PSD3 and e-money institutions: the end of the separate EMI licence and what replaces it

PSD3 ends the separate EU licence for electronic money institutions (EMIs). The Second E-Money Directive (EMD2) is repealed, issuing e-money is added to the list of payment services as service 8, and each EMI becomes a payment institution authorised to issue e-money. Existing EMIs keep operating through a transition of up to 27 months after PSD3 enters into force, during which they must show their regulator that they meet the new rules and that every service they provide is covered by their new authorisation.

The Council adopted its first reading position on 29 October 2026. The steps that remain, Parliament's approval and publication in the Official Journal, are formal. Our article on PSD3 re-authorisation for existing institutions covers the process common to all payment institutions; this one covers what is specific to e-money.

What stays the same

The features that make e-money a distinct product are kept in PSD3. An EMI that becomes a payment institution continues to issue e-money at par on receipt of funds, redeem it at par at any time on request, and refrain from paying interest or any benefit tied to how long the e-money is held. Distributors can still distribute and redeem e-money on the institution's behalf, and remain distinct from payment agents.

For customers, nothing visible changes. For the institution, authorisation, capital, safeguarding and supervision all move into one framework.

Capital

Article 5 of PSD3 sets initial capital by service and adds the amounts together where an institution provides services in more than one band.

Ongoing own funds for e-money remain at least 2% of average outstanding e-money, and an institution that also provides the core payment services holds the sum of both requirements. Most EMIs hold far more than the minimum; the compliance work is in documenting the calculation correctly in the file.

Safeguarding

The largest operational change for EMIs is timing. EMD2 allowed funds received for e-money to be held for up to five business days before safeguarding. PSD3 requires funds still held at the end of the business day after receipt to be safeguarded: placed in a separate account at a credit institution, or at a central bank where it allows this, or invested in secure, liquid, low-risk assets approved by the home regulator. The insurance or comparable guarantee option remains.

Three related rules matter for EMIs with large balances:

• institutions must try not to hold all customer funds with one credit institution;
• material changes to safeguarding must be notified to the regulator in advance;
• the EBA will set technical standards on managing the risks of safeguarded funds.

An EMI with one safeguarding bank should start opening a second relationship now. Our guide to safeguarding requirements by jurisdiction compares the EU and UK rules.

Listing every service

Under EMD2 an EMI may provide payment services related to its e-money business, and many authorisations describe those services broadly. Under PSD3 the authorisation lists each Annex I service, and only listed services are permitted.

Before the file is drafted, map every product, white-label programme and partner arrangement against this list. White-label programmes are the most common blind spot, because the product sits under a partner's brand while the permission sits with the EMI.

EMIs operating under a national waiver

Several member states let EMIs below set thresholds operate under the waiver in Article 9 of EMD2, with lighter capital and governance requirements. The agreed texts give those institutions a longer transition than fully authorised EMIs, recognising that many will meet the full regime for the first time. A waived institution should assess early whether it can meet the full PSD3 requirements, whether its home state keeps an equivalent exemption, and whether a merger or sale is the better route. The UK's own registration regime for e-money issuers below the thresholds is separate and unaffected.

The winding-up plan and distributors

Article 3(3)(r) of PSD3 requires institutions providing the core payment services or issuing e-money to hold a winding-up plan adapted to their size and business model. For EMIs with distribution networks, the plan must explain how holders redeem e-money bought through each distributor if the programme closes, and how critical activities carried out by outsourced providers, agents or distributors continue during an orderly exit. Programme managers and prepaid issuers should treat this as the central document in their file.

Reporting and supervision after the transition

Once an EMI is authorised under PSD3, its supervision runs under the new framework. Conduct rules for customers, including transparency, charges, liability for unauthorised transactions and fraud prevention, sit in the Payment Services Regulation and apply directly in every member state. That removes many of the differences between national laws that EMIs passporting across the EU deal with today, but it also means the institution's terms, disclosures and complaints processes must be updated to the PSR on the date it applies.

Statistical and prudential reporting will follow the EBA's standards under PSD3. EMIs should expect their regulator to ask for e-money outstanding, safeguarded funds and own funds in a new format, and should check early that finance systems can produce the figures by service.

E-money tokens

Under MiCA an e-money token can only be issued by a credit institution or an EMI. After PSD3, a payment institution authorised for service 8 can issue e-money tokens, and the agreed texts coordinate the two regimes. An EMI with a token programme should include it in its PSD3 file, with the reserve, redemption and safeguarding arrangements MiCA requires. Our article on non-MiCA stablecoins and the January 2027 ESMA deadline covers the token side.

Groups with EMIs in both the UK and the EU

Many groups hold an FCA-authorised EMI in London and an EU EMI in Ireland, Lithuania or the Netherlands. PSD3 applies only to the EU entity. HM Treasury's consultation on modernising UK payment services regulation, which closed on 6 October 2026, keeps e-money as a separate category in the UK and does not propose re-authorising existing firms, so the two entities will sit under different frameworks for the first time since the UK left the EU.

The practical effects are worth planning for now:

• safeguarding timing will differ between the two entities, so shared treasury processes need separate cut-offs;
• the EU entity will report e-money as a payment service while the UK entity continues as an EMI, which affects group regulatory reporting and board packs;
• intra-group outsourcing from the UK to the EU entity, or the reverse, must meet DORA on the EU side and the FCA's operational resilience rules on the UK side;
• product terms and disclosures for EU customers will follow the Payment Services Regulation, while UK customers stay under UK rules.

Our guide to the UK EMI licence sets out the UK requirements that continue to apply.

Questions boards are asking

Do we need to change our name or branding? No. The institution keeps its legal identity; what changes is the legal basis of its authorisation and the list of services in it.

Will banking partners treat us differently? Partner banks and card schemes will ask for evidence that the PSD3 file has been submitted and accepted, and some will build that into onboarding and annual reviews. A clear timetable shared with partners early avoids difficult conversations later.

Is this a good time to add services? Yes, if the business case is ready. Adding a service through the PSD3 file avoids a separate variation later, though it adds to what the regulator must review.

Should we move our licence to another member state? Rarely. Re-authorisation is not a reason in itself to move, because every member state applies the same framework and a move adds a full new application to the work.

How EMIs should prepare

Firms with existing EU licences or plans for one can see how regulators assess files today on our pages for the Lithuania EMI licence, the Netherlands EMI licence and the Malta EMI licence.