Annual statement

Transcription

1 Annual statement 1

2 Currence profile Currence is the owner of the Dutch uniform payment products ideal (online payments), Incasso (direct debit), Acceptgiro (giro collection forms) and Chipknip (electronic purse). 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 the rules and regulations. It also works closely with all interested parties to prevent fraud. Currence provides public information and brand promotion, based partly on market surveys, 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 rapid and the new Dutch market model also allows potential new market entrants and innovative applications. Changing markets and customer requirements are what inform policy and the further development of Currence payment 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

3 Currence is owner of the uniform Dutch payment products. In its year of incorporation, 2005, Currence acquired the ownership of the PIN, Chipknip, Acceptgiro and Incasso products. ideal was added to the portfolio in

4 Organisation and key figures 2014 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 Drs Sjors Kruiper 1959 CFO Royal Fruitmasters Group Currence Holding B.V. and subsidiaries Currence Services B.V. was transferred to the Dutch Payments Association on 1 July

5 ideal Licensees and Certificate Holders Institutions ideal Licensees ideal Certificate Holders Acceptgiro Licensees and Certificate Holders Institutions Acceptgiro Licensees Acceptgiro Debit Processors 4 4 Acceptgiro Credit Processors 4 4 Clearing House Acceptgiro 1 1 Acceptgiro Printers Acceptgiro Service Bureaus Incasso Licensees and Certificate Holders Institutions Incasso Licensees 35 9 Incasso Debit Processors 2 2 Incasso Credit Processors 2 2 Incasso Clearing House 1 1 5

6 Chipknip Licensees and Certificate Holders Institutions Chipknip Licensees Acquiring Processor Chipknip 1 1 Issuing Processor Chipknip 3 3 Chipknip Terminal Suppliers Chipknip Data Communications Providers Acceptant Payment Service Providers Chipknip 2 2 Card Suppliers, Personalisers and Destroyers 7 7 Switch 1 1 Clearing House 1 1 6

7 * Concerns only Dutch direct debit transactions. 7

8 * Since the introduction of SEPA Acceptgiro payments are processed as SEPA Credit Transfer and are therefore indistinguishable from normal giro transfers. 8

9 Currence products ideal Online market Three quarters of Dutch people shopped online in Some 8% of all consumer spending now takes place through this channel. The average total amount spent by each online shopper in 2014 was 1,100, spread over ten purchases. In 2014, the amount spent on the online market grew by 8.4% compared to 2013, while the number of purchases increased by 13.5% to 127 million. Online spending has been growing for several years, at a rate of 8% to 10% per year. This growth is significantly higher than the Growth in online spending still going strong growth in retail trade as a whole and is mainly because consumers are buying more online. To a lesser extent, an increase in the number of online shoppers is also part of this. The share of Dutch people who shop online has risen over the last ten years from 50% (2005) to 75% (2014). 2 Although around 20% of online shoppers sometimes make a purchase through a foreign website, the proportion of these purchases remains limited to 3% of online spending. This applies particularly to relatively small purchases. Over one fifth of those purchases were made from Chinese web-based retailers. The other countries in the top four are Germany, the United Kingdom and the United States. In the European context, the Dutch online market has reached a high level of maturity, according to research by Ecommerce Europe. 3 The Netherlands ranks fifth, with the UK, Germany and France making up the top 3. These three countries account for 61% of all European online sales 4. 1 ) Source: Thuiswinkel Markt Monitor 2014, GfK and Thuiswinkel; Onderzoek Internetgebruik, Statistics Netherlands, March ) Source: Onderzoek Internetgebruik, Statistics Netherlands, March ) European interest group for the online sector. 4 ) Source: European B2C Ecommerce Report 2014, Ecommerce Europe and GfK. 9

10 As an efficient and widely used method of payment, ideal has attracted a great deal of interest from both businesses and policy makers in Europe because of its contribution to the success of the e-commerce sector in the Netherlands. To achieve sustainable growth in cross-border e-commerce, however, more will be needed. Consequently, Ecommerce Europe advocates the further harmonisation of tax and privacy laws, consumer rights and logistics services, as well as the development of secure and efficient methods of payment that can be used across borders in Europe. Number of ideal payments In 2014, the number of ideal payments increased by almost 38 million to over million, an increase of 26.4% compared to 2013 ( Figure 1). Growth was therefore higher than in previous years. Of these 180 million ideal payments, 69 million were made to Dutch web-based retailers (38%), while 40% took place outside e-commerce (including, for example, bill payments, top-up payments and donations to charity). ideal is also increasingly being used to pay for online purchases from web-based merchants abroad. This accounts for some 20% of all ideal payments. In 2014, the total value of ideal payments rose to billion, a rise of 31% compared to

