A step toward an ancillary services exception? The ECJ’s ruling in Betaal Garant

Following our earlier analysis of Advocate General (AG) Campos Sánchez-Bordona's Opinion in Betaal Garant Nederland CV v De Nederlandsche Bank NV (Case C-51/25), the European Court of Justice (ECJ) delivered its judgment on 16 July 2026. In addressing a fundamental question concerning the outer limits of EU payment services regulation, the ECJ confirmed that the receipt and forwarding of client funds under a tripartite guarantee does not constitute a "payment service", and more specifically a "credit transfer", thereby largely following the position adopted by the AG.

I. Background

As outlined in our previous post, the dispute arose when the Dutch Central Bank (DNB) ordered Betaal to cease offering its construction security deposit product. The DNB argued that holding client funds in a fiduciary account and subsequently transferring them to a contractor upon project completion constituted an unlicensed "credit transfer". After the dispute worked its way through the Dutch courts, the matter was referred to the ECJ, which had to decide whether a service consisting of the receipt and onward transfer of funds by an intermediary constitutes a payment service — specifically the execution of credit transfers — under Article 4(3) PSD2, read together with point 3(c) of Annex I.

II. Summary of the ECJ ruling

The ECJ rejected the DNB's position, articulating a defence of the regulatory boundary based on three principal strands of reasoning:

1. Literal interpretation (“account-holding requirement”): Under Article 4(24) PSD2, a "credit transfer" requires the payment service provider to hold the payer's account. Because Betaal did not hold client accounts, instead relying on commercial banks to execute the transfers, the ECJ concluded that it was the client's bank, and not Betaal as intermediary, that was executing the payment service.
2. Contextual interpretation (“ancillary test”): The strict authorisation, prudential and liability regimes under PSD2 are designed for entities whose "regular occupation" is processing payments. Payment services must be carried out as a business activity. The ECJ ruled that these significant regulatory burdens "are not justified if transfers of funds are made only in order to carry out another service offered as the primary service".
3. Teleological interpretation (“The limits of consumer protection”): While PSD2 pursues a high level of consumer protection, it also seeks to ensure legal certainty and consistent application. The ECJ held that the objective of consumer protection "cannot, in itself, alter the scope of the provisions of that directive or extend the scope of the relevant concepts [...] by going beyond the wording of the definitions".

The ECJ therefore concluded that PSD2 "excludes from its scope providers of security deposit services which use, in an ancillary manner, payment services offered by other providers providing such services as a primary service in the exercise of their regular occupation or business activity".

III. ECJ v AG Opinion: a restrained endorsement

Although the ECJ reached the same outcome as the AG, its judgment is markedly more restrained. On several points, the ECJ either declined to follow the AG's broader reasoning or omitted it entirely.

1. The money remittance question was left unaddressed. The AG also considered whether Betaal's activity might instead qualify as "money remittance", despite acknowledging that this was "not a provision that is referred to in the order for reference". He rejected that classification on the grounds that money remittance is characterised by immediacy and unconditional transfer, neither of which was present given that the funds might never reach the contractor in the event of a dispute. The ECJ, by contrast, confined itself strictly to the credit transfer question referred and made no explicit ruling on money remittance. While this leaves scope for regulators to revisit the issue, the ECJ's broader contextual reasoning concerning primary and secondary services militates against any recharacterisation of the service as money remittance (see also recital 47, which notes that Betaal "does not itself transfer funds").
2. The professions analogy was adopted only in a narrower form. The AG devoted significant attention to the parallel with notaries and lawyers, who hold and transfer client funds without requiring a PSD2 licence, and argued that it would be inconsistent not to extend similar treatment to Betaal. The ECJ engaged with this argument only to a limited extent. It emphasised that Betaal's service serves as a statutory alternative to depositing a security deposit with a notary under the Dutch Civil Code, and observed that nothing in PSD2 suggests an intention to bring notarial services of this kind within the scope of the payment services regime.

IV. Impact of the ECJ ruling

The ECJ's judgment has important implications for financial regulation across the EU, introducing much-needed limits to expansive interpretations of payment services legislation by national supervisors.

In particular, the German supervisor BaFin has historically adopted a broad interpretation of payment services, particularly in relation to money remittance, influenced by the Lieferheld judgment (see our previous blog). The ECJ's recognition that PSD2 excludes providers who use payment services "in an ancillary manner" may prompt a re-evaluation of certain BaFin classifications relating to escrow and platform models.

For market participants, the key challenge will be demonstrating that payment activities are genuinely ancillary to their core service offering. Although the ECJ did not identify specific criteria, the AG attached considerable significance to the fact that Betaal's fund transfers were neither automatic nor immediate, but were deferred and contingent upon client satisfaction. By contrast, platforms that process instant and automated payment flows may find it more difficult to demonstrate that such activities are merely ancillary to their principal business.

As the EU finalises the Third Payment Services Directive and the accompanying Payment Services Regulation, the judgment establishes an important judicial baseline. It is now for the legislature to determine whether this ancillary services boundary should be codified or narrowed through statutory amendment. Either way, Betaal confirms that PSD2 has textual and systematic limits that cannot be expanded solely through regulatory interpretation or reliance on consumer protection objectives.

We would be pleased to discuss the implications of the ruling in more detail.

A more detailed analysis will be published in Recht der Zahlungsdienste (RdZ), Volume 3, on 29 October 2026.