Payment app operators and their legal issues in Europe and Asia

Are you expanding your payment app into the European Union? The legal landscape is shifting. This article provides clear answers on Europe’s new Payment Services Directive 3 (PSD3), the Payment Services Regulation (PSR), and new Anti-Money Laundering (AML) rules. We contrast these with high-risk Asian markets and explain why a leading Czech law firm in Prague, EU, is your safest entry point. Our English-speaking lawyers will show you how to secure your business and avoid costly penalties.

Need advice on this topic? Contact the ARROWS law firm by email office@arws.cz or phone +420 245 007 740. Your question will be answered by "Mgr. Vojtěch Sucharda", an expert on the subject.

The 2025 'Great regulatory update': What's changing in Europe?

The European Union is conducting a massive overhaul of its digital finance laws. For FinTech and payment app operators, this "Great Regulatory Update" is the most significant change in a decade.

Several major regulations are converging, creating a new, much stricter legal framework. This includes the new PSD3/PSR, the Digital Operational Resilience Act (DORA), and a powerful new AML Package.

The EU's goal is to move away from the fragmented rules of the past. It is creating a "single rulebook" that is harmonized, centralized, and more powerful. This means you can no longer "shop" for a lenient jurisdiction; you must meet one high, uniform standard.

What is the difference between PSD2 and the new PSD3/PSR?

This is an evolution, but one with critical impacts on your business model.

First, the new rules simplify licensing. Under PSD2, you faced a difficult choice between a Payment Institution (PI) license  or an Electronic Money Institution (EMI) license. If your app started with a PI license but later needed to issue digital wallets (e-money), you often had to start a full, new, and expensive application process.

PSD3 fixes this. It merges the two frameworks by repealing the E-Money Directive. You will now apply for a single Payment Institution license and can add the right to issue e-money. This is a major practical win for startups, making it easier to scale.

Second, PSD3 and the Payment Services Regulation (PSR) strengthen security and shift liability. PSD2 introduced Strong Customer Authentication (SCA), but PSD3/PSR tightens it. Your app will be required to share more behavioral data (like user location, device, and spending habits) with issuers to spot fraud.

Crucially, the new rules introduce liability for fraud you previously were not responsible for, such as mandatory "IBAN-name matching". This means your app could be financially liable for "push payment" fraud, directly impacting your operational costs.

How will the new EU AML Authority (AMLA) affect my app?

This is the biggest change to European anti-money-laundering law in 20 years. The EU is moving AML from a national-level concern to a federal one.

The new "AML Package" has three main parts:

1. AMLA (The Authority): A new, powerful EU-level supervisor in Frankfurt. AMLA will directly supervise the most high-risk financial firms.

2. AMLR (The Regulation): The new Anti-Money Laundering Regulation. As a "Regulation," it is directly applicable law in all EU states, creating a single rulebook.

3. AMLD6 (The Directive): The 6th AML Directive, which harmonizes criminal penalties and enforcement rules.

For your app, this means one thing: no more "regulatory shopping." The AMLR creates one unified, high standard for Customer Due Diligence (CDD) and Know Your Customer (KYC) across the entire EU. Your app's onboarding  and transaction monitoring systems will face intense scrutiny.

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What are my new cybersecurity duties under DORA?

Cybersecurity is no longer just an IT problem; it is now a board-level legal and operational resilience requirement.

You may be confused by two new EU cyber laws: the NIS 2 Directive  and the Digital Operational Resilience Act (DORA). The answer is simple: NIS 2 is a general law for many sectors, but DORA is a specific law only for the financial industry.

As a payment app, you are a "financial entity". This means DORA is the primary law you must follow. It overrides the more general NIS 2, and our legal analysis can save you the time and expense of complying with the wrong law.

DORA’s practical demands are intense:

• ICT Risk Management: You must have a comprehensive framework.
• Incident Reporting: You must report major ICT incidents, with some warnings required within 24 hours.
• Resilience Testing: You must conduct regular testing, including advanced Threat-Led Penetration Testing (TLPT) for larger firms.
• Third-Party Risk: DORA makes you legally responsible for the resilience of your entire supply chain. This includes your cloud providers and KYC software vendors. Your contracts with them must meet DORA's standards.

