How do payments work?

Secure, fast and convenient payments

We provide new, clean and undamaged euro banknotes and coins. And when one bank transfers money to another, the transaction passes through De Nederlandsche Bank (DNB). In addition, we supervise firms that facilitate payments. Our supervision aims to prevent major risks and disruptions in payment systems. For example, we monitor the availability of debit card and iDEAL payments. Under our guidance, financial institutions test whether they are sufficiently resilient to hacker attacks. In these and other ways, we are committed to ensuring that your payments are secure, fast and convenient. In the way you want - cash or digital. Any time, anywhere.

Easy payments for all

We are all increasingly handling our payments and banking matters digitally. But some 2.6 million adults in the Netherlands are unable to handle all their banking and payment matters independently. Some find it difficult to open a payment account or use a banking app, while others have difficulty understanding instructions. More than one in six people need help with these activities. But getting help in person is increasingly difficult. We participate in the National Forum on the Payment System to ensure that as many people as possible can handle their daily banking and payment matters independently. And that everyone can easily pay anywhere – both digitally and in cash, now and in the future.

This is how cash payments work

When you pay cash to buy something, you give coins and banknotes to the seller. That money has to come from somewhere. Banks order euro banknotes from DNB. Security transport companies collect them and take them to ATMs and retailers. So you can withdraw the notes from an ATM. At the end of the day, the retailer will deposit the banknotes you spend to the bank again. Or a security transport van will come by to collect the notes and take them to a cash sorting centre. There, the money is checked to see if it is genuine, clean and undamaged. The approved notes go back to ATMs and retailers, but we keep any remaining notes for an additional check. We take out any fake ones and shred damaged and soiled notes. The good ones are bundled and readied for new orders from banks.

This is how electronic payments work

In electronic payments, the money passes digitally from the payer to the payee. They both need a payment account. This way, you can pay a bill using online banking or the banking app on your smartphone. Also, you can send others a payment request and make a payment after scanning a QR code. To make an electronic payment at a point of sale, you use a debit card, smartphone or smartwatch, while the retailer needs to have a payment terminal. When you buy something on a website, you will use some sort of online checkout. In that case, you will pay using, for example, iDEAL or a credit card.

Transferring money: five seconds, three steps

If you transfer money using your banking app or online banking, the amount is usually credited to the payee’s bank account within five seconds. In those few seconds, a lot happens behind the scenes. The following three steps take place:

• Verification of the means of payment (authentication): is the debit or credit card valid, for example?
• Giving permission (authorisation): does the payer give permission for the payment? Is there enough money in the account?
• Settlement: clearing the payment between the payer's bank or other service provider and that of the payee; debiting the amount from the payer's account and crediting it to the payee's account.

Money from one bank to another passes through DNB

What if the payer and the payee are not with the same bank? Then the money is transferred from the payer's bank to the payee's bank. When Dutch banks transfer money to each other, it passes through DNB. If they are in different EU Member States, it passes through other central banks using a dedicated payment system: TARGET2. 

Your IBAN: paying throughout Europe

Your bank account number is called IBAN, which stands for international bank account number. If you transfer money to another country in Europe, you won't pay a fee. But a foreign bank may charge transaction fees to the payee. That depends on the bank involved. If both banks support instant payment, the amount is credited to the payee’s bank account within seconds. If a bank does not support instant payment, this will be done on the same or the next business day. The reason why transferring euro amounts is so easy is that there is a single European payments area (SEPA). In rare instances,  you may experience difficulties transferring money to another European country. For example, if a firm from another EU country refuses to accept your IBAN, you may be a victim of IBAN discrimination. 

Resisting hacker attacks

Banks are doing all they can to keep hackers out so you can use their services safely. We supervise and work in tandem with the financial sector. For example, we provide banks with software to test their resilience to attacks. Financial institutions are working closely together to become more resilient, as part of our TIBER-NL and ART-NL programmes.

Laws for innovations in payments

There are several European and Dutch laws and regulations that govern payments.

PSD2 is a European act on consumer and business payments. It requires banks to give others access to your payment account, but only if you give your permission. They can be firms that make payments on your behalf, or who can view information about the payments in your payment account. You must, of course, have given them permission to do so.

Read more about 

• Euro banknotes
• IBAN discrimination and the European payments area (SEPA)
• National Forum on the Payment System
• TARGET 2: the system that facilitates payments between European banks
• Programmes to prevent cyberattacks: TIBER & ART
• Oversight: monitoring payment and securities transaction systems
• PSD2