diff --git a/features/messages/impl/src/main/kotlin/io/element/android/features/messages/impl/MessagesFlowNode.kt b/features/messages/impl/src/main/kotlin/io/element/android/features/messages/impl/MessagesFlowNode.kt
index 774f483356..25ffe10800 100644
--- a/features/messages/impl/src/main/kotlin/io/element/android/features/messages/impl/MessagesFlowNode.kt
+++ b/features/messages/impl/src/main/kotlin/io/element/android/features/messages/impl/MessagesFlowNode.kt
@@ -567,6 +567,11 @@ class MessagesFlowNode(
                     override fun onPaymentCancelled() {
                         backstack.pop()
                     }
+
+                    override fun onOpenWalletSettings() {
+                        backstack.pop()
+                        backstack.push(NavTarget.WalletPanel)
+                    }
                 }
                 walletEntryPoint.paymentFlowBuilder(
                     parentNode = this,
diff --git a/features/wallet/api/src/main/kotlin/io/element/android/features/wallet/api/WalletEntryPoint.kt b/features/wallet/api/src/main/kotlin/io/element/android/features/wallet/api/WalletEntryPoint.kt
index c8d5595dcc..9d08208c80 100644
--- a/features/wallet/api/src/main/kotlin/io/element/android/features/wallet/api/WalletEntryPoint.kt
+++ b/features/wallet/api/src/main/kotlin/io/element/android/features/wallet/api/WalletEntryPoint.kt
@@ -44,5 +44,7 @@ interface WalletEntryPoint : FeatureEntryPoint {
     interface Callback : Plugin {
         fun onPaymentSent(txHash: String)
         fun onPaymentCancelled()
+        /** Called when user needs to set up wallet before paying. Caller should navigate to wallet panel. */
+        fun onOpenWalletSettings()
     }
 }
diff --git a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/PaymentFlowNode.kt b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/PaymentFlowNode.kt
index 9fe3c2ee8c..0ca2c1ed83 100644
--- a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/PaymentFlowNode.kt
+++ b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/PaymentFlowNode.kt
@@ -108,6 +108,11 @@ class PaymentFlowNode(
                     override fun onCancel() {
                         callback.onPaymentCancelled()
                     }
+
+                    override fun onOpenWalletSettings() {
+                        // Cancel the payment flow and request wallet settings to be opened
+                        callback.onOpenWalletSettings()
+                    }
                 }
                 createNode<PaymentEntryNode>(buildContext, plugins = listOf(nodeInputs, nodeCallback))
             }
diff --git a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryNode.kt b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryNode.kt
index 70d9e30477..2413b07c6c 100644
--- a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryNode.kt
+++ b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryNode.kt
@@ -38,6 +38,7 @@ class PaymentEntryNode(
     interface Callback : Plugin {
         fun onContinue(recipientAddress: String, amountLovelace: Long)
         fun onCancel()
+        fun onOpenWalletSettings()
     }
 
     private val inputs: Inputs = plugins.filterIsInstance<Inputs>().first()
@@ -64,6 +65,9 @@ class PaymentEntryNode(
             onCancel = {
                 callback.onCancel()
             },
+            onOpenWalletSettings = {
+                callback.onOpenWalletSettings()
+            },
             modifier = modifier,
         )
     }
diff --git a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryPresenter.kt b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryPresenter.kt
index ad19b12829..b4d5281107 100644
--- a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryPresenter.kt
+++ b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryPresenter.kt
@@ -8,10 +8,10 @@ package io.element.android.features.wallet.impl.payment
 
 import androidx.compose.runtime.Composable
 import androidx.compose.runtime.LaunchedEffect
+import androidx.compose.runtime.collectAsState
 import androidx.compose.runtime.getValue
 import androidx.compose.runtime.mutableStateOf
 import androidx.compose.runtime.remember
-import androidx.compose.runtime.rememberCoroutineScope
 import androidx.compose.runtime.setValue
 import dev.zacsweers.metro.Assisted
 import dev.zacsweers.metro.AssistedFactory
@@ -53,6 +53,44 @@ class PaymentEntryPresenter @AssistedInject constructor(
 