Navigating the new EU FinTech regulations

Risks and Penalties	How ARROWS Helps
Risk: Your app's cybersecurity and vendor contracts fail DORA standards. Penalty: Significant fines; regulators can force you to terminate critical vendor contracts, shutting down your service.	Service: Regulatory impact analysis of your systems and supply chain. CTA: Need a DORA gap analysis? Write to us at office@arws.cz.
Risk: Your new PI license application is rejected by the Czech National Bank (CNB) for an incomplete business plan or weak AML controls. Penalty: 6-12 months lost time-to-market; all investment in the application is wasted.	Service: Help with obtaining licenses from the CNB. We have deep experience with the regulator's requirements. CTA: Ready to start your EU application? Contact us at office@arws.cz.
Risk: Your app's onboarding (KYC) process violates the new AMLR. Penalty: Multi-million euro fines from the new AMLA; potential license revocation.	Service: Drafting internal company policies (AML/KYC) and conducting professional training for your compliance team. CTA: Need compliant policies and training? Email us at office@arws.cz.
Risk: Your app is held liable for new types of customer fraud under PSD3/PSR. Penalty: Unforeseen financial losses; mandatory customer reimbursements; loss of consumer trust.	Service: Legal opinions and contract drafting (Terms of Service) to limit liability and comply with new fraud-sharing rules. CTA: Want to understand your new liabilities? Write to office@arws.cz.

The Asian maze: A region of high-risk, high-reward markets

While the EU is harmonizing its rules, the Asian market remains a complex maze of fragmented, high-risk, and non-unified regulations.

For a global payment app, this lack of harmony is a strategic nightmare. What works in Singapore is illegal in India, and what works in Japan is impossible in China.

Why can't I use my EU license in Asia?

The single biggest advantage of an EU license is the "passporting" right. When you obtain a full PI license from a reputable regulator like the Czech National Bank (CNB), you can "passport" your services into all 30 EU/EEA member states.

This powerful mechanism is the foundation of the EU Single Market. This right does not exist in Asia.

Your EU license is worthless for operating in Asia. You must apply for a separate, full, and costly license in every single country. This multiplies your legal costs, compliance burdens, and operational complexity.

Critical compliance failures in Asia

Risks and Penalties	How ARROWS Helps
Risk: Violating India's RBI data localization rules. Penalty: Operational ban (like Mastercard), total loss of the Indian market, and inability to onboard new customers.	Service: Legal opinions on local data sovereignty laws via our ARROWS International network. CTA: Want to understand your legal options in India? Email us at office@arws.cz.
Risk: Applying for the wrong license from the Monetary Authority of Singapore (MAS). Penalty: Application rejection; 12+ months of wasted time and capital; competitors capture your market share.	Service: Legal consultations to structure your business model before applying. CTA: Need advice on MAS licensing? Write to us at office@arws.cz.
Risk: Failure to meet China's new RMB 100M capital requirement or strict PBOC licensing rules. Penalty: Failed market entry; loss of investment; legal action for operating without a license.	Service: We connect you with local experts in 90+ countries from a single point of contact in Prague. CTA: Need to navigate China? Contact our international team at office@arws.cz.

How to avoid legal risk: The real price of non-compliance

For a payment app, "compliance" is not a cost center; it is your license to operate. The financial, operational, and personal consequences of failure are designed to be company-altering.

Can my management team be held personally liable?

Yes. This is the risk that C-suite executives, directors, and investors often overlook. The legal risk is no longer just corporate; it is personal.

A chilling precedent was set in South Korea. In a landmark 2020 case, a court found the Privacy Officer of a travel agency personally guilty of negligence after a 2017 data breach.

The officer was personally fined. This was in addition to the large corporate fine. The violation? Failure to take necessary "technological and managerial measures". This is the exact language used in DORA and GDPR.

This case sets a global precedent. When your company fails to implement proper compliance, regulators and courts may look past the corporate veil and hold you—the responsible manager or director—personally accountable.

The personal and financial price of non-compliance

Risks and Penalties	How ARROWS Helps
Risk: Personal liability for directors, officers, or your designated Privacy Officer for a data breach. Penalty: Personal fines, reputational ruin, and even criminal investigation.	Service: Professional training for management (with certificates). We create a "paper trail" of compliance and due diligence to protect your officers. CTA: Need to train your team? Write to office@arws.cz.
Risk: A massive GDPR fine for improper data processing or a data breach. Penalty: Fines up to 4% of your total global annual turnover or €20 million, whichever is higher.	Service: Drafting legally required documentation (GDPR-compliant Privacy Policies, Data Processing Agreements, internal policies). CTA: Do you need a contract review? Contact us at office@arws.cz.
Risk: A multi-million euro AML fine for systemic failures in your KYC and transaction monitoring. Penalty: Enormous fines, forced replacement of your management team, and loss of your license.	Service: Representation in court or before public authorities. If a regulator (like the CNB or AMLA) opens an investigation, you need expert defense. CTA: Facing an inspection? Email us at office@arws.cz.

Your next step: Using Prague as your gateway to Europe and the world

The regulatory environment is complex, but the strategic path forward is clear. Instead of facing a fragmented, high-risk world alone, you can use a stable, efficient "hub-and-spoke" model.

