Digital Euro PSP Pilot: What the ECB Open Call Means for Luxembourg Payment Institutions

Last updated: April 2026

On 5 March 2026, the Eurosystem published its call for expression of interest inviting licensed payment service providers to participate in the digital euro PSP pilot. The application window closes at 17:00 CEST on 14 May 2026. For CSSF-supervised payment institutions and electronic money institutions in Luxembourg, this is not a distant policy development. It is a practical decision with a defined deadline: apply, or wait and watch from the sidelines.

I have been tracking the digital euro project since the Governing Council’s decision on 30 October 2025 to move into the current preparation phase, and the gap between the ECB’s published materials and what operational teams inside PSPs actually need to evaluate is significant. The call for expression of interest document runs to dozens of pages, the FAQ was updated on 20 March 2026, and there was a TSP workshop call on 27 January 2026. Sorting through all of that to answer a single question (“should we apply?”) is harder than it should be.

This article breaks down what the pilot involves, what the ECB expects from participating PSPs, how selection works, and where Luxembourg-based institutions face specific considerations.

What the Digital Euro PSP Pilot Actually Is

The pilot is a 12-month controlled test scheduled to run during the second half of 2027. It will allow a limited group of end users to make payments using a “beta digital euro,” a digital means of payment issued by Eurosystem central banks that is distinct from the eventual digital euro foreseen in the proposed legislation.

End users are not retail customers. They are staff from participating Eurosystem central banks (including, potentially, the Banque centrale du Luxembourg) and merchants that already provide everyday services on ECB and NCB premises, such as cafeterias and restaurants. Selected e-commerce merchants are also in scope.

The beta digital euro will not have legal tender status. The ECB is explicit about this: preparing for the pilot does not pre-empt any decision to issue the digital euro. That decision only comes after the EU co-legislators adopt the digital euro Regulation, which is still progressing through the legislative process following the Council’s general approach of 19 December 2025.

Teams sometimes conflate the pilot with a commercial rollout. It is not. There will be no retail customers, no live transaction fees, and no production-scale volumes. The point is validation: can the infrastructure work, do the user journeys hold up, and what needs to change before a potential live launch?

Four Use Cases PSPs Will Need to Support

The pilot covers four specific payment use cases, and each one carries different technical demands for participating PSPs:

Online Person-to-Person (P2P) Transactions

A payer transfers funds to another individual using a user alias or DEAN (the beta digital euro access number). Both devices must be connected to the internet. The transaction is remote, meaning payer and payee do not need to be in physical proximity.

Offline Person-to-Person (P2P) Transactions via NFC

This is the use case that generates the most questions. The payer initiates the transaction by entering the amount in the payment application, and the transaction completes by tapping two devices together via NFC. Neither device needs internet connectivity. Settlement is instant and local. The ECB provides the secure element software that handles double-spending protection, so PSPs do not need to develop that component themselves.

Online Person-to-Business (P2B) at the Point of Sale via NFC

A consumer pays a merchant at a physical point of sale. The merchant uses a SoftPOS application on their device. Both devices must be online. The Eurosystem will not provide a SoftPOS development kit; PSPs or their acquiring partners define and implement their own acceptance solution.

Online Person-to-Business (P2B) in E-Commerce

A consumer selects the beta digital euro as a payment method on a merchant’s website or app. If available, the default payment application opens via overlay. Otherwise, the payer inserts their identifier in a payment gateway and is redirected.

The common mistake I see in early assessments is treating these as four variations of the same thing. They are not. Offline P2P requires secure element integration and NFC handling. SoftPOS requires acquiring-side development. E-commerce requires checkout gateway integration. A PSP deciding to participate needs to scope each use case separately and decide which ones to support.

