Annual Report 2015 Contents Key figures Annual Report
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Contents
2 Currence profile
3 Organisation and keyfigures 2015
10 Statement from the Supervisory Board
11 Currence Holding B.V. Annual Account
12 Report from the Executive Board
15 Currence products 15 iDEAL 31 Acceptgiro 33 Incasso (direct debit)
35 Explanation of the structure, organisation and goverance of the company
‘Currence’ is not an existing English word, but combines associations with ‘currency’ (in the sense of ‘money’) and ‘current’ (in the sense of both ‘present’ and ‘flow’) to suggest contemporary monetary flows. ‘Currence’ therefore stands for efficient, state-of-the-art electronic payment systems. As part of the word ‘concurrence’, it has connotations of co-operation. ‘Currence’ is also related to the term for ‘competition’ in several European languages, which is appropriate, given that one of Currence’s main objectives is to foster competition.
1 • Annual Report Currence 2015 Contents Contents Key figures Annual Report
Currence profile
Currence is the owner of the Dutch uniform payment products iDEAL, Acceptgiro, Incasso (in 2015, exclusively lottery direct debit), and eMandates (from 2016).
Currence’s aim is to facilitate competition and increase transparency in uniform payment systems in the Netherlands, while maintaining high standards of quality, efficiency and security of the uniform payment products.
In dialogue with all interested parties, Currence sets objective rules for its payment products. It issues licences and certificates to established players in the market and new market entrants that comply with these rules and wish to offer Currence payment products in the market or to provide support services. To ensure the quality and security of its products, Currence supervises market parties’ compliance with its rules and regulations. It also works closely with all interested parties to prevent fraud. Currence provides public information and brand promotion, also based on market research, and positions its payment products as secure, convenient and efficient.
The payments market is a dynamic one. The pace of internationalisation and technological development is high. Changing markets and customer requirements are the basis for the policy and the further development of Currence payment products. The establishment of the Single Euro Payments Area (SEPA) has resulted in outdated national products being largely replaced by European variants. The development of new payment methods has also led to the introduction of new national products.
Currence is an autonomous organisation with governance that ensures its independence. Currence was formed in 2005 as a result of an initiative by eight Dutch banks, prompted in part by the recommendations of the Wellink Commission in 2002 to promote greater transparency and competition in payments. The formation of Currence created a new market model in Dutch payments, in which product ownership and regulation are separated from transaction processing.
2 • Annual Report Currence 2015 Currence profile Contents Key figures Annual Report
Organisation & key figures
3 • Annual Report Currence 2015 Organisation & key figures 2015 Contents Key figures Annual Report
Organisation & key figures 2015
Board members
Executive Board Drs Piet M. Mallekoote
Supervisory Board Name born function appointed steps down Mr Rien Hinssen 1956 Former member of the Executive Board of SNS REAAL 2014 2018 Drs Sjors Kruiper 1959 CFO Royal Fruitmasters Group 2015 2019
Currence Holding B.V. and subsidiaries Currence Incassomachtigen B.V. Currence Holding B.V. added to the Holding as of 1 January 2016
Acceptgiro B.V. Currence Incasso B.V. Currence iDEAL B.V.
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iDEAL Licensees and Certificate Holders Institutions 2014 2015 iDEAL Licensees 12 13 iDEAL Certificate Holders 48 58
Acceptgiro Licensees and Certificate Holders Institutions 2014 2015 Acceptgiro Licensees 21 18 Acceptgiro Debit Processors 4 4 Acceptgiro Credit Processors 4 4 Clearing House Acceptgiro 1 1 Acceptgiro Printers 22 23 Acceptgiro Service Bureaus (printed) 241 243 Acceptgiro Service Bureaus (digital) 11 12
Incasso Licensees and Certificate Holders Institutions 2014 2015 Incasso Licensees 9 6 Incasso Debit Processors 2 2 Incasso Credit Processors 2 2 Incasso Clearing House 1 1
5 • Annual Report Currence 2015 Organisation & key figures 2015 Contents Key figures Annual Report
Key figures iDEAL
iDEAL transactions 2010 68.84 miljoen 2011 93.87 miljoen 2012 117.22 miljoen 2013 142.54 miljoen 2014 180.21 miljoen 2015 222.06 miljoen
iDEAL transaction 2010 4.98 miljard turnover in euro 2011 6.87 miljard 2012 8.83 miljard 2013 10.80 miljard 2014 14.13 miljard 2015 18.07 miljard
6 • Annual Report Currence 2015 Organisation & key figures 2015 Contents Key figures Annual Report
Key figures Incasso
Incasso transactions 2010 1.31 miljard 2011 1.34 miljard 2012 1.34 miljard 2013 1.19 miljard 2014 0.15 miljard 2015 *
Incasso transaction 2010 288.01 miljard turnover in euro 2011 297.21 miljard 2012 297.88 miljard 2013 263.17 miljard 2014 31.84 miljard 2015 *
* Concerns only Dutch lottery direct debit transactions. Numbers unknown.
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Key figures Acceptgiro
Acceptgiro transactions 2010 151.50 miljoen 2011 139.12 miljoen 2012 133.58 miljoen 2013 122.10 miljoen 2014 30.03 miljoen 2015 23.98 miljoen
Acceptgiro transaction 2010 61.22 miljard turnover in euro 2011 62.03 miljard 2012 63.42 miljard 2013 49.83 miljard 2014 ** 2015 **
** Since the introduction of SEPA Acceptgiro payments are processed as SEPA Credit Transfers and are therefore indistinguishable from normal giro transfers.
