The PaymentsJournal Podcast: Recent Episodes
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Customers no longer measure service in days or even hours—they measure it in seconds. Whether they’re paying employees, closing on a home, moving money between accounts, or covering an unexpected expense, they expect funds to be available immediately. That demand for speed is fueling the rapid growth of real-time payments, particularly those enabled by the Federal Reserve’s FedNow Service.
In a PaymentsJournal Podcast, Bernadette Ksepka, SVP, Deputy Head of Product Management for the FedNow Service; Shankar Jayaraman, Director of NOW Network at Fiserv; and Ben Danner, Senior Analyst of Debit at Javelin Strategy and Research, discussed the use cases driving the service’s momentum and how financial institutions that have yet to join the network can position themselves to meet evolving customer expectations.
Breaking Records Every DayAs more use cases for FedNow go live and more institutions participate, adoption continues to accelerate. Every week, the FedNow Service is breaking its own records.
It recently surpassed 1,776 financial institutions on board, which according to Ksepka is an appropriate number for a U.S. payment system to celebrate. Fifty service providers support FedNow connectivity, and new banks are joining the network almost daily. The service now reaches all 50 states and includes seven of the top U.S. banks.
“And 95% of our participants are community banks and credit unions,” said Ksepka. “They’re offering instant payments alongside some of the nation’s largest institutions. This isn’t just large banks chasing new technology. A credit union in rural Montana wants the same real-time tools that a major bank in New York City wants.”
Finding New Avenues for GrowthFedNow’s growth is being fueled by a combination of expanding participation and an increasing number of real-world use cases.
One of the fastest-growing areas is earned wage access and off-cycle payroll. Workers no longer want to wait two weeks for a paycheck, and employers are using the FedNow Service to provide access to earned wages or pay employees at the end of a shift. For many families, that can mean the difference between paying rent on time and falling behind.
The service is also reshaping major life events. Homebuyers can send escrow payments instantly, while car buyers can complete financing and drive off the lot immediately—even on weekends. Digital wallet funding and defunding has emerged as another significant use case, enabling money to move seamlessly in and out of brokerage accounts, payment apps and other digital platforms.
Businesses are finding value in real-time payments as well. Major fintechs are partnering with FedNow to deliver new capabilities to their customers, while small businesses are using the service to pay suppliers faster, improve cash flow, and reduce reliance on checks.
For financial institutions, account-to-account transfers remain a significant opportunity. Many consumers maintain multiple accounts and increasingly expect to move money instantly between them, whether within the same institution or across different banks.
Behind this growth are several structural advantages. The expanding number of participating financial institutions continues to increase the network’s reach, while FedNow’s direct participation model allows banks to settle transactions through their Fed master accounts. Another catalyst came last year with the introduction of instant government payouts, demonstrating the potential of real-time payments at scale.
“FEMA was the first agency to make disbursements over FedNow through Treasury’s digital payout program,” said Ksepka. “When families are dealing with a crisis, getting those funds immediately instead of waiting days for a check to arrive and clear is not just more convenient, it’s critical. Other agencies are now using the service, with more expected to join in the near term.”
Tracking Payment NumbersThe growing use of the FedNow Service for larger-value transactions is evident in the numbers.
As the financial institutions serving businesses use the network for everything from vendor payments and disbursements to corporate transfers and brokerage-related transactions, the average payment value has climbed well beyond that of other real-time payment networks. In 2025, according to Danner’s research, the average FedNow transaction exceeded $100,000, compared with approximately $4,000 on The Clearing House’s RTP network as of June 2025.
“Adopters of FedNow are seeing more high-value B2B payments, while something like RTP is going to be more consumer-focused,” said Danner. “That being said, average value per payment has actually declined on FedNow despite the overall volume growth. That suggests broadening use cases beyond the historical high value corporate transactions.
Ksepka added: “That’s the beauty of the platform. We are use-case agnostic, and it’s a platform for innovation that allows for any types of use cases.”
Overcoming ConcernsFinancial institutions still face several obstacles when it comes to adopting instant payments. Three concerns come up repeatedly, starting with core system readiness: Is the institution prepared to process 24/7/365 real-time transactions?
The second is liquidity management. How do institutions keep accounts funded when they are sending money? Is there a risk of running a negative balance?
“Most of the financial institutions who are sending today have solved that by taking baby steps,” Jaramayan said. “Come in on the network. Participate in the network. Receive first. Your ability to receive payments gives you a perspective of how things are in that space. All the rest then falls in line right after, one after the other.”
The third is internal prioritization. Many financial institutions approach instant payments as a technology initiative when, in reality, it’s a product decision. Every institution has competing priorities and long project backlogs, but instant payments are increasingly becoming table stakes, and customers are coming to expect these capabilities.
“For late adopters, my biggest advice is don’t overthink it,” said Ksepka. “Start simple. You don’t need 10 use cases on day one. Pick one meaningful opportunity for your customers, maybe weekend auto loans or faster B2B payments. You learn from there.”
FedNow Into the FutureAs it moves forward, the FedNow Service is focused on three goals: unlocking more innovation, strengthening security and risk mitigation, and preparing for the next wave of instant payment capabilities. That includes features such as Request for Payment and, eventually, cross-border payments.
“We’re super excited about a group of innovative early adopters coming together to work with us to test these new flows, explore new features, and really help shape what 24/7 international payments look like,” Ksepka said.
One of the newest tool provides sender institutions with receiver account signals to help assess risk before a payment is sent over the network. FedNow is also exploring ways to make payee name verification easier through a real-time API, giving institutions another layer of assurance before payments are made from their customers’ accounts.
“The biggest message is don’t get left behind and don’t give your customers a reason to look elsewhere for financial services,” said Jarayaman. “Now is the time to adopt if you haven’t. The financial institutions who ultimately win will be the ones who treat real-time as an infrastructure, not as a feature.”
The post The Use Cases Propelling the FedNow® Service’s Growth—and Shaping Its Future appeared first on PaymentsJournal.
A payment used to begin with a person making a decision: swiping a card, approving a transfer, or authorizing a purchase. Increasingly, that decision is being embedded into software. As programmatic payments become more common—and as agentic AI expands their reach—financial institutions must adapt to a landscape where transactions may be initiated by systems acting on behalf of businesses and consumers.
The opportunity is significant, but so is the challenge of ensuring those systems behave as intended.
In a PaymentsJournal Podcast, FinScan’s Kieran Holland, Global Head of Solutions Engineering, and Chris Ostrowski, Head of Product Management, as well as James Wester, Co-Head of Payments at Javelin Strategy and Research, explored the present and future of programmatic payments—from the rise of automated transactions to the new demands they create for fraud prevention, compliance, and oversight.
A World of Multiple PaymentsOne reason programmatic payments have become increasingly important is that financial activity is becoming more continuous and embedded into everyday processes. Instead of a handful of large, manually initiated payments, businesses and consumers are relying on a steady stream of smaller, automated transactions triggered by specific events, behaviors, or needs.
“We all want to pay our Netflix subscriptions,” said Holland. “We all want Alexa to go out and buy groceries when we say, ‘Hey Alexa, I’m running low on mangos.’ Programmatic payments is just the background technology that’s driving a more transactional world.”
Digital platforms have also normalized recurring and event-driven payments. Consumers are more comfortable authorizing transactions that occur automatically under specific conditions—whether that means renewing a subscription, purchasing additional credits for an AI platform after reaching a usage threshold, or completing a payment triggered by a predefined event. These experiences have changed consumer expectations around when and how payments can happen, making automated transactions feel like a natural part of everyday digital interactions.
“You have that ability to trigger searches and purchases when that TV you’ve been waiting forever to buy hits that right price point,” said Ostrowski. “It’s similar to the concept within the stock market where you’re waiting for stocks take a certain price and then it executes. That’s very much similar what you’re doing to these programmatic payments in a 24/7/365 economy.”
Moving at Machine SpeedEspecially for larger organizations, payments are no longer just financial events. They are increasingly embedded directly into digital platforms and operational systems. When programmatic payments are triggered by events such as a completed transaction or a supply chain milestone, companies can maintain control while automating workflows and allowing money to move at machine speed.
These changes are happening at the consumer level as well. For example, parking apps have become a common frustration for drivers visiting new locations. Many parking lots now require downloading a separate app before a payment can be made.
“I used to have to type my credit card information into each and every single one of these parking apps depending on where I was parking,” said Holland. “I went to the coast and this new parking app said, ‘Do you want to log in with Google?’ Yes. ‘Do you want to authorize a payment through Google Pay?’ Yes, I do.”
“Four hours later, it prompted me: ‘Hey, you’re running low on parking time. Do you want to add some more?’ Yes, done. That’s a really tangible advantage, where I can just delegate it through Google Pay or Apple Pay,” he said.
Fighting Financial Crime & FraudBecause these payments are completed so quickly—and because many involve relatively small dollar amounts—existing fraud detection and security systems must evolve to identify and mitigate emerging risks.
“Your systems really have to be fine-tuned to detect those risks as they are happening,” said Ostrowski. “You can’t rely on the analysts coming in at 8:00 AM. You have to have the right technology in place, the right monitoring place 24 hours a day, seven days a week to make sure that you are properly evaluating those payments as they flow through.”
Strong guardrails will be essential as these payments evolve. In the traditional payments environment, a consumer whose card information was compromised could typically cancel the card and resolve the issue. Programmatic payments introduce a more complex challenge because transactions may be authorized through automated systems, predefined rules, or software agents acting on a user’s behalf.
“You’ve got an infrastructure where we’re enabling 40 or 50 different vendors to connect and automate things out of your account,” said Holland. “Do we want to use that large hammer to crack a very small nut that one of those 50 vendors is nefariously overcharging you? We’re probably going to be in a situation where there’s a bit of a human learning curve to go through.”
The behavior of AI models differs from the human behavior that fraud detection systems have traditionally been designed to monitor. Those systems will need to learn what normal activity looks like in a world increasingly driven by machine-initiated transactions.
“You have to figure out what the agents are going to do,” said Wester. “The agents aren’t necessarily going to behave in ways that we think are sort of logical or the right way. They’re going to follow patterns that are recognized and all sorts of data and decisions.”
The results of these efforts also need to be auditable. Regulators must be confident that automated decisions are being made in appropriate, transparent, and accountable ways. What are the implications when AI doesn’t behave as intended?
“I’ve run out of toilet tissue twice in the last three weeks,” said Holland. “When I ask the AI agent to order me some new toilet roll from Amazon, it’s ordered me 500 rolls because it tries to be smart. It taken it quite literally that I run out too quick.”
Key TakeawaysSince programmatic payments occur in real time, the tools that support them must operate in real time as well. Whether it’s fraud screening or the onboarding of a newly introduced third-party agent, these capabilities must function at the same speed and scale as the business processes they support.
It’s also vital to understand the underlying data involved and ensure it’s accurate, reliable, and aligned with the organization’s objectives.
“When you take a look at some of the studies that have been done about major corporate AI roll outs, a lot of the time, it’s not that the AI was bad, or that the ultimate business aim was bad,” said Holland. “It’s the data that went into it wasn’t sufficient to give them the outcome they needed.”
Finally, there is a human element to consider. Programmatic payment systems will not operate at their full potential without people who can oversee their performance, provide guidance, and step in when human judgement is required.
“If you’re finding the desired success, you can bring in the people to be able to support it, so you’re not trying to play catch up or having a number of regulatory findings as your examiners come in for the first for the first time,” Ostrowski said.
Holland added: “You want to avoid the AI equivalent of throwing a spaghetti at the wall and seeing what sticks.”
The post The Rise of Programmatic Payments and the New Compliance Challenge appeared first on PaymentsJournal.
No one likes waiting for a check to arrive in the mail. Today’s consumers are accustomed to instant, digital experiences, and those expectations extend to payments. Whether they’re receiving a refund, reimbursement, or settlement, recipients expect fast, secure and flexible options.
That shift is prompting organizations to rethink how they disburse funds, with prepaid cards emerging as a practical option for many use cases. By giving payees more direct ways to receive their money, organizations can reduce reliance on paper checks while improving access to funds for recipients.
In a PaymentsJournal Podcast, U.S. Bank’s Ashley Downey, Treasury and Payment Solutions Senior Product Manager and Kristin Ridgway, Prepaid Payment Solutions Consultant, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed how modern payment hubs can help organizations reduce costs, improve security, and provide recipients with greater choice. By moving payments away from paper checks and toward prepaid cards, payors can simplify disbursements while improving the payment experience.
Moving Away from ChecksDespite the continued shift toward digital payments, many companies still reflexively turn to paper checks for disbursements. Paper checks remain an expensive and inefficient payment method. The cost per check can exceed $4, with some estimates reaching as high as $20.
“Think about all that goes into printing checks—the postage, labor, manual approvals, stuffing envelopes, tracking lost mail,” said Ridgway. “Probably the most time-consuming and expensive is check fraud. As they move those payments to prepaid cards or other pay methods, all those issues are eliminated, especially the fraud.”
Checks have become less convenient for payees as well. Consumers expect speed and convenience in nearly every aspect of their lives, making a trip to the mailbox and a stop at a check-cashing location feel outdated—especially when additional fees may be involved.
Fortunately, organizations have a growing range of alternatives to paper checks, including prepaid cards, payroll cards, digital payments, and even peer-to-peer services like Zelle.
“All of these things are part of the arsenal every recipient uses, and they need to get those funds where they need it and as quickly as they can,” said Downey. “Having that access is key to consumers’ ability to take hold of their own personal finances.”
The Benefits of PrepaidFor recipients who may not have a traditional bank account—or simply want immediate access to their funds—prepaid cards can offer a practical alternative to paper checks.
“Why do people use prepaid cards for themselves?” said Hirschfield. “People feel like it’s a safer option versus checks or cash. But it also turns immediately into the ability to access the money. It’s much easier to use a card on an open loop rail, especially when you’re under banked, when you have poor credit and don’t qualify for a credit card.”
There’s also compliance consideration. Uncashed checks must be tracked, reported, and remitted to the state, creating additional administrative burden and audit exposure.
“When a payment is made to a prepaid card, we handle statement responsibility according to the state where the recipient resides,” said Ridgway. “We take that burden away from our clients when the payment is made to a prepaid card.”
A Focus on FlexibilityIn most cases, payee preferences and payment use cases help determine the optimal payment method. What U.S. Bank has found works well for its clients is conducting an assessment of who they’re paying and why they’re making those payments.
There may be situations where funds are urgently needed, such as providing food or services to victims of a natural disaster. Or a business might have a vendor on-site who needs payment in hand before leaving. The ways those individuals prefer to receive payment could be very different—and critical to their missions. Increasingly, customers are demanding not just faster payment methods but also more payment options.
The challenge for many organizations is that they may not be prepared for that level of complexity. One emerging solution is a single disbursement platform connected to multiple services and tools, such as U.S. Bank’s Payee Choice. A decision engine can process each payment and determine the ideal outcome for both the payor and the recipient.
“We simplify the process so the end recipient doesn’t have to fully know or understand all the options available to them,” said Downey. “We use what information we receive from the client to best identify what solutions or payment methods best fit that recipient.
“A good example of that is Zelle,” she said. “We can identify if a person is already enrolled in the Zelle network using the aliases provided by the client. And we can suppress showing that option to individuals who aren’t already enrolled. If they are enrolled in Zelle, click this button, you’ll get the payment in minutes. That’s just a better experience.”
Protection from FraudAs organizations evaluate their payment mix, security has become just as important as efficiency and consumer preference. Fraud continues to be a major concern in the payments space, with paper checks remaining a primary target for criminals. Providing alternative payment options can help reduce that exposure while giving recipients greater choice.
“Any type of electronic and card payment gives a much deeper programmatic fraud management solution,” said Hirschfield. “There are many more steps needed to protect these programs.”
Having multiple layers of fraud prevention built into the process minimizes the need for organizations to collect and store sensitive data, thereby reducing their exposure and risk. Payee Choice continuously monitors for fraudulent activity.
“We’re validating that person is the rightful owner of the account that’s being linked for payment for ACH or an instant payment, for example,” said Downey. “For Zelle, we can do a name match as well. And we’re making sure we’re preventing any misguided payments.”
Final ThoughtsPaper checks are becoming increasingly disconnected from how recipients actually want to be paid today—particularly among younger consumers who have never used them.
“We live in this digitally-native society—especially younger generations,” said Hirschfield. “Having these options to have any kind of digital payment or electronic payment is critical.”
Offering payment choice helps close that gap, reducing friction for recipients and operational complexity for organizations.
“It’s been really powerful to have our customers move away from issuing checks and manual processes to be freed up to work on other things at their business,” said Downey. “Helping those clients move from just thinking about a payment solution and being able to drive overall improvement for them has been really successful.”
The post When Payment Choice Becomes the Expectation appeared first on PaymentsJournal.
Many companies expect gig workers to deliver fast, reliable work—but the way they’re paid often tells a very different story. Behind the scenes, payouts can lag days or even weeks, get chipped away by fees, and disappear into layers of currency conversion and compliance hurdles that most contractors never see coming.
This gap between real-time work and delayed compensation becomes even more pronounced in cross-border payments, where long-standing friction points persist: settlement delays, hidden costs, currency conversion, regional regulations, and limited visibility into where money actually is at any given moment.
In a recent PaymentsJournal podcast, Kate Lifshits, CEO of NOWPayments, and James Wester, Director of Cryptocurrency at Javelin Strategy & Research, discussed the many ways in which leveraging digital assets for payouts can create a more effective solution.
Not only can crypto payouts address operational challenges, but implementing efficient global payout systems can also be a key differentiator when it comes to attracting and retaining vital talent in a competitive market.
The Operational Pain PointsThe issues with cross-border payments only intensify as organizations scale high-volume international payouts. Although cost is often the most visible concern, many of these expenses are not immediately obvious.
“It’s not the payout itself that costs a lot, it’s the operational overhead that comes with this payout,” Lifshits said. “There are things like reconciliation, operational failures, and support tickets that come with failed payouts, and all kinds of manual operations are needed. If we’re talking about 100 payouts, it’s one fee. If we’re talking about 100,000 payouts, it’s another fee because at scale we’re talking about additional infrastructure.”
Understanding fee structures is just one aspect of the broader operational complexity facing finance teams at global organizations. These teams must manage multiple banks and fiat currencies while continuously staying current on regional regulatory, tax, and compliance requirements.
While this is challenging for organizations, payout inefficiencies can be even more detrimental for contractors. One of the biggest obstacles for small businesses—and especially freelancers, creators, and gig workers—is cash flow.
Budgets are often stretched thin after covering supplies or subcontractors, and financial pressure can rapidly escalate when payouts are delayed, inaccurate, or subsumed by fees.
Unfortunately, all of these issues are common in the current payment system.
“The system itself was built by banks for banks, for their convenience and not for either end of the transaction,” Wester said. “It’s not built for the sender. Tthe sender has to figure out the complexity, they have to figure out where it’s going, and they have to figure out the cost. And the recipient, it’s definitely not designed for them because they have to wait. They are the ones where often the fees are built into whatever it is that they received.”
Translating Speed into TrustThese payment challenges don’t align with current customer expectations. When users can send peer-to-peer payments almost instantly with full visibility in a seamless digital experience, traditional cross-border payment systems can feel archaic.
“They want settlement and they’re even beginning to understand the differences between when a payment is made and when a payment settles,” Wester said. “They are expecting that settlement to be immediate. Nobody wants to wait for a payment to clear anymore, you don’t want to hear that phrase. You just expect a payment to happen and the money to move and for it to be available in an account right away.”
For their part, many organizations want similar clarity on the other side of the transaction, since understanding cash flow is essential to operations. However, the complexity of cross-border payments—combined with managing multiple platforms, freelancers, and contractors—makes it difficult to track cash flow accurately.
This creates a difficult environment, because organizations that rely on gig workers and contractors at scale understand that speedy, reliable payouts are the lifeblood of their business model.
“In this case, speed translates into trust and reputation and that in its turn translates into bigger volumes, because speed means that the users will trust this provider or this business—whichever is sending the payouts—and that in its turn will bring in more usage,” Lifshits said. “It all goes together.”
Improving the Economics of Global PayoutsAs merchants increasingly recognize the importance of efficient payouts, many also acknowledge that current cross-border payment systems fall short of expectations.
Digital assets can provide near real-time payment and greater transparency, while often reducing currency conversion friction and regulatory overhead. Perhaps most importantly, crypto payments can help reduce the spiraling costs of global payouts.
“It’s different with crypto payment gateways because they can help scale without ballooning the fees. The fees stay the same even with a big scaling,” Lifshits said. “All the pain points could be dealt with in this traditional infrastructure, but it will cost very, very much. But if it’s a crypto payout infrastructure, the fees will be what they are supposed to be in a world that makes sense.”
At the center of this infrastructure is the crypto gateway, which bridges payments processors and merchants. While early crypto gateways were little more than a “Pay with Crypto” button at checkout, modern systems have evolved into sophisticated payment orchestration platforms that optimize routing while maintaining compliance.
Crypto gateways have become essential for managing the many components of the digital asset ecosystem, including cryptocurrencies, wallets, integrations, and infrastructure layers. This is transformative for organizations that are drawn to the cost and efficiency benefits of digital assets but hesitant about operational complexity.
These gateways also address one of the most significant barriers to adoption: volatility. Crypto gateways allow merchants to choose how actively they manage digital assets, from fully automated conversion to more hands-on control.
All these advantages make crypto payouts as user-friendly as other payment tools in a merchant’s stack.
“Crypto is not something now that a business needs to look at and think that is different from the standard way of doing things,” Wester said. “It has become a standard for business-to-business payments, and it is not something that is strange or foreign or weird or exotic. It’s a standard tool for making payments and has become so very quickly.”
Changing Business EconomicsCrypto has been adopted rapidly in part because it often offers a more efficient alternative to many traditional payment methods. However, the benefits of using digital assets for payouts extend beyond cost reduction.
“If you think about gig economy marketplaces or about any time there has to be a payout, when you think about making that payment better, faster, and cheaper, it becomes something that those businesses can now use as a competitive advantage,” Wester said.
While crypto gateways are powerful tools, they were not entirely fee-free—until now. NOWPayments recently introduced zero-fee payouts with near-instant processing for wallets within its ecosystem. This solution is designed for high-volume global operations and delivers meaningful improvements in efficiency and scalability.
Beyond reducing costs, NOWPayments introduces a new value proposition for partners: the ability to generate additional revenue when their users engage with ChangeNOW PRO. This makes NOWPayments the first crypto payment gateway to enable partners not only to accept payments, but also to participate in and benefit from the broader ecosystem.
Along with settlement times of roughly a second, zero-fee payouts and new revenue opportunities present a compelling alternative—even compared to already low-cost crypto gateways.
“The problem here is that every fee looks small until you scale it and multiply it by millions or billions of transactions,” Lifshits said. “The small businesses that are scaling to become big businesses, they will face issues even if the fee is $0.01.”
“That is why our zero-fee instant payouts are meant to change business economics, because they’re free, they are available to everyone, and they’re instant. And that means lower operational costs and a far better user experience,” she said. “It’s not even about reducing costs or saving money; it’s about enabling new business models and new revenue streams.”
The post Why Crypto Will Be the New Standard for Global Payouts appeared first on PaymentsJournal.
As financial institutions merge and evolve, the pressure on back-office operations grows just as quickly as it does on member-facing services. Accounting teams that once relied on manual processes and patchwork systems are now expected to deliver greater accuracy, faster reporting, and the flexibility to support future growth.
As a result, many banks and credit unions are reevaluating whether their current accounting platforms can keep pace—and looking for partners that can support both today’s demands and tomorrow’s challenges.
In a PaymentsJournal Podcast, Kellie Rychwalski, Chief Financial Officer at Del-One Federal Credit Union, Kandra Person, Senior Solution Consultant at Fiserv, and James Wester, Co-Head of Payments at Javelin Research and Strategy, discussed the accounting solutions available to financial teams today. Newer platforms have made significant advances compared to the way things were handled in the past.
“I was just looking for efficiencies,” said Rychwalski. “Simply being able to attach a PDF of an invoice to an accounts payable or fixed asset transaction instead of filing is a huge time saver.”
Seeking a Platform with Greater FunctionalityWhen Rychwalski joined Del One in 2012 as the Director of Accounting, she found an integrated general ledger (GL) system that lacked much of the functionality the credit union needed.
“We were looking for something that was core agnostic,” said Rychwalski. “We knew that we would be changing data processors or core systems at some point, and didn’t want to have to continuously move the GL.”
Del-One eventually selected Fiserv’s financial accounting and finance operations platform, Prologue, in a hosted environment. The credit union would receive full support from Fiserv, and if they changed core systems in the future, they wouldn’t need to replace the entire GL again.
When the credit union merged with Louviers Federal Credit Union and migrated its GL into Prologue, the transition was easy for the team to absorb. From day one, they were able to produce consolidated financials without waiting for the operational merge date.
“We could still balance to the different core processors of their different outside vendors, but we could bring our financial statements together as one consolidated financial statement,” Rychwalski said. “For the person who spent two months manually combining them, that was a really big deal.”
Streamlining ApprovalsThe sheer volume of AP that flows through a thriving credit union can be daunting. Prologue helps alleviate the burden by assigning approval limits, connecting the appropriate invoices to each transaction, and routing everything through the approval workflow automatically. It eliminates the need for staff to chase down approvals manually.
“The system knows that anything over $100,000 has to go to my supervisor, so it’ll come and get my approval and then it’ll send it over to my supervisor,” Rychwalski said. “Nobody is running around trying to make sure they got all the signatures, and the actual transaction has the invoice and approval history attached to it.”
Prologue allows Del-One to establish policy limits that determine who can approve transactions and at what amounts. If an amount requires a second approval, the workflow automatically routes it to the appropriate person. Instead of tracking down signatures on paper invoices, approvals are connected digitally from the start.
“Many of the prior processes were ad hoc processes that solved the problem when they were first developed, then they just became standard operating procedures,” said Wester. “Having a system that can automate that and make people more efficient gives you more time to do other things that are more important to the business.”
Moving Beyond a Patchwork SystemMany legacy systems exist only in the minds of long-time employees. Rychwalski explained that previous budgets were prepared through an elaborate network of spreadsheets—a process that was not only unsustainable, but also difficult to transfer to others.
“I needed something that would calculate interest income and expense that would allow me to project based on rates,” Rychwalski said. “And that’s what Vantage brought to us. I’m able to project that if the rates go up, this is the way it’s going to look. I can build formulas.”
The previous spreadsheet process consumed a tremendous amount of time, both in maintaining the files and in training others. It also created accuracy issues, since manual processes inevitably introduce human error.
“The accuracy also increases because Vantage brings in the account level detail, the instrument level detail from those cores,” Person said. “With it being core agnostic, it’s bringing in all that detail to calculate all the cash flows for those specific investments, loans, shares, and deposits.”
Ready for the FutureOrganizations investing time and money into these products must understand that proper mapping is critical. Teams need to understand how the GL is structured, what accounts are grouped together, and how to maintain consistency while still leaving room for future changes and growth.
“You’re going to create products that you haven’t thought about yet,” said Rychwalski. “You have to be able to understand how to update new products, create new products, and change the ones that you have.”
The post What Happens When a Credit Union Outgrows Its Accounting System appeared first on PaymentsJournal.
Every bank wants to earn its customers’ trust. Today, protecting customers’ identities is just as important to earning that trust as safeguarding their money.
Too many financial institutions, however, still treat identity protection as an afterthought. They fail to recognize that identity protection is not only a cybersecurity imperative but also a powerful driver of customer loyalty and engagement.
In a PaymentsJournal Podcast, Javelin Strategy & Research’s Tracy Goldberg, Director of Cybersecurity, and Dylan Lerner, Senior Analyst of Digital Banking, discussed the opportunity for banks and credit unions to offering identity protection services to customers and members. While these services deliver clear security benefits, financial institutions should also consider the risks of leaving customers vulnerable to identity-based attacks. As the saying goes, trust arrives on foot but leaves on horseback.
Seeking SecurityIdentity theft remains a widespread problem.
Consumers are increasingly looking to trusted partners to help them navigate identity theft risk, creating an opportunity for banks and credit unions to partner with identity theft protection services (IDPS) providers.
“There’s so many different ways to look at this, but at the end, it comes down to the fact that you should do anything you can to tell your customers, ‘Hey, security is important to us too,’” said Lerner. “Then all those ancillary benefits come into play.”
Banks and credit unions are uniquely positioned to help consumers recover from identity theft. Not only do they safeguard much of a customer’s or member’s financial assets, but banks and credit unions also carry a reputation for stability and trustworthiness.
“Cybersecurity generally is never thought of as a customer service or loyalty topic,” said Goldberg. “But consumers are telling us that when it comes to a cybersecurity incident—whether it’s a socially engineered attack like a scam or even malware that may have infected their device—they more often than not want to turn to a trusted partner like a financial institution.”
Not every institution has the resources to build a comprehensive cybersecurity program that includes identity theft resources in-house. As a result, many turning to white-label IDPS solutions that provide identity protection under the financial institution’s brand.
“I want the IDPS to be with my name and my branding, to not only build credibility but loyalty,” Lerner said. “There is something to be said about having a strong brand name associated with it.”
At the same time, there are advantages to partnering with a third-party provider that brings strong brand recognition and established expertise. The key is selecting a solution that best aligns with the financial institution’s overall strategy and customer experience goals.
Making It AccessibleAn effective IDPS strategy should enhance, not complicate, the customer/member relationship. Prioritizing sophisticated technology at the expense of accessibility can ultimately undermine adoption and engagement.
“The most important thing in banking relationships is ease of use,” said Lerner. “Security is always second to being able to use something.”
There is risk in relying too heavily on generic educational messaging. When consumers are inundated with scam alerts and warnings, they often start to tune them out. Financial institutions should leverage their own data to personalize communications and tailor recommendations to individual needs. Just as importantly, every alert should include clear, actionable guidance on what customers can do next.
“So often when we look at the top 20 financial institutions, one of the missing key elements in education is making it actionable,” said Lerner. “That’s what a lot of these identity protection services provide. Rather than an identity theft kit that says, ‘Contact each of the three bureaus,’ provide a trusted provider that can help with the next step. That actionability is a big upgrade over education.”
Ultimately, identity protection works best as a partnership between the customer/member and the financial institution. That collaborative approach strengthens trust and builds longer-lasting relationships.
“If consumers find that identity theft protection adds value, you might find that your customers either add more products or stay with your financial institution longer,” said Goldberg. “That ancillary benefit is now available to them beyond just offering basic banking products and services that are pretty commoditized in today’s market.”
Customize the OfferingFinancial institutions can bolster those relationships by ensuring that identity protection and other security offerings are customized. For instance, seniors may benefit from features designed for caregivers or family financial management. Other consumers with young children may have more interest in identity monitoring that includes the entire family. Different consumer segments face different risks, giving financial institutions an opportunity to deliver more relevant, personalized security solutions.
“This just goes to show me that the financial institution has the consumer’s best interest at heart,” Goldberg said. “They are helping me to shore up my cybersecurity, not only within my bank account, but also in my personal life.”
Financial institutions don’t have to be the experts in every aspect of identity protection. A well-chosen IDPS partner understands where consumers are most vulnerable and can identify when consumers need additional safeguards, enhanced monitoring, or offering hands-on support during identity recovery.
“The more secure your customers and members are, from a cybersecurity standpoint, in their personal lives, the more secure their accounts are going to be,” said Goldberg. “And the less risk you’re going to see as a financial institution.”
The post The Missing Piece in Banks’ Identity Protection Strategy appeared first on PaymentsJournal.
Entrepreneurs bring tremendous enthusiasm and energy to building their businesses, but they’re often less excited about the everyday—yet essential—tasks like building the infrastructure needed to accept and send payments. When they do tackle those tasks, they usually discover they’re far more complicated than expected.
That’s why more startups are turning to outside partners to help them build remittance platforms. In a PaymentsJournal Podcast,Avinash Chidambaram, Founder and CEO of Cybrid and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed how these partners can help growing businesses with everything from compliance to building payment applications.
Complications AboundThere’s much more to a remittance platform than simply collecting payments. Building one typically requires significant and expensive developer resources, particularly in early-stage startups and expanding fintechs without existing systems.
Challenges include onboarding, Know Your Customer (KYC) requirements, compliance, and other features that can affect or delay a launch. Further, these requirements vary depending on the business, so it’s difficult to copy a playbook across an industry. Sending stablecoins across borders, for instance, presents fraud and KYC challenges that are very different from those facing a local hardware store or even a domestic-only bill pay platform.
The challenges of sending and receiving payments across borders are already complex, and they are made worse by the fact that companies must adhere to the unique compliance requirements in every jurisdiction involved. A startup that has found customers halfway around the world has enough on its plate without also navigating the complexities of remittance infrastructure in every market where it operates.
“What surprises people when they start looking at remittances or cross-border [transfers] is that all the complexities that you have in payments in one market are now multiplied for every market that you’re trying to go into,” said Chidambaram. “You have to think about all of those rules, all of those regulations, all of the requirements, all the compliance things across every different corridor.”
Rather than outsourcing to a service provider, which can get expensive, a key unlock is to work with technology vendors that handle the compliance posture on your behalf. Not only can experienced partners take the burden off a business’ shoulders, but they can also manage these issues more efficiently and cost-effectively.
“Go do the stuff that you do well, go build your business,” said Wester. “You don’t need to be paying attention to the regulatory happenings in a particular jurisdiction that you may be dealing in or sending monies to. Let somebody else do that because that’s the part where it’s changing.”
Solving the Same ProblemsDespite operating in different markets, remittance and B2B companies face similar challenges. For instance, both require significant data collection on users, called KYC for individuals or KYB for businesses. This data is necessary for compliance reasons, but handling sensitive personal information is also a risk to individual businesses. Again, this is where a technology vendor can help; pre-built APIs make this data collection easier and more secure, with fewer developer resources required.
Given the rapid pace of change in payments, organizations must continually adapt to new requirements. Speed, in particular, has become ever more important in B2B payments as suppliers have come to expect real-time transactions whenever possible. And in today’s global economy, payments now move through a 24/7 cycle.
Consider a company purchasing goods from China. It must manage everything from payment timing to constantly fluctuating foreign exchange rates. Rather than manage all of that internally, many organizations find it easier to rely on partners that have already solved these challenges.
“We realized we’re already helping other customers make payments to China,” said Chidambaram. “So why wouldn’t we take that information and bundle it all together? The network effect isn’t just having more endpoints. It’s also experiencing all those pain points, learning from everybody else’s experience, because I think generally that’s going to be good for all of us. The rising tide will lift all boats.”
Drawbacks of Infrastructure VendorsOf course, not every outside partner offers the same level of support. Many businesses turn to infrastructure vendors to power money movement. The challenge is that these providers typically focus on the underlying technology, leaving implementation and the front-end user experience to the client.
“It’s pretty straightforward to get the basics in place,” said Chidambaram. “But it doesn’t necessarily directly fit the setup for a particular jurisdiction, and it doesn’t necessarily meet the strict compliance requirements and standards in the jurisdictions that we operate in.”
Some organizations have relied on open-source repositories or the growing array of AI tools. While both can provide the basic building blocks, they often fall short as businesses scale and their requirements become more sophisticated.
Another issue is fraud and risk considerations, which can require reserve funding.
“If there’s money lost [due to fraud], we’re just going to take it from [reserve funds],” said Chidambaram. “It’s an actual direct cost to those entrepreneurs and to those companies because they don’t have anyone helping them manage any of that risk.”
Final TakeawaysThe core message for any organization developing an international remittance or B2B payments platform is to find a partner that approaches the challenge holistically, freeing the business to focus on growth. The right partner can manage capabilities that may not initially seem like competitive differentiators, such as liquidity management and 24/7/365 money movement.
The most optimal B2B payment platforms deliver a stronger, more seamless payment experience for everyone who uses their applications. Given the size and complexity of many B2B payments, every aspect of the transaction has become increasingly important. Similarly, the best remittance platforms automate the necessary things that don’t provide competitive differentiation, like KYC collection, but prioritize their developer time on building market-leading user experiences.
“The devil is in the details,” said Wester. “The messy stuff may be that 10% that you didn’t know you needed to pay attention to. You got 90% of the way there, but it was the 10% that you missed that will get you fined or will get you shut down or will lose a partner.”
Chidambaram added: “We’ve made it easy for you to go beyond the core infrastructure of minting a stablecoin and sending it to a wallet. We are empowering entrepreneurs so that they don’t have to worry about the payment side of it anymore. My advice is if you are an entrepreneur or a startup and your business is do not do payments, go do the thing that you do.”
The post The Case for Not Building Your Own Remittance Stack appeared first on PaymentsJournal.
Business customers today have more ways to move money than at any point in recent memory. The arrival of near-instant payment networks like FedNow and RTP has expanded the menu of options, giving companies new ways to balance speed, cost, and security when making payments.
In a PaymentsJournal Podcast, Darren Beyer, Chief Product Officer and Co-Founder of Qolo, and Hugh Thomas, Lead Analyst of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how the business payments landscape has evolved. While faster payments have captured much of the industry’s attention, they noted that speed is only one consideration. In many cases, choosing the right payment method has become a more nuanced decision.
A Panoply of OptionsAccording to Javelin’s 2026 Commercial Payments Factbook, one of the most notable developments in business payments is that virtually every alternative to paper checks is growing at the same time—a dynamic the industry hasn’t seen before.
The payment method companies choose depends on the circumstances surrounding the transaction. When funds need to move immediately and both parties want real-time visibility into the transfer, businesses often gravitate toward RTP. In newer supplier relationships, where trust may still be developing, virtual cards are frequently the preferred option, particularly when buyers and suppliers are looking for working capital or cash management benefits.
ACH remains a mainstay for established business relationships. Companies that have worked together for years often rely on ACH because the process is familiar, automated, and dependable. Whether using standard ACH or Same Day ACH, many businesses continue to view it as a simple and efficient way to move funds.
The banking ecosystem has also split across newer instant payment networks. While many large financial institutions helped build and adopt The Clearing House’s RTP network, smaller banks have generally shown greater interest in the Federal Reserve’s FedNow service.
“The problem is that while both of those are real time networks, they don’t talk to each other,” said Beyer. “If you’re a bank that does FedNow, you can’t accept an RTP for one of your banking clients. The best way that gets solved is by both of those reaching a critical mass of acceptance on the banking side. Until that problem gets solved, those are going to continue to be throttled.”
Beyond SpeedThe conversation around faster payments has been building for more than a decade. Since the Federal Reserve first outlined its vision for modernizing payments, financial institutions and technology providers have invested heavily to expand available options.
Now that those systems are reaching greater maturity, the focus is shifting. The challenge is no longer about enabling faster payments, it’s helping businesses understand when speed matters—and when it doesn’t.
For many, delaying a payment can be advantageous. A company issuing large volumes of payments may prefer to preserve cash for a few extra days. In other situations, speed can be critical, such as when paying a six-figure supplier invoice and avoiding costly late fees.
“If you were to ask 100 CFOs of varying size companies about RTP or FedNow, they might say, that’s kind of like a real-time ACH or something, isn’t it?” said Beyer. “That’s their level of understanding of what it is. Once you understand what something is, you can think about how are you going to use these things.”
“Your CFO may realize, OK, I know what RTP is, now I can hang on to my funds till the absolute last moment and then push them out in my contractual obligation to pay a payee. All that becomes more material to the CFO. That cascades down through the organization in working with providers to better understand the mandates the CFOs push in terms of hitting those cash conversion cycle goals.”
By and large, it’s less about choosing a single payment rail and more about applying rules-based decision-making. Today, more businesses have the ability to route payments based on factors such as timing, cost, and the nature of the relationship between counterparties.
“Bank of America recently had a webinar about their use of RTP for home closing costs,” said Thomas. “I don’t know that 10 years ago you would have seen a bank talking about this. But the folks involved in the ecosystem understand there’s a need for broader education in terms of how all these various different instruments get used.”
Matching the Tool to the TaskEach payment method offers its own balance of convenience, control, and risk.
Checks, despite their declining share of payments, still provide a level of flexibility. They may take longer to arrive, but senders can stop payment if something goes wrong.
Electronic payment methods come with their own safeguards. Card-based payments, including virtual cards, offer dispute and chargeback protections. ACH transactions also provide mechanisms for addressing unauthorized activity.
The trade-off becomes more pronounced with real-time payments. The same speed that makes these networks attractive can also create challenges when fraud occurs. Once funds have been sent and received, recovering them can be far more difficult.
That reality reinforces a central point, according to both Beyer and Thomas. No single payment method is right for every situation. Each fills a distinct role, and the optimal choice depends on the context and the payer’s goals.
“All the hard technical stuff is done,” Beyer said. “We’ve built all the piping, but now we need to help customers understand how best to orchestrate this. Banks have to catch up, they’re not going to go spend a bunch of money if they can’t monetize it.”
“The rest of the world has to now do the hard part of coming up with the use cases, rules-based routing, all of those different things. It’s the old adage that it takes 90% of the work to do the final 10%. That’s where we’re sitting right now with RTP and FedNow. We collectively have to get that last 10% across the line.”
The post When Faster Isn’t Better: The New Rules of Business Payments appeared first on PaymentsJournal.
Banking relationships often start earlier than most people realize—and they tend to last longer than expected. Roughly half of young consumers will stick with their bank into adulthood, and many never switch.
This puts banks’ focus squarely on Gen Z, where the youngest members of the cohort are in their early teenage years and the oldest are already facing significant financial decisions. Still, many financial institutions have struggled to connect with this digital-first demographic.
In a recent PaymentsJournal podcast, Fiserv’s Tina Shirley, VP of Product Management and Josh Mesaros, Inside Sales Executive, as well as Ben Danner, Senior Debit Analyst at Javelin Strategy & Research, discussed payments experiences across generational lines and the areas where banks fall short.
What they uncovered was that when financial institutions improve payment experiences to better engage Gen Z, they also positively impact consumers across the board.
The Gamut of Mobile Banking ExperiencesFor most consumers, the best mobile experience isn’t the flashiest one—it’s the one that works seamlessly every time.
While many banks focus on creating sleek new user interfaces, customers’ highest expectation for online and mobile banking apps is simply that they work—especially for everyday interactions like viewing checking account balances and reviewing credit card transactions.
Over the years, many of these features have become taken for granted, but they represent a significant improvement over are far superior to the alternative.
“I think back to when online bill pay was new for me, it was kind of a life-changing offering,” Shirley said. “Rather than writing a check and having to go get stamps and remember to mail a check, moving to online bill pay changed my routine from being annoying and inconvenient to just a couple of clicks to pay my bill.”
Although many mobile banking activities have become ingrained behaviors, new technologies have driven significant shifts in other areas. This is especially true for Gen Z and millennial consumers.
“The biggest one for me would be Zelle®,” Mesanos said. “I live with a bunch of buddies and every month I have my payment set and scheduled where on the first of the month I pay my roommate, who then pays all of our rent to our landlord at once. It is also very convenient when going out to dinner and for my yearly dues to my hockey team. Zelle®‘s just a must have for me.”
The Fragmentation of Financial AppsAlthough Zelle*®* is a powerful tool, there is no monopoly in fintech—a reality that underscores one of the biggest challenges facing banks and credit unions as they compete for relevance among Gen Z.
The market is now crowded with digitally native fintechs and neobanks, many of which have made early inroads with users.
While many of the companies were created to addresses specific banking niches, several fintechs have since expanded their offerings to rival traditional banks. Companies like Venmo and Cash App can accept deposits, facilitate investments, and issue debit cards.
However, while these services may be bank-like, they are not equivalent to full-service banking offerings.
“Some of these third-party payment platforms—for example, Venmo—are not insured,” Mesanos said. “I once had a buddy in college that had a bunch of money sitting in his Venmo account because he didn’t want his parents to access that and see how much he had. But that not being insured scares me because you never know what’s going to happen.”
Another issue with fintechs is that many operate as walled gardens, where users must join a platform to participate in its ecosystem. To accommodate these varied scenarios, customers often download multiple apps. This can quickly lead to financial fragmentation, where users hold balances across several platforms with no holistic way to manage them.
“You might have a Gen Z customer bouncing around between all these different fintech apps and multiple banking apps, to the point where they have 10 to 15 apps on their phone that are just for banking and payments,” Danner said.
“One single app that can do all of those different things would be huge because there is app fatigue in a way,” he said.
Unifying the Banking ExperienceAs consumers increasingly juggle multiple financial apps, banks have an opportunity to differentiate themselves by becoming the central hub for user’s financial lives.
Unfortunately, many banks and credit unions are still behind the curve on the fundamentals.
“I’ve banked with several small banks and credit unions that didn’t have a whole lot of features built into their mobile experience,” Danner said. “When we talk about these things that are table stakes at the large issuer—like budget tools, spend management controls, instant everything—some of the smaller banks and credit unions I’ve been with don’t have any of those tools in their app.”
This lack of scope and functionality further contributes to fragmentation, as users often must rely on multiple apps to accomplish a single objective. Integrating these experiences is a critical first step, but an attractive mobile banking solution goes far beyond functionality alone.
Perhaps more than any other generation, Gen Z consumers are accustomed to optionality. Instead of cable or satellite, they expect to curate their own mix of streaming services from a collection of options.
However, this abundance of choice can also be overwhelming. As a result, many younger adults place a premium on guidance, especially when it comes to major life decisions. Unfortunately, too many banks still rely on one-size-fits-all messaging for a generation that expects tailored experiences.
“I’m getting retirement notifications or notifications like, ‘Here is a $400 promo to open a small business account,’” Mesanos said. “It would be helpful if there was a ‘For You’ category where I could learn about mortgages or car loans, something that’s more relevant to my generation.”
Personalizing Offers Via AIBanks now have more tools than ever to deliver personalized guidance at scale—and Gen Z consumers increasingly expect that level of customization.
Institutions have substantial access to consumer data through onboarding information, transaction history, and product interactions.
They also have artificial intelligence and other customization tools at their disposal, which can generate personalized recommendations with minimal staff involvement. These tools can be deployed at critical moments, while the customer is actively engaged with the bank’s app.
Unfortunately, many banks and credit unions have continued to operate as usual—and the limitations are becoming increasingly apparent.
“Truth be told, I don’t feel much pain, but I do feel like my bank is serving up the same experience that it did 10 years ago, or more,” Shirley said. “My journey has changed; my bank still has tools that are relevant, but maybe in a different way than they used to be. It’s continuing to invest in the technology that enables the experience that customers or members expect.”
The Winning Combination for Gen ZFor younger consumers navigating fragmented financial lives, the institutions gaining traction are often the ones that can simplify the experience while still making it feel personal.
This blend of personalization, education, and AI has resonated strongly with younger adults.
A centralized banking experience can cut through the noise for a generation inundated with financial advice from social media and accustomed to managing money across multiple banks and fintech platforms.
However, becoming a central hub doesn’t mean a financial institution must be the sole provider of services. In many cases, consumers place greater value on institutions that can provide a holistic view of their financial lives, regardless of where their accounts or balances reside.
That broader experience must be paired with functionality, which is why Zelle® has become such an important component of financial institutions’ payments stacks. The service offers a near real-time, low cost, and secure way to send payments that feel familiar and intuitive to Gen Z customers.
As Zelle® approaches its tenth anniversary next year, some corners of the market have suggested the payments solution could begin to show its age—but the opposite may be true.
“In my opinion, it is the right network enabling instant payments,” Shirley said. “Here at Fiserv, we are bringing things forward like allowing recurring payments and scheduled one-time payments. The user sees their recent recipients so they can easily transact, and they aren’t having to dig into a long list to figure out who to pay.”
“There are things that we’re able to do and we’ll keep moving forward with from a user experience perspective, I’m looking forward to seeing what the next 10 years will bring,” she said.
The post For Gen Z, Banking Loyalty Begins with Payments appeared first on PaymentsJournal.
A decade ago, accepting card payments at a farmers market, food truck, or pop-up shop often meant investing in bulky hardware, worrying about battery life, and paying for ongoing technical support. Today, a small business owner can accept secure, contactless payments with nothing more than a smartphone.
Tap-to-pay is doing more than speeding up checkout for consumers—it’s lowering the barriers to commerce for micro merchant, giving them access to affordable payment technology, customer insights, and enterprise-level security once reserved for much larger businesses.
In a PaymentsJournal Podcast, Sara Craven, General Manager at Visa’s Authorize.net, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, explored what micro merchants can gain from tap-to-pay. Despite the ease and convenience, these transactions are protected against fraud just as effectively as traditional card payments.
Making It Easier on CustomersMerchants used to be able to get away with accepting only certain payment methods. Today, consumers expect to pay however they want. They want to be able to tap their device—whether it’s Apple Pay, Google Pay, or a credit or debit card—anytime, anywhere.
Tap-to-pay allows even the smallest businesses to accept nearly every type of payment. More importantly, it helps bring more consumers through the door, which can translate into higher revenue.
“I was at a lacrosse tournament with my 14-year-old,” said Craven. “They had these long lines for folks who just wanted to buy a taco and they were only accepting cash. I sat there thinking, if they had tap-to-pay, with the ability to quickly move consumers through their lines and not have to worry about the change or the dollar bills, it could have been game changing.”
Apgar added: “My personal use case is leaving the Kroger the other day and the Girl Scouts had the cookie stand set up out front. I only had $20 in my pocket, so I could only buy four boxes. It was really a heartbreak. Had they had they accepted cards, I certainly would have bought many more than I needed.”
Simple Yet ComprehensiveThere’s no need for merchants to purchase dongles or dedicated hardware to set up tap-to-pay. They simply download an app or sign up online, and they’re ready to start accepting payments.
From there, merchants can integrate payments into their broader customer experience. A farmers market vendor, for example, can not only accept payments but also record orders directly on their device, track customer information, and analyze purchase history. From an omnichannel perspective, this gives merchants a centralized view of their operations, including customer activity and overall business performance.
“If we can’t get to the farmers market one week, tap-to-pay still shows my order both from when I purchased in person and also when I purchased online,” said Craven. “It creates a really nice, connected ecosystem for merchants.”
The early days of wireless payment terminals were marked by bulky hardware that resembled old cellular phones. These devices required reliable cell signals, and battery life was often a major limitation. For merchants operating in places without easy access to electricity—such as farmers markets—keeping terminals powered throughout the day was a challenge.
It has also historically been difficult for acquirers and PSPs to efficiently serve micro merchants. Deploying and programing payment terminals is expensive, and ongoing tech support adds even more cost. Tap-to-pay removes much of that burden by eliminating the need for dedicated hardware altogether.
“We’ve got tons of partners who leverage on Authorize.net,” said Craven. “They’re reselling or offering our service to merchants as a streamlined approach to our products. They can also get their merchants onboarded without having to send them devices. It’s super easy for PSPs to scale in this space without the overhead of having to manage hardware deployment and support.”
State-of-the-Art Fraud ControlsDespite its simplicity, tap-to-pay offers the same level of security and reliability as more complex payment systems.
“I joke that my mom is very nervous about using tap-to-pay because she’s worried that the minute she touches her phone or her credit card to someone else’s phone, they’re able to steal her credentials,” said Craven. “But everything is fully encrypted. You don’t see full credit card data. It has a token attached to it so that you’re able to purchase again without having to enter or show your clear card data. They don’t even have PIN numbers that the merchants have accessible.”
Behind the scenes, advanced fraud prevention tools monitor transactions to ensure that in-person payments are being made by the authorized user, based on behavioral patterns and prior usage history associated with the card or device.
Tap-to-pay is also more secure than swiping a card because payment data is encrypted instantly, and there’s no magnetic stripe involved. Consumer can feel confident that their information is protected and that transactions are secure. Much of this security is invisible to the user, but it helps create a seamless and trustworthy experience for both merchants and consumers.
Final TakeawaysAs consumer expectations continue to shift toward faster, more flexible payment experiences, tap-to-pay is becoming less of a convenience and more of a competitive necessity for businesses of all sizes.
For micro merchants in particular, the technology removes many of the traditional barriers to accepting digital payments, allowing them to operate with greater mobility, lower overhead costs, and more direct access to customer insights. As smartphones become all-in-one business tools, tap-to-pay is set to play a central role in how small businesses sell, grow, and engage with customers in the years ahead.
“There are so many use cases for that today, especially when you look at the makeup of small business in the U.S.,” said Apgar. “Field services like plumbers, electricians, and real estate agents—the use cases are almost limitless.”
Craven added: “It is table stakes that people expect to be able to tap their device anytime and anywhere. Then you have the age-old problem, I don’t have change for a $50 when I’m at the farmers market. It’s all the benefits of card payments rolled into an easily accessible platform.”
The post Tap-to-Pay Gives Small Merchants a Big Advantage appeared first on PaymentsJournal.
Modern geopolitical tensions now extend well beyond traditional statecraft. They increasingly manifest through wiper malware attacks, distributed denial-of-service (DDoS) attacks against critical organizations, and coordinated disinformation and influence operations designed to shape public perception in real time.
Even as active flashpoints evolve and direct confrontation fluctuates, organizations are left operating in a sustained environment of elevated cyber and systemic risk.
In a recent PaymentsJournal podcast, Teresa Walsh, CEO and Founder at Integrated Intelligence Solutions, and Tracy Goldberg, Director of Cybersecurity at Javelin Strategy & Research, discussed how financial institutions can strengthen operational resilience and build more integrated cybersecurity strategies in response to this shifting threat landscape.
Perhaps most importantly, the direction of travel is clear: public and private sector coordination is no longer optional. It’s becoming foundational to how organizations anticipate, withstand, and recover from disruption.
The Changing Cyber-Risk LandscapeThese capabilities are increasingly critical because the cybersecurity landscape has reached an inflection point. Ongoing geopolitical volatility has pushed cyber resilience to a top priority for most organizations.
Coordinated cyber-attack campaigns now often blend network intrusion, disruption, and disinformation, creating cascading impacts .
“When two nations are fighting against each other, one of the things they’ll always go after is your communications system and probably your energy systems as well, because they’re trying to disrupt the other guy and make their lives harder,” Walsh said.
“If you’re a private sector company, like a banker or some other type of company, you have to understand what you are going to do if you don’t have access to the internet or if you don’t have access to power to even turn your computers on,” she said.
There are many documented examples of how these tactics are used in modern conflicts, including cyber attacks against critical infrastructure, large-scale malware campaigns, and disruptive events.
These incidents can assume many forms. Disinformation and misinformation campaigns are especially prevalent during periods of instability, often used to create public confusion or shift narratives.
There have also been cases where nation-states, directly or indirectly, leverage fraudulent activity, including account takeovers or money-mule recruitment to launder funds. Increasingly, these operations are augmented or outsourced to third parties like hacktivist groups or cybercrime syndicates, which can operate independently or align with broader geopolitical objectives.
