The Dutch experience with standing committees in the retail payments domain

On Friday, the 16th of May, the Euro Retail Payments Board (ERPB) held its first meeting in Frankfurt. The start of this new institutional body may raise questions in the industry as to its exact objectives and what it will achieve in practice. However, Dutch history shows that there are clear benefits to having long-term standing committees in the retail payments sector.

Standing committees in payments: the Dutch case
Originally, the Dutch market for retail payments consisted of privately owned commercial banks, savings banks and cooperative banks that competed with the government-operated Postal Cheque and Giro Services. The system design of these providers differed. The private players had set up the so-called Bankgiro system as opposed to the Postal Giro system of the State.

In the 1980s, the technology difference served as a barrier between the institutions, which remained in place until the State privatized its Giro-services in 1986. Subsequently the work started on the harmonization of technical standards by means of the work on the Dutch Payments Circuit (Nationaal Betalings Circuit). It took until 1998 for all the different types of payment mechanisms to be fully harmonized.

Although it did take quite some time to harmonize the technical standards in the Netherlands, the regular interaction between industry players improved the trust and willingness to cooperate on issues of common concerns. So when the need arose, in the 1990s, to drive down the costs of retail payments a dedicated task force was set up. The task force developed an array of measures and communication to steer the users to the most efficient payment mechanisms. The effects in changing the payment mix in the Netherlands were clearly visible.

National Forum on the Payment System
At the end of its term, in 1995, the task force was converted into a standing committee on the efficiency of payments in which both the demand and supply side were represented.[1] This standing committee was the precursor to the National Forum on the Payment System that was set up in 2002. This National Forum functions as the platform in which issues with respect to retail payments are discussed between representatives of suppliers and users of retail payments.

Over time, the Forum has established working groups on the migration to EMV, on the migration to SEPA, on usability, security and efficiency. It has become the platform for discussion of market developments and collective decision making to improve payments in the Netherlands. For example, when the 1 and 2 eurocent coins in practice created too much confusion for consumers and unnecessary costs for merchants, the members in the forum agreed to abolish the use of these cents and to implement a rounding procedure. This improved the efficiency of Dutch retail payments by approximately € 30 million per year.

Unlocked potential in forming bonds and creating trust
In the Dutch situation there have been many participants to these standing committees and working groups that at the time felt that a lot of their work amounted to pushing back and forth paperwork rather than contribute to real life problems. And to be honest: at some stages of the process or in some working groups this may have been the case. 

I have spoken to quite a number of participants to such committees and working groups. In hindsight most of them acknowledge the value of the trust and bonds that are being built by working together with opponents and competitors on issues of interest. These bonds and relations spilled over into an increased trust and cooperation outside the formal scope of the committees an working groups. Both board members and technical experts create a wider and trusted network of counterparts that were consulted when the need arose. 

We should therefore recognize that apart from the actual output, the ERPB work in itself will also create trust an bonds in the European retail payments industry. This will unlock further potential and further cooperation that will be beneficial to all in the retail payments sector. It is this 'hidden value' that must not be underestimated.

[1] The so-called Working Group on Efficiency in Payments: ‘Werkgroep Efficiency Betalingsverkeer, which was chaired by Mr. Klomp, a highly respected representative of Dutch retailers.