Rapidly moving towards even
securer and more efficient
payment transactions
2009-2012 Four-Year plan paying by debit card:
quick, secure and simple!
This is the Four-Year Plan of the Stichting Bevorderen Efficiënt Betalen
(Foundation for the Promotion of Efficiency in Payments).The Foundation
was established as a result of the Convenant Betalingsverkeer 2005 (2005
Payment Transactions Covenant) that was concluded between banks and OTC
(over-the-counter) institutions.A Further Agreement was concluded between
the aforementioned parties in May 2009. This plan indicates which activities
the Foundation will perform between 2009 and 2012.
The most important challenge is a smooth and quick transition from magnetic
strip payments to EMV chip payments. In this regard, the Foundation is working
towards achieving 100% operational and active EMV terminals by the end of 2011 and supporting OTC institutions in getting their customers used to actually performing EMV transactions as smoothly as possible.
Essentially, the Foundation also wants consumers to be able to pay with
electronic money at every conceivable place.The Foundation is specifically
aiming to extend the number of POS (point-of-sale) terminals to 270,000 by the end of 2012.
From the Foundation's perspective, debit card payments must increase from 1.7 billion transactions as counted in 2008 to 2.7 billion transactions in 2012.
This requires an annual growth of 11%.The Foundation wishes to contribute
towards this growth through its activities.Lastly, the Foundation is involved in
various projects aimed at optimising electronic payments.
The Foundation depends on constructive and creative contributions from Everyone involved in the flow of payments to make payment transactions even
Table of Contents
Introduction 4 Objectives 7 Current situation 8 Activities for 2009-2012 10 EMV programme 10POS terminals at more locations 14
Optimisation of electronic payments 17
More debit card payments 21
Assessment 21
Introduction
Further growth in the number of debit card transactions is making payment in the Netherlands significantly securer, easier, more efficient and more effective. Paying by
debit card will become even safer through the use of EMV chip technology. Everybody
involved in the Maatschappelijk Overleg Betalingsverkeer (MOB, or National Forum on
the Payment System) agrees on this. Debit card transactions and the use of EMV chip
technology must therefore be encouraged.
A radical market transformation is underway: from a purely Dutch market in which only one so-called scheme (PIN) is active, to a European market in which various schemes
and even more providers will be active.The use of EMV is crucial in this market shift as
POS terminals and cards are being equipped with EMV chip technology throughout Europe. This will offer many benefits, such as further international standardisation, an
international market operation and joint investment in security and innovation.
In order to face these and other challenges, banks and representatives of OTC institutions have joined forces in the Foundation for the Promotion of Efficiency in
Payments. The Foundation manages a fund which supports projects that increase the
security and efficiency of payment transactions.
The Fund was established as a result of the 2005 Payment Transactions Covenant,
which was tightened up and updated by means of a Further Agreement.
We are currently in a transitional situation and facing considerable challenges:
• how to quickly reach that new situation, based on new technology without sacrificing past achievements;
• how – in view of the new circumstances – to build a strong enough card payment infrastructure to handle the expected growth;
• how to ensure the envisaged security and efficiency;
• how to quickly get customers accustomed to the new method of payment; • how to encourage customers to pull out their cards more frequently and pay
Originally it was agreed that the banks and OTC institutions would work together in the Foundation until the end of 2010. That cooperation was extended to at least the end of 2012 in the Further Agreement. It was further agreed to intensify a number of activities.
Among other things, these additional efforts should lead to all POS terminals in the Netherlands only processing EMV technology transactions by the end of 2011, if this is reasonably possible in practice, instead of by the current deadline of the end of 2013. This is necessary in
the interest of secure electronic payment transactions.
The additional efforts will also aim at an even greater increase in the number of debit card transactions and POS terminals, so further reducing
the number of cash transactions.
The objectives and activities of the Foundation for 2009-2012 are
outlined in this Four-Year Plan.More detailed working plans will be drawn
up each year and approved by the Board of the Foundation. This also
means that if circumstances change in the years to come, this can also
have repercussions on the working plans.
