Dutch debit cards go digital
Ronald te Velde
Connective Payments, December 2021
A new brand logo
Most Dutch people will hardly notice it, but the new debit card that they will receive in the coming years has a new brand logo. V PAY and Maestro cards are being replaced by Visa Debit and Debit Mastercard cards. These are the worldwide debit card products of the international card schemes. This switch has been coming for a long time, because it is so obvious, coming from three trends:
- The Dutch only have credit cards or Paypal as an international standard means of online payments. The pandemic has further increased e-commerce numbers and value by Dutch consumers.
- Dutch people travel a lot, and continue to do so when the corona measures are lifted. They prefer to use their primary means of payment, which is the debit card.
- Our lives are becoming increasingly digital.
The debit card is king…
The debit card is by far the most popular payment method in Dutch retail. Since the transition from PIN to the international brands Maestro and V PAY, now a decade ago, the share of card payments, which was around 35% at the time, has increased dramatically. That triumphal march was further enhanced by both the introduction of contactless payments and the pandemic. In the corona year 2020, the share grew from 67% to more than 78%, or 4.87 bln transactions. According to the Dutch Payments Association, 85% of card transactions were contactless. About 15% of those were made with smartphones and wearables (with built-in NFC-chip).
With the new OVpay going into operation, allowing cardholders to pay with their debit card in Dutch public transport, the debit card will be even more central as a means of payment. Read our interview with OVpay Program Director Bas van Weele here.
Are you seeing fewer and fewer signs on the counter with texts like “Rather pin than cash”? That may be true, because Dutch people no longer need that incentive.
… but not in e-commerce
The pandemic has reinforced another trend. Online shopping by Dutch consumers has increased 27% in numbers and 7% in euros in 2020. There, however, the picture is completely different. In 2020, 69% of purchases at Dutch webshops and apps were made with iDEAL. For purchases at international web stores and apps, consumers choose from an ever-growing range of credit cards, PayPal and similar variants. However, one payment method is notable for its absence online, and that is the debit card. The reason: the current generation of debit cards is technically not suitable for online use. This requires a PAN (16 or 19 digit card number), which is missing from the current debit cards.
… traveling with a debit card can be challenging
Dutch people are enthusiastic travellers. They increasingly expect that paying abroad, also outside the SEPA zone, works just as easily as at home. But outside Europe, a V PAY or Maestro debit card is not accepted in every shop, museum, etc. Consumers find this annoying and need to carry cash as an alternative.
Conversely, visitors from our neighbouring countries are increasingly unable to pay in Dutch stores if their terminals are not yet equipped to accept Visa Debit and Debit Mastercard.
… as our lives are becoming increasingly digital.
And last but not least, the Homo Digitalis, a new species that thrives in a habitat with omnipresent and permanently connected screens and displays, is ubiquitous. We generate more mobile payments and take out video and audio subscriptions such as Netflix and Spotify. We use more and more digital services via apps that provide seamless ways to pay. But the current generation of debit cards is absent from that domain.
A new generation of payment cards with a global reach
All those drawbacks will soon come to an end, as the international card schemes have advised issuers to migrate their European debit card products to Visa Debit and Debit Mastercard. Mastercard has even set a date on which Maestro cards may no longer be issued: 1 July 2023. This means that the Dutch market is preparing for the issuance of a new generation of debit cards. These cards will provide more functionality than the old ones. Major improvements are in the pipeline for:
- Physical retail merchants
- Online merchants
- Consumers in physical retail
- Online consumers
We will explain these consequences successively.
1. Physical retail merchants
The Dutch Payments Association has set up an industry-wide program Debit Card Acceptance (DCA) in which acquirers work together with Visa, Mastercard, terminal suppliers and merchants on the update of the terminal infrastructure. According to the Payments Association, more or less 90% of the ~400,000 terminals in Dutch POS can be prepared with a software update. The remaining older terminals, roughly 10%, have to be replaced. This involves expanding the card products to be accepted on the payment terminal and software to ensure that the process flow runs smoothly. Additionally, acquirers may offer new contracts to their merchants for acceptance of all card types. This will further increase conversion and turnover. The infrastructure migration should be finished by the end of 2022. By then, visitors from neighbouring countries are able to use their debit cards again at Dutch payment terminals.
More information about the DCA program can be found on the website of the Dutch Payments Association.