     @Composable
     override fun present(): PaymentEntryState {
+        val walletState by walletManager.walletState.collectAsState()
+        var walletInitialized by remember { mutableStateOf(false) }
+
+        // Initialize wallet manager first
+        LaunchedEffect(Unit) {
+            val sessionId = matrixClient.sessionId
+            walletManager.initialize(sessionId)
+            walletInitialized = true
+        }
+
+        // Show loading state while checking wallet
+        if (!walletInitialized || walletState.isLoading) {
+            return PaymentEntryState.Loading
+        }
+
+        // If no wallet is set up, return early with that state
+        if (!walletState.hasWallet) {
+            return PaymentEntryState(
+                noWalletSetup = true,
+                isCheckingWallet = false,
+                amountInput = "",
+                recipientInput = "",
+                prefillAmount = null,
+                prefillRecipient = null,
+                parsedAmountLovelace = null,
+                isValidRecipient = false,
+                recipientResolutionState = RecipientResolutionState.NotNeeded,
+                senderAddress = null,
+                senderBalanceAda = null,
+                isTestnet = CardanoNetworkConfig.NETWORK == CardanoNetwork.TESTNET,
+                amountError = null,
+                recipientError = null,
+                canContinue = false,
+                eventSink = {},
+            )
+        }
+
+        // User has a wallet — proceed with normal payment flow
         val (prefillAmount, prefillRecipient) = remember(parsedCommand) {
             extractPrefills(parsedCommand)
         }
@@ -63,13 +101,14 @@ class PaymentEntryPresenter @AssistedInject constructor(
         var senderBalanceLovelace by remember { mutableStateOf<Lovelace?>(null) }
         var recipientResolutionState by remember { mutableStateOf<RecipientResolutionState>(RecipientResolutionState.NotNeeded) }
 
-        LaunchedEffect(Unit) {
-            val sessionId = matrixClient.sessionId
-            walletManager.initialize(sessionId)
-            senderAddress = walletManager.getAddress(sessionId).getOrNull()
-            senderAddress?.let { address ->
-                cardanoClient.getBalance(address).onSuccess { balance ->
-                    senderBalanceLovelace = balance
+        LaunchedEffect(walletInitialized) {
+            if (walletInitialized) {
+                val sessionId = matrixClient.sessionId
+                senderAddress = walletManager.getAddress(sessionId).getOrNull()
+                senderAddress?.let { address ->
+                    cardanoClient.getBalance(address).onSuccess { balance ->
+                        senderBalanceLovelace = balance
+                    }
                 }
             }
         }
@@ -113,6 +152,8 @@ class PaymentEntryPresenter @AssistedInject constructor(
         }
 
         return PaymentEntryState(
+            noWalletSetup = false,
+            isCheckingWallet = false,
             amountInput = amountInput,
             recipientInput = recipientInput,
             prefillAmount = prefillAmount,
diff --git a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryState.kt b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryState.kt
index 87649a5872..238d00dd8b 100644
--- a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryState.kt
+++ b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryState.kt
@@ -12,6 +12,10 @@ import io.element.android.features.wallet.impl.slash.Lovelace
  * State for the payment entry screen.
  */
 data class PaymentEntryState(
+    /** True if the user has no wallet set up yet. */
+    val noWalletSetup: Boolean,
+    /** True while checking if wallet exists. */
+    val isCheckingWallet: Boolean,
     val amountInput: String,
     val recipientInput: String,
     val prefillAmount: Lovelace?,
@@ -32,6 +36,28 @@ data class PaymentEntryState(
             val ada = lovelace / 1_000_000.0
             String.format("%.6f", ada).trimEnd('0').trimEnd('.')
         }
+
+    companion object {
+        /** Initial loading state while checking wallet. */
+        val Loading = PaymentEntryState(
+            noWalletSetup = false,
+            isCheckingWallet = true,
+            amountInput = "",
+            recipientInput = "",
+            prefillAmount = null,
+            prefillRecipient = null,
+            parsedAmountLovelace = null,
+            isValidRecipient = false,
+            recipientResolutionState = RecipientResolutionState.NotNeeded,
+            senderAddress = null,
+            senderBalanceAda = null,
+            isTestnet = false,
+            amountError = null,
+            recipientError = null,
+            canContinue = false,
+            eventSink = {},
+        )
+    }
 }
 
