Brazilian Fintechs Between PSD2 and PSD3: Why Lithuania Became the Default Entry Point and What Comes Next

What Is Being Licensed, and Why

Under the PSD2/EMD2 framework, fintechs operate under two distinct regulatory categories.

A Payment Institution (PI) is authorized to provide payment services, including credit transfers, direct debits, and card issuance, with minimum initial capital requirements ranging from €20,000 to €125,000, depending on the scope of the services provided (Directive (EU) 2015/2366, Article 7).

An Electronic Money Institution (EMI) has a broader regulatory scope. In addition to providing payment services, EMIs may issue electronic money, offer payment accounts with their own IBANs, and safeguard customer funds, subject to a minimum initial capital requirement of €350,000 (European Banking Authority, 2024).

European digital banks such as Revolut, Wise, Paysera, and Lydia initially obtained EMI licenses because their business models relied on holding customer balances in proprietary IBAN accounts. Fintechs focused primarily on payment processing without maintaining customer balances generally opt for a PI license, benefiting from lower capital requirements and a less burdensome compliance framework.

Both licensing regimes grant passporting rights, allowing firms authorized in one EEA Member State to provide services across all 30 countries of the European Economic Area under a single authorization. This passporting mechanism represents the principal regulatory asset at stake. A license issued in any Member State provides access to a market of approximately 450 million consumers without requiring separate authorizations in each jurisdiction.

Why Lithuania Became the Default Choice

Brexit fundamentally reshaped the European licensing landscape.

Until January 2020, fintechs seeking access to the European market overwhelmingly preferred authorization by the UK's Financial Conduct Authority (FCA), which offered an experienced regulator, English-language supervision, and a relatively efficient authorization process. The UK's departure from the European Union eliminated passporting rights for FCA-authorized EMIs, creating a regulatory gap that the Bank of Lithuania deliberately positioned itself to fill.

Lithuania's strategy rests on three practical advantages. The Bank of Lithuania accepts applications and conducts regulatory supervision entirely in English—a feature that remains uncommon among European regulators (Zitadelle AG, 2026). Lithuanian regulation does not require company directors to reside in Lithuania, unlike jurisdictions such as Malta, Cyprus, and Ireland, where local residency requirements continue to apply under varying interpretations. licensed institutions receive direct access to the Single Euro Payments Area (SEPA) through CENTROlink, the payment infrastructure operated by the Bank of Lithuania. This significantly reduces dependence on correspondent banking relationships during the initial stages of operation (Financial License Market, 2026).

The results are measurable. According to Zitadelle AG, more than 200 Payment Institutions and Electronic Money Institutions operate from Lithuania in 2026, which is more than in any other EU Member State. The Bank of Lithuania processes licensing applications within an average of three to six months, compared with 12 to 24 months in Germany (BaFin) and Ireland (Central Bank of Ireland). Revolut Bank UAB, Revolut's European banking entity, is licensed in Lithuania while serving customers across the European Union (Zitadelle AG, 2026).

The Dutch Alternative

Fintechs with greater financial resources, more flexible expansion timelines, or stronger reputational considerations often choose jurisdictions that traditionally have longer licensing processes but offer more mature banking ecosystems and deeper pools of operational talent.

One recent example relevant to Brazilian companies is Brex, the financial platform founded by Brazilian entrepreneurs Henrique Dubugras and Pedro Franceschi in 2017. Brex obtained a Payment Institution license in the Netherlands in August 2025, established a local team in Amsterdam, and planned to commence full operations in early 2026 (Brex, 2025).

The company's decision appears to have been driven by several factors, including the regulatory reputation of De Nederlandsche Bank (DNB), proximity to continental Europe's private banking and wealth management ecosystem, and access to highly skilled technical talent capable of supporting large-scale operations.

The PSD3 Window

Timing is perhaps the most important regulatory variable Brazilian fintechs should understand. A political agreement on PSD3 and the PSR was reached on 27 November 2025 between the European Parliament and the Council of the European Union. Final legal drafting and publication in the Official Journal are expected during the first half of 2026 (Norton Rose Fulbright, 2026).

