The Future of Payments in The Netherlands

One particularly innovative area in payments is The Netherlands, where cash has been in steady decline for decades and where card payments have been leapfrogged by going straight to account-based payments with their extremely popular online banking iDEAL payment solution beloved by consumers, merchants and many banks. A triple-play that few payment solutions have been able to replicate.

Now that Open Banking has become obligatory, allowing consumers to pay directly from their accounts – without fees, without entering long 16-digit codes – and allowing merchants to receive funds instantly and irrevocably, a new iteration of iDEAL is being created. But how will iDEAL 2.0 fit into the pan-European developments outlined in the previous blog? Just changing internal structures and making an improved mobile experience cannot be the sole answer.

Possible Futures for iDEAL

Maybe iDEAL 2.0 will instead be the basis for new value-added services.. Maybe iDEAL 2.0 will provide a single API hub so that all Dutch banks can be accessed simply for PSD2/Open banking. The single hub could provide not only basic compliance APIs but also value-added APIs to allow banks to be integrated as lenders in other ecosystems, to provide credit scores to merchants (“instant scoring for instant finance”), to provide e-mandates/e-signing services and the many more monetisable APIs in the new connected economy. This is a great opportunity for iDEAL to create this new API ecosystem and build on the foundation of Open Banking standards like the Berlin Group protocol. iDEAL 2.0 could provide bank-based e-Identity along the Nordic model which is sorely needed if we are not to build all our digital economy on the 1970’s technology of passwords. Finally, iDEAL could be the transport mechanism for the only thing that counts now – Data.

So, many ideas exist on how iDEAL can become an even greater success than before. Let us hope that some of these ideas are exploited and we will not just see an internal technical restructuring with proprietary protocols or just yet another newly shaped payment button.

Europe has proven that it can create large, even global schemes, having repeatedly created many global successes like GSM, allowing the many players in the telecom world to interoperate. This is also a generic scheme which not only allows telephony but also many value-added services like messaging, data, identity and more. GSM is a worldwide success and shows that two-sided markets can be made to work without building single centralized platforms and creating monopolies.

As we can see there are some clear lines in the future: payment will be instant, connected, less-cash, bank-based, API-driven, mobile, cheap, easy, open, more secure, less dependent on others … but the road from where we are now to the pan-European goal we are looking towards still has a few challenges. We’re now only in Season 3 of the box set, whereas AI-driven lifestyle apps are probably Season 8 – there is still a long way to go and much progress to make.

Let us work together to get to the future – there are some excellent examples which show how this can be done.

In our next blog we will explain how equensWorldline will facilitate acquiring banks to become Ideal 2.0 compliant and how Open Banking will enrich the online shopping experience.

[1] in contrast to the rest of Europe where the number of € banknotes in circulation has more than trebled since introduction of Euro, and the value of € banknotes in circulation since introduction has quintupled … cash growth being particularly high in the last few years.
Source: European Central Bank (ECB)