Withstanding DisruptionHigh impact cyber incidents have demonstrated how disruptive these types events can be . In some cases, enterprises have experienced widespread device outages, operational shutdowns, and recovery timelines extending over multiple weeks.
This begs the question for all organizations, especially financial institutions: Are they prepared to withstand a 30-day disruption—whether impacting their own operations or those of a critical third-party provider?
“Most of the time when we talk about disruption, even when your regulator talks about disruption, they’re not talking in terms of 30 days,” Walsh said. “They’re usually talking in terms of three hours or maybe a day or two. The concept of a 30-day disruption, that might completely wipe out a company, wipe out their entire profit, and wipe out their customer base and their reputation.”
While such scenarios may appear unlikely, ongoing geopolitical instability and the increasing sophistication of cyber threats makes it essential for organizations to plan for extended disruption.
Institutions must also look beyond their own operations. As reliance on third-party vendors grows—often across multiple jurisdictions—these relationships introduce additional systemic risk. For example, a fintech partner with significant operations in a region affected by a conflict could create downstream operational impacts for a bank.
This makes it critical for financial services firms to map dependencies, identify concentration risk, and understand the complexity of their external ecosystem.
“We talk so much about third-party risk, and we don’t even have a handle on third parties, but no organization out there—I don’t just limit it to financial institutions—has a good handle on who their fourth and fifth parties are,” Goldberg said.
“As you are mapping out your enterprise and your systems and your network and all of those different entities upon which you rely, if any of those were to go down, what would the domino effect be?” she said.
The Expanding Cyber Discussion Toward ‘Cyber Fusion’Alongside external risks, internal approaches to resilience are often fragmented. One common challenge is the divide between fraud prevention and cybersecurity teams, which increasingly need to operate in close coordination.
“When I started out at my first bank, my boss said that we in the cyber team have visibility that the fraud teams don’t and we need to be able to share that with them,” Walsh said. “Anything that we have on the cyber side that can affect the fraud space—tell them, communicate, help them try to see how we can make it better and how we can make the bank more resistant to cybercriminals .”
This collaboration becomes even more important during periods of geopolitical volatility, when cyber risk, financial crime, and fraud often converge. In these situations, policies related to know-your-customer and anti-money laundering may need to be adapted in response to changing cyber risk .
Addressing these challenges requires enterprise-wide alignment and cross-functional coordination, which is becoming an important trend in modern resilience strategies.
“We could even bring HR into the discussion; because we know, in addition to rogue employees, we also have individuals who are applying for positions who are just trying to infiltrate the organization,” Goldberg said.
“But then you also have the socially engineered pieces ,” she said. “We know that most compromises getting into a company’s network, or even data breaches, they usually come back to a phishing attack—someone was manipulated who has admin rights or access gets conned. There’s a lot of ways that this cyber fusion discussion could expand.”
The Role of the Private SectorBeyond internal collaboration, rising cyber threats have made cooperation between public entities and private organizations essential, particularly during periods of geopolitical instability.
“We saw a wonderful example leading into the Ukraine war with Russia, where several U.S. technology companies and cybersecurity companies went in and helped them out,” Walsh said. “They helped them transfer vast amounts of information to the cloud to be able to make sure that if something did happen, the data wouldn’t be lost forever, and they would still be able to operate.”
“It was a wonderful example of how the private sector can help a country when these things happen,” she said.
Often, private companies are well positioned to respond quickly due to access to specialized talent, infrastructure, and threat intelligence capabilities. However, this collaboration is not purely altruistic. Given the interconnected nature of the global digital economy, localized cyber incidents can rapidly escalate into broader systemic disruption, affecting industries and regions far beyond the initial target.
“From a resiliency standpoint in the financial services industry, larger financial institutions have an obligation to share information with smaller institutions ,” Goldberg said. “And from a global perspective, especially as we think about cyber resilience, we’re only as secure as those smallest nations.”
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Credit unions don’t want to be disadvantaged by their technology. They aim to offer members the same capabilities available at competing financial institutions. A critical part of that is having an ecosystem they can plug into—one that allows them to run their operations efficiently while staying competitive.
To help credit unions achieve that, Velera recently introduced a unified, cloud-native architecture designed to support agility and future readiness. In a PaymentsJournal podcast, Jeremiah Lotz, Senior Vice President of Enterprise Data and AI at Velera, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the benefits this technology stack is intended to bring to credit unions across the country.
The New EcosystemMeeting member expectations requires more than adding new tools on top of existing infrastructure. It depends on a more foundational shift in how core systems are structured—one that allows data, decisions and services to operate in a more connected way across the institution.
The Velera Ecosystem consists of the technology layer Stellaris and the intelligence layer Atmos, forming a centralized, cloud-native foundation that brings together payments, data and risk in a single connected environment. Velera developed this ecosystem in partnership with clients over several years, with the goal of making it configurable and adaptable to different credit union needs, as well as improving the member experience.
“As member expectations change, we want to have the ability to be flexible and to enable our financial institutions to move along with those member needs quickly as well,” said Lotz. “The accelerated speed and ability to scale intelligently with this unified technology ecosystem is one of our key goals.”
“We want to move from disconnected systems to this unified ecosystem where everything works together,” he said. “And we want to be able to build something once and deploy it in multiple places, which will allow us to remove the friction and patchwork integrations that credit unions have historically had to face.”
A key design consideration has been keeping the system from becoming overly complex or burdensome for credit unions. Institutions retain the ability to roll out new capabilities and features without major rebuilds—and can integrate new systems or transition to newer processes more easily over time.
For instance, small business onboarding, which has historically taken months, can be completed in a matter of weeks within this model.
“Credit unions often run what we could call a thin or efficient technology group,” said Wester. “There’s no requirement for a rebuild or massive integration, because that’s not where these financial institutions are going to be spending a ton of money, time or resources. Anytime you can take that friction out and make it more efficient, that’s good.”
What Atmos Can DoAtmos aggregates fragmented data into a real-time intelligence layer spanning the ecosystem. In many organizations, payment, fraud and member data reside in separate systems. A shared data layer allows these inputs to be viewed in a more connected operational context across traditionally siloed functions.
This structure enables a range of capabilities:
- Real-time connectivity of information
Enables more informed decision-making in the moment, extending beyond transaction-level decisions to shaping the next step in a member’s experience—whether that involves fraud checks, authentication or payment processing.
- More effective use of AI
AI is most effective when connected to high-quality, unified data. Atmos provides a foundation for applying AI to payment and member data, including enabling natural language interactions and insights.
- End-to-end member experiences
Rather than treating interactions as isolated events, connected data allows institutions to understand and support the full member lifecycle—and to design continuous experiences over time.
- Broader use of data across applications
Through APIs and shared data access, credit unions can extend capabilities across multiple use cases rather than being limited to single-point solutions.
Catering to Younger MembersAttracting younger members has long been a priority for credit unions. These members tend to have different expectations shaped by digital-first experiences. The Velera Ecosystem supports more personalized engagement, using data to help tailor relevant experiences.
“This is where the data starts to come to life, especially when I think about how younger generations are interacting with tools on a daily basis,” said Lotz. “I know you’ve got my information, you know how I used my payment account, and I’m not creeped out by that. But I do have an expectation of the cool tools to help me be better at it.”
For example, data can be used to suggest how a member might best use a rewards account or support savings goals. Rather than generic messaging, the goal is to provide timely, relevant guidance for members.
The same data can also be used as an opportunity for education—surfacing tools or financial options that members may not have explicitly searched for, but could benefit from.
“That creates trust and the understanding that I know my credit union has this data about me and I know that they’re using it in a way that benefits me,” said Lotz. “That makes me appreciate and trust them because they’ve got my needs in mind.”
Moving into the FutureMany credit unions still operate within legacy systems that limit how quickly they can adapt. In many cases, meaningful changes require significant rebuilds. As organizations gain better access to and integration of their data, new possibilities emerge that were previously difficult to implement.
In an AI-enabled environment, broader and better-structured data can improve how institutions understand and engage with members. The more relevant data that can be fed into those models, the more effectively those systems can support outreach and decision-making.
Awareness of digital privacy and data usage continues to grow. Credit unions often have a trust advantage with their members, which can create an opportunity to use data responsibly and transparently in ways that ultimately benefit members.
“You can help a member understand their account usage, where they can use particular financial tools, and where they can do things to help with savings or retirement,” said Lotz. “The earlier you start encouraging those responsible behaviors, the better it is for everyone.”
The post Inside the Tech Shift Redefining How Credit Unions Operate appeared first on PaymentsJournal.
The most expensive resource in any small business isn’t capital—it’s time. And increasingly, that time is being swallowed up by something owners never set out to manage: payments.
The last thing business owners want to do is devote more energy to managing payment processes. Many small businesses have discovered business management software with embedded payment capabilities that remove much of the friction associated with reconciling multiple systems and statements while uncovering a wealth of valuable customer data.
Worldpay for Platforms, now Global Payments’ annual Merchant Insider Report examines trends like these that are driving payment innovation and reshaping the small business landscape. In a PaymentsJournal Podcast, Matt Downs, President, Integrated and Platforms at Global Payments, and Don Apgar, Director of Merchant Payments at Javelin Strategy and Research, explored the findings and opportunities these advanced platforms present for embedded finance.
The Payment TrendsWorldpay for Platforms’ data shows that customer expectations around payments have shifted from a “nice to have” feature to a mission-critical capability. Across the three years of this research, one of the most consistent trends has been the growing importance of software. Indeed, 85% of small and medium-sized businesses say software is more important today than it was three or five years ago.
In 2018, roughly 40% of buying decisions included payments and software as a bundled package, according to Downs. Today, that figure has climbed to 70%, meaning that when businesses switch payment providers, they increasingly want software included as part of the solution.
What’s driving this increase is the growing importance of integrated workflows. Software is becoming specialized across industries, fueling demand for bundled payment and software solutions that streamline operations and reduce complexity.
“We’re seeing the same in our research,” said Apgar. “Merchants want a holistic platform that that they can run their business on. Consumer expectation with regard to ease and a lack of friction have significantly increased. Business owners today are looking for an easy to use, all in one package of software and payments together that can run their business and deliver a superior customer experience.”
The Biggest Concern: FrictionOne of the most surprising findings in this year’s Merchant Insider report is that the payment experience itself is not the primary driver of customer retention. Instead, friction remains the biggest obstacle. Wherever friction appears, it serves as an early warning sign that churn may follow.
More than 80% of merchants surveyed said they would switch platforms for better payment capabilities. At the core, what they’re looking for is a truly seamless experience.
Businesses have come to expect payments to be invisible. Take Uber, for example. It’s difficult to tell where the transportation experience ends and the financial experience begins. Drivers don’t have to worry about whether passengers will pay or whether they’ll have enough cash to cover expenses, because they know they’ll be paid quickly and reliably.
Business management software aims to provide a similar experience for small businesses by handling payments while providing merchants with visibility into cash flow and business performance. The latest improvements have gone beyond integrating payments into business software to a level that makes them not just functional but much more useful to the merchant.
Integrated payments simply connect payment processing to software, pushing transaction data back into the platform and recording reconciliation. Embedded payments go much further. They encompass the entire workflow—from customer onboarding and payment acceptance to reconciliation, reporting, and even chargeback management within the software itself. Worldpay for Platforms’ research shows that 99% of respondents are willing to consider embedded finance capabilities.
“Instead of having to pivot out to look at your online banking portal or log out and log into your merchant processor for portable reporting, they want it all seamless right there in that software,” said Downs. “Seamless, flexible, full reconciliation. That is the definition of embedded payments, and they can get the full experience without leaving the vertical software. This is being done at scale around the globe. If you’ve missed part of that design, you’re set up to lose.”
The Rise of Vertical SaaSMerchant acquirers have enabled businesses through horizontal solutions for years, but newer vertical SaaS providers understand the unique operational challenges within specific industries.
When a merchant operates on a SaaS platform, the fintech provider has access to data. They can see seasonal fluctuations, peak periods, and revenue patterns. These insights allow them to understand not only which financial products a merchant may need, but also when they are most likely to need them.
As fintech companies continue expanding into banking and delivering more services under one roof, they are likely to challenge traditional banks’ ability to maintain relationships with their depositors.
“Banks are getting into the software services, but they’re not doing a good job of leveraging the data that the software generates,” said Apgar. “Being able to bolt on POS software to a bank account is not the same level that the fintechs are bringing through their embedded finance model.”
Worldpay for Platforms’ embedded finance solution serves as an orchestration platform that allows software companies to build these experiences with minimal development and go-to-market effort. The orchestration layer allows providers to combine multiple financial products and create highly tailored experiences for specific use cases. Looking ahead, AI-powered capabilities for areas such as dispute management are expected to further enhance the platform experience.
“We’re helping our partners think about future-proofing,” said Downs. “We’re thinking about how they can differentiate from their competitors by creating a richer payments and embedded finance experience right there natively in the software.”
Time to “Pick a Lane and Go”At the end of the day, increased competition is driving innovation, and small businesses stand to benefit the most. While many of these advances are still in their early stages, that doesn’t mean business owners can afford to wait.
“Now’s the time to pick a position,” said Downs. “With embedded payments and more specifically embedded finance, you’ve got to pick a lane and go, because it’s going to get hypercompetitive out there. If you want to provide value to your clients and drive that net revenue retention and the ability to grow, now is the time. At the rate that AI is going to move, either you better serve your customer—or your customer is going to find a way to get served themselves.”
Final TakeawaysAcross the 2026 Merchant Insider Report, the story is consistent: software is more critical, payments are more central, and expectations are higher than ever. At the end of the day, this is about helping merchants grow revenue, operate more efficiently, and scale their business — so platforms can too.
If you want the full picture, this year’s report breaks down where platforms are winning—and where they’re falling behind. Download the full report on Worldpay for Platform’s, now Global Payments, website today.
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Payments risk is no longer confined to a single payment rail or transaction type. Financial institutions and businesses today must manage risk across the ACH Network, checks, wire transfers, real-time payments, and a growing number of emerging payment methods.
As the payments ecosystem becomes more interconnected, professionals need a broader understanding of how risks differ across payment channels—and how to effectively manage them.
That need has helped elevate the importance of Nacha’s Accredited Payments Risk Professional (APRP) accreditation. In a PaymentsJournal Podcast, Kerry Sellen, Senior Consultant at Nacha Consulting, and Ben Danner, Senior Analyst of Debit at Javelin Strategy & Research, discussed the value of the credential, the knowledge it provides, and the role it can play in career development.
Introducing the CredentialThe APRP certification focuses not only on ACH payments, but also on checks, debit and credit cards, prepaid cards, wire transfers, and emerging and alternative payment methods. Any professional in the payments industry can work toward accreditation, although Nacha recommends having at least two years of industry experience before taking the APRP exam.
“It’s great hearing of its availability,” said Danner. “I originally thought this was only geared for bankers and financial institutions, but it’s really wide open for payment professionals across the space. Not just your Main Street banker, but also your startup fintech teams.”
The Path to an APRPWhile the APRP can help professionals build a strong foundation in payments risk, it also offers value to those with years—or even decades—of industry experience. Because the accreditation covers a range of payment types and risk considerations, it often exposes professionals to areas of the payments ecosystem outside of their day-to-day responsibilities.
Sellen’s career path illustrates that point. Even after spending years in the payments industry, she found that pursuing the APRP expanded her understanding of risk management and introduced her to new concepts and payment channels.
Sellen started her career working in ACH payments at eFunds Corporation. She later joined First Data, where she spent the next 20 years serving in a variety of roles across the payments industry.
“My first job was to work with the team to write the requirements for the ACH system to process their ACH payments,” she said. “During my tenure at First Data, I also led teams in the business risk and controls group operations and product development.” After leaving First Data, Sellen joined Nacha where she’s been a senior consultant with Nacha Consulting for the past seven years. “Risk management is always a part of the engagement,” she said
When she registered for the test, one of the study materials included was the Accredited Payments Risk Professional Handbook. At more than 100 pages, the handbook can seem intimidating at first because it covers a tremendous range of payment types and risk concepts. To help remember all the terminology, Sellen created a spreadsheet containing key terms and their definitions.
“What surprised me was the number of regulations and guidelines that the candidate needs to have a general understanding of,” Sellen said. “Whenever I had down time—like waiting for my kids at school or at the doctor’s office—I always had my printed spreadsheet with me.”
A Much-Sought-After ExpertiseThe APRP helps professionals understand the risks associated with different payment types and the controls that can mitigate or manage those risks. That expertise can make a significant difference to a customer’s bottom line.
“I had a client who was experiencing significant fraud,” said Sellen. “I reviewed their policies and procedures, their risk management processes, and I spoke to the risk management team. After gaining a good understanding of their processes and procedures, I made some suggestions on how they could implement additional controls. A few months later, the client called and said the number of fraud cases had significantly decreased.”
In addition to signaling professional credibility and expertise, accreditations such as the APRP are important for career development. They can make individuals more attractive candidates for new opportunities and advancement, particularly in payments risk, compliance, and fraud management.
Important Related Professional DesignationsThere are several important accreditations related to the APRP. The Accredited ACH Professional (AAP) designation focuses on the rules and regulations governing ACH payments and is valuable both for professionals who are new to ACH and for those with years of experience in the industry.
The Accredited Faster Payments Professional (AFPP) designation focuses on faster payment systems such as Same Day ACH and FedNow. As these payment methods grow, the AAP, AFPP, and APRP accreditations will become increasingly important for organizations hiring the next generation of professionals to build payment applications and develop new payment capabilities.
“Nacha is a highly respected institution across the banking and payments industry,” Danner said, adding that Nacha accreditations carry a significant industry weight, which is very important for career development.”
Getting StartedFor anyone interested in taking this year’s exam, it’s important to register as early as possible and begin studying as soon as the APRP handbook is received. Applicants can also attend Nacha’s Payments Institute or participate in Payments Association training programs designed specifically for APRP test prep.
The annual test window begins on Aug. 3 and runs through Aug. 29.
“If you have worked in payments for years, you will add a highly respected qualification to your resume,” Sellen said. “If you’re relatively new to the field, you will give yourself an edge over the competition.”
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Consumers may be spending more cautiously, but they’re not spending less strategically. As inflation, rising debt, and economic uncertainty continue to pressure household budgets, shoppers are becoming intentional about every purchase they make.
To stretch their budgets further, many consumers now map out discounts and sales well in advance of major shopping events and holidays.
This growing focus on value and flexibility is helping fuel interest in prepaid products. Gift cards are no longer reserved for birthdays and holidays; they’re increasingly being used for everything from loyalty rewards and incentives to personal spending and budgeting.
In a recent PaymentsJournal podcast, Sarah Kositzke, Global Insights Director at Blackhawk Network (BHN) and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research discussed BHN’s latest 2026 Global Spring Gifting Research, which uncovered changing consumer behaviors, the role of emerging technologies and platforms, and why gift cards provide retailers with a strategic advantage in any economic environment.
Adapting Gifting TraditionsThe financial challenges of recent years have caused staples like groceries to become a budgetary concern for many consumers. Fuel has also become a budget-buster, with prices rising sharply since the beginning of the year.
Even gifting is becoming more intentional, as consumers apply the same value-driven mindset they use in everyday purchasing decisions.
These factors have shifted consumer behavior. Shoppers are now more deal-motivated and intentional about how they spend each dollar. They are leveraging loyalty and rewards programs, and many have leaned into bargain hunting, often with the help of AI or social media.
“It’s important that we understand that consumers are not abandoning gifting traditions; they’re adapting how they want to participate in them,” Kositzke said. “They’ve got all of these various channels in which they can leverage to find those cards. It is this major opportunity for brands to think about, ‘How do we offer more flexibility? How are we thinking about the value that we’re driving and the convenience, especially as we think about the economic times we’re in?’”
In difficult financial times, gift cards are frequently viewed as a port in a storm because they offer budget certainty for buyers and spending flexibility for recipients.
These benefits have made prepaid products particularly popular among younger generations. According to BHN, 72% of Gen Z and millennial consumers purchased gift cards instead of physical gifts this past year, compared to 38% of their older counterparts.
Many younger consumers, often working with smaller discretionary budgets, look for gifts that maximize value, are useful to recipients, and help reduce waste. Gift cards meet that need while also offering convenience for buyers, who can often earn loyalty points or rewards through retailer promotions.
“We saw growth in projected gift card spend as well as purchasing,” Kositzke said. “About 77% of respondents told us, ‘We’re going to purchase a card this upcoming year to give to somebody else,’ and self-use showcased almost a double-digit growth. They’re starting to recognize that budget value just even for themselves, and younger consumers are especially likely to use gift cards for both gifting and themselves. It’s creating that incremental revenue opportunity for brands.”
AI, Loyalty, and Smarter SpendingAnother trend driven by younger consumers is the use of AI as a shopping assistant, with many using the technology to compare prices and scour product reviews.
“Consumers are building what we call this value optimization toolkit, where it combines AI searches, loyalty rewards, deal discovery, flexible payment, and all the things that help us act smarter across that purchase journey,” Kositzke said. “I think of it as the place to find all that stored value or the change that you have in your couch cushion. AI is definitely going to be leveraged, probably even embedded in there somehow to combine all of these things together.”
As AI plays a greater role in curating products and services, standing out in AI-generated recommendations has become a critical component of merchants’ brand strategies. Down the line, building loyalty will also become more important—and more challenging.
This is an area where gift cards excel. BHN found that roughly 92% of survey respondents participate in loyalty programs, with gift cards remaining one of the most popular redemption options. This self-use of prepaid products can create strong customer relationships, often opening the door to additional engagement and growth.
“That’s another way to optimize your program, to think about how do I get gift cards delivered to somebody who is self-use, but how do I get them to feel like that giftable moment to give to somebody else?” Kositzke said. “This just means your brand needs to think about traditional search, but also what’s beyond traditional search with some of those other e-commerce optimization tools that you might need to leverage.”
The Rise of Social ChannelsStanding out on social media is equally as important as creating AI-friendly branding. Consumers want gift cards to be delivered through the same channels they use to communicate with friends and family, including TikTok and Instagram.
While email is still the primary delivery method for gift cards, younger generations have shown strong interest in social media and text-based delivery options. For these consumers, the experience extends beyond receiving a gift card—it also includes how they discover and purchase it.
“We saw more interest in terms of purchasing on social channels and especially through social streaming events,” Kositzke said. “Think of any of those events where you’re captivated in terms of, ‘Oh my gosh, I wish I could have this,’ but maybe you’re not ready for that full breadth of product line that is being offered in that moment.”
“But a gift card helps to say, ‘I know that I’ll purchase this, but maybe I have this gift card and I have to add some additional funds later,’” she said. “There’s definitely strong interest in getting gift cards during those events. In fact, we saw about 50% of respondents already purchasing gift cards through social streaming events and almost 7 in 10 want to in the future.”
Despite the growing emphasis on AI, social media, and digital gift cards, there remains a strong contingent of customers who expect retailers to offer physical gift cards. In fact, roughly half of respondents in BHN’s research said they would prefer a physical gift card over a digital alternative.
Ultimately, the most effective strategy is an omnichannel approach centered on flexibility. Even when consumers purchase gift cards in-store or online, they expect to use them seamlessly across channels.
“That’s something that’s critical, it’s the digitization of cards and how you manage and handle both a digital card and a physical card in the digital atmosphere,” Hirschfield said. “Digital and physical are not opposing forces, they are complementary forces and there is a merging of them at a certain point into the digital realm that is important.”
Engagement, Retention, and Incremental RevenueThe capabilities of technologies like digital wallets and AI are creating new use cases for gift cards and fueling additional demand. Merchants have responded by developing loyalty programs designed to capitalize on growing self-use trends.
“It all capitalizes on the behavioral returns,” Hirschfield said. “We consistently see redeemers come to the store more. They spend more than the value of the card. They buy more expensive items. When you focus on that behavior, the cycle keeps moving in positive ways. That redeemer who has a positive experience will buy more cards for themselves and for others. It’s a self-fulfilling prophecy.”
This cycle continues to expand through the growth of digital messaging channels and social media platforms. For younger consumers in particular, these platforms have become central hubs where they discover, engage with, and purchase the products they want.
“You want consumers to be met where they are shopping,” Kositzke said. “You’ve got to still be in store, but you can’t forget that digital is online and growing, and in these loyalty ecosystems as well as through social channels. Then, it’s how to get your brand to be recognized within that AI ecosystem too, because you want AI to come back and be like, ‘This is exactly the thing that you should get’ and gift cards should be woven into that narrative.”
As these trends continue to converge, prepaid products are poised to play an even larger role in the future of commerce.
“In this constrained economy, gift cards are no longer just this nice-to-have,” Kositzke said. “They’re a strategic advantage that you have for engagement, for retention and for incremental revenue.”
To learn more about this research, check out the new eBook from BHN, “Stretched Thin: How affordability pressures are reshaping consumer spending and gift card preferences.”
The post How Cautionary Spending Is Fueling Gift Card Purchases appeared first on PaymentsJournal.
Picture the scene; a U.S. developer discovers that one of their fastest-growing markets is overseas. For many digital businesses, the first signs of international opportunity develop quickly. However, new local markets also mean new local complexities. Brazilian customers expect support for Pix. In India, UPI dominates the payments landscape. In Poland, BLIK accounts for as much as 70% of e-commerce transations annually. Across any market, local regulations, payment preferences, and fraud considerations can vary significantly.
This is how an exciting growth opportunity becomes an operational challenge.
These local complexities and risks have fueled the rise of the Merchant of Record (MoR) model, in which a third-party partner assumes liability for key functions such as tax obligations, regulatory compliance, and chargeback handling.
While these platforms deliver benefits across all these areas, the evolution of cross-border commerce has transformed MoR solutions from a tax workaround into a critical component of international business operations.
In a recent PaymentsJournal podcast, Bridger Bullock, Senior Business Development Manager at Nuvei, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the evolution of the Merchant of Record model, the criteria that differentiate these solutions, and how the operational advantages MoR platforms provide can equal—and potentially surpass—the tax and compliance benefits that originally drove their adoption.
Far Beyond OrchestrationOne reason for MoR solutions rise in popularity over recent years is the landscape for international growth becoming exponentially more complex.
“Just in the U.S., if you want to manage all of the sales tax collection, there are 13,000 different jurisdictions that you would have to adhere to in making sure that you are compliant,” Bullock said. “Outside of the U.S., you can only imagine how many different rules and jurisdictions you have to be compliant with, and that’s just from a tax perspective.”
“There’s also fraud, which is getting much more complex depending on the region,” he said. “Lastly, there are so many different payment methods for each region that it’s critical that merchants offer those payment methods in those local regions so that there is a frictionless customer experience.”
Along with domestic real-time payments systems like Pix and UPI, alternative payment methods (APMs) now include everything from stablecoins and buy now, pay later services to digital wallets.
As these payment types have emerged, many merchants have sought to increase payment flexibility by leveraging payment orchestration systems that route transactions through the optimal payment rail.
While these solutions offer clear value, payments are only one component of successful cross-border commerce.
“Orchestration connects the dots from an authorization and a settlement perspective so you can transact globally fairly easily,” Apgar said. “But when you get into complexities such as local APMs, local fraud and risk tools that are available, local tax, and local banking, the complexity really multiplies. Being global today goes way beyond just orchestration.”
Taking Gaming GlobalOne of the industries that has been a trailblazer for the MoR model is gaming. Gaming platforms built for digital commerce often face relatively few barriers to expanding their products into new territories.
In their zest for expansion, gaming companies have frequently taken a proactive approach to the operational realities of global expansion.
“Forward-thinking companies like Roblox or Epic Games look at it holistically, so a local payment method in each region is critical to them,” Bullock said. “Say they want to be able to create the best customer experience in Korea. They need to make sure that GCash is set up as a payment method. Once the customer purchases, the sales tax is collected without Roblox or Epic having to deal with what that sales tax looks like in that region and what fraud looks like in Korea.”
Addressing these challenges at a granular level is critical because many gaming platforms aspire to expand into dozens of countries and regions quickly to remain competitive. Effective MoR solutions, therefore, must pay careful attention not only to local payment preferences, but also to tax laws and regulatory requirements that are constantly changing.
“Ideally for the merchant, they can do all of this through one API,” Bullock said. “They don’t have to go through several different PSPs, payment processors, and gateways to make sure that they can offer all these things. They just have one that can be this all-encompassing solution for them, which takes a huge burden off and makes it a frictionless customer experience during the checkout process.”
The Architectural Differences that MatterMoR platforms can provide this level of comprehensive support, but not all solutions are created equal. For merchants and the institutions that serve them, selecting the right provider begins with the fundamentals: ensuring that tax liability and fraud risks are effectively managed.
MoR platforms differentiate themselves in several ways:
- Their distinctly local approach to fraud prevention and compliance management across regions.
- The level of transparency they provide into the rules, controls, and decision-making processes used to manage risk.
- Local acquiring capabilities represent another importance differentiator and can often determine the success of an integration.
“Let’s say that there’s a large merchant that has an entity in the U.S,” Bullock said. “Certainly, merchants want the highest authorization rates that they can get. If they have quite a presence of customers in APAC, it gets difficult for the issuers in that region to approve the majority of the transactions because they’re looking at those transactions as foreign transactions, as not from that region.”
Merchant of Record solutions—on top of all their other benefits—frequently enable local acquiring in regions where merchants don’t have a legal entity. This can improve authorization rates while also delivering a range of operational benefits.
“When you talk about local acquiring, you have to talk about local banking, too,” Apgar said. “If you have a local acquirer, they still have to pay the merchant somehow, and a local acquirer is going to pay in local funds, which means you need a local bank account, which then oftentimes you need to have a legal business entity present in that domain so that the bank can open an account for you.”
“It’s not just the U.S., all countries have compliance requirements, so complexity quickly spirals,” he said.
A Holistic Global SolutionAt their core, Merchant of Record solutions are designed to simplify the challenges of global commerce by assuming responsibility for many of its most complex operational requirements. This not only eliminates the need for merchants to build these capabilities internally, but also removes the burden of researching and managing the regulatory and tax nuances of every market they operate in.
The result is a meaningful operational boost. Alongside the financial gains generated by higher approval rates, stronger fraud prevention, and customer-friendly payment options, merchants gain more time and resources to focus on growing their business.
“For merchants, they want to focus on the customer experience, and they want to focus on delivering quality products,” Apgar said. “Being able to offload all this operational responsibility to a Merchant of Record construct is a huge savings operationally and from an opportunity cost and time perspective. It’s great that merchants can outsource this without completely relinquishing control over the fraud processes and the mechanics of how it’s executed—it’s the best of both worlds.”
However, fully offloading these responsibilities requires a comprehensive solution that can address all of a merchant’s needs; and can adjust its parameters on the fly as merchants scale and global commerce shifts.
It will also require business leaders to rethink how they view MoR solutions.
Many still regard them primarily as a tax shortcut or a buffer against chargeback and fraud liability, when in reality they have become a foundational component of modern cross-border commerce.
“It should be looked at as an all-inclusive solution to expand internationally,” Bullock said. “It can certainly offload some of the tax and compliance and it does, but it is much more than that. Looking at it from a holistic approach is going to allow the highest authorization rates for many reasons, it’s going to create a great customer experience for many reasons, and it’s going to offload my burden as a merchant to be compliant for many reasons.”
The post How the Merchant of Record Became a Global Commerce Engine appeared first on PaymentsJournal.
Few payments professionals have been able to observe and influence the industry as much as Jane Larimer, President and CEO of Nacha, who has helmed the organization that governs the ACH Network through challenging industry transitions and considerable organizational success.
In her nearly 31 years at Nacha, Larimer has seen firsthand the shift away from paper checks to moving payments at the speed of modern life.
During Larimer’s tenure, ACH has served as the national economic infrastructure. In 2025, the ACH Network processed $93 trillion. However, Nacha has not been content to coast on this success. Instead, the organization has continued to lead the payments conversation through innovation, education, and consensus-building.
In a recent PaymentsJournal podcast, Larimer discussed the biggest accomplishments and hurdles in her storied career, the many new projects on Nacha’s docket, and why—after over three decades—she is still excited to be a part of the payments industry.
The Accelerating Shift from Paper to DigitalAlthough the financial services sector has undergone a widescale digital transformation, it didn’t happen overnight.
“One of the first things that I think of among my accomplishments was there were still a ton of paper checks then, only maybe 50% of Americans got paid with Direct Deposit,” Larimer said. “There were billions of checks, so one of the first projects I did at Nacha was check conversion. What that meant was stripping the information off the MICR line of a paper check and then converting that into electronic payments—that was literally the first year.”
Also early in her tenure was an electronic benefit transfer (EBT) initiative aimed at moving from paper-based to electronic solutions. The goal was to reduce reliance on paper food stamps, which were high-risk for fraud and carried social stigma.
To address this issue, Nacha worked with networks, merchants, and financial institutions to shift the paper-based system to an interoperable state-issued card usable on debit card networks and at the point-of-sale. This effort ultimately led to the launch of the Quest Operating Rules and QUEST Service Mark.
For years afterward, Larimer and Nacha worked to grow ACH payments to be more vital than ever. In 2016, Nacha introduced Same Day ACH, providing the capability to send and receive ACH debit and credit payments within hours on the same business day.
“That was just a huge sea change in 2016,” Larimer said. “Everybody’s been saying this for a long time and we’re always talking about the pace of change. Back in 2000 and then 2015 we thought that things were changing quickly, but what we’re seeing is that pace of change has accelerated, and it’s always going to be accelerating.”
A Momentous Year for PaymentsThis momentum isn’t slowing down, as faster payments, digital assets, and artificial intelligence continue to reshape the industry. Nacha is advancing a series of initiatives aimed at expanding capability while bolstering trust in the payments space.
One of the most significant developments is the planned increase of the Same Day ACH transaction cap from $1 million to $10 million—This enhancement is expected to broaden adoption by enabling a wider range of commercial use cases for what has already become a fast-growing payment method.
At the same time, Nacha has approved new risk management rules taking effect this year, reflecting a parallel priority: addressing the rising threat and volume of credit-push fraud. Together, these changes underscore a dual focus on scaling payment capabilities while reinforcing system integrity.
“We have a lot of irons in the fire,” she said. “We are working as hard as we can in conjunction with the industry to make the ACH as efficient as it possibly can be, and to meet the needs of the end users of the [ACH] Network and all the participants with the [ACH] Network—the financial institutions, our processors, our corporates, and consumers.”
Beyond rulemaking and ACH Network enhancements, Nacha is also continuing to engage the industry through education and convening. One recent milestone was its Smarter Faster Payments conference in San Diego this spring, which brought together the ecosystem for more than 130 educational sessions spanning topics from stablecoins, AI and faster payments to compliance and risk.
In an often fragmented and rapidly changing industry, conferences like this play a critical role in helping industry professionals synthesize emerging trends and translate them into practical strategies.
“It’s trying to invest in the things that you think are going to go forward, because along with all the cool stuff, there’s a lot of noise,” Larimer said. “It’s using discernment to say these are things that are important to me, they’re important to the industry, and let me learn enough about them to be able to make that determination about where are we going with this. Could this be of use to my company?”
“How much do we have to understand about this to be able to appropriately discern whether it is strategically lifted up as a priority or say: ‘Not right now. This bears watching, but this isn’t where we need to be placing our bets right now,’” she said.
Relevant Education in a Fast-Moving IndustryAlongside conferences, accreditations have become an increasingly important way to stay current in the payments industry. For newcomers, the challenge is not a lack of information, but an overabundance of it—where separating insight from noise can feel like a steep learning curve.
Accreditations like Nacha’s Accredited Faster Payments Professional (AFPP) and Accredited ACH Professional (AAP) can serve as valuable tools for onboarding new employees and refreshing the knowledge of seasoned veterans.
However, the benefits of these accreditations extend beyond education. They are also widely viewed as an industry-wide mark of credibility.
“We were really happy to be working with the U.S. Faster Payments Council on the AFPP, because we’re believers in education at Nacha,” Larimer said. “Accreditation is a great way to not only learn the material, but then to be able to bring it back to your organization to help them, because I truly believe that people who understand their business are a lot better at it.”
“They understand the nuts and the bolts, and having your AFPP or your AAP shows the world that you know it too,” she said. “It’s great for career-building and it’s a great benchmark.”
An Outsized Impact on the IndustryDespite the complexities of the payments space—and in many ways because of them—the industry remains one where careers like Larimer’s are possible.
“I love this job, I love this industry, and I love payments,” Larimer said. “Things that I value deeply are the relationships in the payments business, where you’re out at a conference and you see people that you’ve built relationships with over the years. It’s the people you can give a call to if you have a question, or if you need something, or if there’s an issue.”
“When I go to Smarter Faster Payments, there are people that I met my first year at Nacha who are still coming to it,” she said. “Then, there are people that I’ve just met this year that I’ve already had back and forth with because I’ve learned from them. It’s a relationship business and I’m a people person, so that makes me happy.”
Along with professional relationships, the payments sector offers the promise of lifelong learning for those curious enough to explore and willing to grow.
Together with networking and accreditation, there are also evolving industry-wide initiatives such as those led by Nacha’s Payments Innovation Alliance. The Alliance serves as an innovation consortium for the payments industry, with current work spanning pay-by-bank, AI, and quantum computing.
Larimer also praised the Nacha staff as “outstanding, smart, and good-at-what-they-do folks.”
“We’re small—we’re less than 80 people—but I think we have an outsized impact on the payments industry,” she said. “I couldn’t be prouder of the folks that I work with, and I just look forward to doing everything we can to make the ACH as strong and as effective as possible.”
And as for what the future holds?
“For right now, there is so much happening. I cannot imagine being bored,” said Larimer. “I think we have a lot in front of us and there’s a lot of exciting opportunities out there for the industry. And I just look forward to building it all with the industry.”
The post A Career in Payments: Insights from Three Decades at Nacha appeared first on PaymentsJournal.
Quantum computing may still be years away from breaking cryptography, but powerful quantum computers are rapidly advancing, and their impact on cybersecurity is already unfolding. Unlike previous technological shifts, it has the potential to render some of today’s most trusted cryptographic protections obsolete—forcing organizations to rethink how they secure data long before the threat materializes.
This moment, commonly referred to as Quantum Day, represents the point at which a quantum computer can effectively compromise today’s unbreakable algorithms. In a PaymentsJournal Podcast, Antoine Kelman, NORAM Payment Services Chief Technology Officer at IDEMIA Secure Transactions, and Tracy Goldberg, Director of Cybersecurity at Javelin Strategy & Research, discussed how organizations should prepare for this eventuality.
Getting an Early StartA few years ago, Quantum Day was estimated to occur sometime between 2030 and 2040. However, rapid progress—particularly in countries like Korea—suggests that this timeline may be compressing. Many regulators are now urging organizations to be fully prepared by 2030, which is only a few years away.
Preparations are already underway. Regulators across multiple jurisdictions are requiring critical industries to assess their exposure and begin updating cryptographic protocols. National cybersecurity agencies are actively defining policies and advancing new standards.
A key concern is the emergence of “harvest now, decrypt later” attacks. In this model, attackers collect encrypted data today—even if they cannot yet decrypt it—with the intention of unlocking it in the future once quantum capabilities become available.
Online vs. OfflineThe payments ecosystem includes cards and terminals with long operational lifetimes. Without sufficient preparation, these devices could become vulnerable. To address this, it’s important to understand how current transactions and cryptographic methods function.
There are two primary transaction types: online and offline. Offline transactions occur when the payment terminal can’t communicate with the issuing bank—whether due to connectivity issues, system outages, or practical constraints. Certain use cases, like mass transit, rely on offline processing because speed is critical.
Both transaction types must be addressed in the context of Quantum Day. On the online side, quantum computers are not expected to significantly weaken symmetric cryptography. As a result, maintaining strong, up-to-date algorithms is generally sufficient for quantum resilience.
Some networks mandate offline functionality for resilience purposes—for example, during large-scale cyber incidents that disrupt communications.
“We know that we’ll have to rely on offline transactions and therefore we have to address the Quantum Day risk,” Goldberg said. “We constantly have these types of conversations every time there’s a pretty significant change or shift that is needed, but eventually everyone will get on board.”
Identifying Additional VulnerabilitiesAnother challenge is the long lifecycle of payment cards. Due to extended deployment and replacement cycles, it can take more than a decade to fully refresh cards in the field. As a result, some devices in circulation may still be active when Quantum Day arrives.
“With chip cards, we knew the risks for decades, and look how long it took us to make that migration,” Goldberg said. “If financial institutions, card issuers, acquirers, and merchants think that we’re going to be able to address Quantum Day concerns and we don’t get started now, they’re fooling themselves.”
The broader challenges lies in the complexity of the payments ecosystem. Cryptographic keys are stored, distributed, and managed across multiple layers and components, creating a wide attack surface.
“The first, most critical area to address in the payment business was the card itself,” said Kelman. “It continues to be our priority, because it embeds those secure elements that contain all the vital cryptographic assets that could be vulnerable to attacks.”
Seeking AgilityAny security measures implemented today will not be permanent. Crypto agility, the ability to rapidly and securely transition between cryptographic algorithms, will be key. Post-quantum cryptographic standards are still evolving, and flexibility will be important.
Achieving this will require a cultural shift. The U.S. payments ecosystem has traditionally operated in silos, where agility has not been a core design principle.
“It’s a very diverse ecosystem,” said Goldberg. “You have a lot of different players. You have a lot of different types of systems that have to connect to one another in agility. It just isn’t something that we thought about. But it’s going to be a necessity.”
The long-term goal is to avoid large-scale card reissuance where cryptographic updates are needed. This was a major challenge during the transition from magnetic stripe cards to EMV chips. Instead, issuers, acquirers, and networks should focus on building systems that can evolve without requiring physical replacement.
Consumers are already accustomed to frequent updates on their mobile devices. A similar expectation may emerge for payment cards, where security updates can be applied without requiring physical replacement.
Questions for Financial InstitutionsFinancial institutions have to begin addressing several key questions. They need to understand whether they have fully assessed their cryptographic bill of materials, where and how encryption is performed across their systems, and what tools and algorithms are in use so that risk can be properly evaluated.
For many organizations, these are new and complex challenges. In fact, some institutions lack a clear understanding of their current cryptographic risk exposure. Organizations should approach cryptographic risk assessment in the same way they evaluate broader cybersecurity risks—by identifying vulnerabilities, quantifying impact, and incorporating findings into a long-term strategy.
“We can’t prepare for risks that we haven’t identified yet, and that’s the way we have to approach this,” Goldberg said. “Things are going to come up that we haven’t even contemplated. We have to have models in place that are agile and can change.”
A way forward is to engage technology partners already building solutions that help financial institutions accelerate their transition to post-quantum cryptography readiness. IDEMIA Secure Transactions is one such partner and is already supporting this transition through consultation, and by providing the following:
- Chips that support post quantum cryptography
- Hardware Security Module (HSM) for secure keys and data management, that can support evolving cryptographic standards including post‑quantum algorithms, while preserving long-term upgrade flexibility.
- Robust and certified cryptographic libraries supporting classical and post-quantum algorithms, enabling banks and fintechs to build crypto-agile applications and payment systems
- Crypto-Agility Services, helping card issuers future-proof payment products through remote cryptographic updates, enabling rapid response to vulnerabilities, regulatory changes, and legacy cryptography deprecation.
Final TakeawaysAt the end of the day, financial institutions should recognize that customers will be affected. Fraud risks may increase during the transition period, potentially snowballing into an overall poor user experience and broader ecosystem instability.
“We need to start preparing to address this issue in particular by issuing cards that would run quantum ready algorithms, keeping in mind that the era in which we are entering into is very fluid,” said Kelman. “Our devices need to be crypto-agile and have these crypto agile solutions. What we’re saying is basically we need to prepare, now if not yesterday. We need to prepare for the worst, but maybe hope for the best.”
The post Preparing for Quantum Day and the Risks to Modern Cryptography appeared first on PaymentsJournal.
Artificial intelligence has raised consumer expectations. Today, people can create a personalized event invitation, social media post, or digital experience in seconds, so why does the payment card they use every day still feel generic?
That question is driving renewed interest in payment card innovation, including personalization, premium materials, digital integration, and stronger security features which continue to influence what consumers want from the cards in their wallets.
In a recent PaymentsJournal podcast, Brent Bowen, Senior Vice President and Head of Sales for Financial Services Solutions at Giesecke+Devrient, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the evolution of card design, the impact of the digital landscape, and the role technology is playing in the future of card innovation.
The overarching message: cards remain the cornerstone of financial services product lineups, but staying top of wallet is increasingly challenging.
Pushing the Unboxing EnvelopeThis workhorse role of payment cards has long offered a branding opportunity for banks and credit unions, as well as digital-first firms and fintechs whose card offerings may be one of their few tangible links to customers.
This opportunity is only likely to increase, as data from Nilson found that purchase volume on the leading card brands rose 6.4% last year, despite continued inflation and economic pressures.
“The card will never go away, no matter how things expand in the digital space,” Riley said. “It becomes the way that a financial institution—whether it’s a fintech, a Wall Street bank, or a Main Street bank—can present themselves to their customer. It goes in their wallet every day and it’s an important part of the relationship. When you start building the value proposition for a credit card, the card itself comes into play.”
A focus on individual lifestyles has fueled demand for special cards, although premium in cards doesn’t always mean gold-plated. A strong consumer segment is drawn to eco-conscious cards made from wood or recycled plastics. Others may prefer ceramic or similarly distinctive materials t while opening the door to more innovative designs.
The popularity of premium cards has even turned receiving them into a social media moment, with many consumers sharing the unboxing experience online.
“Many fintechs have pushed the envelope, no pun intended, with that unboxing experience, and that has created some unique opportunities to differentiate themselves from a branding perspective,” Bowen said. “These products and services reflect the consumers’ personalities and values. They want that cardholder experience to be delivered the way they want it and in the shape that they expect it to be.”
“Whether it’s maximizing reward points or travel points, whether it’s lowering fees and interest, or even security and convenience and speed—those are all things that consumers are looking for in their payment products today,” he said. “Card products help differentiate that in the marketplace.”
Digital and Physical ConvergenceAlthough physical cards retain strong tactile appeal, delivering a robust digital experience is equally important. This is no small feat, as e-commerce, AI, and social media have raised expectations for communication and product delivery.
The convergence of physical and digital products is another key trend transforming payment cards. For example, a consumer attracted to a metal card as a status symbol also expects the convenience of loading the card into a digital wallet for e-commerce transactions. This digital optionality is critical not only for convenience, but also for driving customer engagement.
As a result, speed to market has become critical for issuers seeking a return on investment. It also aligns with another growing consumer preference: constant innovation and access to the “next big thing.” AI is helping drive these expectations by giving users immediate feedback and personalized experiences in seconds.
At the same time, the technology could prove to be a gamechanger for issuers.
“One of the big things that is coming into our market is this AI world,” Bowen said. “G+D has a AI card design tool, so you as a consumer can use this AI generation and say, ‘I want a puppy dog sitting on a beach drinking a cool drink’, or apply images that have special value for you, and it will show you your card right there.
The Influence of SecurityAlongside these expectations for speed and customization comes an equally strong expectation of security. As the digital economy has expanded, so too have vulnerabilities to fraud.
These threats are accelerating the integration of advanced security standards into payment card technology. For example, the Fast IDentity Online (FIDO) standards are passkeys bound to a device to help mitigate password vulnerabilities and resist phishing attempts.
When paired with EMV (Europay, Mastercard, and Visa) standards and near-field communication (NFC) contactless payment technology, authentication can be significantly enhanced.
“That security is going to drive not necessarily the design of cards, but the way the cards are used in the marketplace,” Bowen said. “If I am a consumer of a bank or a fintech and want to make a transaction, one best way to make sure that I am talking to who I’m talking to is to verify the phone credentials.”
“If it’s a high-dollar transaction, I might want to verify the person using that phone and ask them to tap their payment device against the phone to authenticate or verify that they are who they say they are,” he said.
Biometric authentication is another major security trend. The widespread use of fingerprint and facial recognition on smartphones has prompted pilots in additional use cases, most notably payments, where the security benefits are clear.
While a growing segment of consumers is security-conscious and would welcome this added layer of protection, mass adoption of biometric cards is likely still years away.
Still, for certain segments and use cases, biometric cards could hold substantial appeal. After all, security is one of the main reasons card payments have become a dominant payment method.
“That’s what is core to the card business, the irrefutability of transactions,” Riley said. “Without that level of confidence, there would be no card business. We’ve got to be able to ascertain not only is there value associated with the open credit line, but is it the customer making the transaction or the authorized user?”
The Fight to Stay Top of WalletAll these trends—stronger security, hyper-personalization, and the convergence of digital and physical experiences—will continue to keep payment cards in consumers’ wallets for years to come.
Even so, differentiating in a highly competitive market and staying top of wallet remains a challenge for issuers. For organizations looking to acquire customers more efficiently and drive card usage, the answers may not come easily.
One place to start is with the customer.
“It’s this granular marketing mentality of being able to hyper-personalize that card product into the consumer’s hands, so that it feels like it’s coming specifically to me, Brent Bowen, and I’m not just one of the masses,” Bowen said. “These advanced personalization strategies, in my estimation, can increase revenues 15% to 20%.”
“There’s also the ability to reduce the acquisition costs for these card programs,” He adds: “Personalization can drive that cardholder experience.”
This evolution underscores how cards have become critical ambassadors for financial services brands. More than ever, organizations now have the tools to maximize the value of these offerings.
“It’s personalization and customization of individual packaging and a marketing-to-a-segment-of-one mentality,” Bowen said. “We’re moving to a world where the consumer wants their card to be unique, instantly issued, and personalized, almost in real time.”
“AI can help drive all of those things, either in the back office or on the front end from a design perspective,” he said. “It can help provide an experience that a consumer is expecting of today’s world. Where is my card, when am I going to get it, and what’s it going to look like?”
The post Serving a Segment of One: The Race to Stay Top of Wallet appeared first on PaymentsJournal.
Know Your Customer rules were designed to stop financial crime, but in practice, they are increasingly being bypassed by both human error and machine-generated deception.
Last year, Barclays was fined £42 million (roughly $56.9 million) for failing to properly vet clients for money laundering risks. In this case, the UK lender had access to all the information required to flag the offending clients but failed to follow through.
More broadly, similar issues persist across the banking sector. In many instances, institutions conduct perfunctory KYC checks during onboarding but fail to maintain ongoing monitoring. It is often only after the fact that they discover their “verified” customers had been bribed or coerced into becoming money mules.
Meanwhile, the threat landscape itself is also evolving. In a growing number of recent cases, cybercriminals have used technologies such as artificial intelligence to generate convincing fake documents and synthetic identities capable of bypassing financial institutions’ verification protocols.
Taken together, these challenges are driving a broader assessment of the KYC model. In a recent PaymentsJournal podcast, Jon Jones, Chief Commercial Officer at Data Zoo, and Jennifer Pitt, Senior Fraud Analyst at Javelin Strategy & Research, discussed how these risks are accelerating the evolution of identity verification, and how trusted data within a layered approach has become essential to identifying and addressing modern fraud threats.
Establishing Trusted RegistriesAlthough the pandemic is often credited with accelerating the shift toward digital identity proofing, the change had already been underway for years. One key driver has been the growthof the digital economy, which has helped organizations build substantial datasets on users’ biometric information, behavioral analytics, and device intelligence.
While this data can be a powerful tool for identity verification, it is of limited value if it is inaccurate.
“The role of data in KYC is becoming increasingly important and it comes down to one word: trust,” Jones said. “The advancement of AI has resulted in single-layered solutions becoming somewhat compromised and institutions increasingly need to leverage authoritative data. For example, checks through government or credit-based authorities have become table stakes going forward.”
“If you look at fake images and documents, it’s very easy to have them created now,” he said. “Creating a synthetic identity from an image or a document is not that hard, but maintaining the presence and consistency across government records or credit bureaus is much harder. It requires the need for trusted registries in some form of the process.”
Synthetic identities pose a particular challenge because they are created by blending real and fabricated data into a new entity. This means there is no direct victim to report fraudulent activity, and often no clear red flags for organizations at onboarding.
This is just one of the reasons why changes to the current KYC model have become paramount.
“When I was in banking, I saw that KYC was treated as a onetime check and the KYC team would just look at static identity data,” Pitt said. “Once that matched, they would move on, and KYC wasn’t being done after that initial check. What we need is the idea of perpetual or continuous KYC, where we’re using automated tools to look at KYC or identity verification processes in the background.”
The Three LevelsIn addition to ongoing customer checks, there must be protocols in place to continuously validate data. Data has become the lifeblood of an effective KYC process, and the potential for corruption through fraudulent or erroneous information makes stringent verification essential.
“We typically look at trust from three levels,” Jones said. “The first one is the authoritative nature of the data, meaning does it come from a real-time primary source like a government record or an M&O with clear privacy policy guidance? This is essential. The second one is looking at transparency. Organizations need to see what data sources were checked, what attribute levels were matched, and what level they were matched.”
“The third one is basic coverage,” he said. “From an identity verification perspective, we work in a global world. It’s not just a U.S.-based or UK-based solution, where data is prevalent. It’s looking to make sure that we are catering for all geographies and all demographics, and that isn’t easy.”
One of the most challenging demographics to evaluate is the thin-file population, often composed of young adults or immigrants with limited or no credit history. Due to this reduced digital footprint, it can be difficult to verify their identities, yet this group now comprises roughly 76 million people in the U.S., or about a third of all adults.
Another challenge in maintaining accurate data is that customer profiles are constantly changing as individuals open new accounts or update addresses. This fluidity makes it critical to implement mechanisms that can constantly check and cross-check information.
“One of the things organizations often miss is there are two parts of identity verification,” Pitt said. “There’s the identity verification itself, is the information being presented that of a real person? That addresses things like synthetics, deepfakes, information that is not that of a real person.”
“The other piece is identity proofing. Is that identity that’s being presented the actual identity of the person that’s presenting it?” she said. “We need to make sure we have both of those pieces and not just one.”
Data Confirms IdentityEvolving toward a more effective KYC model will require a layered identity verification approach. This model evaluates multiple factors, including known identity data, biometrics, behavioral and contextual signals, device interaction patterns, and shared threat intelligence.
It is critical to take all these inputs so that no single data point is given undue weight.
“Trusted data sits within the verification workflow as a foundational layer and asks the question, does this identity actually exist in the real world?” Jones said. “Capabilities such as document verification are extremely powerful. I’ve worked for some of the leading vendors in the world, and they asked the question as to whether the person presenting a document is real and matches the ID, whereas trusted data helps confirm that the identity itself exists and is consistent across multiple records.”
“Biometrics confirms the person and data confirms the identity, and you need both,” he said.
Alongside improved fraud detection, one of the biggest advantages of a layered verification approach is that it can strengthen security without increasing customer friction.