 /**
diff --git a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryView.kt b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryView.kt
index 1af95c8abc..5357f69ff6 100644
--- a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryView.kt
+++ b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/payment/PaymentEntryView.kt
@@ -7,6 +7,7 @@
 package io.element.android.features.wallet.impl.payment
 
 import androidx.compose.foundation.layout.Arrangement
+import androidx.compose.foundation.layout.Box
 import androidx.compose.foundation.layout.Column
 import androidx.compose.foundation.layout.Row
 import androidx.compose.foundation.layout.Spacer
@@ -15,6 +16,7 @@ import androidx.compose.foundation.layout.fillMaxWidth
 import androidx.compose.foundation.layout.height
 import androidx.compose.foundation.layout.imePadding
 import androidx.compose.foundation.layout.padding
+import androidx.compose.foundation.layout.size
 import androidx.compose.foundation.layout.systemBarsPadding
 import androidx.compose.foundation.rememberScrollState
 import androidx.compose.foundation.text.KeyboardOptions
@@ -23,6 +25,7 @@ import androidx.compose.material.icons.Icons
 import androidx.compose.material.icons.filled.Close
 import androidx.compose.material3.Card
 import androidx.compose.material3.CardDefaults
+import androidx.compose.material3.CircularProgressIndicator
 import androidx.compose.material3.ExperimentalMaterial3Api
 import androidx.compose.material3.Icon
 import androidx.compose.material3.IconButton
@@ -35,6 +38,7 @@ import androidx.compose.runtime.Composable
 import androidx.compose.ui.Alignment
 import androidx.compose.ui.Modifier
 import androidx.compose.ui.text.input.KeyboardType
+import androidx.compose.ui.text.style.TextAlign
 import androidx.compose.ui.tooling.preview.PreviewParameter
 import androidx.compose.ui.tooling.preview.PreviewParameterProvider
 import androidx.compose.ui.unit.dp
@@ -48,6 +52,7 @@ fun PaymentEntryView(
     state: PaymentEntryState,
     onContinue: () -> Unit,
     onCancel: () -> Unit,
+    onOpenWalletSettings: () -> Unit,
     modifier: Modifier = Modifier,
 ) {
     Scaffold(
@@ -66,75 +71,167 @@ fun PaymentEntryView(
             )
         }
     ) { padding ->
-        Column(
-            modifier = Modifier
-                .fillMaxSize()
-                .padding(padding)
-                .padding(horizontal = 16.dp)
-                .verticalScroll(rememberScrollState()),
-            verticalArrangement = Arrangement.spacedBy(16.dp),
-        ) {
-            if (state.isTestnet) {
-                TestnetWarningCard()
-            }
-
-            state.senderBalanceAda?.let { balance ->
-                BalanceInfoCard(balanceAda = balance)
-            }
-
-            Spacer(modifier = Modifier.height(8.dp))
-
-            OutlinedTextField(
-                value = state.amountInput,
-                onValueChange = { state.eventSink(PaymentFlowEvents.AmountChanged(it)) },
-                label = { Text("Amount (ADA)") },
-                placeholder = { Text("0.00") },
-                keyboardOptions = KeyboardOptions(keyboardType = KeyboardType.Decimal),
-                isError = state.amountError != null,
-                supportingText = state.amountError?.let { { Text(it, color = MaterialTheme.colorScheme.error) } },
-                singleLine = true,
-                modifier = Modifier.fillMaxWidth(),
-            )
-
-            OutlinedTextField(
-                value = state.recipientInput,
-                onValueChange = { state.eventSink(PaymentFlowEvents.RecipientChanged(it)) },
-                label = { Text("Recipient") },
-                placeholder = { Text("addr1... or @user:server") },
-                isError = state.recipientError != null,
-                supportingText = state.recipientError?.let { { Text(it, color = MaterialTheme.colorScheme.error) } },
-                singleLine = true,
-                modifier = Modifier.fillMaxWidth(),
-            )
-
-            when (val resolution = state.recipientResolutionState) {
-                is RecipientResolutionState.NeedsManualEntry -> {
-                    MatrixUserNeedsAddressCard(
-                        matrixUserId = resolution.matrixUserId,
-                        displayName = resolution.displayName,
-                    )
+        when {
+            state.isCheckingWallet -> {
+                // Loading state
+                Box(
+                    modifier = Modifier
+                        .fillMaxSize()
+                        .padding(padding),
+                    contentAlignment = Alignment.Center,
+                ) {
+                    CircularProgressIndicator()
                 }
-                is RecipientResolutionState.Error -> {
-                    Text(resolution.message, color = MaterialTheme.colorScheme.error, style = MaterialTheme.typography.bodySmall)
-                }
-                else -> Unit
             }
-
-            Spacer(modifier = Modifier.weight(1f))
-
-            Button(
-                text = "Continue",
-                onClick = {
-                    state.eventSink(PaymentFlowEvents.Continue)
-                    onContinue()
-                },
-                enabled = state.canContinue,
-                modifier = Modifier.fillMaxWidth().padding(bottom = 16.dp),
-            )
+            state.noWalletSetup -> {
+                // No wallet setup prompt
+                NoWalletSetupContent(
+                    onOpenWalletSettings = onOpenWalletSettings,
+                    onCancel = onCancel,
+                    modifier = Modifier
+                        .fillMaxSize()
+                        .padding(padding)
+                        .padding(horizontal = 24.dp),
+                )
+            }
+            else -> {
+                // Normal payment form
+                PaymentFormContent(
+                    state = state,
+                    onContinue = onContinue,
+                    modifier = Modifier
+                        .fillMaxSize()
+                        .padding(padding)
+                        .padding(horizontal = 16.dp),
+                )
+            }
         }
     }
 }
 
