Drawing the line: Advocate General's Opinion tests the boundaries of regulated payment services under PSD 2

On 26 February 2026, Advocate General Manuel Campos Sánchez-Bordona (AG) of the Court of Justice of the European Union (CJEU) delivered a non-binding Opinion in Betaal Garant Nederland CV v De Nederlandsche Bank NV (Case C-51/25) that has the potential to push EU national competent authorities to reconsider how they interpret the definition of "payment services" in Article 4(3) of Directive 2015/2366 (PSD 2), particularly with respect to the execution of credit transfers within the meaning of point 3(c) of Annex I to PSD 2.

The CJEU had been asked to determine whether the business activities of the plaintiff, Betaal Garant Nederland CV (Betaal), which offers (among other services) a security deposit service for real estate construction contracts (as an intermediary party), fall under the definition of "payment services" in Article 4(3) of PSD 2. The AG ultimately determined that, based on the specific facts and circumstances, the security deposit service offered by Betaal should not be classified as a "payment service" as defined in Article 4(3) of PSD 2, when read in conjunction with point 3(c) of Annex I of PSD 2.

The significance of the case is underscored by the range of parties that submitted observations to the CJEU. The Dutch government supported the position of its supervisory authority, arguing that the services should be regarded as a payment service. The Italian government and the European Commission disagreed, submitting that Betaal's business model did not constitute a payment service. The Czech government considered the activities to constitute a payment service only under certain conditions, and the Norwegian government argued that the service instead constituted money remittance.

This article sets out the circumstances that gave rise to the underlying dispute, which originated in the Netherlands, the reasoning behind the AG's determination, and the potential implications for regulated firms and businesses operating escrow-type or intermediary fund-holding arrangements.

Facts leading to the preliminary reference to the CJEU

Betaal offers a security deposit service relating to real estate construction contracts. Under this service, the final instalment of the construction costs payable by an individual (Client) to a building contractor (Contractor) is held by an intermediary pending satisfactory completion of the construction works. The arrangement is designed to protect both the Contractor against the risk of the Client defaulting on the final instalment notwithstanding satisfactory completion of the works, and the Client against the performance risk it would bear on the Contractor if the final instalment were paid prior to completion of the works to the Client's satisfaction.

Pursuant to a tripartite agreement between Betaal, a Contractor and a Client:

• The Client transfers the final instalment to the Betaal Foundation (a foundation affiliated with but separate from Betaal), which retains the funds in a payment account in its own name.
• Upon notification by the Contractor and the Client that the construction project has been satisfactorily completed, the funds are transferred to the Contractor.

It is important to note that under this contractual arrangement:

• Betaal and the Betaal Foundation do not have payment accounts in the name of a Client.
• The transfer of funds to the Contractor is made from the payment account of the Betaal Foundation, and not from a Client's payment account.
• Betaal and the Betaal Foundation cannot manage or trade with the funds that make up the security deposit.
• Betaal deducts a commission before the funds are transferred to the Contractor.

Betaal's security deposit service came under the scrutiny of the Dutch supervisory authority, De Nederlandsche Bank (DNB). The DNB formed the view that Betaal was conducting a "payment service" in the form of the execution of a payment transaction (more specifically, the execution of a credit transfer) under Article 4(3) of PSD 2 and point 3(c) of Annex I of PSD 2, for which it did not have the necessary authorisation under Dutch transposing legislation. The DNB ordered Betaal to cease offering the security deposit service and imposed a penalty payment.

After the court of first instance agreed with the DNB's position, the matter was appealed. The referring court sought a preliminary ruling from the CJEU regarding the interpretation of the definition of "payment services" under PSD 2 in order for it to determine the legality of the DNB's order for Betaal to cease offering the service until the necessary authorisation is granted.

The AG's determination

In his non-binding Opinion, the AG ultimately determined that, based on the specific facts and circumstances, the security deposit service offered by Betaal should not be classified as a "payment service" as defined in Article 4(3) of PSD 2, when read in conjunction with point 3(c) of Annex I of PSD 2.

He concluded that Article 4(3) of PSD 2, read in conjunction with point 3(c) of Annex I of PSD 2, should be interpreted as meaning that a service, provided by an entity as an intermediary, entailing the receipt and forwarding of funds, 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's payment account, in circumstances where the entity holds the payment accounts in its own name.

The AG's determination is based on literal, systematic and teleological interpretations. The AG's reasoning based on these interpretations is summarised below.

Literal interpretation

The DNB submitted that Betaal, acting as an intermediary, executes the transfer of funds from the Client (as the payer) to the Contractor (as the payee) and therefore provides a "payment service" within the meaning of Article 4(3) of PSD 2, read in conjunction with point 3(c) of Annex I. The DNB maintains that the account from which the transfer of funds is made to the Contractor is irrelevant on the basis that the meaning of execution of "credit transfers" under point 3(c) of Annex I should be interpreted very broadly and covers actions taken by entities that are not financial institutions, but which involve the transfer of funds to payment accounts held by financial institutions.