For example, if an organization begins with document verification as the first step in the onboarding workflow, it can extract most of the data required for trusted validation from these documents. This includes information such as name, address, national ID, and date of birth—all of which can be captured using optical character recognition (OCR) technology.
“When we talk about identity verification, we often talk about this from the fraud detection lens, but identity verification can help with other things,” Pitt said. “It does reduce customer friction for people that aren’t fraudsters, and it improves the customer experience because of that. It helps with compliance issues, and it also enables institutions to apply more risk-based verification to determine where and when additional data checks need to be invoked.”
Defense in DepthThe benefits of adopting a layered identity verification approach are spurring the metamorphosis of Know Your Customer, Know Your Business, and anti-money laundering processes.
“I like to think of it as defense in depth, which is what cybersecurity professionals tend to call it,” Pitt said. “The idea that one fraud detection method might be thwarted by fraudsters and then there is another defense that might help. We’re going to start to see a shift more towards this perpetual or ongoing KYC. For any good-sized business, we need to be able to vet the customers and vet who is actually doing business with us.”
As identity verification tools evolve, there will likely be a continued shift towards secure, portable digital identity schemes that enable online verification of consumers.
For example, Australia’s ConnectID is a program which allows users to verify their identity with businesses or government agencies using information already verified by their financial institution. The objective is to simplify online verification and reduce unnecessary data sharing.
Some of the primary use cases for such programs include age verification, which has become a pressing need in many online environments. This includes both safeguards to protect children and requirements to ensure adults meet age thresholds of 18 or 21, depending on jurisdiction.
Alongside these developments, the overarching driver behind the need for stronger identity verification models is the rapid proliferation of sophisticated technologies.
“We’re going to continue to see a shift to a data-first model, which from AI perspective is driving the element of trust to the forefront,” Jones said. “To do that, you need to be 100% reliant on direct real-time validation against trusted assets and you need to do that globally. Increased adoption is going to come by using data as a layer within orchestration workflows.”
The post The Future of KYC Is Layered—and Data-Driven appeared first on PaymentsJournal.
Despite near-constant industry buzz, the days when artificial intelligence agents dominate e-commerce—and consumers widely complete in-store purchases with a palm swipe—have not yet arrived.
This is not to say they will never arrive, but if the rollout of prior tech trends like biometric authentication and embedded finance is any indication, there is still substantial runway before this financial future becomes reality.
In a recent PaymentsJournal podcast, Javelin Strategy & Research’s Don Apgar, Director of Merchant Payments, and Christopher Miller, Lead Emerging Payments Analyst, cut through the noise surrounding recent payment innovations to assess the true progress of financial trends this year.
What they found is that all these still face challenges. Most notably, an increasingly sophisticated retail landscape only amplifies the questions merchants and financial services firms must answer as they adopt new innovations.
A Road Test for Agentic CommerceNo discussion of trends would be complete without artificial intelligence, and debate about AI’s role in financial services has intensified as models have become increasingly capable. This has led many experts to project the imminent rise of agentic commerce, where AI agents shop and make purchases with limited user direction.
Last year saw a wave of announcements around agentic AI, including new commerce platforms from Visa and Mastercard, as well as a Google-developed agentic protocol intended to serve as a framework for this new shift.
Despite these unveilings, very little true agentic commerce materialized in practice.
“The prediction was that this year we were going to see things live for the first time,”
Miller said. “These products—the ideas, the concepts, and the workflows—were all going to get road tested for the first time. My suggestion was that things might not go as smoothly as all the announcements suggested they would, and, frankly, that turned out to be the case.”
These kinds of false starts are not unusual with new technologies, where it takes time to test edge cases and build the underlying infrastructure. In agentic commerce, that infrastructure would need to cover everything from how consumers input an initial prompt to which AI agent is ultimately authorized to complete a purchase.
While many of these components are now being addressed, significant unanswered questions remain about what the finished system will ultimately look like.
“We’re getting to questions of who will use this and what will they use it for?” Apgar said. “How will we resolve trust issues? How do we resolve authority issues? How do we know that the action mirrors the intent, and the result mirrors the instruction? From a prediction perspective, as much of the buzz that we’ve seen about agentic commerce, 2026 is still going to pan out to be a building year.”
Agentic Search Versus CommerceWhile agentic commerce may still be a work in progress, AI has already become firmly rooted in the consumer experience this year, especially as a tool for product discovery and comparison.
“One of the things that AI does well is digest large amounts of data efficiently,” Apgar said. “If you are searching for a bookcase that’s less than 26 inches tall and less than 38 inches wide, I’m sure you’ve gone through web searches where you’re muddling through product pages and you have to find the details of the specifications and you have to drill down to find the measurements—only to back out and do it again on another web page. And there are how many bookcases?”
AI can rapidly narrow search results, often producing answers and recommendations that consumers would not easily find through conventional search methods.
While these tools are a game changer for consumers, they are also changing merchant business models. Instead of relying on search engine optimization to surface in Google results, merchants are now competing to be visible within AI-generated recommendations.
At the same time, as AI increasingly becomes the buffer between merchants and customers, many retailers worry about declining website traffic. This shift could weaken brand identity and, in some cases, reduce businesses to little more than fulfillment engines operating behind AI interfaces.
On the other hand, merchants who do surface prominently in AI-driven discovery stand to reach new audiences and bolster their brand visibility.
These complexities are already beginning to impact merchants, and the sophistication is likely to deepen as agentic commerce evolves.
“If we had this vision that agentic commerce was a single-provider solution that a consumer might use from end-to-end and somehow it would just layer over the existing framework of e-commerce, that’s proven to be false,” Miller said. “Just layering OpenAI on top of the internet as it exists is not going to work for anybody.”
“In a sense, the internet—and more precisely the e-commerce version of the internet—will have to be reengineered for everybody’s benefit, in enabling things like software agents to do any of this work,” he said. “That’s where the building is going to be, it’s in that infrastructure layer.”
The Path to Biometric AuthenticationA trend that appeared closer to mainstream adoption this year was biometric authentication at the point of sale. The benefits are well established, including stronger security and reduced friction at checkout. Unlike agentic commerce, biometric technologies have existed for years and have been piloted globally across a range of use cases.
Given this, it might have been expected that this year would mark a clear inflection point in adoption. So far, however, progress has been limited to continued trials, including the launch of additional Biometric-Authentication-as-a-Service platforms that integrate biometrics into existing payments stacks.
There has also been movement toward cross-experience, unified identity solutions. In many cases, when customers create a biometric profile with a company, their in-store purchase and loyalty data remain disconnected from their online profiles. Cross-experience identity solutions can connect these dots.
Still, these platforms are far from widespread adoption, which appears to reflect the current state of the biometric authentication market this year.
“I suggested that new products would come to market and we’d start to see some more launches, but I will say that it’s been a little bit light in terms of news on that front,” Miller said. “There is a path to market, but that doesn’t mean that any merchants have said, ‘We’re going to turn that on,’ and it doesn’t mean that the capability is ready to light up today.”
“We might be a little slower than what I thought, but we continue to see development in the marketplace, the creating of the business plans and of the go-to markets so that these products and capabilities are going to be available to be chosen,” he said. “That wasn’t true two years ago in a widespread way, so that’s a significant advance, even as we continue to wait on its arrival.”
The Boiling Embedded Finance PotThere are notable parallels between the gradual rollout of biometric authentication and the evolution of embedded payments and finance. One of key challenges in embedded finance, however, is that banks and fintechs are often operating at cross-purposes.
Many fintechs have developed strong vertical Software-as-a-Service (SaaS) platforms that address a wide range of merchant needs, but these systems don’t always balance ease of use with financial services expertise.
For example, some fintechs may present a seasonal merchant with an interest-bearing deposit offer during the offseason, when cash flow is tight. Conversely, they may extend credit during peak season, when liquidity is already strong.
Financial institutions with deep experience in these products often struggle to integrate with newer merchant platforms. They may offer a SaaS-based point-of-sale system but lack the capability to fully leverage the data these platforms generate.
“The pot is still boiling, with the fintechs struggling to figure out banking and the banks struggling to figure out data,” Apgar said. “Everybody thought based on how fast the market was moving and the many partnership announcements that this would be a lot further along, and that one or two companies would have come out on top and stick the flag in the top of the mountain that says, ‘We’re the embedded finance leader.’ But we’re not there yet.”
The Difficulties of ImplementationAlthough this year’s trends continue to face adoption challenges, the overall trajectory of these innovations is still largely on track, albeit at a slower pace than many anticipated.
For financial services firms, this slower rollout may even be beneficial, providing additional time to build the infrastructure needed to adapt.
However, it should not become a reason to delay initiatives in areas like biometrics and agentic commerce. Instead, merchants and financial institutions should continue experimenting with how these innovations can be integrated into their offerings, because—if this year is any indication—the path to adoption may be longer and more complex than expected.
“Implementation is hard,” Miller said. “If I could write one prediction for 2027, it would be that implementation will continue to be hard no matter what new tool comes out.”
The post Separating Hype from Reality in Emerging Payment Trends appeared first on PaymentsJournal.
When an AI agent buys the wrong product—or makes a purchase no one explicitly approved—the fallout isn’t just a customer service issue. It’s a liability problem the payments ecosystem isn’t fully prepared to handle.
In a PaymentsJournal Podcast, Jill Willard, CTO at IXOPAY, Rory Herriman, CTO and COO at Zip Co, and Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research, explored how liability may evolve as AI agents take on more responsibility in transactions.
A Multidimensional ProblemThat question of liability quickly becomes a technical one: how do you even evaluate trust in an agent that isn’t human?
The first challenge is determining how to calculate a trust score for an AI agent that lacks a traditional human behavioral footprint. Any viable framework must extend beyond identity to include intent—and how that intent translates into behavior.
This isn’t just an engineering challenge; it’s also a cognitive one. Professionals in this space must rethink how they evaluate risk, developing new instincts that help them focus on the right signals.
“We have certain models, frameworks, and even language that professionals use to describe the vectors of risk,” Miller said. “As we think about the replacement of human actors with agentic actors, we lack instinct. The mere notion blocking bot traffic as a way of defending against fraudulent behavior stops being useful. It becomes anticommercial.”
Herriman added: “We have to approach it as a multidimensional problem. “It’s not just ‘Is this actor good?’ Even if the actor is good, there are other dimensions on top of the binary switches, a complexity that never disappears.”
Assigning Liability in a New ContextIn the world of AI, merchants are steadily losing control over the checkout experience. Decision-making has shifted upstream. A consumer can now instruct agent not only to buy “blue shoes,” but to purchase them from a specific merchant.
This shift brings a corresponding liability. If an agent buys light blue shoes instead of dark blue, who is at fault? Today, that burden often falls on the merchant.
“We’ve seen some card brands, such as Amex, say that they’re going to accept liability for agentic transactions, which is an awesome development,” said Herriman. “But even if the liability fully shifts and the card brands take on more of that liability, there’s still a cost to shipping the wrong goods out. That can be the hard cost of the shipping fees or the operational cost to get the goods out the door, but it can also be at the cost of customer relationships.”
Liability will become a central issue for issuers, providers, and merchants in the coming years. Existing frameworks address stolen cards or unauthorized use of payment credentials. But when a consumer is dissatisfied with what an agent selected on their behalf, responsibility becomes far less clear.
A similar cycle emerged in early e-commerce. Merchants drove growth by offering generous return policies and absorbing the associated risk. Over time, return rates skyrocketed, leaving businesses with inventory that couldn’t be resold at full value.
Eventually, that broad assumption of liability narrowed. Companies began analyzing customer behavior and limiting privileges for high return users—an early example of risk-based personalization.
Responding to ComplexityPayments have never had a single, unified approach, and agentic commerce is no exception. Agents will operate across multiple protocols and may express preferences for how transactions are executed—for example, specifying which rewards card to use.
Orchestrators are working to simplify this complexity for merchants, who are primarily focused on selling products—not managing payments infrastructure. Meanwhile, agent developers are not necessarily optimizing for merchant interests.
“Merchants have to figure out how to participate in an ecosystem where they aren’t necessarily the reason why the products have been developed in the first place,” said Miller. “It’s a common position for merchants to be in. It was the same thing with adding features like Apple Pay.”
Enter the Unified Trust LayerMerchants will need partners to help them adapt to this shifting landscape. IXOPAY is working to involve merchants early in the Unified Trust Layer initiative, fostering a mindset that balances both merchant and consumer priorities. This approach helped drive Zip’s partnership with IXOPAY.
“When we began talking about how agentic commerce and agentic payments were going to affect both of our businesses, it was fairly clear that those intersections were common,” said Herriman. “Throughout our network of 25,000-plus merchant partners, our focus is ensuring that in this new era of consumer payments, we’re able to show up with them with the same intentionality of protecting them and protecting fraud against them in the way that we do in the traditional shopping channels.”
At its core is the concept of a pre-transaction authorization query, allowing merchants to evaluate the trust score of an agent before completing a sale. This moves decision-making beyond a simple binary of approve or decline.
“With the trust score, you’ll be able to kind of get some insight into that agent within that particular transaction, and decide maybe to accept agentic transactions from this protocol, but not for this particular transaction,” said Willard. “It’s adding to that multidimensional layering that agentic commerce brings.”
Ongoing EvolutionThe criteria for evaluating agents will evolve over time as new behavioral patterns—and new forms of fraud—emerge. Merchants and their technology partners will need to collaborate closely to build capabilities tailored to agentic commerce.
With improved risk models, new technological tools, and the integration of agent trust scores into existing workflows, merchants can shift from a default “no” to more nuanced, conditional approvals.
“It’s going to be a rocky road as the innovation continues to unfold and as a lot of these protocols come to life,” said Herriman. “But when we’re past those challenges, what does it really look for the merchant? A channel that opens up greater access to more customers through things like orchestrated shopping, which most merchants can’t participate in today.”
These opportunities will require new safeguards, including frameworks like the Unified Trust Layer. One thing is clear: merchants that want to remain competitive won’t be able to ignore what’s coming.
“They will end up needing to participate because it’s going to be such a big channel,” said Willard. “Regardless of if you open up to full agent bot shopping, you’re going to have to rethink your consumer experience on how they interact with you and your brand. It’s not a question of if they’re going to participate in agentic commerce. It’s by how much and when.”
The post Searching for Trust in Agentic Commerce appeared first on PaymentsJournal.
For decades, banks could afford to move slowly. Now, speed is table stakes. In a world of instant payments and real-time expectations, institutions built on legacy systems are being forced to confront a hard reality: modernizing is no longer optional.
In a PaymentsJournal Podcast, George Malesky, Director of Partnership Development at Qualpay, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed what legacy banks are up against as instant payments become the norm. For institutions whose technology stacks need an overhaul, the options may not be ideal, but at least they exist.
Focusing on the Big PictureWhen a bank tries to do everything at once, it typically ends up doing very little well. The first step toward modernization is defining a clear focus. Banks need to identify operational efficiencies and determine which upgrades will create the most leverage and opportunity.
This isn’t just about driving growth. Strengthening compliance and risk management systems is equally critical. While improvements in sales and customer experience can attract new business, foundational operational enhancements are what makes that growth sustainable.
“You’re not going to totally disrupt your core, or completely overhaul your system,” said Malesky. “But you can make things like onboarding and payments and servicing better by making sure they have updated technology.”
Getting Ready for Instant PaymentsOn top of existing challenges, banks must now prepare for a world of faster payments. Neither regulators nor customers are willing to accept institutions that can’t keep pace.
Speed alone isn’t the solution. Banks need the right technology and the underlying architecture to support it. Just as important is adopting a forward-looking mindset—one that anticipates future demands, especially when competing with more agile fintechs.
“You have to make sure everything works together, that the APIs and the middleware all talk together well,” said Malesky. “Sometimes it’s more about thinking of a way to work around your core rather than replacing it or going through it.”
Too often, banks overestimate the strategic value of owning their payment infrastructure while underestimating its cost. The burden extends beyond upfront investment to include complexity, ongoing maintenance, regulatory requirements, scheme updates, fraud management, and continuous innovation.
What’s critical here is treating payments as a strategic capability—not necessarily a fully owned asset. In-house solutions can offer control and customization, but they come with significant trade-offs in cost and operational burden.
Looking for a PartnerSome banks, with sufficient capital and internal resources, may choose to modernize their payment systems independently. However, many are finding success by partnering with providers that bring both experience and modern platforms.
These partnerships can accelerate transformation timelines.
“Everyone knows the old adage that every journey begins with a single step,” said Malesky. “But when it comes to siloed systems and fragmented tools, maybe it’s a handful of steps to get there at the forefront. There’s not necessarily a single bullet or a single provider that can do absolutely anything and everything that a bank will need, but you want to reduce vendor clutter and some of the complexities by having single source solutions.”
Breaking Down SilosPartnering can speed up modernization, but it doesn’t eliminate one of the industry’s most persistent challenges—siloed systems.
Embedded solutions can reduce distractions and minimize errors, but they don’t always integrate smoothly with adjacent systems. Both legacy and modern platforms must communicate effectively to deliver real value.
Siloed systems create friction across the organization. Customers may struggle to navigate disconnected services, while banks face inefficiencies such as duplicated data and redundant processes. The impact is far-reaching.
“When a bank is not operating as one holistic system, it loses opportunities to cross sell,” said Riley. “You’re losing a line of sight on the true risk of a customer, whether there’s loans or deposits involved. They don’t necessarily have to work together, but when they do, it’s a much better experience for everyone, especially the operational people and of course the customer.”
One clear example is onboarding. Fintechs can onboard customers in minutes, while traditional banks may take up to seven days—and at two to three times the cost for merchant accounts.
“It’s really a challenge if you’re going to be that slow,” said Malesky. “When we used to text in the early stages of flip phones, we had to open up our phone and press the number 2 three times to get the letter C. It was a slow, monotonous process. But in those days, we didn’t know any different. We didn’t know what was coming with iPhones.”
Fintechs are effectively delivering the “smartphone experience” of financial services. Once customers become accustomed to that level of speed and convenience, it’s difficult to revert. If banks can’t meet those expectations, customers will look elsewhere.
Where Are Banks Heading?Modernizing a legacy banking system involves many moving parts. It’s not enough to address current needs, banks must also align their upgrades with long-term strategic goals.
“Unless you’re ready for the future, you will not get through it,” said Riley. “It’s not just ‘Let’s get to it on a 10-year plan.’ It’s where you’re looking to go, and how quickly will you get there.”
Malesky added: “Think ahead to how you can make the customer experience that much better because that translates into more customers, and more usage for existing customers. And that’s the goal for most banks.”
The post The Instant Payments Shift Is Testing the Limits of Legacy Banking appeared first on PaymentsJournal.
Not long ago, a concrete company and a takeout restaurant could end up running their business on the exact same software. Systems built for everyone, in practice, worked perfectly for no-one—and bending them to fit the realities of a small business was often frustrating or simply impossible.
Vertical software-as-a-service (SaaS) solutions emerged to solve this problem, quickly evolving from the exception to the norm. The reasons for this growth are largely self-evident: vertical SaaS enables rapid implementation with minimal customization. In many cases, merchants feel these platforms are built for their business rather than retrofitted to it. However, the operational benefits of SaaS are diminished if payments aren’t integrated into the solution.
In a recent PaymentsJournal podcast, Brad Pinneke, Head of Enterprise Development at Worldpay, now Global Payments, and Don Apgar, Director of Merchant Payments at Javelin Strategy and Research, discussed how embedded payments have become a critical driver of vertical SaaS—a synergy that will only strengthen as new trends and technologies reshape the landscape.
The Case for Embedded PaymentsOne of the most notable aspects of the rise of vertical SaaS is that it has largely been market-driven. Adoption has accelerated as industries not typically known as early adopters—such as healthcare, construction, and financial services—have come on board, despite heavy compliance and consumer protection requirements.
With the advantages of vertical SaaS now well established, these platforms will continue gaining traction and carving out new niches.
“POS systems were so generic that everybody had to customize it, and most merchants were finding that that customization wasn’t possible because the platform didn’t support the features that they needed for their business,” Apgar said. “Now that these features are being identified, it’s created these micro-markets for POS platforms to be focused on the needs of specific business types, and payments are part and parcel with that.”
Payments are a logical addition, given that vertical SaaS solutions increasingly encompass nearly every aspect of a small business. A pizzeria’s platform, for example, may manage everything from payroll to inventory.
Yet few functions are as mission-critical as payments. This is why embedded payments and vertical software are increasingly in lockstep. By embedding payments directly into workflows, businesses can complete transactions at the exact moment a customer is ready to pay—whether when a service is completed or a product is purchased.
“I’ll give you a great example from the last couple of years: field services,” Pinneke said. “In the past, the tech used to complete the job and then the office staff would send an invoice and the payment would arrive weeks later. Then, they have to reconcile that payment, take it to the bank, and cash flow was unpredictable.”
“Fast forward to today, where embedded technology comes into play,” he said. “The job is marked complete, the payment is scheduled instantly, the receipt is automatically sent out, and the funds are settled predictably. You’re limiting the back-office intervention, which has huge impact to smaller businesses.”
Automatic, Not ForensicOne of the benefits of vertical SaaS solutions is the ability to deliver holistic business insights through a unified dashboard. Embedded payments extend this value far beyond checkout.
“The embedded impact is that things like payouts and fees and balances are visible alongside operational metrics,” Pinneke said. “In the past, you had the system of record showing one thing and then you had a payments portal showing something else and the reconciliation between those was tough.”
“That’s a big part of it today—it’s automatic, not forensic,” he said. “Forensic was such a big part of small business challenges; they just didn’t have time. Now, the reporting reflects reality, not just an estimate, and that’s critical for businesses today.”
When implemented correctly, this seamless integration can improve cash flow while streamlining the customer experience.
However, these gains depend on thoughtful placement within the platform. Payments should not exist as a separate or disjointed process; instead, sales, onboarding, and customer experience should reinforce a single, cohesive journey.
Equally important is timing. Successful platforms introduce payments early in the customer lifecycle. Too often, organizations treat payments as an afterthought—only addressing them once users are trained and ready to deploy the solution.
In short, platforms that succeed with embedded payments don’t position them as a value-add—they treat them as critical infrastructure that completes the workflow.
“When POS evolved into vertical SaaS, it wasn’t uncommon for the merchant to say, ‘I’m going to shop for my software and now I’m going to shop for my payment solution,’” Apgar said. “Successful SaaS providers have figured out that it’s not a check-the-box optional feature. A lot of what’s driving the move toward embedded finance is that the vertical SaaS software is enabling a single source of truth database—starting with payments and eventually evolving into supplier payments and other functions that work off that same data set.”
“It’s critical to the functionality of the system to drive off that single data set to have payments embedded in the SaaS solution,” he said. “The SaaS company has to embrace that and make that part of the go-to market strategy. It’s not a bolt-on or an add-on, it’s core to the function of the platform.”
The Time ResourceMerchants and platforms that embrace embedded payments as a core component of vertical SaaS will be better equipped not only for today’s challenges but also for a future shaped by artificial intelligence.
“For the SMB that is the typical vertical SaaS user, AI is going to be a game changer,” Apgar said. “The most critical resource in the life of the business owner is time. With the centralized dataset within the vertical SaaS platform, the common option has been to create dashboards. So, we create marketing dashboards and payment dashboards and cash flow dashboards and say, ‘Here’s all the information that the business owner needs.’”
“The bottom line is the business owner doesn’t have time to sit there and sift through all this,” he said. “That’s what AI does best, it manages large volumes of data to impute trends and make recommendations.”
AI-driven decisioning is especially valuable at key points in financial workflows where human intervention can be slow and costly—such as determining whether funds should be released.
Rather than relying on manual review, AI can sift and analyze vast datasets to flag suspicious or high-risk transactions, then approve, deny, or delay them accordingly. This helps financial institutions meet growing demands for real-time transactions while maintaining strong fraud protections.
AI also plays a crucial role in payments orchestration, selecting the optimal payment rail based on factors like cost or efficiency. As new payment methods emerge, AI will become increasingly central in determining the best route for each transaction.
From Reactive to ProactiveUltimately, AI is shifting organizations from reactive reporting to proactive insights. Historically, businesses often accessed key data weeks or months after the fact. Today, AI can process information in real-time, transforming areas such as predictive risk assessment and exception handling.
These efficiency gains also create opportunities for cost reduction, including areas that directly impact merchants’ bottom lines.
“AI feels like back when reliable internet became available, it’s such a driving force today,” Pinneke said. “The number one thing I get asked is ‘How do we handle chargebacks?’ If you look at AI, there is probably the greatest opportunity to let AI engines figure out the chargebacks in real time and deal with them.”
“If you think about the entire process, it’s essentially broken,” he said. “People dispute something, it comes back, and the merchant and retailer has to go and collect data and show proof and all of that,” he said. “Imagine if AI tools did more of the upfront work. We would probably see a lot less chargebacks, and that turns into real dollars. That’s probably the number one place where AI is making a difference for everybody up and down the food chain.”
The post Embedded Payments Are Becoming Core to Vertical SaaS appeared first on PaymentsJournal.
Crossing $10 billion in assets isn’t just a milestone for financial institutions—it’s a turning point. What looks like a measure of growth quickly becomes a fundamental shift in how a bank operates, earns revenue, and manages risk.
However, this landmark also brings substantial regulatory and compliance obligations, including changes to debit card revenue streams, mandatory participation in annual stress tests, and enhanced infrastructure requirements.
It’s no surprise, then, that banks approaching the $10 billion inflection point often face a new level of uncertainty as their business model begins to evolve.
In a recent PaymentsJournal podcast, Ellen Davitt-Lalwani, Senior Director of Portfolio Advisory Services at Fiserv, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, addressed commonly asked questions about this transition and outlined the leadership, compliance, risk management, and card program strategies that can help ensure a smooth crossover.
The Regulatory UptickOne of the most impactful aspects of the transition is the requirement to comply with debit interchange regulations under Regulation II, introduced through the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
While these rules were passed to strengthen the U.S. financial services system following the 2008 financial crisis, the card-driven payments landscape means they also carry revenue implications for banks crossing the $10 billion threshold.
“Cards are your customers’ primary physical contact with your brand,” Davitt-Lalwani said. “We need to remember that as Regulation II is put into place—as an institution moves from unregulated to regulated—their interchange can be cut by 40% or more and every transaction matters, for both debit and for credit. Interchange cuts also affect consumer and business debit transactions. For some clients, their interchange ranges from 30% to 50% of non-interest income today.”
Indeed, the impact stems from the Regulation interchange cap: $0.21 per transaction, plus five basis points of the transaction amount, and an additional $0.01 for fraud prevention. This is significantly lower than what many midsized institutions currently earn, making it essential to accurately estimate the resulting interchange revenue gap, particularly on debit transactions.
While this is one of the most consequential changes, it is far from the only compliance consideration.
“One of the things that comes into play is Dodd-Frank stress testing, which puts a highlight on bank liquidity and, since you have become a large institution, ensures that you have the wherewithal to survive changes in the economy,” Riley said. “There are other regulations that also come into play that affect revenue, and there are higher compliance costs that come through the Volcker rule, which has to do with investments in private equity and financials in the background.”
Preparing for What’s AheadGiven these new obligations, banks often have several key questions as they prepare to cross the $10 billion milestone. For example, institutions frequently ask whether they should proactively communicate with regulators and third-party providers about their trajectory.
“That is certainly a ‘yes,’” Davitt-Lalwani said. “In terms of working with prudential regulators as well as third parties, having at least six months advance notice is a good idea. In terms of regulators, feel free to reach out to the Ombudsman’s office. It’s a good opportunity for your financial institution to establish a relationship with your regulator and it gets you off on the right foot.”
“In terms of reaching out to third parties such as Fiserv, Visa, and Mastercard, there is typically an orchestration of operations and technology that needs to take place,” she said. “That six months advance notice gives everyone an opportunity to circle the wagons and put all of the right components in so that when you’re truly ready to step across that threshold, you’re doing it with all parties fully knowledgeable.”
Another common question is whether additional asset thresholds trigger further regulatory requirements. The answer is yes. The $25 billion threshold introduces another layer of complexity, often compounded by the fact that it’s frequently reached through mergers or acquisitions.
As banks near $10 billion in assets, some consider temporarily slowing growth until the necessary infrastructure is in place. This can be supported through deposit management partners such as StoneCastle, which can help move deposits off balance sheet until the institution is ready for the crossover.
However, these partnerships must be established well in advance. Beyond balance sheet management, they also provide a buffer against “flights to safety,” when volatile market conditions drive sudden surges in deposits.
“I’ve been through that $10 billion inflection point and one of the financial institutions that I was employed by experienced that flight to safety just as we were approaching the $10 billion mark, and it pushed us right up over the threshold,” Davitt-Lalwani said. “We are a nation that has a very dynamic socioeconomic market, so preparation is the better part of valor in this. I strongly recommend that financial institutions consider putting those types of tools into place.”
A Regulator in ResidencePreparation also requires a clear understanding of more complex reporting expectations, including enhanced audit, compliance, and risk reporting that often demands new data capabilities.
In some cases, banks should also be prepared for the possibility of an on-site regulatory presence.
“There could potentially be a regulator on-site all day every day with your associates—whether it’s in the cafeteria, walking through the parking lot, or in the elevator,” Davitt-Lalwani said. “They’re going to be able to pick up on conversations and to see and hear things that may not have occurred in prior situations. They’re important components as to how financial institutions need to be prepared and how they can work for success in the future.”
These expanding obligations frequently require investment in both staff and technology. As teams grow—often in unanticipated ways—strong organizational alignment and clear communication becomes critical.
Just as important is maintaining a customer-centric focus. As institutions scale, they can lose the personal touch that differentiates them. Structured feedback mechanisms, such as customer surveys, can help preserve that connection during the transition.
“One of the best customer surveys I’ve ever had was to ask our customers if there was one thing they could change in the near term that would improve their relationship with us, what would that be?” Davitt-Lalwani said. “Your customers and members will tell you where you need to improve so they can willingly work with you and deepen their relationship.”
“On the back end of it, make sure to communicate to your customers or your members that we’re listening to you; we’re hearing what you have to say, and this is how we’re responding to meet your needs,” she said.
Balancing Growth and RiskAmid these changes, banks must continuously balance revenue generation with enterprise risk management. While the transition can feel complex, the ultimate goal is to position a successful institution for sustained growth.
“You don’t end up at this threshold by accident,” Riley said. “You either got here through organic growth or through a merger. The focus is on the prep work, having everything in place because this is not a casual move and it needs planning that goes in front of it. Life will change when you crossover that barrier. The opportunities are certainly there and the risk is also there.”
Given these considerations, establishing a comprehensive communication strategy ahead of the $10 billion threshold is essential—not just to explain new processes, but also to prevent internal silos or unintended organizational friction.
“You want to make sure that everyone understands that higher water raises all boats,” Davitt-Lalwani said. “It’s important that we fortify the organization in all of the appropriate places Regulators, talk to your associates at the front-line level, at the back-office level, as well as executive and mid-management. (You want to make sure they) have an understanding as to how and why the organization is changing and what the anticipated needs will be.”
“Communication is key, but it can be elusive, so having the board and the executive team devise a plan and putting in listening posts to make sure that the message is getting out there is a great thing to do and should not be overlooked as you embark upon this journey,” she said.
The post Inside Banking’s $10 Billion Inflection Point appeared first on PaymentsJournal.
Fraud disputes are one of the fastest ways for banks to lose customers—and one of the least prioritized parts of the business. Despite the high costs, many institutions still treat them as a back-office function rather than a decisive point in the customer relationship.
Beyond immediate losses—such as chargebacks, write-offs, and investigation expenses—banks also lose revenue when an engaged customer no longer keeps their account top of wallet.
In a PaymentsJournal Podcast, Steve Durney, Vice President of Partnerships and Alliances at Quavo, and Suzanne Sando, Fraud Analyst at Javelin Strategy & Research, discussed the hidden costs of fraud disputes. It’s a problem that will only intensify as AI and agentic commerce evolve.
Customers Are Willing to Move OnBanking industry recovery rates for fraud average around 64%, leaving more than a third of disputed dollars unrecovered. For most banks, disputes are an expensive process, with operating costs eroding already thin margins.
Research suggests that if a fraud issue or dispute isn’t handled effectively, 60% to 70% of customers will move to another bank. Notably, the outcome doesn’t always have to favor the customer, as long as the process is managed transparently and resolved efficiently.
Once customers feel they aren’t being treated fairly, it’s difficult to restore trust. Accounts may be quietly abandoned, and products go unused. Even without formally closing an account, customers often disengage entirely.
“We’re seeing growing numbers of consumers who are willing to close an account and walk away when they have a bad experience with their account,” said Sando. “Setting everything back up with a whole new financial institution—like bill pay or getting all your accounts linked to whatever other financial accounts you were linked to—it’s a tremendous hassle. If you’re willing to go through all of that, that says a lot for how important security and customer service is throughout a process like this.”
Modernizing the Dispute ProcessSeveral aspects of the dispute process need modernization to improve efficiency and recover lost value. Because dispute teams rarely receive priority budget allocation, banks often underinvest in technologies that could significantly improve performance.
Organizations that ignore these inefficiencies and continue to deprioritize back-office enhancements only prolong the problem. Five years from now, they are likely to be facing the same challenges.
“The inefficiency really comes into what historically would have been categorized as judgement—something where a human being has to give opinion on in order to route it properly,” said Durney. “Second is the document interpretation, for documents that are incoming from either a consumer or a merchant, or being transmitted from the bank to the merchant. That’s the lion’s share of the inefficiency.”
Banks without standardized documentation and clear rules force teams to spend valuable time interpreting procedures instead of executing them. When deeper, manual investigations are required, staff should be freed from repetitive administrative tasks so they can focus on higher-value work.
Fighting Against Constant TurnoverHigh turnover within fraud teams is another persistent challenge, especially given the long ramp-up time required for investigators to become effective.
“I asked a bank not long ago, ‘What’s the turnover rate in your department and how long does it take you to onboard somebody?’” said Durney. “They said the onboarding was about six to seven months before they were effective, and they had a turnover rate of roughly 25%.
“If you’re turning over your staff every four years and it takes you six to nine months to have somebody be a top performer, that’s a radical impact on all these day-to-day manual tasks,” he said. “There has to be a way to get people up to speed faster, handling the cases in such a way that you can actually hold on to staff and you don’t have that turnover.”
Involving experienced compliance and regulatory professionals in designing dispute process technology can help reduce risk and ensure systems are better equipped to handle complex scenarios.
The Risks of Agentic CommerceWhile banks are still working to modernize dispute processes and stabilize fraud teams, the next wave of change is already emerging.
Agentic commerce promises new opportunities, but also introduces significant fraud risks. When AI agents act on behalf of consumers, traditional fraud signals—such as behavioral biometrics, device intelligence, and IP address—become less reliable, making it harder to distinguish legitimate activity.
Fraudsters will increasingly leverage agentic AI in ways that are difficult to predict.
“Once people really figure out how to use the tools to be able to make the agents go off and do things, you’re going to get the gray area of people abusing the system,” said Durney. “The use cases that we see so far are using AI to navigate the system. Say: ‘I bank with Bank X, tell me how to navigate the disputes process,’ and it will generally give you a pretty good recipe as to how to get through it.”
Banks are already anticipating how AI could go wrong. Those looking to stay ahead in fraud dispute management must prepare now.
“HBO’s Silicon Valley has a perfect example of this,” Durney said. “They told the AI to go buy them burgers for lunch, and then a pallet of frozen hamburgers showed up. Did the AI do what it was supposed to do? More importantly, what is a consumer going to do? A consumer is going to find the easiest path to go. I need somebody to be my advocate to fix this problem because I didn’t want a pallet of frozen hamburgers.”
The post The Hidden Cost of Fraud Disputes Is Hitting Banks Hard appeared first on PaymentsJournal.
Cross-border payments have long been defined by delays, fees, and a maze of intermediary banks. Stablecoins are changing that—offering a faster, simpler alternative that cuts out the middleman entirely.
This use case is one of the key drivers behind the stablecoin market’s rapid growth in recent years. However, stablecoins—and digital assets more broadly—have the potential to reshape virtually every payment scenario, from enterprise transactions to retail purchases.
In many cases, the infrastructure to support these applications is already in place, largely due to the rapid proliferation of crypto payment gateways. While early iterations did little more than add a ‘Pay with Crypto’ button at checkout, these crypto gateways have quickly evolved into full-scale payments orchestration platforms.
In a recent PaymentsJournal podcast, Kate Lifshits, CEO of NOWPayments, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, discussed the dynamic powers of stablecoins, the remaining regulatory and infrastructure challenges, and how the final barriers to mainstream adoption are steadily falling.
Solving Pain PointsAlthough they aren’t issued by the U.S. Federal Reserve, leading stablecoins have effectively become a digital representation of the dollar. This makes them a powerful alternative to the existing rails.
“There are some pain points that most merchants that use traditional rails face,” Lifshits said. “Those are speed, availability, costs, and the inability of the traditional rails to meet the rising demand for optimization and innovation. That’s exactly where stablecoins come in because if we’re talking about speed, we are talking about several seconds instead of several days. If we’re talking about costs, we’re talking about several cents or a dollar instead of a lot of dollars.”
Beyond efficiency gains, the modern infrastructure supporting stablecoins can serve as a springboard for innovation. From a liquidity perspective, near-real-time settlement enhances the time value of money, enabling organizations and consumers to deploy funds more effectively.
Together, these advantages make stablecoins a compelling option across a wide range of use cases.
“In the way that business-to-business payments are being looked at, it is just having another option,” Wester said. “For the longest time there were no options in how you paid your bills, or the options you had were limited, expensive, and slow. It’s just having a new rail that has cheaper, faster, and better settlement time and removes some of the intermediaries who are taking a toll to move things along. And there are also friction points in having all of those intermediaries.”
“We’re creating a whole new option that didn’t exist before, especially from a B2B standpoint,” he said. “Even remittances—when you’re talking about consumers paying each other across borders—what you’re seeing now is a new option that is cheaper, faster, better, and begins to drive down costs everywhere.”
The Added Bonus of CryptoFor all the progress in crypto payments, onboarding remains a sticking point. Many merchants are still wary of the perceived complexity of integration, while others lack a clear starting point.
“It’s up to the crypto payment gateways to give them the easiest onboarding flow ever,” Lifshits said. “That would mean that when they start using the payment gateway, they see all the traditional tools they are used to, but with the added bonus of crypto.”
The goal is to make crypto payment gateways as intuitive and seamless as the tools merchants already use, such as those offered by Stripe or PayPal.
Gateways must also address longstanding concerns around crypto acceptance, namely, how digital assets are managed after receipt and the volatility of cryptocurrencies like bitcoin and Ethereum.
This makes it critical for merchants to have the ability to convert crypto to fiat at any point, as well as the flexibility to choose how actively they manage digital assets. This optionality helps address another concern: crypto transactions can be unforgiving. For example, sending funds to the wrong wallet can have irreversible consequences.
While the infrastructure to mitigate these risks has improved greatly, silos still exist. Many organizations continue to rely on separate payment stacks for traditional rails and digital assets.
“We’re seeing development along both of those,” Wester said. “There are some nuances to payments the traditional way that we haven’t built into stablecoins yet. But what’s surprising to me is how quickly we are identifying those nuances, how quickly we are beginning to see the traditional rails and the legacy providers look at stablecoins and say, ‘We can do that, we can integrate that, let’s bring that into more traditional bank and financial institution payment rails.’”
Advancing the Crypto MissionRising institutional interest is driving new regulatory measures worldwide. These landmark frameworks represent a turning point for an industry rooted in decentralization and long viewed with skepticism by global financial leaders.
“Regulation always lags innovation. You have an innovation, you don’t know what that innovation is going to entail, so regulators don’t exactly know what they’re supposed to be regulating,” Wester said. “Now that we’re seeing that it does provide cheaper rails, faster clearing, and all sorts of innovation, traditional financial services began to say to regulators: ‘We want to be able to do this,’ and regulators finally started coming around and saying, ‘Let’s see what we can do.’”
Recent efforts include Europe’s Markets in Crypto-Assets (MiCA) framework and the GENIUS Act in the U.S.—developments that would have seemed implausible just a few years ago. Yet digital assets are proving they can be as compliant, safe, and secure as traditional financial instruments.
They can also align with existing Know Your Customer (KYC), Know Your Business (KYC), and anti-money laundering standards. In some respects, blockchain-based transactions offer even greater transparency than traditional systems.
As these long-awaited regulations take effect, it is critical for digital asset firms to embrace and adhere to them.
“To further the mission of crypto, a payment gateway should be licensed, they should understand each country’s rules, and help businesses to operate with crypto on a regulated and licensed and compliant basis,” Lifshits said. “That would mean not just licenses, but also procedures as KYC and KYB. But here we see an interesting challenge—the KYC and KYB procedures should be out there without breaking the UX.”
“That’s where the conversion usually starts to fail, when businesses are trying to be compliant and safe, but then the UX suffers for it,” she said. “It’s up to the payment gateway to comply with the rules, but to still to be able to provide a better experience than the traditional payment gateway that only works with fiat.”
The Future Is NowDelivering a strong user experience while maintaining compliance is a difficult balance, but a crucial one. Many users remain hesitant to engage with crypto payments, making trust a decisive factor.
“You can integrate this into consumer payments, remittances, commercial payments—whatever application it is,” Wester said. “It’s all a part of simplifying that user experience and then educating people on just how simple it is.”
Ultimately, ongoing improvements in infrastructure, compliance, and education are all aimed at building that trust—the foundation for mainstream adoption of crypto payments.
“If crypto itself is getting more trust, the same should go for crypto payment gateways,” Lifshits said. “And it’s not just education. There should also be a bit of marketing here because crypto is already here.”
“It’s not just something in the future, it’s here. And you should do it now because while you’re waiting, others are already reaping the benefits,” she said.
The post Crypto Payments Are Ready for the Mainstream appeared first on PaymentsJournal.
Today is World Passkey Day. And while the industry celebrates the shift away from passwords, the more important question is what kind of passkey replaces them. Many organizations recognize that passwords are on the way out, with passkeys emerging as a replacement. What’s less widely understood is that the two main types of passkeys—synced and hardware-bound—serve very different use cases and carry distinct risk profiles. While both improve security and usability compared to passwords, one offers much greater protection.
In a Payments Journal Podcast, Adam Lowe, Chief Product and Innovation Officer at CompoSecure and Arculus, and Tracy Goldberg, Director of Cybersecurity at Javelin Strategy & Research, broke down how these approaches differ in practice. They explored how keys behave when stored in software versus hardware, and why those distinctions are especially important in payment authentication.
What Is a Passkey? A passkey is a cryptographic credential that allows a user to authenticate their identity with an application or service without a password. Many consumers encounter passkeys through mobile devices or platforms like Microsoft, often using biometrics such as fingerprints or facial recognition to log in.
In most of these cases, the underlying credentials are software-based and synced through the cloud. This approach is very convenient: a single passkey can work seamlessly across multiple devices. However, that convenience introduces risk. If a user’s cloud account is breached, the bad actor may gain access to synced credentials, creating a significant security concern.
Synced passkeys also face additional challenges. For example, while modern implementations are designed to resist replay attacks, improperly implemented systems or surrounding infrastructure can still be vulnerable if intercepted authentication data is reused to trick a system into granting access.
“The more we have out there that’s living in the cloud, it’s just more readily accessible to cybercriminals,” said Goldberg. “The more that we can do in a physical environment—in addition to what we’re doing in a digital space—just enhances the security.”
As Goldberg noted, hardware-bound passkeys are generated, stored, and managed on a local device, like a smart card or USB. These are widely used in high-security environments, including U.S. government and intelligence settings, and are generally considered best-in-class for strong authentication.
“Software passkeys are great for that first layer, but we really need that depth of defense,” said Lowe. “Adding hardware local passkeys provides that next layer of defense for users.”
A common misstep that organizations make is adopting hardware passkeys without fully modernizing their underlying systems. Often, this is done to avoid disrupting user workflows. While hardware passkeys can add a strong layer of protection, their benefits are limited if they are simply layered on top of legacy infrastructure rather than integrated into a modern authentication architecture.
“When you sign, you’re getting a digital signature from the key, but you’re also attesting,” said Lowe. “There’s a certificate on hardware that proves it’s a valid hardware signer. While that food chain lives in the cloud, it can be manipulated. So another value to the hardware is not only am I signing, I am signing from a valid piece of hardware in a very straightforward way.”
Non-Portability Is the Key With hardware-bound passkeys, credentials are generated and stored within a secure element on the device. A secure element is a specialized chip designed to create and protect cryptographic keys—similar to those used in passports or payment cards.
The defining characteristic here is non-portability. The private key never leaves the device. This is analogous to keeping a physical house key in your pocket: access requires possession. Because the key can’t be exported, duplicated, or remotely accessed, the attack surface is dramatically reduced.
“We’re not saying that software passkeys go away,” said Goldberg. “It’s just an additional layer, a step-up authentication. It’s going to take a little bit more friction to authenticate and verify certain types of transactions or even certain types of individuals.”
Read Privileges vs. Write Privileges So when are software passkeys good enough, and when is hardware-backed authentication necessary? One useful way to frame the distinction is through read versus write privileges.
Read privileges—access to view data—generally carry lower risk, since no changes can be made. In these scenarios, software-based passkeys may provide an acceptable balance of security and convenience. Write privileges, on the other hand, allow users to take actions that alter systems or move value, such as initiating payments. These higher-risk operations are where hardware-backed authentication becomes far more important.
“That’s where we typically see that software to hardware migration, for stepping up an event,” Lowe said. “A very typical example would be sending a wire, sending any reasonable amount of money. Any time you get a risk flag, you can have the user tap into a step-up event.”
The Tipping Point The shift to hardware-bound passkeys could have occurred years ago, but widespread adoption likely depends on a tipping point—one that convinces organizations the added security justifies the change.
“That tipping point is going to be a combination of increased cybersecurity risk, such as network infiltration that leads to data breaches,” said Goldberg. “It’s going to be upticks in fraud and increased risk to identity.”
Many experts expect that payment flows, in particular, will increasingly require hardware-based authentication, given the high value and sensitivity involved.
“If you do hardware-based authentication on a payment card, it shows possession of the physical card, which also answers so many fraud questions,” Lowe said.
“We’ll get to the tipping point where consumers are concerned about their identities being compromised, and governments have more concern about verifying the authenticity of individuals, agents, and companies,” he said. “The whole notion of getting away from software-based authentication to having this additional layer of hardware will just become second nature.”
The post The Passkey You Can’t Steal: Why Hardware Beats Software for High-Stakes Authentication appeared first on PaymentsJournal.
When events like the NCAA Final Four come to town, they bring an influx of short-term workers who keep everything running—but often for just four or five days. Despite the brief duration of this work, many organizations still rely on traditional payroll systems to compensate them, creating unnecessary friction where speed and simplicity matter most.
In industries that have relied heavily on cash tipping, such as hospitality, prepaid cards can be just as game changing. Instead of asking for a valet driver’s Venmo, a diner could scan a QR code and send a tip directly to the driver’s prepaid account.
While event staffing and tipping are two clear examples, the potential extends much further. In a recent PaymentsJournal podcast, Ben Osmond, SVP of Treasury and Payment Solutions at U.S. Bank, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, explored the impact of prepaid solutions across sectors such as the gig economy and contract work.
As cash and checks continue to decline, prepaid products can reshape the work experience for contract and seasonal workers, while also delivering benefits for employers.
Filling the Tip CardAs tip jars have gone increasingly cashless, restaurants have sought more efficient ways to distribute tips digitally.
“What they are doing is using prepaid programs to provide tips at the end of shift,” Osmond said. “There’s some interconnectivity with the point-of-sale systems where we’re able to calculate the tips that a server is going to receive so that they can have those loaded onto a prepaid card at end of shift. Often, they will have them on their card and in their account before they jump in their car or jump on the bus to head home.”
This model is often well received, in part due to consumers’ familiarity with gift cards and the stored-value accounts like those offered by Starbucks or Target. That said, some workers may still hesitate to accept tips through what they perceive as a gift card format.
“Sometimes people don’t understand that you still get a regular paycheck maybe from your hourly work, and that a card that you get for your tip outs is a payroll card,” Hirschfield said. “Some of that is just the messaging and the idea around it, where they don’t think of it as payroll but as their tip card, that’s what it’s there for and that’s the intent.”
“It’s a payment option; it doesn’t mean it’s the one thing they will get,” he said. “When you go home at the end of the day, you’ve got that tip money in your hands in the same way you would have in a cash environment. These products support the whole idea that there’s multiple ways to pay people, just like they’re always have been. It used to be you would get your check for your hourly work and your cash for your tip outs. Now, we’re moving to a digital environment for that.”
Winning or Losing TalentBeyond tipping, digital prepaid cards can dramatically improve the work experience for contract and seasonal workers across industries.
“Instant issuance changes the game when you think about those contractors, those seasonal workers and short-term employees whose entire employment experience might come down to five days of working at an event,” Hirschfield said. “When they finish on the day it closes, pay them out and their entire experience is complete. They’ve worked their hours; they’ve received their payment, and everyone has a clean break.”
This streamlined approach creates a win-win: payers benefit from simplified coordination, while workers receive fast, secure, and flexible compensation.
As short-cycle payments become more common—whether for summer jobs, event staffing, or project-based work—prepaid cards are well positioned to meet this important need.
“More employers are starting to realize the value because today’s workforce is mixed,” Osmond said. “There are gig employees, contractors, and temps, and a lot of the legacy payroll systems struggle with high turnover and rapid onboarding of employees. Ultimately, a pay experience can win or lose talent in a tight labor market. It’s very important that employees are being paid the way that they want to be paid.”
Real-Time Earnings AccessJust as important as how workers are paid is when they are paid. In a digital payments landscape, where consumers can receive near real-time transfers via apps like Zelle, the answer is increasingly immediate.
“One of the most relevant trends today is earned wage access, the ability for an employee to receive wages for hours that they have already worked but have not yet received a paycheck for,” Osmond said. “With that Friday or every other Friday payday, they’re able to access these funds early and request a portion of their wages which can be sent to them electronically onto a prepaid card, plastic or digital.”
Regardless of how payments are delivered, workers expect digital access to their financial information. This makes it critical to offer a robust app that provides full visibility into balances, transactions, and spending. This is especially important for contract and short-term workers, many of whom juggle multiple jobs and remain constrained by traditional pay cycles.
“Having these options where you can get paid either with earned wage access on an early basis or a couple days early, those are critically important to the people receiving that money—especially when they may need to spend that money as soon as they earn it to fit their lifestyle.” Hirschfield said. “Also, you get people who are potentially underbanked and unbanked, and this can also fill that gap.”
From the Employer’s PerspectiveWhile the benefits for workers are substantial, employers also stand to gain. Paying via prepaid can reduce onboarding time and administrative costs, enabling workers to get started more quickly.
“It can cut costs around eliminating checks or email reissuing of checks, things of that nature,” Osmond said. “It can reduce fraud. That’s something that often doesn’t get talked about from an employer’s perspective, but there is fraud on paychecks. They’re also having less calls and less concerns into their HR or their payroll department with questions about their checks.”
“You can lower the cost of ownership scale of all of these things,” he said. “We work with a lot of quick-service restaurants that have many different locations that are using our prepaid products. By having one product and one disbursement method, they’re able to be much more efficient than they would by delivering checks to each different location.”
Immediate payouts can also play a valuable role during employee separations. Whether voluntary or involuntary, issuing final wages via prepaid card can help defuse what is often a sensitive and time-critical situation.
And these scenarios are only part of the broader opportunity for prepaid solutions within the full-time workforce.
“You look at other things where it might be an off-cycle payment, where it could be a bonus or sales incentive program,” Hirschfield said. “These things are done off cycle; they’re instantly done. You hit an incentive bonus on sales, you’re paid instantly, and you feel rewarded. These are all examples that play into why having programs like this help.”
A Frontline ExperienceTaken together, these developments position prepaid cards as a valuable part of modern work experience—and signal the potential for disruption within the broader payroll space.
“As we think about this as a whole, payroll and wages aren’t just a back-office function anymore, it’s a frontline experience,” Osmond said. “Payroll cards and wage cards have moved beyond check replacement to become a digital infrastructure for the workforce that today is mobile, it’s mixed, and it’s often outside of traditional banking.”
“The next standard is simple, it’s a quick onboarding process,’ he said. “We need to pay people fast, we need to pay them consistently and we need to do it with controls in place that employers can stand behind. What these products do, it helps make a real bank-issued program that can support earned wage access as well as tip functions—without changing the payroll cycle as a whole for the employers.”
The post Tips on a Prepaid Card: A Practical Solution with Broad Industry Impacts appeared first on PaymentsJournal.
Not long ago, fraud teams could keep pace by reviewing incidents one by one. That era is ending. Armed with artificial intelligence and cloud-scale infrastructure, today’s cybercriminals operate faster, more broadly, and with far greater sophistication than ever before.
The rise of agentic commerce will only intensify these challenges, in part because it upends a longstanding assumption in fraud prevention: that bot traffic is inherently suspicious. In a world where legitimate transactions may be initiated by AI agents, that distinction becomes far less clear.
In a recent PaymentsJournal podcast, AtData’s Diarmuid Thoma, Head of Fraud and Data Strategy, and Brandt Hoffman, Sales Director, Fraud Services, along with Jennifer Pitt, Senior Fraud Management Analyst at Javelin Strategy & Research, discussed how these shifts are dramatically impacting payments risk.
At the center of this transformation is a simple but growing imperative—organizations must know, with confidence, who (or what) is on the other end of every transaction. Achieving this now requires systems capable of analyzing and contextualizing vast, dynamic data streams in real time.
The Outputs of ScalabilityHistorically, many fraud attacks were treated as isolated events, leading financial institutions to adopt a reactive, situational approach. However, there are often patterns that emerge when these incidents are viewed collectively. Recognizing and operationalizing those patterns is critical.
“From a law enforcement perspective, I remember a mail theft case that I investigated,” Pitt said. “We conducted a search warrant on the suspect’s home and found bags of open and unopened mail. We also found stacks of paper that contained full personally identifiable information—name, date of birth, Social Security number, next of kin, last known addresses—you name it, he had it.”
“We searched his phone and his computer, and we were able to see that he was connected with several other suspects that we were already investigating,” she said. “What we uncovered was this hierarchical organized crime ring where there ended up being more sophisticated identity theft and other crimes. If we were just looking at one of those players or incidents, we wouldn’t have seen this whole organized crime ring.”
While traditional vectors like mail fraud persist, the digital landscape has allowed bad actors to expand their reach exponentially. Technologies such as AI and cloud computing have supercharged criminal capabilities faster than most organizations can evolve their defenses.
