Has PSD2 Favoured Investments in the European PayTech Companies?
Digital Economy Working Paper 2025-04
The payment industry has experienced an important transformation with the rise of PayTech firms. This study investigates the impact of the Payment Services Directive 2 (PSD2) on the investment dynamics within the PayTech market in the European Economic Area (EEA). Using a unique dataset of venture capital funding rounds in the USA and the EEA from 2010 to 2019, we apply a difference-in-differences methodology to assess the impact of PSD2 on investments in PayTech firms within the EEA. The results of our intensive margin analysis reveal that the approval of PSD2 in 2016 significantly boosted the funding amounts and the number of funding rounds for EEA-licensed PayTech firms, particularly on B2B firms, younger companies (5–10 years old), and those with fewer than 50 employees. Additionally, early-stage VC funding benefited more from the new regulation than seed and late-stage funding. The extensive margin analysis shows that PSD2 facilitated the entry of new firms in the EEA market, particularly benefiting PayTechs with EMI licenses. In addition, it led to a rise in the founding amount in the EEA countries. However, the PSD2 did not increase the number of EEA firms exiting the market through IPOs. Overall, our results suggest that PSD2 created a more competitive and innovative payment services market in the EEA by facilitating funding access for emerging PayTech firms.
CÁCERES Natasha;
CALZADA Joan;
DUCH BROWN Nestor;
MARTINEZ SANTOS Fernando;
2025-04-11
European Commission
JRC141896
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