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12 ideal used most often for online purchases by far Popularity of ideal is unprecedented In 2014, slightly more than half (54%) of all online purchases made by Dutch consumers were paid for using ideal, followed by credit card payments (11%), which lagged behind by some way. This is according to figures from the ecommerce Payment Monitor, a survey into payments for online purchases in the Netherlands conducted by GfK in collaboration with ideal and Thuiswinkel.org. the ecommerce Payment Monitor represents an extension of the existing Home Shopping Market Monitor and focuses on how purchases are paid for. In 2014, the composition of the Supervisory Board changed. Whereas payment information for previous surveys was based on the most recent purchase made, now all purchases are included in the survey. This made it possible, for the first time in 2014, to monitor the market shares of the various payment methods for online shopping. The proportion of market shares is slightly different from the picture shown by the most recent purchases. However, ideal is the dominant payment method used under both methods. The proportion of credit card payments is higher, however, and that for Acceptgiro payments is lower. It is therefore possible to conclude that credit cards are used more often by frequent online shoppers, and that Acceptgiro is a less favoured method of payment. This is consistent with the fact that new buyers are generally more cautious, preferring post-payment and therefore opting to pay by Acceptgiro. For other payment methods, there were no significant differences > 12

13 Relevance of ideal for entrepreneurs There are around 45,000 Dutch web-based retailers. 5 Almost all larger web-based retailers offer ideal as a payment method to their customers (Figure 3). Among smaller web-based retailers, bank transfer is the most frequently offered method of payment, although ideal is also widely accepted by these types of retailer. On average, larger web-based retailers offer at least five payment options and smaller internet retailers at least three. Half of the larger web-based retailers offer six or more methods of payment. For smaller web-based retailers this figure is 11%. 5 ) Source: 13

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15 Businesses use a number of criteria when choosing a payment method. The advocacy organisations for Dutch and European webbased businesses (Thuiswinkel.org and Ecommerce Europe, respectively) mention the following three criteria in their communications: range, conversion and cost. Web-based retailers encourage consumers to use specific payment methods Range: This is the number of potential buyers who are able to use one or more of the methods of payment offered. In the Netherlands, the range of ideal is large. Web-based retailers now argue that the range of ideal should be extended outside the Netherlands, so that more consumers can use this payment method. Conversion: The number of consumers who actually make a payment. This is determined mainly by the ease of use of the payment method, and its technical reliability. ideal has a success rate of 85%, which is high compared with other payment methods. Cost: This includes not only direct transaction costs, but also indirect costs, for accounting, fraud and disruptions. Web-based retailers sometimes apply surcharges to ensure that these costs are (partly) passed on to consumers or to encourage certain payment methods. A little less than half of web-based retailers prompt consumers to use specific payment methods. This is less than in 2013, when it was 51%. Unlike in 2013, the most common way of encouraging shoppers to use a particular payment method is by selecting it by default. Some 32% of web-based retailers use that approach. Calculating a surcharge for certain payment methods is done by 18% of businesses (this was 27% in 2013). Figure 4 shows that web-based retailers have a strong preference for ideal: nearly 40% of larger web-based retailers that offer payment with ideal indicate that ideal is their preferred option, and paying with ideal very rarely involves any surcharges. 15

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17 On 13 June 2014, European legislation came into force (Consumer Rights Directive 2011/83 / EU, included in the Distance Selling Act) that regulates the surcharges that web-based retailers may charge for the use of a particular method of payment. In addition to the requirement that the surcharge must be clearly stated in advance, it may not exceed the actual costs incurred by the retailer. A comparison of average surcharges (Table 1) shows that those applied to the use of MasterCard and Visa credit cards have decreased compared to 2013, while those for other payment methods have increased. The most expensive payment method for web-based ideal is the cheapest payment method for web-based retailers retailers is cash on delivery, while ideal is the cheapest. It should be noted here that the amount shown for ideal in the table is based on the few web-based retailers who charge a fee for ideal payments. At these retailers, too, ideal is by far the cheapest method of payment. Only 2% of web-based retailers demand a surcharge for ideal payments. Table 1 Fees for payment methods In percentage of webshops that set a fee averages Payment method Surcharge % Surcharge % Cash on delivery 73% 11,92 73% 12,09 Klarna 20% 2,62 Afterpay 31% 1,66 American Express 11% 4,48 2,6% 8% 9,50 MasterCard 15% 5,56 2,4% 8% 3,34 2,0% VISA 15% 5,58 2,5% 8% 3,70 2,1% PayPal 19% 2,48 3,2% 13% 2,69 3,25% One-off direct debit 5% 1,88 14% 1,70 ideal 1% 0,81 2% 2,62 Source: Payment methods in webshops 2014, BOOM marktverkenningen, on behalf of Currence 17

