De Nederlandsche Bank

De Nederlandsche Bank Payment research and statistics and the involvement of stakeholders Thijs Kettenis Third Macedonian Conference on Payment and Securities Settlement Systems Ohrid, 29 June 2010

Agenda • Objectives of payments research • Wholesale payments research • General overview • Retail payments research • General overview • Dutch Payments Reporting Model • Involvement of stakeholders • Why involve stakeholders? • National Forum on the Payment System • Results

Introduction (1) Mission of DNB Payments Division: • being a strong and influential central bank which promotes the efficiency, safety and accessibility of the Dutch payment system One of the ingredients = Payments Research • To support our policy and visions • DNB as a Knowledge Institution

Introduction (2) Objectives of payments research: • Monitoring and understanding developments • Analysing consequences of policy alternatives • Retail and wholesale payments

Introduction (3) Outlets • DNB policy notes • DNB Working Paper Series • DNB Occasional Studies Series • DNB Quarterly Bulletin • DNB Annual Report • DNB Statistical Bulletin • National and international journals • Presentations at national and international conferences

Wholesale payments research (1) Objectives • To monitor and understand interbank payment behaviour • To gain an insight into the possible consequences of payment incidents • Finding ways to detect payment stress ahead of time Types of research • data analyses • network topology • scenario analyses • experiments

Wholesale payments research (2) Data sources • TARGET2 transaction records • Behavioural experiments Close cooperation with: • Other DNB divisions • University of Amsterdam

Wholesale payments research (3) Issues of interest: • How to detect stress in the interbank market • Behaviour of banks in stress situations • The impact of individual bank failures on the overall payment system • The current network of financial institutions and its evolvement over time

References • Heijmans, R. (2009), Simulations in the Dutch interbank payment system: sensititivity analysis, DNB Working Paper, No. 199, De Nederlandsche Bank NV, January 2009 • Heijmans, R. and R. Bosman (forthcoming), Disruptions in large value payment systems: An experimental approach, DNB Working Paper in progress • Ledrut, E. (2007), Simulating retaliation in payment systems: Can banks control their exposure to a failing participant?, DNB Working Paper, No. 133, De Nederlandsche Bank NV, March 2007 • Pröpper, M., I. van Lelyveld and R. Heijmans (2008),Towards a network description of interbank payment flows, DNB Working Paper, No. 177, De Nederlandsche Bank NV, May 2008

Agenda • Objectives of payments research • Wholesale payments research • General overview • Retail payments research • General overview • Dutch Payments Reporting Model • Measuring the number of cash payments • Involvement of stakeholders • Why involve stakeholders? • National Forum on the Payment System • Results

Retail payments research (1) Objectives • To monitor and understand payment behaviour of consumers, retailers and banks • To anticipate future developments • To analyse consequences of possible measures Overview Preview

Retail payments research (2) Issues of interest: • Costs and benefits of payment instruments • Perception and usage of payment instruments • Focus on different consumer groups • Acceptance of payment instruments by retailers • Impact of safety and security • The impact of surcharging • SEPA: Consumers’ desires and expected costs and benefits • SEPA: readiness of corporates and retailers • Competition and price-making forces • The role of non-banks • Authenticity and appearance of banknotes

Retail payments research (3) Data sources • Consumer, retailer and bank surveys • Online, telephone and face-to-face questionnaires • University of Tilburg (DNB Household Panel) • Research agencies • National Forum on the Payment System • Statistics supplied by banks, processors, creditcard companies and debitcard scheme owner • Dutch Payments Reporting Model

Dutch Payments Reporting Model(1) • DNB is trusted party • 8 major banks report quarterly on line to statistical department DNB • Not mandatory • Structured quality control • Strict deadlines & reminder procedures • Output: • controlled individual data • accumulated total data for all banks (leveled up for whole sector)

Dutch Payments Reporting Model(2) • Collected Data: • Credit transfers • Direct debits • Debit & credit cards • Accounts • Infrastructure • Differentiated: • Users: consumers & businesses • Domestic & cross border • Volume & value • Choice of channel

