Compliance, infrastructure, or both: What it really takes to launch a payments product in Europe

European payments innovation has never been more commercially compelling. The European fintech market is valued at nearly $100 billion in 2026, and is forecast to almost double by 2031. 

Embedded finance is a major engine of that growth, with non-financial businesses, from sports clubs to logistics firms, racing to build payment experiences directly into their platforms. 

Consumer demand is clear and investor appetite remains strong. The European Union’s (EU) regulatory direction, centred on the Payment Services Directive 3 and the Payment Services Regulation, alongside the European Commission’s proposed framework for financial data access, is broadly tilted toward openness and interoperability.

And yet, for the fintech companies, independent software vendors, and digital platforms that want to seize this opportunity, the gap between a compelling payments idea and a live, compliant product remains stubbornly wide.

The regulatory wall that stifles innovation

The core problem is structural. Traditionally, companies intending to issue cards or process merchant payments in Europe have needed either their own banking or electronic money institution (EMI) licence, or a direct principal membership with card schemes.

Neither process is a straightforward undertaking. As noted by licensing specialists, the process of obtaining an EMI licence in Europe routinely takes between 12 and 18 months. It requires substantial legal and compliance resources, and demands that businesses demonstrate sufficient capital and staffing before a single transaction is processed.

For standard banking authorisation, the timeline stretches well beyond two years, with minimum equity capital requirements of €5 million in the European Economic Area (EEA). This sets an extremely high bar for an early-stage platform, or a growing marketplace that simply wants to offer its customers a co-branded card or a seamless checkout experience.

This is a genuine market failure. Regulatory compliance is entirely necessary, but the current structure means that the cost and complexity of obtaining a licence acts as a filter that favours well-funded incumbents over innovative challengers.

Compounding this, the EU’s evolving regulatory landscape continues to add new layers of obligation, such as the Digital Operational Resilience Act (DORA), which came into effect in January 2025, mandating that EU financial entities strengthen their security to withstand cyber disruptions. From DORA’s operational resilience requirements to the Instant Payments Regulation’s real-time processing mandates, ongoing compliance is a demanding task for those without dedicated infrastructure teams.

The infrastructure fragmentation problem

Even for companies that do clear the regulatory hurdle, a second challenge awaits. The Banking-as-a-Service (BaaS) market in Europe – a model where non-bank services integrate their digital banking infrastructure directly into non-bank businesses’ products – has grown rapidly, but it has done so in a fragmented way. 

Many BaaS providers specialise in either card issuing or merchant acquiring, rarely both. This forces growing fintechs and platforms to stitch together relationships with multiple infrastructure partners, each with its own APIs, commercial models, and compliance frameworks. The result is a brittle and expensive technology stack that creates reconciliatory headaches, limits real-time visibility over transaction data, and slows down any attempt to launch new products or enter new markets.

The practical consequence is that something that should take months takes years. A payments proposition – that looked like a competitive differentiator at the point of conception – becomes a commodity by the time it reaches customers (if it gets there at all). 

The fragmentation is particularly acute for companies trying to build comprehensive payment ecosystems, where a single customer journey might involve card issuance, merchant acceptance, multi-currency settlement, and embedded reporting. Cobbling that together from separate vendors is technically possible, but strategically precarious.

The opportunity waiting to be unlocked

The companies that will lead European payments over the next decade are not necessarily the largest or the most heavily capitalised companies. They are the ones that can move the fastest from the concept of a product to the customer experience, within a robust regulatory framework and at a price point that makes commercial sense. 

A marketplace that can offer merchants a seamless acquiring experience, alongside a co-branded card for its sellers, has a fundamentally different value proposition from one that relies on redirecting users to third-party payment providers. That kind of embedded payments capability, where finance becomes a feature of a broader platform rather than a separate product category, is where the most significant growth is concentrated.

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Cross-border payments are one sector that can benefit from these changes immediately. As any company that has tried to move funds across national borders will know, the process is time-consuming and expensive. Payment orchestration has ameliorated this problem to a certain extent, but the system is only as good as the algorithms behind it that ‘choose’ which overseas payments channels to use for a given transaction. 

Because data is collected and held by the orchestrator, not the merchant, that data can’t be used by the merchant themselves to improve their payments processes. What is needed is infrastructural change: having singular systems under the control of merchants themselves allows them to control the cross-border payment system on a granular level. This gives them the ability to continually move forward and optimise the cross-border payments process.