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  1. Analysis
May 19, 2014

Country Survey: the Netherlands

Despite the European sovereign debt crisis, the Netherlands card payments channel recorded marginal growth both in terms of volume of cards and transaction value, between 2009-2013. According to the central bank, De Nederlandsche Bank (DNB), post-recession growth potential in the banking sector exists in terms of electronic payments, both from consumers and businesses, reports CI

By Verdict Staff

Despite the European sovereign debt crisis, the Netherlands card payments channel recorded marginal growth both in terms of volume of cards and transaction value, between 2009-2013. According to the central bank, De Nederlandsche Bank (DNB), post-recession growth potential in the banking sector exists in terms of electronic payments, both from consumers and businesses, reports CI

In terms of the number cards in circulation, the channel posted a review-period CAGR of 0.75%. The growth was primarily driven by charge cards and prepaid cards. The channel is expected to post a CAGR of 2.06% over the forecast period (2014-2018), as the Dutch economy gradually recovers.

The Dutch cards and payments industry presents positive growth potential

The Dutch card payments channel grew moderately both in terms of value and volume during the review period. In terms of the number of cards in circulation, the channel grew from 58.8 M cards in 2009 to 60.6 M in 2013, at a CAGR of 0.75%. Although the charge cards category had the smallest channel share of 0.2% in 2013, it registered the highest review-period CAGR of 7.28%, followed by the prepaid and debit card categories.

In terms of transaction value, the card payments channel grew at a marginal CAGR of 0.87% during the review period from EUR148.4 Bn (US$206.2 Bn) in 2009 to EUR153.6 Bn in 2013. The channel is expected to post a forecast-period CAGR of 1.74%, from EUR154.4 Bn in 2014 to EUR165.4 Bn in 2018.

Growth of m-commerce, e-commerce and outbound travel to drive the card payments channel

The number of active internet users in the Netherlands is one of the highest in the eurozone. The growth of m-commerce in the Netherlands is also very strong, with more than half the country’s population owning a smartphone. Banks such as ING Bank, Rabobank and ABN Amro have partnered with various merchants and online retailers to provide secure payment facilities, enabling customers pay online or via mobile phones linked to bank accounts. Similarly, e-commerce recorded a review-period CAGR of 9.53% and is anticipated to post a forecast-period CAGR of 8.02%.

Despite the global financial slowdown, outbound travel expenditure among the retail and corporate segments increased during the review period from EUR14.8 Bn in 2009 to EUR15.9 Bn in 2013 and is anticipated to increase over the forecast period, fuelling the growth of the card payments channel.

Adoption of secure payment technology to drive card-based transactions

To offer more security to card users and enable them to conduct a greater number of on and offline transactions, several banks have taken steps to offer enhanced security features. Despite the initial reluctance to adopt Europay, MasterCard, Visa (EMV) cards, many banks and card issuers are now offering cards with chip-and-PIN technology. To conduct secure online payments, banks have implemented ‘MasterCard SecureCode’ and ‘Verified by Visa’ programs. With the adoption of advanced security features, the growth of card-based payments is projected to rise over the forecast period.

Embracing social media to benefit the cards and payments industry

The use of social media to reach out to target audience is rapidly increasing among Dutch banks. ABN Amro Bank uses the micro-blogging tool Twitter to communicate the latest developments concerning the bank’s products and service offerings are to answer any consumers’ queries. Similarly, the bank also has its own online forum, where customers are invited to share their thoughts and suggest possible improvements. ING Bank and Rabobank are present on social networking sites such as Twitter, Facebook, LinkedIn and YouTube. With the number of banks strengthening their presence in social media to engage with their target audiences, this will have a positive impact on the cards and payments industry.

  1. Analysis
April 29, 2014updated 04 Apr 2017 4:07pm

Country Survey: The Netherlands

A high amount of internet users in the Netherlands and a smartphone penetration rate of 50% means the country is primed for a shift to digital payments. The countries big banks are also embracing digital to speed the move away from cash. EPI reports

By EPI editorial

A high amount of internet users in the Netherlands and a smartphone penetration rate of 50% means the country is primed for a shift to digital payments. The countries big banks are also embracing digital to speed the move away from cash. EPI reports

Despite the European sovereign debt crisis, the Netherlands card payments channel recorded marginal growth both in terms of volume of cards and transaction value, during the review period (2009-2013). According to the central bank, De Nederlandsche Bank (DNB), post-recession growth potential in the banking sector exists in terms of electronic payments, both from consumers and businesses.