In the opinion of the AG, a literal interpretation of Article 4(3) of PSD 2, read in conjunction with point 3(c) of Annex I, does not support the DNB's argument on the following bases:

• The security deposit service involves two distinct transactions (first from the Client to the Betaal Foundation, and second from the Betaal Foundation to the Contractor), being two distinct payment services carried out by the respective financial institutions of the parties and not by Betaal or the Betaal Foundation. This is because Betaal/the Betaal Foundation do not maintain any payment accounts in the name of Clients. The AG states that "the wording of the provisions for which the referring court is seeking an interpretation implies that the transfer of funds referred to in those provisions must be carried out by the payment service provider that holds the payer's payment account" and refers to ABC Projektai (C‑661/22) as precedent.
• The "execution of payment transactions" and the "execution of credit transfers" as referred to in point 3 of Annex I implies "technical involvement" by the payment service provider with the payer or payee's payment accounts when making a transfer. But, as the Betaal Foundation holds the funds in a payment account in its own name without the ability to manage those funds, it has no technical involvement with the payer's (Client) or payee's (Contractor) payment accounts. The technical operations for executing the payment transactions and credit transfers are carried out by the Client and Contractor's respective financial institutions.
• According to Article 80 of PSD 2, a payment order must be irrevocable once it has been received by the payer's payment service provider. However, under the arrangement, the release of funds to the Contractor was conditional on notification by the Client that the construction works were satisfactorily completed. The AG was of the view that the Client's ability to 'revoke' the transfer of funds by not notifying completion would contradict Article 80 of PSD 2.

Systematic interpretation

Considering a systematic interpretation, the AG is of the opinion that Betaal does not fall within the scope of PSD 2 on the basis that its "main activity" is not the provision of payment services on a "professional basis". Rather, the AG maintains that Betaal's main activity is the provision of security deposit services related to real estate construction contracts. In his view, this "main activity" condition is derived from the legislative context of PSD 2. The AG states that the rigorous requirements in PSD 2 regarding authorisation, prudential supervision and capital "only make sense if they are applied to professional providers of payment services" and would be "disproportionate" if applied to providers of other kinds of services who also conduct fund transfers as an ancillary component of their main activity (such as notaries or lawyers). The fact that Betaal conducts payment transactions on an "ancillary basis" in the course of its main activity does not make it a professional payment services provider subject to the scope of PSD 2.

In support of this thesis, the AG relies on a combination of Article 2(b) and Recital 24 of PSD 2, which together provide that the directive's framework should be confined to service providers who provide payment services as "a regular occupation or business activity". The AG also cites the CJEU's Rasool decision (Case C-568/18), which was delivered under the original Payment Services Directive (Directive 2007/64/EC), and involved a gaming arcade operator who filled ATMs operated by a third-party provider but had no influence over the flow of payments.

Teleological interpretation

The DNB proposed a broad interpretation of PSD 2 taking into account its consumer protection objective and cited Recital 6 in this regard. However, the AG stated that consumer protection objectives should not take precedence over other objectives, such as the need for legal clarity and consistent application of the legal framework. Furthermore, the AG indicated that a broad interpretation, as suggested by the DNB, would be problematic given that, in many Member States, professionals such as notaries or lawyers who handle security deposits and hold and transfer client funds are not considered to fall within the scope of PSD 2 because those activities are ancillary to their main activity. For the same reason, the AG considers that companies such as Betaal should be treated in the same way.

Comments on money remittance

Although the CJEU has not been asked to interpret the meaning of "money remittance" as part of the preliminary reference, the AG dealt with a submission by the Norwegian government arguing that Betaal's security deposit service constitutes "money remittance" as defined in Article 4(22) of PSD 2.

Referencing Recital 9, the AG rejected the position that the service constitutes "money remittance" given that Betaal's transactions lack the immediacy and unconditionality characteristics of "simple" money remittance transactions — the transfer of funds to the Contractor is conditional on the Client confirming completion of the construction works and Betaal deducts a commission before the funds are transferred to the Contractor.

Key takeaways and practical implications

The AG's Opinion is significant for a number of reasons and, if endorsed by the CJEU, could have material implications for businesses that hold or transfer funds as part of a broader commercial service:

• Businesses operating escrow-type or intermediary fund-holding arrangements, including online platforms, facilities agents, and paying agents, should assess whether their activities might fall outside the scope of regulated payment services under the AG's reasoning.
• The AG's endorsement of a de facto ancillary activity privilege could provide relief for entities that currently obtain (or are required to obtain) payment services authorisation solely because of fund transfers that are incidental to their main business. However, the boundary between a "main" and "ancillary" payment service activity is inherently fact-specific.
• For regulated firms operating in Ireland, the ruling could prompt a review of how the Central Bank of Ireland approaches the perimeter of regulated payment services. Firms operating business models that involve holding or transferring funds on an ancillary basis should monitor the CJEU's judgment closely and consider how it may affect their regulatory obligations.

Conclusion

The judgment of the CJEU in this case will be of considerable interest when it is handed down. In the meantime, the AG's Opinion provides a useful reference point for navigating the boundary between regulated payment services and non‑regulated ancillary activities in an increasingly complex payments landscape.

For further information on this case and its potential impact for financial institutions operating in Ireland, please contact Eimear O'Brien, Partner, Eoin O Connor, Partner, Patrick Brandt, Partner, Louise Hogan, Partner, Sarah Lee, Senior Practice Development Lawyer or your usual ALG contact.

Date published: 30 April 2026