18 Relevance of ideal for entrepreneurs It is not only the high rate of usage of ideal (see the box Payment preferences for online purchases on page 25) that demonstrates how consumers appreciate this method of payment. Brand research has been showing for years that consumers regard ideal highly. ideal highest scoring financial brand On the list of essential brands of the European Institute for Brand Management (EURIB), ideal is listed as the fifth most essential Dutch brand (as it was in 2013). The annual survey by BrandAsset placed ideal as the fourth most powerful brand for Dutch consumers (it was no. 3 in 2013). In both studies, ideal is the highest scoring financial brand. ideal has significant benefits for consumers because it is a secure payment method and it is based on the familiar format of internet banking. This also makes it one of the most accessible payment methods, because no separate registration is required. With web-based retailers offering an increasingly attractive product range, the number of consumers who shop online frequently is growing. Some 50% of consumers now overlook any potential inconveniences, such as not being able to see or feel the product, according to the Thuiswinkel home shopping market monitor. The second most commonly cited inconvenience was shipping costs (47%) and in third place (25%) was having to pay in advance. It should be noted, however, that by law consumers cannot be obliged to pay more than half the purchase price in advance. Organisations such as the consumers association (Consumentenbond) and ConsuWijzer 6 advise consumers to take this into account when choosing a method of payment and indeed a web-based retailer. It is partly for this reason that web-based retailers offer the possibility of paying cash on delivery or by Acceptgiro after receiving the goods. New payment methods for postdelivery payment make use of ideal Acceptgiro is becoming a less attractive option, however, because it needs to be printed on paper in a specific format and because it will be discontinued by New payment methods that enable post-delivery payment, such as the Dutch Afterpay system and the Swedish Klarna, will fulfil this need in a fully digital manner. Both of these payment systems make use of ideal for the final payment, for which a link is sent to the consumer by . 6 ) The government service desk for consumers, part of the Authority for Consumers and Markets. 18

19 Preferred payment methods for online purchases Most online shoppers prefer to pay for their online purchases with ideal, followed by Acceptgiro and credit card, which are some distance behind. Young people tend to prefer ideal (71% of year olds compared to 60% on average). Older people (over 65) are less likely to prefer ideal (52% compared to 60% on average). Older online shoppers often prefer to pay by debit card either on delivery or when picking up their purchases (10% compared to 5% on average), or to pay by Acceptgiro (15% compared to 13% on average). ideal tends to be preferred for smaller amounts In some cases, the preferred method depends on the amount (Figure 5). For example, to pay for purchases of 25, people are more likely to prefer ideal than for a purchase of 200 (64% versus 55%). For credit cards, exactly the reverse is the case: more people prefer to pay an amount of 200 by credit card than an amount of 25 (9% versus 5%). For amounts of 200, slightly more people prefer to pay post-delivery by Acceptgiro (13% versus 11%) or by debit card upon delivery or pick-up (6% versus 4%). These differences in preference depend in part on the perceived delivery risks associated with purchases that cost more, but liquidity issues also play a role (delayed payment). For others, however, this is not an issue at all, as evidenced by the fact that slightly more than half of online shoppers also pay amounts of 200 and upwards using ideal. 19

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21 Payment with ideal via smart phones and tablets The ecommerce Payment Monitor, mentioned previously, reveals that most online purchases are made using a laptop or desktop Online purchases via tablets or smart phones are most often made at home computer (42% and 35% respectively). Tablets are used for 14% of all online purchases and smart phones for 5% (Figure 5). What is remarkable, however, is that mobile devices are still used primarily at home. This applies to both tablets (96%) and smart phones (76%). Smart phones are also used relatively often in the workplace (10%) or while visiting family or friends (6%). The use of payment methods varies greatly between devices. ideal has the highest market share across all devices. On desktop and laptop computers, however, its share is 59%, which is much higher than that for smart phones (29%). This is despite the fact that ideal offers many advantages when making purchases on a smart phone or tablet, because no separate security mechanism is required (such as a token with a debit card or a TAN code) as ideal transactions are made using the bank s mobile app. This convenience opens the way to the use of ideal in a variety of situations outside the home or while on the move. Indeed, the share of ideal payments for smart phone purchases increased substantially during 2014, from 24% in the first quarter to 34% at the end of the year. Almost 20% of all ideal payments are made using an app Most banks have now added ideal to their mobile banking app. Almost 20% of all ideal payments at these banks are made using the app. In 2015, more banks are expected to follow suit, continuing the expansion of mobile banking. What is also remarkable is that purchases made on smart phones are relatively often paid for using credit cards or PayPal (included in the other category). Although omni-channel commerce is regarded as an important channel for future online sales, the share of online purchases in physical shops remains very limited at 1%. Furthermore, the use of the in-shop terminals remained stable over the course of the year. 21

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23 i ideal payment in a mobile banking app (ING) ideal participants Ever more ideal participants The number of licensees and certificate holders for ideal continues to increase. In 2014, BNP Paribas Fortis S.A. became an ideal acquirer-licensee. This brings the number of participating ideal acquirers to six. Additionally, nine consumer banks are also participating, making ideal available to their customers for making payments. Table 2 ideal Licensees and Certificate Holders Institutions ideal Licensees ideal Certificate Holders

