23 June 2021
iDEAL 2.0: A sensible step, with some challenges ahead
The most important payment method in the Netherlands is due for a renewal. Back in December 2020, iDEAL’s brand owner Currence announced that it had started working on iDEAL 2.0, and bits of information about the rehaul have been released since then. I believe an update of iDEAL is both logical and sensible, but I do see a few challenges along the way.
iDEAL saw the light of day in 2005 and has grown out to be the most frequently used online payment method by Dutch consumers. It offers a smooth and safe way of paying online. Meanwhile, however, modernizing the scheme interface protocols was due. And even though iDEAL has dominated the Dutch online payment landscape for years, the competition has developed as well. That is why I believe updating iDEAL to today’s market needs and standards is the right way to go.
The transformation from iDEAL to iDEAL 2.0 involves many changes. To summarise based on current available information, it seems that iDEAL 2.0 tends to become a wallet that will be structured around a central access point (CAP). This means it will not only initiate the payment, but consumers can also store their data and preferences on for instance what account to use or to which shipping address the goods can be sent. These changes sound especially interesting for smaller online merchants that are highly dependent on the iDEAL payment and do not have the possibility to facilitate a complete onboarding process.
Points of attention
Overall, iDEAL 2.0 seems to be a good improvement, but the new set up raises a few points of attention. For instance, people will have to register for this service to have an improved customer journey, and this is a sensitive issue in relation to GDPR. Consumers have to give banks permission to share their personal data, and the European privacy law dictates that this permission has to be specific. As a result, consumers cannot issue a general permission for several purposes. As far as we know, this challenge has not been solved.
In addition, I believe there is something strange in the way iDEAL 2.0 tends to share the consumers’ personal data with online shops. Only after selecting the payment method of iDEAL will the merchant receive essential information like shipping address, age verification and/or credit check. From a merchant perspective, this additional information is irrespective of the payment method. Therefore, in my opinion, the system should be set up differently and more open, so that the provision of essential customer information is not linked to the payment method. This ensures that the system becomes more applicable for multiple target groups. In addition, it is in line with the developments of Open Banking and complies with the PSD2 regulations on the European market.
My third remark relates to the fact that iDEAL 2.0 will be hosted from a single CAP, while the complexity of the transaction flow and the number of transactions increase. In general, this does not have to be a problem if the platform is set up properly, but any technical flaws may cause the whole system to collapse. Therefore, iDEAL 2.0 can be seen as having a single point of failure and, based on our experience with the processing of large payment volumes, I believe this is rather risky in this essential field of online payment.
Finally, iDEAL 2.0 is a perfect solution for smaller online merchants who mainly focus on the Netherlands. However, the payment method does not yet offer a proper solution for cross-border trading. Even though the access to iDEAL is not formally limited to Dutch banks, we still see that only Dutch consumer banks are member of the scheme. I am very curious to see what iDEAL 2.0’s plans are in this regard, as e-commerce is not bound to geographical borders and a European-wide payment method like iDEAL would make a lot of sense. Just look at the European Payments Initiative of which Worldline is one of the initiators, which exactly is trying to launch such a European wide service.
Powerhouse payment method
Still, despite my points of attention, I believe that updating iDEAL to a more future-proof version is the right – and only – way to go. When the above challenges are resolved, iDEAL 2.0 will definitely be a powerhouse payment method for the Dutch market, and naturally, equensWorldline will also play an active role in this development. After all, we will continue to perform the processing work for acquiring banks, safeguarding a seamless operation as we provide today. Even more, we will continue to support banks and merchants in their challenges to keep in pace with developments on Open Banking providing an even more seamless customer journey.