Beyond just deploying generative AI to create more convincing impostor sites and deepfakes, bad actors can now deploy AI agents to autonomously carry out widescale fraud campaigns. For example, agentic AI has been used in a technique where email addresses are rapidly and sequentially created for use in fraudulent activities.
“We see thousands and thousands of them every day, where we see sequential types of emails created and they’re not necessarily in one client,’” Thoma said. “Somebody’s using an email over here to create a bank account and going and buying a pair of sneakers over there.”
“Individually, it looks fine; there’s nothing wrong there,” he said. “At a platform level, we see the cumulative effect. It’s a simplistic example, but that type of behavior is a direct output of the scalability of fraud.”
Distinguishing Malicious AutomationGiven agentic AI’s potential to amplify fraud across every channel, the emergence of agentic commerce presents unique challenges for fraud prevention teams.
Many of the open questions around agentic transactions center on authorization. In the conventional e-commerce model, the shopper selects items, completes verification, and explicitly authorizes the purchase. When an AI agent acts as the consumer’s proxy, however, new gray areas emerge.
“What happens in a chargeback scenario?” Thoma said. “The industry hasn’t got all the answers on that. It’ll slowly emerge, but one of the things that won’t change is history. It’s still you buying it. Especially for physical goods, it’s going to your physical location, it’s going to your name, and it’s probably using your e-mail address to confirm all the details. There’s still a lot of information, even in the agentic world, that’s going to be coming through.”
This means that one of the most important considerations for fraud prevention will be the user’s history. Fortunately, this data is already present for many consumers. For example, the organization can confirm the age of an email address, whether it has been actively used, and if there are any red flags associated with it.
This historical data becomes a critical point of continuity as organizations design fraud strategies for agentic commerce.
“It was always, ‘Let’s look at the negative aspects of what this transaction could present,’” Hoffman said. “Now, we have to be cognizant to bring in those positive signals. What are the good signals that we can lean on? What allows us to interpret or infer more quickly? How do we start to identify what it means to be a positive bot, or to be a good transaction along the line?”
A Timeline EventTo act on these signals effectively, teams must start from an accurate baseline. A core lesson from AI is that models are only as strong as the data that feeds them. Just as importantly, that data must remain current, especially as consumers’ digital footprints continue to expand.
“Many still look at data like it’s a credit report, where it’s a static thing that you see in a piece of paper and that’s it,” Thoma said. “It’s not. It’s a timeline event. If you think about when you were 20 to now, you’ve had different addresses, you’ve had different IPs and different devices. Your name may have changed for different reasons, and your email probably changed one or two times.”
“Your profile naturally evolves, so the importance of the data quality and the skill in the overlaying models is to know when that change is abnormal versus normal,” he said.
A practical way to evaluate changes in a user profile is through percentage-based shifts. Significant or rapid deviations across key attributes may indicate potential account compromise.
Similarly, the repeated use of a single element across multiple account creation attempts can signal synthetic identity activity, where bad actors combine real and fabricated information.
“We commonly see that, and its behavior that is distinctly different from somebody who’s just moved addresses,” Thoma said. “Yes, they’ve moved addresses, but a lot of the time when people move, they only move a couple of blocks down. There’s continuity in that profile, where we can still say that even though the profile has changed, it’s still fine.”
“That’s a broad example of how important it is to have that data quality,” he said. “Because if you don’t have fresh data to reference, the timeline to reference back further, you can’t say, ‘This is normal behavior for them or not.’ That’s how important it is.”
Data for the Whole OrganizationThe growing emphasis on identity verification is driving a widescale shift in how financial institutions approach fraud prevention. Yet opportunities remain to break down data siloes and improve visibility across systems.
“We are seeing some evolution in the ability for payments teams and fraud teams to come together quicker,” Hoffman said. “Payments teams are very focused on the transaction and what it means to bring that revenue in. There still is some hesitation for the fraud teams and the payments teams to merge together.”
“In the most advanced organizations that I work with, those two functions are working hand-in-hand,” he said. “They know exactly what’s going on from a payments perspective and how that affects the flow of fraud.”
The pace and complexity of the threat landscape demand more sophisticated infrastructure. Modern fraud prevention solutions rely on graph-based methods to map relationships between entities—sometimes referred to as fraud topology or halos.
These topology-aware systems can enhance detection accuracy while reducing costly false positives. They also enable organizations to apply the right level of friction within the customer journey, including step-up authentication when warranted.
While designed for fraud prevention, the benefits of these capabilities often extend well beyond risk teams, strengthening decision-making and operational efficiency across the entire organization.
“The data is customer data; it has huge amounts of value,” Thoma said. “You’re seeing their geolocation, behavior, age demographics—all that stuff is extremely important for the business, not just for the fraud team. Everybody thinks that’s a lot of money for fraud prevention, but it becomes very cheap because you’re splitting that into multiple budgets.”
“The marketing team can use it for targeted products, and you can increase conversions,” he said. “It doesn’t have to be fraud data, it’s company data for all divisions of that business to use.”
The post As Fraud and Agentic Risks Mount, Data Provides Continuity appeared first on PaymentsJournal.
International wires have long been the default for B2B payments—an entrenched system that works, but few would describe as optimal, given multi-day settlement timelines and high fees. But as stablecoins gain traction in cross-border transactions, businesses are starting to ask a more fundamental question: Can we replace wires altogether?
In a PaymentsJournal Podcast, Avinash Chidambaram, Founder and CEO of Cybrid, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed what would need to happen for stablecoins to become the default mechanism for B2B payments. What’s exciting as well is the possibility of even more use cases across payments, treasury, and remittance. “There are all sorts of things you can do better that you don’t consider to be a problem,” Wester said. “But maybe with new technology, we can do things that you didn’t even know were possible.”
Structural InefficiencyWires work well enough—they move money from sender to recipient, which meets the core need. What most enterprises don’t see, though, is the complex web of systems and intermediaries behind these transactions; they simply build their processes around bank-based payments.
Over time, layers of intermediaries have made these systems deeply entrenched and difficult to replace. In the past, this made sense. Moving money across borders and oceans was a treacherous game, and paying a little extra for trust and security was a value-add rather than a painful cost. Now, however, times (and money movement) have changed. Organizations have access to tools that enable simpler, more streamlined alternatives with built-in trust.
“The inefficiency isn’t just technological, it’s structural,” said Chidambaram. “Whether it’s correspondent banks, clearing houses, processors, [or] compliance, these experiences that are happening in the background between banks cost both complexity and time, and are hugely inefficient.”
Looking for Improvement in B2BAlongside new technology came new expectations of transparency; companies want to track their payment from the second it leaves their account to the moment it lands in a recipient account. However, this is simply not possible with wire transfers. Stablecoins, on the other hand, offer complete traceability—and enterprises are taking note. They can verify, often in near real time, that funds have been received. This visibility is driving growing interest as businesses see clear operational benefits.
“Most enterprises are focused on their core business and then they say, ‘OK, well, can I improve some of my operations and finance as a separate thing?’” said Chidambaram. “Now a customer can go into our platform and say I want to make a payment to this invoice and upload that invoice. We can automatically pull the funds from a customer’s account to fund the payment transaction, convert that to stablecoins automatically and then send stablecoin to the recipient’s wallet.”
“That can improve B2B payments from two contexts,” he continued. “First, it’s just faster. Secondly, you can see that it’s settled—that [your recipient] actually received the funds.”
Improving the User ExperienceFor the longest time, a major barrier to broader digital asset adoption, including stablecoins, has been poor user experience—complex interfaces and high stakes for errors.
Firms like Cybrid are beginning to address these challenges across retail, commercial, and enterprise payments. The experience now goes beyond accessing a wallet to include greater visibility into transaction status and fees.
The secret sauce is in programmability. Stablecoins by nature can be programmed—a payments team member can set up rules or triggers, which then guide how payments operate. For instance, payment terms. For instance, if you have to pay a supplier every month, you can create a programmable rule that ensures money lands on time, avoiding late fees or penalties and ensuring business continuity. But the use cases go beyond pre-determined rules and can become dynamic as well.“We’re starting to see people adopting ERP tools that have intelligence built into them,” said Chidambaram, “Where they can say, ‘Hey, your inventory is running low. Or you need to make these payments. Here are all the payables that you have.’ And over time, we’re finding that people are actually wanting to wait as late as possible to make those payments.”
Keeping Existing WorkflowsAccounts payables and receivable teams already operate within established workflows in fiat currencies like the US dollar or Euro—for payroll, invoicing, and more—and are unlikely to overhaul them entirely. The good news, though, is that stablecoins operate in the background. When you make a payment, the recipient receives their local currency automatically (or stablecoins if they choose, but it’s not required). All the while, the business sending those payments benefits from speed, cost efficiency, and transparency.
“You’re going to have an organization that says: ‘This is how I do payroll for my local employees, but I need to do this other thing for my contractors overseas and this other thing for my suppliers,’” said Chidambaram. “Some of them might have taken only wires then, but are now accepting stablecoins. They have the ability to pick which rail makes the most sense to solve the problem.”
These benefits are especially relevant given the growing complexity of payroll, including irregular schedules and cross-border payments. Stablecoins could play a key role here. For example, enabling early wage access models that allow workers or suppliers to receive funds ahead of traditional pay cycles.
“You get paid every two weeks because, in our brains, that’s how you get paid,” said Wester. “That goes back to direct deposit, which goes back to you had to have a check, and that goes back to all sorts of things that go into the processes. Same thing with AR/AP and so many of our payment processes at the corporate level. Now we can rethink a lot of those things.”
Something BetterFor the foreseeable future, stablecoins will coexist with traditional payment rails. Both are necessary to support the trillions of dollars moving through global systems today. But as enterprises, suppliers, and payers grow more comfortable, a larger share of that volume is likely to shift toward stablecoins.
“Many people think digital assets and stablecoins are a solution in search of a problem,” Wester said. “I’ll say, well, you know, what you’re doing now is slow, costly, and inefficient, with layers that you can’t see. You don’t think of this as a problem, but maybe that’s because you didn’t know there was anything better.”
A key remaining hurdle is integration. Stablecoin payments are not yet embedded in most enterprise software platforms, where traditional methods like wires are still the default. But as vendors evolve and enable easier integration, stablecoins will become more accessible—unlocking even broader use cases.
“Banks, PSPS, enterprises, large and small, every one of them have been thinking about stablecoins,” said Chidambaram. “How do I go in my take advantage of this? What are the capabilities I need? Then that starts to unlock people’s minds: What else can I solve with this new payment rail?”
The post What Would it Take for Stablecoins to Replace Wire Transfers in B2B Payments? appeared first on PaymentsJournal.
When a shopper is tricked into making a fraudulent purchase, they expect recourse from their financial services provider. These guardrails are one of the reasons credit cards have become predominant in the U.S.—not only can consumers dispute charges after the fact, but many issuers proactively alert users when suspicious activity occurs.
Similar protections exist for ACH payments, but they are largely a function of the lag between payment initiation and settlement. With real-time payments, such as those facilitated by FedNow and the RTP network, this buffer disappears.
As both systems gain traction, particularly in B2B use cases, fraud prevention strategies must evolve to address payments that are instant and irreversible.
In a recent PaymentsJournal podcast, Darren Beyer, Chief Product Officer at Qolo, and Suzanne Sando, Lead Fraud Management Analyst at Javelin Strategy & Research, discussed how the convergence of faster payments and increasingly sophisticated fraud is fueling a full-scale redesign of fraud prevention architecture. It has also placed a demanding onus on financial institutions to implement highly precise risk controls while preserving the customer experience.
The Window Is ClosingAs faster payments erode the traditional safety net around transactions, institutions must shift fraud detection to earlier stages of the payment process. In the past, organizations benefited from extended review periods, during which funds could be reversed if necessary. That capability is quickly becoming a thing of the past.
“In the world of instant payments, specifically around RTP and FedNow, you’ve got an instantaneous movement and settlement of money. And that’s where the problem lies, because there’s no longer time to pull this stuff back,” Beyer said. “There’s no window where you have an ability to say, ‘I really didn’t mean to send it’ or ‘I fat-fingered this particular account number.’”
“With that gone, it’s less of an opportunity for the people sending payments to fix problems, and that opens the window for fraudsters,” he said.
In this environment, striking the right balance between strong fraud prevention and a seamless customer experience is difficult, especially given the high expectations shaped by card and ACH transactions.
These challenges are accelerating the need for real-time decisioning, where firms analyze multiple data points to assess payment risk before processing. However, achieving high decision accuracy will likely require introducing some level of friction. While this may feel new in the context of real-time payments, methods like multi-factor authentication are already familiar to both banks and customers.
“Every time I log into YouTube, I get a six-digit one-time passcode,” Beyer said. “If I have to do that for YouTube, why is my financial institution not making me do that? They do when I log in, but if I’m doing a big payment out, shouldn’t the same thing be happening? Isn’t the ‘friction’ of getting a one-time passcode worth the extra two or three seconds it takes to put that into the website? I think the answer is yes.”
The challenge lies in applying the right amount of friction in an emerging payments model. This is where step-up authentication plays a key role. It allows institutions to adjust controls, enabling low-risk payments to proceed smoothly while subjecting higher-risk transactions to greater scrutiny.
Even so, introducing any friction into the customer journey can raise concerns for financial institutions.
“There has been an assumption that strong security will ruin the customer experience, but Javelin has found that good security can improve trust and adoption of certain payment channels and methods and new technologies,” Sando said. “Consumers and businesses want to know that their accounts and their money is protected and that they can trust the institution and the organizations that they choose to do business with.”
The Widening Technology GapImplementing safeguards that remain invisible to legitimate users yet highly effective against bad actors is no small feat, but the tools to optimize this balance are rapidly improving.
Artificial intelligence has been instrumental in advancing these capabilities, as it has across nearly every sector. However, many financial institutions have lagged in adopting these technologies.
“This is a scenario where it’s so rapidly changing the industry but the traditional players—processors and banks who are operating under a regulatory environment and are operating under an environment where you can’t inhibit people from getting access to their money—they have all these constraints,” Beyer said. “Fraudsters don’t, and they can just start playing with all these great new AI tools.”
“There’s always been a gap,” he said. “Fraudsters have always been ahead of the financial institutions and the processors, and the reason for that is they’re more nimble; they’re able to get things done quicker. If you didn’t have that gap, you wouldn’t have fraud.”
Unfortunately, this gap is not only persistent but widening. Rapid advancements in generative AI and the emergence of AI agents have enabled cybercriminals to scale both the speed and scope of their attacks.
“Bad actors can adopt those technologies quickly, and they’re incredibly creative. I don’t want to give them applause for that, but they’re incredibly inventive in the way that they take risks to use new technology,” Sando said. “It’s difficult for FIs to keep pace when it comes to the adoption of any innovation.”
“It’s no surprise that AI is a problem for criminal manipulation,” she said. “But we also know that it’s a huge asset for financial services that they could make great use of in terms of automating certain aspects of the customer experience. Or even the employee experience, for things that maybe used to be a manual review of transactions, or typical tasks that were completed during fraud investigations.”
Buttressing the SystemAI has quickly become central to modern fraud defenses, given its ability to detect anomalies across massive datasets. However, the rise of real-time payments is fueling the demand for intelligent infrastructure that can function as an authentication layer within the payment flow.
This is especially critical in commercial environments, where overly restrictive controls can lead to false declines or delays—issues that can quickly escalate into serious operational and reputational damage.
Ultimately, faster payments are not just driving the need for better technology, they are forcing financial institutions to rethink their entire approach to fraud prevention.
“The organizations that are succeeding in instant payments are going to be the ones that can make the competent decisions on risk just as quickly as that money is moving in that real-time setting,” Sando said. “Fraud detection isn’t just this back-office function anymore, that just happens in the background without real knowledge of it. You have to highlight fraud detection because it’s now a critical piece of the payment experience.”
This shift in mindset is essential. The fraud threat is not going away, but institutions can take advantage of one constant: the pursuit of easy money often leads criminals down the path of least resistance.
“Fraudsters are always going to find a way, but they are fundamentally no different than anybody else in business,” Beyer said. “They have an ROI, their time is valuable, and they’re going to go where they can make the most out of their time. If your bank or your processor is tougher to get through than your neighbor’s bank or processor, they’re going to go to your neighbor.”
“Make your buttress, your fortress, your castle gate—all the armor that you’re going to put around your system. Make that better than your competition and they’re going to go to your competition,” he said. “You’re never going to get a 100% fraud-proof system. Fraudsters will always be ahead, but if you can make yourself better than the people around you, then you’re not going to be the target, they are.”
The post Instant, Irrevocable Payments Demand a Fraud Prevention Reboot appeared first on PaymentsJournal.
Last year, the treasurer’s office in Warren County, New York sent $3.3 million to what it believed was the county’s roadwork and maintenance contractor. It was not—the payments were instead routed to a fraudulent account. Because the county had recently switched from paper checks to ACH, the treasurer’s office had no account verification policies in place to prevent what turned out to be a textbook case of fraud.
While the damage in Warren County represents the upper end of the spectrum, this incident is far from an outlier. It underscores the importance of implementing ACH protections, which many organizations already have in place. Too often, however, these measures are treated as a set-it-and-forget-it solution or merely a compliance checkbox.
In a recent PaymentsJournal podcast, John Gordon, CEO of ValidiFI, and Suzanne Sando, Lead Fraud Management Analyst at Javelin Strategy & Research, discussed how robust ACH fraud monitoring controls can do more than satisfy regulatory obligations—they can act as a proactive risk prevention mechanism. This is essential to combat the growing prevalence and complexity of fraud.
The Importance of TrustThe compliance aspect of ACH fraud monitoring is partly driven by the latest version of the WEB debit rule, instituted by Nacha—the organization that governs the ACH network. Nacha’s enhanced fraud monitoring requirements raise expectations for all participants in the ACH ecosystem.
“It increases the bar to say that we’re not just checking the validity of the account, but we’re also doing fraud checks,” Gordon said. “It creates an opportunity for financial service providers to identify fraud and to look at the potential risk associated with a consumer.”
“It moves beyond compliance for compliance’s sake, which creates a lot of opportunities for financial service providers to not only identify and reduce fraud, but to put consumers in the right products that create mutually beneficial paths for them,” he said.
Finding the right fit with customers has become more challenging in the digital era, where consumers have more options than ever and increasingly expect efficiency in every interaction. As a result, consumers often choose the path of least resistance when selecting a financial institution.
These factors place institutions in a precarious position: they must balance security with customer expectations, both of which significantly impact retention.
“The importance of consumer trust cannot be overstated,” Sando said. “We’re finding that when consumers have experiences with fraud or scams on a particular account—whether it’s a traditional financial account like your checking or savings or a merchant account—if they’ve experienced any sort of suspicious activity or fraud and scams, they’re much more likely these days to close an account where the fraud occurred and move somewhere else.”
Stepping Up AuthenticationGiven the risk of attrition, account onboarding and authentication have become critical stages in the customer experience. One key challenge arises from misapplied friction, where every user is forced to undergo the same verification process regardless of risk profile.
“Our belief is there’s enough value in customer data that it can be managed through step-up authentication, that you are injecting friction where friction is warranted based on the risk signals that consumers have in concert with their profiles—whether that be their bank account, their payment transactions, or their credit scores,” Gordon said.
“There are a number of different ways to end up at the right answer so that you’re facilitating a flow where the consumers stay in the process and you are fast tracking your low-risk consumers and putting obstacles in place where they should be,” he said.
This process can be optimized by leveraging the richer data available in a validated account. Institutions can go further by authenticating the account, confirming that the applicant’s name matches the account owner’s—allowing for a more targeted, efficient approach.
Implementing these measures early in the process is critical for fraud prevention and enables a customized experience, reducing the verification burden on the institution.
For example, if a consumer opts out during onboarding due to friction triggered by their financial profile, the institution avoids a potentially difficult credit decision. Conversely, highly qualified consumers can be fast-tracked, improving both the experience and conversion rates.
Scouring Alternative DataAlthough authentication is vital, it is increasingly challenging under the current credit scoring system. Last year, traditional scoring methodologies eliminated medical debt—a significant portion of consumer credit—from scores. While this change reshapes scoring, it does not remove the underlying debt burden.
Additionally, consumers now maintain more financial relationships than ever, including accounts at traditional banks, digital-first banks, and fintechs. Many of these relationships are undisclosed, complicating accurate assessments of creditworthiness.
“It becomes incumbent upon financial service providers to look at alternative data in a way that they can derive value out of it,” Gordon said. “We believe the consumers’ bank behavior, their payment success rates, and the velocity with which their PII elements change are all clues that will lead you to have a more accurate picture of that consumer—what they can afford and their creditworthiness.”
“When we factor in the way that consumers acquire credit today versus the way they did in 1989 when the FICO score was created, they’re wildly different,” he said. “The traditional scoring methodologies haven’t kept pace with the way consumers are acquiring credit now. We see scenarios where consumers apply with a clean bank account only to subsequently change to a neobank account or some other bank account that they’re utilizing to enact what equates to first party fraud.”
Palatable to All PartiesThese challenges have driven the emergence of data-driven treatment strategies, where financial service providers leverage shared industry data. This intelligence provides critical insights into connections between consumers, accounts, identities, and performance metrics.
Such knowledge enhances underwriting, creating a scenario where a consumer’s application experience is guided by both their inputs and industry knowledge of past activity. However, these strategies must always be aligned with the institution’s broader objectives.
“We have a client that we work with that does account-to-account payments tied to loyalty cards,” Gordon said. “Their exposure in that scenario is fairly limited, they want as much acceptance as they can possibly get. Conversely, we have some clients who are doing large dollar distributions, and it is not too much to ask for someone to credential into a bank account and we’re talking about the potential for five- and six-figure disbursements.”
“It’s difficult to ensure that you’re keeping down the cost of doing business, the fraud losses, and ultimately the cost of credit,” he said. “When you marry the authentication process to the use case, you end up with a lot better solution that’s more palatable to all parties.”
Confidently and CompliantlyDeveloping strategies and implementing fraud management measures is imperative, as new and potent fraud variant emerge daily. The most effective defense is sharing information and leveraging a risk intelligence provider to help chart the way forward.
“It’s finding a solutions provider that is flexible and can adjust and be agile in the same way that we find fraudsters are agile with technology and how they can use it against consumers,” Sando said. “It’s also about recognizing the fact that consumers are not all the same, it’s not one-size-fits-all. It’s about having that solution provider that can help you figure out how we navigate each individual case to make sure that it’s optimized for every single customer that comes through the system.”
These solutions help organizations stay ahead of escalating fraud threats and maintain compliance with regulations like Nacha’s rule enhancements. But that’s just the beginning.
“There is a lot of opportunity beyond compliance in account verification and authentication,” Gordon said. “What we see is that not only will more of your payments clear, but there are certain attributes and thresholds that , when crossed, significantly improve performance. Meaning, you’ve verified the account, the account has a certain history, and it doesn’t indicate any of the negative attribution that we often see compounded by a name match. You have the ability to operate confidently and compliantly in a way that you probably aren’t enjoying at present.”
The post From a Checkbox to a Differentiator: Redefining ACH Fraud Monitoring appeared first on PaymentsJournal.
As financial fraud continues to accelerate, its impact on victims goes far beyond monetary loss. The emotional and behavioral effects are long-lasting, shaping future decisions and sometimes undermining trust in their financial institutions.
Substantial progress has been made in strengthening fraud detection and prevention, but much work remains—especially in the age of AI. In a PaymentsJournal podcast, Dal Sahota, Global Director of Trusted Payments at LSEG Risk Intelligence, and Suzanne Sando, Lead Analyst of Fraud Management at Javelin Strategy & Research, discussed how fraud affects different generations and what banks can do to stay ahead of the problem.
Fraud Comes from EverywhereIt’s hard to go a single day without encountering a scam attempt or hearing about someone who has been targeted. This constant exposure underscores how sophisticated and pervasive fraudsters have become.
LSEG’s latest global research shows that most consumers believe scams are on the rise. As more aspects of life move online—opening new avenues for fraud—it is clear that everyone is at risk.
“This morning, I got an email from a car rental company about a supposed upcoming trip from Orland Park, Illinois,” said Sando. “As someone who lives in Milwaukee, about an hour and a half outside of Orland Park, I’m not picking up a rental car there. But you stop and think, ‘hey, I do find myself randomly researching trips. Could this have been something that I looked up and maybe I’m getting a prompt from their website?’ That’s how people end up clicking on phishing links or providing details they didn’t intend to reveal to a fraudster.”
Across the GenerationsBecause scammers have become highly skilled in targeting, each generation experiences fraud differently. Scams exploit areas where specific groups are more vulnerable. Older generations expressed the highest concern about fraud in the LSEG study, while younger groups reported greater exposure to emerging threats such as deepfakes and “quishing” attacks.
Reactions also vary by age. Some 97% of victims reported changing their behavior after being scammed, becoming more cautious online, sharing fewer financial details, and avoiding certain channels. Some may feel so insecure about certain payment types that they abandon them entirely. Older adults, however, tend to experience the greatest loss of trust compared with other groups.
“There are deep levels of distrust in any and all communication, which can be really devastating when you’re trying to maintain a relationship with your financial institution,” said Sando. “If you don’t even know that you can believe what’s being sent to you from your bank, what can you believe? Once that security feels like it’s just an afterthought and that trust has been violated, it’s really hard to go back to business as usual.”
The Information GapThe effects of scams extend beyond individual victims—they ripple throughout the financial services ecosystem.
“That really comes out in the research, how that’s impacting consumers and the lack of trust when they’re interacting in digital channels,” said Sahota. “We found that 32% of respondents reference shame as an emotional impact. And this is very devastating in the market.”
A significant information gap exists regarding accessibility and the warning signs of potential fraud. Less than a quarter of LSEG’s survey respondents described themselves as well-informed in this area. Separate data from Javelin indicates that many consumers are unaware of the educational resources their financial institutions offers, even when these resources are available online or via mobile apps. These programs are only effective if consumers can locate and act on them.
“We can think about this in terms of vulnerabilities that they’re under and how those are targeted,” said Sahota. “Don’t assume that the consumer’s first language is English, for example. Those are nuances to work within, but the fraudsters really take advantage of those exposed vulnerabilities.”
Sando added: “A lot of financial institutions post really text-heavy articles. Frankly, you’re seeking out education when you need it the most. You’re not sitting around on your couch on the weekend reading education on your bank’s website. You’re going to it in that moment. So it has to be hitting the consumer right at the part where it’s most critical.”
A More Personalized ExperienceFinancial institutions could benefit from delivering a more personalized experience, tailoring education based on demographics and customer behavior. Understanding what resonates—by geographic location, generation, or product ownership—helps identify who is most vulnerable to specific scams and how to reach them.
“You’re not going to hit older generations with a lot of pop-up notifications on their phone,” said Sando. “That’s not the typical way that they consume information.”
Once someone has fallen victim to a scam, they often struggle to focus on available resources or their rights. This is when financial institutions must guide them through the recovery process.
“A scam victim shouldn’t have to be the most well-informed person on the process of reimbursement and resolution for your scam,” said Sando. “You want to have a highly trained investigator or case worker from your financial institution that’s there to walk you through because you’re already having to bear the burden of the financial loss.”
Playing on OffenseWith money moving faster than ever, applying the right level of friction to the right type of payment reassure consumers. A small verification step can provide certainty that the beneficiary is legitimate. Friction that ensures validation is not a barrier—it’s a protective measure.
Too many institutions wait until validation occurs too late. In the era of real-time payments, once a transaction is submitted, the money is gone. Prevention must come before the payment, not after.
“We are focusing earlier on in building a full picture of ‘Who is this person I’m paying? What’s their historical account information?’” said Sahota. “Building a full picture and using the data that we have access to as financial services can make the difference in detecting suspicious activity before it’s too late. There are a number of vulnerabilities that the fraudsters and the scammers are exploiting. They continuously evolve. The leveraging of AI in that regard has really scaled the scams up. We need continuous risk assessment of all the aspects across the value chain.”
“We continue to play from behind,” he said. “We’re always on defense, we’re never on offense. We’re always being reactive when we should be proactive.”
To explore the full breadth of consumer insights referenced in this discussion you can review the complete survey findings in LSEG’s After the Scam research.
The post The Emotional Toll of Financial Fraud appeared first on PaymentsJournal.
Many credit unions are grappling with the differences between cryptocurrency, stablecoins and tokenized deposits—and whether these innovations fit into their business model. It’s important to take a step back and allow strategic evaluation, rather than urgency, to drive decisions around digital assets.
Velera and its Digital Asset Lab are helping credit unions overcome the “fear of missing out” that often accompanies emerging technologies like crypto. In a PaymentsJournal Podcast, Velera’s Vlad Jovanovic, Vice President of Innovation, and Nathan Meyer, Senior Innovation Strategist, as well as James Wester, Director of Cryptocurrency at Javelin Strategy & Research, discussed what credit unions are doing—and should be doing—in the digital assets space.
Three Primary Categories of CryptoThe concept of digital assets now encompasses stablecoins, tokenized deposits and a range of cryptocurrencies such as Bitcoin, Ethereum and Solana. Cryptocurrency itself has evolved into a speculative asset class that consumers can buy, sell, trade and hold. Its volatility makes it risky, but people are using it to grow wealth, diversify portfolios and explore the broader digital assets landscape.
Regulatory guidance on crypto is still incomplete. The CLARITY Act, which aims to provide a clear regulatory framework for digital assets, is still progressing through Congress. For these reasons, most credit unions are approaching crypto cautiously.
“Do you want to create a connection point that allows your members to be able to transact with Bitcoin or Ethereum or Solana?” said Meyer. “That creates more risk exposure for the member, as well as concerns around what type and level of trading you’re allowing them to do. Because there is volatility, it can have significant impacts on them—both positive and negative.”
Stablecoins and Tokenized DepositsStablecoins function primarily as a payment instrument, designed to provide liquidity and trading within the crypto market. They are typically backed by secure assets, most often U.S. dollar-backed assets, such as short-term Treasurys.
Stablecoins can be thought of as a new payment rail—just as FedNow and RTP provide speed for real-time payments, stablecoins offer similar capabilities. The first step for a credit union considering stablecoins is to assess whether member demand exists. Without demand, creating additional infrastructure is unnecessary. But for organizations with members engaged in remittance, stablecoins can move money more efficiently and at lower cost than traditional wires.
Another important type of digital asset is tokenized deposits. This infrastructure enables credit unions and banks to tokenize existing balance sheets and bring them into the digital realm. Tokenized deposits can remain internal to a credit union’s ecosystem, but some institutions are exploring them for intraday settlement or liquidity pools.
“We’ve seen a lot of VC dollars enter the space and a lot of start-ups are creating hype around their technology,” said Jovanovic. “That in itself is going to create a bit of a FOMO effect within the credit union industry. Am I doing enough? Should I be doing more?”
The Coming Regulatory ImpactRules governing digital assets are still evolving. The GENIUS Act, passed in July 2025, provides a framework for exploring use cases and applications of this technology. NCUA has issued proposals outlining constraints related to crypto, which credit unions should review carefully before moving forward.
Credit unions should also monitor the CLARITY Act as it moves through Congress to inform decisions around partnerships and exposure to digital assets. One immediate opportunity is engaging with regulators to help them understand credit unions’ needs—shaping regulations in a way that benefits both institutions and their members.
“Stablecoins and crypto to some extent have been wrapped up politically in ways I haven’t seen with other technology,” said Meyer. “I never had to worry about thinking through cloud migrations and worrying that as soon as an administration changed, the dynamic around that technology was going to deflate or inflate. There is a lot related to crypto that has tie-ins politically, and that is feeding some of this movement versus the actual problem it solves or demand.”
“It’s important for credit unions to understand both the CLARITY and GENIUS Act, but also understand if you get out over your skis in this space and a different administration comes in, regardless if it’s Republican or Democrat, you could see a very different perspective on privatization of stablecoins and money in general,” he said.
What Should Credit Unions Do Now?For most credit unions, the first step is education—learning both the technology and the regulatory landscape of stablecoins. Bringing in digital assets experts, participating in industry consortiums, and collaborating with peers can accelerate this process.
Ultimately, the most important questions revolve around members’ needs and the organization’s strategic objectives.
“One of the best ways to cut through hype is to ask why,” said Wester. “How does that support the mission of my bank, my credit union, my product? That’s a really important question, because if you have somebody coming to you from either the vendor side or the crypto and digital asset space, it feels like hype.”
Meyer added: “If you truly know who you are and what role you play in the community for your members, it allows you to avoid false signals. You can point to that strategic structure of who you are and very clearly articulate where this fits within that umbrella.”
The post What Should Credit Unions Be Doing with Crypto? appeared first on PaymentsJournal.
In the past, banks and businesses could build rapport by delighting customers over several interactions. That window has largely disappeared amid the impersonal nature of today’s digital ecosystem—and the growing sophistication of fraud.
The surge in fraud and money laundering has prompted many experts to advocate for a return to a zero-trust framework, where every party must be verified before a transaction proceeds. That mandate will only grow more complex as agentic commerce gains traction and AI agents—and their intentions—must also be validated.
In a recent PaymentsJournal podcast, FinScan’s Chris Ostrowski, Head of Product Management, and Kieran Holland, Global Head of Solutions Engineering, along with Christopher Miller, Lead Emerging Payments Analyst at Javelin Strategy & Research, discussed how these factors have placed a premium on trust.
There are tangible ways organizations can build trust in a real-time, agentic environment. Increasingly, however, those efforts must take place long before a transaction is ever executed.
Accelerating Social ChangeMany artificial intelligence enhancements have been implemented behind the scenes, from workflow optimization to cybersecurity. While customer-facing tools like chatbots have been successful, asking consumers to entrust shopping and payments to AI agents requires a far greater leap of faith.
That leap comes at a time when many consumers are experiencing a crisis of confidence. Fraud attempts have become both relentless and highly convincing—and too many individuals have fallen victim.
“I always give the example of what I would say to any member of my family who says, ‘I’ve received an e-mail offering me this deal or a massive bargain,’” Holland said. “If someone came up to you in the street and said, ‘I’m a Nigerian prince who wants to give you $5,000 if you could cash that for me,’ would you trust them?”
“There’s still that social change needed, because when something is not face-to-face, I have to have certain controls and mechanisms to make me feel confident,” he said. “Maybe that change will eventually become ingrained; maybe it just won’t. Maybe us humans need a certain amount of confidence that we used to get from face-to-face interactions.”
To rebuild confidence in a digital-first environment, organizations must establish effective risk controls around payments. That task has grown more complicated amid the rapid expansion of payment types, now spanning cards, crypto, and real-time payment rails.
This proliferation has elevated payments orchestration platforms to the forefront. These platforms not only operate across multiple payments rails, but also enable businesses to intelligently route transactions to optimize authorization rates, timing, and cost.
Such optimization is no longer just a matter of efficiency. It’s foundational to establishing trust before a transaction ever occurs. It’s also a prerequisite for agentic commerce to scale meaningfully.
“With those true agentic payments, you’re trusting that individual to act on your behalf with that vendor, potentially for the first time, or even a network of vendors,” Ostrowski said.
“You have to trust through interaction, but also within access and being able to facilitate enabling the right credentialing and set of controls within it. So you don’t have your agentic AI go out and buy you 10,000 rolls of toilet paper because it was more efficient to do it that way,” he said. “You’re having to put a lot of that trust up front.”
Given the potential volume and velocity of agent-driven transactions, trust must rest on a firm foundation. Achieving that will require broad industry alignment—a necessary, though potentially challenging, step.
“One of the interesting things here is that trust means something different for each participant in a transaction like this,” Miller said. “There is what a merchant needs to trust, there’s what an issuer needs to trust, there’s what a processor needs to trust, and there’s what consumers need to trust. There’s just a lot here to think about in terms of how we can get all the participants to agree to do the transaction.”
Driving the Next Generation of E-CommerceThis industry-wide agreement between merchants and financial services firms will be paramount because the roles and responsibilities within agentic transactions remain fluid.
“You’re setting conditions around more of an event-driven architecture,” Holland said. “When something happens on this system, then do something else for me without me having to initiate it. But who defines what the criteria for that is? Who designs the guardrails around that and who—I suppose legally and philosophically—holds the responsibility for saying, ‘I want this?’ And now the AI has translated that into a set of conditions that it’s going to use.”
“It’s the same concept in fraud prevention as in retail banking,” he said. “We don’t expect the end consumer to be the perfect guardian of their own financial health. We accept a certain level of responsibility across the injury to help them in that regard. I think the same is going to be true of agentic AI.”
Like modern payments infrastructure, agentic commerce will likely include baseline controls. However, banks will still need to implement their own safeguards, policies, and compliance frameworks to protect customers and their institutions.
Larger financial institutions may need to take the lead, gradually introducing customers to agentic commerce through limited, well-defined use cases that build familiarity and confidence over time.
“You’ll probably see something similar to the use of Zelle in the U.S. where you have banks coming together and putting those safeguards around it at a common level,” Ostrowski said. “It can drive the growth of agentic AI usage within various financial services, within payments, and within retail itself.”
“You’re also going to continue to see the growth of trust registries, where you go through verification processes to be placed on the registry to show that I have proven my ability to be trusted, and that information can follow along with the agents,” he said, “especially within the blockchain space of being able to cryptographically assign transactions and agents with certain rights. All of that can be facilitated at these larger institutions that are already learning it in other areas, to help drive this next generation of e-commerce.”
The Messaging StandardA consortium-driven approach to agentic commerce will hinge on clear, standardized communication. Although the ISO 20022 messaging protocol was not developed specifically with agentic commerce in mind, its rich, structured data model is well suited to this paradigm.
“ISO 20022 has been designed deliberately so that much clearer information is available about what this transaction is and who’s involved,” Holland said. “Whether you need to identify the name and location of the ultimate debtor, the ultimate creditor intermediaries and so on, that new standard was designed from the ground up to do that.”
“It’s important because when you look at how AI within compliance is starting to take off, data is the foundation to that,” he said. “If you haven’t got good foundational, reliable data about who’s involved and who the counterparties are, making a good, accurate, and certainly more automated decision comes with significant risk.”
A common messaging standard becomes even more critical as transactions accelerate towards real time. For example, stablecoins and agentic commerce share significant synergy: both are real-time, highly efficient, and capable of leveraging ISO 20022’s enhanced data capabilities.
For stablecoins to integrate fully into mainstream financial systems, however, transactions must embed sufficient data to distinguish them from other cryptocurrency transfers. They must also incorporate compliance-related information, including support for travel rule requirements.
“That whole sphere comes back to the standard ISO 20022 fields and that consistency we’re starting to get to be able to go forward in these various ways,” Ostrowski said.
Making the Final DecisionMore advanced communication standards, efficient infrastructure, and stronger safeguards are all critical to fostering trust in an agentic commerce ecosystem. Yet none of these solutions can replace distinctly human qualities—creativity, empathy, curiosity, and judgment.
“It’s a true saying that if you design a very fixed, very structured, automated system, us humans will always find a new scenario, a new circumstance that is all of a sudden going to break it,” Holland said. “Introducing humans into it is that creativity buffer where I can see that Chris has bought 10,000 rolls of toilet paper, I can see that it meets his preferences, but I as a human know that’s unlikely.”
“That curiosity whereby humans can still intervene and say 99.9% of the time this might be right, but with my insightfulness, with my creativity, I can introduce that human factor back into this overall very tightly structured process,” he said. “I become that level of flexibility that’s not going to break the system.”
The human element won’t disappear, because AI agents are ultimately designed to act on behalf of individuals. Preferences differ widely and evolve constantly.
An AI agent may learn a consumer’s favorite restaurants, events, or airlines. But human priorities shift. Tastes change. Context matters.
In the end, even in an agent-driven economy, trust will remain deeply human.
“Maybe that day you feel like a window seat instead of an aisle seat, and your agent would say, ‘No, that’s not your typical pattern, you normally do this,’” Ostrowski said. “There’s still that level of independence that the human wants and over time the agent will try to mimic that, but you’re still never going to completely replace that.”
“It’s similar to what we’re seeing within the regulatory environment, where regulators aren’t ready to hand off agentic decisions for risk evaluation or compliance approvals to agents entirely,” he said. “They still want to see a human reviewing the cases, making decisions on whether I should onboard or reject a type of transaction. I want to be the one approving it; I want to be making that final decision. It’s doing 90% of the work for me, but I want that last 10% to stay with me.”
The post The Fate of Agentic Commerce Hinges on an Elusive Resource: Trust appeared first on PaymentsJournal.
High-profile data breaches at major retailers exposed thousands of consumers’ personal account numbers (PANs), spurring the adoption of tokenization—a solution that replaces sensitive account data with surrogate values, protecting both consumers and merchants.
As tokenization scaled, its benefits proved to extend well beyond fraud prevention. Merchants often saw meaningful lifts in authorization rates. But the rise of competing token types, the emergence of agentic commerce, and evolving policies from industry leaders have made tokenization strategy more complex than ever.
In a recent PaymentsJournal podcast, Kiel Cook, Principal Product Manager at IXOPAY, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, explored tokenization’s performance advantages—and why the next phase of change represents an opportunity for merchants to take the reins of their payments destiny.
Avenues to AuthorizationAs demand for tokenization increased, card networks introduced network tokens, payment service providers (PSPs) issued proprietary tokens, and third parties developed universal tokens to bridge ecosystems. For a time, the industry speculated about which format would ultimately prevail.
“The different forms of tokenization were pitted against each other as a this-or-that scenario in the beginning,” Cook said. “But over time, especially in 2025, what I realized was these are actually a better-together play. Ultimately, when we’re talking about payment credentials, we’re talking about authorization rates. Network tokens are a trusted source and typically increase the likelihood of avoiding soft declines.”
“But there are still scenarios where the network token may fail or may not be the most apt payment credential to use,” he said. “Those who are positioned to pivot back to the PAN when needed are the ones that are going to win. The more avenues you have to obtain authorization rates, the better.”
Beyond security and authorization benefits, tokens are persistent. They stay current even when underlying cards expire or are replaced. This reduces unnecessary declines in card-on-file and recurring payment scenarios.
Tokens can also serve as a common denominator across P2Ps, acquirers, and regions. When paired with payments orchestration platforms, they unlock operational flexibility and significant efficiency gains.
Together, these advantages make tokenization foundational to modern payments infrastructure. Yet rapid adoption has also surfaced new pain points for merchants.
“As the merchant landscape and consumer shopping started to evolve into omnichannel and then mobile, merchants would go with best-of-breed providers and sometimes wind up with multiple tokenization stacks,” Apgar said. “When you now want to change PSPs or you want to make a change to a sales channel or bolt on another vendor, it becomes a real issue if you don’t have control over the token.”
The Question of OwnershipFor small businesses just getting off the ground, token ownership is rarely top of mind. Payments services are often lumped into the broader cost of doing business.
“It’s usually not until an issue arises with their PSP, such as downtime or some new technology gets launched into the market and their PSP doesn’t have that,” Cook said. “Then they’re looking to move and they realize they don’t have the authority to make those decisions; they need the permission of their provider in order to take their data and put it somewhere else.”
“In that moment, the question is, ‘Do you own your data? Do you have control? Can you do what you need to do to drive efficiency, to increase your bottom line with your customers, to increase your brand recognition, to have a robust payment connectivity layer?’” He said.
That calculus changes as merchants expand and integrate multiple PSPs. At that stage, token ownership directly impacts portability, routing flexibility, and negotiating leverage. In short, whoever controls the token controls critical aspects of the payment relationship.
“How much autonomy would you like to have in your payments decision?” Cook said. “That’s going to help you understand how important ownership of your own data is going to be for you. Those who own their payment credentials own their own destiny.”
The Tokenization MandatePayment credentials remain incredibly powerful and increasingly difficult to safeguard amid rising fraud sophistication. To strengthen protections, Mastercard has committed to tokenizing all e-commerce transactions by 2030.
While many support the spirit of this mandate, merchants are struggling with its practical implications. Credit cards will still be widely used in 2030, and issuers will continue to provide PANs to consumers.
However, PANs will likely play a diminished role in the transaction lifecycle. That shift makes universal, merchant-driven tokenization essential—not only for protecting customers, but also for maintaining PCI compliance.
“The 2030 mandate is more of a requirement to convert a PAN to a network token because I don’t see PANs being completely removed from the ecosystem by then,” Cook said. “Digital wallets will continue to expand because merchants will start to receive more network tokens through avenues or rails that are out of their control.”
“But there will still be times where someone who’s on the other side of the digital divide that hasn’t adopted a digital wallet and is still coming in trying to process with their PAN,” he said. “The onus will be on the merchant in those scenarios to have the avenues to convert PANs, when they do receive them, to network tokens.”
Developing Agentic TrustA more proactive tokenization strategy is becoming critical as the payment ecosystem approaches another inflection point: the rise of agentic AI. These autonomous agents are poised to become a mainstream shopping interface.
“We’re going from one payment credential—historically the PAN—to now a proliferation of payment credentials and line of sight to where these are coming from,” Cook said. “How do you know what to trust and what not to trust? How do you know the difference between an agentic agent that has permission versus a bot hitting your website?”
“One of the big things is making sure that you as a merchant have your data stored in a way so that the agent can pick it up and share it with the consumer on the other side of that search,” he said. “Not having your data in the correct format or being able to be picked up in a certain way is going to be a big challenge for your company to maintain line of sight to your consumer, as they have a new middle layer managing the interaction.”
This highlights a new core challenge—trust. Merchants must verify not only the consumer, but also the AI agent acting on their behalf, along with permissions and intent behind each transaction. Meeting this need will require new infrastructure capable of assessing and managing agentic risk.
Tokens can play a pivotal role by creating guardrails around agent-driven activity. Merchants should begin preparing now to support agentic-ready token frameworks.
“Keep in mind, it’s just a different version of a network token, which are just payment credentials,” Cook said. “Universal tokenization should be looked at as, ‘I’m about to get bombarded with payment credentials that are scheme-persisted. I don’t control the usage; I don’t control the relationship; these things weren’t built with me in mind. What was built with me in mind? What is my tool to anchor myself?’ That’s universal tokenization.”
“That’s the playbook that I would put out there for merchants to leverage to protect themselves,” he said. “It’s making sure that they have line of sight to who is who and having something that they can drop directly into their ecosystem without having to re-architect their entire payment stack in order to be relevant in the agentic commerce world.”
The Tactics Are ChangingThe rapid evolution of payments—especially the acceleration of generative and agentic AI—has created urgency for many merchants to modernize. While adopting new technologies is important, strategy must remain grounded.
“If you go back 10 years ago, we were in the same place with tokenization and everybody rushed to tokenize as a stopgap security measure—only to find out down the road that I now need a more holistic strategy around how I use tokens and what benefits they give me beyond security,” Apgar said.
“That’s where we are with AI, too,” he said. “My advice to merchants would be slow down the conversation and understand what AI means for your business, for your customers and your data security—and try to put a strategy around all of this.”
At its core, any tokenization roadmap should be a natural extension of a company’s broader mission: protecting customers, optimizing performance, and maintaining control in a dynamic ecosystem.
“We’re talking about consumers making a purchase and merchants receiving a payment credential and maintaining line-of-sight to their customer for loyalty plays, security plays and so on,” Cook said. “This is what we’ve always been doing; the tactics are just changing. This is change management. Are you paying attention to the things that are changing? Do you see the incremental adjustments that are occurring and are you adjusting as you go?”
“If you have a rigid approach to your processing stack, that’s when things will become detrimental,” he said. “At the end of the day, no one can see what’s on the other side of the 2030 line. The best thing that you can do is put yourself in a flexible, future-proof payment stack so you’re prepared for whatever payment credential that comes on the other side.”
Learn more about how agentic commerce shifts risk to merchants and breaks traditional fraud models The post Tokenization: From Security Tool to Future-Ready Payments appeared first on PaymentsJournal.
For many small business owners, the workday doesn’t end when customers leave. It continues late into the evening—logging into multiple dashboards, exporting spreadsheets, reconciling transactions, and trying to make sense of scattered financial data.
In the absence of a centralized solution, many have been forced to stitch together a patchwork of banks, fintech apps, payment processors, and accounting tools just to keep their business running. Reconciling these fragmented systems has become a drain on merchants who are already stretched thin.
This growing complexity has implications beyond the merchants themselves. As small businesses expand their financial relationships across multiple providers—and as physical banking touchpoints become less frequent—financial institutions are finding it harder to cultivate meaningful connections with this segment. What was once a relationship-driven business risks becoming transactional.
In a recent PaymentsJournal podcast, Eleanor Bontrager, VP of Product Management at Fiserv, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed how banks still hold an advantage in small business financial services. However, many financial institutions will need to shift their strategies to become the centralized financial hub that SMBs increasingly expect.
Eliminating the SpreadsheetsWhile financial management is critical to any business, it is only one facet of running an organization. The more time business owners devote to managing finances, the less time they can spend on other key tasks.
As digital payments have evolved, merchants have adopted a growing array of tools to deliver the payment experiences and financial services customers expect. As a result, small business owners often cobble together fragmented solutions that were never designed to work in concert.
“They’re having to look at the disparate data that comes from those tools and try to imagine what their cash flow position might be,” Bontrager said. “Many aren’t even really using tools; they’re using Excel spreadsheets. They’re literally sitting down with a pen and paper trying to figure out what money they expect to be coming in and what money they expect to be going out and trying to figure out what that means for their business.”
Amid these challenges, merchants don’t want more tools to bolt on. Instead, they are seeking a streamlined solution that enables seamless, transparent transactions and provides a holistic view of their cash flow.
Cost remains an important consideration. Yet many merchants would willingly invest in a unified platform that reduces administrative burden and minimizes the errors common in manual processes.
“We’ve seen research recently where small businesses will spend an average of 25 hours per week just trying to manage data between various financial applications,” Apgar said. “They’re not doing that when the store is open, that time is family time—after hours and on weekends—where people are constructing spreadsheets and poring over paper statements.”
“The data from their point of sale has to be reconciled back to their bank statement,” he said. “You have payroll to manage, vendors have to get paid, and those invoices have to get reconciled to inventory. There are so many moving parts.”
All Their Financial Eggs in One BasketThese variables have led SMBs to increasingly seek a single financial home. Ironically, this desire often stems from the complexity created by maintaining multiple financial relationships—business owners now need a centralized cash flow hub that aggregates their various accounts and functions.
While such a solution may not eliminate every external relationship, it provides merchants with a critical anchor. Once engaged on a centralized platform, banks are well positioned to differentiate themselves and deepen relationships with their SMB clients.
“All in all, money moves faster within the financial institution environment, so the FIs have a clear advantage here,” Bontrager said. “That’s what small businesses want and need, to be able to make those payments easily and quickly. They’re also looking to have that secure, trusted relationship. Within the bank environment, those fraud and risk protections are very much built into that experience.”
“As we think about the ideal solution, it’s taking some aspects of the fintech solution and making those available in the FI channel,” she said. “For example, many small businesses have a strong preference for putting all of their spends on a credit card. Being able to make that available within a payment application and not just relying on DDA accounts. That can be important to package all of that up together, just for the convenience of the small business.”
Consolidating banking and fintech relationships into a single hub may seem counterintuitive, given the adage warning against putting all one’s eggs in one basket. However, diversifying an investment portfolio to mitigate risk is fundamentally different from streamlining a small business’s banking infrastructure for efficiency and clarity.
“When we say having all their eggs in one basket, it not suggesting that the way for FIs to win in small business is to be a one-stop shop and provide every single financial service that a business could want,” Apgar said. “It’s really about having all the financial data in one basket to the extent that data can be exchanged.”
“Even if businesses are using some fintech services, API architecture that’s common today facilitates that kind of data exchange, so the FI can come to the forefront with a complete snapshot of the small business’s financial health and cash flow—and really become the primary partner,” he said.
From Data Harvester to Trusted AdvisorData has become central to modern financial services because it helps organizations personalize their offerings in a digital environment.
“There can be so much data; it’s being able to take that data and translate that into timely, accurate advisory nudges to the small business that help them anticipate when they’re at risk or see that there’s an opportunity,” Bontrager said. “That’s becoming more of an expectation. It’s, “Hey, you might go cash flow negative next week’ or ‘Looks like your revenues are increasing, are you looking to open a second location? Can we help you with that?’”
Yet solutions that deliver these types of actionable insights to small businesses have been limited. Historically, many financial institutions didn’t treat the SMB segment as a strategic priority. Smaller merchants were often funneled into consumer products or served by commercial and treasury solutions built for much larger enterprises.
The traditional small business strategy—such as it was—centered largely on branch-based relationship building and small business lending.
“There’s so much more that they can be doing,” Bontrager said. “Being able to meet small businesses where they are and provide solutions that allow them to make payments, receive payments, reconciliation, automated workflows. Providing those solutions is key to being able to continue having the small business relationships that they have today.”
“That relationship aspect is always going to be super important, but you need to be able to have an excellent digital solution from a payments and receivables perspective in order to keep fostering that relationship,” she said. “As they do that, they’re going to have more data about that small business and that’s going to help them better serve their small business customers.”
Becoming the Central Financial HubWhile holistic SMB platforms are quickly becoming a market expectation, many financial institutions lack the infrastructure or resources to build and deliver them in-house.
This moment represents a tipping point. To stand out in a crowded market, banks must rethink and modernize their small business banking strategies.
“The reality is that the customers are already filling in those gaps on their own today,” Apgar said. “Rather than wait until you can build everything internally to provide 100% of your customer needs, it makes sense to embrace relationships strategically with the right partners to be able to create that end-to-end digital solution—both from service delivery and also from a data perspective—to deliver those key insights that businesses are looking for.”
The first step is simple: listen. By engaging small business customers and understanding their pain points, banks will uncover common themes—such as the need for intuitive workflows that simplify payments, receivables, and cash flow management.
The ultimate objective is to provide a solution that helps small business owners focus on growing their business rather than managing its financial complexity. For many banks, achieving this vision will require strategic partnerships and external support.
“Think about where those partnerships can come from that will help them be able to deliver a solution like that and have some speed to market that will allow them to quickly meet the needs of small businesses,” Bontrager said. “In doing so, if they’re able to provide the key insights that the small business is looking for, the upside for the financial institution is they have that data, and they can also benefit from those insights and make better risk or underwriting decisions.”
“There’s a lot of potential in the solutions that are available,” she said. “It comes down to evaluating the problem, figuring out who their small business customers are and what their needs are, and then being able to provide them with solutions that meet their needs.”
The post Despite Fintech Encroachment, Banks Can Remain the Go-To for SMBs appeared first on PaymentsJournal.
With the advent of faster payments, many financial organizations have prioritized speed over fraud detection. Consumers expect instant transactions, but banks must still protect themselves and their customers from fraud. Running fraud detection in the background—analyzing contextual signals and historical data—helps strike the right balance between speed and security.