More information about the Foundation's completed and current projects is available on www.efficientbetalen.nl and www.pinnenzakelijk.nl
Objectives
Debit card transactions are a quick, secure and simple payment method
for consumers and OTC institutions.Carrying cash around, for instance,
is no longer necessary – you do not have to draw money at an ATM
every time or fear losing your money. Recent research has moreover
shown that debit card payments are a very efficient payment method for
OTC institutions as well as banks, andare more efficient than paying by
cash, for example.
The general aim of the Foundation is to encourage measures that provide the right incentives to steer the behaviour of all parties in Dutch payment transactions to the most efficient and secure payment method
possible. The social costs of payments may decrease, taking into
account the interests of all parties and the security of payments.
The current solutions cannot always be used to achieve the aforementioned
objectives.Specific obstacles have to be removed in a number of cases.
The Foundation's responsibilities also include promoting solutions. For
example, solutions must be found for vulnerable groups of consumers who find debit card transactions difficult because of their functional limitations.The Foundation also has to look at solutions for people who
are currently used to controll their expenditure by paying cash.Solutions
must also be found for payment situations in which it is difficult to imagine not paying cash.Lastly, it is also important that the debit card payment infrastructure is strong enough to be able to deal with the expected
growth and increased importance of this payment method. The
Foundation also wishes to contribute in this regard.
More specifically, this involves:
• encouraging OTC institutions to accept debit cards (any brand) as a Payment method and to acquire POS terminals that are EMV-compatible with long-term data communication solutions for this purpose.
The Foundation is aiming for 270,000 POS terminals by the end of 2012; • encouraging businesses that already accept debit card payments to adapt their infrastructure (POS terminals and data communications) – to the extent that this has not already been done – so that they can accept EMV card payments. The Foundation is aiming for 100% operational EMV terminals by the end of 2011, so that all transactions can take place using EMV technology, instead of the magnetic strip on cards issued by Dutch banks;
• encouraging consumers via the employees of the OTC institutions and their employees to pay by debit card instead of cash. The Foundation is aiming for the ambitious number of 2.7 billion electronic debit card transactions by the end of 2012.
Current situation
It has been possible to make purchases in the Netherlands with a bank card and pin code
since 1987. There are currently more than 25 million debit cards in circulation which can
be used with a pin code in the Netherlands.Practically every Dutch adult over the age of
18 has one or more bank cards.
Because growth stagnated at the beginning of this millennium, the parties to the Payment Transactions Covenant agreed in 2005 that the Foundation's activities must contribute towards an increase in the annual number of debit card transactions by one billion –
quicker than may be expected on the basis of independent growth forecasts. The target
figure was fixed at 2,334 billion transactions by the end of 2010. 1,756 billion transactions were recorded by the end of 2008. It was also agreed in 2005 that the Foundation's activities would lead to a significant increase in the number of POS terminals for
consumer use.There were 206,392 POS terminals in 2005.This increased to 234,393 by
the end of 2008.
Debit card transaction according to a trend with grow situation at the beginning of this milenium
The number of debit card transactions has grown year-on-year since 1987.
In 2005, when the Payment Transactions Covenant was concluded, 1,334 billion transactions were processed
We can confirm that the tide is turning, growth is no longer stagnant. The growth rate for 2008 debit card transactions has
exceeded ten per cent. This change was particularly evident
during the last months of 2008. This is mainly due to the ‘Klein bedrag? Pinnen mag!’ (Small amount? Pay by debit card anyhow!) campaign in the supermarket sector, a joint initiative of CBL (Institution for Supermarkets) , Currence and the Foundation. This has not only led to an increase in the growth rate of debit card transactions in the supermarket sector, but also spread out to other sectors. Signs on which OTC institutions indicate that they levy a surcharge on small transactions are quickly
disappearing. In this way, consumers are increasingly receiving
the message that they may pay for small amounts with their debit
card.More than that, that it is even a preferred payment method.
The growth in the number of transactions continued in 2009.
POS terminals
(including growth in relation to last year)
Activities for 2009-2012
The purpose of all activities in this Four-Year Plan is to promote socially efficient, reliable,
secure and cheap payment transactions.
