knowledge 13 August 2026 |

Payment Services After Betaal: ECJ Narrows PSD2 Scope

Question Referred to the CJEU

The Dutch Court asked the CJEU whether Article 4(3) of the Payment Services Directive (“PSD2”), read in conjunction with Annex I, point 3(c), should be interpreted as meaning that an intermediary’s receipt of client funds into the account of a linked foundation and subsequent transfer of those funds to a contractor, with the client’s consent, constitutes a ‘payment service’ and specifically a ‘credit transfer’.

The CJEU Decision

The CJEU held that an arrangement under which an intermediary receives client funds into a related foundation’s account and subsequently transfers those funds to a contractor, with the client’s consent, does not constitute a ‘payment service’ or a ‘credit transfer’ under PSD2.

Background

The CJEU first examined the nature of Betaal Garant Nederland CV’s (“Betaal”) business. It noted that Betaal provides a guarantee mechanism for construction projects that may qualify as an ‘equivalent guarantee’ under Article 767 of Book 7 of the Netherlands Civil Code and operates as an alternative to placing a deposit with a notary. As this type of guarantee is neither defined nor regulated by PSD2, the CJEU found that it fell outside the scope of PSD2.

The CJEU observed that the service operates in two separate sub-transactions:

1. the client transfers funds to the account of Betaal Garant Foundation (the “Foundation”), where the money is held as security until the works contract is performed to the satisfaction of both the client and the contractor and this is notified in writing to Betaal; and
2. following that verification and with the client’s consent, the Foundation sends a payment order to its bank, in order for that bank to transfer the required sum from its payment account to the contractor’s payment account.

The Payment Services Analysis

Turning to PSD2, the CJEU noted that a ‘payment service’ under Article 4(3) must involve one of the activities listed in Annex I. Those activities include the execution of payment transactions by way of credit transfers under point 3(c). The CJEU further observed that a ‘payment transaction’ covers any act of “placing, transferring or withdrawing funds, irrespective of any underlying obligations between the payer and the payee”.

However, the CJEU held that a credit transfer can only be executed where the payer has submitted a payment order to their payment service provider and that the provider must hold the payer’s payment account. For the purposes of the credit transfer service considered by the Court, the existence of a payment account held by the relevant payment service provider formed an essential element of the analysis. Applying this interpretation, the CJEU found that Betaal’s security deposit arrangement did not constitute a payment service. Although the arrangement involved the transfer of funds, those transfers were executed by the client’s and the Foundation’s banks and not by Betaal itself. Neither Betaal nor the Foundation held payment accounts for the clients concerned. Rather, the transfers were executed from payment accounts maintained by the clients and the Foundation with their respective payment service providers.

The CJEU also considered the broader context and purpose of PSD2. Referring to Recital 24, it emphasised that PSD2 applies only to payment services provided by entities that qualify as payment service providers. Endorsing the AG’s reasoning, the CJEU noted that payment service providers are subject to strict requirements because they are directly involved in the transfer of funds, and that such requirements are not warranted where the transfer is merely ancillary to another primary activity of the business.

In the CJEU’s view, the transfer of funds formed only part of Betaal’s principal activity of providing an equivalent guarantee. It emphasised that Betaal does not fall within any of the categories of a payment service provider recognised by PSD2 and does not itself transfer funds.

Turning to the objectives of PSD2, the CJEU held that PSD2’s consumer protection objectives cannot extend its concepts beyond their wording, and that an expansive interpretation would undermine legal clarity in payment services. It further observed that Betaal’s service constitutes, under Netherlands law, an alternative to depositing a security deposit with a notary, and that nothing in PSD2 indicates an intention to subject such notarial services to the payment services regime and authorisation requirements.

The CJEU therefore concluded that, on a literal, contextual and teleological reading of PSD2, PSD2 does not extend to providers of security deposit services that use, in an ancillary manner, payment services offered by other providers whose primary business activity is the provision of such services.

The CJEU’s Conclusion

Accordingly, the CJEU held that a service under which an intermediary receives a client’s funds into the payment account of a related foundation and subsequently transfers those funds to a contractor from that account, with the client’s consent, does not constitute a payment service under PSD2. More specifically, it does not amount to the execution of a credit transfer within the meaning of Article 4(3) and Annex I, point 3(c), of PSD2.

Money Remittance

It is worth noting that the CJEU did not consider whether Betaal’s activities could constitute money remittance under Annex I, point 6, of PSD2, as the question referred by the Dutch Court was confined to Annex I, point 3(c). The issue nevertheless arose in the AG’s Opinion following submissions by the Norwegian Government, which argued that Betaal’s activities were more properly characterised as money remittance. The judgment therefore does not directly provide authority for the proposition that arrangements of this kind fall outside the scope of money remittance and therefore the PSD2 regime, and that question remains open.

Key Takeaways

The judgment raises broader questions regarding the interpretation of ‘payment services’ under PSD2. In particular, it remains unclear whether the CJEU’s reasoning is confined to business models closely resembling that of Betaal, or whether it will extend more broadly to services where the transfer of funds is merely ancillary to the principal activity. This uncertainty is particularly significant in light of the divergent approaches to the interpretation of PSD2 taken by Member States and the European Commission.

It should be noted that, although the CJEU reached the same outcome as the AG, the judgment is more restrained. The CJEU cited the AG only on the narrow proportionality point (at paragraphs 45–46) and did not adopt the AG’s broader “main activity” reasoning or his analysis of money remittance. It is therefore appropriate to exercise caution in relying on the AG’s Opinion for broader propositions (for example, a general ancillary services exception) that the judgment itself does not support.

As an interpretation of EU law given by the CJEU under Article 267 TFEU, the judgment must be applied by the referring court and is authoritative for national courts and authorities across the EU when interpreting the relevant provisions of PSD2. It remains to be seen how national regulators, including the Central Bank of Ireland, intend to apply the decision.

The judgment could have important implications for how payment services are interpreted under PSD3 and the proposed Payment Services Regulation (“PSR”), which are expected to be adopted within the next year. Notably, the contextual support on which the CJEU relied, particularly Recital 24 of PSD2, which confined the framework to entities providing payment services “as a regular occupation or business activity” does not appear to have been replicated in the PSD3/PSR legislative texts, although the PSD3 definition of 'payment service' continues to refer to 'any business activity set out in Annex I'. If this omission persists in the final texts, there is potential for divergence between the case law established by this judgment and the future legislative framework. From a legal certainty perspective, it would be preferable for the implications of the decision to be reflected in the final legislative texts, rather than leaving the matter to potential interpretative guidance by the European Commission or regulatory guidance by the European Banking Authority or national regulators.

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 services providers in Ireland. If you need any payment services related advice, please contact us for further information as to how we can help.