In a PaymentsJournal Podcast, Diarmuid Thoma, Head of Fraud & Data Strategy at AtData, and Jennifer Pitt, Senior Analyst of Fraud Management at Javelin Strategy & Research, discussed how traditional fraud detection methods have fallen short in the era of real-time payments. The key today is to stop fraud before it occurs.
Moving Protections UpstreamFor customers, speed is paramount—but that speed is only required at the transaction or decision phase. Banks can conduct much of the pre-authorization and risk assessment before a transaction ever happens, without the pressure of real-time execution. By the time a customer reaches the transaction stage, the bank should not be scrambling to complete all fraud checks instantly.
Many institutions focus on where the financial loss occurs. When a transaction results in a chargeback, they look to fix the transaction itself. In most cases, however, that wasn’t the customer’s first interaction. The initial touchpoint often occurred much earlier, well upstream of the chargeback.
“With account takeover, you can see a lot of behavioral signs before payments even happen,” said Pitt. “If the information is changed in something like an account profile, that’s a clue. Logins from different areas at different times can be a clue. If that is flagged first, then essentially the suspicious payment doesn’t happen, and there’s no loss to either the consumer or the financial institution.”
Building an IdentityIn the traditional brick-and-mortar world, banks might have asked for a driver’s license or passport to open an account, perhaps along with a utility bill to verify an address. While those documents could be forged, such cases were relatively uncommon.
Today, verification relies on digital identity. Devices, IP addresses, and email accounts form the foundation of an identity profile. That profile extends across consortium networks containing prior transaction data, creating a clearer picture of how a consumer behaves. For example, is this person likely to buy $1,000 sneakers?
“It’s building an identity,” said Thoma. “Even in the physical world, who we are is defined by liking a certain bar, or shopping at a certain store. All of those together, that’s you. All we’re doing now is taking that and translating it into a digital concept. From a fraud perspective, that builds consistency. The nice thing about good people, from a fraud profiling point of view, is they’re very consistent.”
Modern fraud professionals build dynamic profiles rather than relying on static identifiers. They can construct timelines spanning five or 10 years—whatever data is available—representing a big leap forward from traditional methods.
“When I was in the banking world, part of my role was to evaluate investigations to see if the investigations were done correctly,” said Pitt. “I would frequently listen to different calls from customer service reps and call centers. Several times I listened to calls where the fraudster themself was trying to make a wire transfer.
“The call center rep just asked for basic information like name, date of birth, normal knowledge base questions. Information that you can get pretty much anywhere, from leaked data breaches to background check websites,” she said. “That wire was able to go through. And when the customers called in to say there’s fraud, the customer service representative said, well, no, you verified the information.”
Bringing the Information TogetherMany financial institutions still conduct manual reviews one transaction at a time. This approach yields insight only into those specific transactions and fails to reveal broader fraud patterns or emerging tactics.
“I still see small financial institutions operating as if there were no internet,” said Pitt. “They’re essentially verifying physical documents, especially in branches with human detection only. That is not good enough anymore with the AI tools that are out there for fraudsters. It is so easy to fake or forge some of these documents. You can’t rely on a human detection for that.”
Compounding the issue, criminals understand reporting thresholds. They deliberately stay below those limits, spreading activity across multiple accounts and institutions. That is why consortium data-sharing is essential for identifying coordinated patterns that would otherwise go undetected.
The Best Quality DataIn the early days of social media, companies could look up a profile to confirm a person’s existence. Today, AI can easily generate convincing social profiles across multiple contexts and geographies. Fabricating digital footprints isn’t only simple, it’s scalable. The challenge for banks is no longer finding data, but finding data that can’t be easily manipulated.
“Ideally, the best quality data is immune to automated generation,” Thoma said. “Sources that are unconnected to each other are independent of each other. An email is unrelated to a device from a data perspective. When you take in all this data from unconnected data sources—if they all agree that something’s good—generally you have better decision quality.”
Investing in advanced fraud prevention tools may seem costly upfront, but the expense is inevitable. Institutions will either pay on the front end by strengthening their defenses—or on the back end through fines, consent orders, reputational damage, and customer attrition.
“We have to stop looking at payments fraud from the point of the transaction,” said Pitt. “That’s the last possible point to prevent fraud. We talk about defense in depth and a layered approach where if some security measure does not catch the fraud, then another one will. We still need to look at the payment itself, but we also need to look at everything before that so that we can catch the fraud earlier.”
The post From Reaction to Prevention: Rethinking Payment Fraud appeared first on PaymentsJournal.
ACH is a critical part of the U.S. payment infrastructure, driving a significant portion of transaction volumes and supporting important use cases such as supplier payments, payroll, and many others. Despite competition from newer rails that serve similar purposes, ACH continues to grow at a remarkable pace.
In a PaymentsJournal Podcast, Radha Suvarna, Chief Product Officer of Payments at Finastra, and James Wester, Co-Head of Payments at Javelin Strategy & Research, examined why ACH payments have remained so resilient and valuable, and highlighted the benefits for financial institutions considering offering ACH payments to their customers.
Old Is New AgainWhen fintech is discussed in the context of modernizing financial services, there is often the assumption that “old” means outdated and “new” means superior. Even though ACH is considered a legacy rail, it’s still highly reliable. It was designed for a specific type of payment: high-volume, predictable transactions that need to be scheduled, such as payroll or bill payments.
“One reason ACH continues to grow is because we can do the planning for those predictable payments,” said Wester. “If you can plan for all of that beforehand, it becomes a great rail for handling those types of payments.”
A Modern ACH Payments EngineLooking ahead, ACH must become forward compatible alongside other payment rails. Enabling forward compatibility allows the industry to leverage new technologies such as artificial intelligence and integrate them seamlessly with ACH driving improvements in areas such as fraud detection and automation.
So what does a modern ACH payments engine look like from an operational perspective? First and foremost, it must be cloud-native and modular. It should leverage modern technologies such as microservices and API-based capabilities to connect seamlessly with both upstream and downstream systems. The platform should also be architected to scale volumes up or down as needed, recognizing that ACH doesn’t necessarily need to run continuously throughout the day and has peaks in volumes.
“If we can scale the infrastructure up and down as necessary to drive more efficient total cost of ownership, that would be a significant value add,” said Suvarna. “It would be particularly effective in high volume throughput windows.”
Another important component of forward compatibility is the ability to test new use cases and enable fast experimentation. Smart routing between batch payments and real-time payments, for example, could be offered as a value-added service. To determine whether such capabilities create meaningful impact, organizations need platforms that allow quick testing, with the ability to fail fast or scale successful outcomes.
Financial institutions can rely on a modern ACH solution to integrate with cloud-native and API-driven systems, enabling faster and more efficient launches for new offerings.
It’s also important to note that while the ACH clearing itself has not yet transitioned to ISO 20022, many corporates are already using this for their submissions. A modern ACH platform needs to be able to both handle this, and the eventual migration of the clearing system, seamlessly while accommodating the complex workflows already built around ACH today.
Seeking ROI: CostThe ROI from ACH can be viewed through two primary lenses: cost and revenue. On the cost side, the first consideration is infrastructure. Platforms built on open-source technologies and modern software stacks are typically less expensive than legacy systems.
The second cost driver is software maintenance and enhancement. As new use cases come up across corporate and retail segments, and as specifications continue to evolve, keeping pace with business-driven and standards-driven changes can be very expensive for legacy platforms.
“There are fewer software developers available to code in some of the older technologies like COBOL,” said Suvarna. “Which means there aren’t that many developers around to make the necessary changes for the foreseeable future. The specialized infrastructure roles where you have a person who really knows the system, those obviously become more expensive.”
The third cost area is operations. Today, exception handling and returns for ACH are often managed separately from other clearing systems. Consolidating these processes into a unified stack—and leveraging technologies like AI—can streamline operations.
“I’m not saying today you can’t deploy AI technologies and machine learning to identify payment repairs, based on the data coming from the legacy ACH capabilities,” said Suvarna. “But the more open modern stack makes it easier and faster.”
Seeking ROI: RevenueOn the revenue side, the primary opportunity for banks lies in differentiation through an enhanced user experience. Examples include offerings such as smart routing between ACH and real-time payments. A second opportunity comes from innovative use cases, where banks create differentiated value propositions around ACH that set them apart from competing institutions.
“When people start talking about ROI, I often hear them talk about revenue first,” said Wester. “But you have to be careful when you talk about system upgrades from a revenue standpoint. To sell it to your leadership, start with the inevitable things that need to be sunsetted and where you can find cost avoidance.”
Finding a PartnerFinancial institutions embarking on this modernization journey need partners with experience across multiple implementation domains. A broad perspective helps identify dependencies, eliminate blind spots, and apply best practices. An experienced vendor understands the optimal path forward, knows where common pitfalls exist, and can guide institutions toward scalable, future-ready solutions.
“I like to use the phrase “fish don’t know water is wet,”’ said Wester. “Oftentimes, financial institutions have been running their systems a certain way for so long that they no longer look inefficient, just because they still work. A good partner can come in and say, here are the best practices, here are things where you might be blind to your own issues.”
Finastra, for instance, serves both large enterprise and mid-market client segments. They have built out Global PAYplus for large enterprises and Payments to Go for mid-market clients—both delivered on cloud-native platforms supporting modern ACH clearing. This single, modern payment hub architecture supports multiple clearing types with a common user experience across all rails, and enables forward compatibility, positioning the platform to support future use cases as they emerge.
“At the end of the day, ACH isn’t about just technology modernization,” said Suvarna. “It’s a transformation of business processes around very critical infrastructure that serves many corporate and retail customer needs.”
The post ACH and the Path Toward Future-Ready Payments appeared first on PaymentsJournal.
Credit unions have distinct hallmarks: they are not-for-profit and member-owned. Yet amid the flood of financial services companies in today’s digital landscape, these differentiators can be difficult to convey. While many younger consumers are actively seeking the kind of guidance credit unions excel at providing, they often perceive credit unions as just another bank.
In a recent PaymentsJournal podcast, Velera’s Tom Pierce, Chief Marketing and Communications Officer, and Carrie Stapp, Vice President of Marketing, along with Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, analyzed two Velera studies—Eye on Payments and CU Growth Outlook—to distill critical insights into how credit unions can reclaim their brands and stand out in a crowded field.
From Emerging to StandardSeveral of the most compelling insights center on how consumers pay. While debit and credit cards have jockeyed for dominance in recent years, usage was nearly evenly split last year. Despite this balance, the two methods tend to serve different purposes. Consumers typically use debit cards for everyday purchases—such as convenience stores, pharmacies and grocery stores—while credit cards are more often reserved for larger purchases at big-box retailers or entertainment venues.
Another notable trend is the continued momentum behind digital wallets and contactless payments. Roughly seven in 10 consumers now use a mobile wallet at least a few times per year, and about a third use wallets multiple times per week.
“Another key finding is about other areas that have moved from emerging payments into payment standards, including buy now, pay later and P2P payments,” Pierce said. “With BNPL, we’ve got 38% of credit union members saying they would be likely to use that type of program if it was offered by their credit union.”
“On the P2P side, three-quarters of consumers say they use these payments at least periodically, and some of the younger generations are using them as a primary payment method,” he said.
As Gen Z ages into adulthood, the preferences of younger consumers are coming into sharper focus. When it comes to payments, digital is—unsurprisingly—the default. Still, this makes it even more critical for credit unions to keep digital capabilities top of mind.
“It calls out the big trio within payments right now, which are digital wallets, BNPL and contactless cards, and those are very important high-growth areas,” Riley said. “They also appeal to younger generations, which feeds right into the significance of Gen Z. One of the common problems with credit unions is the aging level of their members. Making sure that you’re building the business for decades to come is the reason you want to engage the younger age cohorts.”
The Growing Identity CrisisTo establish meaningful engagement, organizations must look beyond payments and understand how younger consumers learn about financial services. For Gen Z, guidance frequently comes from non-traditional sources, rather than established FIs.
“Social media, for the first time across all of our generations, showed up in the top three as most trusted for financial advice,” Stapp said. “Understanding the role that social media plays, understanding where younger generations are getting their information, and how they’re trusting that information is incredibly important for the financial services industry to understand, absorb and adapt to.”
At the same time, younger consumers are experiencing heightened financial stress. Social media can exacerbate this anxiety by encouraging constant comparison, while the growing number of apps, cards and digital payment options can make it difficult to track spending and stick to a budget. Although digital financial management tools exist, many consumers are increasingly looking to their financial institution for support and guidance.
Credit unions thrive in delivering this personal touch, yet many younger consumers remain unaware that this lifeline exists.
“Only 16% of respondents from the Gen Z category said that credit unions are focused on community, and they equally felt that they were profit-driven,” Stapp said. “They’re not understanding what the basis of a credit union is, and that it’s people helping people. It’s creating an identity crisis and an opportunity for the credit union industry to re-educate, and I would go so far as to say rebrand itself.”
The Embedded OpportunitiesAs part of broader rebranding efforts, credit unions have several key opportunities to consider. First, economic uncertainty in recent years has driven strong interest in credit cards, making competitive credit card offerings an important area of focus.
“I’ve seen some numbers out there that only about 20% of credit union members have a credit card with their credit union, so there is a lot of white space there,” Pierce said. “This year, we had nearly four in 10 credit members apply for a new credit card in the last year and over 50% of Gen Z said that they would look to apply for one in the next year. So, a lot of growth opportunity is there in the credit card space.”
“We also saw nine in 10 folks saying they received real-time approval or denial following application for a credit card, so having that real-time response through origination solutions is critical for engaging that member quickly,” he said.
Outside of card offerings, credit unions should also rethink how they engage with members. In the Velera Eye on Payments study, consumers across all generations expressed a strong preference for online interactions, especially for tasks such as paying bills, adjusting card controls or applying for new accounts or products.
This digital preference is reshaping traditional definitions of financial solutions. Embedded finance, once understood simply as financial products accessible within a website or app, is rapidly expanding into a more comprehensive and integrated experience.
“We’re seeing a lot of the big banks, as well as the fintechs, embedding themselves in the lives of consumers at the point of sale,” Stapp said. “I was buying a birthday card over the weekend and the birthday card aisle had an entire section where you can add a Venmo code inside of the card.”
“This is what we’re talking about when we’re talking about embedded. I’m watching Netflix or Amazon Prime and I can buy whatever’s on that ad right there from my phone or from my TV,” she said. “The definition of embedded goes further than just, ‘Can I access a product or service on a website or my mobile app?’ That’s important to understand, on top of understanding how they’re preferring to pay.”
Bringing Members AlongThese shifts in expectations and technology underscore the need for credit unions to revisit the overall member journey and experience.
“What is it that we’re creating that makes their lives easier?” Stapp said. “We now have to meet them where they are instead of them coming to us for a product or solution. When you’re thinking through your digital strategy, when you’re thinking through the products and solutions that you are going to invest in for your financial institution, map out that digital strategy and experience that your member is going to get with the lens of, ‘Is this enticing to all of the generations, particularly those generations where I’m going to get my growth?’”
As they develop this roadmap, financial institutions must also plan for fraud, which is increasing in both scale and sophistication. Instead of relying on physical tactics like gas pump skimmers, bad actors now deploy advanced impersonation scams to trick consumers into sharing personal data or sending money.
Artificial intelligence has made these fraud attempts more effective, but it also offers powerful tools for detection and prevention. Equally important, consumers themselves are embracing AI. Velera’s Eye on Payments report found that one in three consumers uses AI several times per week, and over half use it for financial planning or budgeting.
While shifting preferences, emerging threats and rapidly evolving technologies present challenges, they also create significant opportunities.
“From an innovation perspective, account card origination is a critical investment area,” Pierce said. “Making sure your members are protected from the evolving fraud and then laying the future for AI are all great areas of focus for investments. On this innovation journey, credit unions have a wonderful opportunity to bring their members along.”
“In Eye on Payments, 85% of respondents—especially the younger generation—said that they would trust their credit union for financial and innovation-related advice,” he said. “As these innovations are coming to market, bringing your members along and being a trusted advisor is key to your success.”
The post Not Just Another Bank: How Credit Unions Can Reach Younger Members appeared first on PaymentsJournal.
Scams have become universal, affecting all types of consumers and every kind of organization. This has placed tremendous pressure on financial services firms, which often bear the brunt of the financial losses, to develop strong fraud prevention strategies to protect their customers.
In a recent PaymentsJournal podcast, Raj Dasgupta, Vice President of Product Marketing at BioCatch, and Suzanne Sando, Lead Fraud Analyst at Javelin Strategy & Research, discussed the evolving forms of scams, the varying global approaches to fraud prevention, and how financial institutions can develop a blueprint to combat these threats.
Inundated at Every TurnOne of the most impactful trends in recent years is that cybercriminals can now more accurately target their victims. For example, someone interested in investing may receive messages about cryptocurrency scams, while a job seeker might be targeted with fake job offers.
Even with this precision targeting, cybercriminals continue to cast a wide net.
“The target for these kinds of scams could be just about anybody,” Dasgupta said. “Usually, we are led to think that they would have been elderly people who are less tech savvy or who can be gullible, but not quite. It could have been anybody. What we are seeing romance scam-wise is it’s skewed towards the elderly. The scammers target lonely individuals who are looking to get into a relationship.”
“Or it could be an investment scam where it can target practically anybody, mostly the elderly, but then the younger demographic is also not immune to those kinds of scams,” he said. “If you are less averse to financial risk, you might end up investing in cryptocurrency in the hope of great returns, ultimately to realize that you’ve been scammed.”
These diverse scam variants are driving a widespread problem. In a recent survey conducted by BioCatch, respondents reported a 65% year-over-year increase in the total number of scams between 2024 and 2025. This included a 14% rise in purchase scams, the most common type worldwide.
Phishing scams via both voice and texting— oftenknown as smishing—also increased last year, along with significant upticks in romance and investment scams.
The lone bright spot in the study was a 15% decrease in impersonation scams, where criminals pose as legitimate agencies. This decline is likely due to increased awareness and more effective controls implemented by organizations.
“We saw minuscule drops in scam losses in the number of affected victims, but it’s not enough to throw the confetti and pop the champagne,” Sando said. “We’re still talking about a $20 billion problem for scams across 22 million victims, according to Javelin data. Scams feel so prevalent at this point. It feels like we can’t trust anybody or anything—we can’t trust any text that comes in, or emails, DMs, or social media.”
“Everything that we get is met with this air of distrust, and from a consumer perspective, rightfully so,” she said. “We’re inundated with these messages all the time, at every single turn. I don’t feel like I can trust that this voicemail that I got from my mom is really from my mom.”
A Changing AnswerIn addition to rising volumes, scam messages have become more convincing and harder to detect. A major driver of this trend is new technology, particularly artificial intelligence.
“There are AI technologies which are easily adoptable, like writing out a grammatically correct email or a text message and making it look very real,” Dasgupta said. “Those are easily accessible technologies. Now it’s hard for our customers to detect if a victim was in fact receiving an email or a text which was constructed by AI.”
“The more sophisticated forms are not happening at scale so we can’t call them mainstream just yet, but that is not to say that things can’t change in about six months, because this is a space which is moving very fast,” he said. “Technology itself is changing very fast. I wouldn’t be surprised if I have to give you a different answer six months from now.”
AI has also enabled the creation of highly realistic deepfake audio and video. For example, a deep fake audio clip could be used in a call to convince someone that a family member is in distress and needs urgent help.
As retailers deploy AI in the shopping experience, such as through agentic commerce, cybercriminals are finding ways to exploit this technology. For instance, they could create counterfeit agent services or attempt to manipulate AI agents themselves. Unfortunately, these examples represent just a few of the many ways cybercriminals are leveraging AI for scams.
“We have not seen all that AI is capable of at this point,” Sando said. “That can go for how it can help financial institutions better mitigate scams, but it also stands true for criminals. They aren’t bound by regulatory bodies or compliance or governance teams or data privacy restrictions.”
“They can do whatever they want, so they can move a lot faster and more freely in adopting AI,” she said. “They’re more agile and they can do what they need to get it to fit their needs for their schemes.”
Not Just a Fraud ProblemThe scale and sophistication of scams have imposed both direct and indirect costs on financial institutions. These include authorized losses, where customers are manipulated into approving transactions, and unauthorized losses, such as account takeovers or stolen cards.
Unfortunately, the impact of scams extends far beyond immediate financial losses. They can cause operational strain and reputational damage.
“Something that is not immediately apparent is that victims can leave the bank, so there is a real cost of attrition and related is the cost of acquisition,” Dasgupta said. “When one customer leaves, to get another customer to have the same level of profitability, your acquisition cost may be double what you normally have to acquire new customers.”
“Bear in mind also when the customers are leaving, in a lot of cases they’re seniors and they’ve had their life savings with the financial institution,” he said. “When they choose to leave, they’re leaving with all that money, so it’s a big deposit loss. It impacts the overall portfolio.”
In addition to driving customer attrition, scams consume substantial resources. Many institutions rely on staff to investigate incidents, and these teams are often quickly overwhelmed by the sheer volume of cases.
What’s more, the increasing effectiveness of scams has led to a rise in authorized losses, and the resources required to investigate and respond to these incidents are often substantial.
“All the associated costs mean that the profitability of your deposit portfolio is taking a hit,” Dasgupta said. “It’s not only the reimbursement losses, but everything else: investigative effort, regulatory exposure, regulatory requirements, compliance requirements, legal exposure, deposit loss, acquisition costs of new customers, and the profitability of the deposit base.”
“All of those things have to be taken into consideration when thinking of scams as a problem rather than just a fraud problem,” he said.
Getting It RightDue to this combination of factors, scams have become a global scourge. However, some regions have made strides in developing effective scam prevention mechanisms.
“Two countries are top of mind when it comes to getting it right,” Dasgupta said. “One is Australia, and I would give a shout out to Australia because they’re not doing it because of regulatory pressure, but they’re doing it because they feel like they need to protect their customers. They’ve taken a variety of actions—be it technology related, be it process related—to make sure that their end users are not going to be victims of scams and lose money.”
“The UK is a bit different than Australia because there is regulation that came into effect not too long ago, where the losses will have to be divided out between the sending bank and the receiving bank so that the victim who’s a customer of one of those banks is not left holding the bag,” he said. “That’s a step forward.”
Conversely, the U.S. has lagged behind in this area. One reason is the sheer number of financial institutions operating in the United States; another is the country’s more market-driven regulatory approach.
While some leading U.S. banks have invested in scam prevention, significant progress remains to be made. The strategies adopted by other countries can provide useful guidance, but U.S. institutions will ultimately need to forge their own path.
“The important part to me is not taking exactly what some other country is doing and doing a copy-paste into the U.S.,” Sando said. “We know that’s not going to work. Everybody has their own regulations and things that are going to work for them. It’s about taking what strides other countries have taken, figuring out what’s feasible for the U.S. and taking action on that.”
“That is where I feel like we’re missing the boat,” she said. “We’re missing the take-action part in a big way. We’ve got a lot of good things going for us. We’ve got task forces and scam groups that are popping up that are sharing critical information and encouraging more industry-level information sharing. That’s a huge step forward. We now have to get to the point where we’re taking concrete action to stop those scams.”
Combating the TypologiesThe most impactful action financial institutions can take is to acknowledge the scam threat and begin developing proactive solutions. Given the unlikelihood of regulatory mandate on scam prevention in the near term, organizations will need to lay the groundwork themselves.
Although this is a significant undertaking, the first step is to develop a dedicated strategy to mitigate the devasting impacts of scams. Then, it’s time to act.
“If they don’t act, they will be at a loss,” Dasgupta said. “Scams cannot happen if there is no mule account where the scam proceeds can be deposited. They’re all interlinked and at the end of the day the more accounts you have either become victims of scams or they’re holding illegal money from scams.”
“Banks are becoming very aware of it and at the highest levels they are making it their KPI to combat this entire ecosystem of different scam typologies and different attack vectors so that they can make their base more profitable and have better quality deposits,” he said. “That’s where my hope is that this trend continues, where banks are getting more aware of what needs to be done and taking action.”
The post Escalating Scams Demand a Dedicated Response appeared first on PaymentsJournal.
Every year, billions of dollars vanish at the final step of online shopping, not because consumers change their minds, but because of hurdles within the checkout experience. Despite decades of innovation in payments technology, many shoppers still walk away when checkout feels slow or overly complex, costing businesses an estimated $260 billion annually.
The answer may lie in the growing influence of developers as companies build embedded payment platforms. In a PaymentsJournal Podcast, Bryan Long, Senior Director of Product Management at North, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed how developers are driving innovation—and actively solving checkout challenges—for online retailers.
Managing FrictionToday’s e-commerce ecosystem reveals a widening gap between shoppers and merchants. Consumers expect a seamless experience: fast product discovery, strong brand trust, and checkout convenience features like one-click checkout, intelligent form filling, and address autocomplete. Meanwhile, merchants and the independent software vendors (ISVs) that power point-of-sale systems need data access and security, without sacrificing conversation rates.
“Address autocomplete or one-click payment buttons are not just conveniences for merchants,” said Long. “I think of them as friction management. Every extra field that a user has to fill out lowers conversion and results in decreased sales.”
Some platforms attempt to bridge this gap with guest checkout solutions. Shopify, for example, allows customers to complete purchases in a single click using stored credentials. While convenient, this approach can limit a retailer’s ability to collect customer data such as email addresses and shipping details.
Additionally, redirecting shoppers to a third-party payment gateway—often with a different URL—can undermine brand trust and introduce friction at the most critical moment of the purchase journey.
“For me, it sets off all these subconscious alarm bells. Is data security an issue here? It feels like the page has been taken over by hackers,” Long said. “As a product person, it’s really bad product design especially when a shopper is about to divulge their most personal data.”
The Benefits of Embedded PaymentsEmbedded payments provide a more comprehensive solution. They allow businesses to own the checkout experience, keeping customers on the merchant’s site through the transaction while delivering a fully branded, customizable flow. The result is lower churn, higher conversion rates, and increased revenue.
By enabling one-click checkout and supporting popular wallets like Apple Pay and Google Pay, embedded payments reduce cart abandonment. Features such as address autocomplete and intuitive form design further streamline data entry, cutting down checkout time and customer frustration.
“The tech has evolved so much just in the last couple of years to meet all those points that reduce the friction, protect the data, and deliver that stellar user experience,” said Apgar. “But the fact of the matter is most merchants, when they spool up their e-commerce site and pick a payments provider, they implement the tech that’s available and never revisit it. Many sites are using outdated technology simply because that was the best that they could find at the time.”
As cart abandonment rates remain stubbornly high, businesses are reevaluating legacy payment processors and increasingly opting for fintech-driven solutions. While switching costs exist, many organizations are finding the integration effort well worth the payoff.
Developers as Decision MakersOver the past five to seven years, another major shift has reshaped the payments landscape: developers have become key decision makers. If a product introduces too much friction—whether in APIs, documentations, or integration complexity—developers will simply abandon it and advise business owners to do the same.
“What we’re really seeing is developers having become first-class citizens,” Long said. “It’s an add-on, self-service for developers is sales. In 2026, a salesperson is often times not your first point of contact—the API documentation is.”
“That’s why we build product functionality for developers,” he said. “Providing a unified sandbox that mirrors production allows developers to test end-to-end in system integration without having to wait for a sales call. Giving developers access to API logs and code samples also improves the integration experience and cuts down on the time to integrate, which is faster speed to revenue.”
When embedded payment strategies are paired with well-architected, API-first platforms, partner integration timelines can shrink from months to weeks. This cycle builds trust with developers and improves brand credibility. At the end of the day, developer experience is not just about having polished documentation—it’s a revenue engine.
“I’m seeing more specific solutions as opposed to just building a SaaS product for one industry now,” said Long. “It’s getting more verticalized and specific to merchants, individual use cases and needs. Finding a solution to help drive your business is becoming easier, and that’s all due to the rise of the developer as a decision maker.”
The Rise of Agentic CommerceThat focus on developer experience is now colliding with an even bigger shift—software is no longer built solely for humans to operate. Increasingly, it’s being built for other software to reason over, act on, and transact with autonomously. As AI systems move from passive tools to active decision-makers, the same API-first principles that won over developers are becoming foundational for a new class of users—AI agents.
One of the most transformative trends in payments today is agentic commerce, where AI agents handle every stage of the transaction. Research suggests that within the next few years, more digital commerce transactions will be initiated by AI bots rather than humans.
This shift makes API-first embedded payments not just an advantage, but a requirement for survival. In an agentic commerce environment, checkout flows must be readable and executable by machines, not just optimized for human users. Merchants must deliver streamlined experiences while also ensuring their systems are discoverable, secure, and transactable by AI.
“It’s a complex landscape and it’s getting more complex as the tech advances,” Apgar said. “Merchants really need to find a payments partner with a strong catalog of payment options that’s well organized and deliverable in a seamless fashion. The developer is now a first-class citizen, not a support ticket.”
Long added: “In the end, payments should not just be thought of as a destination that the customer travels to. It should be a seamless layer of the experience that the shopper is having. So whether the shopper is a person on the web or it’s an AI agent in the cloud, the goal is still the same, which is zero friction between purchase intent and ownership.”
The post How Developers Are Driving the Future of Embedded Payments appeared first on PaymentsJournal.
The past holiday season didn’t just test consumer wallets—it revealed how dramatically shopping behavior is evolving. As inflation-weary shoppers searched for flexibility, value, and convenience, gift cards emerged as a central tool in how consumers planned, budgeted, and ultimately gifted. From promotion hunting to increased reliance on AI, the behaviors that defined the season are poised to shape retail for years to come.
In a recent PaymentsJournal podcast, Sarah Kositzke, Director of Research at Blackhawk Network (BHN) and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research discussed the accuracy of holiday shopping predictions, evolving consumer gift card habits, and how brands, retailers, and issuers can prepare for a dynamic year ahead.
Navigating Affordability Through PromotionsOne of the most closely scrutinized aspects of the season was how consumers—under sustained pressure from inflation would approach holiday gifting. While BHN’s post-holiday research indicates that budgets were largely flat year-over-year, shoppers adopted new approaches to strategies to stretch their spending.
“This past holiday, we saw about 90% of people—that’s nearly everyone—leveraging some sort of a promotion, whether it was buy-one-get-ones or percentages off of certain products, or even gift cards,” Kositzke said. “I feel like a lot of people started earlier. They were looking for those deals, that’s what was a motivating factor for starting earlier.”
“One of the most interesting things, which we nodded to in pre-holiday work that we had done, is we said: ‘I think folks who start earlier in the season also have a larger budget for gifting.’ And we found that to be true, it was nearly double those who started later,” she said. “Factor in all the promotions, factor in looking for those deals—even if it was starting in October—that’s where we saw the crux of people finding that momentum to get out there and shop.”
This focus on finding discounts further entrenched Black Friday as the official kickoff to the holiday season. BHN found that 31% of respondents identified Black Friday as the leading promotional period, beating out Cyber Monday.
At the same time, more shoppers bought fewer gifts this holiday season. This shift was driven partly by economic concerns and partly by how consumers are prioritizing and managing their many gifting and holiday obligations.
“Gift exchanges are fascinating because, anecdotally, I see it happening a lot,” Hirschfield said. “We’ve put COVID behind us and now it’s like, let’s just get together, but let’s do it in a way that’s fun and interesting, And instead of spending $10 on everyone, you’re amplifying that budget into one item, but you’re doing it in a fun and social way.”
A Haven for Last-Minute ShoppersEven though more consumers started shopping earlier, many stretched their budgets to the very end of the season. Nearly three-quarters of respondents purchased digital gift cards as a last-minute gift on Christmas Eve or Christmas Day.
“They really became a safe haven this holiday season,” Kositzke said. “We saw this last year and we predicted that this would be the case, but digital was such a key factor. We saw 80% of people purchase a digital card for that specific occasion.”
“Whether it’s, ‘Oh, no, I got to the event and I thought nobody was buying gifts, now suddenly everybody bought a gift and I’m feeling left out’ or ‘I missed somebody’ or ‘I’m suddenly going have a night out or a dinner with somebody and I want to be thoughtful and get them something,’ we saw an incredible amount of shift to those digital cards,” she said.
For retailers and brands, this trend heightens the importance of a strong digital gift card offering. Retailers should also promote digital gift cards heavily through Christmas Eve to capture last-minute shoppers.
While digital gift cards served as a lifeline for last-minute gifting, they can play a much larger role in merchants’ overall gift card strategies.
“For a long time, people said digital will replace physical, and I don’t believe that’s true,” Hirschfield said. “Timing is a key factor of why those choices are made. People may prefer to give a physical gift because they want that tactile experience that includes unwrapping something, and you can do that with a physical gift card.”
“But when time gets short or when distance is a factor, digital becomes the gift of choice,” he said. “It fills a need when you can’t be there in person or they’ve just run out at the store, or you can’t get to the store. We also see that impacts the value of these cards. From 2024 to 2025, physical card loads on average went up $11; digital went up $15. When you don’t have to package it, mail it, and all those costs involved, you can say ‘I can spend $4 or $5 more.’”
In addition to the shift toward digital, the value loaded onto both physical and digital gift cards continues to rise. The average total gift card value reached $236 last year, up from $209 in 2024. Beyond this initial spend, gift cards also present a meaningful opportunity for merchants once they reach the recipient.
“What’s interesting is the fact that then I’m going to take that card and I’m going to overspend at the place of purchase, whether it’s a restaurant, whether it’s a store, or whether it’s a service I’m getting done,” Kositzke said. “On average, people spent about $108 over the value of the cards that they received.”
“And people on average—so this has stayed the same—have received about three cards,” she said. “We’re not seeing a huge shift in the number of cards, which means the value of each is going up.”
Generational Gaps in Loyalty and AIIn addition to spending trends, one of the most closely watched aspects of this shopping season was the impact of artificial intelligence. While overall AI usage increased among all consumers, a growing generational divide is emerging: nearly three-quarters of younger consumers used AI for holiday shopping, compared to roughly 31% of older consumers.
What’s more, the number of Gen Z and millennial consumers using AI grew 8% year-over-year, compared to just 1% for Gen X and Baby Boomer shoppers. This overall rise in AI adoption is likely to have lasting effects.
“We saw a lot of people using it for looking for promotions, they’re looking for the best cost, or they’re looking to try to figure out the most creative gift ideas,” Kositzke said. “Especially if it’s somebody who they’ve been gifting to a long time and they just need some new fruitful ideas of, ‘What could I bring?’”
Understanding this growing preference for digital and AI-driven solutions is critical for merchants and gift card issuers seeking to develop deeper engagement with the new generation of consumers.
In addition to AI integration, younger consumers are increasing motivated by rewards and are willing to adjust their shopping behaviors to maximize value.
“The loyalty era is here,” Kositzke said. “People are looking to exchange any points that they have, wherever those programs might be for gifts. We found that younger consumers, about three-quarters, exchanged loyalty points for gifts, compared to 57% of older consumers.”
“What kind of gift did they exchange it for?” she said. “Almost half exchanged for gift cards, some exchanged for physical gifts, and about 10% exchanged for some sort of experience. So, loyalty points and programs can provide the gamut of what people are looking for, especially dependent upon who that end recipient is. It’s important to add these programs into any sort of messaging or ties that you have.”
Diversifying Marketing ChannelsAnother important consideration for merchants is the evolving array of channels through which consumers seek guidance and make purchases.
“Those traditional channels—whether it’s emails, word of mouth, maybe it’s a print in-store flyer—those are all still heavily leveraged,” Kositzke said. “However, we find that they’re more so leveraged by older generations. Nearly two-thirds are seeking those sources compared to only maybe about half of younger shoppers.”
“Younger people are looking for these promotional deals across their Cash Apps, any sort of shopping discount channels that they might be on,” she said. “There are some programs out there where you can input information about your purchases and you’re then earning power there as well, which goes back to that whole points and exchange for gift cards as part of a program.”
This diversity of channels makes it essential for merchants to diversify their marketing and promotional strategies. For example, retailers should expand their approach to include price comparison tools like Google Shopping and deal forums like Slickdeals and Reddit.
To stay relevant, merchants must also continually reevaluate the impact of social media channels.
“TikTok Shop is really driving purchases,” Hirschfield said. “In my N=1 study of my Gen Z daughter, the number of times I hear her mention TikTok Shop purchases for her or her friends, it’s really one of their main sources of purchases. My daughter is a freshman in college, there are 400 young women living in her dorm, and I guarantee you that she is not alone.”
“These are significant populations of people who are using things like TikTok Shop rather than a traditional retail outlet,” he said. “So, utilizing TikTok and things like that where these younger generations are gathering to be influenced to find deals, it’s a meaningful driver of business and you have to be hyper-aware of what’s next—beyond what you might be comfortable with for the people who are making these business decisions.”
Watching Your ConsumerIn addition to these impactful consumer trends, gift cards remain a dominant choice. Last year, roughly 65% of employees received a gift from their employer, and nearly nine out of 10 of these gifts were gift cards.
This highlights the increasing prevalence of gift cards—not just during the holidays. Leveraging promotions, integrating AI, bolstering loyalty programs, and diversifying marketing efforts are all critical lessons from the holiday season that can be applied year-round.
“What I would say is, going into 2026, really watch where your consumer is,” Kositzke said. “Watch where they’re researching, watch the way in which they’re speaking to AI about what it is that they’re looking for, and find a way to be present. We talked about TikTok, YouTube, Cash App, and all these different sites. It’s making sure you’re staying relevant where the consumer is, that’s going to be very important in 2026.”
To learn more, check out BHN’s 2025 post-holiday gift card report infographic, How holiday shoppers adapted to affordability challenges. Just click here.
The post The Gift Card Shift: From Convenience to Core Shopping Strategy appeared first on PaymentsJournal.
In just eight years, Zelle has revolutionized the way people send money. And the best is yet to come—peer-to-peer payments are expanding to small businesses and cross-border transactions, opening up a world of new possibilities.
In a PaymentsJournal Podcast, Tina Shirley, Senior Director of Product for Fiserv, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed how Zelle has become a prominent part of the U.S. financial landscape and how it’s positioned for even greater growth.
A Strong Growth StoryThe numbers for Zelle tell an impressive story. In the first half of 2025, it processed a record 2 billion transactions—a 19% increase over the same period in 2024—totaling nearly $600 billion. As a primary processing partner for Zelle, Fiserv is responsible for more than two-thirds of that volume.
This growth underscores the trust people place in Zelle. In less than a decade, users have become comfortable enough with this payment method to rely on it daily, across a variety of use cases and for substantial sums.
“We see larger dollar amount transactions in Zelle as compared to other P2P applications,” said Shirley. “That shows that people are really comfortable with using Zelle through their financial institution.”
Real-Time Payments Driving B2B GrowthOne area where Zelle still has plenty of room to grow is in the B2B space, where real-time money movement capabilities have become critical. Small businesses, in particular, represent the fastest-growing segment across the network, with more than 7 million accounts now enrolled. These users increasingly expect that transactions can be completed instantly, especially when it comes to moving money.
“There’s been some pent-up demand for small businesses to be able to onboard to the network so that they can pay—and probably more importantly get paid—instantly using Zelle,” said Shirley. “We’ve seen stats that there’s been 31% growth in consumer-to-business payments just through Q2 of this year. So there’s already been a lot of growth in that space.”
Strong demand on the consumer side is further fueling this expectation.
“Something that’s important to me as a consumer is that I’ve used Zelle for many years myself to pay local vendors like the pool guy and the garden guy,” said Riley. “Something I never liked about it is that I have a business relationship with them, and I prefer to deal with it through a business account, so moving into that arena is significant.”
FIs Embrace ZelleZelle discontinued its standalone app a year ago, encouraging users to access the payment platform exclusively through their banking apps and websites. As a result, users increasingly associate the service with their own financial institution.
“When consumers were notified that the common app would be going away, I can only imagine that they were calling their financial institutions and asking when they could access Zelle through their mobile banking app,” said Shirley. “Or they were finding another financial institution who offered Zelle and transitioned to that.
“We have definitely seen an uptick in financial institutions recognizing that they need to offer Zelle to satisfy their customers or members—especially in the community financial institution segment,” she said. “More of the smaller community-based financial institutions are looking for that option to bring Zelle to their consumers.”
Fiserv’s research has found that Zelle is a strong indicator of a primary financial institution relationship, regardless of whether the bank is large or small. The platform has also helped level the playing field between large and smaller institutions.
“My wife and I use a community bank by selection,” said Riley. “It’s not a big institution, but it will transact just like a large bank would. Across the network, the overall experience that consumers and small business have access to is the same, regardless of the size of the institution. It’s an equalizer in a way.”
The Future of ZelleZelle’s capabilities open the door to several new opportunities in the payments landscape. One of the most promising areas is bill pay, where the simplicity of Zelle could provide a clear advantage.
“If we look broader about the payments capabilities in general, we start to streamline the money movement capability and integrate it in other contexts,” said Shirley. “We’re looking at things like offering Zelle as a payment option within the bill pay mode. Say I am paying a small business or my monthly bills and I realize I also need to pay my daycare provider and my lawn service. Why not do it in context of that bill pay from that same place?”
Another exciting frontier for Zelle is stablecoins, which could enable cross-border payments by minimizing friction between different currencies.
Fiserv recently launched its own stablecoin to unlock additional money movement use cases for consumers and businesses, both domestically and internationally. Zelle is reportedly exploring similar initiatives. These use cases are likely to expand further as the global economy becomes more interconnected.
Wherever Zelle goes next, it will already have the trust of financial institutions, having demonstrated the reliability and security of its model.
“When you get into the trust factor, this is a very bank-centric model and you’re going bank to bank on these transactions through Fiserv and the vendors that do the clearance,” said Riley. “That’s a significant area for confidence.”
Shirley added: “At our recent client conference, I had a session to talk about what’s on the horizon for Zelle. I started by asking for a show of hands (from those) who already have Zelle—it was only about half. When I’ve done these sessions in the past, it was mostly existing clients who already had Zelle who wanted to hear what was coming. But there was a lot of interest in seeing what’s (ahead), especially from those who have not yet brought Zelle into their mobile banking app. We’re really seeing that interest grow.”
The post From Cross-Border Payments to Community Banks: The Future of Zelle® appeared first on PaymentsJournal.
Paying a supplier is a fundamental function for businesses, yet it’s often encumbered by a complex billing cycle. When the supplier is in a different jurisdiction, this complexity skyrockets, forcing organizations to navigate foreign exchange rates, bank intermediaries, local regulations, and opaque fees—all with limited visibility into where a payment is and when it will settle.
By contrast, stablecoin payments are immediate, transparent, and less expensive. Designed to maintain a consistent value and typically backed by U.S. dollar reserves, they combine the reliability enterprises expect from traditional currencies with the speed and transparency of digital payment rails.
In a recent PaymentsJournal podcast, Avinash Chidambaram, Founder and CEO of Cybrid, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, discussed B2B use cases for stablecoins and the future of this dynamic digital asset in enterprise payments.
No Longer the Wild WestOne of the most important factors driving stablecoin adoption is increasing global regulatory clarity. In the United States, the GENIUS Act governing stablecoins marked a milestone moment, dramatically shifting how banks, B2B payments platforms, and remittance providers view digital assets.
Although regulatory approaches vary by region, the underlying value proposition of stablecoins remains unchanged. Their reserve-backed structure provides organizations with the green light to move forward.
“Globally, you’re starting to see this shift towards enabling businesses and retail customers to start using stablecoins as back-end infrastructure at the very least,” Chidambaram said. “The fact that it’s a stable crypto asset gives CFOs, treasury departments, and even regular retail customers a clear understanding of what the value of that token is.”
“For example, it’s basically a U.S. dollar when I’m sending a stablecoin overseas and it’s being converted into a Hong Kong dollar,” he said. “Now, you’re accepting the benefits of the blockchain and tokenization systems to affect very meaningful use cases and experiences for your customers.”
The combination of these benefits and improving regulatory clarity has rapidly shifted many financial institutions’ attitudes toward digital assets. Early adopters who recognized the potential of stablecoins and anticipated a more amenable regulatory environment are now prepared to reap the rewards of their foresight.
“There was a perception for a period of time that the larger field of crypto was kind of like the wild, wild west,” Wester said. “Yet, there have been companies over the last many years that saw the value of crypto, digital assets, stablecoins, blockchain, and tokenized assets—and were begging for regulatory clarity. They were saying that there’s an efficiency gain here; there are cost reductions.”
“What’s so surprising is how willing and able companies in the space were to say, ‘Now that there’s clarity, we’re happy to look at compliance; we are happy to look at regulation; we are happy to look at governance—because we were always willing to do that,” he said.
Unlocking the 24/7 CycleAs more organizations consider stablecoins, the promise of the technology has become clear—especially in B2B payments. Built around 30-, 60-, and 90-day payment cycles largely designed to accommodate paper checks, traditional B2B payment infrastructure is ripe for disruption, and stablecoins are proving to be a game changer.
In cross-border payments, businesses have often been limited to sending suppliers a wire confirmation as proof of payment, despite being unable to guarantee when the transaction would actually settle.
These challenges are mitigated with stablecoins.
“Now, I can say: ‘From my blockchain wallet, I’ve sent you a payment that happens to run over stablecoins, and I can see on the blockchain that you received it,’” Chidambaram said. “By the way, both parties on either side of that transaction have been KYB checked—we know who they are. There are much lower transaction costs because there’s not a bunch of folks in the middle who are taking their pound of flesh, and lower FX costs.”
“The other thing is, you can now source stablecoins 24/7, 365,” he said. “It all runs on a blockchain. Minting stablecoins doesn’t stop at 5 p.m. If you are buying goods from another jurisdiction, you don’t have to worry about, ‘When does that bank open up over there? Did they receive the funds or not?’ You can start to operate your business on the 24/7 cycle.”
In addition, organizations can attach data to stablecoin payments, improving reconciliation, accuracy, and confidence in supply orders. This, in turn, delivers meaningful operational benefits across procurement and supply chain functions.
Stablecoins also enable more effective treasury management. Organizations can retain cash within the business for longer, paying for goods and services precisely when needed.
“I heard a statement a couple of months ago, and it drove home the benefit of this type of granularity on being able to send money, and that was: ‘Real-time payments don’t matter because I want to pay somebody tomorrow and know that they’re getting paid immediately tomorrow,’” Wester said. “I know that they don’t need to get paid for 30 days. I want to pay them on day 29 and hold my money as long as I possibly can.”
“It flipped the way that I was thinking about it because when you think about real-time payments, it’s, ‘I need to pay somebody immediately,’” he said. “No, I need the ability to pay them immediately, but I want to be able to have that flexibility and manage my money. If it’s 30 days, I want to be able to send it as late as I possibly can.”
The Programmable ValueThis programmability of stablecoins is one of their most impactful features. It enables businesses to automate many payment processes that are currently manual and time-consuming, while also unlocking more sophisticated use cases.
“Some of our customers use us to onboard to investment products,” Chidambaram said. “Take a real estate inverse investment product for commercial real estate for example. You can raise money quickly in the sense that you have an investment opportunity, people can fund that investment using stablecoins from anywhere around the world using a Reg A, Reg D, or Reg S kind of structure.”
“There are also disbursements,” he said. “You can programmatically fund the investment and once the investment has been completed, you can programmatically fund the disbursements. You think about all the higher value stuff that we usually need a lot of people and operations to do, but now you’re able to program that into the token.”
While there are significant use cases for stablecoins, many organizations have been hesitant to adopt digital assets. However, companies don’t need to understand the intricacies of blockchain, cryptocurrencies, or tokenization to benefit from stablecoins. Payment providers have developed back-end infrastructure that manages every aspect of stablecoin transactions, allowing businesses to leverage the technology without added complexity.
“I’ve laughed a couple of times in the past when people talk about stablecoin payments versus other payments as though there is going to be some sort of a qualitative difference from the experience standpoint,” Wester said.
“Your company doesn’t have to be an expert in ERP solutions, you just use the ERP solution,” he said. “The same thing is going to apply once we start moving over to stablecoins. They’re going to start recognizing the benefit of faster, cheaper, programmatic money movement. It’s not going to require anything other than that.”
The Lumpy Path to AdoptionAlthough momentum behind stablecoins is building, broader adoption in payments still faces obstacles.
“I would love to say it’s going to be a straight line towards adoption, but I do think that it’s going to be a lumpy evolution,” Wester said. “There are still some things that need development, such as the user experience part and where stablecoins and digital assets fit within ERP solutions, banking solutions, and middle- and back-office solutions.”
“I would love to say it’s a rocket ship to the moon and in a year’s time, everybody will be adopting it, but it will take some time,” he said. “The next year is going to be interesting in terms of where we start seeing real development.”
While there may not be sweeping adoption this year, stablecoins are likely to continue gaining traction. As a result, businesses should begin strategizing how to incorporate stablecoins—alongside an ever-increasing number of payment types—into their operations.
One of the most effective ways to leverage stablecoins is through a payments orchestration platform, which routes transactions through the optimal payment type.
“As more people start to support their flavor of stablecoins, you’re going to start seeing organizations using platforms like us to say, ‘Here’s how I want to orchestrate a payment,’ and more of the value of cross-border payments will move onto stablecoins,” Chidambaram said.
“We’re feeling very excited about the opportunity over the next few years, as more companies understand what a stablecoin is and how it’s helping them meet an objective faster, cheaper, and with more control over their treasury,” he said. “More companies are going to start to embed infrastructure like ours to provide those back-office improvements in experience to their end customers.”
The post Stablecoins and the Future of B2B Payments: Faster, Cheaper, Better appeared first on PaymentsJournal.
Amid the rapid transformation of the payments industry, merchants have leveraged multiple acquirers to navigate new payment types, regulations, and consumer expectations.
For example, operating across regions like the European Union often requires merchants to work with multiple acquirers to navigate the unique regulatory, payment, and consumer nuances of all 27 countries. Increasingly, however, multi-acquiring is no longer just a European necessity. Many U.S.-based companies have embraced this model to support transactions across e-commerce, in-store, and mobile apps. Tier 1 US merchants are doing business across Europe, with many doing business worldwide, running into the same requirements as their EU based counterparts.
Against this backdrop, ACI Worldwide conducted a study of more than 100 Tier 1 merchants with over $500 million in annual revenue. Roughly half of these merchants primarily operate in North America, with the remainder based in Europe.
In a recent PaymentsJournal podcast, Dan Coates, Product Management Director at ACI Worldwide, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the study’s most compelling findings—highlighting the tangible impact on merchant performance and the growing role of payments orchestration as a core operational capability to reduce complexity and unify analytics for more informed decision making.
Acquiring By DefaultThe single-acquirer model is quickly becoming a relic of the past. Today, nearly 97% of enterprise merchants operate with multiple acquirers.
However, this shift is often driven by necessity, rather than intentional strategy.
“While I think there’s a desire to have a single acquirer, in many cases they end up that way by default,” Coates said. “In North America, there’s also a view that by using multiple providers—not necessarily card acquirers—that they are multi-acquirer as well. They’ve got a different private-label credit card provider, a different gift card provider, they’re leveraging a gift card mall and all those things. I think those are the fundamentals contributing to that 97% number.”
Merchants are responding to consumer expectations for higher authorization rates, broader payment method support, and uninterrupted transactions.
Still, the upside is hard to ignore. ACI found that four in 10 respondents experienced an average acceptance rate lift of approximately 1%, while nearly two-thirds reported cost reductions of at least 2%. At enterprise scale, even modest percentage gains can translate into significant revenue and margin improvements.
These bottom-line benefits help explain why the remaining minority of single-acquirer merchants is shrinking—and why multi-acquiring, supported by orchestration, is fast becoming the standard rather than the exception.
“It’s been an interesting evolution to watch as enterprise merchants expand their acquiring relationships past a single acquirer,” Apgar said. “That was always the standard—to have one simple, straightforward acquiring relationship. But I think merchants have grown in ways that a single-acquirer could no longer support. Everybody’s got their own product road map, and by necessity it forced a lot of enterprise merchants to seek alternative relationships to fill gaps in their payment stack.”
The Relevance of the ResultsMerchants are increasingly diversifying their payment strategies, often driven by the desire to support local or alternative payment methods. This includes dominant domestic real-time payment systems like UPI in India or Pix in Brazil. Adding another acquirer can also be necessary for tapping into widely adopted digital wallets like Venmo or PayPal, giving merchants access to a broader customer base.
“We need to look at these results because it may reveal something about how you’re using multi-acquiring that may not align, or maybe a different view in the world as to how others are using multi-acquiring,” Coates said. “We have to look at this from the bottom line: How do I increase revenue? How do I reduce costs? How do I defend myself against chargebacks?”
Multi-acquiring strategies give merchants a real-time lens on the payments landscape. By comparing acquirers and pivoting between them, businesses can secure the most competitive rates.
“Merchants, especially at the enterprise level, famously want to compare notes and understand who’s doing it better than they are, who’s doing it less expensively than they are, and who’s getting more results out of a certain process,” Apgar said. “But market rate is dependent on the application and the use case.”
“Merchants love to say, ‘How come he’s paying less than I am?’” he said. “But the reality is the use case is never identical, there’s always extenuating factors about the application and the requirements that drive costs.”
Shaping the Acquiring StrategiesSeveral factors shape a merchant’s acquiring strategy. For example, businesses with both brick-and-mortar stores and e-commerce platforms often navigate different rate structures across channels. The merchant’s industry also matters: grocers and department stores usually benefit from lower rates, while high-risk sectors—like gaming—face higher costs.
The proliferation of payment types is further redefining strategy. According to ACI, merchants prioritized which payments methods they most want their acquirers to support, with digital wallets topping the list.
“When you look at a wallet, it’s a container for other payment types, typically cards,” Coates said. “Wallets help things because they maintain and manage those cards. You can’t put an expired card into a wallet. If the card expires while it’s in the wallet, the wallet’s going to yell at you and say, ‘Hey, your card expired, you can’t use this anymore.’”
“If the card gets lost or stolen, all of a sudden we’re getting responses from the wallet that there is an issue with the card,” he said. “Card approvals were great; mobile wallet approvals are even better.”
Following closely were account-to-account banking transfers, buy now, pay later services, and even cryptocurrency. Other emerging needs include Click to Pay from providers like Visa and Mastercard, alongside greater support for local payment rails.
With this rapidly evolving mix of payment types and consumer preferences, merchant payments are more complex than ever.
“Merchants got into multi-acquiring because of channel expansion and country expansion, and a lot of them lost visibility across channels with different tokenization schemes, different fraud schemes, and different settlement schemes,” Apgar said. “Orchestration is a way to pull out those standard elements across the acquiring landscape and bring that continuity back to the enterprise.”
Defining the OrchestrationPayments orchestration has evolved beyond simple gateways that connect merchants to multiple providers. Modern orchestration platforms now integrate 3-D Secure authentication, risk management, point-to-point encryption for in-store transactions, and tokenization—addressing the full spectrum of payment complexity.
For merchants, managing these services themselves is not only time-consuming but also prone to errors, inefficiencies, and lost revenue. A true payments orchestration platform takes on this burden, providing a single, centralized hub where every transaction is visible and manageable in real time.