2005 2006 2007 2008 2009 2009 Q1 Q2 Q3 Q4 Numbers of transactions in thousands Domestic payments Remote payments 2,307,944 2,489,477 2,578,477 2,683,668 2,749,463 676,036 694,781 674,911 703,736 Transfers 922,907 1,027,150 1,067,057 1,115,303 1,129,674 279,718 288,557 273,568 287,831 of which paper-based 74,804 63,009 53,493 47,983 43,084 12,108 10,740 9,646 10,590 Standing orders 88,062 103,894 104,536 104,654 104,452 25,901 26,188 26,165 26,198 Express transfers 6,952 6,619 6,325 6,253 5,170 1,338 1,311 1,266 1,255 of which paper-based 2,016 1,749 1,345 1,227 893 248 228 211 206 Inpayments transfers 230,538 208,227 208,746 203,954 194,259 51,784 49,895 44,685 47,895 Direct debits 1,059,348 1,139,061 1,176,944 1,225,541 1,272,131 308,080 318,695 318,135 327,221 Digital invoices New media payments 137 4,514 14,811 27,865 43,575 9,179 10,092 11,040 13,264 POS payments 1,509,139 1,646,230 1,796,437 1,968,406 2,157,049 495,222 546,482 532,481 582,863 Debit cards 1,333,558 1,451,279 1,588,495 1,756,119 1,946,071 441,521 494,905 484,656 524,989 Cards with an e-money function 146,925 164,386 174,834 176,122 177,047 45,780 43,174 39,910 48,182 I Credit cards 28,656 30,565 33,108 36,165 33,931 7,921 8,403 7,915 9,692 Total domestic payments 3,817,083 4,135,707 4,374,914 4,652,074 4,906,512 1,171,258 1,241,263 1,207,392 1,286,599 of which paper-based (=1.1.1+1.3.1+1.4) 307,358 272,985 263,584 253,164 238,236 64,140 60,863 54,542 58,691 Cash transactions 524,762 527,908 519,950 521,231 499,947 119,220 129,999 126,867 123,861 ATM cash withdrawals 473,075 480,158 474,914 478,389 460,043 109,291 119,816 116,812 114,124 OTC withdrawals 15,976 14,283 13,309 11,908 9,842 2,537 2,712 2,395 2,198 Deposits 35,711 33,467 31,727 30,934 30,062 7,392 7,471 7,660 7,539 Cross-border payments Remote payments 12,825 14,347 16,570 18,352 15,470 3,747 3,655 4,366 3,702 Credit transfers 12,695 14,231 16,466 18,252 15,393 3,726 3,635 4,347 3,685 of which paper-based 1,127 750 597 512 417 102 95 107 112 Cheques 86 74 55 39 25 8 7 6 4 Other 44 42 49 61 52 13 13 13 13 POS payments 62,685 67,106 73,453 81,821 87,712 15,772 19,424 31,496 21,022 Debit cards 11,605 14,439 18,039 23,750 32,043 4,826 6,364 12,004 8,850 I Credit cards 51,080 52,667 55,414 58,071 55,669 10,946 13,060 19,492 12,172 Total cross-border payments (4+5) 75,510 81,453 90,023 100,173 103,182 19,519 23,079 35,862 24,724 of which paper-based (4.1.1+4.2+4.3) 1,257 866 701 612 494 123 115 126 129 Cash transactions 30,634 31,042 34,009 39,108 40,068 7,631 9,105 15,670 7,662 I ATM cash withdrawals 30,634 31,042 34,009 39,108 40,068 7,631 9,105 15,670 7,662 Numbers at the end of period Infrastructure domestic payments Bank offices 3,341 3,356 3,504 3,421 3,137 3,380 3,286 3,254 3,137 ATMs 7,446 8,114 8,546 8,654 8,506 8,642 8,642 8,536 8,506 Other cash points 849 798 824 818 802 798 Cash deposit machines 1,773 1,960 2,037 2,178 2,320 2,264 2,285 2,301 2,320 E-moneycard loading terminals 4,054 4,154 4,192 4,187 4,134 4,213 4,207 4,158 4,134 Payments terminals 252,224 265,779 306,264 316,182 340,160 326,391 331,651 325,361 340,160 Current accounts 23,573,538 23,473,267 23,746,058 23,824,735 24,042,537 23,531,207 23,694,531 23,620,612 24,042,537 Bank cards 5,465,133 5,128,774 3,053,624 2,717,614 2,148,952 2,426,944 2,360,350 2,283,073 2,148,952 Euro cards 19,939,697 20,350,925 22,275,095 22,493,797 22,241,990 25,405,207 25,710,573 25,930,033 22,241,990 Cards with an e-money function 17,532,891 18,203,479 18,132,110 18,249,656 24,065,517 18,212,320 17,369,493 17,550,268 24,065,517 I Credit cards 6,048,104 6,240,776 6,027,084 5,722,393 5,808,238 5,719,230 5,747,967 5,766,893 5,808,238

Dutch Payments Reporting Model(4) • International contributions: • ECB • EU • Wholesale & retail payments & settlement systems • 15 tables • Country data • Comparative data • Statistical Data Warehouse

Dutch Payments Reporting Model(5) • International contributions: • BIS • 13 developed countries (incl. US & Japan) • Euro area • Wholesale & retail payments, settlement data • 11 tables • Country data • Comparative data