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Annual Report
9 • Annual Report Currence 2015 Annual Report Contents Key figures Annual Report
Statement from the Supervisory Board
The Supervisory Board advises the Executive Board and monitors its policy in the interest of the company and the individual payment-product companies. The Supervisory Board takes account of the interests of all stakeholders in this regard.
The Supervisory Board met on nine occasions in 2015. During the regular meetings, the Supervisory Board discussed in particular the phasing out of Chipknip and improving the availability of iDEAL. It also paid attention to the reorganisation of the financial administration. In this context, and in addition to the regular meetings, discussions took place with the Audit Committee of the Dutch Payments Association on the subject of sharing manpower. Since late last year, the financial administration of Currence, the Dutch Payments Association and the Dutch Banking Association (NVB) have been managed by the same team. The collaboration has enabled the team to expand while achieving cost savings. The expansion has resulted in a clearer distinction among the various responsibilities and ensured the interchangeability of staff.
The Supervisory Board met in the absence of the Executive Board to review its own performance in the year under review, as well as that of the Executive Board.
In 2015, the General Meeting of Shareholders reappointed Sjors Kruiper as a member of the Board for a period of four years. He will step down in 2019.
10 • Annual Report Currence 2015 Statement from the Supervisory Board Contents Key figures Annual Report
Currence Holding B.V. Annual Account
We hereby present to the General Meeting of Shareholders the company’s Annual Report and Account for the financial year running from 1 January 2015 to 31 December 2015 inclusive.
The Annual Account was prepared by the Executive Board and, after being audited by KPMG Accountants N.V., was discussed by us with the Executive Board.
We ask the General Meeting of Shareholders to adopt the Annual Account in accordance with the Executive Board’s proposal.
In accordance with the Executive Board’s proposal and based on the provisions of the Articles of Association, we recommend that the result after tax (excluding participating interests amounting to -/-130,000 euros) be allocated to the other reserves.
A further proposal to the General Meeting of Shareholders is that the dividend of 1.7 million euros distributed by the product-specific companies be added to the respective dividend reserves and subsequently paid out.
Chipknip B.V. and CeaNet B.V. are being wound up. The remaining equity of these companies will be paid out on completion of the liquidation process.
The Supervisory Board would like to express its appreciation for the way in which the Executive Board and the staff have carried out their responsibilities. We request that the General Meeting of Shareholders ratifies the Executive Board’s conduct of the company’s affairs in 2015, as well as the supervision exercised by our Board.
Amsterdam, 29 April 2016 On behalf of the Supervisory Board,
Rien Hinssen, Chairman
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Report from the Executive Board
Dutch people are using the internet to arrange their affairs more and more. The same applies to making payments. This was again visible in 2015 with the strong increase in the use of iDEAL (+23%). In response to this ongoing digitisation, both banks and payment institutions are expanding their digital services at a rapid pace. At the end of 2015, the new uniform digital product, E-Mandate, was introduced to the market. At the beginning of March 2016, the banks launched a pilot for identification services and in April 2016 a pilot was initiated for the iDEAL QR code. Following the completion of the SEPA project in 2014, the dynamic development in innovation was greater than ever.
National payment products The majority of national payment products have been replaced in recent years by harmonised European variants. The establishment of the Single Euro Payments Area (SEPA), for example makes it possible to make payments and receive money within the Eurozone through a single account by means of the European IBAN standard. This is both efficient and convenient for users, especially for cross-border payments. The national PIN product was Digitisation of payment forms discontinued in 2011 and replaced by the internationally widely accepted Maestro and V PAY payment products. Chipknip and Incasso were replaced continues to grow... in 2014 by new initiatives such as contactless payments and SEPA Direct Debit (SDD). Also in 2014, the national bank transfer was superseded by a European-wide variant. Acceptgiro has continued as a payment product and since 2013 has been based on the IBAN. However, the National Forum for the SEPA Migration agreed in 2012 to phase out the Acceptgiro by no later than 1 January 2019. Use of the printed Acceptgiro has meanwhile continued to decline, from 30 million in 2014 to 24 million in 2015. Digitisation of payment forms is continuing to grow, with both consumers and entrepreneurs making ... iDEAL payments once again increasing use of more efficient means of payment. In this context, iDEAL payments once again grew strongly in 2015. iDEAL’s market share in e-commerce grew strongly in 2015 grew from 54% in 2014 to 56% in 2015. Its growing popularity was also reflected in an increase in consumer payments of invoices and donations with iDEAL and in its use by foreign online shops. Use of mobile devices to pay with iDEAL grew significantly in popularity in 2015.
The success of iDEAL is unparalleled compared to other countries of the Eurozone. In these countries credit cards and PayPal are much used as forms of online payments. In the Netherlands, these forms of payment account for no more than 20% of online purchases. In 2015, preparations were made to make iDEAL payments even more user-friendly by means of a special QR code. This will make payments via smartphone even easier in areas where traditional forms of digital payment are less common, such as for donations at the door or for paying invoices. A pilot is currently under way.
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From old to new iDEAL’s infrastructure offers plenty of opportunities to expand the digital services of banks and payment institutions. Currence is therefore working closely with the Dutch Payments Association, the banks and payment institutions (including Fintech companies) to exploit opportunities and develop New payment products new applications together. In this context, E-Mandates were realised in 2015. This facility enables consumers to authorise a direct debit transaction replacing the old through a digital signature in a secure and familiar/trusted way. This form of authorisation is an alternative to the printed form requiring a signature and replaces the authorisation that consumers provide on a website by ‘ticking’ a consent box. This latter method also carries the risk for payees that consumers are able to reverse a direct debit payment for a period of thirteen months. iDIN; new identification and An important recurring issue associated with conducting business using the internet is digital identification. The past year saw the development of iDIN, a authentication service service that enables individuals to identify themselves securely through their own bank on websites of e-commerce companies, insurers and the government. A pilot project was launched with the tax authorities (Belastingdienst) in March 2016. The pilot will be extended to include more participants in the course of 2016. If the pilot is successful, iDIN is also set to be included as a new product with Currence.
