Europe’s payments gatekeepers get a check-up — progress, but key gaps remain

New EBA follow-up finds clear wins — and clear holes

The European Banking Authority has published a follow-up peer review of how national authorities approve payment institutions and e-money firms. The report says things have improved since the last review in 2023: authorities are processing more applications and working together more smoothly. But the EBA also flags clear holes — fitness and probity checks are inconsistent, risk-based assessments are uneven, and some countries still leave long backlogs.

That matters because these authorisations are the gate that new payment challengers must pass through to trade across Europe under PSD2. Faster, predictable approvals lower the cost of scaling and make cross-border business viable. Slow or inconsistent supervision raises uncertainty, forces firms to hold more capital or hire more compliance staff, and can delay revenue. The EBA frames its tone as improvements but remaining shortcomings — a cautious thumbs-up that still leaves investors and executives with homework.

What the follow-up found: concrete improvements and remaining weaknesses

The EBA’s follow-up focuses on how national supervisors handle licence applications and how they apply the rules of PSD2. On the positive side, the review highlights better processing workflows in a number of jurisdictions. Several authorities have shortened steps in the authorisation chain, improved coordination when firms apply across borders, and increased use of shared templates and checklists. Supervisors are also talking to each other more often, which reduces the number of repeated questions firms face when seeking permission to operate in several countries.

Despite these advances, the follow-up points to several persistent problems. Fitness and probity checks — the background and suitability tests of key managers and owners — remain uneven. In some states these checks are thorough and consistent; in others they are patchy, with limited follow-up on important adverse information. The EBA also warns that risk-based assessments are applied differently: some authorities properly tailor attention to higher-risk applicants, while others either over-apply burdensome checks or under-apply scrutiny.

Another headline weakness is the backlog and variability in decision times. While some authorities have reduced waiting lists, others still operate slow processes that leave applicants in legal limbo. The review also flags limited documentation of key decisions and a lack of consistent reasoning in refusals or conditions attached to licences. That increases legal and operational uncertainty for firms and their investors.

How changes could reshuffle the payments market and investor expectations

For payment companies, the practical effect of the EBA’s findings is twofold. First, where authorisation is faster and predictable, growth becomes cheaper and faster. New entrants can scale across the EU without building a separate legal and compliance setup for every country, which favours firms with efficient onboarding and modular compliance models.

Second, where checks remain inconsistent or slow, firms face higher costs and longer timelines. That can pressure margins, push up capital needs, and slow the path to profitability. Listed fintechs and banks that rely on third-party payment partners should expect potential disruptions to planned rollouts and revenue recognition if partner licences are delayed or restricted.

Credit markets may also react. If supervisors attach more conditions to licences or increase scrutiny of key managers, borrowing costs for smaller firms could rise. Investors should expect a modest re-pricing in segments where regulatory uncertainty remains high, and a more favourable view on firms that already hold robust compliance frameworks or licences in low-friction jurisdictions.

Signals for investors: what to monitor and when to expect market moves

Investors should watch a short list of measurable signals that will show whether the picture is improving or worsening. First, national backlog figures and average decision times for authorisations. A clear drop in waiting times across several large member states would be a bullish sign for growth-oriented payment names.

Second, the tone and number of enforcement notices and licence refusals. A rise in public enforcement actions or conditional licences signals tighter scrutiny and higher compliance costs. Third, announcements from firms about delayed launches, changes to capital buffers, or management reshuffles tied to “fitness and probity” issues are fast-moving market catalysts.

Finally, cost-to-comply metrics and guidance from issuers — increases in compliance headcount or budget, or specific disclosures about regulatory risk — often precede rating or valuation moves. Expect share or credit reactions around quarterly results and any supervisory press releases that name systemic concerns.

What regulators will likely do next and timing to watch

The EBA has signalled it will keep monitoring and may issue further guidance to push for greater harmonisation. That could include more detailed templates for fitness checks, clearer guidance on risk-based approaches, and follow-up reviews of specific national authorities. National supervisors will also publish updates at different speeds — some within months, others over the next year.

Practically, expect targeted guidance and pressure for better documentation of refusals, plus a push for shared supervisory practices across border cases. For mergers and new entrants, the cumulative effect will be clearer rules but also more visible evidence of supervisory expectations, which will influence deal pricing and due diligence timelines.

Final read: a cautious chance, and a clear checklist for investors

The EBA’s follow-up is a conditional step forward: it validates progress in processing and cooperation but leaves big questions around how strictly and evenly the rules are applied. For investors, that means favouring firms with clean, well-documented licences and scalable compliance setups, while treating names exposed to slow or unpredictable national processes as higher risk. In short: the plumbing is improving, but some pipes still leak — and those leaks matter for valuations, margins and growth timetables.