The Dutch payment cards market is mature, with a high penetration rate of 1.9 cards per inhabitant.
The market is dominated by debit cards, which users perceive to be secure, cost-effective and consumer-friendly.
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Pay-later card payments are not popular due to a cultural aversion towards debt. Dutch consumers are very comfortable both with using debit cards – they accounted for 90% of the overall transaction value in 2017 – and online payment channels, especially local brand iDEAL, which is backed by wide acceptance and a convenient user experience.
Growth in the payment cards market is supported by well-developed infrastructure, with one POS terminal per 34 individuals. Growth in the e-commerce market is attributed to high levels of internet and smartphone penetration.
In spite of a high level of consumer comfort with established payment instruments, recent developments in mobile proximity payments and contactless technology by ING, Rabobank and ABN Amro will see these payment options gain traction among Dutch consumers.
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By GlobalDataDebit cards old firm
Debit cards remained the most widely used payment card in the Netherlands, accounting for 90% of the total payment cards transaction value in 2017.
The migration of low-value cash transactions to debit cards was a key trend, and according to the Dutch Payments Association, the number of debit card transactions valued at under €10 ($12.45) increased by 17.2% in 2016.
Banks and other financial service institutions signed the Nadere Overeenkomst II agreement in September 2014 to reduce cash usage by 2018, by converting cash transactions to debit transactions.
Contactless prominence
The Netherlands has recorded an uptake in contactless payments. According to the Dutch Payments Association, the number of contactless payments in 2016 increased by almost five times to 630 million payments, compared to 135 million in 2015. In December 2016, 24% of all debit card payments were contactless.
ABN Amro replaced all its payment cards with contactless functionality in December 2015. Similarly, ING Bank and Rabobank are replacing older cards with contactless-enabled payment cards.
The ideal alternative
iDEAL remains a market leader of Dutch third-party payment services. The company currently serves 10 million customers through 100,000 merchants. The service is offered by 10 issuing and seven acquiring banks as well as 59 collecting payment service providers.
In total, 283 million payments worth €23.7bn were successfully processed through iDEAL in 2016. The average transaction amount in 2016 was €81.40.
Small pay-later market
Pay-later cards form a relatively small market, accounting for only 9.9% of the total payment cards transaction value in 2017, primarily due a consumer preference for debt-free payments. Although banks started issuing credit cards in the early 1980s, the market’s growth has remained low in comparison to debit cards.
In many cases, overdraft facilities have reduced the need for credit cards. ING Bank offers an overdraft facility of between $526.10 and $2,104.50 quarterly; and between $2,631.70 and $26,306.40 on a continuous basis. Similarly, De Volksbank offers an overdraft facility of $2,630.60 for current account holders.
Relatively high transaction costs for merchants previously prohibited retailers from accepting credit card payments; the average merchant service charge was 2.2% per transaction during 2010-2012. However, it started to decline from 2013 and reached 0.59% in 2016; it is expected to remain stable at 0.59% over the four-year period to 2021.
With the implementation of the EU interchange fee cap from June 2015, use of credit cards at merchant outlets is expected to rise.
Moderate POS growth
The Netherlands continues to report impressive growth in its POS network, with the number of POS terminals recording a CAGR of 19.1% between 2013 and 2017.
Dutch retailers are increasingly installing mPOS terminals. mPOS solution provider iZettle launched the iZettle app card reader in the Netherlands in November 2014. The company also introduced the iZettle Card Reader Lite in February 2015, which enables retail businesses to process chip-and-PIN card transactions. The business launched a mobile contactless card reader in February 2016.
