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Credit cards are the most popular payment method across the globe. This is also true for online payments; most online transactions are made using credit cards. Over the last few years a number of alternatives to credit card payments, especially designed for e-commerce (e.g. PayPal) have emerged. But there are also successful local online payment methods.

One of the most successful ones is the

How does it work?

With iDEAL customers can pay for online purchases directly from their bank account. All major banks in the Netherlands, such as ABN AMRO, Rabobank and ING Bank support iDEAL. The iDEAL service is operated by Currence, a bank association that coordinates the payment systems in the Netherlands. To accept iDEAL payments a merchant can sign up at a certified bank or payment service provider.

This is how iDEAL works:

• The customer selects that he wants to pay with iDEAL and selects his bank during the checkout.
• He is then redirected to his banks login page to authorize the payment using a TAN.
• The bank verifies the transaction and initiates the transfer to the merchant’s bank account.
• The customer is then redirected back to website and the shop will get a conformation of the payment.
• The merchant will receive the payment within 1-2 working days on his bank account.

Advantages

Compared to other payment methods iDEAL offers some advantages for merchants and customers. Millions of customers already use online banking and can use iDEAL without signing up or registering for third-party services. Also customers don’t have to share personal information such as account number with the online merchant. Merchants benefit from the real-time confirmed, guaranteed (by the customers bank) payments that cannot be reversed (no chargebacks).

The transaction fees depend on the size and sales volume of the merchant but are usually much lower (especially for larger transactions) than the fees for accepting credit card payments.

Limited to the Netherlands

iDEAL is based on the Dutch domestic transfer and is only available to customers of the participating banks in the Netherlands. There are planes to adapt iDEAL to the Single Euro Payments Area (SEPA) standard so it can be used also for cross border payments within the E.U. There are similar local direct online banking services in other countries such as Secure Vault Payments in the U.S.