24 In 2014, six new certificate holders joined, while four parties terminated their certificate agreements, mainly due to mutual acquisitions or take-overs. Certificate holders are known as Collecting Payment Service Providers (CPSPs). They are licensed as payment institutions by the local regulator (or have an exemption). CPSPs have entered into an agreement with an acquirer-licensee under which they act as a reseller. Number of CPSPs rises again Web-based retailers have a choice between an acquirer or a CPSP to process ideal transactions. In total there were over 105,000 active ideal contracts at the end of That is an increase of 5% compared to CPSPs usually offer a wide range of online payment methods, and the package of services offered to web-based retailers by a CPSP often involves a combination of IT and financial services. CPSPs carry out technical and financial processing for various payment methods and ensure that web-based retailers payment pages are integrated with the financial back office. Additionally, CPSPs often provide additional services. A service that is offered by some CPSPs is the reconciliation of ideal receipts with orders from the website. Other services include, for example, refunds for purchases that have been returned or risk management in case of post-delivery payments. CPSPs that focus on foreign web-based retailers also often offer currency conversion services. Of the 48 CPSPs, 13 are located abroad. Two thirds of the CPSPs provide services for foreign web-based retailers (Figure 7). This Web-based retailers in 51 countries now accept ideal allows consumers with a Dutch bank account to pay for online purchases from foreign web-based retailers in 51 different countries. Together, these account for about 20% of all ideal payments. The relative share of licensees and certificate holders varies depending on the number of contracts and the number of transactions. Of the web-based retailers that offer payment with ideal, almost 65% have signed an ideal contract with a CPSP, while slightly more than half of all ideal transactions are processed via these contracts (Figure 8). 24

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27 ideal abroad ideal has a message protocol for both web-based retailers and licensees (Issuers and Acquirers). This provides the correct information needed for the authorisation of payments by the payer at his or her bank (Issuer) and the relevant information for the bank (Acquirer) and the internet retailer. The actual payment is then made by means of a European transfer payment (SEPA Credit Transfer), which is processed through the European clearing and settlement institutions. Still no European standard for online payment methods Although similar payment methods are used in some other European countries, there is still no European standard. However, the functional differences are small, so some form of interoperability between these Online Banking e-payments payment methods is technically feasible. But establishing such a system would depend not only on making standards interoperable, but also on other mutual agreements, such as the acceptance policies of web-based merchants and commercial agreements concerning the calculations of costs. Additionally, there would need to be a realistic prospect of sufficient volumes of cross-border online buying and selling, and a decent infrastructure for mobile and internet banking for consumers would need to be put in place. So far, CPSPs are playing an important role in the acceptance of ideal as a payment for web-based retailers based abroad. CPSPs are generally helping web-based retailers to enable consumers to pay using their preferred payment method. These services provided by CPSPs reduce the need for a uniform internationally applicable online payment method for cross-border payments. A further point is that in a number of countries there is less demand for a system of payment that uses internet banking because credit cards are used much more widely there. To improve the effectiveness of the market for online payments, the European Commission is proposing the inclusion of a new group of payment service providers in the revised draft Payment Services Directive 7 (PSD2). These payment service providers are known as Third Party Payment Service Providers (TP-PSP). They provide services to web-based retailers and carry out payment transactions at the instructions of the account holder within the internet banking environment using personal log-in codes. 7 ) At the start of May 2015, the European Parliament, Council and Commission reached a political agreement on the content of the revised directive. 27

28 However, Currence and its licensees have significant concerns regarding the security, legal liability and clarity of this service by TP- Concerns about re-use of personal log-in details PSPs. From the viewpoint of security, in Europe it would be preferable to build on payment methods that involve online banking (either existing methods such as ideal or new methods). This would avoid the need for personal log-in codes to be given out to third parties by the consumer. It would also serve to increase confidence in the security of payments over the internet. Availability of ideal For a payment method such as ideal, which is widely used, availability is crucial. With the increasing popularity of ideal on mobile telephones in a variety of situations and environments, the importance of availability is growing fast. Viewed over the entire chain, the availability of ideal improved in 2014 compared to Availability of ideal increased Availability at participating banks (banks that process ideal payments on behalf of their corporate customers, such as web-based retailers) is close to 100%. With the exception of one outage in April 2014, the joint availability of these banks during the financial year remained at a consistently high level (see Figure 9). The availability of ideal via consumer banks (banks that offer ideal as an online payment option to their retail customers) is most visible to the outside world. At these banks, availability improved still further in 2014 (99.5%) compared to 2013 (99.4%) (see Figure 9). This improvement was the result of the changes, which had been promised in 2013, to the infrastructure at these banks in order to create a separation between the processing channels for internet banking, mobile banking and ideal. 28

