information to an existing payment or e-money authorisation should confirm with its insurer that the policy extends to the new service.
Capital is one of the easier sections of the re-authorisation file to prepare, but it depends on two things that take longer: an accurate list of services, and up-to-date audited figures. Institutions with a financial year ending in 2027 should plan to file using those audited accounts, so the board should agree the capital plan before the year-end close. Where a capital injection is needed, allow time for shareholder approvals and, if the injection changes ownership above the regulatory thresholds, for the regulator's change of control approval, which can take several months.
Article 3(3)(c) requires evidence that the institution holds the initial capital under Article 5. For existing institutions, the regulator will also expect the own funds calculation and how it is monitored. A clear capital section includes the services mapped to Annex I, the initial capital calculation, the own funds calculation under the method used with the underlying figures, the composition of own funds, and how capital is monitored and reported to the board. Many institutions add a forward projection to show headroom over the next two to three years.
Groups that hold licences in several member states should prepare a consistent methodology across entities, because supervisors increasingly compare files within groups.
Our guide to the EMI licence under PSD3 explains the wider change for e-money institutions, and our Lithuania payment institution licence guide shows how capital is assessed in one of the main EU licensing hubs.
Because PSD3 adds capital amounts together, the list of services in the authorisation now has a direct cost. Before filing, review each service against the business plan for the next two to three years. A service that is unlikely to be used, for example payment initiation added in case of future demand, adds EUR 50,000 to the floor and expands what the regulator reviews. It may be better to apply for it later through a variation once the product is ready.
The opposite also applies: a service the business actually provides must be in the authorisation, whatever its capital cost, because services left out cannot be provided after the transition. White-label card programmes, cash withdrawal services and remittance corridors added since the original licence are the usual items to check. The goal is an authorisation that matches the business exactly, with capital sized to fit.
We recalculate initial capital and own funds under PSD3, prepare the capital section of re-authorisation files, and advise on structuring services to avoid unnecessary capital. For new applicants we prepare the full authorisation file, including the capital plan, in the member state that suits the business.
EUR 150,000 for the core payment services, EUR 40,000 for money remittance only and EUR 50,000 for payment initiation. Amounts add up where services fall in more than one band.
EUR 250,000, plus the amount for any other payment services the institution provides.
Yes. Unlike PSD2, where the highest amount applied, PSD3 adds the amounts for each band of services the institution provides.
Method B, based on payment volume. Methods A and C remain available, and e-money uses method D at 2% of average outstanding e-money.
No initial capital, but they must hold professional indemnity insurance or a comparable guarantee.
An EMI that also provides core payment services moves from EUR 350,000 to EUR 400,000. An EMI that only issues e-money needs EUR 250,000.
Get in touch: WhatsApp +44 7563 115980, Telegram @buckinghamcapital or [email protected].
This article is general information, not legal advice. Requirements change, and the regulator’s own publications take precedence.
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