The future of Dutch payments: interview with Nicole Jonker, DNB

The future of Dutch payments: interview with Nicole Jonker, DNB

Dr. Nicole Jonker is a senior policy advisor and economist in the payments policy department of the Nederlandsche Bank. She holds a PhD in economics from the University of Amsterdam (2001). We spoke with her about her research on payment trends among Dutch consumers.

1. You’ve been researching how consumers pay for things for over a decade. What got you interested in consumers and payments? What keeps you interested?

I’ve always been interested in the behaviour of people, and the factors influencing their choices; my PhD thesis was devoted to educational and labour economics. I studied people’s educational choices and the impact of these choices on their performance in the labour market.

When I started at De Nederlandsche Bank’s (DNB) payments division, DNB has just started studying how consumers perceive different means of payment at the point-of-sale (POS). It turned out to be a very interesting topic. Consumers make payments every day, and although payment instruments like cash and cards all enable people to make payments, they are clearly perceived differently by consumers in many aspects, such as acceptance, costs, ease of use, safety, transaction speed, helpfulness with respect to budgeting, etc. These differences turned out to influence their choice of payment instrument at the counter.

What keeps me interested? There have been many interesting developments in IT and in regulation (e.g. SEPA, IFR and PSD2) which have changed the retail payments market considerably since I started working in it.

We now have a European retail payments market instead of a Dutch one. People do not only make purchases at the POS, but also online, which has resulted in new forms of payments, like iDEAL and Paypal, but also in innovations like cryptos, of which bitcoin is the most well-known.

In addition, new non-bank players have entered the retail payments market and offer services to consumers and merchants. With the upcoming implementation of the Payment Services Directive 2 (PSD2) into Dutch law, new players that offer account information services or payment initiation services for online payments may enter the Dutch retail payment market and offer these new kinds of services to Dutch consumers.

All these developments come with new research questions, which makes retail payments a very interesting research area.

2. Dutch consumers now pay more often with a debit card than with cash. How does this shift benefit Dutch society? Do you see any problems associated with the decline of cash?

Since 2015 the Dutch use the debit card more frequently than cash. Every year debit card usage grows slightly at the expense of cash. In 2016, about 55% of all POS payments were made with the debit card and about 45% with cash.

The latter figure shows that cash still plays an important role in many people’s lives. The shift towards less cash has several benefits for society. First of all, it enhances safety, as less cash in the till makes shopkeepers less attractive targets for criminals. Second, the shift towards less cash results in cost savings for banks and retailers, because cash payments are relatively labour intensive compared to card payments. In the end, consumers may also benefit from these cost savings in the form of lower consumer prices.

As far as I know, the problems associated with the decline in cash usage are thus far limited. Most consumers and merchants are satisfied with the availability and cost for cash. Although cash usage declines, the cash infrastructure still functions well in the Netherlands. There are about eight thousand ATMs in the Netherlands and people can still use cash to pay for their purchases almost everywhere. Having said that, it is important that cash continues to function well as a means of payment for both consumers and businesses.

Consumers who prefer to use cash should be able to do so. This implies that in situations in which consumers can’t go to another provider in the neighbourhood who accepts cash for a specific product or service, the provider should allow cash payments. Also for retailers, it should remain possible to withdraw cash and deposit cash revenues easily and against reasonable fees.

However, in a declining cash usage environment, there arises an increasing tension between the accessibility and affordability of the infrastructure. The infrastructure required for providing cash and depositing cash revenues is costly. As cash usage declines, these costs will increasingly weigh on the remaining cash transactions. Therefore, in order to keep cash transactions affordable for retailers, while ensuring the availability, Dutch banks are working together to set up a more efficient cash infrastructure. I think this is a very good initiative of the banks.

More in general, I think that a well-functioning cash payment system is also important for society as a whole, as it will safeguard the accessibility and financial stability of the POS payment system in case of (temporary) disruptions in the electronic payment system.

3. In the article “In love with the debit card but still married to cash” (2017), you and your colleagues argue that “even when consumers have fallen in love with a new payment instrument, they find it hard to divorce from their old payment instrument.” Do you think this will impede the uptake of new payments products and services?

Yes, I think that will be certainly be the case. Habits may impede the uptake of new products and services. The adoption of contactless payments clearly illustrates this. Consumers can pay contactless using their debit card or their smartphone. The uptake of contactless payments using the debit card goes very quickly, half of the debit card payments are contactless payments, so people can change payment habits quickly.

