iDEAL ready for the future Piet Mallekoote CEO Amsterdam November 2015 Content • An example for other countries? • Cooperation and competition • What is next? • Summary iDEAL ready for the future November 2015 | 2 How it works iDEAL ready for the future November 2015 | 3 iDEAL: 4-corner Online Banking e-Payment based on SEPA Credit Transfer € SEPA Credit Transfer iDEAL protocol Online & Mobile Banking iDEAL ready for the future November 2015 | 4 Advantages Online Banking e-Payments • Independence from cards • Leverage investments in existing online banking infrastructure • Security-sensitive data stay inside the banking environment • Infrastructure re-usable for new, other services • Replacement of high-cost paper-based payments iDEAL ready for the future November 2015 | 5 iDEAL outpaces growth of online retail 180 million transactions 26,4% growth 20% mobile iDEAL ready for the future November 2015 | 6 iDEAL most popular payment method in Dutch eCommerce Market share payment methods 2014 (nr of online purchases) 2% 5% 4% iDEAL 3% Credit card 4% Acceptgiro (paper) 5% Direct Debit Credit transfer 7% 54% PayPal Gift card 6% Debit card (in store) Cash 11% Other Source: eCommerce Payment Monitor 2014, GfK iDEAL ready for the future November 2015 | 7 Not only for eCommerce payments iDEAL usage category Volume shares e-Commerce - Consumer goods, travel, tourism 50% Ticketing and other services - Tickets: concerts & events, trains - Top-up: mobile phones, e-wallets B2C e-billing - Utilities, insurance premiums 50% - AfterPay, Klarna, PayPal Account verification - Mandates, agreements iDEAL ready for the future November 2015 | 8 iDEAL participants 9 Buyer Banks (issuers) 7 Seller Banks (acquirers) 56 Payment Institutions (acting as aggregators) 100.000 Accepting merchants iDEAL ready for the future November 2015 | 9 iDEAL success factors in the Dutch market • Institutional factors - Low use of credit cards - High penetration of broadband internet and online banking • Merchant benefits - Immediate payment guarantee / non-revocable payment - Easy integration in web shop • Consumer benefits - Integrated in secure online banking / no separate sign-up iDEAL ready for the future November 2015 | 10 Summary of benefits for all parties involved | Cooperation and competition iDEAL ready for the future November 2015 | 12 iDEAL is based on “co-opetition” Cooperation: to create the biggest pie possible Technical standards Scheme (with a brand) Active stakeholder management (consumer & merchants) Competition: to share the pie most efficiently Scheme roles open to any credit or payment institution Value-added services iDEAL ready for the future November 2015 | 13 Cooperation is essential in payments • Cooperation is essential in payments innovation because … • Divergent solutions lead to market fragmentation - High(er) transaction costs - Insufficient reach and trust and … • From two-sided markets we learned: - Cooperation constrains fragmentation, and creates reach and trust - Cooperation goes hand in hand with competition iDEAL ready for the future November 2015 | 14 What is next? iDEAL ready for the future November 2015 | 15 iDEAL mobile • ‘App’ and ‘web’ usage at merchant and/or bank • Same protocol & messages • In the mobile banking app: 5-digit pin • Enabling “payments everywhere” via QR codes iDEAL ready for the future November 2015 | 16 iDEAL QR • Major trend in shopping: convergence of online and physical commerce • iDEAL QR facilitates “real-world online” payments Use cases Channels • Infrequent payments • Paper invoice • Video-on-demand • Television screen • Restaurant • Bill • Charity donation • Poster, sticker • Pop-up store • iPad • ... • ... iDEAL ready for the future November 2015 | 17 E-Mandates • Offers the same rights as a paper-signed mandate - Operational risk for refunds reduced from 13 months to 8 weeks • E-mandates increase the chance of success for direct debit - White- and black list are incorporated in the system (core) - Mandate registered by Debtor Bank (B2B) - e-Mandate provides validated data from the bank domain, such as IBAN and registered account name and the name of signatory • E-mandates based on familiar iDEAL process - Convenient, safe and trusted by the consumer iDEAL ready for the future November 2015 | 18 E-Mandates iDEAL ready for the future November 2015 | 19 E-Mandates iDEAL ready for the future November 2015 | 20 Bank ID service Scope Log in using e-Identity service - Tax authority - Insurance company - E-commerce “Logging in via your bank” • Anonymous log-in Banking authentication customer agrees to share data • Provide data with merchant e-Identity • Validated Routing Service • Customer consent Provider Issuing Domain Acquiring Domain Pilot Q1 2016 iDEAL ready for the future November 2015 | 21 Bank ID – built on 4 pillars Initial Means of Quality of Infrastructure and identification authentication customer data legal framework (in bank (desktop + (Wwft+, ISO (messages, screens branch) mobile) standards) + R&R + contracts) • Requirement for banks: maximum reuse of resources • Scheme and brand: connect to existing infrastructure • Brand is important for consumer recognition (operation, terms and conditions) iDEAL ready for the future November 2015 | 22 Seamless payments • Recognise your customer • One-click buy • From check-out to check-in Check-out ORIËNTATION SELECTION LOYALTY TRANSACTION DELIVERY Check-in iDEAL ready for the future November 2015 | 23 Access-to-the-account (XS2A) • PSD2 opens possibility for payment initiation services and account information services • These services (may) disrupt existing banking services • Challenges for banks - ‘wait and see’: banks will loose customers and will be disrupted in the end - act with sense of urgency: banks disrupt themselves with new services (iDEAL may be an example) • iDEAL is ready for PSD2 iDEAL ready for the future November 2015 | 24 Summary iDEAL ready for the future November 2015 | 25 iDEAL ready for the future • Convergence of online and physical payments - iDEAL Mobile - iDEAL QR • Retaining customer-bank relation with relevant value-added services - E-mandates - Bank ID • Seamless payments - BankiD - iDEAL ready for XS2A iDEAL ready for the future November 2015 | 26 Merchant Acquiring Forum LUNCH PSE – SME Strategy Workshop July 2015 v0.1.