April 2, 2026

ECJ C-51/25: Clarifying The Interpretation Of Payment Services?

Chloe Barrowman, Dr Alexander Behrens, Suzana Cvejic, Martina Stegmaier A&O Shearman + Follow Contact LinkedIn Facebook X Send Embed

A case currently before the European Court of Justice (ECJ) has the potential to significantly influence the interpretation of payment services regulation in the EU. Manuel Campos Sánchez-Bordona, advocate general of the ECJ, has published an opinion in which he advocates a narrower interpretation of payment services under Directive (EU) 2015/2366 (Payment Services Directive 2—PSD2) than is currently employed in many member states, including Germany. Should the ECJ endorse this view, it would have important consequences for the scope of PSD2.

Background

The case was brought before the ECJ in the form of a preliminary ruling. The court was faced with the question of whether the business activities of the plaintiff, Betaal Garant Nederland CV (Betaal), which offers, among other services, security deposits for construction contracts, fall under the definition of payment services. For the security deposit, Betaal enters into an agreement with the client and the building contractor.

On this basis, Betaal receives the first of the instalments due from the client and retains it in a payment account in its own name until the construction is completed. Only when the client and contractor notify Betaal that the construction has been duly completed does the contractor receive the final instalment.

The Dutch supervisory authority, De Nederlandsche Bank NV (DNB), considered this service to be a payment service in the form of the execution of payment transactions, more specifically the execution of a credit transfer under Art. 4 point (3) in conjunction with Annex I, point (3)(c) PSD2, for which Betaal did not have the necessary license.

Subsequently, DNB prohibited the further provision of this service and imposed a penalty payment on Betaal. After the court of first instance agreed with the DNB’s opinion, the court of appeal referred the case to the ECJ.

Participation of other member states

The importance of the question is demonstrated not least by the fact that a number of parties have submitted their opinions to the ECJ. These were quite diverse: the Dutch government followed the opinion of its supervisory authority and argued that the services should be regarded as a payment service. The Italian government and the European Commission disagreed, arguing Betaal’s business model did not constitute a payment service. The Czech government considered it a payment service only under certain conditions, and the Norwegian government considered it instead to be money remittance.

The advocate general’s view

The advocate general has taken a clear position and does not consider the forwarding of a security deposit to be a payment service.

This conclusion is based on a literal, systematic and teleological interpretation, which will be examined in more detail and critically questioned, from a German regulatory law perspective, below.

The advocate general’s legal analysis

Literal interpretation

According to Art. 4 point (3) in conjunction with Annex I, point 3(c) PSD2, the term “payment service” covers the execution of payment transactions, including the transfer of funds to a payment account by “executing credit transfers, including standing orders”.

In the opinion of the DNB, Betaal, as an intermediary, executes the transfer of funds from the customer (payer) to the contractor (payee) and, thus, provides a payment service.

The advocate general disagrees, stating that Betaal does not maintain any payment accounts in the name of its customers, a prerequisite for credit transfer services. Instead, Betaal holds the funds in a payment account in its own name (without the ability to trade or profit from those funds) and is an intermediary in a transaction characterized by two separate payments: first from the customer to Betaal and then from Betaal to the contractor.

The advocate general further argues that “execution of payment transactions” implies technical involvement with the payment accounts when making the transfer, which in Betaal’s case would be carried out by the banks which supply the accounts and not by Betaal itself.

Finally, according to Art. 80(1) PSD2, the payment order should be irrevocable. Yet in Betaal’s case, the customer could cancel the payment if it was not satisfied with the completion of the building work meaning it would not qualify as a payment service.

Systematic interpretation

The advocate general goes on to state that Betaal is not a payment institution because its main activity is not the commercial provision of payment services. In his view, this “main activity” requirement can be derived from the provisions of PSD2 itself, the legislative context of the Directive and the stringent obligations placed on payment institutions, which can only be justified if payment services are provided on a commercial basis and as a main activity. Betaal’s main activity, on the other hand, is the provision of services in the field of real estate collateral.

To support his thesis of a general ancillary activity privilege, the advocate general cites the Rasool decision of the ECJ (ECJ, judgment of March 22, 2018, C-568/18), which was issued under Directive 2007/64/EC (Payment Services Directive—PSD).

In the Rasool case, a gaming arcade operator installed ATMs that were operated entirely by a third-party provider. The arcade operator only filled them with cash but had no influence on the flow of payments. The withdrawal of money was not necessary for their business but merely conducive to it, meaning that it was an ancillary service under PSD.