Revision of European Payment Directive In accordance with the revised European Payment Services Directive (PSD2), banks are required, under authorisation of their customers, to provide access to the current accounts of these customers for (licensed) payment institutions. The aim is to enable these institutions to issue online payment orders, on behalf of the account holder, for such things as purchases made by the account holder, or to download payment details from their account to compile statements from multiple current accounts of the account holder. Gaining access to an account holder’s current account means that risk of abuse cannot be excluded. Such risks include the consumer’s possible oversight in cases of phishing. Although an accessible and secure online payment method has existed in the Netherlands for a number of years in the form of iDEAL, Currence is considering adapting the use of iDEAL to accommodate these new European possibilities. This will enable licence and certificate holders to offer these new services more easily.
Currence organisation The developments mentioned above have led to the winding up of Chipknip B.V. and CeaNet B.V. (general partner of Chipknip B.V.). Currence Incasso B.V. will also go into liquidation. Currence Incassomachtigen B.V. has been added to the Holding as a new private limited liability company as of 1 January 2016. It is expected that iDIN will also be added as a private limited liability company in the course of 2016.
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Financial risks Currence has limited exposure to financial risks. With regard to liquidity risk, Currence has a fixed amount of permanently available resources at its disposal. In view of Currence’s licence and certificate holders (banks and payment institutions), the credit risk is limited. In 2015, Currence issued a temporary credit facility of seven million euros to Betalingsverkeer Services B.V. This facility runs until July 2016, and the credit risk exposure is limited.
Results 2015 and outlook 2016 The consolidated financial statements of Currence contain the financial data of Currence Holding B.V. and its group companies. The financial policy of Currence is aimed at cost efficiency. Currence has a limited profit objective. Its policy is primarily aimed at continuity, and it operates within the framework of competition laws. During the year under review, Currence recorded a net profit of 1.140 million euros, notwithstanding the tariff reductions for iDEAL. The consolidated balance sheet total amounted to 20.545 million euros, while shareholder’s equity was 15.512 million euros as of 31 December 2015.
The financial policy of previous years will be continued in 2016, while focus will be maintained on cost efficiency with a limited profit objective both for current products and those to be introduced.
Amsterdam, 29 April 2015
Piet M. Mallekoote Chief Executive Officer
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Currence products
iDEAL
Developments in the online payments market Figures show that 77% of people aged 12 and above shopped online in 2015. That equates to more than 11 million people, according to market research carried out by Statistics Netherlands (CBS). Dutch consumers made more than 142 million online purchases in 2015 for a total of 16.07 billion euros. Online purchases for goods and services therefore show a growth of 16.1% compared with 2014, according to market research carried out by Thuiswinkel.org into online consumer spending in the Netherlands.
35% of Dutch bricks-and-mortar companies follow an omni-channel strategy, enabling consumers to order, book or reserve products or services online. The number of online retailers is also continuing to rise. According to Thuiswinkel.org, there are almost 45,000 active online retailers. Besides e-commerce outlets, other branches are increasingly developing their online presence, such as the government and charity organisations.
There is a wide variety of payment methods among online retailers in the Netherlands. iDEAL is the most widely accepted method among major online retailers (96%; Figure 1). This figure is lower (71%) among smaller retailers, where regular bank transfers are common. Other widely accepted payment methods are credit cards and PayPal.
iDEAL most essential In the brand research carried out by EURIB (European Institute of Brand Management) into essential brands in the Netherlands, iDEAL has financial brand maintained a top 5 position of all brands for a number of years, achieving an essential score of 63% in 2015. The figures also reveal some interesting information about iDEAL devotees, who appear to be male and younger than 25. Score differences are small, but among men iDEAL ranks fourth, whereas women put the brand at ninth. Young people place iDEAL second, just behind Bol.com. Among financial brands in 2015, iDEAL was once again the most essential brand, ranking number one.
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Figure 1
Large web-based retailers Acceptance of payment methods by online shops* End of 2015 Small web-based retailers
iDEAL 96 % 71 %
Visa 72 % 20 %
MasterCard 72% 20 %
Credit transfer 67 % 81 %
PayPal 65 % 45 %
Bancontact 30 % 22 %
Cash on delivery 27 % 14 %
Afterpay 23 % 3 %
American Express 17 % 11 %
Sofort banking 10 % 12 %
Klarna 9 % 2 %
Direct debit 5 % 2 %
Acceptgiro 4 % 0 %
* Source: Payment options for web-based retailers 2015, BOOM market research on behalf of Currence. Explanation: The larger web-based retailers are members of Thuiswinkel.org. Together they account for 70% of online spendings in the Netherlands.
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The average number of payment methods that an online retailer offers has risen to 3.6 in 2015. This is a 13% increase compared with 2014 (3.2). The rise Online stores offer more is primarily due to increasing numbers of online retailers also accepting foreign methods of payment such as Bancontact and Sofort. The variation in the methods of payment for number of methods of payment offered to consumers remains high. Approximately 20% of online retailers offered six or more payment options in their customers 2015, whereas 15% offered only one. Major online retailers in particular offer consumers a variety of payment options. 60% of these online retailers offer six or more methods of payment, compared with only 16% of small online retailers.