2. Online merchants
Online merchants such as web stores can increase the ease of payment for their customers and thus increase conversion. With the Visa Debit and Debit Mastercard option, they offer Dutch and international customers a trusted option to pay.
To make the payment process even faster and smoother, online merchants may choose to integrate the Click-to-Pay option into the checkout process. The customer who activates his debit card for Click-to-Pay via his bank or during an online purchase fills in his payment details once. After that, he is able to pay with one click wherever the Click-to-Pay button is offered. Click-to-Pay will be rolled out in Europe in 2021 and 2022. We wrote an earlier Insights article about the ins and outs of Click-to-Pay.
Merchants who want to go one step further and offer the customer a kind of Uber experience, where the checkout is fully automated, can opt for merchant tokenisation. Tokenisation is a technology that prevents fraud by storing payment credentials in a secure way. A major advantage of this is that storing tokens has fewer security risks and does not require PCI-DSS certification. In practice, this means that a Dutch bank card holder will soon be able to pay with his bank card not only safely, but also much easier. For example with Netflix or Spotify, renting a scooter or e-bike, but also as a returning customer at Bol.com or Zalando. We wrote about this subject earlier in this article.
3. Consumers in physical retail
Virtually nothing changes in the physical shopping experience for consumers. Cardholders will receive a new debit card from their bank to replace the old one. When the first Debit Mastercard cards can be issued depends on the readiness of the terminal base at the end of 2022; According to Visa Country Manager Jos van de Kerkhof, Visa Debit cards could be issued as early as 2022 as they will work wherever V PAY is accepted.
Existing Maestro and V PAY cards will continue to work until replaced. To make mobile payments, Apple Pay or Google Pay wallets are linked to the new card. Cardholders do not have to take any action and they will receive their new card automatically from their bank. The most important change for Dutch cardholders is that the new debit card has a wider reach around the world than the old one.
4. Online consumers
With a new debit card, cardholders can go online wherever Visa and/or Mastercard are accepted. Consumers who do not have a credit card can therefore also shop with their debit card at foreign websites or apps that accept Visa or Mastercard.
The payment process and conditions are the same as for credit cards. For instance, the same dispute process applies to payments with Debit Mastercard and Visa Debit cards. Consumers have the right to dispute a transaction and are entitled to chargeback if the product or service is not delivered. Compared to credit transfers and iDEAL, this is a significant improvement of the payment conditions for consumers.
The payment experience is becoming more and more uniform, which is great for consumers who like convenience and do not want to constantly fill in new online forms. In combination with the new debit cards, innovations such as Click-to-Pay and merchant tokenisation ensure that the payment process is becoming increasingly seamless.
Both issuers and acquirers are in for strategic choices
What from the outside looks like a cosmetic operation – a new brand logo on the debit card – is in reality a strategic development. In the Netherlands, the choice for banks and other card issuers seems relatively clear. Replacing V PAY and Maestro with Visa Debit and Debit Mastercard seems to be the most logical step to be ready for the next ten years. Of course, other market developments such as iDEAL 2.0 and the EPI project may influence this development. It is yet to be seen how these developments will evolve at the same time.
It also seems logical that banks are responding to the merchant tokenisation trend. In general, consumers like seamless processing flows: the less hassle, the more convenience. Switching to the bank app and from there authorising the transaction during the checkout process is gradually becoming an obsolete step.
On the one hand, issuing banks risk weakening the primary relation with the cardholder because switching to the bank app during the payment process becomes more and more unnecessary. But on the other hand, the relation is strengthened because the debit card becomes the central enabler of more and more transactions.
Acquirers who have already positioned themselves on omni-channel payments and who have invested in tokenisation seem to be well-prepared for the evolving consumer demands. Cardholders who want a better user experience are increasingly choosing to store their card data in a digital Click-to-Pay or BNPL wallet or with a trusted webshop or app. A good example is the announces global partnership of Mercedes Benz and Visa, in which drivers can scan their fingerprint to buy a cup of coffee or pay for gas right from the vehicle’s infotainment screen. The vehicle itself will become a biometrically enabled payments device, using Visa’s secure Delegated Authentication technology. It eliminates having to use a cell phone or password to authenticate payments for goods and services.
To optimise conversion rates, merchants expect these kinds of solutions from their payment service providers.
Are you interested in more backgrounds and developments regarding the introduction of the new debit cards in the Netherlands and what it would entail for your business? Contact Ronald te Velde.