“Ideal” Online Payment method

In my previous post I’ve described 3 major modern online payment methods. Let met give more attention to the most modern one – iDEAL.

iDEAL is one of the online payment methods which are using online banking with special tokens. Currently such methods are deployed by different European Banks. Of course each bank has it’s own authentication method for e-banking and it would be a nightmare to support online payments for every bank.

Fortunately the banks are trying to consolidate their efforts at least on country level. Currently I know only Netherlands and Belgium (Bankcontact\Mister Cash)  having such systems.

How does it work?

The system is a bit more complicated for a user, than paying with credit cards.

  • Step 1. You select products in your e-shop and click on “pay”
  • Step 2. Normally you select your bank from the list

ideal_payments(sorry for the Dutch text)

 

  • Step 3. You’re transferred on a page of your bank where you perform the authentication and pay.

ideal_payments_1

Please note that the system automatically picked the amount of the payment and the name of the e-shop. You only need to use your card to authenticate yourself and click on “Pay”

  • Step 3.  iDEAL system transfers information back to the site of the merchant and the e-shop starts the process of delivery of goods – online or offline.

 

 

Pluses of iDEAL system

  • It’s very secure. It uses direct connection with your bank with 2-factor autentication.
  • It could be done online, sitting on your chair.
  • It’s more automatised than just “wire transfer”, because customer doesn’t have to type correctly the bank account of the e-shop, amount or any special “number”, which e-shops are using to recognise the transaction. This data is filled automatically, which really helps with human errors

 

Minuses of iDEAL system

  •  First and the biggest disadvantage – customer has to leave your site and go to another – the website of the bank, which supports iDEAL. It creates a huge field for customer errors. People forget to click on “pay”. People pay on “pay” twice. People forget to click on “OK” and close their browser. Basically you lose some control on what the customer is doing during the purchase.
  •  Second is coming from the first – the payment process is asynchronous. With credit card you start a transaction and finish it (successfully or unsuccessfully) within one process. With iDEAL you have a number of processes, which your e-shop starts, by sending customers to the bank payment page and then we must wait till the customer comes back
    Customers may come back in a couple of minutes (that’s how long it’s required to pay with iDEAL). They may come couple of hours later in a different order. They may not come at all or come two times. Your e-shop software has to maintain a table of current “open” transactions and wait for possible outcomes. 
  • Every transaction is actually a bank transfer to your account. If your Payment Service Provider is not using some buffer bank account, you end up with hundreds of small transactions, which your accountant has to book. 
  • The services from the banks. supporting iDEAL system, are sometimes not “ideal”.  We’re using the one from Rabobank, it doesn’t have a possibility to initiate a charge back. But paying back to your customers it’s a separate big topic, which I’m going to cover later

 

Conclusion

The rest of the world is still considering iDEAL as a “new and innovative system”, and it does have some glitches. But I belive that such systems will eventually be the payment method of the future. It will replace Credit Cards as e-banking is replacing paying your bills at a brick-and-mortar banks.

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