More than half of the Dutch online retailers (52%) prompt consumers to use specific methods of payment (2014: 44%). The most common instrument adopted by online retailers is the calculation of a surcharge on their least favourite method of payment. Just like last year, only 2% of online retailers that offer iDEAL impose a surcharge for using the service, which on average is significantly lower compared to other methods of payment. The method of payment involving the highest fees is cash on delivery.
iDEAL is (almost) free Both the European and the Dutch government are looking closely at fees relating to methods of payment in e-commerce. Since June 2014, new for consumers European legislation providing consumers with even better protection when they make remote purchases has come into force. These regulations state, among other things, that consumers have a longer reflection period and that they are entitled to a full refund within 14 days if they return the product. Moreover, this law prohibits unnecessary costs for the use of a payment method. The Authority for Consumers & Markets (ACM) has already successfully admonished several companies, such as meal delivery companies and flight ticket providers, for their high payment costs.
iDEAL internet payments continue to increase in 2015 1 billion iDEAL payments In 2015, payments using iDEAL increased sharply once again. With a growth higher than 23.2% (2014: 26.4%), a record level of 222.1 million iDEAL processed since payments was reached (figure 2). iDEAL celebrated its tenth anniversary in 2015. From the introduction of iDEAL to the end of 2015, close to 917.5 its introduction million iDEAL payments were processed. The billionth payment is expected in May 2016.
1 Since 13 June 2014, Dutch consumers have benefited from new European legislation concerning consumer rights (Directive 2011/83/EU of the European Parliament and European Council). The European Directive ensures that consumers throughout the European Union benefit from the same rights in a number of areas, especially with regard to online shopping and selling at the door and on the street (canvassing).
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Figure 2
Number of iDEAL payments Millions of transactions, percentage growth relative to the previous year
220
200
180
160
140
120
100
80
60
40
20
0 4.4 14.9 27.9 45.4 68.8 93.9 117.2 142.5 180.2 222.1
238.4% 86.6% 62.9% 51.7% 36.4% 24.9% 21.6% 26.4% 23.2% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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More and more online buyers are making purchases on foreign websites. Almost one in three parties offering iDEAL to online shops is located in a foreign country. This represents a marked increase (46%) compared to 2014. According to the recent eCommerce Payment Monitor, 23% of the Dutch population aged 15 and over made one or more purchases on a foreign website in 2015. In 2015, these 3.2 million buyers spent a total of ¤ 513 million on foreign-language online shops, which is an increase in expenditure of 31% compared with 2014. Cross-border expenditure is increasing faster than the total online expenditure in 2015. Currently, 3% of total online expenditure takes place on foreign websites. Almost a quarter consisted of payments to Chinese websites. Germany (16%) and Great Britain (15%) follow in second and third places.
20% iDEAL payments Of the 222 million payments made in 2015, 80 million (36%) were at Dutch online shops and 44% outside of the traditional e-commerce sector. used for purchases on Payment with iDEAL is growing relatively strongly in this sector of the economy, with iDEAL being increasingly used for the payment of invoices, top-up foreign websites payments, the payment of government services and public transport, and donations to charity. Purchases on foreign websites account for around 20% of all iDEAL payments.
iDEAL payments made in 2015 amount to a total of 18.1 billion euros, which is an increase of 28.4% compared with the previous year (2014: 14.1 billion euros). An average sum of ¤ 81.39 was paid per transaction. This amount increased from ¤ 75.78 in 2013 and ¤ 78.40 in 2014. As 44% of iDEAL transactions take place outside the e-commerce sector, where lower amounts are usually paid, this average amount is considerably lower than the average amount per purchase in the e-commerce sector: ¤ 107.00 (source: eCommerce Payment Monitor, 2016).
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Figure 3
Proportion of payments made by various methods Percentage of online purchases in 2014 and 2015
iDEAL | 56% Acceptgiro | 4%
Credit card | 12% Debit card | 3% Once again iDEAL most used payment method in 2015 2015 Direct debit | 6% Gift cards | 3%
Credit transfer | 5% AfterPay | 2%
PayPal | 5% Other | 4%
iDEAL | 54% PayPal | 4%
Credit card | 11% Debit card | 4%
2014 Direct debit | 7% Gift cards | 3%
Acceptgiro | 6% Cash | 2%
Credit transfer | 5% Other | 5%
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Proportion of iDEAL payments in the e-commerce sector has increased again According to the eCommerce Payment Monitor 2016, more than 142 million online payments were made in the e-commerce sector in 2015. Of these, iDEAL accounted for more than half (56%). This represents an increase of two percentage points compared with 2014, when iDEAL accounted for 54%. After iDEAL, the next most frequently-used form of payment is the credit card, whose share has increased from 11% to 12%. AfterPay and PayPal are fast increasing their market share in relative terms: the share of AfterPay has doubled from 1% to 2% and the share of PayPal has increased from 4% to 5%. The use of Acceptgiro on the other hand is falling rapidly.
Use of iDEAL on the mobile The growth of iDEAL is primarily due to the fact that purchases on mobile devices are increasingly paid for using iDEAL. 28% of all purchases via growing strongly smartphone in 2014 were paid for using iDEAL, but this figure increased to 39% in 2015. iDEAL also successfully increased its share of purchases made by tablet, accounting for more than half (53%) of such purchases in 2015, up from 48% in 2014.
There has been a significant increase – from 58% in 2014 to 71% in 2015 – in iDEAL payments on smartphones for the purchase of tickets for events and attractions, which is the second largest sector with 11% of all purchases. However, mobile iDEAL payments are also increasingly made in the Media & Entertainment branch, which is the largest branch with 23% of all purchases – the share of iDEAL payments in the number of smartphone purchases has risen from 12% to 18%, while iDEAL tablet purchases have increased from 29% to 36%.