The Two PSP Roles: Distributing and Acquiring

The pilot distinguishes between two roles, and a PSP can take on one or both:

Distributing PSPs

These enable individual end users to access pilot payment services: onboarding, liquidity management, and transaction processing. They do this either through the Eurosystem-provided digital euro app or by integrating the functionality into the PSP’s own proprietary app using a software development kit (SDK) provided by the ECB.

Acquiring PSPs

These enable business end users (merchants) to accept beta digital euro payments. This includes providing SoftPOS solutions for in-store payments and e-commerce or m-commerce payment acceptance. The acquiring PSP manages merchant onboarding and transaction processing on the business side.

For a Luxembourg payment institution, the distributing role is likely the more natural fit given the market structure. Most CSSF-licensed payment institutions operate on the distribution and e-money side. Acquiring capabilities require POS terminal or checkout gateway infrastructure that many Luxembourg PSPs source through third-party processors.

How the Selection Process Works

Applications are assessed in two stages.

Stage 1: Eligibility Requirements

The Eurosystem checks that applicants hold the necessary regulatory license and have the technical and operational capabilities to participate. PSPs that do not meet all eligibility requirements are eliminated before scoring begins. For Luxembourg institutions, this means a valid CSSF authorization as a payment institution or electronic money institution under PSD2.

Stage 2: Weighted Evaluation Criteria

Eligible PSPs are scored on four dimensions:

1. Regulatory compliance: evidence that the PSP meets applicable licensing and conduct requirements.

2. Technical and operational capabilities: ability to maintain system availability, stability, and performance throughout the pilot, with dedicated resources and established incident processes.

3. Market presence and business fit: ability to serve end users in one or more euro area countries, with geographic and market reach relevant to the pilot objectives.

4. Delivery track record: demonstrated experience delivering comparable projects on time and to specification.

The ECB also wants the final pool of selected PSPs to ensure representative coverage of the euro area market in terms of size, geographical spread, and market reach. This is where smaller market participants often overestimate their chances. The ECB is not looking for token representation; it wants PSPs that can contribute meaningfully to validation across diverse market conditions.

Selection outcomes will be notified by the end of June 2026.

What Participation Actually Requires

This is the section that matters most for operational planning, and it is where I see teams underestimate the commitment.

Timeline and Phases

After selection (expected end of June 2026), pilot PSPs enter the development phase starting in Q3 2026. This involves signing a participation agreement with the relevant NCB (for Luxembourg PSPs, that would be the Banque centrale du Luxembourg), developing pilot payment services, onboarding to and integrating with the digital euro service platform (DESP), conducting testing, and onboarding end users. The operational phase starts in the second half of 2027 and runs for 12 months.

Costs and Remuneration

Participation is not remunerated. The ECB is clear: pilot PSPs bear their own costs. No subsidy, no reimbursement, no financial or non-financial incentives. PSPs also cannot charge fees to participating end users or merchants during the pilot. The ECB acknowledges that costs will vary depending on the PSP’s business model, existing infrastructure, and scope of participation.

The honest assessment: for a mid-sized Luxembourg payment institution, the development and testing workload over roughly 18 months (Q3 2026 through the end of the operational phase) represents a material resource commitment. Teams need to be realistic about whether they can absorb this alongside ongoing regulatory obligations like DORA compliance, PSD2 reporting, and whatever PSD3 preparation the CSSF expects.

Outsourcing to Technical Service Providers

PSPs can outsource pilot activities to third-party technical service providers (TSPs). The ECB recognizes the role TSPs play in retail payments and is engaging directly with TSPs through dedicated workshops. If a Luxembourg PSP relies on a third-party front-end solution or infrastructure partner, the PSP submits the application as the official participant and the TSP operates under the existing contractual arrangement. Joint applications and joint ventures are not permitted.

The important nuance: even with outsourcing, the pilot PSP remains fully responsible for its role and obligations in the pilot, consistent with the EBA’s guidelines on outsourcing arrangements. TSP involvement does not shift accountability.