Teleological interpretation

DNB had emphasized PSD2’s consumer protection objective, citing recital 6, which refers to the need for “a high level of consumer protection in the use of” payment services. In its view, this requires a broad interpretation of payment services.

In the advocate general’s opinion, such a broad interpretation cannot be distinguished meaningfully from other services that are not covered by PSD2. In support of his position, the advocate general observes that national competent authorities do not apply PSD2 to lawyers and notaries providing transfer or custody of funds or provision of security deposits because those activities are not their main activity. By extension, the advocate general considers the same logic must apply to companies such as Betaal.

Money remittance business

The advocate general also addresses the Norwegian government’s argument that Betaal’s business model is a money remittance business. In his opinion, the business model lacks the immediacy and unconditionality characteristic of simple money remittance transactions. This, according to the advocate general, is also supported by the fact that Betaal retains a fee when forwarding the security deposit to the contractor; the provision of these services must also be commercial in nature and constitute the main activity.

Concluding opinion

The advocate general concludes that Art. 4 point (3) in conjunction with Annex I, point (3)(c) PSD2 should be interpreted as meaning 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”.

First thoughts on the advocate general’s arguments

The advocate general’s opinion clashes with parts of the current legislative implementation of the PSD2 and the corresponding administrative practice in Germany. In particular, this applies to the German implementation and interpretation of the scope of application of the money remittance business within the meaning of Sec. 1(1) sentence 2 No. 6 of the German Payment Services Supervisory Act (Zahlungsdiensteaufsichtsgesetz—ZAG).

In light of the guidance of the German regulator, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht—BaFin), Betaal’s provided service would likely qualify as money remittance business pursuant to Sec. 1(1) sentence 2 No. 6 ZAG.

Relying on the preparatory legislative reasoning for Sec. 1(1) sentence 2 No. 6 ZAG, BaFin traditionally interprets the scope of application of the money remittance business broadly, allocating to it the function of a “catch-all provision” for the transfer of funds by order.

In this regard, BaFin states expressly that the ZAG does not provide for a general exemption for ancillary activities and that, hence, the requirement to obtain a license or registration for payment services is not eliminated by the mere fact that these services are provided solely as an ancillary activity to another activity outside the financial sector.

That said, BaFin applies an unwritten exception to this principle according to which selected professionals, such as lawyers and public notaries, can transfer funds between parties as long as such transfers remain within the scope of the duties typical of their profession and as defined in their professional codes of conduct. Whilst this exception used to be codified in the PSD, it was not continued within the PSD2.

In any event, the advocate general’s opinion goes far beyond this (unwritten) exemption. Moreover, the ECJ’s Rasool decision, cited by the advocate general, can hardly justify a general ancillary activity privilege as (i) it was delivered under PSD; and (ii) the arcade operator in the Rasool case performed only preparatory acts in advance of the actual provision of payment services, i.e., they were not directly involved in the flow of payments.

Despite the wording of the PSD2, BaFin reiterates the German legislator’s reasoning for the scope of application of Sec. 1(1) sentence 2 No. 6 ZAG by stating that it is irrelevant whether the parties involved in the payment transaction pursue any purposes beyond the mere transfer of the funds.

Outlook from a German regulatory law point of view

If the ECJ were to follow the advocate general’s arguments, the consequences for the German payment services practice could be profound.

As a direct consequence of a binding decision, a significant change to the scope of application of payment services under the PSD2, especially the money remittance business, would have to be expected. BaFin would likely be forced to narrow its interpretation of the application scope of payment services such as the money remittance business. Whole market areas might consequently fall out of the scope of an authorization requirement under the ZAG, e.g., facilities, escrow, and paying agents, having incurred extensive costs for obtaining authorizations and setting up and maintaining the required proper organization of their businesses.

Against this backdrop, it is entirely unclear how the national legislators would react to such a paradigm shift (the advocate general does indeed propose a national regulation of service providers that would fall outside the scope of the PSD2 following such a new interpretation of payment services). Furthermore, uncertainties would remain regarding the interpretation of other payment services not covered by this decision.

Irrespective of the outcome, the case at hand offers the ECJ the opportunity to further harmonize the member states’ rather diverse administrative practices in the payment services market. A ruling is expected in the coming months.

[View source.]

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