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30 Despite the improvement in overall availability, individual disruptions to the ideal payment system at banks have impacted webbased retailers and consumers. Any visible disruption, no matter how small, is the subject of immediate attention on social media and in the press. This is an issue that licensees focus on constantly and which is always on the agenda of talks between Currence, Thuiswinkel.org and other stakeholders. The measures agreed in 2013 to improve actual availability and enhance communication in the event of disruptions had a positive impact in One of the measures concerns the separation between the infrastructures for different processing channels at consumer banks, which was mentioned earlier, so that an outage in internet banking, for example, will not lead to problems with ideal. The implementation of these measures is underway and remains a focus point for further changes in the IT systems of banks. Permanent 100% availability is unrealistic. The measures concerning communications aim to ensure that retailers and consumers have as much information as possible when ideal is affected by an outage. Web-based retailers benefit if, in the event of an outage, consumers are properly informed about the cause. In such situations, retailers must be able to accept payments from customers via other methods. Consumers are directed back to the payment page in the event of an outage To this end, Currence published a supplement to the ideal integration manual for web-based retailers in Should there be an outage in ideal, this manual contains instructions about how consumers can be redirected back to the merchant s payment page. The consumer can then select a different method of payment on the payment page. By applying these instructions, it becomes less likely that an outage during an ideal transaction will lead to the loss of that sale. A project has also been set up to put in place an availability system and a website which shows the availability of ideal banks in real time. As the system uses data from all current ideal transactions, it gives the most reliable and complete picture of the availability of ideal. The website shows the current and historic availability of ideal at the various banks. This enables consumers and merchants to see immediately at which banks it is possible to pay using ideal. The system and the webpage were realised in April

31 Fraud / improper use Currence received 19 complaints in 2014 concerning (possibly) fraudulent web-based retailers offering ideal as a payment option. After further investigation, 17 of these were excluded from ideal. In 2013, 31 (potentially) fraudulent merchants were reported. This decrease is a reason for optimism, but on the other hand, every case of fraud is one too many. Close partnership with Thuiswinkel.org, the Consumer and Market Authority and other government agencies, including the police, has meant that any signs of suspicious or fraudulent activities can now be shared more quickly. Licensees and certificate holders can, on this basis, take action against the ideal payees involved, with the possibility of excluding them from the ideal payment system. Acceptance criteria for high risk merchants tightened further In early 2014, there were some cases of fraud involving the use of ideal to purchase Bitcoins. In these cases, the purchaser was expecting to pay for a product, but in reality the customer was being misled into purchasing Bitcoins from the fraudster in question. After identifying this method of fraud, whereby a consumer makes a payment to another party and/or for a different product than he or she intended, Currence further tightened its acceptance criteria for so-called high risk merchants. Since then, this type of fraud has not been observed again. In 2014, Currence and the license and certificate holders launched an investigation into how ideal could be made more resilient to abuse by unscrupulous parties whose sole aim is to defraud consumers. As part of this, a pilot project was launched in partnership with the National Internet Fraud Complaints Desk (LMIO). This project looked at how the information available to the LMIO about criminal activities can be distributed among licensees and certificate holders quickly. This enables possible cases of abuse and fraud to be detected more quickly by merchants offering payment by ideal. 31

32 Agreement with Gaming Authority to combat illegal internet gambling In preparation for a new law on gambling (expected in 2015), the Gaming Authority has been charged with taking action against companies that provide gambling services and explicitly target consumers in the Netherlands. In September 2014, Currence ideal B.V. signed an agreement with the Gaming Authority to cooperate in the fight against these illegal providers. The Dutch Payments Association and a number of other payment service providers have also signed this agreement. Currence ideal B.V. signs agreement to combat illegal internet gambling The agreement states that, provided that certain conditions are met, payments between consumers and providers of illegal internet gambling will be blocked. By accepting the agreement, Currence ideal B.V. and its licensees and certificate holders are signalling that they will not offer payment services to providers of illegal online gambling. The agreement states that the Gaming Authority will periodically prepare a list and distribute this to the payment service providers that have signed the agreement. The list will provide details of illegal online gambling providers that have been subject to administrative sanctions by the Gaming Authority, but are continuing to target the Dutch market. The payment service providers have committed themselves to providing no further payment services to the providers in question. As far as any existing services are concerned, these will be terminated by the payment service provider as soon as the administrative sanction has become definitive. Further development of ideal In 2014, the options were explored for the future development of new functionalities within ideal. The focus is on realising new opportunities for payment, multiple opportunities for payment and at the request of the consumer adding customer data to a payment. This is being done in close partnership with the Betalen 2.0 programme that is being carried out under the auspices of the Dutch Payments Association. An electronic identification service is a part of this (please see the Dutch Payments Association Annual Report (2014)). On the basis of the findings of the research and in consultation with the stakeholders involved, a decision will be taken on which functionality is the most desirable. ideal will grow from being a trusted method of paying for online purchases to a digital payment method with a broad range of applications in both physical and online environments. 32

