PSD3 (Third Payment Services Directive)

PSD3 is the third Payment Services Directive of the European Union, the planned successor to the directive that has regulated payment services in the European Economic Area since 2018. The European Commission published the proposal in June 2023. Unlike its predecessors, PSD3 is not a complete rulebook for payments. It deals with one subject: who may provide payment and electronic money services, on what conditions, and how they are supervised.

The rules on how payments are carried out, including customer rights, fraud liability, authentication and open banking, have been moved into a companion instrument, the Payment Services Regulation. The two texts were proposed and negotiated together and are intended to replace PSD2 and the separate Electronic Money Directive. In everyday use, PSD3 is often used loosely to mean the whole package.

The Commission's review of PSD2 found that the directive had widened competition and reduced some kinds of fraud but had been applied unevenly. National authorities interpreted licensing conditions and exclusions differently, which encouraged firms to seek authorisation where supervision was lightest. The line between payment institutions and electronic money institutions had become hard to draw as business models converged. Non-bank firms depended on banks, which are also their competitors, for access to payment systems and for the accounts in which they keep customers' money. And several large failures of payment and e-money firms had exposed weaknesses in how customer funds were protected.

The review also identified new fraud patterns and open banking problems, which are addressed mainly in the regulation. The history of the earlier texts is covered under Payment Services Directive.

• One licence category. The electronic money institution ceases to be a separate type of firm. Issuing electronic money becomes a service that an authorised payment institution may provide, under a single set of authorisation rules.
• Authorisation requirements. Applicants supply a fuller programme of operations, governance and security documentation, and must submit a wind-down plan showing how the business could be closed without loss to customers. Initial capital amounts are updated, and the method for calculating ongoing own funds is made more uniform.
• Safeguarding. The rules on safeguarding customer funds are harmonised. Firms are to avoid concentrating safeguarded money with a single bank, and may, where a central bank agrees, hold it in a central bank account.
• Agents and distributors. Provisions on the payment services agent and the e-money distributor, and on outsourcing, are tightened, with clearer registration and supervision of networks operating across borders.
• Cross-border activity. The procedures for passporting and cooperation between home and host authorities are clarified, including the question of when services delivered online count as provided in another member state.
• Cash services. Operators of independent cash machines are subject to a lighter registration regime, and shops may offer cash withdrawals without a purchase.

A linked amendment to the Settlement Finality Directive allows payment institutions to be direct participants in designated payment systems, a status previously reserved in practice for banks. Combined with a right, set out in the regulation, to obtain a bank account unless the bank has serious and stated grounds for refusal, this is intended to reduce non-bank firms' dependence on commercial banks. Parts of this change were brought forward by the Union's instant payments legislation, so some payment institutions were able to seek direct access before PSD3 itself was adopted.

Because PSD3 is a directive, each member state must transpose it into national law within a set period after it enters into force, and firms will be governed by the national implementing measures. Institutions already authorised under PSD2 or the Electronic Money Directive are not required to start again, but the proposal requires them to show their national authority, within a transitional period, that they meet the new conditions; those that do not would lose their authorisation. Firms should expect to update capital calculations, safeguarding arrangements and governance documents and to prepare a wind-down plan.

The European Parliament adopted its first-reading position in April 2024 and the Council agreed its negotiating mandate in June 2025. The two institutions announced a provisional political agreement on both texts in late November 2025, and the final compromise texts were published in April 2026. The Council adopted its position at first reading in October 2026, and the Parliament's second-reading vote, the last step before signature and publication in the Official Journal, was scheduled for December 2026. The texts enter into force twenty days after publication. Member states then have 21 months to transpose and apply the directive, the regulation applies from the same date, and existing institutions have 27 months to show that they meet the new conditions. The final text differs in places from the 2023 proposal, so specific thresholds and dates should be taken from the published version.

The European Banking Authority is mandated to produce technical standards and guidelines on authorisation, own funds, safeguarding and supervisory cooperation, and to maintain the central register of authorised firms. The directive also sits alongside the MiCA regime: electronic money tokens are a form of electronic money, and the legislators sought to avoid firms needing two overlapping authorisations for the same payment activity.

• European Commission: Payment services
• European Banking Authority