iDEAL is an e-commerce payment system used in the Netherlands, based on online banking. Introduced in 2005, this payment method allows customers to buy on the Internet using direct online transfers from their bank account.
iDEAL processed 4.5 million transfers in 2006, 15 million transfers in 2007, 28 million transfers in 2008, 45.4 million in 2009, 68.8 million in 2010, 93.8 million in 2011 and 117.2 million in 2012. iDEAL is owned by the Dutch organization Currence, which also owns PIN and Chipknip.
The participating banks in iDEAL are ABN AMRO, ASN Bank, Friesland Bank, ING Bank, Knab, Rabobank, RegioBank, SNS Bank, Triodos Bank and Van Lanschot. Together these serve the vast majority of the Dutch online banking market.
Criticism: Whilst the participating banks claim that iDEAL is a secure method of payment it does not offer any form of guarantee against fraud and has been the target of phishing. This is because iDEAL payments cannot be reversed in the case of online fraud.
iDEAL offers merchants a real-time payment method (publicized as low-cost and virtually risk-free) to accept internet payments. For customers, iDEAL uses the same environment as their banks' online banking sites. A high level of security is realized by using two-factor authentication (2FA), such as a challenge-response access token based on the chip embedded in the debit card or ATM card. Furthermore, no sensitive information is being shared with the merchant, such as credit card numbers. There is no chargeback right however, which can be considered a disadvantage for the consumer using this payment method. This is considered an advantage to the merchants.
iDEAL works as follows:
- Merchant offers iDEAL as payment method
- Consumer selects iDEAL and selects his bank
- Consumer is redirected to his bank's login page
- Participating bank displays transaction data
- Customer enters account number and signs the transaction digitally using a 2FA token
- Bank authorizes transaction in real-time, deducting the amount directly from the consumer's account (if there is not enough balance, the transaction will be refused)
- Merchant received real-time confirmation of the payment by the bank
- Consumer is redirected back to the merchant page with a confirmation that the payment has been successful