33 Chipknip End of Chipknip payments Chipknip has been discontinued after 19 years After 19 years of existence, the method of electronic payment known as Chipknip has been discontinued. Since 1 January 2015, it is no longer possible to pay using Chipknip. The advent of the Single Euro Payments Area (SEPA) and the end of the availability of the data communication infrastructure that was essential to Chipknip meant that changes in the payment infrastructure would have been required to continue Chipknip. After extensive consultation with market participants, it was decided not to proceed with the chain-wide investment necessary to maintain the system, due to the declining number of transactions and the emergence of alternative payment methods (such as contactless payment and mobile payments). In early 2013, after the consultation exercise, Currence announced the discontinuation date for Chipknip. Currence, the banks and market participants then worked closely together to ensure that Chipknip was wound up in an orderly fashion. Due to the early announcement, merchants accepting Chipknip were given sufficient time to resolve any possible dependence on Chipknip during the course of Currence and the banks advised participating merchants to have alternatives to Chipknip in place by 1 October No major incidents occurred during the migration from Chipknip to other payment options, partly due to excellent mutual cooperation and the oversight role played by Currence. 33

34 Migration Paths for Chipknip retailers There will be no single successor to Chipknip, but there are some very good alternatives. For merchants that accept Chipknip and their customers, debit card payment is in most cases a suitable electronic alternative. Contactless payment is also likely to be the subject of a great deal of interest. Contactless payment is actually an extension of debit card payment. To pay smaller amounts, no PIN code has to be keyed in, meaning that contactless payments are very quick to complete. Moreover, no numeric keypad is required for contactless payments. This is a particular advantage at vending machines. However, not yet all consumers had a debit card suitable for contactless payments or a smart phone equipped for contactless payments in the year covered by this report. This has turned out to be an obstacle for retailers who wanted to migrate from Chipknip to just contactless payments. Merchants have therefore often opted for solutions that in addition to offering contactless payment also provide other means of payment, such as regular debit card payment or closed payment systems, and in some cases simply accepting cash. No single successor to Chipknip A range of migration patterns was evident in each of the user segments. The use of Chipknip in shops had already ended in 2013, with a few exceptions. At the launch of paying via an EMV chip on the debit card instead of a magnetic strip, Chipknip had already been removed from the list of possible payment options in most shops. In the parking sector, merchants often chose to introduce payments via mobile apps and/or payments by debit card without the need to enter a PIN code ( dip & go ). In the catering sector, many merchants opted for a combination of regular debit card payments and contactless payments. In the vending sector, the migration proved highly dependent on the specific situation of the provider and its customers. Where there was a fixed group of users of a vending machine, for example in schools or offices, a closed payment system provided a good solution. In case of a more varied group of users, such as in hospitals, contactless payments together with other payment methods, such as regular debit card payment, cash and/or a closed card system were chosen. After the end of Chipknip, the option of payment by Chipknip was removed from the last payment terminals by suppliers. Until the end of 2014, approximately 18,000 Chipknip payment terminals were still active (end of 2013: 31,000). 34

35 Use of Chipknip Chipknip still being used in 2014 Although the termination of Chipknip was announced in 2013, there were still a relatively large number of transactions using Chipknip in In 2014, consumers paid by Chipknip some 76 million times. That was 37% less than in Compared with the peak year 2010 (178 million Chipknip transactions), in 2014 it was just 43% of the volume of transactions (see Figure 10). As a proportion of the total number of payments using payment cards (both debit card and Chipknip transactions), the use of Chipknip declined from a peak of one payment in every 13 debit card payments (2010) to one payment in every 39 debit card payments (2014). Some 80% of all Chipknip payments were made in the parking, vending (vending machines) and catering (company restaurants) sectors, otherwise known as the ParVenCa segment. In this segment, the decrease in absolute numbers compared to 2013 was strongest in catering (see Figure 11). In 2014, consumers charged their Chipknip 11 million times (2013: 17.1 million; a decrease of 36%). The average amount charged fell slightly (9%) to Each charge was used to pay for approximately seven transactions amounting to an average of 2.15 each (2013: 2.27). Over 82 million was refunded to former Chipknip users who had balance remaining In the second half of 2014, banks both individually and collectively through Currence sought to encourage consumers to transfer the remaining balance on their Chipknip using a Chipknip charging point. This led to a significantly higher use of the refund option at the Chipknip charging points (an increase of 63% compared to 2013, to 1.7 million refund transactions). However, there was still a strong expectation that many consumers would still have balance on their Chipknip after 1 January For this reason, Currence, together with its licensees, announced in November 2014 that remaining Chipknip balances would be automatically refunded to the relevant account holder. In early 2015, the banks refunded more than 82 million to Chipknip users for the balance remaining on their Chipknip accounts. However, for Chipknip amounts that belonged to bank accounts that were out of use, for example, automatic restitution was not possible. In such cases, those entitled to Chipknip restitution will be able to apply to their bank for this indefinitely. 35

