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In a sign that market readiness is not where it should be, the European Central Bank (ECB) has delayed giving fintech firms access to the TARGET payment system.
The delay stems from several euro area countries failing to transpose required changes to the Settlement Finality Directive (SFD) and the revised Payment Services Directive (PSD2) into national law.
The changes came about due to a clause in the Instant Payment Regulation (IPR) that allows non-bank payment service providers (PSPs) access to payment systems, a long-held wish of the fintech community intended to level the playing field.
The amendment, set out in Decision ECB/2025/2, was originally scheduled to take effect earlier this year, but it is now expected to enter into force in October 2025.
The ECB has defended the postponement, saying that it is necessary to avoid legal uncertainty regarding the eligibility of non-bank PSPs to participate in TARGET, including both T2, which is used for settling large-value payments, and TIPS, the Eurosystem’s platform for instant retail payments.
Despite the delay at the pan-European level, national central banks in euro area countries that have already transposed the necessary legislative changes are still able to allow non-bank PSPs to access national payment systems operated by their central banks.
However, these systems do not include TARGET itself.
Progress so far
There has already been some movement in the EU on this matter. For example, in April 2025, Latvia became the first country in the eurozone to allow a non-bank PSP to participate directly in a central bank-operated payment system.
As covered by Vixio, the firm xpate was the first to complete the country’s rigorous onboarding process, which includes signing an agreement with the central bank, adhering to technical readiness requirements and undergoing comprehensive testing.
Nevertheless, this postponement from the ECB means that non-bank PSPs that have been enthusiastic about the change will have to continue to rely on commercial banks for access, which can be expensive, less resilient and strategically risky if the banks are also their competitors.
The postponement keeps those barriers in place longer than expected, which will no doubt be disappointing for some.
Slowing momentum
The IPR, which entered into force last year, was seen as a major victory for non-bank PSPs, which were given credit at the time for successful lobbying of both the European Parliament and Commission.
The amendment to the SFD was seen by many as having only an outside chance of success, especially as there was an expectation that the commission and European Council would simply wait to negotiate via the Payment Services Regulation (PSR) instead.
However, the passage of the SFD amendment resulted in the legislation explicitly granting fintechs the right to access payment systems under non-discriminatory conditions.
The delay in aligning TARGET access with this new EU law slows down the regulatory momentum that PSPs had hoped would unlock new business models and improve service efficiency.
All eyes will now be on how quickly central banks can get their act together, especially when there are rumours that some are not at all enthusiastic about the change.
