Looming payments compliance deadlines
However, banks’ stablecoins and tokenised deposits ambitions face a stark reality. Looming payments regulatory deadlines demand mandatory compliance investments, absorbing resources, and potentially reducing the capacity needed for strategic, yet optional, ventures into these new forms of money and payments.
The EU and UK are implementing new regulations to strengthen consumer protection, choice, and resilience. In the EU, after some delays, lawmakers have reached a political agreement on the Payment Services Directive 3 and Payment Services Regulation (hereafter referred to as the “PSD3 package”). The final legal texts are expected by mid-2026, with compliance deadlines anticipated in 2028 (to be confirmed in due course).
Meanwhile, the UK is expected to provide much-needed clarity on the sequencing and prioritisation of payments regulatory initiatives early this year.10 This includes more clarity on next steps for open banking account-to-account payments and modernising the UK’s payments and e-money framework.
While framed as a targeted review, the EU PSD3 package is poised to have a significant operational and financial impact on banks. For instance, the likely introduction of mandatory refunds for impersonation fraud will create a substantial financial exposure. In the UK, firms reimbursed £112 million to victims within nine months of similar rules taking effect.11
EU proposals to make online platforms liable for compensating banks that refund defrauded customers — if platforms are informed of fraudulent content and fail to remove it — could offer some relief.12 However, the practicalities remain unclear until the final legal text is published. Regardless, strategic investments in Artificial Intelligence and advanced biometrics may offer greater ability to monitor transactions, spot anomalies and assess risk in real time, and mitigate the impact of refund costs.
Elsewhere, changes aimed at achieving open banking’s full potential will demand new technological investments. This includes developing dedicated interfaces for third-party providers to access customer open banking data, meeting strict functionality and performance standards, and building dashboards for customers to manage their open banking data permissions.
PSD2 implementation experience suggests that the PSD3 package will divert resources away from the development of new payments offerings towards compliance efforts. 2026 is crucial for planning and future-proofing dependent programmes. Banks should assess resource needs, secure executive buy-in and funding and integrate PSD3 package changes into broader transformation strategies.
Upcoming compliance deadlines create a particular challenge for non-bank payment and e-money firms. Several factors paint a gloomy picture: funding conditions remain tight [Figure 2] and interest income on safeguarded funds will fall as interest rates decline. For firms facing persistent profitability challenges, these pressures are likely to intensify further.
While some EU regulatory changes may boost non-banks’ competitiveness, e.g. facilitating improved access to customers’ open banking data, many will increase operating costs. Fraud refunds are a prime example. In addition, EU non-banks will likely need to submit new information to regulators, including wind-down and safeguarding arrangements, to demonstrate compliance with the PSD3 package.
Against this backdrop, non-banks should reassess their strategic positioning in 2026, evaluating how the regulatory developments affect their viability. Larger players may explore banking licences to expand their product and service offerings and unlock new revenue streams. However, firms will need to balance this approach against the costs and lengthy process involved, which are likely to deter smaller players.
Non-banks may also diversify their offerings to drive revenue growth. However, buy-now-pay-later (BNPL)13 will become a more challenging option as these services face increased regulatory requirements. FCA regulation commences on 15 July 2026, including introducing creditworthiness checks for all transactions. Increased costs, coupled with potentially reduced transaction volumes – as some previously viable agreements may no longer be profitable – could trigger BNPL market consolidation.
link