Settlement Finality Directive: Direct access to payment systems for non-bank PSPs

Background of the legislation

Historically, direct access to payment systems was only allowed for banks, and non-bank PSPs were therefore heavily dependent on these banks. Access to payment systems is specified in the Settlement Finality Directive (SFD). The Instant Payments Regulation enforced a change in the SFD, acknowledging non-banks and allowing them to become a direct participant of payment systems.

These legislative changes introduce a level playing field between banks and non-bank PSPs, making non-banks less dependent in their payment processing.

What is the value of direct access?

What are the main value drivers of direct access to payment systems for non-bank PSPs?

1. Cost savings: Removing intermediary fees and process redundancies, delivering meaningful cost savings that scale with transaction volumes
2. More in control of own risk: A non-bank PSP has increased autonomy of their own risk appetite, meaning less dependency on the risk preferences of their intermediaries - for example, when it comes to onboarding specific merchant categories.
3. Increased innovation: More control over financial flows and transaction processing, reducing the dependency of intermediaries and enabling new business models and competitive differentiation

Recent European Central Bank communication

The European Central Bank (ECB) plays a decisive role in bringing the legislative change to the market. The ECB is responsible to ensure that non-bank PSPs meet operational, technical, financial and risk management standards that are required as a direct participant - while at the same time safeguarding the smooth functioning of payment systems and financial stability. Currently two topics are particularly important in this context:

1. The amendment of the TARGET guideline, to formally allow non-bank PSPs to access the TARGET systems, has been postponed until October 2025. The ECB considers this postponement necessary to avoid legal risks within the member states concerning the eligibility of non-bank PSPs to access TARGET and TIPS.
2. Target accounts, held by non-bank PSPs, may not be used for safeguarding purposes, but only for settlement obligations. The holdings on the TARGET accounts may not exceed a predetermined maximum overnight holding limit. Also the ECB reconfirmed that it will not offer safeguarding accounts to non-bank PSPs. Multiple industry associations, like the Electronic Money Association (EMA), have expressed concerns to the ECB, asking to consider a "calibrated approach allowing some safeguarding to take place."

The postponement of the TARGET Guidelines and the safeguarding decision emphasize the complex balance between innovation and financial stability.

Considerations for non-banks

Becoming a direct participant comes with responsibilities. A non-bank PSP joins a complex ecosystem:

• Robust and efficient liquidity management processes are critical.
• Direct access requires investments in infrastructure, technology and internal payment processing capabilities.​
• Being a direct participant in payment systems involves navigating complex regulatory frameworks and securing approvals from central banks and payment system authorities.​
• Efficient payment processing demands coordination with multiple stakeholders across the payments value chain.​

Are you ready to become a direct participant?

As a non-bank PSP, are you considering to directly participate in the Euro System TARGET services and an SEPA CSM? Then it makes sense to assess your readiness. Worldline, the SEPA Classic and Instant Payments CSM provider based in the Netherlands, and Cash Dynamics,  a trusted advisory firm for Financial Institutions in Cash &  Liquidity and Working Capital management, partnered to facilitate a quick scan for non-bank PSP readiness for direct participation. The primary purpose of the quick scan is to determine if a non-bank PSP’s cash management and liquidity management framework meets the necessary requirements for direct interaction with TARGET and a CSM. The process also supports an analysis of technical, compliance, and operational readiness. It also helps validate the business case for becoming a direct participant.

Learn more about our Clearing and Settlement solution.