CJEU clarifies the scope of ‘payment services’ under PSD2

The Court of Justice of the European Union (“CJEU”) has delivered a significant judgment in Betaal Garant Nederland CV v De Nederlandsche Bank NV (Case C 51/25), providing important clarification on a question which businesses received client funds have long grappled with: does an entity provide a regulated payment service merely because it receives, holds and subsequently arranges for the transfer of funds?

In its judgment of 16 July 2026, the CJEU clarified that the mere receipt, holding and onward transfer of funds does not constitute the execution of a credit transfer under Article 4(3), read in conjunction with point 3(c) of Annex I to Directive (EU) 2015/2366 (“PSD2”), where the intermediary holds the funds in an account in its own name and the relevant transfers are executed by the banks maintaining the respective accounts.

Betaal Garant Nederland CV (“Betaal Garant”) offered a security deposit service in connection with construction contracts in the Netherlands. The contractual arrangements involved:

• a client engaging a contractor to carry out construction works;
• the client, the contractor and Betaal Garant entering into a tripartite security agreement, very similar to an escrow service; and
• the client transferring the final instalment of the construction price to a separate foundation affiliated with Betaal Garant (the “Foundation”).

The Foundation held the funds in a bank account opened in its own name. Once the client confirmed that the works had been satisfactorily completed, the Foundation instructed its bank to transfer the funds to the contractor.

De Nederlandsche Bank (the central bank of the Netherlands or “DNB”) considered that Betaal Garant was providing a regulated payment service—specifically, the execution of credit transfers, without the authorisation required under PSD2. The national court then referred the interpretation of the relevant PSD2 provisions to the CJEU.

In short, the CJEU held that the arrangement did not constitute the execution of a credit transfer by Betaal Garant, drawing a critical distinction between instructing a bank to transfer funds and executing the transfer as a payment service provider.

In this case, the payment flow comprised two separate transactions:

1. a transfer from the client’s account to the Foundation’s account; and
2. a transfer from the Foundation’s account to the contractor’s account.

Both transactions were executed by the banks maintaining the respective accounts. Neither Betaal Garant nor the Foundation maintained a payment account in the name of the client or the contractor. In instructing its bank to release the funds, the Foundation acted as the holder of its own account and as the payer and not as the payment service provider executing the credit transfer.

The contractual arrangements were also relevant to establishing the parties’ respective roles. They demonstrated that Betaal Garant’s principal function was to administer a security arrangement connected with the construction contract, with the movement of funds serving that broader commercial purpose rather than constituting a standalone credit transfer service. The CJEU highlighted that PSD2 defines the concept of ‘payment service’, refers to the activities listed in Annex I to that directive, specifying that one or more of those activities must be carried out ‘[as a] business activity’. The same Court further highlights that recital 24 of PSD2 also implies that the directive’s framework should be confined to service providers who provide payment services as a regular occupation or business activity and provide payment service on a professional and regular basis.

The CJEU referred to a European Banking Authority Q&A, specifically 2020/5216 published on 18 March 2022 wherein the European Commission outlined that the receipt and forwarding of funds qualifies as a payment service and could be either a ‘money remittance’, or an execution of payment transactions in accordance with point 3 of Annex I to that directive.

Although the Court acknowledged in the background facts of this Q&A, it omitted any legal analysis of the money remittance criteria from its substantive rationale considering the narrow scope of the Dutch court’s preliminary question. Nevertheless, the Court established a broad underlying principle namely that intermediary services whose primary business is offering non-payment products (such as legal performance guarantees) fall outside PSD2’s regulatory scope when fund transfers through ordinary bank accounts are merely incidental to that main service.

When assessing whether an activity constitutes the “execution of a credit transfer” the assessment must consider:

• who holds the payer’s payment account;
• in whose name the relevant accounts are held;
• who technically and legally executes the transfer;
• whether the intermediary maintains payment accounts for its customers;
• whether the provision of payment services forms part of the intermediary’s regular occupation or business activity; and
• whether the movement of funds constitutes a standalone service or forms part of a separate commercial arrangement as an ancillary activity.

The judgment may be relevant to businesses operating escrow arrangements, security deposit structures, online marketplaces and other models involving the conditional release of funds. It does not, however, create a freestanding exemption applicable to all such arrangements.

This CJEU judgment provides legal clarity for commercial intermediaries across the EU by confirming that ancillary handling of funds, and instruction mechanisms do not automatically drag these arrangements into the rigid scope of payment licensing. By layering on the concept of “by way of business” – specifically requiring that a payment service be provided as a regular occupation or standalone commercial end in itself – the CJEU elevates the test beyond mere repetition of the service. The ruling clarifies that even if an intermediary handles funds repeatedly or systematically, such activity remains outside the regulatory perimeter if the fund transfers are purely incidental to a primary, non-payment commercial purpose.