knowledge 23 April 2026 |

Advocate General’s Opinion on PSD2 may alter the EU’s Interpretation of Payment Services

The Dispute Giving Rise to a Request for a Preliminary Ruling

The case arises from a Dutch dispute as to whether an entity, acting as an intermediary between a client and a building contractor, holding and releasing client funds under an escrow‑type arrangement is providing a regulated payment service under PSD2. The referring Court is seeking the ECJ’s interpretation of whether the service offered by the plaintiff, Betaal Garant Nederland CV (“Betaal”), in receiving and forwarding real estate security deposits for construction contracts from one party to another, constitutes a payment service, within the meaning of PSD2.

The disputed business activity of Betaal involves a tripartite agreement between (1) a client who is to receive construction services from a building contractor, (2) Betaal, and (3) the building contractor. Under such agreement, Betaal receives funds from the client, that are to be paid to the building contractor upon satisfactory completion of the building works. Upon receipt of the funds from the client, Betaal holds the funds in a payment account in Betaal’s own name, and, once the client has given his or her consent, then subsequently transfers them to the building contractor. Betaal deducts a fee when transferring the money received from the client to the contractor.

Netherlands’ local legislation in relation to payment services, which transposes PSD2 into national law, prohibits operating as a payment service provider (“PSP”) without a licence, and the Central Bank of the Netherlands, De Nederlandsche Bank NV (“DNB”), took the view that Betaal was providing a payment service in the form of the execution of payment transactions (payment service 3 under PSD2) without approval. The DNB thus ordered Betaal to stop providing such services and imposed a penalty payment on Betaal. Following the agreement of the District Court of Rotterdam with the DNB’s position, Betaal brought an appeal against the judgment at first instance before the Trade and Industry Appeals Tribunal and that Court referred the case to the ECJ for a preliminary ruling. The ECJ must determine whether the service offered by Betaal constitutes a payment service within the meaning of PSD2 in order for the referring Court to adjudicate on the lawfulness of the DNB’s decision to order Betaal to cease its activity as a PSP until it obtains the necessary authorisation.

Observations Submitted to the ECJ

Other observations have been submitted to the ECJ by the Czech, Italian, Netherlands and Norwegian Governments and the European Commission. The DNB and the Netherlands Government argue that the referred question should be answered in the affirmative i.e. that Betaal’s service is a payment service. In contrast, the Italian Government and the European Commission observe that it should be answered in the negative i.e. that it is not a payment service. The Czech Government submit that an affirmative answer is appropriate, but only under certain conditions. Lastly, the Norwegian Government is of the view that the service in question does not constitute a payment service (which we understand is a reference to payment service 3) but instead qualifies as a money remittance service (which itself is a payment service).

AG Opinion

The AG is of the view that Betaal’s security deposit service does not constitute a payment service under PSD2. To support that view the AG looks at different forms of statutory interpretation as follows:

Literal Interpretation

The DNB finds that Betaal, acting as an intermediary, executes the transfer of funds from the client (the payer) to the contractor (the payee) and thus provides a regulated payment service under local legislation/PSD2. The AG asserts that a literal reading of Article 4(3) of PSD2, together with point 3(c) of Annex I to PSD2, does not support the DNB’s classification. Article 4(3) stipulates that a payment service is “any business activity set out in Annex I”. According to Annex I, point 3(c), a payment service may consist in the “execution of payment transactions, including transfers of funds on a payment account with the user’s PSP or with another PSP”, where that transaction involves the “execution of credit transfers, including standing orders.”

The AG determines that Betaal does not control the client funds deposited in its payment account, for the purposes of trading with them or obtaining a profit from them. The AG finds that Betaal is an intermediary in a triangular legal transaction between the client, Betaal and the contractor involving two separate payment transactions, carried out by financial institutions and not Betaal, as follows:

   (i)  The client issues a payment order to its bank which implies the transfer of funds from the client’s payment account to Betaal’s payment account which the AG says could be regarded as the payee. The AG says the client’s bank is the one carrying out the payment transaction in this case and therefore provides the payment service; and

   (ii)  Betaal then acting as payer issues a payment order to its bank, which entails the transfer of funds from Betaal’s payment account to the payment account of the contractor. The AG says it is Betaal’s bank that carries out the payment transaction in this case and thus provides the payment service.