Because the Payment Services Regulation (PSR) is directly applicable legislation, it will enter into force 20 days after publication. By contrast, PSD3, as a directive, must be transposed into national law by Member States within 18 months. Accordingly, the new framework is expected to become fully applicable between the second half of 2027 and the third quarter of 2028 (Worldline, 2026).

The key consideration for market participants is the grandfathering regime. Payment Institution and Electronic Money Institution licenses issued under PSD2/EMD2 before PSD3 becomes applicable will automatically transition into authorizations under the new unified category of "Payment Institution authorised to issue electronic money." No new licensing application will be required; firms will only need to update governance documentation and regulatory reporting to comply with the revised framework (Crassula, 2026).

This creates a meaningful opportunity for Brazilian fintechs. Companies that secure a license before 2027 can enter the European market under the current regulatory framework while benefiting from uninterrupted authorization after the transition. Firms that wait until the new regime takes effect are likely to face a more complex initial licensing process without any clear offsetting advantage.

What This Means for Brazilian Companies

For Brazilian fintechs planning European expansion between 2026 and 2027, Goyaz recommends three priorities.

First, define the intended business model with precision. Businesses that intend to hold customer funds, issue proprietary IBANs, or provide prepaid card services will require an Electronic Money Institution (EMI) license, with a minimum capital requirement of €350,000. Companies focused exclusively on payment processing without safeguarding customer balances may operate under a Payment Institution (PI) license, requiring €125,000 in minimum capital.

Second, align the licensing jurisdiction with the company's target customer profile. Lithuania is well suited to businesses focused on high-volume payment flows, retail customers, and digital asset integration. The Netherlands appears better positioned for firms serving medium-sized and large corporate clients that require additional regulatory credibility. For business models prioritizing regulatory reputation over speed to market, jurisdictions such as Germany, Ireland, and France continue to represent strong alternatives.

By last, submit the licensing application under the PSD2/EMD2 framework before PSD3 becomes applicable in order to secure grandfathering rights. In practical terms, this means filing applications during 2026 or the first half of 2027, taking into account both average regulatory processing times and the time required to prepare the necessary documentation.

Working Bibliography

Brex. 2025. "Brex Secures EU Payment Institution License, Unlocking Next Phase of Global Expansion." Press release, August 7. https://www.brex.com/journal/press/brex-secures-eu-payment-institution-license.

Council of the European Union. 2025. "Provisional Political Agreement on Payment Services Directive 3 and Payment Services Regulation." Press release, November 27. https://www.consilium.europa.eu.

Crassula. 2026. "PSD3 and PSR 2026: Timeline, PI/EMI Merger, APP Fraud, FIDA." Updated April 2026. https://crassula.io/guides/licenses/psd3-psr.

European Banking Authority. 2024. Guidelines on Authorisation and Registration under PSD2 and EMD2. Consolidated version. https://www.eba.europa.eu.

Financial License Market. 2026. "Lithuanian EMI License: Complete Guide for 2026." Published April 2026. https://www.financiallicensemarket.com/blog/lithuanian-emi-license-complete-guide-2026.

Norton Rose Fulbright. 2026. "PSD3 and PSR: From Provisional Agreement to 2026 Readiness." Published March 2026. https://www.nortonrosefulbright.com/en/knowledge/publications/cedd39c6/psd3-and-psr-from-provisional-agreement-to-2026-readiness.

Worldline. 2026. "The Scope and Timeline Are Locked In for PSD3 and PSR: What Should PSPs Know?" Published April 2026. https://worldline.com/en/home/main-navigation/resources/blogs/2026/the-scope-and-timeline-are-locked-in-for-psd3-and-psr-what-should-psps-know.

Zitadelle AG. 2026. "EU EMI License 2026: Electronic Money Institution Authorization Europe." Published April 2026. https://www.zitadelleag.com/services/payment-licensing/eu-emi.