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Mobile payment with iDEAL appeals to users 23% of all iDEAL payments The shifting of the online market to the mobile channel has been a trend for years. For the entire e-commerce sector, 20% of transactions are completed via mobile banking apps with a mobile device – 6% using a smartphone and 14% on a tablet. Currently, nearly a quarter (23%) of all iDEAL payments are completed using mobile banking apps. These payments largely accounted for the growth of iDEAL in 2015.
The ease of using a smartphone or tablet to make a payment is enhanced when no separate security mechanism is required (e.g., the use of a token with a card or a TAN code). Consumers will then be more inclined to complete the payment. With an iDEAL payment in the mobile banking app, consumers usually do not need their login device and can simply pay with a PIN code.
ABN AMRO and SNS Bank added iDEAL to their mobile banking apps in 2015, after the other banks had already done so earlier. Most consumers can now make iDEAL payments with their mobile banking app without requiring a token. iDEAL is therefore user-friendly, and suitable for widespread use and new mobile applications.
Large part of online stores Research conducted by Currence has revealed that the suitability of online shops for mobile use is still often limited. Only 8% of the online shops studied is not yet suitable for offers pages that are suitable for a mobile device. Online shop owners have internet sites that are suitable for computers and mobile devices, but not all mobile device Dutch online shop owners have their own mobile apps. Even among members of Thuiswinkel.org, only 3% have these apps. The Dutch e-commerce sector therefore still has much to gain.
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iDEAL QR: a new application with added value Pilot iDEAL QR In 2015, iDEAL was made ready for payments with a QR code. This code makes paying with iDEAL even easier, especially at locations where traditional forms of digital payment cannot be used. By scanning an iDEAL QR code with a smartphone or tablet, consumers can make an iDEAL payment. The use of a QR code is a logical choice; it can be used by a wide audience.
Donations Invoice Restaurant bill Video on demand Transfer from PC to mobile device
Image: Intended usage situations for iDEAL QR
Many intended usage iDEAL QR will be introduced through a pilot during the Hartstichting collection in mid-April 2016. In addition, the use of iDEAL QR will be tested in an situations iDEAL QR extended pilot with a number of entrepreneurs. On the basis of an evaluation, it will be decided whether or not a national introduction will take place and, if so, in what form. More information on the functioning of iDEAL QR can be found on the website of iDEAL.
iDEAL providers iDEAL is an open and transparent agreements system (product scheme) accessible to (all) providers who have demonstrated their compliance with established conditions. A distinction is made between two types of providers: licensees and certificate holders. Licensees are responsible for the entire chain of iDEAL payments in their domain and the completion of these transactions (consumer domain, “issuing”, or entrepreneurial domain, “acquiring”). Certificate holders are responsible for part of the chain, especially the acquiring domain, and have entered into an agreement with an acquirer licensee for their activities; on the basis of this agreement, they function as resellers. iDEAL certificate holders are also referred to as Collecting Payment Service Providers (CPSPs) due to the money-collecting nature of these payment institutions. Only licensees and certificate holders certified by Currence are allowed to offer iDEAL to consumers and companies.
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Figure 4
Acquirers Number of parties offering iDEAL to online shops Per year
CPSPs
70
60
50
40
number of CPSPs 30
continues to increase 20
10
0 32 37 46 48 58
5 6 6 6 7
2011 2012 2013 2014 2015
The number of iDEAL licensees and certificate holders continued to increase in 2015. In the year under review, PPRO Group joined iDEAL as the first First non-bank and non-bank and foreign licensee (acquiring). With this addition, the number of acquirers of iDEAL reached seven. In 2015, ten certificate holders (CPSPs) foreign licensee iDEAL also joined. Compared to the previous year, this number is high. This illustrates the market potential that these applicants see in iDEAL and the strength of the brand. The applicants also include the so-called Fintech companies, which use iDEAL for new applications and new business models. With these ten companies, the number of certificate holders increased to 58, 38 of which also offer their services to foreign online shops. This allows consumers with a Dutch bank account to use iDEAL to pay for their internet purchases abroad. Some companies are currently offering this feature in 60 countries. Consumers can even quickly and easily pay for their purchases in Chinese online shops with iDEAL.
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Role of CPSPs further Nearly 73% of the companies that accept iDEAL have an iDEAL contract with a CPSP (2014: 64.5%) (figure 5), while 58% of iDEAL payments are made increased in 2015 through these CPSPs (2014: 54.5%). In total there were over 95,000 active iDEAL contracts at the end of 2015. That number is lower than in 2014 (-13%), which is possibly due to a consolidation among accepting companies.
Figure 5
Share of certificate holders Role of banks and CPSPs for iDEAL, end of 2015 Distribution of iDEAL contracts, payments and turnover Share of licensees
27.2% 42.0% 46.8% 64.2% 72.8% 68.0%
iDEAL contracts iDEAL payments iDEAL turnover
The number of banks offering iDEAL to consumer customers remained at ten in 2015. Although iDEAL is open to every bank and payment institution in the eurozone, the interest remained limited to Dutch banks in the consumer domain and therefore to consumers who had a bank account with these banks. Nevertheless, bunq joined iDEAL as a new issuer in early 2016, raising the number of consumer banks to eleven.
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Availability of iDEAL Due to the sharp increase in the number of iDEAL payments, the stability of the iDEAL payment chain is an important theme for Currence and its licensees and certificate holders. Ongoing attention is therefore paid to the availability of the iDEAL payment chain. Individual disruptions in the iDEAL payment traffic at banks have a direct impact on companies and consumers, both in e-commerce and in other branches.
