Online payment method iDEAL breaking with trend

VLEUTEN | The popular online payment method iDEAL in the Netherlands keeps its momentum. In the first 3 quarters of 2014, the number of iDEAL transactions exceeded the 129 million payments. That is more than 27% growth compared to the same period last year. 

iDEAL breaking with trend

It definitely seems iDEAL is breaking with the trend of years of declining in terms of relative growth. Last year, the number of iDEAL transactions - over the whole year - grew with 21,6% to 142.5 million transactions. The growth percentages for the years 2011 and 2012 were respectively 36,5% and 24,8%. Now iDEAL picks up pace and moves towards 26-28% growth for 2014. Please see below for the chart sourced from the new iDEAL website.

Screen Shot 2014-10-17 at 12.22.25

iDEAL has become an 'All-Rounder'

In our article '12% of iDEAL payments through IDEAL Mobiel' in July this year, we already give some rationale why iDEAL's growth is accelerating. 'A long time ago', when the Dutch people started to shop online and iDEAL was launched (back in 2005), iDEAL was primarily used to complete for online retail purchases. Through the last years, iDEAL developed into a more all-round online payment method, fit for different channels, checkouts and segments.

Non-ecommerce businesses accepting iDEAL

In the last years, more and more non traditional ecommerce businesses went online with their products and services. Nowadays iDEAL is accepted by governmental websites, insurance companies, financial institutions and membership and charity organisations (pay for contributions and subscriptions). Even fines for exceeding speed limits can now be paid for using iDEAL.

International Merchants Adding iDEAL

Besides the fact that more and more businesses automate their services, use the online channel and include online payments, there is also a clear trend that a growing number of international ecommerce merchants add iDEAL to their checkout. These retailers recognise the importance of offering a trusted payment method that is preferred by local shoppers.

Besides providing ease, trust and payment convenience, likely to increase conversion rates, these international merchants appreciate the fact that iDEAL can be used to instantly covert a sale into payment (pre-delivery), payment is guaranteed (no chargebacks) and transactions costs are fixed.

In addition, by accepting iDEAL, merchants are able to reach over 10 million people in the Netherlands capable of paying with an instant, and simplified, online bank transfer. There is no other Dutch online payment method available at checkout with such reach that supports instant checkout and payment confirmation.

'pay-after-delivery' with iDEAL

The payment method iDEAL, however, is not only fit for instant checkouts and payment, but can also be used to complete so-called 'pay-after-delivery' purchases. It definitely seems that more and more Dutch shoppers prefer to shop first and pay later.

Payment companies like Klarna and Afterpay both provide a payment solution that facilitates swift online checkouts by using invoice. Shoppers can redeem the invoice by using iDEAL. There is no need for consumers to share sensitive payment information, or have cap-readers, tokens, or tan-codes at hand of remember security codes to complete the purchase.

'iDEAL Mobiel' - the mobile version of iDEAL

In addition to all of the above, iDEAL also embraced the mobile sales channel. The Dutch banks Rabobank, ING Bank and Knab have optimised their iDEAL payment flow when shopping and paying with smartphone and tablet.

Basically they have made it more simple (less steps or no need to have an authentication device) to complete payment. As mobile commerce is growing in the Netherlands, roughly between 10-12% of all online spendings are paid for using a mobile device, iDEAL is likely to grow in so-called 'iDEAL Mobiel' transactions as well. 

iDEAL outages gain importance

However, not everything looks bright for iDEAL. As the iDEAL payment method connects the shopper with their online banking environment to complete the pre-filled bank transfer, the banks online banking systems need to be available (logically). By becoming an all-round kind of payment method, it also increases the dependence of merchants, businesses and consumers. 

Especially this year, and again in recent weeks, many merchants have experienced 'outages' which negatively impacts online sales and even reflects negatively on the iDEAL brand. Consumers willing to shop (or in need to shop online for particular goods) will tend to use other forms of payment like credit cards, PayPal, Klarna, Afterpay and SOFORT to complete the purchase. One can imagine the shoppers' frustration when the actual method of preferred choice does not work. 

That is also why a growing numbers of business people, branche representatives (including - the Dutch home shopping branche organisation) and politicians openly hold the banks accountable for their outages. Due to the damage to the public (both merchants and consumers), the request for financial compensation becomes louder and louder. 

iDEAL outlook for the remainder of 2014

Traditionally the upcoming months show the largest number of iDEAL transactions being processed as the Dutch prepare for their Holiday season including 'Sinterklaas' and Christmas. December has always been iDEAL's best month, and that will likely be the case this year.

However, the current economic situation, still not stable and indicating Europe might face new economic challenges, might influence the Dutch spending behaviour. Although it might impact the amount spend online, it is less likely to really decrease the number of iDEAL transactions (the average transaction amount will probably drop). Given the historic growth percentage in the last quarter (between 20-25%), we expect that the number of iDEAL payments for 2014 will be around 178 million transactions.


Context: iDEAL Payment Method Profile

iDEAL is an online payment method using real-time online bank transfers to complete online and mobile purchases. iDEAL's success is due to the fact that it is perceived as a secure online payment method by both customer and merchants in The Netherlands. As a key driver for the usage of iDEAL, over 10 million Dutch people have online banking capability. There is no chargeback mechanism and merchants benefit from payment guarantee. Processing costs are fairly low in comparison to other online payment options and they are fixed (20-70 eurocents). In other words, it is a payment method that merchants can count on. Consumers feel confident using their familiar home banking and not having to share sensitive card data. All major Dutch banks support iDeal from both issuing and acquiring side. The acquiring licensees include ABN AMRO Bank, Rabobank, ING Bank, Friesland Bank (=Rabobank), Deutsche Bank and The Royal Bank of Scotland. More information on the preferred online payment methods in the Netherlands.

Article by Erik van den Heuvel, About-Payments, October 17th, 2014.

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