ECJ confirms AG opinion on boundary between payment services and e-money issuance

A ruling from the European Court of Justice helps to draw a line between the regulated activities of providing payment services and issuing electronic money. In ABC Projektai UAB v Lietuvos bankas (Case C-661/22) the ECJ follows the Advocate General’s opinion from last year. The conclusion is that a payment institution should not find itself accidentally issuing e-money where it receives funds which are not accompanied by a payment order, even if those funds remain available in a payment account for longer than expected.

In this case a Lithuanian payment institution received funds from customers who had not indicated the purpose of the payments that they wished to make. This resulted in the firm holding the funds for longer than the time required to execute the payment transactions before eventually refunding the customers some time later. The ECJ was asked whether these services should be regarded as services linked to the issuance of e-money.

The ECJ says that they should not. Where a customer puts funds at a payment institution’s disposal and those funds are credited to a payment account held by that institution in the customer’s name, those transactions should be regarded as relating to the operation of a payment account and so form part of a payment service. The ECJ confirms that this position does not change merely because the funds are not accompanied by a payment order.

By contrast, the issuance of e-money is distinct from a mere entry in a payment account. In other words, e-money is an asset separate from the funds received from the customer. The ECJ notes that e-money must have been issued beforehand and be electronically “stored”.

Firms should take care only to receive funds from customers which are for the purpose of executing payment orders, even if those orders are not immediately specified. To avoid falling into the business of “taking deposits” – which would be beyond the scope of payment institutions’ licence – the accounts to which the funds are credited must be used exclusively for the execution of payment transactions.