This is the question currently dealt with in front of the European Court of Justice in Case C-661/22.
In the context of a request for a preliminary ruling from the Supreme Administrative Court of Lithuania, the Advocate General delivered his opinion on 5 October 2023 (“Opinion”).
The said request is the result of a legal dispute between a Lithuanian payment institution (“PI”) and the Bank of Lithuania, which revoked the licence of said institution in April 2020. One of the grounds put forward by the Bank of Lithuania was that the PI had retained customers’ funds for longer than the time required to execute payment transactions or for technical reasons, which in the view of the Bank of Lithuania amounted to the issuance of electronic money, although the PI claims that it advised its customers of the need to send payment orders and that, if it did not receive a payment order, it would proceed to return the funds, which it claims to have done.
As a reminder,
- the “time required for the execution of payment transactions” is determined in article 83(1) of the second payment service directive (“PSD2”) as starting from the receipt of the amount of a payment transaction and ending by the end of the following business day, and
- the “time of receipt” is the time when the payment order is received by the payer’s payment service provider in accordance with article 78(1) of PSD2.
Arguments of the Advocate General
In the Opinion, the Advocate General does not share the position of the Bank of Lithuania described above and counters that “the holding, by a payment institution, of funds received from a user is, in principle, an activity which entails the operation of a payment account”. In his view, “that characteristic is not lost where those funds are held for longer than the statutory period for execution of payment orders against them”.
The Advocate General further argues that the execution period described above starts to run once the payment order is received and not when the payment account holder transfers funds to that account. In other words, the period does not start to run on receipt of funds if the payer has not issued a payment order from those funds, as can be seen from his Opinion.
A second set of arguments put forward by the Advocate General relates to the question of whether the relevant activity can be classified as the issuance of e-money. Again, the Advocate General’s Opinion does not share the view of the Bank of Lithuania, mainly because it considers that the decisive criteria for the issuance of electronic money are (i) the requirement of a specific agreement, (ii) the requirement of prepayment and subsequent control of the funds, (iii) the electronic or magnetic storage of electronic money, or (iv) the acceptance of electronic money by third parties.
It will be interesting to see how the outcome of this case before the European Court of Justice will affect the future approach to electronic money. Will it be possible in future for payment institutions to hold funds on their payment accounts for a longer period and in the absence of a payment order? And if so, what would this “holding period” be?
As we have seen, the current proposal for a third Payment Services Directive (PSD3) envisages the inclusion of Electronic Money Institutions as a sub-category of PIs and the subsequent repeal of the existing E-money Directive (Directive 2009/110/EC), but does not specifically address the issues raised above.
What the Opinion also says
In addition to the core text of the Opinion, it may be worth highlighting two of its footnotes:
- First, footnote 30 refers to a reply given by the European Commission back in 2012 and which can be found in the EBA Single Rulebook Q&A which seems to be aligned with the Advocate General’s position by confirming the ability of a payment account operated by a PI to hold a credit balance in readiness for future payment transactions.
- Second, footnote 17 states that there are many companies today offering e-money services, including Apple Pay and Google Pay. From a regulatory perspective, neither of these two products is currently issued as e-money by a relevant e-money institution, and under the current PSD3 proposal they are considered as a “digital pass-through wallet” and a technical service not subject to authorisation.
 Opinion of Advocate General M. Campos Sánchez-Bordona delivered on 5 October 2023, paragraph 25
 Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market
 Opinion of Advocate General M. Campos Sánchez-Bordona delivered on 5 October 2023, paragraph 45