Payment services perimeter: the money remittance question Betaal Garant leaves open
In short: The payment services perimeter question the European Court of Justice answered in Case C-51/25 Betaal Garant, decided 16 July 2026, was about credit transfers alone: an intermediary which neither executes a transfer nor holds the payer’s account makes no credit transfer under PSD2. It did not decide whether the activities were money remittance, and in the United Kingdom the money remittance definition in regulation 2(1) of the PSRs 2017 is drawn more widely.
A business that receives a customer’s money and pays it on to a third party looks, on the face of it, as though it is making a payment for that customer. The Court of Justice of the European Union has now held that it is not a credit transfer, where the money passes through an account the business does not hold for the customer and banks make the transfers. Credit transfer was the only issue the Court was asked about. For a firm scoping a product for the United Kingdom, the harder question is the one left open.
What PSD2 defines as a credit transfer
Article 4(24) of Directive (EU) 2015/2366 (PSD2) defines a credit transfer as a payment service for crediting a payee’s payment account, from a payer’s payment account, by the payment service provider which holds the payer’s payment account, on an instruction given by the payer. Read with the definition of “payer” in Article 4(8), the last two elements are characteristic and necessary. A firm holding no payer account, and giving no instruction as that account’s provider, executes no credit transfer within point 3(c) of Annex I.
The facts were ordinary. Betaal Garant provides security deposits for Dutch building contracts under a tripartite agreement between client, contractor and itself. The client pays a deposit of roughly six per cent of the contract price into the payment account of a separate linked foundation, and it goes to the contractor within five working days of both parties confirming completion. De Nederlandsche Bank, acting on a request from a consumer body, imposed a penalty of 10,000 euro a week capped at 50,000 euro for carrying on the activity of a payment service provider without authorisation.
Two transfers took place and banks made both. The client’s bank moved money out of the client’s account into the foundation’s account, and the foundation’s bank later moved it on to the contractor. Betaal Garant held no account for any client, executed neither transfer, and was never the payer’s provider. The tripartite agreement does not change who made those transfers, and Article 4(5) explains why it cannot: a payment transaction is the act of placing, transferring or withdrawing funds irrespective of any underlying obligation between payer and payee.
Business activity, the notary comparison and the limits of scope
The Court considered whether this was a business activity: Article 4(3) requires the Annex I activities to be carried out as a business activity, and Article 1(1) lists the categories of provider PSD2 addresses. Betaal Garant falls into none of them. It sells an equivalent guarantee within the meaning of Article 767 of Book 7 of the Netherlands Civil Code.
The Court also considered the comparison with notaries. The equivalent guarantee is a statutory alternative to lodging the retention with a notary, and the Court found nothing in PSD2 to suggest that notaries providing that same deposit service were meant to need authorisation. Before the Court, De Nederlandsche Bank accepted that PSD2 does not apply to notaries and lawyers who hold client funds. A rule that catches Betaal Garant but not a notary doing the identical thing is hard to defend.
The Court considered whether consumer protection brought the activity within scope, but concluded it did not, because it cannot widen a defined term beyond its wording without defeating the legal clarity PSD2 also seeks. Paragraph 52 concludes that providers of security deposit services which use payment services supplied by others, ancillary to their own primary service, fall outside the scope of PSD2. No exclusion in Article 3 was applied, because none was needed, and no ancillary services exemption was created. That second limb is being read too widely: paragraph 46 says the authorisation, prudential and liability requirements are not justified where funds move only to deliver another service as the primary one, a purposive gloss on scope with no test attached.
The issues the Court did not decide
The referring court asked only about Article 4(3) with point 3(c) of Annex I, so the Court ruled on credit transfers alone, and the Advocate General said there was no reason to rule on money remittance because nobody had referred it. Some commentators read paragraph 53 more widely, on the Dutch and German texts. The narrower reading is better supported by the terms of the reference and the terms of the answer, and the point matters, because money remittance is a separate listed service in its own right.
