Pay after delivery: the present situation in the Netherlands

The Dutch in general have a good reputation when it comes to paying their bills. Therefore paying by invoice and thus after delivery has been very common. Nonetheless the larger Dutch banks founded iDeal, an online payment method that forces consumers to pay in advance. The method is the most frequently used payment method among Dutch internet consumers. How does that effect post-pay behavior?

In the Netherlands, it is legally required to provide consumers a payment option where they can pay after delivery. However, post delivery pay methods often stay unused, due to the immense popularity of iDeal. A service which allows consumers to safely transfer money to online stores from their home or work place. This is done within a secure area of the site of their own bank. A wellknown environment for consumers that use this for all their online banking services, something Dutch consumers use quite a lot and costumers have great confidence in this method. Online shop owners often prefer working with iDeal as well, since the method is probably the cheapest way of collecting payments and guarantees online shop owners straight away that they will be able to collect their money. Instead of credit cards or services like PayPal, that offer consumers a chargeback option.

Credit card as after delivery pay option
Some online shops use a credit card payment option as the only alternative for post pay. The ANWB for example. This is the biggest and leading union regarding  the interest of tourist and drivers in the Netherlands, with a sales volume over more than a billion each year. Using a credit card is only option for ANWB costumers that prefer to pay afterwards. Because the credit card payment is collected after the costumer received package.

The rise of paying after delivery
Despite the popularity of iDeal and the lack of governmental control regarding the ability of post payment options, the use of online post payment options is rising in the Netherlands. This is because of trustmarks demanding post pay options and emphasizing the importance of them. In addition, it seems that consumers are discovering them as well. A reason for the increase in use can possibly be awarded to the fact that iDeal is not easy to use on a mobile phone, since in most cases costumers need to use a card reader.

Post payment in The Netherlands
There are several parties in the Dutch ecommerce industry that are offering payment options to pay after receiving your package.  These companies are providing special plugins for online stores and, in most cases, will take the responsibility for the financial risks as well. They guarantee the web store owner will be able to collect the money. That is, if the costumer passes the credit check.

Afterpay as leading provider
Afterpay is a Dutch provider, founded by Wehkamp, one of the biggest online shops in the country. The provider was independent since a management buyout in 2010 and is, since this year, owned by the German Arvato Bertelsmann. In a short period of time, Afterpay has grown to be the leading provider on the Dutch market. It’s uncertain if Afterpay will be able to keep that position, due to the strong competition.

Gothia, Sveawebpay and Klarna
The last couple of years, several companies entered the Dutch market. Like the Swedish initiatives Sveawebpay and Gothia for example. The latter cooperated with the payment provider Sisow for a short period of time, but this deal never became very successful. At this moment, Gothia already left the Dutch market and Sveawebpay does not seem to be able to establish as well. Our Dutch collegaues expect that Sveawebpay will currently even pause their actions in the Netherlands.

A third Swedish party however, Klarna, is still active on the Dutch market since 2010. The company didn’t have an easy start either, but was patient and is making progress each year. Despite the tough competition, they managed to retrieve some big clients and are still going good. Currently even better than the market leader Afterpay and therefore Klarna seems to be a strong competitor to become the next market leader in mobile payments and payments after delivery.

Other parties on the market
Will Klarna be able to compete with iDeal as well? That’s not a easy task whereas other players lie in wait for those transactions too. Small sized providers like Billink for example. A number of 1.500 online shops are connected to Billink and the provider and although this provider didn’t connect any top players so far, it expects five major names to join them before the end of this year. But there is more. PayPal is rising too. More than fifty per cent of all the online stores in the Netherlands are already offering PayPal as payment method to their consumers and this number is growing.

Can they beat iDeal?
But is it realistic to seriously compete with iDeal? Online stores offer more and more payment options, but consumers seem to use iDeal only. Even though this payment does not seem consumer friendly at all, it is still preferred by most online consumers. It is safe and relatively cheap. And these are aspects you cannot ignore. Also, this payment method keeps breaking record after record. In May of this year only, iDeal processed 15,386,195 transactions. In perspective: that’s more than during the holiday season month December 2013. If this increase proceeds, the number of transactions will reach over 160 million this year. An amount that means a  ten percent growth. And since the holidays usually guarantees another peak, it is questionable whether there is a way to ever top iDeal in the Netherlands.