In terms of the number cards in circulation, the channel posted a reviewperiod CAGR of 0.75%. The growth was primarily driven by charge cards and prepaid cards. The channel is expected to post a CAGR of 2.06% over the forecast period (2014-2018), as the Dutch economy gradually recovers.

Positive growth potential

The Dutch card payments channel grew moderately both in terms of value and volume during the review period. In terms of the number of cards in circulation, the channel grew from 58.8 M cards in 2009 to 60.6 M in 2013, at a CAGR of 0.75%.

Although the charge cards category had the smallest channel share of 0.2% in 2013, it registered the highest review-period CAGR of 7.28%, followed by the prepaid and debitcard categories.

In terms of transaction value, the card payments channel grew at a marginal CAGR of 0.87% during the review period from EUR148.4 Bn (US$206.2 Bn) in 2009 to EUR153.6 Bn in 2013. The channel is expected to post a forecast-period CAGR of 1.74%, from EUR154.4 Bn in 2014 toEUR165.4 Bn in 2018

 

M-commerce, e-commerce and outbound travel to drive the card payments channel

The number of active internet users in the Netherlands is one of the highest in the eurozone. The growth of m-commerce in the Netherlands is also very strong, with more than half the country’s population owning a smartphone. Banks such as ING Bank, Rabobank and ABN Amro have partneredm with various merchants and online retailers to provide secure payment facilities, enabling customers pay online or via mobile phones linked to bank accounts. Similarly, e-commerce recorded a review-period CAGR of 9.53% and is anticipated to post a forecast-period CAGR of 8.02%. Despite the global financial slowdown, outbound travel expenditure among the retail and corporate segments increased during the review period from EUR14.8 Bn in 2009 to EUR15.9 Bn in 2013 and is anticipated to increase over the forecast period, fuelling the growth of the card payments channel.

 

Adoption of secure payment technology to drive card-based transactions

To offer more security to card users and enable them to conduct a greater number of on and offline transactions, several banks have taken steps to offer enhanced security features. Despite the initial reluctance to adopt Europay, MasterCard, Visa (EMV) cards, many banks and card issuers are now offering cards with chipand-PIN technology. To conduc t secure onl ine payment s , banks have implemented ‘MasterCard SecureCode’ and ‘Verified by Visa’ programs. With the adoption of advanced security features, the growth ofcard-based payments is projected to rise over the forecast period.

Embracing social media to benefit the cards and payments industry

The use of social media to reach out to target audience is rapidly increasing among Dutch banks. ABN Amro Bank uses the microblogging tool Twitter to communicate the latest developments concerning the bank’s products and service offerings are to answer any consumers’ queries. Similarly, the bank also has its own online forum, where customers are invited to share their thoughts and suggest possible improvements. ING Bank and Rabobank are present on social networking sites such as Twitter, Facebook, LinkedIn and YouTube. With the number of banks strengthening their presence in social media to engage with their target audiences, this will have a positive impact on the cardsand payments industry.

  1. Analysis
February 10, 2010

Country Survey: The Netherlands

As one of the most advanced electronic payment markets in the world, it is surprising that the Netherlands is one of the laggards when it comes to migrating to EMV But, as John Hill reports, rising incidents of fraud and a push for more efficient payments is accelerating payment card usage. The Netherlands is one of the most resilient European economies and has a flourishing financial market, as well as healthy payment card usage although the slow speed at which it is migrating to EMV has cost it as it employs more and more of its resources to combat fraud.

By Verdict Staff

As one of the most advanced electronic payment markets in the world, it is surprising that the Netherlands is one of the laggards when it comes to migrating to EMV. But, as John Hillreports, rising incidents of fraud and a push for more efficient payments is accelerating payment card usage.

 

The Netherlands is one of the most resilient European economies and has a flourishing financial market, as well as healthy payment card usage – although the slow speed at which it is migrating to EMV has cost it as it employs more and more of its resources to combat fraud.

The Dutch economy is noted for stable industrial relations, moderate unemployment and inflation, a sizable current account surplus, and its role as a European transportation hub.

The country has been one of the leading European nations for attracting foreign direct investment and is one of the four largest investors in the US. After 26 years of uninterrupted economic growth, the Netherlands’ economy – which is highly open and dependent on foreign trade and financial services – has been hard-hit by the global economic crisis.

Dutch GDP contracted 4.3 percent in 2009. Exports declined nearly 25 percent in 2009 due to a sharp contraction in world demand.