The Financial Supervision Act (Wft) establishes availability requirements for ‘time-critical payment orders’. These payment orders involve payment authorisation by the debtor and then the transfer of that payment to the beneficiary within the expected time frame. iDEAL payments also fall under this category. In this case, however, the creditor does not immediately receive the amount, but instead receives a notification stating (or guaranteeing) that the amount is guaranteed and will be transferred at a later date. Pursuant to the Wft, licensees of iDEAL are obliged to comply with the established availability requirement and must also publicly report on their iDEAL availability.
Further improvement In order to further improve the availability of iDEAL, Currence, in collaboration with the iDEAL licensees, decided in 2015 to raise the availability availability iDEAL standard of iDEAL from 99.0% to 99.5% during prime time (the high-demand time period between 07.00 and 01.00) as of 1 August 2015. The old and new standards were consistently achieved in 2015, both by the consumers and the merchant banks (figure ).6
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Figure 6
Availability of iDEAL 2014-2015 In percentages, per month
Merchant banks 100.0%
Weighted availability in % 99.5%
Norm 99.0%
98.5% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014 2015
Consumer banks 100.0%
Weighted availability in % 99.5%
Norm 99.0%
98.5% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014 2015
Explanation: The availability of the iDEAL merchant banks (acquirers) and the iDEAL consumer banks (issuers) weighted according to the number of transactions during prime time (07h00 - 01h00).
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All parties involved in the iDEAL payment traffic demonstrated an improved availability in 2015. The availability of the participating iDEAL merchant banks (acquirers) is nearly 100% (figure 6). The availability of the consumer banks (issuers) was higher in 2015 (99.8%) compared to 2014 (99.5%).
The improved availability in 2015 is the result of the adjustments made to the infrastructure by the banks. This led to the separation of the processing channels for internet banking, mobile banking and iDEAL. Due to this separation, the iDEAL availability of consumer banks already largely complies with the above-mentioned availability requirements of the Wft, which are monitored by the Dutch Central Bank (DNB). DNB established a growth path leading up to the new standard: at the end of 2016: 99.64%, at the end of 2017: 99.76% and at the end of 2018: 99.88%.
Currence, its licensees and its certificate holders are convinced that the availability of iDEAL will continue to increase in the coming period due to the efforts made by the licensees to improve their iDEAL systems.
iDEAL availability page 24/7 insight Both consumers and companies want to be informed immediately of any disruption in iDEAL payment traffic. An extra service in the form of an iDEAL availability iDEAL availability page was therefore developed in 2015 for online shop owners and other online merchants. This page has been online since April 2015. It shows the 24/7 real-time availability of iDEAL banks.
Image: Availability of iDEAL
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Companies that accept iDEAL can register on the availability page and then receive a notification of each change in the iDEAL availability for each bank. In the event of an disturbance, these companies can inform their customers, allowing them to choose an alternative method of payment to complete their transactions.
iDEAL abroad iDEAL uses a message protocol for the communication between online shops and licensees (issuers and acquirers). This protocol provides the correct information needed for the authorisation of payments by the payer at his bank (issuer) and the relevant information for the bank (acquirer) and the online shop. The actual payment is then made by means of a European transfer payment (SEPA Credit Transfer, SCT), which is processed through the European clearing and settlement institutions.
Yet no standard for Several other European countries have similar payment methods based on the SCT, both for e-commerce and for the full ‘digitisation’ of the payment online payment methods of invoices with internet banking. For instance, the use of MyBank, a legal entity of EBA Clearing, has increased in a number of countries, especially Italy. Payment methods based on the SCT are used in Germany and Switzerland. The use of these methods is still limited. iDEAL remains front runner in Europe.
In the past, research was conducted into the mutual interoperability of the SCT-based online payment methods. This revealed that technical differences are relatively limited, but that there are major differences in the areas of functionality, business rules and governance. This problem can be difficult to solve in practice.
CPSPs aggregate payment In order to achieve interoperability of payment methods, differences need to be bridged, while there should also be sufficient market urgency. So far, most methods for companies companies have been showing little interest. Companies have indicated that they experience more important problems in cross-border e-commerce that have a greater priority, such as complex VAT regulations, differences in consumer laws or the nature of local customer service. The conversion process at these companies will also benefit from consumers being able to pay with the (local) payment method that they trust the most and also regard as the easiest method to use. These preferences differ considerably within Europe. The technical and commercial differences between the (national) payment solutions are, in practice, addressed by CPSPs, which offer online shops the opportunity to accept nearly every type of payment method. The same applies to iDEAL. CPSPs active abroad offer iDEAL users a great deal of added value. This makes cross-border e-commerce a fact.
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Fraudulent online shops Stricter regulations... As the brand owner of iDEAL, Currence has the task of guaranteeing the integrity and reliability of this payment method to the best of its ability. To do so, Currence works closely with all parties concerned, offering guidance and actively participating in the joint fight against fraud. Currence received four complaints from certificate holders in 2015 about possible fraudulent online shops offering iDEAL as a payment method. After an investigation, these shops were excluded from using iDEAL. In 2014, 19 (possible) fraudulent merchants were reported and 17 of these were subsequently excluded following an investigation. This decrease is due to stricter iDEAL acceptance criteria regulations, resulting in improved monitoring of online shops by CPSPs. The anti-fraud measures were further strengthened as the parties involved started sharing information more efficiently. The decrease is satisfying, but every fraud case is one too many.
... and intensification A public-private partnership with the National Internet Fraud Complaints Desk (LMIO) was formed in 2015. This collaboration involved a pilot programme of cooperation... with a number of CPSPs. The objective of the partnership was to strengthen fraud prevention and prosecution measures by immediately sharing knowledge and information from fraud reports. This partnership was considered valuable and resulted in a number of fraudulent online shops being shut down.
