The payments sector in Luxembourg has been a key driver of its FinTech success, attracting a wide range of international payment firms that use Luxembourg as a base for their European operations. These firms take advantage of the country’s strategic location, robust regulatory framework, and ease of passporting services across the EU.
Why payments firms establish in Luxembourg
Luxembourg has positioned itself as a hub for international payments firms due to the combination of a business-friendly regulatory environment and strong industry expertise.
The country’s role as a hub for payments services led to the Payments Association EU choosing Luxembourg as the HQ for their EU representation office in 2020.
1. Regulatory Clarity and Proactivity
Luxembourg is a proactive leader in implementing EU financial regulations, with the CSSF having supervised payment institutions since 2009. Circular CSSF 26/906, issued in January 2026, consolidates the governance, central administration and risk management rules for payment and e-money institutions into a single text addressed to them, replacing four older circulars that applied across the financial sector.
Applicants work with the regulator from initial first meetings, before formal files are lodged. Luxembourg also passed its law implementing the EU Instant Payments Regulation on 2 April 2025, ahead of the EU deadline. This allows payment and e-money institutions to participate directly in designated payment systems without a sponsor bank, as well as safeguard client funds directly in an account at the central bank.
Additionally, since late 2025, eligible non-bank firms are also able to join the Eurosystem's TARGET services, including TIPS for instant payments.
2. Passporting
Firms licensed in Luxembourg are able to passport their services across the EU and European Economic Area without the need to obtain additional licenses in other member states, simplifying their European expansion.
3. Access to Major Players
Luxembourg hosts a wide array of international payment groups: PayPal runs its European business from a Luxembourg bank, Amazon Payments Europe and Alipay (Europe) hold e-money licences. Recently, the CSSF has licensed dtcpay, Ripple and Coinbase as e-money institutions and Paytm Europe as a payment institution, adding firms from Singapore, the United States and India to a market already shaped by major international players.
Licensing process for payments firms in Luxembourg
Payment services in Luxembourg are governed by the Law of 10 November 2009 on payment services, which also covers the activity of e-money institutions and transposes the EU’s Second Payment Services Directive (PSD2). The law was amended in April 2025 to implement the Instant Payments Regulation. Three types of firm can provide payment services: payment institutions, e-money institutions and banks.
Payments Institutions (PIs)
PIs are versatile entities that can service both individuals and businesses, proving the infrastructure for secure and efficient payment processing both within Luxembourg and across the EU. They are able to offer a broad range of services, including enabling cash deposits and withdrawals, executing payment transactions, such as direct debits and credit transfers, issuing payment instruments, such as debit or credit cards, offering money remittance services, and facilitating account information services and payment initiation services.
Electronic Money Institutions (EMIs)
EMIs go beyond standard payment services, offering the ability to issue e-money – digitally stored value that can be used to facilitate payment transactions. An e-money licence authorises a firm to issue electronic money. Payment services, such as transfers to accounts held at other institutions, card issuance or merchant acquiring, are not included by default. Each must be specified in the application and authorised by the CSSF within the same licence.
Banks
Banks licensed in Luxembourg can automatically offer both PI and EMI services, in addition to the other services usually permitted to such entities, such as deposit taking and credit granting.
Luxembourg is home to
international banks from over 20 different countries
Why you need a licence
In the EU, FinTech firms are required to obtain a license as soon as they engage in offering financial services, handling financial transactions, or accessing sensitive client data. This licensing is critical to ensure compliance with EU regulations designed to safeguard financial systems and protect consumers.
A properly regulated FinTech firm not only fulfils legal obligations but also enhances its credibility and trustworthiness among potential partners and clients. Being licensed offers the company itself legal protection, reducing the risk of penalties and regulatory issues.
In addition, obtaining a license ensures that FinTech firms comply with AML regulations, which are crucial for preventing illicit financial activities and maintaining the integrity of the financial system. For investors, counterparties, and customers, dealing with a licensed entity provides assurance that the company adheres to rigorous financial standards.
How to set up a payments firm in Luxembourg
Setting up a payments firm in Luxembourg involves several key steps:
1. Initial Contact with the CSSF
The process usually begins with an informal meeting with the regulator, where prospective applicants present their business model and an outline of proposed activities, including:
- Business plan and description of activities.
- Diagrams of the fund and data transfers linked to their activities.
- Overview of intra group and external outsourcing arrangements.
This is a vital step, allowing the CSSF to provide guidance and clarify regulatory expectations prior to any formal submission.
2. Application Drafting
Following the initial meeting, applicants must draft their formal application, detailing their business plan, organisational structure, and compliance mechanisms. The CSSF reviews the application and may request additional information through feedback rounds.
3. Company Incorporation
To obtain authorisation in Luxembourg, PIs and EMIs must be incorporated under Luxembourg law, in practice usually as a public limited companies (Société Anonyme – SA). Both must safeguard client funds, either in a segregated account at a credit institiution, through an insurance policy, or in an account at the central bank.
The Luxembourg entity is also required to employ a workforce that is proportionate to the volume of transactions and the scope of payment services it intends to provide. The exact staffing requirements are flexible and are typically discussed and agreed with the regulator.
Under current law, the minimum capital requirements are:
- EUR 20,000 to EUR 125,000 for a PI, depending on the type of payment services offered.
- EUR 350,000 for an EMI
The entity must at all times respect the own funds requirements as set out by the Law.
4. Final Submission and Approval
Once the company has addressed all regulatory requirements, established its operational teams, and formed the necessary partnerships with service providers, the CSSF will signal approval for the formal submission of the application. The application process includes a thorough verification by the CSSF to ensure that the company meets all legal and regulatory standards. Once these conditions are satisfied, the CSSF will issue the license.
Upon granting the license, the CSSF send an official letter to the supervised entity detail the periodic legal reporting obligations the company must fulfil. This ensures ongoing compliance and transparency in operations.
Luxembourg-authorised PIs and EMIs may extend their services across the EEA through passporting. This allows the entity to offer its services in other EEA countries either through cross-border provisions or by establishing a local branch or subsidiary. The passporting process involves a regulatory notification to the CSSF, and the applicant must inform the CSSF in advance of the specific markets and services it intends to target through the passporting mechanism.
The CSSF charges a one-off fee of €30,000 to review an application for a new PI or EMI licence, and €8,000 (PI) or €6,000 (EMI) to extend an existing licence to additional payment services. The annual supervisory fee depends on the previous year’s payment volume: €30,000 up to €1 billion and €40,000 above. Firms authorised for three years or less, with volumes up to €1 billion, pay a reduced €25,000.