“You make one single call; it’s doing an orchestrated list or pipeline of tasks,” Coates said. “I am going to check the risk on that consumer, I am going to execute a 3-D Secure risk check if the score comes back and do that step-up authentication. Then, I’m going to go ahead and do the authorization and then do a post-authorization risk check.”
“Before I return a response to the merchant, I am also going to tokenize that card number such that they do not have PCI data and they can also reference that number in the future,” he said. “That is what I define as orchestration.”
These platforms unify what was once a highly fragmented operation, offering merchants a single view of all their payment activity, regardless of the number of acquirers involved. Smart retry, for example, allows a payment initially declined by a global acquirer to be automatically rerouted through a local one. While the local acquirer may charge slightly more, the approach prevents lost sales and reduces cart abandonment—a tradeoff that is often highly profitable.
Similarly, least-cost routing optimizes every transaction based on factors like channel, transaction type, and issuing country. This ensures that payments are processed through the acquirer offering the least-expensive and best approval rate.
“That’s where we’re seeing a lot of growth in AI in this whole scheme because you’re talking about maximizing approval rates and using higher cost networks only when necessary,” Apgar said. “Before, there was always a lot of rules-based structure around how to operate in an orchestrated environment. If you get this kind of a card, send it over here. If it fails at point A, send it to point B.”
“Now AI is making that more dynamic. Rather than following a structured rule set, the orchestration platform can make these decisions on the fly and the rules adapt to the environment as the issuers change, as the external environment changes and affects the merchant,” he said.
Keeping Top of MindThe technology behind payments orchestration is sophisticated, yet the goal is simple: increase approval rates, reduce chargebacks, and lower overall payment costs—all while freeing merchants from operational complexity.
As the payments landscape continues to undergo transformative changes, orchestration platforms will remain critical for merchants looking to maximize revenue and stay competitive. Three key trends are set to make this technology even more essential in 2026.
“Number one, payment methods and payment channels will continue to increase and proliferate,” Coates said. “It’s more complex, there’s more channels, there’s more payment types, and payment methods that are out there. That makes payments orchestration all the more important as we go forward. Number two is AI. It’s been a big topic and we’ll be implementing methods to use and leverage AI to address those challenges.”
“Number three is agentic commerce, which has become a strong topic—and will continue to be—because it is at the crossroads of all those things,” he said. “When we think about multi-acquirer and multiple payment methods—we’re leveraging AI and we’re leveraging crypto potentially along with those things—it’s bringing that all together in one single place. It’s an exciting time to be in payments.”
Get a copy of the survey findings in the report Unlocking Opportunity: How Payments are Powering Merchant Growth
The post Multi-Acquiring Is the New Standard—Are Merchants Ready? appeared first on PaymentsJournal.
The ACH Network is reliable and ubiquitous. And over the past year, it continued to realize strong growth, both in the volume of payments and overall dollar amount. In 2025, ACH Network payment volume increased by roughly 1.6 billion, reaching a total of 35.2 billion, or an average of 141 million payments per day. In the same period, $93 trillion moved across ACH rails, up nearly $7 trillion from the prior year. While transaction volume grew by 4.9%, the total value of those payments increased by 7.9%.
This growth reflects the continued expansion of ACH use cases across the payments space. In a PaymentsJournal Podcast, Michael Herd, Executive Vice President of ACH Network Administration at Nacha, and Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research, analyzed the drivers behind this increase and explained why ACH is positioned to grow even further.
Embedded in the EconomyA highly efficient method for moving large volumes of payments, ACH continues to see growing adoption—including B2B payments, consumer bill payments, and account transfers. It remains a cost-effective option for high-volume payments between known counterparties.
ACH is directly embedded across a wide range of platforms, software providers, and business workflows, including invoicing and payroll. Businesses from Stripe to QuickBooks to ADP all offer ACH as a readily available payment option.
Because ACH is so deeply integrated across the economy, it tends to grow in lockstep with overall economic activity. How the ACH Network scales to support that growth has been an important factor in its recent expansion.
Moving on From ChecksDespite the government’s high-profile decision to move away from paper checks last year, federal ACH volume increased by just 1%. The commercial sector has been the primary driver of overall growth.
In the B2B segment, ACH volume exceeded 8 billion transactions in 2025, representing $63 trillion in value, and continues to grow at roughly 10% annually. This dovetails with findings from the Association for Financial Professionals, which reported last year that checks now account for just 25% of B2B payment volume.
“That calls out a success at the industry level in moving businesses from checks to ACH,” said Herd. “It also shows that there’s room left to continue that transition for the 25% of B2B payments left that are checks, and that could still move to ACH and other payment rails.”
Danner added: “Replacing paper checks has been an important development. The paper check is clunky, less efficient, prone to fraud, and you have to mail it. Why not use something like ACH? It’s safer, it’s automated, it’s cheaper, it’s easier to reconcile, improves cash flow, liquidity, and reduces manual processing.”
Another fast-growing B2B use case is healthcare claim payments, which flow from insurers and other payers. Last year, ACH processed 548 million healthcare payments, moving nearly $3 trillion directly to medical providers, hospitals, and pharmacies.
Consumer Growth in Same-Day ACHAs impressive as the growth of the overall ACH Network is, Same Day ACH has been expanding at an even faster pace. In 2025, Same Day ACH transactions grew nearly 17%, exceeding 1.4 billion payments. It’s increasingly becoming a routine part of consumers’ financial lives.
“We’re seeing Same Day ACH being deployed in consumer payments pretty broadly,” said Herd. “The use cases include account-to-account transfers between financial institutions, digital wallet loads where funds are being debited from a bank account, and credit card bill payments where the issuer has reasons to collect funds as quickly as possible.”
Online consumer ACH payment volume rose by about 650 million payments to reach 11.4 billion, representing 6% year-over-year growth. These payments cover a wide range of consumer bills—including mortgages, car loans, insurance premiums, utilities, student loans, and credit card bills. Essentially, any recurring payment that resembles a bill is a natural fit for online ACH.
Popular alternative payment methods, such as digital wallets, often rely on ACH either to move money to or from a user’s bank account or to settle transactions behind the scenes. Many credit card bills are paid via ACH, as are numerous settlement payments to merchants. The continued shift away from paper checks is also driving this trend.
Pay-by-Bank via ACHThe continued shift toward faster electronic payments has paved the way for Open Banking, also known as Pay by Bank. This approach lets consumers pay directly from their bank accounts, streamlining transactions and reducing friction. Younger generations, in particular, expect mobile-first, fully digital experiences, making Open Banking a natural extension of the ACH Network. Linking to a bank account through an Open Banking session to initiate an ACH payment fits seamlessly into this environment. Even major players like Walmart now offer Pay by Bank through their apps.
“I often talk about people in their 20s who have never had a checkbook, have never written a check, wouldn’t know how to locate routing and account information in order to pay a bill, or even sign up for payroll Direct Deposit,” said Herd. “They largely do that through their phones by Open Banking and linking their bank accounts.”
“It’s not surprising that these areas are growing, especially as consumers continue to embrace digital payment methods,” said Danner. “We’re in the early stages of adoption of true Open Banking in the U.S., and there’s still tremendous potential for ongoing and expanded adoption of that and its ability to enable ACH payments.”
“Younger generations of consumers and employees are enrolling in ACH payments for transfers and payroll Direct Deposit,” he said. “And there’s still a lot of potential there for it to become even more mainstream.”
New Rules for the New YearEven with the rise of Open Banking and faster, more frequent ACH payments, Nacha also remains focused on safety and soundness. New Nacha Rules are set to go into effect to enhance the system’s value and security. In 2026, ACH participants will begin implementing upgraded transaction monitoring rules, with additional improvements—including for international transactions—also on the way.
These changes aim to support the growing volume and speed of payments while maintaining reliability for both consumers and businesses.
“Over the long run, we have better risk management across the entirety of the ACH system,” said Herd. “That creates an environment that is receptive to and encourages additional adoption and growth.”
“An example we’ve experienced in the past is account validation, which is a rule we added in 2018,” he said. “It created a whole new industry of account validation services that enabled better ACH risk management quality and therefore better adoption. That’s the kind of thing we’re looking for to contribute to even further growth in the future.”
Taken together, these trends show the ACH Network’s continued growth is the outcome of thoughtful integration, ongoing adoption, and continuous modernization. It continues to be well positioned for businesses and consumers who are moving away from paper checks and towards faster, safe electronic payments.
The post What’s Driving the Rapid Growth in ACH Payments appeared first on PaymentsJournal.
Fraud is evolving faster than ever, with AI-powered scams, deepfake-enabled identity theft, and a surge in account takeovers putting financial institutions on high alert and accountholders at risk. As the most visible safeguard of the past few decades, the humble password is coming under increasing scrutiny.
In a PaymentsJournal podcast, Dr. Adam Lowe, Chief Product and Innovation Officer at CompoSecure and Arculus, and Suzanne Sando, Lead Analyst of Fraud Management at Javelin Strategy & Research, explored the rising fraud challenges facing financial institutions and how some of the latest solutions may be inspired by innovations in retail.
Emulating RetailersWithout much fanfare, two of the most successful online retail sites have been moving beyond passwords. eBay has embraced passkeys for years, while Amazon has announced plans to go entirely password-less by 2030. For banks, adopting similar approaches could reduce account takeovers and streamline customer access without compromising security.
“In the same way that they think about completed carts when you’re buying your favorite collectible on eBay, a bank or financial institution should think about completed user journeys,” said Lowe. “Whether I’m trying to send a wire, ACH, get a mortgage, whatever, I’m trying to complete a journey. If we can look at these tech leaders, take what they’ve learned, and apply those learnings to FIs and banks, we’ll be in a great spot.”
Fraud on the RiseIt’s clear that urgent action is needed to combat the rising instances of financial fraud. Around 60% of financial institutions have reported an increase in fraud over the past year—a figure number that climbs to nearly 70% among enterprise banks.
Javelin’s research revealed a 90% increase in losses suffered by consumers targeted by identity fraud between 2023 and 2024. Meanwhile, the incidence of traditional identity fraud has also been rising year over year, though at a slower pace.
These losses are not just financial—they demand significant time, operational effort, and resource allocation to detect and resolve identity fraud issues.
We have entered the AI era, accelerating both the volume and speed of attacks. Many financial institutions are struggling to counter these sophisticated threats while relying on aging legacy systems. Banks that fail to act now risk finding themselves even further underwater.
“A lot of those losses are attributable to account takeover and new account fraud, where criminals are relying on AI to increase the legitimacy of their phishing attacks,” said Sando. “They’re finding ways that bypass authentication and ID verification. Nine in 10 consumers in our annual survey report that they fear AI will be used against them to commit identity fraud.”
Even some biometrics can be faked. Any scenario in which a consumer can be tricked into giving a code can expose biometric templates, and weaker biometrics, such as voice, are increasingly easy to replicate.
Beyond the PasswordMany in the industry recognize that operating from a purely defensive position is no longer sufficient. With the rise of artificial intelligence, a proactive approach to blocking fraud—through stronger authentication methods—is key.
Financial institutions need to recognize that the passwords consumers are comfortable using are not enough. These credentials are frequently reused across multiple accounts, both financial and non-financial, fueling the proliferation of account takeover incidents.
“It’s a habit that is unfortunately being reinforced by banks at this point to encourage the use of a username and password,” said Sando. “Stronger and more advanced authentication is removing those weaknesses, and it also instills confidence in the validity of the identity of the user on the other end of the interaction.”
Financial institutions and consumers alike are seeking credentials that are resistant to spoofing and don’t impose penalties for legitimate use. That’s where passkeys provide a solution. Similar to signing a check, a passkey allows users to digitally authenticate into a banking app or card using a unique key that proves identity in a zero-trust manner. Trust doesn’t need to be assumed or guessed; cryptographic verification ensures authentication in a secure and reliable way.”
“Technology like our Arculus tech—where a passkey is built into the card when you need to have a user step up or authenticate it—goes back to those easy-to-use but zero-trust methods that allow banks and FIs to protect their consumers,” said Lowe. “I was in Las Vegas for work and I got locked out of my banking account because I didn’t get to a text message that got delayed fast enough.
“Here you could have a user seamlessly prove who they are with something that’s in their pocket every day. And you don’t lose that customer relationship, you don’t lose that revenue, and you don’t get that false decline.”
Doing Fraud Prevention RightPasskeys are poised to become a cornerstone of the next generation of fraud-fighting tools. While there is often too much reliance on consumer education to detect and prevent fraud, education still plays an important role in helping customers understand why this step is necessary and how it protects them.
What’s needed is to show consumers real, concrete examples of how easy it is to crack or bypass traditional authentication methods such as passwords and OTPs—and the true scale of fraud losses that result. There’s plenty of industry chatter and data on this topic, but far less understanding of the real-world impact of fraud on consumers themselves.
“Consumers want to know how their bank is protecting them from identity fraud and how they are securing their accounts,” Sando said. “They don’t want to just bury their heads in the sand and hope for the best. Consumers look to their bank and their financial institutions as the experts in protecting their identities and their accounts. And as consumers, we want to take the necessary steps and actions to protect our accounts.”
Customer buy-in is essential to the success of any fraud prevention program. It cannot succeed unless users actually adopt it, find it easy to use, and clearly see its value.
“When banks and financial institutions get fraud prevention correct, it’s a better user experience, it’s better brand loyalty, and they are actually reclaiming revenue at the top line as well,” Lowe said.
The post Why the Future of Financial Fraud Prevention Is Passwordless appeared first on PaymentsJournal.
Banks are no strangers to artificial intelligence. For years, machine learning and deep learning models have quietly powered fraud detection, transaction monitoring, and risk analysis. But the industry is now approaching a more consequential shift: agentic AI—systems that don’t just analyze data, but can act on it. With that shift comes a fundamental question about how much authority banks are prepared to give to machines.
Trust sits at the center of the debate. Is AI ready to be trusted with decisions that carry financial and regulatory consequences? That question was featured prominently in a recent conversation between Deepak Gupta, Chief Product Engineering and Delivery Officer at Volante, and Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research. And if the answer today is “not yet,” what needs to change for banks to get there?
Ways to Leverage AIAcross financial institutions, AI adoption is accelerating for a clear reason—efficiency. Internally, banks are under pressure to do more with fewer resources. AI is increasingly used to automate repetitive tasks, improve accuracy and consistency, reduce investigation backlogs, and bring greater predictability to operations that have been historically labor-intensive.
Externally, the focus shifts to customer impact. Banks are exploring how AI can lower operational costs for clients, reduce friction across payment flows, and strengthen compliance.
Some of the most compelling opportunities sit at the intersection of both. In payments operations and exception handling, AI can repair and enrich payment data, classify exceptions in real time, and route transactions to the right place. Machine learning models can identify fraud as it happens while reducing false positives.
Conversational AI adds another layer, enabling natural language queries such as “Why did this payment fail?” “Where did it get stuck?” “How was a similar issue resolved before?” Meanwhile, banks are applying AI to intelligent payment routing, liquidity optimization, and funding prediction—turning what were once reactive processes into proactive ones.
Cutting Down on TimeFor the moment, the simplest answer is that AI reduces the amount of time required to perform certain tasks. This progress tends to happen in fits and starts, which makes the impact feel uneven—especially when AI affects only one part of a task or workflow. To understand the impact that ultimately shows up on the bottom line, it is important to take an end-to-end view.
The real benefit is not solving a specific problem, although that remains important. Understanding how AI is changing outcomes requires an end-to-end perspective across an entire domain or set of workflows.
“Our approach is learn to walk before you run, and run before you sprint,” said Gupta. “We are thinking of AI as an assistant to payment operations teams. Maybe in a couple of years, the confidence level increases, the predictability increases, and the algorithms gain more acceptance, to a stage where you might be able to say to a subset of your payment system: OK, go ahead and approve it automatically.”
How to Measure AI’s SuccessThe first area of impact is efficiency. For example, has the cost and effort required to process a payment been reduced? Given a fixed volume of payments handled by a single person, AI can enable a higher volume to be processed with the same headcount. In concrete terms, efficiency is reflected in the number of transactions processed per person before and after AI.
The second area is risk reduction, such as identifying and minimizing false positives or preventing compliance violations. The goal is to create business value, whether by lowering the cost per transaction or allowing customers to expand their revenue base.
Finally, there’s adoption. Even the best tool has no value if it’s not used.
Building TrustAchieving widespread adoption depends on organizational trust in AI. Miller analogizes this to career ladders used to develop individuals over time, where capability and responsibility increase gradually.
“If you show up as a new hire, you get limits around the amount of damage you can do,” Miller said. “It might be that you can only approve things below a certain volume, or you can’t work with certain clients. We build guardrails around people to limit the amount of damage that their learning process can cause. As we think about how to measure the effectiveness of AI, we might have to actually return to that.”
“These guardrails are not because AI is dangerous,” he said. “It is because learning is a process that generates risk. AI has to prove that it’s trustworthy. If it can’t do that, there will be no adoption. But for trust to emerge, you have to start using it first.”
That trust has to be prevalent on both sides.
“When I get in my Tesla, I find it safer for Tesla to drive than myself, because I get distracted,” Gupta said. “I get a phone call or I’m looking at something else. But once I put the car on self-drive, I know it will stop itself at the right time. In fact, my family says when we go together, ‘Dad, why don’t you let the car drive itself? It drives better than you do.’
“The key is to take the risk to let the car drive itself first,” he said. “You can still be in control, but let the car drive itself. The same thing that should happen in payments: trust the new technologies, trust the new paradigms.”
Looking to the FutureOne development already underway is the emergence of systems capable of taking action autonomously. Guardrails are not just controls—they form the foundation of trust, allowing leaders and operations teams to delegate more tasks to AI that can learn and adapt.
“Instead of delegating the workflows as they exist, you create the possibility of a world where the systems might reinvent the workflows on their own,” Miller said.
As AI continues to evolve, banks will not just respond to payments. They’ll anticipate them, becoming more proactive, efficient, and strategic in managing the flow of money.
“Payments will transition from largely a transactional back-office function to an intelligent continuously available capability,” Gupta said. “AI will enable banks to shift from reactive processing to proactive and predictive operations. When you go to FedEx, you don’t tell them which plane you want the package to go on. You just say when you want the package to get there and how much you’re willing to pay for it. And then voila, FedEx does the magic for you and says: OK, these are the options, which one do you want?
“Similarly, you shouldn’t have to figure out which payment is the cheapest option. Should I send it through RTP or FedNow? Just let the AI do that for you. AI will find the fastest and the cheapest path.”
The post When Can Payments Trust AI? appeared first on PaymentsJournal.
In today’s world, nearly anything a business or individual desires is available instantly. Yet, for most, receiving a payment still takes two to three days to clear, despite the availability of instant payments networks such as FedNow.
What will it take for instant payments to reach a tipping point and become a standard expectation? In a PaymentsJournal Podcast, Justin Jackson, Head of Enterprise Payment Solutions, Digital Payments at Fiserv, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed potential triggers for an inflection point for FedNow and other instant payment methods, and how financial institutions should be preparing now.
Looking for Hockey Stick GrowthAlthough instant payments have experienced steady growth and adoption, a defining moment that pushes them into the mainstream has yet to occur. Instant bank-to-bank transfers and digital disbursements platforms process payments in real time, but a breakthrough use case that drives significant volume has not emerged.
One likely catalyst for that critical moment would be the federal government. As the largest payor to both individuals and businesses, any major move toward instant payments could have a sizable impact on the U.S. economy. The government possesses the ability to shift the market.
Steps in that direction have already been taken. The federal government has largely stopped issuing paper checks—with a handful of exceptions—so recipients of government funds increasingly require bank accounts for direct deposit. It’s a small step from there to instant payments.
Europe has already completed a similar transition, with real-time payment methods integrated into everyday financial activity.
“I was in the EU earlier this week, and I met with a large bank that recently deployed instant low-value payments in their markets, the equivalent of a FedNow or RTP transaction here in the U.S.,” said Jackson. “They didn’t do a bunch of marketing fanfare, and they didn’t automate conversion of their low-value batch transactions into instant transactions. They just put it out there so that users could take advantage of an instant payment. Within a matter of weeks, they’ve already seen usage approaching 20% for the instant transaction instead of the batch-based transaction.”
Disaster PaymentsA critical opening for government intervention is providing instant payments for disaster relief. Anyone who has experienced a hurricane or wildfire knows the urgent need for immediate funds to cover basic necessities, such as clothing or temporary lodging.
Receiving a check is often impractical in a disaster zone, as cashing it can be nearly impossible. While prepaid cards are sometimes used, they’re limited—recipients can’t pay rent or make other essential payments that require traditional banking access.
What people truly need is direct deposit into their bank account. If their FI can’t process the transaction instantly, recipients are effectively cut off from accessing and using the funds when they need them most.
“Having that instantly delivered transaction is critical, and being the financial institution that enables that is going to engender loyalty that you were part of the solution in their time of need,” said Hirschfield. “As opposed to, well, you weren’t ready, right? You weren’t at the table and able to take that transaction in real time. That’s a very different perception from your account holder as to the capability level for your institution, taking that instant payment at the moment when it was really important.”
Options for the Gig EconomyIn the private sector, one promising use case is within the gig economy. Workers in this space are often paid irregularly. For example, someone who spends an afternoon driving so they can pay their rent may need to receive their earnings quickly. But that is not always possible.
“We’ve seen gig economy companies telling workers that because of where they bank, they can’t get their money for another three days,” said Jackson. “Now put yourself in the mindset of that worker. The whole reason they just spent an afternoon doing this work is they need that money right now because the rent is due. Being told to either wait three days or go to a different bank, it might make sense for them to think about a different financial institution relationship.”
The Challenge for Smaller BanksFinancial institutions and banks serving smaller communities have been the least likely to enter the instant payments fray, yet they may be the ones who need it the most. They can’t afford to have a competitor down the street offer this service while they can’t. As more government payments start to flow across instant payment rails, and as more agencies disburse or accept funds this way, nonparticipating FIs will face even greater pressure to join the networks.
That same dynamic will also spur the discovery and utilization of new use cases. Availability is the first step toward mass adoption, setting the stage for a critical mass of FIs nationwide to participate in the networks. As participation grows, so too will adoption and usage, ultimately making instant payments the norm rather than the exception.
Don’t Get Left BehindSo, what should smaller banks and credit unions be doing now to prepare for instant payments? The first step is to consider the implications for their own business. They should evaluate how their products can leverage instant payments—not just in terms of technology, but in how customers—from consumers and small businesses to commercial enterprises—actually want to use them.
Most importantly, don’t wait for the inflection point before taking action. Banks that hold off until the government mandates instant payments for key transactions risk being left behind.
“Social Security payments are not available as instant transactions right now, but don’t wait for that announcement to come out until you sign up,” said Jackson. “Otherwise you will have a whole list of customers asking, ‘Why can’t I receive my payment instantly?’ Because it’s guaranteed that someone else can.”
The post Getting Out in Front of Instant Payments—Before It’s Too Late appeared first on PaymentsJournal.
The rise of artificial intelligence is coinciding with a shift toward instant payments that are increasingly difficult to stop once fraud occurs. Real-time payments put a stopwatch on fraud prevention, leaving businesses with only moments to detect and respond to suspicious activity.
Striking the right balance between frictionless customer experiences and strong controls is becoming a critical challenge for businesses. In a recent PaymentsJournal Podcast, Dal Sahota, Global Director of Trusted Payments at LSEG Risk Intelligence, and Suzanne Sando, Lead Analyst of Fraud Management at Javelin Strategy & Research, discussed the importance of collaboration and highlighted how AI has become a double-edged sword—assisting fraud prevention teams while also giving criminals more sophisticated tools.
A Growing ConcernOpenAI tools have enabled scams to scale, increasing their ability to penetrate markets across the globe with minimal friction. Javelin’s research found that 88% of consumers are concerned that AI will be used to commit identity fraud against them.
“What I’ve been hearing more is voice can’t be trusted and video can’t be trusted,” said Sahota. “The scale has increased, meaning that the cost of committing fraud is very low, meaning that the potential gains that the frauds can go after are even more exponentially higher year on year.”
Sando added: “We’re all confident that the number one tool that’s going to be used by fraudsters is AI. We’re going to see a shift in focus to more manipulation and social engineering tactics versus just the more traditional way of trying to gain unauthorized entry into an account.”
Faster Payments, Faster FraudThe rise of faster payments also means faster fraud. When money moves instantly from one domestic account to another, the sender often has little to no recourse to recover funds—regardless of whether the loss stems from fraud or simple error.
In cross-border payments, fraud exposure rises exponentially, and the likelihood of recovering funds is even lower. While some countries offer consumer and business protections that can partially offset these losses, reimbursement is typically limited to specific regulatory or legislative corridors.
Overall, the longstanding processing delays built into traditional payment channels have effectively disappeared. As a result, real-time detection and prevention of suspicious activity are no longer optional—they’re essential.
Detecting Legitimacy Is ParamountOrganizations should be analyzing every piece of data available to them to gain confidence in who is authorizing a payment or purchase. This includes the need for stronger shared network data and deeper network intelligence. Without access to that intelligence, organizations are likely to miss important signals—often at the exact moment they matter most. Detecting those signals in real time can prevent significant financial losses for customers and reduce future instances of identity fraud.
The challenge lies in navigating this process in real time: collecting and analyzing information using faster, more accurate data signals at speed. This requires evaluating biometric attributes tied to the device and the transaction, as well as determining what constitutes normal versus abnormal behavior.
How the Good Guys Use AIMore transactions are conducted digitally than ever before, with trillions of transactions and a quadrillion dollars in value exchanged each year. How is it possible to identify a bad or suspicious transaction amid all that activity? One emerging answer is the use of AI.
When combined with robust data and existing defense mechanisms, AI adds another layer of protection against attackers who are themselves using AI illegitimately. However, AI must play a proactive role—taking the offense in ways that can prevent fraud before it happens, not just detect it after the fact.
Criminals can take greater risks and move faster because they’re not constrained by AI governance or risk management teams. To keep pace, fraud prevention teams need strong collaboration and the elimination of organizational silos. This enables them to adopt AI responsibly as it evolves, close the gap with criminals, and ultimately get ahead of them.
Another major trend is the focus on authentication and identity proofing. Many banks are recognizing that they are losing confidence in the true identity of the user on the other end of a transaction.
“How can we trust that transaction if we can’t even trust the person who may or may not be authorizing it?” Sando said. “That’s going to be particularly important as we see a rise in deep fakes and synthetic identities that are aided by AI.”
Minimizing (but Not Eliminating) FrictionThis is also an important moment for organizations to consider what their optimal level of friction should be. The conversation often centers on balancing friction with the consumer experience, but the goal should be less about eliminating friction entirely and more about applying it where it matters most. Effective friction comes from confidently verifying who is being paid or confirming that biometric data aligns with patterns observed across recent transactions.
Contextual signals such as biometric behavior, rich transaction data, and network and device intelligence provide valuable insight without creating unnecessary friction for consumers. These signals allow organizations to make confident decisions about whether fraud or suspicious activity is present without compromising the customer experience. When suspicious behavior is identified, authentication measures can then be appropriately escalated.
“When businesses make payments, typically to their suppliers, those can be 30, 60, even 90 days out,” Sahota said. “And one of the areas that we’ve been working on is how can we create tools to verify who they’re paying well in advance of when they pay. The friction is done much earlier, but it’s the right level of friction.”
Fostering CollaborationTrue market leadership today depends on deep collaboration—partnerships that go beyond traditional boundaries to address challenges collectively. One area where this is starting to take shape is in the sharing of fraud insights across market participants, enabling faster detection and smarter prevention strategies.
“If we look at how our organizations manage fraud, whether that’s a bank, fintech or a multinational corporate, typically it’s done in some level of isolation,” said Sahota. “We need to get better with our cross industry and cross-border collaboration and data sharing. That’s where we have the strongest shot at reducing fraud and scam losses.”
But these efforts must evolve far more rapidly and on a larger scale. Fraud networks operate globally, and the response to them must match that scope and sophistication.
“A private-public sector collaboration and partnership would allow connections between everyone who has something to bring toward solving the problem,” Sahota said. “When we work together, we will get in front of the problem, and we will beat the fraudsters in their game that they play.”
The post Faster Payments Demand Faster Fraud Detection appeared first on PaymentsJournal.
Digital banking has trained consumers to expect speed, simplicity, and instant results. Yet, when those same expectations reach the commercial side of the house, many financial institutions fall short—leaving business clients stuck in slow, manual onboarding journeys that drive up costs and frustration.
In a recent PaymentsJournal podcast, Penny Townsend, Co-Founder and Chief Payments Officer at Qualpay, and Hugh Thomas, Lead Commercial and Enterprise Payments Analyst at Javelin Strategy & Research, discussed the common challenges that often hinder commercial banking onboarding and explored how organizations can meet rising customer expectations while still maintaining compliance.
Bridging Gaps in a Broken Onboarding ProcessOne of the main issues contributing to onboarding deficiencies is the continued use of outdated systems. Paper documents and manual data entry are still a fixture in many processes, often causing delays and errors.
What’s more, the complexity of onboarding commercial clients frequently requires back-and-forth communications, which can create bottlenecks and misunderstandings. Even when institutions manage to navigate these hurdles, they sometimes stumble at the final stage.
“A number of years ago, I applied with a company and their onboarding process was particularly fantastic right at the beginning of it,” Townsend said. “But I couldn’t quite finish it when they were trying to authenticate who I was. Know Your Customer (KYC) was happening, and it went offline to try and figure out who I was as a person, and I couldn’t get through that process. I can’t even explain to you why I couldn’t get through it, but I couldn’t figure out how to take that last step.”
These challenges often arise because organizations are trying to juggle multiple processes simultaneously—collecting data, performing authentication, ensuring compliance, and meeting security protocols.
When institutions rely on outdated systems, more gaps emerge, making it harder to guide clients smoothly through the onboarding journey. This stands in stark contrast to the streamlined interfaces and seamless interactions that have become standard across other sectors.
“I was trying to renew my driver’s license in the UK and the whole government process has been digitized,” Townsend said. “For me to prove who I was, it was a combination of using my phone and my passport. I had to put my phone next to my passport and it scanned my passport details. I had to take a picture of myself as well with my phone and that completed the KYC.”
Commercial clients, accustomed to these modern experiences in their everyday interactions, are likely to resist onboarding processes that rely on paper documentation and lengthy communications.
“Expectations for systems in things like B2B payments are being driven more so today by consumer experiences,” Thomas said. “If you can do this for my driver’s license, why can’t I onboard a new supplier with the same degree? Why is it not just a QR code or something like that? We securely exchange enough information that we know one another well enough to do business and to have a banking exchange between us.”
The Juxtaposition of DepartmentsAlong with outdated systems, many onboarding processes are managed across siloed networks and fragmented workflows.
When financial institutions rely on disparate systems for services such as cash management, lending, and onboarding, clients often have to provide the same information to multiple departments. This duplication can lead to longer approval times and higher costs.
“A perfect example would be the separation that was driven by the changes that happened after 9/11 and with FinCEN, and this different structure where I have an underwriting policy in one department, but I also need to do my anti-money laundering with a different group,” Townsend said. “There was a reason why those two departments were segmented: because compliance has this strong role at a bank, but it’s juxtaposed with wanting to onboard customers, and then you have an underwrite as well.”
“When you have people that have different focuses and they’ve not all been merged together, there’s going to be a lot of friction between what those teams do, and that typically creates a lot of the slowdown that happens,” she said.
These delays may result from departments being physically separated, using incompatible technology, or operating under different rules. Additionally, a department’s main goal may not be to onboard customers efficiently.
These conflicting goals create friction, which can lead to a poor first impression and even missed opportunities.
“I’m always struck by the opportunity that often gets left on the table to better coordinate across departments for the betterment of everyone,” Thomas said. “A great example is if you do payables outsourcing and you look at the flow that’s going out to see what’s potentially going to FX providers.”
“Off that, you say, ‘What could we do conceivably to get a piece of this FX business, knowing the volume that’s going out and understanding we have this overall risk perspective on the customer and we park this much of their capital in different credit products,” he said. “They’d be that much more of an efficient type of customer, but I’m always struck by the fact that through siloed components of institutions, you just don’t get that kind of coordination.”
Driving Through the LifetimeAs regulatory and compliance demands continue to mount, financial institutions are facing an unprecedented challenge: how to stay compliant without stifling businesses growth. Many banks still rely on processes that require businesses to submit the same documents multiple times across different departments—adding friction and slowing onboarding.
Manual compliance checks can also miss critical red flags, leaving institutions vulnerable to fraud, exploitation, and costly penalties. These risks are amplified by an ever-shifting regulatory landscape and the rise of transformative—but not yet fully tested—technologies.
“The latest thing that’s probably going to be the biggest impact on how we think about privacy is artificial intelligence,” Townsend said. “You’re seeing the different states are having a different opinion and we’re seeing the federal government come in potentially with an overall arcing framework for what we should do. That, in itself, will impact how privacy is thought about and how we deal with people’s data and where it can be stored.”
In this complex environment, financial institutions are under immense pressure to understand and navigate their obligations. Yet, embedded within these challenges is a significant competitive opportunity for organizations that can turn compliance into a strategic advantage.
“It comes down to changing attitudes around how you create this onboarding experience,” Townsend said. “Javelin wrote a fantastic article that talks about the onboarding experience being not just this moment in time when you onboard the customer at the beginning, but it’s something you think about it through the lifetime of the customer.”
“That sounds weird, but when banks have so many products that they can offer to a customer—whether it’s a business customer or consumer—that onboarding experience drives through the lifetime,” she said. “How do you meet and bring products at the right time, at the right moment to a customer?”
Starting on the Other SideShifting the mentality around the onboarding process can be challenging, especially since many banks have historically outsourced some or all of these functions. However, outsourcing has become an increasingly perilous tack to take, as numerous organizations are now waiting to step in and address the gap if banks are unprepared.
To stay at the forefront of the commercial customer banking experience, financial institutions will need to start at the very beginning.
“It’s just that shift in attitude of how you can think about things differently, where we think about customer satisfaction first and how we can make that experience better,” Townsend said. “Then, think about how do I apply compliance and how do I apply all these different things.”
“Have a different way of framing it rather than starting at the other side of it—this is why we can’t do this, or this is why we can’t do that,” she said. “Shift how you think about it, and that will probably be the greatest opportunity for change that banking might have over where we are right now.”
Building the BridgeAltering this mindset is essential, as fintech competitors are often more equipped to handle certain onboarding aspects than banks are. For example, recent research from Capgemini found it can cost up to two to three times more–around $496–for a financial institution to onboard a merchant for payment services, while a technology company can spend approximately $214 to accomplish the same task.
This cost gap shows no signs of narrowing, which makes it even more difficult for many institutions to compete. This means the future of financial institutions’ merchant acquiring commercial banking products will belong to the organizations that can shift their mindset from gatekeeping to guidance, and from a compliance-first to a customer-first mentality.
“With compliance as the backstop to what’s going on, modern onboarding cannot remain just that one-time event or that disconnected checklist,” Townsend said. “It has to evolve into a continuous and integrated experience that adapts during the life cycle of a client–and also when you want to add and remove products. All of this will help strengthen the relationship over time.”
For a financial institution to achieve this transformation, it is critical to select the right technology and partners that can provide a holistic view of the process. This means the partner should be equipped to handle all aspects of onboarding, underwriting, and compliance payments, as well as the customer engagement life cycle.
While turning to partners for these crucial functions may cause some trepidation, modernizing an institution’s onboarding systems offers a far greater opportunity.
“It’s a call to action, a moment to have the FI pause and take a look and figure out how to build that bridge with the right partner,” Townsend said. “Or else the FI is going to get left further and further away from their commercial customers, as other fintechs and services jump in to do what the FI is unfortunately unable to do right now–which is to provide that modern onboarding experience.”
The post The Biggest Bottleneck in Commercial Banking? Onboarding appeared first on PaymentsJournal.
As payments have evolved from cash and checks to cards and digital payments, something essential has been lost: the human touch. Yet consumers are not data points—they crave a payments experience that is fast, secure, and effortless, and when they do need support, they want it to shift seamlessly into something personalized and attentive to their needs.
In a recent PaymentsJournal podcast, Robyn Burkinshaw, CEO and Founder at BlytzPay, and Christopher Miller, Lead Emerging Payments Analyst at Javelin Strategy & Research, discussed the current gaps in the payments landscape, what an ideal model for more human transactions could look like, and how organizations can start to speak their customers’ language.
From Clicks to Conversations Digital payments have reshaped the way people move money, bringing new speed and convenience to everyday transactions. Still, even with these advances, friction persists—from the hassle of repeated app downloads to layers of authentication that slow down the process. Too often, the very tools designed to simplify payments end up complicating them or leaving certain customers behind altogether.
“When we’re thinking about the technology that we’re building, we’re thinking about a bank box, and you either fit in the box or you don’t fit in the box,” Burkinshaw said. “Between 70% to 75% of the population fit in that and it’s easy for them to transact, but 25% of the population doesn’t fit in that. The unbanked and underbanked community doesn’t fit in that box.”
“If I’m in person at the grocery store, the checker doesn’t care if I’ve got $50 of my $100 bill in cash and $50 on a card,” she said. “But that has not expanded outside that bank box in the digital experience in a way that meets people where they are.”
Making payments conversational means giving consumers greater flexibility in how they transact. When adopted at scale, this model fosters an open ecosystem where all consumers—regardless of background or socioeconomic status—can access a payment experience that is both convenient and inclusive.
While some organizations have made their payment experiences more conversational than others, there is substantial room for improvement across the board—especially among traditionally rigid institutions such as government agencies and utility providers.
“I made a tax payment using a bill pay service and that tax payment was wrong by a penny,” Miller said. “The result was that that entire payment was returned to me and $0 of it was credited against the tax bill—and that’s good for no one.”
“You can imagine if you are a landlord or an auto dealer, if someone sends you almost all of the money that you want to get from them, you’d like to be able to take that and then have a conversation about whatever the remainder is,” he said. “A system that isn’t flexible enough to handle situations like that is one that’s missing opportunities to improve outcomes.”
AI and Common Sense Payments challenges like these can take a real toll on customer relationships, especially as consumers increasingly expect transactions to be immediate, intuitive, and personalized.
“Consumers want control of their money,” Burkinshaw said. “It doesn’t matter if I make $100 or $1 million a month, I want control over where my money goes and how it’s transacting. We’ve gone from personalized relationships at the bank to digital relationships where there’s no engagement and there’s no interaction. I believe—especially in bill pay—we need to bring it back somewhere in the center where there is digital communication for convenience.”
It’s important for organizations to remember that every payment represents a person on the other end—someone who wants their needs to be acknowledged.
Yet, as many companies have become more tech-centric, that human connection has started to fade. The rise of artificial intelligence has only intensified worries about dehumanization, with many fearing that automation will come at the expense of empathy.
But when used thoughtfully, AI can actually strengthen—not replace—human connection. As part of a two-way, human-centric approach, it can help organizations customize their messages and move beyond the impersonal, one-size-fits-all push notification.
“The best AI is AI that is invisible,” Burkinshaw said. “People are thinking about AI as the end. AI isn’t the end, it’s a means to an end. It’s got to be paired with common sense; it’s got to be paired with critical thinking; but it also has to be paired with automation.”
“The cool thing about AI is it gives you the ability to wrap your arms around huge swaths of data, pull that data in, make it consumable, and then make it actionable,” she said. “If I’ve got data for the sake of data inside businesses, I have to understand what my KPIs are, what moves my business. Then I have to apply technology, AI included, in bite-sized pieces so that I can grab the things that are going to be effective to my business and make those changes.”
Payments in Flux The more effectively an organization can analyze data and align insights with its objectives, the greater potential for success. In financial services, payments data—even from declined transactions—offers a wealth of valuable information.
“What happens today, especially in the subprime markets, is you take those declines, we throw the declines in a bucket and then we throw it at our collections department to go figure out what’s going on,” Burkinshaw said. “AI, in my opinion, gives the ability to be able to take tedious amounts of data and make it consumable in a way that can be effective when it comes to businesses.”
Understanding the trends behind these payments will be critical in a rapidly shifting environment. For example, recent changes to the credit card interchange fee model, prompted by merchants’ lawsuit against Visa and MasterCard, could change the paradigm for many shoppers.
Such changes may have an outsized impact on unbanked and underbanked communities, who often rely on payment methods that merchants may not always accept. These groups have already been affected by the decline of cash as a payment option, further widening the divide between the banked and unbanked.
Taken together, these factors suggest that more alternative payment methods are likely to emerge to better serve these communities.
Multilingual and Culturally Aware The landscape also presents a significant opportunity for financial institutions, though these organizations may need to adapt their strategies.
Consumers are multilingual and come from diverse cultures and belief systems. There are substantial benefits for organizations that recognize these differences and adopt a conversational approach to payments.
This model can lead to higher collection rates, reduced call volumes, and stronger customer relationships. When technologies like AI are integrated effectively, it can also deliver operational efficiencies.
“The upsides are very clear,” Miller said. “If you think about the ability of a system to be able to speak in multiple languages and support folks, that’s a substantial advance over the requirement that you, for example, hire 10 people with 10 language skills to be able to provide that same level of service. It’s an important conversation, but any of these conversations have to involve not just the technology buyer and the technology seller, but the end user in an ongoing dialogue.”
To engage in meaningful dialogues that keep customers connected, organizations will increasingly need to speak the customer’s language—literally and figuratively.
“One of the things to emphasize is the need for bilingual communications,” Burkinshaw said. “If English isn’t my first language—or if English is my first language and I’m in a place where English isn’t the predominant language—we want our consumers to feel respected, connected, and valued.”
“We want to reach them in a language that’s convenient for them, especially when we’re when we’re talking about bill pay and we’re talking about the four to six bills that consumers are going to pay on a recurring basis,” she said. “Meet them where they are, address their needs, and do it in a way that’s not only convenient, but makes them feel like they’re a person.”
The post Conversational Payments: The Next Big Shift in Financial Services appeared first on PaymentsJournal.
Running a small business is hard enough—juggling operations, customers, and cash flow. Now imagine software that not only streamlines day-to-day work but also provides the financial tools needed to grow. That’s the promise of embedded finance.
In a recent PaymentsJournal podcast, Ian Hillis, SVP of Growth at Worldpay, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, examined the emerging embedded finance landscape, the value it offers merchants and software providers, and what the future holds for small- to medium-sized businesses (SMBs) embracing this new paradigm.
Speaking the LanguageTwo forces are fueling this shift: the thriving U.S. small business sector and the expanding universe of software-as-a-service (SaaS) platforms that serve them.
“It’s been interesting to watch the evolution of the technology as the cost of delivering SaaS solutions continues to drop,” Apgar said. “The size of the business that’s too small to utilize software is now zero. Quite frankly, it’s a win-win for the SaaS company that you can use payments as a revenue driver, but also for the user because it’s easy to consume the service in the application rather than to source that service separately.”
As these platforms become more deeply integrated into SMB operations, business owners are increasingly demanding solutions tailored to their specific needs. Vertical-specific software has existed for years, but it has traditionally focused on the largest markets—restaurants, retail, and hospitality.
Now, with cloud technology lowering the barrier to building software for niche verticals, more SaaS platforms can meet the unique demands of their SMB customers. The result? Rapid adoption and a wave of innovation changing how small businesses operate.
“In 2018, we did a study and came back with about 34% adoption in the U.S. for SMBs leveraging vertical-specific software to run their business,” Hillis said. “Fast forward to 2022, and that jumped up to 48%. If you fast forward to 2024, it’s nearly 64%, which is incremental and explosive growth in a short time.”
“You’ve got SMBs that are using vertical-specific software to run their business, and that software platform is sitting on a lot of data—employee data and customer data,” he said. “They speak the language of that vertical and it’s a trusted resource. A natural evolution of that is for the SMB to look to that trusted relationship in a high-traffic area for expansion of additional products and services, many of which are financial in nature.”
Reducing Time and ComplexityFor SMBs, time is often the most valuable currency. Embedding finance helps reclaim it. With the right tools in place, transactions become faster, insights sharper, and growth more attainable.
“Each product is provided by a best-in-class partner who wakes up every day thinking about that experience with deep expertise,” Hillis said. “Service, support, and risk are all taken on behalf of the software platform, so they don’t have to take away resources from their current focus. That helps reduce time to market and operational complexity, while unlocking new revenue streams.”
For time-strapped SMB owners juggling countless responsibilities, that immediacy is invaluable. Embedded finance solutions not only provide access to more effective products, but also offer deeper insights into business performance.
With all key data visible in a single, unified solution, business owners can make faster, more informed decisions—and focus their energy where it matters most: running and growing their business.
“We’ve seen some research recently where small businesses will spend 20 to 25 hours per week just reconciling data between applications—between their merchant statement, their bank statement, their financial needs, supplier invoices—all these things are basically taking a number from one application and inserting it to another application so the business owner can run their business,” Apgar said.
“There’s a tremendous need to have a shared data set that can drive all the financial needs of a small business,” he said. “Then, if you look upstream from a supply chain perspective, especially when you get into credit products, having access to all that data on the SaaS platform gives the lender real-time visibility into the borrower’s business.”
Growth Compounds GrowthWhen a SaaS platform can use its data to recommend products that are relevant to a business, it evolves from being just a payments provider to becoming a true business partner. Taking that a step further, giving merchants access to capital directly within the software keeps them more deeply engaged in the ecosystem.
“If I have an embedded bank account and I have a loan with my platform—and then I move into a commercial charge card or I expand into payroll—that becomes the spot where I no longer have to start swivel-chairing between all of these different offerings and I log into my vertical-specific software platform,” Hillis said. “That’s not just retention, that’s 360-value coverage on their financial health offering.”
For example, a point-of-sale system provider for bars could offer a loan to an existing customer who wants to expand into a food truck venture. Loans like this have been shown to drive roughly a 15% increase in transaction volume.
What’s more, data from venture capital firm a16z shows that companies embedding financial services into their platforms can see a 2x to 5x increase in average revenue per user.
“That’s everything from payments to accounts to capital offerings—hence the wide range of 2x to 5x—but that means significant dollars for a software platform when you think about the average revenue per user basis,” Hillis said.
“Many of these products create growth that compounds growth,” he said. “If you take a capital offering out and can invest in that as an SMB, theoretically your revenues then go up. If you’re already monetizing payments to the software platform, you see the benefit of that as well. You are delivering both increased value from the experience lens, and then you get to enjoy that from the commercial side as well.”
More Runway to GoAlthough embedded finance is an important tool for revenue generation, it also gives software providers a powerful way to deepen customer relationships. This represents the next frontier of fintech—where companies move beyond payments services to play a larger role in their customers’ overall financial lives.
This model will take shape through new products such as flexible loans, merchant cash advances, embedded account search, and commercial charge cards. Complementing these products will be platforms that unify and simplify access to embedded finance solutions.
“In September, we went live with our embedded finance engine, and it makes it ridiculously simple for software platforms to offer embedded financial products to their customers,” Hillis said.
“It’s leveraging that high-trust, high-traffic environment, and it can be done in a single sprint without having to push anything else from the road map,” he said.
Platforms like Worldpay give SaaS providers access to services such as accounting, financial health insights, payroll tools, and even business insurance, which can be either general or industry specific.
As innovations continue to emerge, these platforms allow software firms to integrate them seamlessly. For example, data-driven orchestration represents the future, with platforms leveraging artificial intelligence to deliver agentic, adaptive embedded finance solutions.
All of these possibilities stem from the cloud-based software systems that many SMBs have already embraced.
“We’re early innings on embedded finance,” Hillis said. “We’re just starting to see the threshold crossed on some core products. It’s been exciting to watch those get adopted, and we’ve got lots more runway to go.”
The post Inside the Embedded Finance Shift Transforming SMB Software appeared first on PaymentsJournal.
Creating a synthetic identity used to be the realm of seasoned hackers, but now it can be done with a few simple prompts. Just as artificial intelligence has fueled countless business innovations, it has also been a boon for bad actors—allowing cybercriminals to commit fraud at a fraction of the cost and with greater sophistication.
In a recent PaymentsJournal podcast, Danica Kleint, Product Marketing Manager for Fraud Solutions at Plaid, and Jennifer Pitt, Senior Fraud Management Analyst at Javelin Strategy & Research, examined how AI is rendering fraud-fighting methods obsolete, and the tools and techniques organizations can use to defend against future threats.
The Flywheel EffectBad actors use AI as a proving ground. Within AI models, cybercriminals can create and test fabricated credentials. Unlike legitimate businesses, threat actors aren’t encumbered by regulatory or ethical boundaries, allowing them to evolve their methods faster than fraud prevention professionals can respond.
These bad actors also exploit vast repositories of stolen personal data from the growing number of data breaches, as well as the wealth of information that consumers and businesses share online. With more data and advanced tools, cybercriminals can now construct synthetic identities that are extremely difficult to detect.
Compounding the problem, many financial institutions still rely on outdated verification methods.
“When I was working in banking, I had to review customer service calls, and there were several calls where fraudsters called in pretending to be the victim,” Pitt said. “They would give static identity information—that’s all that these call centers were asking for: name, date of birth, account number—and they didn’t verify anything else. This is information that they’re easily able to get on the internet through social media or that has been leaked from data breaches.”
To make matters worse, today’s fraud attacks are often highly coordinated, executed by far-reaching and organized fraud rings.
“Not only do they have better tools to commit fraud, but we’re also seeing them collaborate more and share tips and insights,” Kleint said. “It’s this flywheel of a rapid increase in fraud across the whole ecosystem. I remember not that many years ago, fraudsters were just two people in a dorm room trying to hack a few things here and there.”
“Now, they’re these large-scale operations where there’s even TikToks readily available to learn how to commit fraud,” she said.
Layering Fraud DefensesIn the battle against increasingly sophisticated fraud schemes, financial institutions can no longer rely on a single line of defense. The most effective strategy is to build layered defenses—a coordinated system of tools, data, and analytics that work together to detect and prevent fraud from multiple angles.
While some organizations worry that such an approach could increase customer friction, advancements in technology have significantly reduced these concerns.
One effective starting point is to leverage the significant customer data FIs already possess. With the right analytics, institutions can use these data points to run synthetic or stolen identity checks, helping uncover fabricated identities or records linked to deceased individuals.
Beyond identity verification, FIs now have an increasing number of tools at their disposal.
“An interesting one that we’ve been seeing catch a ton of fraud lately is facial duplicate detection,” Kleint said. “It’s a super simple concept: have we seen this face across our platform or service multiple times?”
“But not that many companies are doing it,” she said. “You take a picture from the ID or from the selfie image and you just see if you’ve seen that face across your organization multiple times.”
In addition to facial duplication detection, financial institutions should deploy systems that flag duplication across other identity elements. For example, if a bank identifies the same name or date of birth used to open a dozen accounts, this could signal coordinated fraudulent activity.
Device intelligence and behavioral analytics add another critical layer of protection. These systems can identify atypical patterns in how customers interact with platforms, alerting the institution to potential risks in real time.
Ultimately, organizations benefit from taking a broader, comparative view of customer behavior. By evaluating an individual’s activity alongside peers in similar demographic groups, FIs can distinguish between legitimate anomalies and genuinely suspicious behavior.
“What a lot of financial institutions that have some behavioral analytics in place are lacking is they’re just looking at a single customer,” Pitt said. “That addresses account takeover for that customer, but it doesn’t address things like new account fraud.”
“It’s looking at the device intelligence in the beginning to see if that device has been used before,” she said. “Is this typical behavior of a customer that’s in that demographic that gives this typical KYC information? Looking at the historical data of that customer—as well as the historical data compared to that demographic—is critical.”
Shifting the StrategyTechnology alone isn’t enough. More organizations are realizing that true resilience requires a shift in strategy—not just in tools.
“Companies are focused on fraud at the very beginning, at onboarding, but it happens throughout the entire lifecycle of a customer,” Kleint said. “Often, they forget about how they could potentially have account takeovers later in the journey and we’re seeing that be so prevalent right now.”
While continuous fraud prevention is important, one of the most critical strategic shifts for financial institutions is opening the lines of communication with their peers.
By sharing data within an industry consortium, organizations can begin to leverage collective network insights—not only to understand how an individual or device has behaved on their own platform, but also how that behavior extends across other institutions.
Because bad actors often operated in organized groups, it’s important that financial services firms work together so fraud attacks can be traced back to the organizations that initiated them.
Still, many FIs remain reluctant to participate in a consortium model due to compliance and privacy concerns. While these concerns are well-founded, as long as customers have full visibility into how their data is being used and organizations encrypt personal information, consortium members can share intelligence freely while still meeting their regulatory and privacy obligations.
“Financial institutions in particular are hesitant sometimes because of privacy concerns,” Pitt said. “They’re afraid not only will they violate privacy laws, but they’re also afraid that they’ll alienate their customers by sharing information. But collaboration is going to be key—if we can’t collaborate, we are going to continue to lose this fight.”
Across the Entire EcosystemUnfortunately, the fight against fraud is only getting tougher. Generative and agentic AI tools are advancing at a meteoric pace, giving bad actors new ways to deceive and exploit. To keep up, companies must adopt technologies that close the gap—and work together to establish stronger, industry-wide standards for identifying and preventing fraud.
Perhaps more importantly, organizations need to make the most of the systems already in place.
“Plaid’s network powers digital finance—one in two Americans have used Plaid in some way,” Kleint said. “We’ve seen a billion device connections across the ecosystem and because of that scale, we can see how those devices and individuals have conducted themselves across the entire financial ecosystem.”
After all, fraud is ultimately about financial gain—and the surest way to uncover and trace it is by following the money.
“We sit at the center, so we have this view that nobody else has,” Kleint said. “We can see patterns like a person connecting to six different fintech apps within a week. They’re using different personally identifiable information, but they’re using the same device or the same email. It’s these patterns that fraudsters are not aware of. They’re not aware that we can see all this, and it’s super powerful in understanding potential risks.”
From transforming member experiences to building a culture of information literacy, data has become a catalyst for innovation at credit unions. New use cases are constantly emerging for organizations willing to explore them, and artificial intelligence will only increase their value.
In a PaymentsJournal Podcast, Jeremiah Lotz, Senior Vice President of Experience Design and Enterprise Data at Velera, and Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research, explored how credit unions are collecting and leveraging data to improve efficiency and better serve their members.
Data As an AssetForward-thinking credit unions view their data not just as a resource, but as a strategic asset—a goldmine of insights into both members and the business itself. While many credit unions have already invested heavily in data, unlocking its full potential requires clarity on what the organization hopes to achieve. The first step is understanding how the institution intends to put that data to work.