References (1) • Bolt, W., D. Humphrey and R. Uittenbogaard (2008), Transaction pricing and the adoption of electronic payments: a cross-country comparison, International Journal of Central Banking, March 2008 • Bolt, W., and S. Chakravorti (2008), Consumer choice and merchant acceptance of payment media, DNB Working Paper, no. 197, De Nederlandsche Bank NV, December 2008 • Bolt, W., N. Jonker and C. van Renselaar (2009), Incentives at the counter: An empirical analysis of surcharging card payments and payment behaviour in the Netherlands, DNB Working Paper, no. 196, De Nederlandsche Bank NV, December 2009 • Bolt, W. and H. Schmiedel (forthcoming) SEPA, Welfare and Payment Competition, ECB Working Paper in progress • Brits, J.H. and C.C.A. Winder (2005), Payments are no free lunch, DNB Occasional Studies, vol. 3/no. 2, De Nederlandsche Bank NV, Amsterdam. • EIM (2007), Het toonbankbetalingsverkeer in Nederland: kosten en opbrengsten van toonbankinstellingen in kaart gebracht, Zoetermeer • Heij, de H. (2009), Banknote Design for the Visually Impaired, DNB Occasional Studies, vol. 6, no. 2, De Nederlandsche Bank NV, Amsterdam • Heij, de H. (2007), Public Feedback for better Banknote Design, DNB Occasional Studies, vol. 5, no. 2, De Nederlandsche Bank NV, Amsterdam

References (2) • Jonker, N., B. Scholten, M. Wind, M. van Emmerik, M. van der Hoeven (2006), Counterfeit or genuine: can you tell the difference?, DNB Working Paper, No.121, De Nederlandsche Bank NV, December 2006, • Jonker, N. (2007), Payment instruments as perceived by consumers – a public survey, vol. 155, issue 3, pages 271-303 • Jonker, N. and T. Kettenis (2007), Explaining cash usage in the Netherlands: the effect of electronic payment instruments, DNB Working Paper, no. 136, De Nederlandsche Bank, March. • Jonker, N. and A. Kosse (2008), Towards a European payments market: survey results on cross-border payment behaviour of Dutch consumers, DNB Occasional Studies, Vol. 6, no. 1, Amsterdam. • Jonker, N. and A. Kosse (2009), The impact of survey design on research outcomes: a case study of seven pilots measuring cash usage in the Netherlands, DNB Working Paper, no. 221, De Nederlandsche Bank, August 2009 • McKinsey & Company (2006), Payment services in the Netherlands, an analysis of revenues and costs for banks, Amsterdam. • ECB-DNB (2009), Retail Payments – Integration and Innovation, Conference proceedings of the joint conference organised by the ECB and DNB on 25-26 May 2009

What is benefit of stakeholders sitting around the table? • A lot of market parties and financial authorities are involved in the national payment system Benefit for market parties • For users: better knowledge of developments and possibilities; possibility to jointly express wishes and concerns • For banks: better knowledge and understanding of wishes, needs, possibilities and developments; possibility to explain developments Benefit for central bank • Not all needs are catered for in purely commercial context  Need for cooperation! • Role for central bank

The National Forum on the Payment System • Objective: contributing to an efficient organisation of the Dutch retail payment system from a social point of view • Issues regarding: • Accessibility • Efficiency • Security • Technological developments

Mission and objectives • Making principle agreements about efficiency measures and measures with respect to the security, availability and accessibility of payment services, and standardisation (e.g. joint measures to stimulate the use of efficient payment products). • Open and free exchange of ideas about policy issues in the area of payment services. • Holding periodic consultations on the bottlenecks and social consequences of developments in the payment system. • Co-operating on the compilation, analysis and publication of numerical, non-competitive data.

Composition • Chaired by DNB. • Broadly composed of institutions representing providers and users of payment services. • DNB also performs the secretariat function. • The Forum meets twice a year.

Criteria for acceptance Organisations need to: • Act on behalf of users or providers of payment services that represent the interests of a specific group • Be representative • Make a professional contribution to realisation of a socially efficient payment system

Participants • Netherlands Bankers’ Association • Council of Dutch Retail Businesses • Netherlands Association of Small and Medium-sized Enterprises • User Platform for the Payment System • Dutch Association of Catering Establishments • Dutch Home Shopping Organisation • Netherlands Petroleum Industry Association • The National Consumers Organisation • Senior citizens’ association • Dutch Council of the Chronically Ill and the Disabled • Dutch Organisation of Blind and Partially Sighted People Observers: • Ministry of Finance • Ministry of Economic Affairs • Currence

Working groups • The Working Group on Availability and Accessibility: • How to safeguard and improve the physical availability and accessibility of payment services for consumers and entrepreneurs. • The Working Group on Social Efficiency: • How can social efficiency in the payment system be improved • Cost structures and the effectiveness of incentives for efficient payment behaviour in the light of technological and social developments

Working groups • The Working Group on Security: • How to safeguard the security of the payment system, partly with a view to enhancement of social efficiency. Its operations encompasses both personal security and the security of payment products. • The Consultation Group on SEPA: • To monitor and improve the process of the realization of a uniform European payments area, and to develop a national change-over and communication plan for SEPA

Results of the National Forum • Rounding-off to nearest 5 cents • Solutions for bottlenecks regarding SEPA migration • Agreement on speeding up EMV migration • Monitoring reports on availability of banking services • Guideline for user-friendly EFTPOS terminals • Research • Joint information brochures

Questions?

De Nederlandsche Bank