Court of Justice ruling in Betaal Garant: The limits of the concept of payment services | In Principle

In its judgment of 16 July 2026 in C‑51/25, Betaal Garant, the Court of Justice of the European Union considered the meaning of the term “payment service” under the Payment Services Directive (PSD2). The interpretation adopted by the court tends to limit the scope of services regarded as regulated payment services. But whether the ruling made in reference to a specific service can be treated as a general principle remains an open question.

The case before the Court of Justice involved the operations of the Dutch company Betaal Garant. The company provided security deposit services to individual investors securing their payment of fees under construction contracts. Under the Dutch Civil Code, the investor must pay the contractor’s fee only upon completion of specific phases of construction. However, to protect the contractor’s interests, the parties may agree that to secure the payment of the final instalment, the investor may pay a specified sum of money into a notarial escrow, or provide an “equivalent guarantee.”

This latter type of security, in the nature of a security deposit, was the subject of Betaal Garant’s business. First the investor and the contractor would conclude a tripartite security deposit agreement with Betaal Garant. Then the investor would deposit the amount of the security by a transfer to the bank account of a foundation affiliated with Betaal Garant. Upon completion of construction, Betaal Garant would be notified that the works were performed satisfactorily, and then the foundation would pay out the last instalment of the contractor’s fee, by transferring the funds from the foundation’s account to the contractor’s account. This service was performed for a fee, the costs of which were borne by both the investor and the contractor.

The Dutch central bank (DNB) found that Betaal Garant was providing payment services without the required licence. Consequently, DNB ordered the company to cease this activity and to pay a fine. Betaal Garant filed several unsuccessful challenges to the DNB decision, until reaching the Dutch Supreme Administrative Court for Trade and Industry. That court submitted a request for a preliminary ruling to the Court of Justice, seeking to determine whether the service provided by Betaal Garant should be regarded as “execution of credit transfers,” i.e. one of the types of payment services referred to in PSD2.

How did the Court of Justice approach the case?

In considering the request for a preliminary ruling, the Court of Justice identified three essential issues. First it focused on the literal definitions of “payment transaction” and “credit transfer” under PSD2. The definition of “payment transaction” essentially refers to a transfer of funds between payer and payee “irrespective of any underlying obligations between the payer and the payee.” And under the definition of “credit transfer,” it is essential for the existence of this type of service that the payment service provider holds a payment account for the payer.

Considering this linguistic analysis, the Court of Justice found that fund transfers related to the security deposit service were not performed by Betaal Garant as such, but by banks: the bank of the customer (investor) and the bank of the foundation associated with Betaal Garant. The security deposit agreement between Betaal Garant, the investor, and the contractor was not relevant for those transfers.

Based on the documentation in the case, the court also recognised that neither Betaal Garant nor its associated foundation held payment accounts for customers. The court additionally pointed out that the “equivalent guarantee” service itself was regulated in the Dutch Civil Code as an alternative to a notarial escrow. However, that “equivalent guarantee” service was neither defined nor regulated by PSD2, and thus the directive was not applicable to the service.

The second issue examined by the Court of Justice was related to how the business of payment service providers is regulated under PSD2. The directive sets rigorous requirements for payment service providers (e.g. involving licensing, prudential supervision, and liability to customers) which in the court’s view are justified by the payment service providers’ direct participation in the transfer of funds. The ruling also relied on one of the recitals in PSD2, under which the directive should apply to entities “who provide payment services as a regular occupation or business activity.”

Assessing the service performed by Betaal Garant in this context, the court did not find a basis for applying such far-reaching requirements. The court found that the transfers in question were ancillary and were performed solely for the purpose of providing another principal service, namely the “equivalent guarantee” service.

In the final portion of its ruling, the Court of Justice addressed the aims sought to be achieved by the Payment Services Directive. The main aim is to ensure a high level of consumer protection. But in the court’s view, furthering this objective cannot in itself “alter the scope of the provisions of that directive or extend the scope of the relevant concepts contained in those provisions by going beyond the wording of the definitions of those concepts.” Such an approach could not be reconciled with the further aim of the directive of providing legal clarity and predictability in the area of payment services.

Consequently, the Court of Justice held that the service provided by Betaal Garant under the facts presented does not constitute a “payment service,” and more specifically does not constitute “execution of credit transfers” within the meaning of PSD2.

Summary and conclusions

In C-51/25, Betaal Garant, the Court of Justice essentially held that a company intermediating in the transfer of funds is not engaged in “execution of credit transfers” if the transfer is ancillary to another principal service provided by the company.

It remains an open question to what extent this interpretation may be treated as a general principle that ancillary activity would not fall within the definition of “payment services.” Numerous arguments made by the court speak for this approach—arguments that refer not only to “execution of credit transfers” specifically, but more broadly to the rules set forth in PSD2. This is also confirmed by the earlier advocate general’s opinion in the case, presenting reasoning with respect to the service of “money remittance” similar to that ultimately applied by the court with respect to credit transfers.

But the peculiarities of the case may stand in the way of extending the application of the ruling: the security deposit agreement in question was regulated in the Dutch Civil Code, and the transfers of funds were made by banks that were subject to the Payment Services Directive. Consequently, the refusal to apply the directive to Betaal Garant did not mean that customers entrusting their funds to that company were left unprotected. It will be worth observing in this context how national supervisors, including the Polish Financial Supervision Authority, apply the court’s ruling in practice.

Rafał Kuchta, adwokat, FinTech practice, Wardyński & Partners