New Judgment of the Court of Justice of the EU on the Boundaries of Regulated Payment Services

The concept of a payment service is defined in the Annex to PSD2 and covers several categories, such as the execution of credit transfers, services enabling the withdrawal or deposit of cash, money remittance and other types of payment services.

Whether a particular model qualifies as a payment service is of fundamental importance from the perspective of regulation. This is decisive, in particular, for determining whether the activity is subject to an authorisation requirement by the supervisory authority (in the Slovak context, this is the National Bank of Slovakia).

What was the subject matter of the proceedings?

The proceedings concerned a model in which the company Betaal Garant received funds from clients into an account with a bank as a guarantee and/or security deposit for an instalment of the purchase price for the construction of a building. Upon proper completion of the construction, Betaal Garant instructed the bank to transfer the amount, reduced by a fee, to the account of the contractor.

The central bank of the Netherlands classified these operations as a payment service and imposed a sanction on Betaal Garant on the ground that it had been providing payment services without the required authorisation. After proceedings before the Dutch authorities, the case ultimately reached the Court of Justice of the European Union.

What conclusions did the Court of Justice of the European Union reach?

The Court of Justice of the European Union relied on the definition of a “credit transfer” in PSD2, according to which a credit transfer means a payment service for crediting a payee’s payment account with a payment transaction or a series of payment transactions from a payer’s payment account by the payment service provider which holds the payer’s payment account, based on an instruction given by the payer. It emphasised that the payment service of executing credit transfers covers only the activity of the entity which holds the payer’s payment account and technically carries out the transfer.

In the case under consideration, the transfers were executed and the accounts were held by banks, not by Betaal Garant. The service of Betaal Garant was therefore classified as a specific security/guarantee activity under Dutch law, which does not fall within the scope of PSD2 as a “credit transfer” payment service. However, the Court of Justice of the European Union did not state whether this model could fall under another category of payment services, such as “money remittance”, since this was not the subject matter of its proceedings on the request for a preliminary ruling.

The Court of Justice of the European Union also pointed out that the principal activity of Betaal Garant is the provision of an escrow‑type guarantee and/or security‑deposit service, not the provision of payment services as such. Ancillary services in which the handling of funds is only secondary to another service should not automatically be regarded as a separate provision of payment services within the meaning of PSD2.

At the same time, the judgment makes it clear that its conclusions are tied to the specific facts and contractual set‑up of the model in question and do not constitute a general exemption for all guarantee or security‑deposit instruments or for other categories of payment services.

Impact on Slovak legislation and practice

Slovak legislation on payment services, based on the PSD2 framework, is founded on an exhaustive list of activities which may be regarded as payment services and precisely defines payment service providers.

In the light of the judgment, there is scope for a less strict interpretation of what still is and what no longer is a payment service, in particular as regards situations where the handling of clients’ funds has rather the nature of an ancillary service.

Since, with regard to the judgment, we have not yet observed a specific position of the National Bank of Slovakia, it is not possible to predict with precision how the Slovak regulator will approach these issues when assessing specific models in practice. We will therefore closely monitor the impact of this judgment on the interpretation of the concept of a payment service in the Slovak legal environment and on the decision‑making practice of the National Bank of Slovakia.