Most activities last longer than one year. 2009, in particular, is seen as the run-up and
development year for the various activities that the Foundation wishes to carry out. Most
of the expenditure will be incurred after 2009.
EMV programme
With EMV, the same technological standard will be used throughout Europe for debit card payments, meaning consumers can all pay in the same way with their bank card and pin code at all European POS terminals. EMV chip technology is also an important way to
combat skimming.
The most important challenge for the coming years is a smooth and quick transition from
magnetic strip payments to EMV chip payments. This will affect everyone involved in
OTC payment transactions.Banks, for instance, must provide consumers with cards that
have an EMV chip in addition to the existing magnetic strip. Banks must also enter into so-called acquiring contracts with their business clients for the acceptance of EMV
technology-based payment transactions from different brands. Schemes must make their
specifications and certification compatible with EMV and inform consumers, POS terminal suppliers must supply POS terminals that can process these cards, processors and banks must adapt their systems, businesses must upgrade or replace their POS
terminals and consumers must switch from swiping to vertically inserting their cards.The
aforementioned parties will have to communicate with each other in this regard.
The breakdown of all POS terminals as at 31 December 2008 (currently 233,718
terminals) in relation to their ability to process EMV cards is provided in the picture below:
EMV: 28%, EMV Prepared: 36%, Non EMV: 37%
Everyone has his own role to play in the transition to EMV.The Foundation for
the Promotion of Efficiency in Payments will focus its activities in this regard on:
1. Achieving 100% operational and active EMV payment terminals by the end of
2011.
2. Supporting and equipping OTC institutions (businesses and employees) to
enable their customers to become accustomed to actually carrying out EMV transactions by a deadline(s) still to be determined.
The following is specifically required to achieve the 100% EMV
before 01-01-2012
• The POS terminals that are currently EMV-compatible (i.e. 65,041 terminals)
must actually be able to process EMV transactions when required.It is necessary
that these POS terminals have the correct software version.
• The POS terminals that have the necessary EMV hardware (i.e. 82,150 terminals)
must be upgraded to EMV so that they can actually process EMV transactions
when required.It is known that part of this category of POS terminals (more than
40%) can be upgraded remotely.
It is important to make progress in the area of debit card payments via
broadband at the same time as this migration:the more businesses that migrate
to TCP/IP, the better.
• The POS terminals that are not yet EMV-compatible and cannot be upgraded (i.e.
86,527 terminals) must be replaced by EMV-compatible terminals by the end of 2011. The deadline of some of these terminals coincides with this timing. Other terminals will have to be written off prematurely. POS terminals within the fuel sector require special attention in this category. It is known that some of these POS terminals are built into outside pillars at filling stations and replacing the
terminals may lead to associated alterations.
• Newly purchased POS terminals must immediately be EMV-compatible and no
Banks and OTC institutions will also have to make a concerted effort
towards a migration that will take place quickly and successfully.This is
based on the assumption that migrations are reasonably possible in practice.
Intensive consultation will have to take place among the various stakeholders, particularly with Dutch suppliers of pay systems, resellers, and suppliers of cash register systems. We expressly refer to the last group here, because these suppliers provide connections (between POS terminals and cash register systems) that have led to problems during
earlier replacement processes.Specific attention is needed in this regard.
Businesses must be jointly encouraged to replace or upgrade their POS terminals in time. A solution is being sought for businesses that are
unable to use their POS terminals for the agreed five years.
Specific attention will be paid in the EMV programme to particular areas, such as the fuel sector in general and unmanned POS terminals, such as those used in the fuel sector and at Nederlandse Spoorwegen (Dutch
Railways).The specific elaboration of this section will take place in 2009.
The efforts and results will also be detailed in the coming years.
The activities relating to the first objective (100% EMV point-of-sale terminals by 31 December 2011) and the communication activities relating to the second objective (assisting and supporting OTC institutions) require careful coordination with other parties that are involved in the EMV migration. This coordination takes place within the EMV coordination group that will report to the MOB (National Forum on
the Payment System).