+@Composable
+private fun NoWalletSetupContent(
+    onOpenWalletSettings: () -> Unit,
+    onCancel: () -> Unit,
+    modifier: Modifier = Modifier,
+) {
+    Column(
+        modifier = modifier,
+        horizontalAlignment = Alignment.CenterHorizontally,
+        verticalArrangement = Arrangement.Center,
+    ) {
+        // Cardano icon
+        Text(
+            text = "₳",
+            style = MaterialTheme.typography.displayLarge,
+            color = MaterialTheme.colorScheme.primary,
+        )
+
+        Spacer(modifier = Modifier.height(24.dp))
+
+        Text(
+            text = "Wallet Required",
+            style = MaterialTheme.typography.headlineMedium,
+            textAlign = TextAlign.Center,
+        )
+
+        Spacer(modifier = Modifier.height(12.dp))
+
+        Text(
+            text = "You need to set up a Cardano wallet before you can send payments.",
+            style = MaterialTheme.typography.bodyLarge,
+            textAlign = TextAlign.Center,
+            color = MaterialTheme.colorScheme.onSurfaceVariant,
+        )
+
+        Spacer(modifier = Modifier.height(32.dp))
+
+        Button(
+            text = "Open Wallet Settings",
+            onClick = onOpenWalletSettings,
+            modifier = Modifier.fillMaxWidth(),
+        )
+
+        Spacer(modifier = Modifier.height(12.dp))
+
+        Button(
+            text = "Cancel",
+            onClick = onCancel,
+            modifier = Modifier.fillMaxWidth(),
+        )
+    }
+}
+
+@Composable
+private fun PaymentFormContent(
+    state: PaymentEntryState,
+    onContinue: () -> Unit,
+    modifier: Modifier = Modifier,
+) {
+    Column(
+        modifier = modifier.verticalScroll(rememberScrollState()),
+        verticalArrangement = Arrangement.spacedBy(16.dp),
+    ) {
+        if (state.isTestnet) {
+            TestnetWarningCard()
+        }
+
+        state.senderBalanceAda?.let { balance ->
+            BalanceInfoCard(balanceAda = balance)
+        }
+
+        Spacer(modifier = Modifier.height(8.dp))
+
+        OutlinedTextField(
+            value = state.amountInput,
+            onValueChange = { state.eventSink(PaymentFlowEvents.AmountChanged(it)) },
+            label = { Text("Amount (ADA)") },
+            placeholder = { Text("0.00") },
+            keyboardOptions = KeyboardOptions(keyboardType = KeyboardType.Decimal),
+            isError = state.amountError != null,
+            supportingText = state.amountError?.let { { Text(it, color = MaterialTheme.colorScheme.error) } },
+            singleLine = true,
+            modifier = Modifier.fillMaxWidth(),
+        )
+
+        OutlinedTextField(
+            value = state.recipientInput,
+            onValueChange = { state.eventSink(PaymentFlowEvents.RecipientChanged(it)) },
+            label = { Text("Recipient") },
+            placeholder = { Text("addr1... or @user:server") },
+            isError = state.recipientError != null,
+            supportingText = state.recipientError?.let { { Text(it, color = MaterialTheme.colorScheme.error) } },
+            singleLine = true,
+            modifier = Modifier.fillMaxWidth(),
+        )
+
+        when (val resolution = state.recipientResolutionState) {
+            is RecipientResolutionState.NeedsManualEntry -> {
+                MatrixUserNeedsAddressCard(
+                    matrixUserId = resolution.matrixUserId,
+                    displayName = resolution.displayName,
+                )
+            }
+            is RecipientResolutionState.Error -> {
+                Text(resolution.message, color = MaterialTheme.colorScheme.error, style = MaterialTheme.typography.bodySmall)
+            }
+            else -> Unit
+        }
+
+        Spacer(modifier = Modifier.weight(1f))
+
+        Button(
+            text = "Continue",
+            onClick = {
+                state.eventSink(PaymentFlowEvents.Continue)
+                onContinue()
+            },
+            enabled = state.canContinue,
+            modifier = Modifier.fillMaxWidth().padding(bottom = 16.dp),
+        )
+    }
+}
+
 @Composable
 private fun TestnetWarningCard(modifier: Modifier = Modifier) {
     Card(
@@ -186,16 +283,28 @@ private fun MatrixUserNeedsAddressCard(matrixUserId: String, displayName: String
 @PreviewsDayNight
 @Composable
 internal fun PaymentEntryViewPreview(@PreviewParameter(PaymentEntryStateProvider::class) state: PaymentEntryState) {
-    ElementPreview { PaymentEntryView(state = state, onContinue = {}, onCancel = {}) }
+    ElementPreview { PaymentEntryView(state = state, onContinue = {}, onCancel = {}, onOpenWalletSettings = {}) }
 }
 