Luxembourg-Specific Considerations

The CSSF Angle

Luxembourg-authorized PSPs and EMIs considering the pilot should anticipate CSSF interest in the decision. The CSSF has not published guidance specific to the digital euro pilot, but any material change in a supervised institution’s operations or technology infrastructure typically triggers notification or approval requirements under existing CSSF circulars.

The participation agreement is signed with the NCB, not a supervisory authority. But a Luxembourg PSP that commits to a 12-month pilot with the Eurosystem without flagging this to the CSSF is creating unnecessary risk. I would raise it early and informally, even if there is no formal approval process for pilot participation.

Cross-Border Participation

The pilot allows cross-border participation. A Luxembourg-licensed PSP can sign the participation agreement with the BCL and still provide pilot payment services on-site at the ECB in Frankfurt or at other participating NCBs, provided the PSP is authorized to operate in those countries (through passporting or branch establishment). This aligns with how many Luxembourg payment institutions already operate: licensed in Luxembourg, passporting across the EU.

PI/EMI Distinction

Both payment institutions and electronic money institutions can apply. The beta digital euro itself is not electronic money; it is a Eurosystem liability. But the institutional classification matters for how the PSP structures its participation agreement and how it reports the pilot activity. Teams should not assume that the regulatory treatment is identical for PIs and EMIs. The participation agreement terms and the CSSF’s expectations may differ.

What the Pilot Does Not Cover

Clarity on what is excluded prevents wasted preparation time:

The pilot does not test the compensation model for PSPs. The question of how PSPs will be compensated for distributing the digital euro in a live environment is a legislative matter, not a pilot matter. The Council’s general approach of December 2025 introduced provisions for a transitional compensation mechanism, but that applies to the eventual digital euro, not the pilot.

The pilot does not involve retail customers. End users are Eurosystem staff only. There is no customer onboarding at scale, no KYC/AML processing of external customers, and no consumer complaint handling.

The pilot does not resolve the holding limit question. Holding limits will apply, but the specific limits for the beta digital euro have not been published yet. The digital euro Regulation proposal discusses holding limits (often cited around EUR 3,000 in policy discussions), but the pilot limits may differ.

The pilot does not constitute a commitment to issue. The ECB has been consistent on this point since the investigation phase. A decision to issue requires adopted EU legislation. The pilot is preparation, not a pre-commitment.

The Expert Workstream vs. the Pilot: Two Separate Tracks

On 18 March 2026, the ECB opened a separate call for experts to participate in workstreams of the digital euro Rulebook. That call targets individual experts, not institutions, and feeds into the Rulebook Development Group. I covered that development in a separate article on the expert workstream.

The PSP pilot call (5 March 2026) is for institutions. It targets PSPs as operational participants in the testing exercise. The two tracks run in parallel and serve different purposes. A Luxembourg PSP could participate in both, but the commitments and outputs are distinct. Confusing the two leads to misallocated resources.

Should Luxembourg PSPs Apply?

There is no universal answer, but there are clear factors to weigh.

Apply if: your institution has the development capacity to absorb a multi-quarter project alongside existing obligations; you intend to offer digital euro services when (and if) the regulation is adopted; and you want to shape the specifications rather than adapt to them after the fact. The ECB’s own framing is explicit: pilot PSPs will be well-positioned to identify practical implications for their systems and processes, and to suggest optimizations that inform the final implementation.

Do not apply if: your team is already stretched by DORA compliance, PSD3 preparation, or Verification of Payee implementation; or if the unremunerated commitment of 18+ months would compromise other priorities. Watching the pilot results and applying lessons learned to a future commercial rollout is a valid strategy. Not every PSP needs to be a first mover.

The operational reality for many Luxembourg payment institutions is that the digital euro remains a mid-term proposition contingent on legislation that has not been adopted. Investing now makes sense for institutions that treat payments infrastructure as a competitive differentiator. For others, the cost-benefit calculation is less clear.