Suppliers are themselves responsible for upgrading POS terminals and having sufficient stock of replacement POS
terminals for the market.As such, they have sold EMV-
prepared terminals with an upgrade guarantee.Now they have
to fulfil their promises on time and ensure that their customers' terminals are quickly upgraded to accept EMV debit card transactions.
POS terminals at more locations
The Foundation will continue over the coming years to encourage OTC institutions to accept debit cards as a payment method and to acquire EMV-compatible point-of-sale
terminals with long-lasting data communication solutions for this purpose. The
Foundation is aiming for 270,000 POS terminals by the end of 2012.
The Foundation is also focusing on potential entrants in industries and sectors that are
lagging behind.An industry-focused and geographical approach is being followed for this
purpose. A subsidy scheme for entrants provides assistance in this regard. This will be
an activity-based scheme.
The Foundation also intends to focus attention on shopping areas where debit card
payments are accepted everywhere. It will use ‘debit card consultants’ to achieve 100%
coverage in those areas and optimise and upgrade the debit card payment infrastructure,
where necessary.The subsidy may provide assistance in this regard.The plans for this
purpose must still be detailed. It is conceivable that shopping areas that achieve the
required coverage will be rewarded in future.
Consumers must be able to set off without cash and be able to pay with
electronic money in all conceivable places.The penetration of POS terminals
in the Netherlands is already considerably high.However, consumers can still
not pay with a bank card at 14% of retailers (particularly street traders and small and medium food retailers), at half of the catering sector (particularly
Optimisation of electronic payments
The Foundation aims for the securest, most efficient and easiest
possible payment transactions. These characteristics are
inherent to debit card payments, but there is obviously always
room for improvement.Sometimes these improvements relate to
existing issues, but the Foundation also knows from experience that smaller or larger obstacles will still undoubtedly emerge over the coming years and have to be resolved. The following is a
summary of the existing issues:
Towards a stronger debit card payment infrastructure
McKinsey was commissioned by the Foundation to carry out a process analysis of the debit card payment infrastructure in the Netherlands and make suggested improvements from December 2008 to February 2009. All stakeholders involved in debit card payments agree on the analysis and solution directions. It was concluded that debit card payments function well in the Netherlands but that a number of technical and organisational
obstacles hinder further growth. These obstacles relate to
identifying and solving system failures.It was also found that the
delivery time for installing payment systems and
telecommunication connections is variable and generally too long, and that the installation of broadband and POS terminals is not
always successful first time and is poorly coordinated.McKinsey
concluded that the main causes were the complexity of the infrastructure due to a large number of product combinations and the lack of a party that is ultimately responsible.
The Foundation wishes to contribute together with the relevant stakeholders towards the short-term implementation of these solutions.It will encourage and boost initiatives. Meanwhile, it is clear that stakeholders have actively started implementing the
recommendations. The Foundation expects to be able to
introduce the improvements by mid-2009.
The solution directions are threefold:
• the provider structure must be simplified (with a clear and accessible standard offer aimed at small and medium enterprises and customised solutions aimed at retail chains);
• a preferably neutral party to assume responsibility for incident management;
• certification of the infrastructure will have to be
In 2008, the Foundation subsidised a Viziris project together with the
Dutch Central Bank (DNB). The project involved an experiment to
determine the accessibility of debit card payment equipment for people
with a limitation. Thorough research was carried out both in a laboratory
situation and in practice. This led to practical suggestions for POS terminal suppliers to improve the ergonomics of POS terminals and the legibility of the display.As a result, acceptors were also advised on the choice of a POS terminal and where to place the equipment in their business.
One of the suggestions is to place the POS terminal on a stable swivel arm, so that consumers can bring the terminal closer to themselves and
manipulate how the light falls on it.Such a swivel arm could be placed in
wide supermarket aisles and possibly also at other retailers.As yet, there
is no such swivel arm for POS terminals on the market.This is where the
initiative comes from to emphatically encourage the development and
marketing of such an arm.