Regulation 2(1) of the UK’s Payment Services Regulations 2017 defines money remittance as a service for the transmission of money, or any representation of monetary value, without any payment accounts being created in the name of the payer or the payee, where funds are received from a payer for the sole purpose of transferring a corresponding amount to a payee, or are received on behalf of and made available to the payee. Read that against the finding that took Betaal Garant outside the credit transfer activity. The absence of a payment account in the customer’s name is the reason there was no credit transfer, and the same absence is a precondition of the money remittance definition, not an obstacle to it.
The answer, that money remittance describes cash businesses, does not hold. At PERG 15.3 Q22 the FCA says the definition is technology neutral and may apply to business models where funds are received and transferred electronically, whatever its cash origins. The bill payment carve-out at Q25 is narrower than it looks: the FCA puts a firm outside the perimeter where its receipt of the money settles the payer’s debt to the payee, which is not the position where money is held back precisely so that the payee is not yet paid.
| Credit transfer, Schedule 1 Part 1 paragraph 1(c)(iii) | Money remittance, Schedule 1 Part 1 paragraph 1(f) | |
|---|---|---|
| Payment account in the customer’s name | Required, and the provider must hold it | Must not exist, for either payer or payee |
| Who carries out the act | The provider holding the payer’s account, on the payer’s instruction | The provider transmitting the money |
| Decided in C-51/25 | Yes, outside the definition | No, not referred and not ruled on |
| FCA guidance to work through | — | PERG 15.3 Q22 and Q25; PERG 15.5 Q33A on escrow |
The FCA guidance a UK analysis would work through
Regulation 2(1) also puts the business-activity qualifier on the face of the operative definition, where PSD2 spreads it across Article 4(3), Article 2(b) and recital 24. The FCA reads that qualifier as an ancillary test. At PERG 15.2 Q9 it says the services must be provided as a regular occupation or business activity “in their own right and not merely as ancillary to another business activity”, and names five cases it would not generally expect to be caught, the first being solicitors and broker dealers operating client accounts alongside their main professional work. That is the notary point from the judgment.
The ancillary test is a qualifier on a listed activity, so it can take a firm outside the perimeter but never bring one in, and it arises only once a listed service has been identified. The FCA has also addressed the nearest fact pattern directly. At PERG 15.5 Q33A it describes escrow as holding funds pending fulfilment of a condition or confirmation by the payer, says a platform providing escrow as a regular occupation or business activity is likely to need authorisation, and adds that “an escrow service may be a regular occupation or business activity of a platform even if it is provided as part of a package with other services”. It also notes that escrow providers do not usually have authority to negotiate or conclude sales, so the commercial agent exclusion in Schedule 1 Part 2 does not assist them.
Implications for firms documenting a perimeter position
Carrying on a payment service without authorisation or registration is an offence under regulation 138 of the PSRs 2017, so a board cannot leave the perimeter question open. A European Court of Justice judgment handed down after 11.00 pm on 31 December 2020, IP completion day under section 39(1) of the European Union (Withdrawal Agreement) Act 2020, does not bind a court here (European Union (Withdrawal) Act 2018, section 6(1)(a)), though a court may have regard to it (section 6(2)). PERG binds nobody either, and is not law, but it is what the FCA applies.
What the judgment settles is narrow. It supports the position that an intermediary which holds no customer account and executes no transfer makes no credit transfer. It doesn’t change the analysis of money remittance, and a perimeter analysis there depends on the documents: the account structure, the revenue model, and whether the customer contract holds money back so the payee is not yet paid. Our regulatory perimeter and market entry page sets out what a scoping engagement covers, and our authorisation and licensing page the route if the answer is yes.
Perspective
I read the credit transfer holding as confirmation of the orthodox position, and the more interesting part of the judgment is what it doesn’t address. In perimeter scoping, the analysis most often goes wrong where a commercial description of the arrangement, that “the money is held by us and released by us”, becomes the legal characterisation without anyone testing it against the account structure or the revenue model. A firm reading this judgment as clearance would be reading a credit transfer answer onto a money remittance question.
For advice on whether a payment flow falls inside or outside the payment services perimeter, contact Rob Bratby at Bratby Law.