The Dutch financial sector, the seventh-largest in the world, was also hit hard by the global financial crisis, due in part to high exposure by some Dutch banks to US mortgage-backed securities.

Alongside this, migration to SEPA in the Netherlands has been slow in taking hold. Dutch banks introduced a service in 2009 that offers account holders an easy way to convert current Dutch account numbers to the new European numbers: the International Bank Account Number (IBAN) and the Bank Identifier Code (BIC).

Shift towards electronic retail payments

According to the Dutch central bank, De Nederlandsche Bank (DNB), the strong growth of electronic retail payment instruments seen in recent years in the Netherlands continued in 2008.

Not only POS payments, but also remote electronic payments are increasingly performed by both consumers and businesses.

Consumers are making less and less use of paper-based credit transfers and in-payment transfers (the Dutch ‘Acceptgiro’) to make remote payments, although the decline has levelled off over the past two years.

The shift towards electronic payments has sped up the payment system and brought down cost levels. The mass adoption of e-banking in the Netherlands is among the drivers of the growing use of iDEAL. iDEAL is a system unique to the Netherlands that links directly to cardholders’ accounts when they buy online.

PIN transaction chart

Consumers can use iDEAL to pay in advance for internet purchases via their banks’ internet banking services. It currently runs for customers who have online banking with ABN AMRO, ASN Bank, Fortis, Friesland Bank, ING, Rabobank, SNS Bank or SNS Regio Bank.

The number of iDEAL transactions rose to 28 million in 2008. Following a gradual start in 2005, 40 percent of all internet purchases in the Netherlands are now paid for with iDEAL. iDEAL is thus the largest system of its kind.

Currence, the country’s payment system regulator for the majority of payment systems, has said almost 85 percent of all web merchants in the Netherlands offer iDEAL, and two-thirds of all online buyers have used iDEAL and indicated that they will do so more often in the future.

Legal harmonisation of payments, effective as of November 2009, also applies to existing payment products. Strong growth in use of what are known in the Netherlands as PIN cards – which transfer money between bank accounts in real time – especially for small amounts, will result in considerable savings for the economy. iDEAL scores highly among users particularly because payments are safe, easy and fast.

In 2008, iDEAL was brought into line with European standards, and has become available for use in other countries. Despite considerable foreign interest, there have not yet been any definite undertakings for the use of iDEAL in other countries

According to Statistics Netherlands, more than half of the Dutch public uses some form of internet banking. Innovative solutions in other segments of the payment system also help to reduce the use of paper in the payment system.

In 2008 a number of Dutch banks introduced a standard enabling consumers to pay invoices through internet banking, the so-called Standards Digital Invoice (Standaard Digitale Nota – SDN).

The invoices of increasing numbers of organisations, such as insurers, telecom providers, water and energy suppliers and public authorities, may be both presented and paid through internet-based channels.The corporate sector, public authorities and other organisations still face high costs from the mass of paper invoices they send each other.

Debit dominates at the POS

At the POS, Dutch consumers increasingly pay by debit card – to the tune of 1.8 billion times in 2008, an increase by over 10 percent compared to 2007.

At the same time, numbers of over the counter cash withdrawals dropped in recent years, while the number of withdrawals from ATMs stabilised.

Another payment system, the prepaid Chipknip system, is the electronic cash system used in the Netherlands. All ATM cards issued by Dutch banks are smart cards that can be loaded with value via Chipknip loading stations next to ATMs. All bank cards are interoperable.

Chipknip can be used for payments at parking machines, shops and other sectors and no network access is required by the payment collection terminal. The system is therefore complimentary to the online electronic point of sale (POS) payment system using PIN cards.

The maximum value of Chipknip storage and transactions is quite limited, but adequate for small retail transactions.

The use of the Chipknip e-purse has so far been concentrated in a few specific sectors such as parking, vending machines and catering. Credit cards are used relatively infrequently by Dutch residents in the Netherlands.

In 2008, the number of Chipknip transactions rose by less than 1 percent to 176 million. This represents a sharp drop from the growth rate in 2007, when there was already a slowdown.

Following the launch of Chipknip in 1996, there was strong growth from 2002 following modest growth in the first few years. The transition from guilders to euros and the stimulation of the use of Chipknip to pay for parking in three major cities were the main reasons for the growth.

Use was also stimulated by the collaboration between Postbank, which introduced the Chipper, an electronic purse, in the market, and other banks. As a result, the number of Chipknip transactions increased sharply year after year until its use stabilised in 2008.