Task force for cashless supermarkets
Over the last two years, there has been an increased number of
supermarket hold-ups.These hold-ups are increasingly focusing on cash
registers, as opposed to safes in the past. These hold-ups are an
enormous problem for supermarkets, not only because of the material
loss, but particularly in relation to being able to guarantee an attractive
and safe shopping environment for customers and employees.
This problem occurs in all regions and all supermarket formats. The
supermarkets that belong to the Organisation of supermarkets (CBL, or Central Bureau for the Foodstuffs Trade) have been taking steps to jointly
combat crime for years. In this way, they exchange information on
offenders, methods and effective prevention measures and much attention is paid to the issue of hold-ups in the training and instruction of employees.This resulted in a drop in the number of hold-ups until mid-2007.
The recent increase calls for new and more radical measures: without
cash in the supermarket, these stores would be a less attractive target. For this reason, CBL has established a task force and asked the
Foundation to support this initiative.The specific responsibility of the task
force is to investigate what would be necessary to ban cash from the sector within five years and to search for and test solutions for this
purpose.The Foundation contributes towards this special initiative within
the scope of its objectives.
The Foundation expects that industrial designers would want to capitalise on such a demand, or demands in the same context, together with POS terminal and/or cash register system
suppliers.For this purpose, the Foundation wishes to create a
Innovation Award that could be given each year to these types of initiatives.
Promoting standardisation
At this stage, systems linked to the POS terminal must often be replaced if a new POS terminal or cash register system is purchased. Alternatively, the business often has a very limited choice of POS terminals that can communicate with the rest of the store's back office.
This arises because of the lack of standardisation and can delay the innovation and quick
implementation of new POS terminals and cash register systems.This problem prevails
in the retail and fuel sectors. Internationally operating companies have been striving for
years towards global standardisation in the fuel sector.
The Foundation wishes to promote standardisation in this area. It is evident that this is a
complex task, which is all the more reason why standardisation is preferably approached
from a European perspective. Proper coordination with the representatives of banks in
the European Payments Council (EPC) is crucial. After all, the standardisation of debit
cards and transaction processing is already on its agenda.
Encouraging the use of Low Value Payment solutions
In general, debit card payments are the cheapest payment method. There are however
situations in which businesses prefer cash because of costs.This is particularly the case
if businesses have relatively small transactions and low profit margins on their products or services. The chipknip or electronic wallet was originally conceived as a solution for this problem, but this payment method never achieved the scale or success necessary to
attain this goal.As a result of the Single Europe Payments Area (SEPA), this product will
most likely not continue to exist.
Banks and OTC institutions have agreed that banks will carry out extensive research between now and April 2010 into the technical possibilities of replacing low value (cash) payments with electronic (debit card) transactions. The banks will discuss the initial results and lines of thought with the OTC institutions in 2009 and make a specific proposal by no later than April 2010. This alternative (or others, if applicable) must be brought to the attention of businesses. The Foundation will probably be able to play a particular role..
Promoting broadband debit card payments
Debit card payments via broadband are more favourable for most businesses than
having to dial up for each payment transaction via a PSTN or ISDN connection.For this
reason, the Foundation has been promoting debit card payments via broadband for a
number of years. Meanwhile, practically all retail chains and more than half of franchise
However, there is still significant work to be done in the SME sector: 100,000 POS terminals are still connected to PSTN or ISDN, even though KPN (a Dutch telecommunications company) will cease both
types of data connection within a few years.The Foundation is therefore
continuing to promote broadband.In addition, the migration to EMV will
be used as a good reason to switch to broadband.It is also expected that
convenient broadband packages will become available on the market as a result of the aforementioned project: ‘Towards a stronger debit card payment infrastructure’. The Foundation will also draw attention to this project.
More debit card payments
Since 2008, the Foundation has carried out promotional activities to
further stimulate the growth of debit card payments.This requires careful
coordination with other parties (banks and schemes) that also promote
electronic payments. The Foundation has taken the lead in activities
involving OTC institutions, their employees and industry organisations,as
well as in removing remaining barriers. The schemes and banks are
taking responsibility for communication towards consumers and for directly approaching the public.
Maximum synergy can occur if public-oriented activities take place at the same time as activities towards OTC institutions.