In addition, Currence works closely with Thuiswinkel.org, the Authority for Consumers & Markets, as well as police authorities, to ensure that alerts regarding ... restrict fraud iDEAL fraudulent or suspicious behaviour can be shared more quickly. Licensees and certificate holders can use this information to take action against those involved in fraud by, for example, excluding them from the iDEAL payment system.
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Acceptgiro
The decrease in the number of processed Acceptgiro transactions, a trend that has been visible for years, continued in 2015. In 2015, 24 million paper Acceptgiros were submitted to the bank for processing, 20% less compared to 2014 (figure 7). As in previous years, the decrease was influenced by payees and consumers preferring more efficient electronic payment methods. Examples include the European direct debit and iDEAL.
Decrease number of Payees are offering the Acceptgiro payment method less often. For example, there was a significant decrease in the number of online payments made processed Acceptgiro with Acceptgiros (4% in 2015; 6% in 2014) due to a decrease in the number of online shops offering the Acceptgiro as a payment method.
Increase of Acceptgiros An estimate by the three largest Dutch banks reveals that around 85% of the Acceptgiros issued in 2015 were paid by the receivers using internet or paid using internet or mobile banking (2014: 83%). This trend has been visible for many years and is expected to continue. The decrease is especially due to the growing mobile banking popularity of mobile banking, which allows customers to scan the Acceptgiro form (depending on the bank) and pay without entering any further information.
The decrease in the use of (paper) Acceptgiros has contributed to the agreement to discontinue Acceptgiro payment options as of 1 January 2019, which was reached in the National Forum for the SEPA Migration (NFS) in 2012. In order to properly phase out this form of payment, Currence, as the brand owner, has initiated a realistic phase-out scenario. Top priority is considering the interests of all parties involved – distributors, consumers and banks. Existing and new alternatives – mainly digital – will be identified for the various functionalities historically combined in the paper Acceptgiro.
2 The number of Acceptgiro payments is based on the number of processed paper Acceptgiros. This is related to the transition to SEPA and the accompanying replacement of the ‘old’ euro Acceptgiro with the IBAN Acceptgiro. An IBAN Acceptgiro is processed by banks as a normal European transfer (SEPA Credit Transfer). This means that an Acceptgiro that is paid via internet banking can no longer be distinguished from a regular giro payment, which is also processed as SEPA Credit Transfer. For this reason, the exact total numbers of Acceptgiro payments have not been available since 2014, only the total numbers of those processed on paper. 3 Various functionalities: reconciliation based on standardised payment reference, consolidated reports, recognisability and attention value, payment request support, etc.
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Figure 7
Number of Acceptgiro payments completed on paper Millions of transactions
50
40
30
20
10
0 46.4 38.8 30.0 24.0
2012 2013 2014 2015
Involvement stakeholders The manner in which the current paper payment orders – limited in comparison, yet still substantial – can be processed in the future is an important with phase-out scenario aspect that still needs to be worked out. The main focus is on making good alternatives available to people who do not have access or have limited Acceptgiro access to the internet, and do not possess other digital means of communication either, such as a smartphone for mobile banking. The phase-out scenario is being developed in 2016 with the involvement of stakeholders, who will also look at alternatives.
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Direct debit
Lottery Direct Debit – phase-out of the last Dutch direct debit variant The introduction of SEPA signified the end of the local Dutch Direct Debit product. Since 1 August 2014, SEPA regulations have stipulated that direct debit payments may only be processed on the basis of the European direct debit (SEPA Direct Debit; SDD). DNB has granted dispensation to the (Dutch) Lottery Direct Debit , extending the period of this type of direct debit to 1 February 2016.
Unlike the European direct debit, the Lottery Direct Debit could not be reversed by the payer. With the postponement of the final date, the Dutch lottery payees were given more time to adjust to the new situation.
No European successor for For the duration of the exemption, the Payments Association has made an effort to introduce the so-called SDD No-Refund in Europe, partly at the Lottery Direct Debit request of and in cooperation with banks and lottery payees. This would be a European direct debit variant without the right of reversal. With the use of the SDD No-Refund, the Dutch situation could be maintained after the dispensation period. For this purpose, discussions were held with and requests submitted to the European Retail Payments Board (ERPB) and the European Payments Council (EPC). An attempt was also made to introduce the SDD No-Refund variant in Europe with the help of a number of sympathetic countries (including Spain, Italy, Ireland, Austria and Belgium). Unfortunately, this did not yield any results due to the fact that other countries did not see the need for this variant or did not see an opportunity to implement it.
Dispensation period ended Since the dispensation period could not be extended and, and since no equivalent had been found, the option of a non-reversible direct debit for lottery 1 February 2016 companies was terminated on 1 February 2016. With the discontinuation of the local Dutch Direct Debit product, counting Lottery Direct Debit transactions has also ceased. As a result, no Lottery Direct Debit statistics are available for 2015. An overall estimate indicates that the number was around 85 million in 2015.
4 (Dutch) Lottery Direct Debit; Lottery direct debit authorisation
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E-Mandate: market-wide initiative for a valid online mandate In 2014 and 2015, preparations were made for the (digital) E-Mandate product in cooperation with the banks. As of 1 January 2016, this product has been incorporated with Currence in a separate product-specific company.
The E-Mandate product is available in two variants: standard E-Mandate, which focus on the private market, and business E-Mandate for use in the business-to-business market.
E-Mandate provides legally With the E-Mandate product, for the first time customers can provide payees with a legally valid online mandate for recurring or single direct debits valid online mandate... from their payment account. A signature on paper is no longer required. Similar to an iDEAL payment, an E-Mandate is provided by the consumer or business customer through the familiar internet banking application of his bank. This approach is safe, quick and easy for customers. Furthermore, if the customer keeps an approval list for direct debits, this list will be automatically updated with the newly issued digital E-Mandate.