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38 Chipknip in retrospect After 19 years and a turbulent history, Chipknip came to an end in The Chipknip system was launched by a number of Dutch banks in Later, the former Postbank launched an alternative version of the system, known as the Chipper. These two systems used different forms of chip card technology and were therefore not compatible. Partly as a consequence of this competition between the two standards, the use of both payment systems remained low. This changed when the Postbank decided to work with the other banks to launch one single standard (Chipknip). The use of Chipknip rose sharply after 2001 (Figure 12), partly as a result of this. 38

39 As a general method of payment, however, Chipknip never enjoyed the success that had been expected at its launch. It never replaced the billions of cash payments with electronic ones. Chipknip always remained in the shadow of debit cards and cash. At its peak in 2010, the number of Chipknip transactions was less than one-tenth of the number of debit card transactions. Chipknip did not become the success story that was hoped for at its introduction Chipknip was introduced as a hi-tech alternative to cash payments and was intended to reduce the cost of payments. From the point of view of social costs, Chipknip was an admirable initiative. One disadvantage compared to cash was that the holder of the Chipknip could not see the balance available on the card. In addition, he or she had to go through an extra step, charging up the balance on the Chipknip at a Chipknip charging point. For specific payment situations, such as in the ParVenCa (parking, vending and catering) segment, the Chipknip nevertheless maintained a solid position. This was due to the compact size of the Chipknip reader, its high processing speed and the ability to pay offline. Over the course of time, however, Chipknip had to face stiff competition from debit card payments. This due to the fact that accepting debit card payments became cheaper for retailers, and broadband internet became ever more commonplace. As a result of this the debit card payment system became the most obvious choice for nearly all payments. In the ParVenCa segment, Chipknip maintained its advantage longest. Chipknip made a significant contribution to the social acceptance of payment points where it is only possible to pay by electronic means. The first parking meters and canteens where Chipknip-only payment was introduced encountered some resistance. But now electronic-only payment in some cases has become the norm in many sectors, such as fuel stations, shops, municipalities and when parking, and this is generally accepted. 39

40 Direct debit Direct debit and the market The national system of direct debit payments in the Netherlands has been replaced by the European Direct Debit 2014 was an important year for the Dutch direct debit product. The Dutch direct debit was discontinued in that year and replaced by its European equivalent, the SEPA Direct Debit (SDD). This meant that the number of old Dutch direct debit payments processed declined dramatically, from 1.2 billion in 2013 to 153 million payments in 2014 (a decline of over 87%, see Figure 13). Since the transition to SEPA, companies and institutions have been using the new standard European Direct Debit (SDD Core) or the SDD B2B business variant. These two variants have some features in common with the old national direct debit variants, but there are some differences too. For example, the once-only variant of the standard European Direct Debit is reversible and the business SEPA Direct Debit, alongside the mandate itself, also involves a compulsory registration form for the payer s bank. For the submission of European direct debits, the XML format is used instead of the (old) national format (ClieOp). Additionally, the The consumer can refuse any direct debit payment in advance European direct debit has a number of new product features compared with the old Dutch direct debit. For the standard European direct debit, the consumer s bank informs the account holder five days before any amount is deducted on the basis of a new direct debit mandate. Also, the account holder can refuse a debit transaction that he or she does not agree with in advance. Until the end of the additional SEPA transition period on 1 August 2014, Dutch banks continued to process the old national direct debit variants, as well as the new European variants. At the beginning of 2014, many but not all payees had switched to the SEPA variant of direct debits. The extension of the transition period until 1 August 2014 helped to ensure that all payees were eventually able to change over in good time. 40

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42 Lottery direct debits The arrival of the European direct debit signified the end for the Dutch national direct debit. This was not generally a problem, since the new European direct debit was broadly very similar to its Dutch direct debit predecessor. The lottery direct debit (a special product used only for the Dutch national lottery) is an important exception, however. At the end of 2014, there were 84.6 lottery direct debit payments (2013: 82.7 million; +2.3%). The lottery direct debit involves the use of an non-reversible standing order, of which there is currently no equivalent under SEPA. In 2014, at the request of the companies that run the lottery in the Netherlands, the DNB, as the competent authority, used its powers Lottery direct debits have been exempted from SEPA regulations until 1 February 2016 to grant an exemption to the SEPA Regulations. This exemption means that the current lottery direct debit which is non-reversible for the debtor can be continued until 1 February Because the old payment infrastructure had been decommissioned by early 2015, after that it was no longer possible to process the lottery direct debit using this infrastructure. In order to continue to process the non-reversible lottery direct debit, a number of banks have made adjustments to their SEPA payment infrastructure at the request of the lottery companies. At the end of 2014, the four largest Dutch lottery operators successfully switched over to the new system. In 2015, in consultation with Dutch and European stakeholders, the possibility of introducing a non-reversible European Direct Debit ( No-Refund SDD ) after 1 February 2016 will be considered. European regulations (European Payment Directive, PSD2), on which political agreement was reached in early May 2015, also play a role in this. But the question whether there is sufficient support in Europe for a No-Refund SDD has not yet been settled conclusively. 42

