Malta's Fintech Surge Defies The European Trend For PSD2 Authorisation Requests

Valuable information emerges providing insights into the varying approaches of Competent Authorities (CA) across EU Member States. This summary is intended for Fintech stakeholders considering PSD2 authorisation in Malta, as well as regulatory professionals seeking comparative insights across the authorization processes in EU Member States.

Downward EU trend vs Malta's Successful Performance

While the EBA report highlights the downward trend in requests for EMI and Payment Services authorisations, Malta is bucking the trend having recorded a 43% increase in applications for the two-year period under review. Malta received the third highest number of applications in the EU and granted the highest number of authorisations – 21 in two years. From other information available on the market, it is expected that the period 2025 – 2027 will continue showing a strong demand for both PSD2 and CASP licensing (under the MiCA Regulation) in Malta.

Malta's successful pre-screening and direct engagement model

The EBA report further notes a pertinent metric on rejected applications - Malta registered zero rejected applications during the period under review. This was attributed to the regulator's robust pre-screening process and strong engagement with applicants at pre-application stage. The MFSA's process begins with a Statement of Intent and an initial meeting before the formal application - a prime and practical example of the deeper engagement levels adopted by the regulator. In addition, the MFSA issues several communications to the market for guidance on its expectations, in a very clear and consistent manner.

Malta's regulatory approach and staffing

The reorganisation of MFSA's Fintech Authorisation and Supervision teams, as separate from the Banking unit, has created a standalone Fintech unit with additional focus and increased efficiency dedicated to Fintech applicants, including PSD2 applicants. As a result, the Fintech supervisory team joins pre-application meetings to assess the competence of proposed key function holders very early on.

The MFSA has also done a great job in staffing up its Fintech unit – now reaching the second highest staffing levels amongst all national CAs.

Authorisation Timeframes

PSD2 sets a three-month window for authorisation approvals. None of the Member States are achieving this target as reported by the EBA for the period under review.

The median authorisation timeframe is 9.5 months – Malta's performance is broadly within this time bracket while certain countries, such as Cyprus, had instances of 27-month timeframes.

A higher level of staffing at the MFSA is not necessarily translating into shorter authorization timeframes, for several reasons.

First, there has been a significant increase in the number of new authorization applications placing additional strain on resources.

Other material contributors to extended PSD2 authorisation timeframes include incomplete applications and low-quality licence submissions. Based on BDO Malta's experience advising on EMI and Payment Institution licensing in Malta, these issues frequently arise where applicants have limited regulatory experience, lack a clear and sustainable business model, or provide insufficient, inconsistent or inaccurate information to their legal and regulatory advisors. Delays are further compounded when applicants do not fully engage with or reciprocate the MFSA's open, transparent and collaborative regulatory approach.

Further delays occur when applicants take long to determine their position on answers to questions asked by the MFSA during the application stage.

To reduce authorisation timeframes, applicants should ensure complete and high-quality submissions, engage proactively with the MFSA, and seek expert regulatory advice.

Malta's appeal for fintech applicants

Several reasons are included in the EBA Peer Review report highlighting why Malta has emerged as a favourite jurisdiction for PSD2 applications. By extension, we may also attribute the same reasoning to the pipeline of CASP applications under MiCA.

First, the MFSA invites constant dialogue with applicants and has adopted a very open approach to engage early on with applicants. The regulator also sets its expectations very clearly and frequently updates the market on various expectations, impacting both authorisation and supervisory matters.

Secondly, Malta's removal from the FATF grey list in a very short timeframe allowed Malta to actively promote its successful Fintech sector with greater energy and resources.

More importantly, Malta retains a unique advantage in having a single regulator with oversight for all financial services. Our clients tell us that they consider the MFSA to be highly competent and knowledgeable in the areas of business it regulates – a valuable attribute especially when considering the difficulties that applicants face with regulators in other countries, some of which are still grappling to come to terms with the latest regulatory developments.

In terms of post-Brexit traffic towards Malta, this has now surpassed the peak cycle however Malta's corporate law similarities compared to the UK structure remains a feature in Malta's overall attractiveness.

Finally, considering the large number and global players choosing Malta as their home jurisdiction, a complete and well-regulated ecosystem is emerging in Malta, thus lowering barriers to entry and positioning Malta as the jurisdiction of choice for PSD2 and MiCA applicants.

How can BDO Malta assist?

BDO Malta provides end-to-end regulatory, licensing, and compliance support to Financial Institutions operating in Malta and across the EU. Our team assists clients with regulatory readiness assessments, licensing and authorisation of Electronic Money Institutions (EMIs), Payment Institutions, and Crypto Asset Service Providers (CASPs). Our experts also support the design and implementation of effective governance frameworks, internal control systems, and risk management arrangements, as well as the ongoing management of regulatory compliance obligations, including AML and CFT requirements. Contact BDO Malta to discuss how we can support your organisation in obtaining regulatory authorisation, maintaining compliance, and enhancing operational effectiveness.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.