In addition to their ease of use for customers E-Mandates offer companies the opportunity to make their online direct debit process more efficient. This allows them to cut down on the time and costs associated with receiving a paper mandate, while it avoids the uncertainty of the current unregulated online mandates. With the E-Mandate product, the company can be certain that the mandate has been granted by an authorised person, that the mandate is considered legally valid by the bank and that the account number for the direct debit, as provided by the customer, is correct. Moreover, companies do not have to worry that customers can reverse a payment up to 13 months after the direct debit. With a legally valid mandate, this risk is limited to eight weeks in accordance with the product conditions, as prescribed by the European Payment Services Directive (PSD).
... authorisation in a When the business version of the (digital) E-Mandate product is used, the authorisation can be given and processed in a fully digital manner, while the fully digital manner registration of the E-Mandate will be automatically managed by the bank of the payer. The payer and the payee do not need to do anything else to complete the registration process. This saves an enormous amount of time and reduces the risk of input errors, leading to more successful business direct debits.
The E-Mandate product will be launched on the Dutch market in 2016. Currence will publish the names of the companies that have obtained a licence or certificate for E-Mandate on its website.
More detailed information can be found on the E-Mandate website.
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Explanation of the structure, organisation and governance of the company
Structure
Structure of the company At the time of its establishment, Currence was designed to have a special structure to achieve maximum transparency and flexibility. Currence Holding B.V. has various subsidiaries, in the form of product-specific private limited-liability companies. Currence Holding B.V. has issued ‘lettered’ shares to its share holders (shares A to F). Each type of lettered share is related to a specific product-specific private limited-liability company.
This structure has a number of advantages for Currence. On the one hand, it allows the policy on the uniform payments system and the overall external profile of the company to become more firmly embedded. On the other hand, it leaves enough scope for individual shareholders’ interests, and for their relevant rights and obligations to be differentiated for specific products. A shareholder does not have to participate in all product-specific private limited liability companies.
The interests of shareholders may differ for each product-specific private limited-liability company. In order to facilitate access of new shareholders, conditions have been established that new (and existing) shareholders must comply with. This creates a transparent market situation for all parties. A non-bank that plays a role in a particular payment product, for instance, may also be an investor in a product-specific private limited liability company. The non-bank may then become a shareholder of Currence Holding B.V., accepting financial risks only for the specific product concerned and having shareholder rights to vote on the long-term policy for that product only. This structure allows different parties to invest in payment innovation.
Legal structure of Currence Each payment product is operated by a separate private limited liability company. The product-specific private limited-liability companies own the rights to the brands and logos, copyrights and other (intellectual) property rights. This also means that these private limited liability companies are the contracting parties of the licensees and certificate holders and are responsible for issuing licences and certificates and for the related (compliance) procedures. The product-specific private limited liability companies also have specific financial rights and obligations.
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Organisation
Management of the organisation For its internal management, Currence has established an annual Planning and Control cycle. Within the context of this cycle, the objectives formulated by the Executive Board are divided into departmental plans and subsequently into individual plans for the staff.
In order to provide insight into both the risks associated with the operations and the control of the extent to which the above objectives are realised, Currence produces quarterly and other reports. These partly serve to assess the achievement of the intended objectives and to adjust the business plans as required. If necessary, attention is also paid to absenteeism.
In addition, the development of the budget and any associated risks are analysed and assessed every quarter. These internal risk management and control systems worked effectively during the year under review.
DNB oversees the regulation of Currence and its products as part of its duty to promote security and efficiency in the payment system.
Corporate Governance
Corporate Governance Code Currence attaches great value to good corporate governance. Currence largely complies with the Corporate Governance Code. A number of the Code’s principles and best-practice provisions are not applicable to Currence as it is an unlisted company of a limited size.
Independent governance Operating independently is a prerequisite to Currence being able to fulfil its mission and perform well. Currence’s governance structures safeguards its independence. The Executive Board operates independently. No market players whatsoever can influence management decisions concerning the admission of new players to the market (competitors or otherwise). Nor may they exercise any influence that would lead to the unfair exclusion of (potential) market players or impede innovation.
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The independent Supervisory Board advises and supervises the Executive Board. It acts in the interests of the company and its subsidiaries, also taking the shareholders’ interests into account. As the shareholders themselves operate in the payments market, and with a view to the requirements of free competition, they have no powers regarding Currence’s commercial policy, the admission to the market or the Rules and Regulations and product changes, other than their statutory powers. The General Meeting of Shareholders has specific approval authority in exceptional cases only, where product modifications would entail radical changes, and consequently investments, in the payments infrastructure.
Additional assurance of Currence’s independence is provided by the independent possibility of appeal to the Netherlands Arbitration Institute (NAI). Licensees, certificate holders and applicants for admission to the market can appeal to this institute against decisions or sanctions by Currence. No appeals have yet been filed.
Within the framework of its informal approval expressed on 19 April 2005, the Netherlands Competition Authority (NMa, currently ACM) has issued a positive assessment of Currence’s governance in relation to the competition requirements. With its independent governance, Currence fulfils a unique role in Europe that has proved its worth for the operation and management of the uniform payment systems market.
Role for market players Currence will consult with market parties before reaching a decision on changing products and/or regulations. Indeed, these changes may directly affect the business operations of stakeholders, especially the operations of licensees and certificate holders. Market consultations and a structural dialogue with stakeholders in the payment chain relating to its products are vital to the effective operation of Currence. This is safeguarded in part by advisory bodies composed of licensees and groups of certificate holders. They represent the customers of Currence.
Furthermore, Currence maintains regular contact with umbrella groups, industry associations and consumer organisations.
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