43 Acceptgiro Acceptgiro and the market Number of Acceptgiro forms processed declines further The number of Acceptgiros processed has been falling for many years. In 2014 the rate of decline accelerated still further compared to the previous year. In 2014, the decline was 22.9% (2013: 16.4% decrease; see Figure 14). These figures refer only to the number of paper Acceptgiro forms that were physically processed by banks, and not to Acceptgiros paid via internet banking. The decrease is related to the transition to SEPA and the associated replacement of the old Euro Acceptgiro with the new 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, since 2014 the exact total numbers of Acceptgiro payments have no longer been calculated, but only the total numbers of those processed on paper. 43

44 The decline in the use of paper Acceptgiros has been caused by the growing popularity of electronic payment (via internet banking and mobile banking) and the switch to more efficient forms of payment such as direct debit and ideal. New market initiatives, such as Accept , are also playing a role in this. The introduction of the IBAN Acceptgiro has also contributed to the decline. Because of the transition to SEPA, it was necessary to modify the old Euro Acceptgiro form to meet European (SEPA) standards. Some merchants have dispensed with this entirely and switched to other forms of payment. As of 1 August 2014, old Euro Acceptgiros were no longer be processed, and only the IBAN Acceptgiro were accepted. More Acceptgiros paid using internet banking (83%) A sample taken among a number of banks in 2014 showed that approximately 83% of all Acceptgiros were paid using internet banking. This percentage has been increasing steadily over the past decade. Currence predicts that this trend will continue over the coming years. Figure 15 shows the change in the numbers of Acceptgiro payments completed on paper and those completed via internet banking over the past five years (figures are shown for 2014 and 2010). 44

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46 Migration to IBAN Acceptgiro The introduction of the IBAN Acceptgiro, which began in 2014, did not result in many operational problems for consumers, merchants or the organisation responsible for the central processing of Acceptgiro forms. The phasing-out of the old Euro Acceptgiro occurred virtually seamlessly. This was partly because the new IBAN Acceptgiro is very similar to the old version and its introduction coincided with that of the IBAN for domestic transfers. As was mentioned, the transition to the IBAN Acceptgiro led a number of business users and service providers to reconsider its use. Many companies who issue Acceptgiro forms, a few dozen service agencies and a number Acceptgiro to be discontinued on 1 January 2019 of Acceptgiro printing companies decided to stop working with Acceptgiro. The investment required proved too great for them compared to the returns on that investment, mainly because the IBAN Acceptgiro will only exist for a few more years, until 1 January Some 22 printing companies were licensed to print IBAN Acceptgiro forms at the end of 2014 (one fewer than in the previous year). Many service agencies also work in the Acceptgiro payment chain. The services that these agencies provide to commercial users of Acceptgiros include printing the relevant details on the forms, mailing them out and, if desired, processing incoming payments. Due to the change-over to the IBAN Acceptgiro, about half the service agencies providing these services have decided to discontinue this service, leaving 214 service agencies certified by Currence at the end of By the end of 2014, this number had grown again to 241. Apparently, a number of service agencies reversed their previous decisions. In addition, several new parties saw some opportunities in this market. The latter was due to the option of printing Acceptgiro forms digitally in a cost-effective manner, which was introduced in A total of 11 parties were certified to carry out this work in 2013 and At the end of 2014, there were 21 Acceptgiro licensees one fewer than in The number of certificate holders remained unchanged (9). The number of Acceptgiro test institutes also remained unchanged (2). 46

47 Discontinuation of Acceptgiro Given the decline in the use of the Acceptgiros, the MOB agreed in 2013 that Acceptgiro will be discontinued as of 1 January 2019 at the latest. For this reason, under the guidance of Currence and in consultation with service providers, users and other stakeholders, plans will be drawn up in 2015 for a realistic way to bring this about. Alternative payment products that could (in the longer term) replace Acceptgiro will play an important role in this. 47

48 Explanation of the structure, organisation and governance of the company Structure Structure of the company At the time of its establishment, Currence was given a special structure in order to achieve maximum transparency and flexibility. Currence Holding B.V. has various subsidiaries, in the form of product-specific private limited liability companies (B.V.s). Currence Holding B.V. has issued lettered shares to its shareholders (shares A to F), each type of share relating to a specific product-specific company. This structure has a number of advantages for Currence. It allows the policy on the uniform payments system and the overall external profile of the company to become more firmly embedded, while leaving enough scope for individual shareholders interests and their accompanying rights and obligations to be differentiated for specific products. A shareholder need not invest in all the product-specific companies, and the interest of shareholders can vary from one product-specific company to another. In order to facilitate access for new shareholders, conditions have been imposed with which both new and existing shareholders must comply, creating 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 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. 48

49 Legal structure 8 Each payment product is operated by a separate company. The product-specific companies own the rights to the brands and logos, copyrights and other (intellectual) property rights. This also means that these 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 companies also have specific financial rights and obligations. 8 ) Currence Services B.V. was transferred to the Dutch Payments Association on 1 July