Prague is your hub for Europe. ARROWS is your single point of contact for the world.

What is "passporting" and how does it help my business?

"Passporting" is the single most important benefit of an EU license.

When you secure a full Payment Institution (PI) license from the Czech National Bank (CNB) , you gain the right to "passport" your services. This allows you to operate in all 30 countries of the European Economic Area (EEA)—including Germany, France, and Spain—without applying for a new license in each one.

The business impact is transformative: One application. One regulator. One set of rules. Access to a market of 450 million people.

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Why choose a law firm based in Prague, European Union?

Your choice of "home" regulator matters. Prague is a modern, respected, and stable capital within the European Union [Query]. The Czech Republic has a robust legal system, and its regulator, the Czech National Bank (CNB), has deep experience with FinTech.

ARROWS is a leading Czech law firm in Prague, EU [Query]. With over 15 years of experience and a team of 60+ advisors, we have a proven track record of guiding foreign investors and tech companies through the CNB licensing process. We are known for our speed, quality, and innovative, AI-powered legal solutions.

How does ARROWS solve my global (e.g., Asian) legal problems?

This is the solution to the "Asian Maze." Our unique ARROWS International network , built over more than a decade, spans over 90 countries.

You do not need to find, vet, and manage separate lawyers in Delhi, Singapore, and Shanghai. You have one single point of contact at ARROWS in Prague.

We manage the local "insiders", coordinate the legal opinions, and deliver a single, clear, multi-jurisdictional strategy to you in English. We turn global legal chaos into a manageable, centralized process.

What specific help can ARROWS provide?

Our expert FinTech legal team provides end-to-end support:

• Licensing and Regulatory: Full-service applications for PI licenses with the Czech National Bank.
• Regulatory Impact Analysis: Audits to determine how new laws like PSD3, PSR, DORA, and the AMLR will affect your business model.
• Documentation and Drafting: We draft all legally required documentation: internal AML/KYC policies, DORA-compliant vendor contracts, GDPR privacy policies, and customer Terms of Service.
• Training: Professional training for your employees or management (with certificates) on AML, GDPR, and DORA, creating a crucial record of your due diligence.
• Representation: We represent clients in court and before public authorities, including the CNB.
• Global Coordination: We provide legal opinions and manage cross-border compliance through our ARROWS International network.

Conclusion and how to get started

The regulatory environment for payment apps is complex, but the path forward is clear. From Prague, you can access all of Europe. With our global network, you can navigate Asia.

Do not risk the crippling fines, operational bans, or personal liability that come from poor legal guidance.

Our lawyers at ARROWS, an international law firm operating from Prague, European Union, are ready to be your strategic partner. We support over 250 limited liability companies and 150 joint-stock companies, and we welcome innovative business ideas.

Get tailored legal solutions by writing to our expert team today at office@arws.cz.

FAQ – Most common legal questions about payment app licensing

1. What is a Payment Institution (PI) license?

A PI license, regulated by directives like PSD2 (and soon PSD3), is a mandatory authorization from a national regulator (like the Czech National Bank) that allows a company to provide payment services, such as money remittance and payment processing. To start your licensing process, contact us at office@arws.cz.

2. What's the difference between a PI and an E-Money Institution (EMI) license?

An EMI license includes all the rights of a PI license but also allows you to issue electronic money (e.g., digital wallets). The new PSD3 regulation will merge these two license types, simplifying the process. Our lawyers are ready to advise on the right path for you – email us at office@arws.cz.

3. How long does the CNB application process take?

A full EMI license application in the Czech Republic takes, on average, about 6 months for the CNB to review, while a full PI license can take up to 12 months. This does not include the 3-4 months of legal preparation needed before submission. For immediate assistance, write to us at office@arws.cz.

4. If I get a Czech license, can I serve clients in Germany or France?

Yes. This is the "passporting" right. A full-scope license obtained from the Czech National Bank allows you to provide services across all 30 countries of the European Economic Area (EEA) without needing a new license in each one. Need legal help with passporting? Contact us at office@arws.cz.

5. What is the biggest mistake FinTechs make when applying?

The most common failure is submitting a generic or poorly justified business plan. The CNB requires a detailed, credible plan, especially if you are a "small-scale payment service provider". We help draft applications that get approved. Do not hesitate to contact our firm – office@arws.cz.

6. My app uses AI for fraud detection. Is that a legal issue?

Yes. In addition to PSD3 and DORA, the new EU AI Act creates specific rules for 'high-risk' AI systems, which often include financial fraud detection. We provide a comprehensive regulatory impact analysis for all new EU digital rules. Get tailored legal solutions by writing to office@arws.cz.

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