“Look at what the data is saying, and how will it help us make decisions, as opposed to just for historical information,” said Lotz. “Once the organization recognizes that there’s an opportunity to use the data to make decisions or drive intelligence, that’s a sign of a mature level of adoption.”
A key driver is executive alignment at the C-suite level, ensuring that the credit union can use its data to grow, engage and retain membership, and ultimately inform decisions. The next step is empowering data teams to suggest use cases, regardless of the division they work in. When non-technical staff can articulate business needs that data can address, it reflects a culture that is ready to move forward.
“It’s a way to be able to say, ‘I have a problem’ or ‘I have an opportunity that maybe data could help me with,’ versus expecting people to say, ‘Hey, I think you’ve got data. Let me see these three fields and see if it does anything for me,’” Lotz said.
Anticipating Member NeedsCredit unions are learning that consumer data isn’t just numbers—it’s a roadmap to a better member experience. By analyzing individual patterns, institutions can spot potential financial challenges or opportunities before they happen. Using predictive insights in this way transforms interactions, moving beyond reactive service to experiences that delight members.
“It doesn’t always have to be super aggressive,” said Lotz. “It can be more about putting something in front of them that might help in a situation, if they so choose.”
At the same time, members expect their data to be used responsibly—but they often worry about privacy. Credit unions can address these concerns by clearly communicating how data usage benefits members, showing that it’s designed to make their financial lives easier and more personalized.
“Whether it’s coupons I receive or recommendations when I’m shopping online, we know this data collection exists,” said Lotz. “It would be nice to understand that my financial institution is going to use it in a way that’s going to help me, that’s going to protect me or maybe give me opportunities by predicting my behavior.”
Predicting when a member might need a product is just the beginning. Data can also streamline everyday interactions. Instead of asking members to fill out forms, a credit union can provide pre-populated applications or automatically update existing accounts. These anticipatory actions reduce friction and create a tangible, member-first experience that sets the institution apart.
“I have a mortgage with a credit union and it is quite possible for that credit union to predict that each year I need to provide proof that I have homeowners insurance,” said Miller. “This is not a magical data-derived prediction. It’s literally in the system.”
“But to the extent that the credit union would be able to anticipate that this is a need—some document has to be provided and returned. The institution has to take that action proactively, rather than dumping it on me to follow up with. You have the opportunity to turn what might be transactional interactions into wow moments.”
Enlisting the Whole OrganizationData literacy isn’t just about understanding the data—it’s about understanding what lies behind it and how the organization can leverage it. That starts with conversations between data and business teams, which require a shared language across the organization.
“By having that conversation at every level, you’re giving the opportunity for the people who understand the data to start talking with the individuals in the business units and the operations teams,” said Lotz. “Once they start talking about some common problems that they’re facing, they can start to look at data as an asset.”
Identifying ambassadors for the data practice is helpful—individuals who understand how data connects not only to their regular work but also to new opportunities. Considering how to disseminate and distribute data is an important part of bringing non-technical employees into the process. When leadership can put actionable, accessible information into everyone’s hands, it fosters a fully data-literate organization from top to bottom, rather than concentrating knowledge in the hands of a few specialists.
Urgency, Not EmergencyArtificial intelligence has the remarkable ability to uncover patterns and insights within vast amounts of data, but it’s important not to put the cart before the horse. AI should inform and enhance decision-making, not dictate how data is used.
“We have to focus on understanding governance before glamour sometimes,” said Lotz. “We’ve got to make sure we’re focused on responsible enablement of AI. We’re focused on data quality, model transparency and ethical use. Those are non-negotiable things when it comes to AI.”
When applied thoughtfully, AI can power a range of purpose-driven use cases that support members’ well-being. From fraud prevention and personalized experiences to credit risk insights and financial wellness tools, AI works best when it’s focused on initiatives that make sense and deliver real value to members.
“One of the things that a mature governance structure can do is communicate the fact that organizations have to deal with technology like this with urgency,” said Miller. “But it is not an emergency. If we don’t deploy the new tool next week, that is not the end of the world. It is better to do it correctly and in a sustainable, stable method that results in continuous new improvements than it is to get something out there immediately today.
“There’s an opportunity to harness the energy that can come from throughout an organization, with appropriate attitudes toward doing things that are sustainable and lead to long-run change,” he said. “When you have a group of individuals who understand the technology can then start a conversation within the organization, that’s a great opportunity.”
The next iteration in the rapid evolution of artificial intelligence has arrived, and organizations are racing to harness the potential of AI agents to create a dynamic new shopping experience. However, as powerful as agentic commerce can be, the road to adoption won’t be without hiccups—many of which will lead to a surge in disputes.
In a recent PaymentsJournal podcast, Joseph McLean, CEO and Co-Founder of Quavo, and Christopher Miller, Emerging Payments Analyst at Javelin Strategy & Research, discussed the challenges that can arise in the agentic commerce dispute process, the steps financial institutions can take to prepare, and how disputes can serve as an opportunity to engage and retain customers in the age of agentic commerce.
Navigating Uncharted WatersTraditionally, as the volume of payments has grown, the number of disputed transactions has remained relatively stable. However, as agentic commerce gains traction, this pattern is unlikely to hold.
This shift raises many questions for organizations attempting to navigate these uncharted waters.
“There is going to be fraud on these transactions; there are going to be mistakes that are made by consumers or by AI,” McLean said. “The regulations aren’t super clear on who is liable in these scenarios when consumers are making purchases. Is it the consumer? Is it the merchant? Is it the issuer? This also opens up new attack vectors for fraudsters, where they can get into the agentic commerce area themselves posing as other people and making purchases.”
In particular, there may be a rise in first-party, or consumer-engaged, fraud. For example, an AI agent might follow its instructions perfectly, yet if the customer is dissatisfied with the outcome, they may still dispute the transaction. Alternatively, a consumer could intentionally make a purchase with the plan to dispute it later—claiming fraud or an AI error.
These situations create grey areas, as liability becomes unclear when a consumer authorizes an agent but doesn’t directly complete the purchase themselves. It’s therefore critical that these issues are resolved before agentic commerce scales further, since confusion and ambiguity could be detrimental to adoption.
“Merchants, payment processors, and card issuers are all going to think about this in terms of liability and consumers are going to think about it in terms of experience,” Miller said. “If they have an experience that doesn’t meet their expectations, that has implications for the growth of this ecosystem.”
“If a consumer doesn’t believe that they’re going to get what they want by delegating authority to choose or to purchase some piece of software that we’re calling an agent right now, they might not use the agent,” he said. “That’s a fundamental limiter on growth here.”
Trusting the ProcessTo develop a stronger framework around the dispute process, several factors should be considered by financial institutions.
First, FIs will need a mechanism to gauge the consumer’s intent when they instructed and authorized the AI agent.
Given that AI systems can hallucinate or misinterpret instructions, it will be important to verify whether the agent accurately carried out the customer’s request. Understanding consumer intent is also critical because bad actors may attempt to manipulate AI agents—for example, by creating fraudulent websites or impersonating legitimate services to trick AI into making unauthorized transactions.
These challenges also raise broader questions about how to proactively address fraud in an agentic commerce environment.
“When it was a fake website that consumers visited, we could take that head on and teach people what are the ways to recognize a fraudulent website,” Miller said. “If it is your agent that is deceived—if one platform impersonates another within an agentic integration flow—those are entirely outside the sphere of consumer, they can’t do anything about it. It’s interesting to think about not just who is liable, but who will be perceived as having responsibility for solving that problem.”
Issuers, merchants, and agentic AI developers may all need to take on new roles in educating both consumers and AI systems. Considering the potential scope of agentic commerce, an industry consortium approach might also be required to set up comprehensive safeguards.
Regardless of the specific path forward, developing a framework for agentic commerce will likely be necessary sooner rather than later.
“A lot of consumers are using this, and we’re going to see it happen a lot more in 2026 and going forward, but consumers will need to trust what’s happening through the agent,” McLean said. “They will need to trust their merchants, and they will need to trust that their banks can handle it appropriately when something does go wrong.”
Fighting Fire with FireTo develop this trust, financial institutions can take proactive steps to prepare for the increased volume and complexity of agentic commerce disputes. Historically, many FIs have responded to spikes in fraud or dispute cases by simply adding more personnel to the process. However, this approach is unlikely to be effective in the new paradigm.
“The best way to solve this is going to be pulling in more technology, better solutions that solve the problem end-to-end so that the users at the issuing institutions can spend more time focusing on the complex pieces of the work,” McLean said. “These disputes, they will look very similar, but it’s not going to be just more of the same. It’s going to be much higher volumes that are coming through the door and the complexity of these disputes are certainly going to be different than how they’re used to working through disputes today.”
As financial institutions take stock of the dispute process lifecycle, several important questions will arise. For instance, how will the bank handle communications with the cardholder? How will it manage accounting or reconciliation? And how will institutions handle issuing a new card if one is compromised?
These complex challenges can’t be effectively solved by adding more staff or connecting disparate systems. Doing so often creates siloes, which can lead to delays, errors, and poor experiences for both consumers and merchants.
To address these issues, a comprehensive technology solution that manages the end-to-end dispute lifecycle will be paramount.
“One of the things that we need to look at is fighting fire with fire,” McLean said. “How can we bring in AI and those sorts of technologies into the issuing space to help solve these problems, make faster decisions, augment investigations with better data and better materials to help those solutions work through faster.”
“Making sure resolution times aren’t increasing for consumers, making sure that consumers are made whole, and following all the regulations. There are so many moving parts here that the technology is going to have to solve, especially when we start talking about the first party fraud piece,” he said. “It’s another layer of complexity that we’re going to have to deal with, and an effective dispute technology solution is going to be needed by every issuer to handle this problem.”
A Moment that MattersAs financial institutions search for technology solutions, they should consider platforms that handle the full dispute lifecycle—starting from intake. Platforms like Quavo’s offer a unified data solution to receive and track information, allowing institutions to create audit trails and leverage this data within their fraud systems to fight fraud more proactively.
As disputes surge with the rise of agentic commerce, issuers will no longer need to rely on a patchwork of vendors, technologies, and in-house solutions—unlocking significant efficiency gains and potential revenue improvements.
However, one of the most powerful benefits of a streamlined dispute process is its ability to strengthen customer relationships.
“When a consumer has an issue with their accounts—and largely it’s going to be transaction-related—it can go one of two ways,” McLean said. “It can go very poorly and be a bad experience, where your customer may look to leave your institution—and all the research that we’ve conducted says that absolutely can happen.”
“On the flip side, you can take this into what we’ve always called a moment that matters,” he said. “It’s one of those pieces of banking where you can build real trust and build a much deeper relationship with your account holder.”
Across shopping, streaming, and social media, consumers have grown used to receiving personalized recommendations powered by artificial intelligence. While some may feel less comfortable with AI taking on a similar role in their banking experience, a hyper-personalized digital banking platform can deliver far greater value than simply suggesting the next show to binge.
In a recent PaymentsJournal podcast, Fiserv’s Whitney Stewart Russell, President of Digital and Financial Solutions, and Sean Calhoun, Vice President and General Manager of Digital Banking, along with Christopher Miller, Emerging Payments Analyst at Javelin Strategy & Research, discussed the evolving digital banking landscape, the advantages of hyper-personalization, and the ways AI is reshaping banking strategies.
A Perfect Storm of OpportunityFor many customers, digital banking isn’t just part of their experience—it’s their only experience. As consumers increasingly integrate digital platforms into nearly every aspect of daily life, their expectations have risen. They now demand seamless, intuitive, and personalized interactions each time they login.
For example, many users expect to conduct in-depth research or receive relevant guidance with just a few swipes or prompts.
At the same time, one of the largest wealth transfers in history is approaching, with an estimated $50 trillion set to pass from baby boomers to their heirs. Together, these factors make it more critical than ever for banks, credit unions, and fintechs to deliver a truly robust digital experience.
“If you look at younger generations—Gen Z in particular—Fiserv research would say that they are more willing than ever to move where they bank to where they are most happy and satisfied with the digital experience,” Russell said.
“It’s almost like a perfect storm of opportunity to rethink how banks and credit unions show up for consumers and small businesses in the digital space,” she said. “Treat it as an opportunity to get not only a great service delivered, but also a true one-to-one personalized experience that allows them not only to get their jobs done, but also to seek advice and guidance and build a relationship digitally with their bank or credit union.”
Tailoring Individual ExperiencesOne of the most tried-and-true methods of building relationships is by tailoring each experience to the individual consumer. With the help of AI and data analytics, this goes even further—enabling hyper-personalized suggestions that deliver truly curated experiences.
For many consumers, especially younger adults, these customized interactions are no longer a novelty but an expectation. Their digital-first lifestyles—shaped by e-commerce and social platforms—have already acclimated them to interacting with chatbots and AI agents, making hyper-personalization the new standard.
Despite rising consumer confidence, many financial services firms have hesitated from placing AI at the forefront of their operations, fearing it might alienate customers.
Yet, although AI is still a relatively nascent technology, these concerns are largely unfounded. Research from Fiserv shows that most consumers are comfortable with AI in financial services—at least to a certain extent.
“We wanted to dig into the concerns that people have about AI getting introduced into money management in many ways,” Calhoun said. ““People are very comfortable and want to see AI providing them insights, recommendations, servicing up a next best action to them,” he said. “But at the end of the day, they want to make that final decision, that final button push—or whatever it might be—to execute what AI is recommending.”
Balancing Promise with PerceptionAlthough many consumers are becoming more comfortable with AI, financial services firms should recognize that sentiment will continue to ebb and flow.
“Even the folks who had not consulted an AI tool to make a purchase, (which was) a fair number—less than a majority, but more than a quarter, somewhere in that range—said that they would trust such advice,” Miller said. “I think it suggests that there is a long way to run in terms of consumers showing a willingness to listen to or accept advice.”
“That leads directly to the type of relationship-focused attitude that is the opportunity,” he said. “As your customers experience feelings of concern, you can use that as an opportunity to build trust.”
The Path to Relationship BuildingAs financial institutions consider strategies for implementing hyper-personalization in digital banking, it’s important to recognize that this is not a one-time solution. The goal is to create a platform that continuously adapts to user interactions, delivering tailored insights and recommendations.
“Nobody wants to run a campaign, for example, with a low uptake rate,” Calhoun said. “With AI and hyper-personalization, you can quickly learn what that user will typically click on, and you can start driving more relevant, curated recommendations and experiences to them, based on what they’ve done in the past or what they’ve accepted in the past.”
In some cases, this may mean shifting strategies entirely for customers who haven’t engaged with prior recommendations. Real-time adjustments based on individual behavior can boost user engagement within a bank or credit union’s digital channels.
Ultimately, the objective is to evolve the digital channel from a service utility into a relationship-building platform—a challenge for many financial institutions.
“We know from tons of primary research with consumers, and talking to consumers out in the wild, about the digital banking experiences they’re seeking out,” Russell said. “The younger the generation, the more apt they are to want to have advice, guidance, and research tools within their digital banking experience.”
“This technology application is perfect for evolving the digital channel,” she said. “It will help financial institutions that are now faced with digital being the premier, primary, preferred channel for consumers and small businesses; it will be a path for them to develop new relationship-building strategies.”
Different payment methods have gained popularity in different parts of the world. For example, buy now, pay later is widely used in Australia and the Nordics, while account-to-account payments lead the way in the Netherlands and Brazil.
As commerce becomes increasingly globalized, merchants everywhere must adapt to these local payment preferences—or risk losing customers.
In a PaymentsJournal Podcast, Tulio Gambogi, Head of Alternative Payment Methods at Worldpay, David Sykes, Chief Commercial Officer at Klarna, and Don Apgar, Director of the Merchant Practice at Javelin Strategy & Research, discussed the challenge of keeping pace with the wide range of alternative payment methods (APMs). While this may seem overwhelming for individual merchants, payment experts are ready to help businesses stay aligned with the methods their customers rely on.
Connecting with Local APMsDespite the fact that payment rails connect businesses and consumers around the world, payment experiences remain local. How consumers in Brazil pay is very different from how consumers in China do. E-commerce merchants, in particular, need to understand and adapt to local payment preferences in each market.
While supporting APMs might seem like a costly undertaking, the opposite is often true. Local payment methods are frequently more cost-effective than relying solely on traditional payment rails.
“From my perspective, we’re usually a price leader because we’ve got 111 million active consumers,” said Sykes. “Many of them are linked to a bank account or a debit card. In a lot of these markets, we can be more cost-effective than Visa and Mastercard.”
Even a small increase in total sales can offset what might look like a meaningful increase in costs. Weighing those costs against the potential boost in conversion is a critical exercise for any retailer. Failing to do so risks leaving money on the table.
Using a Trusted PartnerOnce a company commits to adapting its payment methods to each local market, the process can quickly become daunting. For instance, it can be difficult for a head of payments at a large global business in San Francisco to determine the right mix for customers in Italy or Taiwan.
“We work with the biggest retailers in the world, who have huge, sophisticated payments teams,” said Sykes. “I’m always surprised by how much they struggle with the complexity, because of the number of markets, and because the space is evolving so quickly.”
Apgar added: “There’s so much buzz today about orchestration, optimization, minimizing cost, and maximizing effectiveness. A lot of merchants are tempted to want a direct connection to all these payment schemes around the world. But there’s a learning curve, and time to market, and resources to be invested. There are a lot of mistakes to be made before getting to that optimized point. And a lot of times the fastest path is to engage with an expert partner like Worldpay.”
Payment partners like Worldpay help by giving merchants access to a growing portfolio of APMs through a single integration. This not only reduces complexity, but also lowers costs and eases the technical burden of connecting and maintaining multiple APMs.
BNPL Is a Worldwide PhenomenonOne example of a payment method with varying considerations across markets is BNPL.
“I never saw buy now, pay later as a trend but as a trusted financial tool,” Gambogi said. “In Brazil, any credit card would come with installments by default. I thought that was the standard. When I started working in this industry 14 years ago, to my shock, I figured out that in other countries there’s no such thing.”
When the phenomenon began gaining traction globally, Gambogi recognized it as a way to reach consumers who might not have made a purchase otherwise. But BNPL isn’t just a flexible payments offering to consumers—it has also proven to be a major advantage for merchants.
“When you select a product on an e-commerce site and put it in a cart, you’ve already decided how you’re going to pay for it,” Apgar said. “What BNPL has done for the most innovative merchants is that by displaying that payment option on the product page, they get customers who are window shopping to see a product that is maybe is a little bit aspirational for them. They see they can make four easy payments with no interest, and suddenly they can afford it.”
For merchants, not offering BNPL can mean a dramatic difference in conversion rates, average spend, and user experience. And the benefits of adopting it can be surprising. When Klarna introduced BNPL—traditionally seen as a tool for younger and less affluent shoppers—to retailer Macy’s, one of the biggest revelations was that around 40% of customers using Klarna were completely new to Macy’s. Even more unexpected, BNPL expanded Macy’s customer base in ways it hadn’t anticipated.
“This was a great story, with new customers and a younger audience for them,” Sykes said. “What blew me away was that half of those customers at that point choosing Klarna were over the age of 40.”
Avoiding Trouble at the Last MileConsumers turn to APMs for a wide range of reasons. However, the complexity of these systems makes them more difficult for most retailers to fully understand—let alone implement and use on a regular basis. Even within a single country, multiple APMs may be widely used. Partnering with a trusted provider can help retailers identify which options matter most and prioritize accordingly.
“Don’t bite off more than you can chew,” said Gambogi. “You don’t need a checkout with 100 different options. You need to focus on the three or four most relevant payment methods for that particular market.
“With those steps in mind, you will be able to offer your shoppers the best user experience at the last step of their interaction,” he said. “You do not want to face trouble exactly at the last mile.”
Cybercriminals have been after personal data for years, but new technology is giving them a dangerous boost. Infostealers—malware that extracts sensitive data like passwords and credit card numbers—are becoming one of today’s biggest online threats because they are easy to use and hard to spot.
While conversations about online safety often peak during Cybersecurity Awareness Month, the reality is that vigilance is needed year-round. In a recent PaymentsJournal podcast, Tracy Goldberg, Director of Cybersecurity at Javelin Strategy & Research, discussed the damage infostealers can cause, how consumers can protect themselves, and how dark web threat intelligence is helping fight back against bad actors.
Protecting the Keys to the KingdomMalware has become a damaging force capable of shutting down systems and causing financial havoc—even to large-scale organizations. However, infostealers take this threat to another level, having been responsible for extracting billions of personal credentials.
“What makes it different from malware that we’ve seen in the past like keyloggers is that infostealers are extremely sophisticated, so they’re capturing all kinds of data,” Goldberg said. “When you type in your username and password, they’re capturing the browsing history and the cookies.”
“Some of these infostealers are sophisticated enough to capture screenshots, which is really frightening,” she said. “There are some infostealers out there that are specifically designed to target crypto wallets and digital wallets—all of that data can be captured.”
Their sophistication makes infostealers exceptionally difficult to detect and neutralize. The combination of stealth and power poses a serious challenge to the financial services industry on multiple fronts.
First, financial institutions must find ways to ensure the authenticity of online browsing and mobile banking sessions. Second, the industry must confront the reality that traditional passkeys and tokens are no longer sufficient to defend against modern malware.
“In the same way that password managers have risks, because if the password to the password manager is compromised in a data breach—and we know people use reuse passwords—then the keys to the kingdom are gone,” Goldberg said. “The same holds true in this environment for passkeys and digital wallets and tokens because oftentimes that encrypted data is held behind a site that is password-protected.”
“When we save passwords and browsing history, which most of us do, if that browser history or the cookies are compromised, then there’s no reason for the cybercriminals to decrypt any data, they get access to where that data is housed,” she said. “It’s an extremely concerning problem, and it’s one that I don’t think we’re prepared for as an industry.”
The Cost of ConvenienceMany of today’s emerging risks stem from the new digital paradigm. While digital payments and modern technologies offer transformational benefits, they have also introduced new vulnerabilities.
“If you have a credit card that is reissued and it’s automatically updated to your digital wallet, if that cybercriminal has already gained access to the password and login credentials that give access to that digital wallet, when the new digital numbers are automatically updated, they have access to it,” Goldberg said.
“We have these digital wallets where our financial institution can reissue a compromised card to us digitally, which means we can start using that card before we get the physical replacement in the mail,” she said. “That convenience is wonderful, but it’s also made it easier for cybercriminals.”
For financial institutions, this can be costly—especially if they must continually reissue EMV chip cards in addition to bearing the broader costs of fraud.
Addressing this challenge is complicated by the limits of consumer education, which has typically been central to fraud prevention. It’s unrealistic to expect the average consumer to stop reusing passwords, regularly clear browsing histories, or log out of every device after each session.
As a result, a new type of solution is needed—one that may require the industry to hearken back to the early days of digital.
“What the solution is going to be, it’s something that we talked about years ago and we never made the leap and that is hardware tokens. These are physical tokens that you carry on your person that you use to log into your device,” Goldberg said. “Whether it’s your mobile device, tablet, or laptop, having that physical token is going to be the only solution.”
“We’re going to almost have to take a step back in time,” she said. “Just like we would use a hard key to open our door, we’re going to have to take a step back, and that’s going to cause challenges for convenience.”
Scouring the Dark WebIn addition to heightened security on the consumer end, dark web threat intelligence can make a broader impact. This intelligence comes not only from collecting the compromised data found on the dark web, but also data from monitoring threat actor communications in forums and chat channels.
Dark web threat intelligence has become critical because it helps uncover the connections between bad actors, who increasingly operate in organized groups. This kind of attribution is growing more important as technology advances and more sensitive data about online.
The growing repository of digital information must be protected, as bad actors are no longer just a threat to individual consumers or organizations—their actions can create ripple effects that reach the level of national security concerns.
“There are threat actors out there that on the surface may look like they are just targeting consumers for scams, but by looking at the tactics, techniques and procedures, dark web threat intel can tell us that there could be something more nefarious going on,” Goldberg said.
For example, a threat analyst combing the dark web may discover a series of compromised credit cards issued by a single financial institution. They might then notice that the cards belong to account holders clustered in a certain part of the country. From there, the analyst would dig deeper to identify further commonalities among the affected accounts and potential links to broader criminal activity.
“You’re able to say: ‘They all shopped at a certain grocery store or dined in a certain restaurant,’ and you just continue to narrow it down,” Goldberg said. “Perhaps you’re able to find out that all of these individuals were on a particular Facebook Marketplace forum and they were engaging with a certain individual who was selling BBQ equipment.”
“Then, you’re able to say: ‘This particular individual who is associated with the account that’s selling the BBQ equipment also has accounts that use different names, but have the same IP address,’” she said. “From here, we’re able to connect the dots, and ultimately the hope is that through this trail of attribution, you’ll find out who the individual or individuals behind some of these malware rings and groups are and take them down.”
The Benefits of FrictionThrough these techniques, dark web threat intelligence can be a powerful tool to track infostealers and identify the victims they have affected. As the financial services industry gains deeper insight into these threats and the criminals behind them, it can take a proactive and preventative stance.
However, as these threats grow increasingly pervasive, cybersecurity has evolved into an everyday priority for everyone.
“The most basic thing from a consumer perspective is that we have to reel in our use of social media,” Goldberg said. “Social media is not just a concern for financial institutions and consumers because it’s a prime channel that’s used for spreading malware and targeting consumers for scams, it’s also used for disinformation campaigns. Everybody just needs to be skeptical of what they read and mindful of what they post on social media—that would be first and foremost.”
“Secondly, everyone needs to jump on board with the reality that it’s not going to always be convenient, and a little inconvenience and friction is good,” she said. “Moving toward an environment where we have a physical hard token key that we have to use to log into our device is just going to mean that our devices and accounts are more secure. I think that’s a direction that we’ll all be moving in.”
As dynamic technologies continue to revolutionize the payments space, conferences have become a critical way for payments professionals to stay informed and share their expertise. One of the signature events of the payments space is Nacha’s Smarter Faster Payments 2026, which will take place in San Diego from April 26-29, 2026.
In a recent PaymentsJournal podcast, Stephanie Prebish, AAP, AFPP, APRP, CTP, Senior Managing Director of Association Services at Nacha, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the wide range of educational tracks and networking opportunities available at the conference—and how attendees can accomplish months’ worth of business in just a few days at Smarter Faster Payments 2026.
The Four PillarsNacha’s conference has become one of the most recognized events in the industry, thanks in part to its educational offerings, which provide an in-depth look at the timeliest topics in financial services.
“Our Payments conference is known in the industry as one of the best conferences out there and we’re planning another excellent year of education and networking and fun,” Prebish said. “We’re really just looking forward to it.”
With such a full event calendar, it is essential for attendees to come prepared with a plan. That plan should make room not only for networking opportunities and keynote speakers, but also for conversations with vendors on the exhibitor floor.
Amid all the activity—and the splendors of San Diego—there is more than enough to keep payments professionals engaged. Still, it is critical for attendees to review the agenda in advance and prioritize the educational sessions that matter most to them.
“We just finished up our first-round selections, and the sessions next year are going to be fantastic,” Prebish said. “We are on top of all the big, new, exciting changes that are coming to payments. We’re going to be talking about stablecoins; we’re going to be talking about fraud monitoring; we’re going to be talking about everything that’s happening with ISO 20022. It’s going to be an amazing conference.”
Defining the AudienceThe tracks were carefully curated to span the full spectrum of the payments industry, highlight emerging innovations, shifting regulations, and strategies for mitigating fraud and risk.
New next year is a track dedicated to one of the industry’s most talked-about technologies: stablecoins. This track provides a detailed exploration of the opportunities stablecoins present for financial institutions, along with strategies organizations can adopt to harness their potential.
There is also a dedicated legal track designed specifically for attorneys working in the payments space. Additional tracks focus on artificial intelligence, compliance and regulations, cybersecurity, and ACH.
With such a comprehensive agenda, it can be challenging for attendees to identify the sessions most relevant to their role. To help, Nacha has developed a system designed to guide participants in mapping out the sessions that will deliver the greatest impact.
“We’re going to have personas dedicated to who you are in the payments industry, and with every session it will be indicated which persona will be the best choice for you,” Prebish said. “This is going to be really exciting for us because it’s not something we’ve done before, where we’ve defined audiences by session. In addition to the tracks, you can also look at these persona maps and decide where you’re going to be best spending your time.”
“Everyone goes to the Payments conference and affectionately calls themselves the rules geek, but that is actually going to be one of our personas—and also payments innovators, payment strategists, and FI leaders,” she said. “We’re really excited about the opportunities that the persona development has given us.”
Finding Like-minded AudiencesAlong with innovations in its educational offerings, Nacha has also enhanced the networking opportunities at Smarter Faster Payments, while keeping long-standing traditions such as the Sunday Social.
“We’re still going to have our tried-and-true events like our Tuesday Night Out, which is going to be held on the USS Midway,” Prebish said. “We’ll have our accreditation reception, which next year is going to be super exciting because we’re adding the celebration of our AFPPs (Accredited Faster Payments Professionals).”
One of the best ways to maximize these networking opportunities is through the event’s mobile app. Attendees can use the app to locate and join meeting pods on the exhibit floor, see who else will be attending, and connect with colleagues to schedule time for conversations.
Another major initiative at Smarter Faster Payments is the development of the next generation of payments professionals. Two years ago, the organizers introduced their next-gen initiative, a “15 Under 40” program designed both to highlight emerging leaders in the payments industry and to foster their continued growth.
Across all these events and initiatives, Smarter Faster Payments provides opportunities for payments professionals from every background to connect, collaborate, and build lasting relationships.
“We’re doing a lot more in the hall, so we’re going to be working with our Payments Associations and offering what we’re calling a community corner, which is going to be a place for industry groups of like-minded audiences to meet up,” Prebish said. “We’re also going to have Coastal Coffee service in the morning and then we’ll have Pacific Pints beer in our beer garden in the afternoon. There is lots of fun stuff going on in the hall as well as our evening activities.”
Hitting the Three CriteriaAlthough the event doesn’t take place until next spring, early registration is now open for exhibitors, and attendees can take advantage of early-bird rates—including discounts for first-time participants and those under 40.
As this event has become the industry “who’s who,” Smarter Faster Payments 2026 is now a must-attend for financial services professionals.
“When I’m selecting conferences, one of the first things I look at is the sponsor, and Nacha stands out at the top of many of the things offered for the payments community today,” Riley said. “Also, the tracks are important and those are really well applied, and then the networking opportunities. From what I’ve seen at Nacha, this hits all those three criteria for me.”
Gift cards have evolved from being a thoughtful, last-minute birthday gift into a mature industry that’s helping companies build loyalty both inside and outside their organizations. Their use cases are expanding rapidly, offering innovative ways for business to not only reward employees but also strengthen their bottom line.
In a PaymentsJournal Podcast, Samara Swenson, U.S. Senior Marketing Manager at Prezzee, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed how businesses can tap into this dynamic new landscape for prepaid cards.
A Strong and Growing MarketAccording to Javelin, the prepaid market was worth more than $300 billion in 2024 and is expected to grow over 8% annually over the next five years. That figure reflects just the closed loop segment; the open loop side adds an additional $40 to $50 billion, with a similar expected growth rate. Altogether, the industry is projected to reach at least $500 billion by the end of the decade.
The B2B segments that Prezzee specializes in are also gaining strength. They account for roughly 15% of the total market, with a comparable 7% to 8% compounded growth rate. Crucially, the B2B segment could expand beyond the current projections as more companies adopt the emerging use cases that are taking shape.
Aligning ObjectivesA full-service gift card program can help organizations align their gifting strategies with specific business objectives, whether that’s employee recognition, customer acquisition, loyalty programs, or incentivizing sales teams.
Each objective requires a slightly different approach. For example, for employee engagement, HR leaders can offer highly personalized and meaningful rewards that recognize key milestones, accomplishments, and contributions. For customer acquisition, a prepaid program enables marketing leaders to execute impactful promotions, referral programs, and loyalty initiatives. Sales leaders can use gift cards to motivate teams and reward performance, ultimately driving higher productivity and sales outcomes.
New Frontiers in Employee IncentivesOne of the key areas where gift cards are already very popular is employee incentives. Gifting employees helps them feel recognized and appreciated, and companies that do this often see increased motivation, loyalty, and overall productivity.
“What many organizations might not realize is that this positive internal atmosphere naturally extends outward,” said Swenson. “Engaged employees are often a company’s best advocate, allowing companies to channel this energy into external marketing campaigns, customer facing initiatives and sales programs.”
Javelin is also beginning to track how many people receive sales incentive through a prepaid program, and early data is showing strong signs of growth.
“That’s been a bit untouched in employee incentives, but there are so many great opportunities to go multimodal—maybe have some that is cash, some that might be stock, but also an immediate reward. ‘Hey, you can go out and treat yourself to something because you hit a goal,’” Hirschfield said.
“It’s not like you’re sitting and waiting,” he said. “You don’t have to do anything except load it in your wallet or go to a store and say, ‘I’m going to use that.’”
Employees who receive incentives are generally happier with their employer. But beyond supporting loyalty at work, card issuers have found that gift cards also foster loyalty among recipients. Javelin data shows that consumers who receive a gift card are more likely to join loyalty programs, become repeat visitors, and even advocate for the brand to friends and family. As a result, these incentives go beyond providing an immediate reward—they can spark long-term relationships.
Digital vs. Physical CardsAs an electronic gift card platform, Prezzee offers plastic-free gift cards that help companies reduce their environmental footprint, supporting broader corporate ESG commitments. By replacing traditional plastic cards with digital alternatives, businesses can cut plastic waste while signaling their dedication to sustainability.
Hirschfield anticipates that digital and physical gift cards will reach an equilibrium by the end of the decade, with a roughly 50/50 split in volume. Gifting is likely to remain popular in physical form, as people often value the tangible experience and gratification of opening a present.
“When you have that ability to provide immediate access, you look at employers and employees, especially when they are remote,” said Hirschfield. “A lot of times, the person giving that reward is not sitting with them. That’s where digital factors thrive.”
Solving for Unused BalancesOne emerging and valuable benefit thatPrezzee offers is the ability for businesses to reclaim any unused or unactivated gift card balances, ensuring that no budget goes to waste. Unlike traditional providers, companies only pay for activated gift cards and can also set expiration dates to encourage timely redemption.
“From a broad perspective, unused funds (tend to accumulate) at what I call the edges of the value: either at full value or down to the last pennies on the card,” said Hirschfield. “These are mostly the scenarios where someone just forgets to use their card. When you eliminate that fully unused portion, you can provide better bang for the buck for that incentive provider and reduce those pressures on the brand. You don’t have that excess liability on the back end.”
Prezzee also provides reporting and analysis tools, enabling businesses to track gift card usage and redemption rates. This data allows companies to continuously refine their strategies, reallocating funds to maximize impact. The combination of transparency and flexibility ensures that every dollar invested in gifting delivers tangible results and measurable returns.
“We’ve seen some truly innovative and impactful applications,” said Swenson. “In emergency response situations, Prezzee has enabled organizations to rapidly distribute funds directly to those affected by crisis. Following natural disasters, our partners have provided essential resources to communities within 24 hours.
For decades, typically large regional or money center banks served as correspondent banks that enabled smaller banks to offer cross-border payments. It was rare for credit unions, community banks, and other smaller financial institutions to offer cross-border payments. And if they did, it was a money-losing proposition, offered out of necessity to prevent their customers from leaving for larger banks.
It’s notable that the problem for originating institutions has become much worse. Over the past decade, the number of correspondent banks supporting originating institutions for cross-border payments has fallen by more than 25%, even as international bank transfer volumes have surged.
Small or even medium-sized financial institutions struggle to find a correspondent bank. And even if one is found—the commercial terms, product issues from the opaqueness of these payments, customer complaints about slow delivery of funds and high fees, as well as service from correspondent banks—make the experience painful for everyone involved.
But things have changed.
New software and new paradigms address “legacy bank systems”, “legacy product thinking”, and “legacy risk” in terms of cross-border payments.
And for the first time, smaller financial institutions, credit unions, and community banks can offer their retail customers, SMEs, fintechs, and others cross-border payments that are faster, transparent, and less costly than the “big banks”. Moreover, they’re very profitable as well as easy to implement and support with new paradigms and new tech—and no correspondent bank required.
In a PaymentsJournal podcast, Gary Palmer, President, CEO, and Chairman of Payall, and Hugh Thomas, Lead Analyst of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how smaller banks can compete and win in the cross-border space.
Fixing the Root Cause Issues at Correspondent BanksWhat could reduce both the risk and the cost of cross-border payments? Fixing manual workflows is the first step. Digitizing and enhancing a correspondent bank’s ability to manage counterparty risk, transaction risk, and multi-jurisdictional compliance lowers the cost of processing each transaction and improves outcomes.
Alternatively, some have introduced stablecoins in an attempt to fill the gap of fewer correspondent banks. But without fixing the underlying risk and compliance issues—they’ve added new risks.
“A professor from a renowned European institution tracking various violations or issues with crypto operators in the areas of sanctions and money laundering has noted a marked increase in violations,” said Palmer. “And even though financial institutions may feel somewhat insulated from risk, this hasn’t been fully tested, and the payment system is exposed to manipulation.”
Payall has developed end-to-end infrastructure and enterprise software for banks of all sizes and all roles, which removes what Gary calls “the fear and friction” from cross-border payments—whether these payments are processed through correspondent banks, new alternatives such as Mastercard Move, or stablecoins.
Hugh Thomas observed: “Smaller banks often lack the technical resources to handle the complex demands of cross-border. What’s notable is how purpose-built solutions digitize these processes, lowering costs and opening participation in ways that weren’t possible before.”
This means that smaller and medium-sized banks can now safely, efficiently, and profitably become correspondent banks or originating institutions.
Banks Are Asking Too Much from Their EmployeesMillions of times each day around the world, an originating bank employee receives a payment instruction from their core system indicating that a customer wants to transfer funds to the U.S. to make a payment for goods and services. From here, this transaction is manhandled through an overgrown jungle of paper processes across multiple departments at the originating bank and its correspondent bank.
It’s each bank’s responsibility to establish reasonable risk controls to mitigate money laundering, terrorist financing, and sanctions violations. Based on the size of the payment and other attributes, employees must decide what data to collect—contracts, invoices, bills of lading, customs declarations, tax receipts, or something else. They must then determine whether the documents are authentic or have been altered or forged. And apply judgment to decide if what’s been provided reflects an economically legitimate transaction. The bank employee also looks for sanctioned people, companies, ports, vessels, and products in this pile of documents, from an ever-changing list of sanctions.
Now consider the time, cost, and risk of error involved—even for a few documents/pages. Multiply that by 5, 10, or 50 pages, and the problem becomes overwhelming.
And where do they record, share, and store the results—along with all the related data, documents, photos, and more? Not in core systems or digital bank platforms—because it’s impossible—but instead, in paper files, shared folders, and emails. What a mess. It’s a slow, costly, opaque, cumbersome, and risky process.
The solution? Digitizing counterparty risk, transaction risk, compliance, and a long list of other previously manual processes eliminates the slow, costly, and error-prone reliance on humans to protect each bank and the payment system.
New, Purpose-Built Software is a Game Changer“It’s easy to understand how AI and digitization could transform cross-border compliance,” said Thomas. “Software that automates data collection, verification, and document analysis has the unique potential to reduce risk and change the economics of participation for smaller banks.”
Payall’s software digitizes all the originating institution’s rules, data collection, verification, and internal, as well as external, sharing needs. Soon, advanced AI will examine PDFs, audio files, videos, and photos, extract unstructured data—such as names of companies, ports, vessels, people, and currencies—and compare them against sanctions lists.
For the first time, an originating institution, even a small bank, can fully digitize its Know Your Transaction (KYT) process for 100% of transactions in real time. Until Payall, these processes could only be executed by a bank’s employees. It’s too much.
Also, from the perspective of a correspondent bank working with originating institutions, nothing is more powerful than “see-through”—or 100% visibility into each rule at the originating institution, how it was executed, the supporting data and artifacts, including the results of 3rd party verification services—orchestrated by Payall.
Additionally, correspondent banks configure their individual risk, compliance, or other rules to this incredibly data-rich payment set and take action. Instead of operating on “trust”—validated by occasional audits on as few as 0.0001% of all transactions, months after a payment—imagine the power of complete visibility into the originating institution’s application of their rules, processes, and supporting documentation on 100% of all transactions in real time.
And based on this, the correspondent bank can choose to either accept the payment or independently execute additional transaction due diligence, including a new form of Know Your Customer’s Customer (KYCC). This is only possible with new software that enables instant, on-demand multi-country KYC, KYB, as well as specialty KYT.
What was previously impossible to see is now not only transparent but can be directly and independently interrogated and decisioned by the correspondent bank—this is Know Your Customer’s Customer reimagined.
This is particularly powerful for correspondent banks that support originating institutions from regions flagged by FATF as having material weaknesses in preventing money laundering, executing KYC, or sanctions screening.
Also, during periods of geopolitical events, bad actors can infiltrate banks. What’s the outcome? In the absence of comprehensive payment data and knowledge, U.S. correspondent banks are compelled to exit from the region or stop just about all payments. But in doing so, legitimate businesses can’t make payments or get paid, and life-saving remittances are stopped. The result? Chaos as commerce is crippled, and everyday citizens struggle to survive. While the bad actors are stopped, a country can be decimated.
“For correspondent banks, Payall enables proactive, data-driven oversight of every transaction, not just retrospective audits or occasional spot-checks. For the first time, correspondent banks can go beyond trust,” said Palmer. “We’ve completely reimagined and redefined Know Your Customer’s Customer so that correspondent banks have 100% see-through into the rules and outcomes of an originating bank partner, and they can directly engage and decision data. This changes everything: it eliminates reliance on inefficient back-office workflows, subjective trust, and guesswork. It creates confidence in the safety of cross-border payments, and gives correspondent banks the control they’ve always needed, but never had.”
Payall’s breakthrough software reduces risk to correspondent banks while ensuring legitimate trade is flowing and the most at-risk can still receive life-saving remittances. “This level of transparency and access fundamentally changes correspondent banking,” noted Thomas. “It’s no longer about faith that a partner executed its controls—it’s about verified execution, visible in real time.”
Correspondent Banks Have New CompetitionWhile new software helps banks overcome legacy systems and legacy risk, Mastercard Move and Visa Direct are new paradigms that address legacy bank product thinking regarding international transfers. Banks and financial institutions of any size can offer cross-border capabilities that no bank has ever offered—such as transfers to mobile money, digital wallets, cash pick-up, and pay to card with Visa Direct and Mastercard Move.
In addition to providing novel software for originating institutions and correspondent banks, having pioneered specialty risk and compliance capabilities as well as end-to-end workflow digitization, Payall is certified by Mastercard Move as a technical integrator and processor. The company also supports Monex and recently announced its FedNow Service certification. Gary emphasized, “We’ll never compete with banks, whether they’re originating institutions or correspondent banks; instead, our software and global payments gateway and orchestration capabilities open more possibilities for all.”
Mastercard Move and Visa Direct are well-positioned to capitalize on the mass exodus of correspondent banks from cross-border payments in the face of growing retail, SME, and other bank customer demand for cross-border payments. Given the modern, inclusive nature of their products, speed of funds delivery, transparency of payments, and commercial terms for banks—if they can make connecting easy and affordable, major global adoption is likely. Thomas added, “What’s interesting is that new entrants like Mastercard Move and Visa Direct expand payout options, but smaller banks can only plug into them if they have the right software partner. Otherwise, the cost and complexity of connecting make it nearly impossible.”
Palmer agreed, noting, “This is where we shine—banks struggle to find resources to connect and operate with Mastercard Move; we eliminate up to 98% of the capex and can launch a bank on Move in weeks.”
“You Can Do This”Correspondent banks struggle with effectively and efficiently dealing with the risks associated with how foreign originating institutions, MSBs, fintechs, and other counterparties execute KYC, KYB, AML, and more. But there’s also the financial risk associated with properly maintaining nostro vostro accounts, FBO accounts, or even safeguarded accounts. The ability to perform dynamic sub-ledgering and complex account and currency reconciliation isn’t supported by legacy systems, which rely on manual control mechanisms. This is why banks need new technology to ensure financial integrity, improve outcomes, lower costs, and address the root causes of why cross-border payments have been high-risk, opaque, costly, and slow.
“A good example is a small bank we’re working with. They recognize the gap in correspondent banking and understand that our proprietary software can deliver the safety and efficiency they need to operate and win,” said Palmer. “The opportunities are material but realizing them takes the right technology and bank leadership. Banks can now do this.”
While originating banks have a different set of risk, compliance, and payment problems, new software and new paradigms address their needs, too. And with the likes of Visa Direct and Mastercard Move, there’s no reason for a credit union, community bank, or smaller financial institution to lose a customer just because they don’t offer cross-border payments.
There’s never been a better time for a bank, even smaller financial institutions, to capture their fair share of cross-border payments—with the right software and know-how.
As more people choose to bank online, the role of the traditional branch has undergone a transformation. Once the go-to place for every financial need, the branch is now primarily a hub for more complex transactions that can’t be completed digitally or at an ATM.
At the center of this evolution is the interactive teller machine (ITM), which enables customers to connect with a live teller at any time of day, regardless of their distance from a physical branch. In a PaymentsJournal Podcast, Fiserv’s Chris Geganto, Senior Director of Product Strategy, and Craig Demetres, Vice President of ATM Product Management, spoke with James Wester, Co-Head of Payments at Javelin Strategy & Research about how ITMs are driving operational efficiency, lowering costs, and enhancing the customer experience at banks and credit unions across the country.
The New BranchThe financial institution branch is no longer just a place for simple financial transactions. It now serves as a vital connection point between consumers and the FI’s brand, its people, and its promise. Branches blend digital and physical touch points to deliver the kind of seamless customer journey that financial institutions have worked hard to create.
Today’s branches even look different. Instead of a row of teller windows that once felt formal and uninviting, modern branches are open, welcoming spaces designed to foster personal relationships. They’re now tailored to support higher-value transactions rather than routine deposits and withdrawals.
And while much of banking has shifted online—or to ATMs to a lesser extent—banks and credit unions still need to provide customers with a meaningful, in-person experience.
“We still have a very personal relationship with our bank account, and with our money,” said Wester. “We still want to have a very personal relationship with our bank. Being thoughtful about preparing the branch for that relationship is very important.”
Empathy vs AutomationOne challenge for every financial institution is balancing automation with empathy. Automation is about being fast and convenient—handling routine, rule-based client interactions quickly, consistently, and accurately. It addresses most of what consumers need from their bank, but it can also feel impersonal.
Empathy sits at the opposite end of the spectrum. It’s thoughtful and personal, building trust and emotional connection, and ultimately deepening the customer’s relationship with the financial institution. It’s also slower and more cumbersome for the consumer, but there are times when it is sorely needed. Filing for a home loan or opening a small business account, for instance, often comes at a critical juncture in a customer’s life.
“Finances really drive the human moments that matter for us,” said Geganto. “When you walk into a branch, you’re freeing your bankers up for those human moments, for those conversations about what matters most in your life.”
Automation doesn’t always have to feel impersonal. With smart design and proactive messaging, banks can provide a seamless handoff to advisors so everyone is working with the same information. While consumers may start with an automated interaction, many will transition to a more personal connection. To keep that experience consistent, FIs must be intentional about embedding empathy into the digital journey that leads to an ITM.
“Although it’s automated, it’s still a personal relationship between the banker and the actual customer itself that directs them to the actual ITM,” said Demetres. “These small credit unions and financial institutions need to make sure that they still have the person there to interact with the customer, whether it be on video or in person.”
ITMs Bridge the GapAn ITM essentially extends the branch experience, expanding service hours and the geographic reach of the branch. It gives consumers the flexibility to conduct transactions on their own schedule, while still providing access to a human when needed.
ITMs also unify the digital and physical channels, bringing channel convergence to life.
“Your brand ethos is coming through that machine because you have trained your universal bankers who are on the other end of that machine in the engagement model that you spent so much time and effort and money to develop,” said Geganto. “It’s being replicated in a digital fashion.”
For any smaller bank or credit union considering an ITM, the first question should be whether the experience can be customized. Can multiple languages be added to support the customer base? Will the voice guidance convey the right tone? Do the visual elements on screen reflect the brand? The automation should feel like a natural extension of the institution, not a generic out-of-the-box solution.
Ensuring That the Crew Is ReadyStaffing the ITM is a crucial part of the overall model. The team on the other side of the video must understand that the customer is navigating the system on their own but is seeking guidance. They need to be trained to recognize the types of critical situations that would bring a customer to the ITM, as well as to understand the strategy that the financial institution is deploying.
They also need to monitor the data being collected closely. Reviewing analytics is a necessary part of making sure the strategy is effective and to identify areas for adjustment.
“The banks and credit unions have to make sure they are being efficient while still keeping that human touch,” said Demetres. “They have to see what accounts and transactions are working, while keeping the human involvement.”
Keeping the Human TouchITMs have proven especially beneficial to credit unions and smaller banks that may not have the capacity for a fully staffed branch with extended hours. They can personalize ITMs to their own needs, reinforcing their brand while enhancing the ability to bring a personal touch to customer interactions. Whether a customer needs to complete a simple transaction or a more complex one, whether they require automation or a human touch, an ITM delivers.
“First and foremost, it keeps the human in the loop, because finances are freely personal,” said Geganto. “When you remove the person, finances are just finances. You need the personal touch because it’s about helping them through those life moments. For every consumer you do that with, you’re building trust and transforming them into a brand ambassador for you.”
Demetres added: “The customer needs to know that there’s always somebody there to support them. ‘Oh, I got this now. I’m never going to have to ask somebody how to use an ATM… how to use an ITM going forward.’ That’s a customer for life.”
Almost without notice, disappearing payments have shifted from novelty to expectation in small business transactions. A traveler arrives at an airport, books a rideshare, and checks into a hotel—never pulling out a wallet or handing over a card. The transaction happens seamlessly, almost invisibly.
The same technology fueling consumer-facing apps is now within reach for small businesses. Research from Worldpay shows that 90% of small businesses consider embedded finance—the integration of financial services, including payments, directly into non-financial offerings—essential to their growth. In a PaymentsJournal podcast, Matt Downs, Group President of Worldpay for Platforms, and Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research, discussed how technological advances are making small business payments both more sophisticated and less visible at the same time.
“Why are payments disappearing?” asked Downs. “Because consumers want ease. They don’t want to see the friction.”
The Sweet SpotWhile they may see the benefit of disappearing payments, a small business faces a different reality than an independent contractor driving for a rideshare company. For small businesses, payments cannot simply vanish into the background. They need visibility and control—both to verify that transactions have been completed and to manage cash flow. Likewise, consumers may prefer that payments remain somewhat visible when dealing with small businesses, so they can make more informed choices based on factors like price or payment size.
The sweet spot is a system where consumer can choose to dip, chip, or use a digital wallet—without having to rethink that decision every time they pay a small business. For the business, it means having access to a payment process that feels sophisticated yet intuitive, flexible yet low-effort to manage.
“Building a solution that supports all of those elements is very challenging,” said Miller. “You have to be able to support all the way through the design elements and what the interface looks like, all the way back to the seamless handling of the payment processing itself.”
Integrating into New VerticalsThe concept of delivering targeted lending within verticals is not new, but it has not yet been fully woven into the consumer experience. For example, a veterinary office may have offered a financing plan in the past, but it likely wasn’t something a customer could access through the same website where they booked their appointment. For the doctor, providing a lending product with fast approval that integrates directly into their existing systems can become a meaningful competitive advantage.
“If you are a vet, the last thing you want to do is evaluate a bunch of different lending programs and take seven sales calls from seven lending programs to evaluate the right one who can integrate the lending product directly to the patient experience,” said Miller. “The market is looking for a solution that meets the needs with a minimum of risk.”
The beauty of a vertical solution is that it is tailored to a business’ individual needs—whether that business is a veterinary practice, a restaurant, or a dry cleaner. To be effective, the software provider must understand the workflow, revenue streams, and nuances of the business, no matter how niche.
Payments have evolved not only by becoming more complex, with more options for both payers and payees, but also by becoming increasingly specialized for the unique requirements of each business type.
“That’s a whole new spin on finance,” said Downs. “Fifteen years ago, there were pretty good payment options out there for retail and restaurants, although they were pretty expensive until the cloud drove the cost down. But that also allowed more entrants to come in and say, ‘Hey, I want to solve use cases for veterinarians or food pop-up trucks.’”
The specialization adds complexity to the process, making an embedded payment solution more of a necessity.
“In an ever-evolving landscape of payment acceptance options, the number of merchants who are actually able to manage that on their own and make decisions to add or not add or build in the integrations is vanishingly small,” said Miller. “The idea that a platform is better situated to manage that complexity and that change is kind of a slam dunk.”
Building Through AIArtificial intelligence is an important component of these new platforms. It helps companies better understand their customers’ needs and plays a key role in driving technological development.
“It allows room for new entrants to come in and shake up weak software companies that weren’t good at understanding their customers at their core,” said Downs. “It’s going to challenge them. It’s going to have an effect on who the winners and losers are in this space. But in the end, the small businesses and consumers will win because they’re going to get better served.”
Embedding AI directly into products gives merchants access to the insights that can transform a business. While AI requires large amounts of data, integrating it into a platform allows businesses with limited data to benefit from powerful analytics. For example, a small vet clinic may not have enough payment data on its own clients to accurately assess risk profiles—but AI can change that.
While small businesses aspire to be sophisticated payment processers, they also don’t want a separate piece of software for the front office, another for the back office, a standalone banking suite, and so on. This has given rise to the notion of the “everything platform,”—software designed to help companies meet all of their processing needs in one place.
With advancements in AI and technologies that can connect and integrate multiple platforms, the ecosystem is now ripe for embedded payments to support small businesses. Very few merchants are capable of managing their payments independently while deciding which integrations to adopt. Embedded payments allow their processes to remain not only customized but also state-of-the-art.
“We take the heavy lifting, the operations, the payments, the financial underwriting, liability, everything that comes with adding more on,” said Downs. “We take that off the software company with a goal of just making sure it works for businesses and the consumer.”
The post The Invisible Checkout: Embedded Payments Transform Small Business appeared first on PaymentsJournal.
Customers signing up for new accounts and services can feel frustrated by the hoops they have to go through, assembling information and entering it in complicated, sometimes multiple forms, whether on paper or online. What they may not realize is that the process can be just as frustrating for the people working at financial institutions, or other businesses performing underwriting functions.
Too often, technology forces both consumers and businesses to adapt to outdated onboarding processes rather than the other way around. In a PaymentsJournal Podcast, Penny Townsend, Chief Product Officer at Qualpay, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed how the next generation of onboarding and underwriting procedures could bring greater efficiency and effectiveness for everyone involved.
