Rob Hoitink from iDEAL runs us trough all the ways in which PSD2 allowed iDEAL to innovate and improve its offering for the Dutch consumer market and beyond
The combination of iDEAL and PSD2 could be a match made in heaven: a strong digital payment brand leveraging the latest regulatory standards for payment initiation to rapidly meet customer demand for new payment options.
iDEAL brand owner Currence teamed up with Online Payment Platform (OPP) to use the PSD2 APIs from Dutch banks for a new option to schedule iDEAL payments on a future date. OPP was the first Dutch PSP to acquire a PSD2 license for payment initiation.
The launching merchant for this new iDEAL scheduling option was the Central Judicial Collection Agency (Dutch acronym: CJIB). When you get a speeding ticket in the Netherlands, the CJIB makes sure you pay it. It is a government agency with extensive experience with iDEAL payments.
Continuous demand for innovative new iDEAL payment options
iDEAL is the most successful payment method in Dutch ecommerce. An iDEAL payment is a single SEPA Credit Transfer (SCT), backed by a real-time payment guarantee. The brand has been established in October 2005 – thus, in 2020 we celebrate its 15th birthday. We are growing faster in 2020 than we did in the previous decade.
Furthermore, iDEAL is continuously improved, notably with mobile payments and QR codes, as over 80% of our payments are currently authorised using a mobile banking app. Therefore, iDEAL QR codes allow users to initiate iDEAL payments in every environment and every channel, providing a mobile payment experience.
These earlier improvements required lengthy projects, taking a huge amount of effort from stakeholders.
One prominent improvement that consumers and merchants asked for is a solution to schedule an iDEAL payment – especially for invoices with a due date in the future, consumers want to schedule the payment date themselves. Implementing this solution in the iDEAL protocol and migrating all stakeholders to this new protocol was originally estimated to cost millions of euros and take years to implement.
Faster iDEAL innovation with PSD2
PSD2 allows third-party providers (TPPs) such as OPP to initiate payments from a bank account, with permission from the account holder. One of the options provided by most Dutch banks in their PSD2 APIs for TPPs is the scheduling of an SCT payment. iDEAL and OPP could leverage this option in the Dutch PSD2 APIs to rapidly develop iDEAL Scheduling, without changing the existing iDEAL scheme and protocol and without the need for other iDEAL stakeholders to migrate their systems.
The pilot for iDEAL Scheduling was agreed between iDEAL, OPP, and CJIB in December 2019. In early May 2020, the CJIB launched iDEAL Scheduling on its website. Customers started using the new option from day one. Without any PR worth mentioning, we processed 10,000 transactions in the first three months. I think the trusted iDEAL logo was all the PR we needed.
What did we learn?
We are currently evaluating the pilot with OPP and CJIB. These are our first learnings:
Consumers like the solution, as 8 out of 10 users indicated they would use iDEAL Scheduling again.
PSD2 APIs differ significantly between banks, and it takes quite some work to align the transaction states and flows needed to report a coherent status to the merchant that initiates the transaction.
Initially, the overall conversion rate was low, slightly above 60%, far below the standard conversion rate of iDEAL.
Some PSD2 APIs require the payer to provide manually typed credentials as they would with online banking in a web browser. Consumers dislike this cumbersome authentication method in comparison with the convenient mobile authentication they are used to for other iDEAL payments.
Next step
Because users like iDEAL Scheduling so much, we intend to include this option more rigorously in the existing iDEAL scheme and protocol, bypassing the PSD2 APIs. We expect the conversion rate will improve when consumers get used to iDEAL Scheduling – and with a more convenient authentication.
Conclusion
PSD2 APIs provide the opportunity to quickly develop and launch new functionality for iDEAL and test it in the marketplace. In the long run, we want to evolve beyond the PSD2 APIs, as the iDEAL scheme requires better control of the customer experience and standards for messaging.
In theory, with the mandatory PSD2 APIs from banks, other PSPs could easily develop and launch a payment method similar to iDEAL, without the burden of aligning stakeholders. There are currently over 70 PSD2 Payment Initiation Service Providers registered at the Dutch National Bank that could challenge iDEAL, but so far none of these have launched a successful initiative. I guess the iDEAL brand is so rock-solid that the resources and investments required to build a new competing brand are too much of an obstacle at this time. Nevertheless, iDEAL intends to accelerate its innovations and strengthen the brand to stay ahead of the pack.
This article was published in our Payment Methods Report 2020, an extensive overview of what’s new in how people pay in the most relevant ecommerce markets.
About Rob Hoitink
Rob has over 20 years of experience in payments. At Currence, he is responsible for iDEAL and eMandates.
About iDEAL
iDEAL is the most successful omnichannel payment method in The Netherlands. The scheme management of iDEAL is vested with Currence, product owner of iDEAL, iDIN, and eMandates.
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