Accordingly, various market parties including retailers and banks undertook steps through their joint special interest organisation Stichting Bevorderen Efficiënt Betalen (Foundation for Promoting Efficient Payment) to further encourage debit card use at the POS.

Electronic funds transfer at the POS (EFTPOS) packages for small and medium-sized businesses were developed to make it more attractive to accept debit card payments, even in smaller numbers and for lower amounts. Over 16,000 retailers have applied for these packages. As a result, the number of sales points accepting debit card payments grew by 6 percent in 2008 from 2007.

 

The netherlands
Key figures on Dutch non-cash retail payments (millions of transactions)
  2003 2004 2005 2006 2007 2008
Electronic
Debit card 1,157 1,247 1,334 1,451 1,588 1,756
E-purse 127 147 165 175 176 176
Credit card 44 49 45 51 63 70
Direct debit 1,001 1,051 1,059 1,139 1,177 1,226
Electronic credit transfer 956 973 974 1,113 1,178 1,249
Total electronic 3,285 3,466 3,576 3,929 4,182 4,477
Paper based
Credit transfer 84 75 76 64 54 49
Inpayment transfer 231 217 201 174 167 164
Total paper based 316 292 276 238 222 212
Total non-cash retail payments 3,601 3,758 3,852 4,168 4,404 4,689
Cash dispenser withdrawals 446 442 463 470 466 470
Counter withdrawals 28 24 16 14 13 12
Source: DNB

A nationwide media campaign promoting debit card use for small amounts was launched, in which retailers actively encourage consumers to use their debit cards – by, for instance, no longer charging extra for small electronic payments.

Partly as a result of this, consumers paid more and more often by debit card in 2008. The debit card is increasingly used to pay lower amounts and in 2008, the average payment came down by nearly 3 percent to €42.52 ($48.46).

Fighting fraud

According to Currence, debit card fraud has also increased materially over the past few years, from less than €4 million in 2005 to several tens of millions of euros in 2008. Fraud mainly takes the form of skimming. Skimmers copy magnetic stripe data during regular debit card transactions and get hold of the PIN code.

Growing debit card fraud is a major cause for concern in the country and as a result a changeover to safer chip technology (EMV) is foreseen as from 2011. In the current migration path, as set by DNB, the magnetic stripe can be used for debit card payments on some locations until the end of 2013. In 2011, payment with chip and PIN cards will be widely accepted in Dutch shops.

Close co-operation between all involved parties and effective management are important conditions for the successful introduction of EMV.

In Belgium, France, the UK and Denmark, the switchover to the use of EMV has already been completed. A cause of the longer preparation time in the Netherlands is that a very safe system, with PIN codes and the online authorisation of all transactions, was opted for when PIN was introduced. Such guarantees were not present everywhere abroad so that the switchover to the more secure EMV infrastructure was given priority in less secure markets.

To facilitate the projected move to EMV, Currence asked its PIN licensees at the end of 2008 whether they intended to implement the above-mentioned regulations and offer chip and PIN transactions to their customers from 2011 onwards.

In response, a number of major card-issuing licensees have informed Currence that they will not be installing PIN on the payment card chip. For strategic reasons they have opted to include only an international brand on the chip. PIN will be maintained on the card’s magnetic stripe, but its use will no longer be permitted on most terminals.

In general, the costs of a PIN payment for businesses are lower than for a cash payment. About 70 percent of all POS transactions have a value of more than €20 and people still pay cash up to this amount for the most part.

Changing consumer preferences

During the first half of 2008, more than 50,000 small and medium-sized businesses were polled at regional level asking whether they would like to see shoppers made aware of shops’ preference for payment by PIN instead of cash. As a result, a large-scale campaign was started at supermarkets in September.

Currence worked closely with the Centraal Bureau voor Levensmiddelen, an organisation representing the interests of Dutch supermarkets, and Stichting Bevorderen Effi ciënt Betalen, a foundation established by banks and POS institutions to promote POS transactions in supermarkets.

The campaign was unique in that all Dutch supermarkets took part. They actively involved check-out staff in the promotion of PIN transactions. Partly as a result of this, the number of PIN transactions in supermarkets has risen by 13 percent, with a substantial increase in the number of transactions below €20.

Besides the costs incurred for payments by businesses, other parties also incur costs in the payment chain. An analysis of these economic costs shows that each cash transaction is approximately €0.10 more expensive than a PIN transaction (€0.27 versus €0.17).

According to Currence, although there may be differences between these costs in individual situations, there are in general no genuine economic grounds for charging consumers extra for PIN transactions – particularly for small amounts.