This was achieved for the first time in 2008 by a joint initiative in the supermarket sector. In 2009, there have been joint initiatives with the supermarket sector once again, as well as with the pharmacy sector and
a number of national retail formats.Joint marketing campaigns are being
supported even more than in 2008.
Assessment
Banks and OTC institutions agreed in the Further Agreement to the 2005 Payment Transactions Covenant to assess the results of the arrangements made in the Further Agreement by no later than 1
September 2013.The assessment is made up of two parts.It must firstly
be established how OTC and other payment transactions develop between 2009 and the end of 2012 with regard to effectiveness, efficiency, security, reliability and cost levels. The second assessment will relate to whether the objectives mentioned in this Four-Year Plan are actually achieved.
The Foundation has an ambitious goal for 2.7 billion debit card
payment transactions to take place each year in the Netherlands.
This goal must be achieved by 2012 and it is intended that a major part of this growth will be at the expense of cash payment
transactions.In order to achieve this goal, an annual growth of
Organisation, coordination & communication
Management
The Board of the Foundation for the Promotion of Efficiency in Payments has four
members. Two of these members are appointed by the NVB (Netherlands Bankers'
Association) and the other two are appointed by Platform Detailhandel (Dutch Retail
Platform).The Board meets around four times a year.The Fund Manager is the secretary
of the Board. The Board decides on an annual working plan for the following year and
accompanying budget in November. The Board also decides on projects in excess of a
certain amount. It further decides at the beginning of the calendar year whether the objectives determined for the previous year have been achieved and whether lines of
activity must be adjusted to achieve the final objectives.
Covenant team
The Covenant Team is made up of representatives of the signatories of the 2005
Payment Transactions Covenant.The Covenant Team meets six to eight times per year.
The Covenant Team is alternatively chaired by a representative from the banks and a representative from the OTC institutions. The secretarial work of the Covenant Team is
carried out by the Foundation's secretariat.
Secretariat
In order to carry out the aforementioned activities plan, the Foundation's secretariat needs to be adequately staffed. For the next few years, there will be 4 FTEs and the
Fund Manager. Staff levels may be increased during peak periods. The secretariat is
located at Overgoo 15, Leidschendam.
The Covenant Team draws up the annual working plans and accompanying budgets
for the Board.The annual plans are based on plans for each activity and target group.
Teams are established for the most important target groups and activities and
submit their plans for approval to the Covenant Team.The chairpersons and secretaries
of the Teams ensure proper coordination with the Covenant Team and the
Four-Year Plan.
At the end of the calendar year, the Covenant Team issues a report on the completed
year with reference to the stated objectives.The Covenant Team looks in further detail
at the content of projects and give support to projects, where necessary.Third parties
sometimes approach the Foundation with a request for support.The Covenant Team
deals with these requests.The Covenant Team can decide independently on projects
Coordination of the Foundation's EMV programme with the
national EMV programme
The emphasis of the Foundation's EMV activities is on promotional activities for a quick EMV transition, on the one hand, and communication with businesses and employees of OTC institutions and their agents
regarding EMV migration on the other. Good cooperation with other
parties and consultative structures will be necessary for this programme.
Communication
The objectives set out in this Four-Year Plan can only be achieved if stakeholders strive towards the same goals, if as many people as possible from various support groups are rallied together, and if there is
coordinated communication with acceptors and end-users. The
objectives and activities must also be actively promoted.To this end, the
Foundation uses various resources such as websites, newsletters, press
releases and meetings.
Specifically, the message will be actively put across that EMV increases the security of OTC payment transactions, that EMV standards for debit card payment transactions must be used, that payment transactions based on EMV technology are accepted and that debit card payments, also in view of expected competition in the market, will continue to contribute towards social efficiency.
In order to ensure unambiguous information for everyone involved, all communication in this regard will be coordinated between banks and OTC institutions.
Publication
Stichting Bevorderen Efficiënt Betalen (Foundation for the Promotion of Efficiency in Payments) P.O. Box 262 2260 AG Leidschendam www.efficientbetalen.nl www.pinnenzakelijk.nl 27 May 2009