Frequently Asked Questions

Who is eligible to apply for the digital euro PSP pilot?

Any licensed payment service provider in the euro area can apply. For Luxembourg, this includes CSSF-authorized payment institutions and electronic money institutions. The PSP must hold a valid license and demonstrate technical and operational capabilities to participate.

What is the application deadline?

Applications must be submitted to digitaleuro-pilot@ecb.europa.eu by 17:00 CEST on 14 May 2026. The application consists of a completed questionnaire (Annex 2 to the call for expression of interest) plus supporting evidence.

Will participating PSPs be paid?

No. Pilot PSPs bear their own costs and receive no remuneration, reimbursement, or incentives from the Eurosystem. They also cannot charge fees to participating end users or merchants.

Can a Luxembourg PSP participate in the pilot at locations outside Luxembourg?

Yes. A Luxembourg-licensed PSP signs the participation agreement with the BCL but can provide pilot payment services on-site at the ECB or other participating NCBs, provided the PSP is authorized to operate in those countries through passporting or branch establishment.

Can PSPs outsource development work to third parties?

Yes. PSPs may outsource to technical service providers (TSPs), but the PSP remains fully responsible for its pilot obligations. The ECB is engaging directly with TSPs through dedicated workshops. Joint applications or joint ventures are not permitted; one PSP must be the official applicant.

What happens to pilot investments after the pilot ends?

The Eurosystem envisions that pilot PSPs will be able to build on investments made during the pilot when implementing digital euro services if a decision to issue is taken. However, the extent of reusability depends on the PSP’s implementation strategy and the final content of the digital euro Regulation.

Does the pilot mean the ECB has decided to issue a digital euro?

No. The pilot is a preparation exercise. The final decision to issue will only be taken after the EU co-legislators adopt the digital euro Regulation, which is currently progressing through the legislative process.

How does the digital euro pilot differ from the Rulebook expert workstream?

The pilot (call of 5 March 2026) invites PSPs as institutions to participate in testing. The Rulebook expert call (18 March 2026) invites individual experts to contribute to the Rulebook Development Group’s workstreams. They are separate tracks with different commitments and outputs.

Digital Euro Rulebook: What the ECB Expert Call Means for PSPs – Covers the separate expert workstream call and Rulebook Development Group participation for payment service providers.
PSD3 and Luxembourg Payment Institutions – Reviews the PSD3 proposal and its implications for CSSF-supervised payment institutions and electronic money institutions.
SEPA Instant Payments Regulation – Explains the new SEPA instant credit transfer requirements and their operational impact on euro area PSPs.
Verification of Payee (VoP) for Luxembourg PSPs – Covers the VoP requirements and implementation timeline for Luxembourg payment institutions.
PSD2 Reporting Requirements – Details the current reporting obligations for payment institutions under PSD2.

Key Takeaways

The ECB’s call for expression of interest for the digital euro PSP pilot was published on 5 March 2026. Applications close at 17:00 CEST on 14 May 2026.
The pilot runs for 12 months during the second half of 2027, with a development phase starting in Q3 2026.
End users are Eurosystem staff and on-premise merchants only. No retail customers are involved.
PSPs can take distributing roles, acquiring roles, or both. Each carries different technical requirements.
Participation is not remunerated. PSPs bear all costs and cannot charge end users during the pilot.
Luxembourg PSPs sign the participation agreement with the BCL and can operate cross-border through passporting.
Outsourcing to TSPs is allowed, but the PSP retains full responsibility for pilot obligations.
The pilot is separate from the Rulebook expert workstream call (18 March 2026) and does not pre-empt a decision to issue the digital euro.

Sources and References

Disclaimer: The information on RegReportingDesk.com is for educational and informational purposes only. It does not constitute legal, regulatory, tax, or compliance advice. Always consult your compliance officer, legal counsel, or the relevant supervisory authority for guidance specific to your institution.