However, we also see that the uptake of paying contactless with the smartphone, another device, is much lower. Using your smartphone requires a more profound change in payment behaviour. This illustrates that the more people have to adjust their behaviour in order to use a new payment product or service compared to the ones they’re currently using, the more difficult it may be for them to adopt this new payment product/service.

4. Some of your research demonstrates that a public campaign can influence debit card usage. Do you think that different stakeholders can influence how we adapt to the financial services in the future?

The public campaign to promote debit card usage was jointly launched by merchant organisations and banks. It was a long term project, aimed at improving the safety of the POS payment system and at achieving cost savings for banks and merchants. Government bodies were in favour of the campaign, but the campaign was the joint initiative by banks and merchant organisations, not of the government.

I’m not sure whether the government should have a role in influencing people’s usage of specific financial services. I think that should be left to the market. Government bodies have a role in informing people on large scale changes in the payments market, like with the euro cash changeover, SEPA migration, and more recently on the risks associated with cryptos and about the upcoming changes related to PSD2.

Having said that, I think that public campaigns like the one for debit cards can influence the adoption and usage of new services by consumers. Public campaigns can provide large groups of consumers and merchants with all kinds of information about a new financial service. This may enhance its adoption.

However, most important for the success of a new financial service is that it is easy to start using it, that it provides added value to consumers and merchants compared to existing services, that it is perceived as safe and that the costs associated with using it are considered reasonable. If new services meet these conditions then a public campaign promoting them may help.

5. Finally, what payments trends should we watch out for in the next few years? As the landscape changes, how can we ensure that the needs of consumers are prioritized, both in policy and financial service design?

An important trend may be the substitution of cash by mobile P2P apps for P2P payments. Although people increasingly use electronic payment instruments at the POS, they still mainly rely on cash when it comes to paying each other, for instance, for splitting pub or restaurant bills, or for lending money to each other.

Recently, banks have introduced all kinds of mobile banking apps which allow consumers to send each other electronic payment orders. These apps are becoming increasingly popular among consumers, and may lead to lower cash usage in P2P payments. It may even be the case that in some consumer segments people will do all their POS, remote and P2P payments using their smartphone and won’t feel the need any more to carry any cash with them.

Another trend may be the growing role of non-banks in offering payment services to consumers. Overall, consumers are satisfied with most of the existing payment methods, and with their payment service provider, a bank. However, as of (probably) mid-2018, PSD2 will be implemented in Dutch law. PSD2 facilitates the entrance of two types of payment service providers in the retail payments market, i.e. payment initiation service providers for initiating online payments and account information service providers.

So, in the next few years, new players may enter the retail payments market. European legislators represented in bodies like the European Banking Association have set strict security conditions which new players should meet in order to enter the retail payments market and start offering their services to customers in the EU.

Taken all this together, legislators and regulators on the one hand further competition and innovation in the retail payments, which may be beneficial for end-users, while safeguarding security for these end-users as well. As in general, Dutch consumers are satisfied with the current payment methods and have a lot of trust in their banks, these new entrants will only stand a chance of success if they outperform the incumbents and other newcomers with respect to financial service design and if they’re able to build trust.

I expect that only new entrants who prioritize the needs of consumers may gain market share. On the other hand, the entrants of these new players may also stimulate the incumbents to come up with new and better services in order to avoid losing market share.

Interviewed by Erin Taylor, Senior Researcher

This article is part of a series on payments and open banking. For more on this topic, see Open banking essentials: what you need to know and Open banking: developments.


Dr. Nicole Jonker, DNBNicole Jonker started working as a researcher in the Research Department of the Nederlandsche Bank (DNB) in 2001. Three years later, she joined the Payments and Market Infrastructure division as an economist.

Nicole Jonker has been involved in various empirical studies in consumer behaviour and retail payments, including the impact of a public campaign to promote debit card usage on consumers’ payment behaviour, the influence of habit formation on payment behaviour, the adoption of Bitcoin payments by retailers, the interchange fee regulation of card payments, price sensitivity of Dutch consumers and retailers with respect to the adoption of debit cards, the usage payment diaries to monitor consumers ’ payment behaviour at the point-of-sale, and the environmental impact of cash and card payments.

She has also been involved in policy work related to financial and digital inclusion, sustainability of retail payments, the Interchange fee regulation of card-based payments in the EU (EU-IFR) and the payments services directive (PSD 2). Nicole graduated with honours in Econometrics at the University of Amsterdam in 1996, and she obtained a PhD in Economics in 2001.

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