 internal class PaymentEntryStateProvider : PreviewParameterProvider<PaymentEntryState> {
     override val values = sequenceOf(
+        // Normal state with wallet
         PaymentEntryState(
+            noWalletSetup = false, isCheckingWallet = false,
             amountInput = "", recipientInput = "", prefillAmount = null, prefillRecipient = null,
             parsedAmountLovelace = null, isValidRecipient = false, recipientResolutionState = RecipientResolutionState.NotNeeded,
             senderAddress = "addr_test1qp2fg...", senderBalanceAda = "100.5", isTestnet = true,
             amountError = null, recipientError = null, canContinue = false, eventSink = {},
         ),
+        // No wallet state
+        PaymentEntryState(
+            noWalletSetup = true, isCheckingWallet = false,
+            amountInput = "", recipientInput = "", prefillAmount = null, prefillRecipient = null,
+            parsedAmountLovelace = null, isValidRecipient = false, recipientResolutionState = RecipientResolutionState.NotNeeded,
+            senderAddress = null, senderBalanceAda = null, isTestnet = false,
+            amountError = null, recipientError = null, canContinue = false, eventSink = {},
+        ),
+        // Loading state
+        PaymentEntryState.Loading,
     )
 }
diff --git a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/timeline/TimelineItemContentPaymentFactory.kt b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/timeline/TimelineItemContentPaymentFactory.kt
index bf2098fd00..21f7034ac5 100644
--- a/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/timeline/TimelineItemContentPaymentFactory.kt
+++ b/features/wallet/impl/src/main/kotlin/io/element/android/features/wallet/impl/timeline/TimelineItemContentPaymentFactory.kt
@@ -38,7 +38,8 @@ class TimelineItemContentPaymentFactory {
      * Check if an event type is a payment event type.
      */
     fun isPaymentEventType(eventType: String): Boolean {
-        return eventType == "com.sulkta.cardano.payment"
+        return eventType == TimelineItemPaymentContent.EVENT_TYPE ||
+            eventType == "co.sulkta.payment.status"
     }
 
     fun isPaymentMessage(body: String): Boolean {