According to the AG’s opinion, the wording and structure of PSD2 indicate that execution of credit transfers presupposes a PSP’s technical intervention on a payer’s and/or payee’s payment accounts to move funds as part of a regulated payment transaction. If the service provider neither holds a payment account for the client nor technically executes the transfer between accounts, it is unlikely to fall within the meaning of “execution of credit transfers” in line with PSD2.

Furthermore, the AG states that Article 80 of PSD2 provides, as a general rule, that a payment order cannot be revoked by a payment service user (payer) once it has been received by the payer’s PSP. In this instance, the client, as the payer of the security deposit, can prevent payment to the contractor if the work is disputed, unlike an irrevocable payment order. Accordingly, Betaal provides a guarantee service, relying on banks to perform the transfers, not a payment service. The AG finds that the monetary transfers required to implement that service are merely ancillary to the guarantee itself.

Systematic Interpretation

In view of the legislative context of PSD2, the AG’s systematic interpretation finds that Betaal’s provision of the security deposit service to clients and building contractors does not fall within the regulatory perimeter of PSD2. The AG proposes that the rigorous obligations imposed by PSD2 are only proportionate and logical if they are applied to services provided by a PSP as its main activity and on a professional basis.  The AG finds that the movement of funds is merely ancillary to Betaal’s main non‑payment service business (providing contractual security) and does not constitute the execution of payment transactions in the PSD2 sense.

Teleological Interpretation

While the DNB advocates for a broad, consumer‑protective interpretation of PSD2, from a teleological perspective, the AG interprets that consumer protection cannot override other key objectives such as legal clarity and consistent application. Services that involve fund transfers only on an ancillary basis, such as security deposit arrangements by entities like Betaal, notaries, or lawyers, therefore fall outside PSD2’s scope.

Money Remittance

The AG’s opinion asserts that the Norwegian Government’s view that Betaal’s service constitutes “money remittance” under PSD2 is unconvincing. As noted in the AG’s opinion, money remittance is described in recital 9 PSD2 as “a simple payment service that is usually based on cash provided by a payer to a payment service provider, which remits the corresponding amount, for example via a communication network, to a payee or to another payment service provider acting on behalf of the payee”.² The AG finds that money remittance under PSD2 is a simple payment service involving the immediate and unconditional transfer of funds to a payee, whereas transfers in Betaal’s case depend on the client’s approval of the completed work and may never occur.

The AG further proposes that money remittance would have to be Betaal’s principal, professional activity, while in fact its main function is to arrange security deposits, with any fund transfers merely ancillary. For the same reasons, the AG finds that the Norwegian Government’s comparison between Betaal’s security deposit service and bill‑payment services offered by supermarkets or retailers is unpersuasive, as those services involve unconditional transfers and are not incidental to another main activity.

Conclusion

The AG concludes that “a service entailing the receipt and forwarding of funds, provided by an entity as an intermediary, does not constitute a payment service if, in the context of a contract concluded with a client and a contractor, that entity receives the client’s funds in its payment account and, after the client has given its consent, transfers those funds from that payment account to the contractor”.

Whilst the AG’s opinion could reduce unnecessary regulatory friction for providers of certain services, if endorsed by the ECJ it may have significant consequences for the interpretation and implementation of PSD2 in practice.

Considering the differing views of the Commission, the Netherlands Government, the Italian Government, the Czech Government and the Norwegian Government, as set out above, it is clear that Member States’ interpretation of payment services under PSD2 is not aligned and requires some form of direction to ensure consistent alignment. Although the AG’s opinion is not binding, it may ultimately influence the ECJ’s decision in the matter. We therefore await the outcome from the ECJ over the coming months and whether it will follow the AG’s views. 

How McCann FitzGerald LLP Can Help:

McCann FitzGerald LLP is a premier law firm in Ireland and advises on the full range of legal, tax and compliance activities undertaken by payment institutions in Ireland.  We have substantial experience in successfully guiding applicants through the regulatory authorisation process and in helping them to comply with their legal obligations, once established. If you are considering setting up a payment institution authorised under Irish legislation or need any payment services related advice, please contact us for further information as to how we can help.