Could you briefly summarise the evolution of the Dutch e-payments market since iDEALs issuance in 2005 and the most important disruption changing the ecosystem?
iDEAL quickly became the payment method of choice for all sorts of digital payments in the Netherlands, including ecommerce, ticketing, invoicing, charity donations and top-ups. iDEAL is by far the preferred payment method for Dutch consumers when buying online. In its 10 years of existence, the payment method has grown significantly each year, with figures outperforming the growth of online retail.
Since 2012, iDEAL payments can be done from a mobile phone / mobile banking app with a simple 5-digit pin code. Conversion rate for iDEAL payments is 85% on web and 90% on mobile. iDEAL ranks fifth in the list of indispensable brands by EURIB (European Institute for Brand Management) for the past years, and first among the financial brands. With its market share of 56%, iDEAL is the payment method of choice for Dutch consumers. It is considered the easiest and most secure online payment method available.
Dutch market shares for e-commerce payment methods
Foreign merchants increasingly recognise this preference of Dutch payers: over 20% of all iDEAL payments are done at a cross-border merchant. Based on the same business and operating model and message protocol, an e-mandate scheme (Incassomachtigen) and an e-identity scheme (iDIN) have been developed.
In terms of regulation, how does the PSD2 affect iDEALs business agenda?
PSD2, in particular XS2A (access to the account), increases the opportunities for newcomers in the e-payments space.
XS2A payments lack some aspects that are seen as important in e-payments, though. These aspects include: a strong cooperation between all parties, a uniform message standard, governance model for product development, change management and stakeholder involvement, brand and logo. Cooperation contributes to low transaction costs in the payment chain (an often forgotten point in the payments industry and in innovation in particular).
Payment methods need brand loyalty, ease-of-use and trust with payers in order to attain the reach and conversion expected by merchants. This makes iDEAL attractive for newcomers in the e-payments space.
Could you explain the security mechanism behind iDEAL?
The payment authorisation by the customer is performed in the familiar, secure environment of the payer’s bank. When shopping on a mobile phone, this means that the payment can be entirely authorised in the secure mobile banking app. The iDEAL protocol is the same for both browser-based and mobile interactions.
This allows for a smooth user experience with the shopping environment (app or mobile-website) and the mobile banking app. This operating model has several advantages:
• payers are already familiar with their mobile banking app and they do not have to install a new – yet unknown – app;• it allows for the best customer experience possible, with as few authorisation codes as possible, because the risk-monitoring is done fully in the sphere of the payer’s bank.
Is iDEAL ready for a EU-wide expansion journey? What could be the main impediments to doing so?
iDEAL is fully based on standard SEPA Credit Transfer. iDEAL is available to all merchants that want to accept payments from Dutch consumers. iDEAL is accepted at a large number of international merchants, and reaching over 60 countries, accounting for over 20% of all iDEAL transactions.
iDEAL is an open scheme, with no barriers for entrance. Every bank or payment institution can join the scheme. We are very happy that, in addition to eleven banks, over 60 payments institutions participate in the scheme, of which two thirds are active abroad.
We are always open for cooperation with other e-payment schemes as well as with payment service providers. Cooperation can range from technical interoperability (ISO 20022), business and operating model to brand and logo.
What payments trend do you foresee dominating the EU payments market by 2020 and why?
That will be the introduction of Instant Payments, especially for low value payments that currently are in the scope of separate solutions such as stored-value wallets. Instant payments will:
• lessen the distinction between P2P and C2B payments; both can be done with the same payment instrument;• reduce the advantage of card payments over ACH payments; the immediate confirmation and certainty of a card payment are matched;• increase the need for strong, trusted payment brands; increasing digital payments require increasing trust with consumers.
What are the top three factors impacting Dutch consumers’ online shopping habits in the near future?
1. Mobile, mobile, mobile
a. Use of mobile phones for orientation, selection and payment in online commerce as well as physical retail.
2. Identification
a. New methods for identification of customers in physical and online situations;b. Introduction of e-identification solutions, such as iDIN; c. Opportunities for combined propositions identification + payment: check-out solutions where identifying personal details (name, delivery address, age) can be combined with a payment in a single transaction.
3. Convergence online and physical retail
a. iDEAL facilitates online payments in the real world with the introduction of iDEAL QR payments. This is a secure way of initiating an iDEAL payment by scanning a QR code with a mobile phone; b. Typical use cases for iDEAL QR are:
i. charity donations through an iDEAL QR code printed on flyers or on a collection box; ii. transferring authorisation for a web shop payment from the computer screen to a mobile device, benefiting as a merchant from the higher conversion rate (90%) of iDEAL Mobile transactions; iii. invoice payments with the iDEAL QR code printed on paper or displayed on a screen;
c. With an iDEAL QR app available in the Google and Apple app stores, the advantages from these type of applications are immediately available to all users of iDEAL Mobile.
About Piet Mallekoote
Piet, CEO at Dutch Payments Association, has a degree in economics at the University of Amsterdam. After studies, Piet joined the Dutch Central Bank, in which he held several senior management positions in economic research, economic and monetary policy and payments, lastly as a member of the Payments and Settlement Committee of the Eurosystem.
In 2004 Piet joined Currence, the then newly established Dutch entity for ownership of the Dutch collective payment schemes, including iDEAL. He became its CEO in 2006.
In 2011 Piet became CEO of the newly founded Dutch Payments Association whose members are payment banks and payments institutions in the Netherlands, combining the two CEO positions.
Piet chairs several steering and stakeholder groups on innovative payments in the Netherlands. For example, the Instant Payments programme, iDEAL innovations and the national digital banking identification and authentication programme.
In his capacity as CEO he is also involved in other innovations in Dutch Payments landscape and participates in a lot of national and international meetings on payments.
About iDEAL
iDEAL payment system allows consumers to make online purchases in a swift and secure way within the familiar environment of their own bank. iDEAL is based on existing infrastructure with any bank or payment institution, which implies they can capitalise on their online banking application and customer base. In the Netherlands iDEAL is by far the most popular online payment method. Any bank or payment institution can obtain an iDEAL licence from scheme owner Currence, through the Dutch Payments Association.
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