An exception to this may be businesses with many sales of low-price articles. In these cases, the margin may not cover or may hardly cover the costs of a PIN transaction and the costs of a cash payment may be partly discounted in the owner’s working hours.

In 2007, 20 percent of the businesses in the small and medium-sized business sector imposed a surcharge for a PIN transaction of less than €10 of approximately €0.25 per payment.

 

The netherlands
Number and volume of transactions per payment type
  2004 2005 2006 2007 2008
PIN transactions (bn) 1.247 1.334 1.451 1.588 1.756
Pin transaction turnover (€bn) 56.7 59.5 64.2 69.5 74.7
Chipknip transactions (m) 127 147 164 175 176
Chipknip transaction turnover (€m) 350 398 440 475 481
Incasso transactions (bn) 0.952 1.059 1.139 1.177 1.1226
Incasso transaction turnover (€bn) 248.3 251.1 254.3 270.4 300.5
Acceptgiro transactions (bn) 215 196 174 169 172
Acceptgiro transaction turnover (€bn) 78.8 71.4 58.4 59.7 68.8
iDEAL (m) n/a 0.1 4.4 15 28
Source: Currence

A study by DNB has shown that merchants who removed the surcharge notices saw an average 8 percent increase in the number of PIN transactions. The supermarket campaign has also been partly responsible for the decrease in the number of surcharge notices.

As in previous years, the number of PIN transactions in 2008 rose more strongly than the total number of POS transactions. The number of cash transactions showed a further decrease but still remains substantial, particularly for small amounts, and is still above the 2003 level.

During the year, people made an extra 140 million PIN transactions instead of paying cash (8 percent of the total growth of 10.6 percent) compared with the previous year. The economic cost of payments in 2008 was thus reduced by approximately €15 million compared with 2007.

In cumulative terms – and annually recurring – a total of about 375 million extra PIN transactions replacing cash payments were made during the past five years, or approximately 20 percent of the current number of PIN transactions. Compared with 2003, this led to a total reduction of €40 million in the cost to the economy in 2008.

Counted up over the five-year period, the total economic savings have amounted to approximately €85 million, about half of which has gone to the POS institutions. It can be concluded that a substantial contribution to a more efficient payment system was realised in 2008, reinforcing the trend of past years towards savings in economic costs.

Issuers

Rabobank

The domestic retail banking business comprises local Rabobanks, Obvion and Bizner subsidiaries. The 153 independent local Rabobanks have over 1,100 branches and around 29,000 full time employees, and operate more than 3,100 cash dispensing machines. The Rabobank branches serve 7.5 million Dutch clients, both private and corporate, offering a comprehensive package of financial services.

Rabobank is the largest mortgage bank, savings bank and insurance agent. It is also the one of the leading banks for the small and medium-sized enterprises sector in the Netherlands. Obvion focuses exclusively on collaboration with independent brokers and it is the largest mortgage lender in this field in the Netherlands. Bizner is an internet bank where businesses can handle their own banking transactions online.

In 2008, Rabo Mobile launched the new Rabo SMS Betalen service. The mobile purse makes it possible to transfer and receive money via SMS. Using a simple process, clients can transfer amounts up to €150 to each other via their cell phones, regardless of which banks or telecom providers are involved. Besides via the internet and by telephone, Rabobank can also be accessed through the TV remote control.

Payment cards chart

Rabobank was the first bank in the Netherlands to offer TV banking via platforms such as Windows Media Centre and Nintendo’s Wii console. Growing numbers of households can access the Rabo TV site via the set top-box supplied by their cable television provider. Since the end of 2008, Tele2 also features this interactive TV channel with Rabobank information.

Rabobank is conducting a number of experiments around cell-phone video calls to see how this new phenomenon could be utilised properly and in a way that respects the client’s privacy, from the banking hall, the offices or via the website.

 

 

ING

In the Netherlands, the new bank created by combining ING Bank and Postbank began operating under the ING brand from 2009.

In 2007, ING announced a substantial investment in its retail banking direct channels and branch network in the Netherlands by combining the direct banking model of Postbank with ING Bank. Preparations were finalised to combine ING Bank and Postbank in the first quarter of 2009. All post offices, Postbank service shops, ATMs and branch interiors have been rebranded. As of January 2009, all branches started working according to ING’s new ‘bankshop’ formula.

ING serves more than 8 million retail clients and 600,000 business customers. Improvements in operating efficiencies and an expected reduction of 2,500 full-time equivalents following the integration of Postbank and ING Bank will significantly reduce operating costs.

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