A Siloed Approach to OnboardingOnboarding is a financial services company’s first opportunity to build a relationship with its customers, so it’s vital to make the process as painless as possible. Yet too many companies still make it cumbersome. For example:
“When people sign up for a bank account, and want a debit or credit card along with the bank account there are multiple applications they have to fill out,” said Townsend. “If I applied for two or three different services, I likely have to fill in secondary and tertiary applications that don’t copy over the data already fed into it.”
Financial services companies have long been a siloed environment, but many organizations are realizing that by connecting their onboarding processes, they can also streamline their internal systems. For example, it’s possible to combine for a business, a bank account, credit card processing, and ACH transaction processing into one application that flows seamlessly through underwriting.
The key is to templatize the information and present it in a data-driven, no-code way, creating a unified experience across all financial products. The goal should be to shift the effort of customers bending to how the technology, the vendor and the implementation require data to be input to how can we optimize the experience to reduce repetition and breakdown the silos that existing for different financial products. Creating better customer experience and more transparency and integrity in the data used to manage ongoing risk and compliance.
“My team is out there talking to people about how they actually onboard customers,” said Townsend. “Sometimes if some of the data has to change on the application, a new application has to be sent out, creating friction right at the beginning. Some applications are manually underwritten, which means they take the data set, log into the third-party tools, then verify that the data set matches what was on the application. After they’ve done the data verification, they’ll do the physical underwrite, but they’re manually inputting it maybe into two or three different systems for different tracking purposes.
“So if you ask me about how automation helps scale onboarding operations, it’s a game changer,” said Townsend. “Move away from the bespoke applications that people have bought in order to solve problems, and start looking more broadly and more holistically. Ask the question, “how can I delight the consumer when they’re applying for something?” By making the onboarding experience as efficient, effective, and speedy as possible.”
Bundling the ProcessesThe implications extend beyond onboarding efficiencies. Consolidating multiple workflows into a single system powered by a common dataset not only streamlines operations but also enables businesses to present products together in combinations that align with how consumers prefer to buy them.
“If somebody comes in to open a business DDA, you can ask if they would like to set up merchant services at the same time,” said Apgar. “You’re not making them go through a separate application. And what that does for the customer is that it incorporates multiple products into a single buying decision. With a discrete workflow, after they buy product A, you have to ask, now would you like to buy product B? If you can bundle B with A in the combined onboarding process, that makes the buying decision much easier for the consumer.”
Benefits Throughout the OrganizationThe onboarding application should be able to accommodate a variety of financial service products, treating each application as structured data that can be validated through automated tools. A simple rules-based engine can then provide a clear red light/green light decision on whether to proceed.
The benefits of this approach cascade throughout the organization. As compliance requirements grow more complex, a transparent workflow becomes invaluable. Without technology that consolidates and supports the process, audits are difficult to manage because data is scattered across disparate systems.
This structure also supports risk management throughout the customer lifecycle. Because underwriting data feeds directly into the risk engine within the same platform, all information remains consistent and accessible. If an underwrite needs to be revisited, the data and tools are already integrated. By simplifying the process, organizations can improve quality while reducing expenses.
“We see that a lot in banking from our clients,” said Apgar. “For whichever product the customer requests, the team gathers the underwriting or risk metrics relevant for that product. If the customer wants a different product, they gather additional data from a different database. Measuring compliance and maintaining viability of the customer relationship requires stringing together a whole chain of information that’s not in an essential spot. There’s a ton of room for increased efficiency.”
Townsend added: “One of my dreams is to make that experience be as transparent as possible. We want people to make that critical decision the same every single time, so we can see how that decision’s been made and know that that if I send the same data set tomorrow, the same decisions are actually going to be made.”
Adding AI Into the MixThis is where artificial intelligence shines—culling through large amounts of data to find patterns and detect anomalies. It’s challenging to maintain a complete 360-degree view of the customer relationship as it evolves. At this point, any organization that automates underwriting is going to rely on AI and rules-based engines.
Every business engaged in underwriting must have a policy reflected in the system in use. Too often, that policy is separated from the actual underwriting process, and people get caught out because they’re not truly following it. The next generation of platforms has the opportunity to bring that policy to life.
“When you start to use all of that intelligence and let the actual policy breathe life within the platform, now you get transparency and true predictability,” said Townsend.
It’s common for organizations to fall short by expecting underwriters to know everything about the policy and implement it manually. By shifting these elements to the platform, businesses can build greater transparency and predictability while also giving underwriters more space to focus on judgment-based decisions. When AI is introduced as a component, it not only adds options and flexibility but also enables the development of policies that are more adaptive—policies that better serve both customers and underwriters.
The post How to Streamline the Onboarding Process and Speed Up Underwriting appeared first on PaymentsJournal.
Amid the rise of subscriptions and digital services, consumers are juggling more bills than ever. In fact, the average U.S. household now pays around 10 bills each month—a growing list that can be tricky to track and manage. While more consumers are turning to their financial institution for help managing these responsibilities, many banks have continued to direct their innovation investments elsewhere.
In a recent PaymentsJournal podcast, Shilpi Mittal, Director of Product Management at Fiserv, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the current state of bill pay, how the service drives customer engagement, and what’s next on the roadmap for bill pay innovation.
Not Just a UtilityBill pay services have been a staple at banks for decades. Yet, because most financial institutions have robust, well-established processes in place, bill pay is often viewed as a basic, no-frills offering.
“It seems like the state of bill pay is this thing you must offer because people expect it,” Wester said. “But there are so many other ways that people want to pay bills—whether it’s through digital channels or through a third party. Unfortunately, the bill pay product itself is still that basic portal where you go in, you find the company you want to pay, you enter an amount, and it gets paid.”
While nearly every bank provides bill pay, it remains an indispensable service—after all, paying bills is an unavoidable part of life for most consumers. What’s more, the rising cost of many household expenses has driven the total U.S. bill pay market to new heights, now valued at roughly $4.46 trillion annually.
“That’s not just a utility, it’s a massive consumer touchpoint,” Mittal said. “For years, financial institutions have treated bill pay as table stakes. It just was, so it didn’t get prioritized for innovation and that’s a missed opportunity. Bill pay directly impacts digital engagement, trust, and customer privacy.”
A well-optimized bill pay has a strong correlation with customer retention, in part because it fosters regular, ongoing engagement. This consistent interaction creates more opportunities for financial institutions to become embedded in their customers’ daily lives.
Once customers are drawn into a financial institution’s digital ecosystem through bill pay, many naturally explore additional products and services.
“Be it a mortgage, a car loan, or a credit card—whatever it is—that consumers then say: ‘Hey, this is the place I pay my bills; this is also the place I manage my money; this is the place that I trust for my financial services; let me go look and see where I can find other things,’” Wester said.
A Natural Moment of EngagementAn improved customer experience is one byproduct of an efficient bill pay service, but there are many other benefits for financial institutions.
“We partnered with a major financial institution to study this and found that customers who actively use bill pay maintain much higher loan balances, grow their deposit balances faster, and bring significantly higher net profit and profit growth compared to those who don’t pay their bills through their bank channel,” Mittal said.
The impacts go beyond financial metrics. Bill payments drive more frequent logins, especially around due dates. This creates a natural moment of engagement—and if the experience is smooth and intuitive, users will keep coming back.
Banks can capitalize on this behavior in several ways. Historically, bill pay has been desktop-first, but in recent years there’s been a strong shift toward mobile payments. A simplified, mobile-first payment flow reduces friction and abandonment, making it essential for every institution—especially those serving younger customers.
“Legacy bill pay systems are missing the mark on how consumers, especially younger generations, manage their money today,” Mittal said. “Millennials and Gen Z use global banking five times more than their parents. They expect speed, convenience, and a frictionless experience. If it’s slow or clunky, they will abandon it.”
Proactive Nudges and Predictive RemindersBecause consumers are juggling more bills than ever, their payments are often scattered over multiple platforms—biller-direct apps, banking portals, and third-party tools. As a result, many are seeking a centralized, intuitive experience that helps them stay on top of their finances.
“They’re just not looking for alerts, they want proactive nudges, predictive reminders, and instant confirmations,” Mittal said. “It’s about peace of mind. American families pay $14 billion in late fees. That’s not just a financial hit, it’s a stress multiplier. That is why behavioral insights are so critical. It’s about giving people control and reducing anxiety. When you integrate those into the experience, engagement follows. Consumers feel supported, not just served.”
These concerns can quickly mount up. For example, missing a credit card payment can damage a consumer’s credit score, which in turn may hinder their ability to secure an auto loan or mortgage—or raise their borrowing costs.
That’s why more consumers are turning to their banks for help in keeping their financial lives on track. While most banks already offer tools that can provide this support, those tools are often underutilized.
“We now have all this data with these accounts,” Wester said. “This goes all the way back to the idea that the bank is the center of a person’s financial life. We have all this information and we can now begin to start putting in those predictive and proactive reminders. It can be small things, like the ability to know that you can access your paycheck sooner. Those are the types of things that consumers want to see and are responding to.”
“Also, it’s not just getting access to your pay sooner, it’s then being able to pay those bills knowing that you have a due date coming up,” he said. “Being able to apply those deposits to paying those bills, that’s all possible now. But that’s the stuff that we are just not seeing in the way these tools are being built.”
Surfacing Real-Time PaymentsSeveral factors are reshaping the bill pay paradigm. One key driver is the emergence of real-time payments rails—such as FedNow and RTP—which have raised expectations for instant settlement.
“For the longest time, we argued that consumers don’t really care that much about settlement so long as they know that their payment is being recognized,” Wester said. “In other words, if I go to a third-party biller and I say, ‘I am paying you, please don’t cut off my cable or my cellphone,’ that was sufficient. What we are beginning to see now from consumers is that it’s not just the recognition of the payment, but when is it hitting the account?”
As consumers become more aware of concepts like cash flow and liquidity, this growing financial literacy will further accelerate demand for real-time payment options.
“FedNow is still in the very early stages, but when you look at all the real-time payment networks as a whole, it’s surfacing the need for bringing instant payments to bill pay and aligning it better with consumer expectations,” Mittal said. “I’m hoping it will help speed the process up, primarily from the biller’s perspective.”
“There must be biller adoption of real-time payments in bill pay, which is going to be the longest tail,” she said. “It’s going to take us several years to bring everybody onto this journey.”
Meaningful, Recurring TouchpointsAlong with advances in payments infrastructure, there have also been substantial breakthroughs in bill payments platforms. For example, Fiserv’s CheckFree Next is designed as a one-stop bill pay solution for consumers using mobile devices.
The platform recently introduced a processing model that streamlines payment flows and enables real-time bill payments. It also allows small and medium-sized businesses to use virtual cards in place of paper checks. Additionally, consumers can pay bills with credit cards on the platform—offering greater flexibility and the opportunity to earn rewards.
“Here is where it gets really interesting,” Mittal said. “We are integrating Zelle, bill pay, transfers and other payment solutions into a single, intelligent, comprehensive payments offering. It’s dynamic, consumer-aware, and designed to meet people where they are. Imagine a system that knows your due dates, nudges you proactively, and helps you plan around your paycheck—all in one place.”
“Our vision is to transform bill pay from a chore into a smart financial assistant,” she said. “Bill pay isn’t just about paying bills, it’s about creating meaningful, recurring touch points that build trust, drive engagement, and ultimately grow value for both the customer and the institution.”
The post Why Bill Pay Is an Underutilized Touchpoint for Financial Institutions appeared first on PaymentsJournal.
In just the first half of the year, ACH payment volume grew by 5.5% on a daily average basis, reaching roughly 17.25 billion payments. The growth is even more pronounced in terms of dollar value, with the ACH Network processing $45 trillion in the first half of 2025—a 6.8% increase compared to the same period last year.
In a recent PaymentsJournal podcast, Michael Herd, Executive Vice President of ACH Network Administration at Nacha, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, examined the state of ACH, the payment types that are driving growth, and the future of the pay-by-bank.
Hitting on All CylindersAccording to Nacha, the ACH Network is experiencing substantial momentum and is on track to add two billion payments in 2025.
The persistent growth signals that the ACH Network is poised to maintain its upward trajectory.
“When I look at the metrics and consider ACH, quite often you’re just looking for general growth,” Riley said. “I look at the total volume of payments and that was solidly up, and the dollar value was significantly up. When you compare that to debit volumes in the U.S.—which only grew by 1%—it’s really significant. I see everything hitting on all cylinders.”
Continuing Long-Standing TrendsThis shift is especially notable because it’s spread across multiple payment types.
First, there are Same Day ACH payments—transactions that clear and settle on the same day they’re initiated. Volume rose by 15% year-over-year in Q2, putting this format on track to reach 1.3 billion same-day payments this year.
“The second area I wanted to call out are business-to-business payments,” Herd said. “B2B volume on the ACH Network increased by over 10%, and this is a long-standing trend in ACH. While there are still pockets of check payments that are in use in the B2B space, I think it’s also clear by now that ACH is the predominant payment method in B2B. They tend to be much larger dollar payments and so that boosts the dollar volume that is moving through the ACH.”
The third area seeing increased activity is consumer payments, which were up nearly 6% year-over-year.
Together, these three segments have significantly expanded overall ACH volume and reinforced its role in the broader payments landscape.
“It’s something that’s really been built into the economy,” Riley said. “When I think of myself as a consumer working professionally since 1980, I don’t think I’ve seen a physical paycheck since then. One way or another, I’m probably doing seven or eight in or out transactions on ACH just personally in a month, so I can imagine how those numbers stand out.”
Growth Across the BoardWithin each of these segments, new use cases for ACH are continually emerging.
For example, in the B2B payments space, ACH is gaining traction in healthcare claim payments—transactions made by health insurance payers to medical providers like hospitals, doctors, and dental practices. This area has seen a year-over-year increase of 10% in ACH usage.
“I think there’s a pretty clear use case and benefits there for medical providers to get paid electronically, instead of waiting for a check to arrive in the mail,” Herd said. “I think that’s a clear benefit where even a standard ACH is a much faster payment than that check that will follow at some future date. We’re seeing strong growth there in that B2B vertical.”
On the consumer side, the growing popularity of subscription-based services has led to broader adoption of ACH for recurring payments, including bill payments and donations.
Consumers also frequently rely on ACH for account transfers, both one-time and recurring. The rise of online bank accounts, digital wallets, and other fintech solutions has further fueled the use of ACH for these types of transfers.
Collectively, these segments and use cases also present strong opportunities for the continued growth and adoption of Same Day ACH.
“We’re still seeing good growth in Same Day ACH across all the major ACH use cases,” Herd said. “That includes Direct Deposit of payroll and other consumer disbursements. It also includes consumer payments to businesses and other kinds of account transfers, and B2B payments.”
A Unique FactorAmid this adoption, a significant development will impact the ACH Network this year: an executive order signed in March instructing the U.S. Treasury to eliminate paper check disbursements. With limited exceptions, the order directs a full transition to electronic payments for federal disbursements by Sept. 30, 2025, to the extent permitted by law.
“It’s been a long time coming,” Herd said. “We should see additional migration of some volume of federal government check payments to ACH. Financial institutions should be assisting existing account holders that still receive federal government checks with options on how to enroll to receive those payments by Direct Deposit.”
“One other lesson is that with no checks, there can be no check fraud,” he said. “That’s been a driving reason for the federal government to pursue this policy—paper checks have become probably the single largest source of fraud committed within the space of federal government payments.”
Another major factor influencing the ACH Network is the growing adoption of pay-by-bank and open banking technologies. In this emerging model, consumers no longer need to manually enter their routing and account numbers for each transaction. Instead, they simply authorize a business or organization to securely access their banking information directly from their financial institution.
“That should make enrollment for ACH easier and more seamless to the consumer, particularly in an all-digital or a mobile-first environment,” Herd said. “Many younger generations of consumers who’ve never had a checkbook don’t know what those routing and account numbers are.”
“This is a method that should overcome that barrier to being able to enroll to use ACH payments, so we’re going to see that continue to expand,” he said. “Nacha currently has a work group that is looking at potential benefits and risks of using pay-by-bank in the marketplace.”
Decades in the MakingThe transition from paper checks to digital payments has long been a topic of discussion in payments circles, with the shift unfolding over several decades. However, there are signs that this momentum is now accelerating.
“In the federal government space, it’s been official policy to mandate the use of electronic payments since 1999,” Herd said. “In fact, one of my first assignments when I joined Nacha was to participate in the in the campaign around EFT ‘99 use. Without getting into all the dirty laundry, it’s taken a long time to get to the point where just about 99% plus of federal benefit payments are made using Direct Deposit or Direct Express card.”
“There’s that last mile to go to get as close to 100% as possible, so it’s exciting to think that may actually happen,” he said.
The post Exploring the Factors Driving Continued ACH Growth appeared first on PaymentsJournal.
The passage of the GENIUS Act in the U.S. has brought stablecoin interest to a fever pitch in recent months. However, even as more of the world’s leading organizations consider launching stablecoin, the use cases for these fiat-backed assets are still being unlocked.
In a recent PaymentsJournal podcast, Nabil Manji, SVP, Head of Fintech Growth and Financial Partnerships at Worldpay, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, highlighted payouts as one of the most intriguing applications for stablecoins—a model that could offer dramatic benefits for merchants.
At the Heart of Dovetailing TrendsIn addition to regulatory clarity in the U.S., there has been global momentum toward more transparent digital asset regulations. For example, the European Union recently passed its Markets in Crypto-Assets (MiCA) legislation.
This improved regulated environment has made the space more attractive for both traditional financial institutions and corporates to explore digital assets. These organizations are considering stablecoins for several reasons, including payments, corporate treasury management, and yield generation.
The combination of regulatory clarity and institutional interest has dovetailed with broader payments trends to bring stablecoins into the spotlight.
“What I think makes the timing almost a perfect storm in a positive way is in many markets around the world, we’ve had domestic real-time payments,” Manji said. “The big outlier has been the U.S., where up until recently with RTP and FedNow, there hasn’t been relatively ubiquitous real-time payments.”
“Very quickly, the world’s largest economy and the participants in it, are going to grow accustomed to having real-time payments for domestic use cases through those payment rails,” he said.
In addition to the surge in real-time payments, cross-border e-commerce has continued to grow significantly, driven by factors like marketplace shopping, the gig economy, and social media commerce.
Consumers increasingly expect these trends—real-time payments and cross-border transactions—to converge, and they don’t understand why an adequate solution isn’t yet available.
Stablecoins are among the leading contenders to fill this gap because transactions are instant, efficient, and borderless. While their surface-level utility as a digital representation of the U.S. dollar is a game-changer, it’s only the beginning of what the technology can do.
“It’s becoming clearer, even to savvy payment folks, that it is different from what we have had in the past,” Wester said. “That was one of the misconceptions for a while, it was ‘Don’t we already do something like that?’ Well, not really. Once you begin to understand what stablecoins can do in terms of being a programmable digital bearer instrument, that idea becomes very powerful, and people begin to explore what they can do with it.”
The Two LensesWhile payment acceptance has traditionally taken precedence, payouts are at the heart of many merchants’ business models. These companies are searching for ways to make real-time, inexpensive payouts to beneficiaries, which could include employees, vendors, customers or other third parties.
These payouts are often high-frequency and low-value—such as those a marketplace might make to its sellers or a gig company to its workers. They could also include an airline reimbursing a passenger for disrupted travel plans, or an online gaming company paying out winnings to a user.
Often, these merchants need to make payout in a relatively high number of currencies and geographies. Additionally, many of the best candidates for stablecoin payouts serve unique customer bases.
“You layer on top of that the type of customers of theirs that would want to receive a stablecoin instead of fiat currency,” Manji said. “Then you layer on top the recipients that are in places like countries that have volatile currencies, or countries that the population is underbanked or unbanked.”
“Also, populations where they’ve got a relatively young age skew and people that want something like a stablecoin, because they’re comfortable with investing and generating yield on a stablecoin or operating something like a crypto wallet,” he said. “Those are the two lenses where this makes sense to offer to customers.”
Cutting Through the ComplexityThough stablecoin payouts may seem like a no-brainer given the regulatory environment and consumer familiarity, many merchants are still concerned about the implications of adopting cryptocurrency for payouts.
“One of the problems with payments people is we’re fascinated with payments, thinking everybody else is fascinated with payments too, and they’re not,” Wester said. “They just want to make sure that their money moves. We started talking about blockchain, digital assets, cryptos, stablecoins and how cool it is from a technology standpoint. All they did was look at it and say, ‘Wait, how are payments done? This sounds complex.’”
However, advancements in technology have made global payouts using stablecoins virtually indistinguishable from payouts in fiat currencies.
For example, on Worldpay’s platform, a merchant can fund their account in various fiat currencies. They can then initiate a payout request via an API call or by uploading a batch file containing hundreds or thousands of payments requests. Alternatively, they can log into the online portal to submit a one-off manual payment.
Regardless of the method, the payment instruction determines which currency should be deducted from the merchant’s account and which currency should be paid out to the recipient.
“For example, they may say, ‘Use some of my USD balance that I funded you to payout one of my marketplace sellers in Turkish lira,” Manji said. “We have connections in our platform to payout in over 130 currencies in over 180 markets, of which approximately 80 are on real-time payment rails. We can, in most cases, execute a relatively instantaneous payout to a beneficiary in countries covering most of the world’s GDP.”
The addition of stablecoin payouts to the platform means that Circle’s USDC has essentially become the 131st payout currency—making the adoption of stablecoin payouts as simple as the click of a button.
“There’s no new integration; there’s no new platform; there’s no new logic,” Manji said. “All we’ve done is in the field in the API where you put the destination currency, instead of putting something like Turkish lira or Argentinian peso, you just put USDC. Instead of sending us an international bank account number or a routing number and account number, you send us a wallet address and we take care of it from there.”
“So, the merchant doesn’t need any crypto wallet,” he said. “They don’t need to hold USDC. They don’t need to touch USDC. They don’t need to know what chain the customer’s wallet is on. They don’t need to screen the wallet. We take care of all of that for them.”
Across the SpectrumThis functionality can be a game-changer for merchants, but it is just the beginning of the road for stablecoins. Once organizations become accustomed to stablecoin payouts, they will begin to recognize other benefits, such as the ability to automatically execute transactions.
“The people who seem to light up the most when you talk about programmability are corporate treasurers,” Wester said. “They’re like, ‘I can do a lot of stuff that right now is either a manual process or an inefficient process.’ I think that is going to be an area where we’re going to see a lot of development.”
The recent surge of stablecoin-related news has led some to wonder when the hype might fade. However, the efficiencies and capabilities of stablecoins are likely to keep them at the forefront of the financial services industry for many years to come.
“There is this increasing interest from traditional financial institutions, from the payment ecosystem, from our clients, and from consumers to start using stablecoins in a meaningful way,” Manji said. “I think there’s this real interest now—across the spectrum—that’s giving us a lot of excitement in terms of how we’re thinking about the space and how we want to invest.”
The post Amid Surging Stablecoin Use Cases, Payouts Stand Out appeared first on PaymentsJournal.
One of the most effective tools in the fight against cybercrime is information sharing—particularly through anonymized consortium data signals—a practice increasingly referred to as cyber fusion. Despite its promise, many institutions remain wary of collaborating in this way, often even within their own organizations.
Greater cooperation—through shared data and interoperable fraud, anti-money laundering, and cyber tools—not only enhances the ability to detect and prevent financial crime, but also delivers measurable benefits to the bottom line.
In a PaymentsJournal Podcast, Teresa Walsh, an intelligence professional with over 20 years experience in both the government and financial services sector, and Tracy Goldberg, Director of Cybersecurity at Javelin Strategy & Research, spoke about the advantages of adopting cyber fusion and the key barriers that keep financial institutions from pursuing it more widely.
Breaking Down the SilosThe financial industry is notorious for operating in silos, with people focused myopically on their own teams’ responsibilities—often without considering how one function impacts another. As organizations network and build stronger internal connections, it becomes clear that no single group holds the complete picture. Combating cybercriminals effectively requires consolidating information and fostering collaboration across functions.
Companies approach cyber fusion in different ways. In some cases, it involves integration within the information security department—bringing together not only the cyber threat intelligence team but also incident responders, forensic teams, AML teams, and Financial Intelligence Units. Each of these groups plays a role in the broader effort.
“First you have to understand what exactly you’re fusing,” said Walsh. “I see an increasingly prominent blurring of lines between what we would define as cybercrime versus nation-state or cyber espionage attacks. We need to get outside the box a little bit and realize that whether it’s a scam that’s impacted a consumer or a phishing attack that has compromised an employee, all of this ties together. The sooner we can connect those dots and share information across these different industries, the better off we’re going to be long-term.”
Starting Within the OrganizationCyber fusion can start within the organization by cross-sharing information and tools across departments such as AML, communications, and HR. From there, the effort can expand to include cross-industry collaboration and broader information sharing. Cyber fusion should remain fluid. There’s no way to predict what the landscape will look like in five years, so it’s essential to develop a strategy that allows for adaptability and agility.
Intelligence needs to be integrated into the process, supporting decision-makers at all levels. It shouldn’t be produced for its own sake—it must serve a clear purpose.
“You’re trying to deliver intelligence to help people looking at expanding out into a new country or deciding whether or not the technology stack that they currently have is good enough, and you’re helping them make those decisions,” said Walsh. “They need objective intelligence that’s not just about the technical ones and zeros. Most risk equations are going to talk about the threat that’s out there.”
“There’s a certain threat actor, there’s a certain tool that they’re using, and it could present a risk to your company,” she said. “What is that and how much exposure do you have? Risk managers need to have good intelligence to help them understand that threat. Analysts try to bring to the table a good understanding of that threat intelligence landscape, helping risk managers decide whether we’re doing well, and if not, how can we do better?”
Cyber risk goes beyond technology; it also involves the human element, where individuals can be psychologically manipulated. Sourcing threat intelligence experts may require thinking outside the box, including those with backgrounds in psychology or behavioral analysis. Technology has its limits, especially as many risks stem from socially engineered attacks, such as phishing texts or direct communication through social media.
“The threat intel community has been thinking along these lines for a long time, but it has to get back to the decision-makers,” said Goldberg. “It’s going to be a cultural change from the top down, and we have to get buy-in from all of these players to move in a direction where cyber fusion can be successful.”
Conversation Is KeyMost industries could benefit from creating a cyber fusion by connecting cyber teams with other internal departments. Valuable insights often emerge from stepping out of isolated workflows and engaging in open dialogue across teams. Understanding what others are working on, how different efforts intersect, and where collaboration can enhance outcomes is key to strengthening cybersecurity efforts.
“Whether it’s a small group of internal people or peer organizations that would be considered competitive to your company, you’re all basically trying to do the same function,” said Walsh. “Some of these threats are not just targeting you, they’re probably targeting a lot of different companies just like you as well. If we want to fight cyber criminals that are trying to steal information or extort money from your companies, we need to work together. We all have pieces of the puzzle, but also it helps people just on a psychological level to know that they’re not alone.”
You Are Not AloneSometimes the job can feel overwhelming, and it helps to connect with someone who has already been through it—or is navigating it right now. Even someone in another department might be working through the other side of the same challenge. As Walsh noted, don’t hesitate to reach out and start a conversation.
“Once everybody starts bringing all that knowledge together, whether it’s actual intelligence or just even the best practice of how to do the job, it crowdsources all of this information together,” said Walsh. “You’re no longer just an army of one trying to figure it out by yourself. You have the capabilities of a strong network around you. I’m always going to be the champion of consortiums, whether they’re official, unofficial, big or small.”
Building TrustTransactional data can be anonymized to help these consortiums function. Some players in the space—whether on the payment side or within digital banking platforms—have access to significant amounts of data and can observe transactions across multiple organizations. Anonymizing this information could support the formation of a consortium that brings all of these players together in a trusted environment.
The trust factor remains one of the biggest challenges. Many financial institutions are hesitant to share data due to concerns about overexposure or violating data-sharing regulations. If they do share data, there’s a risk of repercussions from law enforcement or regulatory agencies, potentially resulting in fines or other penalties.
“We have to get outside some of that thinking and ask vendors to step up to the plate and help with some of this consortium data sharing,” said Goldberg. “That’s where we need to have conversations with the regulators. When you talk to regulators, they’re surprised that people are hesitant about sharing different types of threats. That’s where clarity is needed, especially when we’re going cross-sector because the financial regulator, for instance, is not going to tell a telco what to do.
Walsh added: “We need more open conversations to make sure that we’re not putting roadblocks in front of ourselves, because the bad guys definitely aren’t. If we keep putting roadblock after roadblock in front of ourselves and taking a risk-averse approach of why we shouldn’t be working together, they’re going to be able to get away with what they’re already getting away with, which is billions of dollars worth of cybercrime.”
The post Share and Share Alike: The Promise of Cyber Fusion appeared first on PaymentsJournal.
Many organizations treat their reconciliation and reporting as mere check-the-box activities, investing only the bare minimum to remain compliant. However, companies that deprioritize these critical back-office functions risk being caught unprepared when faced with a more stringent regulatory environment.
In a recent PaymentsJournal podcast, Roger Binks, Chief Commercial Officer at Kani, and James Wester, Co-Head of Payments at Javelin Strategy & Research, explored the current state of the back office, the challenges organizations face, and how businesses can modernize their reconciliation and reporting functions amid regulatory headwinds.
A Traceable and Consistent BaselineResearch from Kani found notable trends among payment leaders. Just over a quarter of respondents said their firms were using fully automated tools, while many still relied on spreadsheet-based solutions for this complex process.
Nearly two-thirds of respondents also reported frequent data errors during reconciliation—errors that are expected to become more expensive and time-consuming as compliance requirements increase.
“The regulatory environment is becoming way more prescriptive than it ever has been,” Binks said. “Reconciliation reporting outputs not only have to be consistent, but they have to be traceable. If you’re having a manual process in there, the workarounds that you have to put in place to make that traceability consistent is really tough.”
“In the UK, the FCA is extending operational resilience requirements into payments,” he said. “What this means is daily reconciliations, real-time controls, and clearly documented processes are going to be mandatory. They’re going to be the sort of baseline of everyone’s business.”
As compliance tasks continue to grow, they add pressure to already strained operations. The report found that roughly 80% of respondents often miss reporting deadlines.
These difficulties will mount for organizations that don’t take steps to modernize.
“Things like reconciliation, reporting, compliance, these are things that we all talk about and we have for a long time,” Wester said. “We have talked about workarounds and band-aids and fixes and manual processes that are employed, while we also know that regulatory compliance and all of the things that that entails, it’s only getting more complex.”
“It’s a known issue, we all talk about it, and yet it continues to be something in 2025 that we are still talking about,” he said. “I’m almost sad about it. It’s almost like, ‘When do we start fixing some of this stuff, especially when we know that regulation and compliance are not going to get any less complex in the future?’”
Saving 700 HoursOne reason manual processes and reporting issues have lingered is that they haven’t been a priority for many organizations.
“Whenever you see regulation or some type of mandate for the way a report must be submitted—or anything like that—a financial institution, a bank, or a business, they often look at what they must do and they work back from there,” Wester said. “It’s almost as though they try to find the least efficient way to do it. To me, I think we look at it the wrong way.”
Instead of viewing compliance as a chore, organizations should recognize that the reporting process produces a critical output: data. Through this lens, reconciliation and reporting become valuable assets—ones that can deliver dividends by offering deep insights into operations.
Beyond increased visibility, a modernized reporting process also offers tangible efficiency gains.
“We asked some questions around how long it took for people to prepare data—just getting it ready for the reconciliation process,” Binks said. “We found that the average UK payments business spends about three hours preparing data before reconciliations can even happen. With that mandatory daily reconciliation process being a requirement—if you work that out—it’s about 700 hours every year spent just preparing data.”
“Think of what you could do with 700 hours a year in terms of other work,” he said. “There’s some stark numbers in there which we can’t ignore.”
Everything Is a Dev TicketAs organizations begin updating their back-office processes, many will face the age-old buy-or-build dilemma. However, with the compliance bar rising rapidly and shifting daily, companies that choose to build solutions face significant challenges.
One of the main hurdles to in-housing is ensuring the organization has the right resources in place—starting with personnel. But maintaining a dedicated compliance team presents its own set of issues.
“It depends upon the way the internal organization is structured, which is oftentimes around a particular group or a particular person or a particular unit that’s built a certain way,” Wester said. “Just training is usually very inefficient. If that person ends up leaving—if the person in accounting retires and they were the one that knew how everything was put together—then it becomes a process of unpacking what they did to make that process work.”
Beyond assembling the right team, organizations must also possess the technical expertise and engineering capacity to develop an in-house solution. This is often a struggle: 60% of surveyed firms with internal solutions reported that resource constraints directly impacted their business growth and agility.
Many of these firms also noted that generating reports was too time-consuming, and that operating systems across multiple payments channels remained a challenge. Additionally, maintaining an in-house solution is a continuous process, one that organizations simply aren’t equipped to take on.
As a result of these challenges, few businesses are pursuing the in-house route. In Kani’s survey, less than 10% of respondents said their firm had built its own system.
“If you’ve in-housed it, all of those different changes—even if they’re internal requests—everything becomes a dev ticket,” Binks said. “Everything becomes an item on a list that someone’s got to deal with. If that’s not your main business, suddenly you’re in the business of building and running a reconciliation team, and that’s not really your core.”
The Back-Office Holy GrailDespite challenges with in-house processes, many organizations continue to lean on them—often because they’re unaware of better alternatives.
“I think that’s one of the problems for people who are in compliance or operations—they don’t know what they don’t know sometimes in terms of what is available,” Wester said. “But also I think that sometimes operations and compliance people are not good advocates for their own needs. Sometimes they’re not tied to revenue, so building a business case for something like a solution in the back office can be a little bit difficult.”
Organizations that begin exploring potential solutions can uncover powerful benefits. Platforms such as Kani manage every aspect of the compliance process, including ongoing maintenance and upgrades.
Another advantage of partnering with a provider is gaining access to the collective knowledge and experience across their entire portfolio. This enables them to stay current with regulatory changes and make proactive improvements to the platform.
“It’s about operational agility,” Binks said. “This isn’t about just speed, it’s about control, traceability and repeatability in a process that you can trust. If you can get that, then you’re in a good place, but it’s a challenge.”
“I would think about getting off Excel and manual systems,” he said. “It’s time to bite the bullet. People just need to work out when, and accept the fact that it’s coming at some point. The back-office efficiency Holy Grail is there—you don’t have to go and build it yourself.”
The post With Rising Compliance Demands, Reconciliation and Reporting Take Center Stage appeared first on PaymentsJournal.
When credit unions look for ways to improve service for their members, accounting systems may not be the first thing that comes to mind. But when Texans Credit Union upgraded its accounting platform, the benefits cascaded throughout the organization—saving money, streamlining operations, and even boosting morale.
In a PaymentsJournal Podcast, Tracy Montez, SVP, Controller at Texans Credit Union, and LaChrisha Dourisseau, Vice President of Solution Consulting at Fiserv, shared a behind-the-scenes look at their migration to a new account platform, Prologue Financials. They were joined by James Wester, Co-Head of Payments at Javelin Strategy & Research, who contributed additional insights on the discussion.
A Cumbersome ProcessWith $2.2 billion in assets and more than 130,000 members, Texans Credit Union was eager to enhance service delivery. In 2020, leadership began exploring ways to scale operations for greater efficiency and speed. With a new community charter allowing them to serve all of Texas, Texans Credit Union also set its sights on growth.
“One of the things I wanted was an upgraded general ledger system,” said Montez. “While a core general ledger is great for processing loans and deposits, they’re not made with accountants in mind, so things take a lot of clicks and a lot of time. We went on a journey to find a product to help us.”
Under the old system, sharing financial reports with the CFO meant exporting data to Excel. If discrepancies arose, accountants had to manually trace each line—determining which combination of four GL accounts fed into a number, isolating the variance, and then investigating the source within the ledger.
“You would think a financial institution would be the place that would have the latest and greatest,” said Wester. “But oftentimes it’s folks in the back-office that are the ones that are having to make do.”
Enter Prologue FinancialsTo solve these and other challenges, Texans Credit Union adopted Prologue Financials, an accounting system from Fiserv. The workflow within Prologue saves time and increases efficiency across the entire organization.
Previously, closing the books took the team approximately five days; now they consistently close in four. When a three-day close is required, like Thanksgiving, they deliver.
“It’s a lot easier to get the reports we need to do general ledger balancing in accounts payable,” said Montez. “It helps with our month in review. When I’m going over financials with the CFO, if he has a question about a variance, we pull up prologue on the spot to view what caused the variance.”
It’s not just about efficiency—it’s about morale. After all, nobody loves accounting except accountants.
“I can’t tell you how many managers have come up to me telling me how much they love the AP workflow because it saves them so much time,” said Montez. “People turn their invoices in faster because they don’t have to allocate an hour to approving all their invoices.”
The Conversion ExperienceTexans CU ended up converting in January—typically one of the busiest months for accounting—but it still managed to close January’s books within its usual five days.
“We had a good conversion experience,” said Montez. “The data was clean and the people that helped us where experienced. It let us add on a lot of new processes and GLs that we could reconcile without adding any people. We didn’t add another person to our team until late in 2024, whereas I think if we would have been on our old general ledger system, we probably would have had to add that person a year ahead of that schedule.”
Another advantage for Texans Credit Union was realizing just how much time they’d been spending on manual tasks. Once those processes were automated, the work became noticeably easier. And with remote work, it’s no longer practical to walk over to a filing cabinet to hunt through files. Now, everything is right there on the computer.
A Worthwhile InvestmentDon’t think of the general ledger system within a financial institution as a cost center. Think of it as an investment in the credit union’s or bank’s ability to expand and build out new products.
Banking is not going to get any less competitive. The financial institutions that modernize their back-office will be the ones better positioned to expand, scale, and compete.
“Don’t be afraid to dream that it can be better than what you have,” said Montez. “Think through how your life could change and what you could be doing instead of the monotonous task you’re doing today. Nobody loves doing a conversion, but I promise it’s worth it.”
Dourisseau added: “Utilizing Prologue makes accounting fun again. While the accounting function is a cost center, it can add tremendous value to the organization, making it more effective, efficient, faster, leaner, and stronger. It allows that talent within the accounting function to be deployed to other projects that add value to the bottom line. That may not always be hard dollars, but these soft dollars are meaningful and can provide the competitive edge in this highly competitive environment of the financial services industry.”
The post What Texans Credit Union Learned from Upgrading its General Ledger appeared first on PaymentsJournal.
As the technology behind payments processing accelerates, it’s also reshaping how merchants need to think about the ways their customers pay. Increasingly, acquirers are discovering that by focusing on areas like reconciliation and streamlining the payments workflow, they can build stronger relationships—not only with their customers, but also with their employees.
In a PaymentsJournal podcast, Highnote’s Chief Revenue Officer, TJ Grissom, and James Wester, Co-Head of Payments at Javelin Strategy & Research, to explore how Highnote is helping drive the unification of the payments workflow and the benefits this trend is bringing to retailers and other payment acquirers.
Looking Beyond RevenueMost merchants just want to run their business. They care a great deal about the business side of things, but not so much about the payment side. That can make it difficult for payment vendors to know which features to highlight, because at the end of the day, the acquirer is primarily concerned with simply being able to accept a payment.
Once they’re confident in that, merchants are more willing to explore which bells and whistles might be right for them. And when they take the time to learn more about the process, they often discover the many ways payment solutions can positively impact their bottom line.
“There’s been an awful lot in the press lately about what core payments really look like,” said Grissom. “The word ‘ledger’ has popped up in payments more in the last three years than it probably had in the previous 50. The core understanding of what true reconciliation looks like—being able to track a payment through its entire lifecycle—has just jumped off the page. We are seeing tremendous value in modern platforms—like what we’ve built at Highnote—that bring to bear a truly unified payment lifecycle.”
As a result, merchants are viewing payments not just as a mechanism to grow revenue, but also as a means to create stickiness—with their customer, their vendors, and even their own employees. They’re seeing payments as a way to bring cohesion to every step of their value chain.
“When we speak with merchants, we think they’re going to start by saying, ‘Let’s talk about core acquiring and the issues we want to resolve on that front,’” said Grissom. “It’s incredible how quickly it turns into, ‘I have a consumer issue that I want to target as well,’ or ‘I have an employee issue.’ By bringing a more unified platform to bear, the conversation quickly switches from money in to money out.”
Cost Is Only Part of the EquationOf course, the predominant concern remains cost, which varies for every customer. They each consider it from different angles and paradigms. But they all want two things. First, to reduce the core cost of payment acceptance. Second, to minimize the opportunity cost.
“If you’re not closing the payments loop rapidly enough or getting your money settled quickly enough, it’s costing you in many other areas,” said Grissom. “It’s not only costing you in core time to money, it’s costing you in experiences.”
Customers are starting to broaden their understanding of what that opportunity cost entails. There is a real loss in not having payments operate as efficiently as possible.
“We used to not be able to do a whole lot with the settlement—it was just cost,” said Wester. “Now vendors can do something to influence that. You begin to see different parties that might not have been at the table from an acquirer standpoint when they’re talking to a merchant. It’s no longer just an accounting function. It might be a treasury function, or a customer facing discussion.”
The Restaurant Use CaseMore merchants are viewing their acquired revenue stream as an asset that can help them address other challenges. They’re seeking opportunities to use payments to make the ecosystem work more efficiently.
“I love the example of restaurant ecosystem with its fully integrated vertical SaaS solutions,” said Grissom. “15 years ago, solution providers in this space were doing incredible work to acquire funds for you and give you lines of credit and working capital because they had direct insight into your business. We can do that in a really low-risk way.”
That was the first big step in the direction of seeing the payment process as a cohesive solution, which has since expanded to other use cases. One of the biggest problems in the restaurant space is retention of talent, especially servers. Now, they have found ways to use payment assets to create stickiness within their own employee base. It makes a difference when a restaurant can pay out tips in real time—directly onto an open-loop card that employees can use on their way home—enabled by embedded capabilities Highnote makes possible.
With modern platforms that can be built out, payments can be customized—not just for the hospitality industry or types of restaurants, but even tailored to the individual restaurant itself, based on what that particular owner wants to do with the point of sale.
Don’t Settle for LegacyThe bottom line for merchants is clear: they no longer have to settle for limited payment options.
“You can’t build what we’re talking about on legacy infrastructure, and you certainly can’t build it by trying to piece together four or five different providers across these different veins,” said Grissom. “Take a step back and ask: If you had your preference, how would this entire lifecycle work? What value could you bring? What operational inefficiencies could you get rid of by bringing more cohesive solutions to market?
“As the person acquiring those funds, you do have the power. You’re the one with the leverage and you should press to understand the value that your providers can bring to the table for you.”
Two decades ago, acquirers were primarily focused on reducing the total cost of payment acceptance. The main value-add was simplifying the process and proving transparency around fees-just knowing what you were paying was a win.
Today, however, the value equation has changed. Beyond just price, merchants can evaluate factors such as ease of acceptance, the type of equipment offered, settlement speed. and the range of payment rails available—including emerging ones that may become viable in the near future. “It makes the job a lot harder now, but the days of payments as a necessary evil should be behind us,” Grissom said.
The post Why More Merchants Are Centralizing Their Payments Infrastructure appeared first on PaymentsJournal.
A consumer purchases a product and receives exactly what was described. However, they experience buyer’s remorse and want to return it. Unsure if they’ll be refunded, they falsely report the transaction as fraudulent instead.
This kind of misuse may seem minor on its own, but it is part of consumer-engaged fraud—a category often mislabeled and misunderstood.
In a recent PaymentsJournal podcast, Nicole Reyes, Managing Vice President of Risk Operations at Velera, and Suzanne Sando, Lead Fraud Management Analyst at Javelin Strategy & Research, discussed how to differentiate types of consumer-engaged fraud, the emerging threats within the category, and the steps organizations can take to protect themselves.
Defining the DivisionsAs many businesses have strengthened their fraud defenses, criminals have shifted their focus to consumers. This shift has had an impact—consumer-engaged fraud has become one of the leading drivers of fraud losses in the industry for both financial institutions and merchants.
While there is broad consensus that consumer-engaged fraud is growing, there is still division over how to define it.
“It can be really hard to track and quantify this type of fraud for each financial institution, especially because of challenges such as mislabeling,” Reyes said. “Some people would consider first-party and scams together. Some would continue to keep first-party reported as fraud, and other financial institutions—once it’s determined it is first-party—they may move those into the collection bucket. So even from a settlement perspective, each financial institution can vary.”
Consumer-engaged fraud breaks down into two classifications: misuse and persuaded.
Misuse occurs when an authorized party reports a legitimate claim as fraud without any outside influence. This includes the traditional first-party fraud model, where a consumer orders an item with no intention of paying—knowingly exploiting a loophole in the system.
The persuaded form of consumer-engaged fraud happens when an authorized party acts under outside influence. Most scams fall into this category, such as when a criminal convinces a victim to pay upfront legal fees in exchange for a promised inheritance.
While there are just two overarching classifications of consumer-engaged fraud, a deeper look reveals a wide range of subclassifications.
“I think it’s kind of alarming when we lay out all of the various types of misuse and consumer-engaged fraud and the scams that there are out there,” Sando said. “It’s alarming to see all of the various ways that consumers are being targeted. But I think it also hammers home the importance of understanding the nuances of these types of fraud and that they each come with their own signals.”
Misuse and PersuadedUnder the misuse umbrella is unintentional fraud, where a consumer reports a fraud claim in error.
“They thought that they were purchasing something from Nike, but the billing website had a different name,” Reyes said. “When they called and asked to validate this transaction, maybe they didn’t recognize it. Then later they call back and say, ‘Oh, I do recognize that is my charge.’ Or they provide their card to a friend or family member and don’t recognize exactly what was spent.”
There are also various forms of intentional misuse. For example, a person may order an item—typically a big-ticket or luxury product—and then file a false fraud claim. Other types of misuse include cases where a consumer claims an item was never delivered or reports it as damaged in transit.
There are perhaps even more instances of persuaded consumer-engaged fraud. These include the many variations of scams and phishing schemes.
“One of the big ones that we’re seeing lately is the imposter or the impersonation scams, where a fraudster may impersonate an employee or a financial institution and convince the consumer to complete an action that would result in a financial loss,” Reyes said.
“Fake emails are another use of impersonation scams and one of the most successful ones—emails that appear to be from the authorized user’s financial institution asking them to click a link to update their information, which then leads to a malicious website design,” she said.
Attacking Through Multiple AvenuesIn addition to the many subclassifications of consumer-engaged fraud, consumers are now under attack through multiple avenues.
“Our research at Javelin shows that consumers are dealing with a huge range of consumer-engaged fraud, and all of that is coming from a variety of communication channels,” Sando said. “You’re getting emails, texts, social media, DMs, and phone calls are still happening. There are friend requests from people you don’t know.”
“There are all these different kinds of communication methods with their own set of tactics that are constantly evolving, and so it makes tracking and preventing this kind of suspicious activity really difficult,” she said.
Technology has enabled bad actors to exploit these channels at greater scale. For example, billions of phishing emails are sent each day—a feat increasingly accomplished with minimal effort.
Artificial intelligence has also made these communications more realistic. In the past, fraudulent messages were easier to detect due to obvious grammatical errors or phony domain names—flaws that are no longer as easy to spot.
Adding to the issue is the vast amount of personal data users willingly share online. Cybercriminals can tap into this information and use it against their targets.
“They’re getting more sophisticated, where now they’ll start hacking into the email addresses and they will target a specific user,” Reyes said. “They’ll say, ‘Nicole, I know that you have a Netflix subscription and maybe you’re on a promotion that’s coming up in a year, so the email that I’m going to send to Nicole is going to be more tailored around trying to entice her to click on this link because it’s Netflix-related. Or I’m going to ask her to extend this rewards promotion.’”
The Other End of the EngagementBecause these communications are so sophisticated, organizations must place renewed focus on authentication.
“Any area or medium in which you allow consumers to engage with you—whether that’s via email, text message, over the phone, online banking—double-check the security of those, making sure you have advanced authentication measures in place, so that you truly know who the consumer is on the other end of the engagement,” Reyes said.
In addition to technology-based measures, financial institutions must ensure their education efforts are current, both internally and externally. This should go beyond simply sharing news about the latest scams. There should be interactive tools that help users become familiar with bad actors’ tactics.
Additionally, many financial institutions capture significant amounts of accountholder data that can be utilized to detect consumer-engaged fraud. For example, they could check purchases against past transactions and monitor for changes in IP addresses.
Although many organizations collect this data, they often can’t use it for fraud prevention because it is siloed in separate systems. To combat modern data-driven fraud, organizations will not only have to share data across departments but also collaborate with industry peers.
“One of my biggest key points here is to get out of the silo mindset,” Sando said. “We can’t make any progress if we don’t start somewhere. I feel like we’re just on the cusp—we’re so close to getting to this point where we can all start working together across financial institutions, across consumer advocacy groups. We just have to get past that siloed mindset of ‘I only know what’s happening in my own backyard.’”
The First StepAs institutions look for ways to move forward, many remain uncertain about the best steps to combat consumer-engaged fraud. The first step is to define the problem appropriately.
“That lack of standardization and categorizing the incident is what’s making it so difficult to effectively track what’s actually happening,” Sando said. “When there’s no industry-wide standard or even a standard set at your financial institution, that means FIs are left to make the determinations on their own of how they should categorize this. That can create delays across the board when it comes to investigating the crime.”
In addition to investigative delays, the lack of standardization often results in inaccurate reporting. Employees are frequently left to handle these incidents through manual review, making accurate trend tracking difficult.
“Those are all reasons why we created a consumer-engaged fraud classification guide—starting within our Velera partnerships—on how can we start to streamline and talk about this the same way,” Reyes said. “Not only to classify it—that’s the first step—but then the next step is how can we systematically tag these types of cases, so that we can start to put some data around it.”
“Then we can start to not only gain insights into what the true volume of the problem is, but also to start to put in preventative measures to combat it,” she said. “We can start to understand how fraud trends are going to shift and what tactics fraudsters may use in the future, so that we’re set up for success to not only better report it and understand it, but to better fight it.”
The post Sorting the Scams: The Many Faces of Consumer-Engaged Fraud appeared first on PaymentsJournal.
Financial institutions are exploring new ways to attract younger savers, and their payment habits are evolving in turn. Credit cards have now edged out debit cards as the preferred choice, even among younger generations. Additionally, digital wallets and peer-to-peer methods like Venmo and PayPal are gaining significant traction in this demographic.
Velera’s Eye on Payments study, a comprehensive annual assessment of payment choices among credit union members and other financial institutions, examines how these trends shift over time. Now in its seventh year, the research delves into the factors shaping consumer choices across various payment methods, with a particular focus on how these preferences evolve at different life stages.
In a recent PaymentsJournal podcast, Velera’s Tom Pierce, Chief Marketing & Communications Officer, and Norm Patrick, Vice President of Velera’s Advisors Plus, discussed the findings from this year’s survey with Brian Riley, Co-Head of Payments for Javelin Strategy & Research. They also explored how credit unions can leverage these insights to better serve their members.
Credit Over DebitAfter five years of debit cards dominating payment preferences, Velera’s research reveals a notable shift toward credit. This year, 37% of respondents indicated a preference for using credit at the point of sale, surpassing debit at 35%. Relatedly, 40% of credit union members reported applying for a credit card within the past year.
Source: Velera’s Eye on Payments 2024 report
Among younger demographics, the trend is even more pronounced. Half of both older and younger millennials, as well as Gen Z respondents, stated that they had applied for a credit card in the last 12 months. Velera’s findings show a 40% preference for credit as the primary payment method within these younger age groups.
“That generational flip is really important in the credit union industry because of the aging membership,” said Riley. “Being able to react and have the right offerings in place for the younger generations is something that’s essential for credit unions.”
Other Payment MethodsMobile wallet usage has seen a significant surge in recent years. The percentage of respondents using a mobile wallet at least a couple of times a month jumped from 27% in 2022 to 34% in 2023, and this year, that figure rose to 50%. Overall, about 60% of credit union members plan to implement mobile wallets within the next six months. Not surprisingly, the lion’s share of this activity is driven by younger consumers.
Source: Velera’s Eye on Payments 2024 report
This demographic also expresses strong concerns about fraud and identity theft, highlighting the importance of engaging with them to build trust and increase their comfort with the fraud prevention tools issuers offer.
Another payment method that has experienced a substantial increase is peer-to-peer (P2P) payments. Just 12% of respondents reported using P2P as a primary payment method in 2023, but that number more than doubled in 2024, rising to 25%.
“As we look at the younger generations, there are a lot more people who are using P2P as a primary method,” said Patrick. “It’s important that they be educated with the ins and outs of using those different solutions. When you have money sitting in your Venmo account, it is outside of the financial institution. It may not be insured, and it may not be a fraud check for losses.
“With the boomer generation, there isn’t a ton of interest in P2P,” he said. “In fact, 62% of those surveyed said they do not use P2P type of methods at all. But that means that there is some that do, and there could be some opportunity to encourage them to do more.”
Design for LivingCard design is also top-of-mind. In fact, more than half of credit union members said that card design influences what type of card they choose to use on a regular basis.
“That was up from 39% last year, and we were pretty amazed with the number last year,” said Pierce. “It seemingly has taken place overnight.”
These design preferences can include various factors, such as the material of the card, its overall design and whether it offers contactless payment capabilities. Is it made from sustainable materials? Is it sleek? Or perhaps an affinity card that showcases their favorite sports team?
Card design is an especially important consideration for younger consumers. Among Gen Z respondents, 82% indicated that the design of the card was a key factor in their decision-making.
“At the end of the day, it’s a billboard for the financial institution,” said Riley. “It’s important to have that card engineered properly with a good-looking design, and have all the features that you’d expect, such as chip and pin and the contactless tie-in.”
Taking a Holistic ViewGiven the growth in credit card usage, it’s an important time for credit unions to look at their card programs holistically. Credit unions are increasingly targeting younger generations, and more than half of this group said they applied for a credit card in the past 12 months.
“How easy is it at your credit union to apply for a new card?” asked Pierce. “You’ve got to look closely at that and make sure you have a quick and effective origination process. Offering a good reward structure and customizing that card so it appeals to a wide range of age groups is also essential. And certainly, tying back to the younger group is an urgent need across the board.”
For more of these insights and to see the full results of the study, DOWNLOAD THE WHITE PAPER at Velera.com.
Over the past five years, the U.S. has experienced an average of $18 billion annuallyin natural disaster-related damages. Millions of individuals are impacted by natural disasters each year, facing financial challenges such as damage to homes, the need for temporary shelter, and the replacement of personal belongings and food.
With delays in funds distribution due to legacy payout methods and outdated processes, there has been a focus on the benefits of using prepaid cards for payouts.
One popular solution to help people recover is prepaid cards. In a recent PaymentsJournal podcast, Marchelle Becher, Business Development Executive with B4B Payments and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, spoke about how these cards have become an essential tool for addressing the needs of disaster victims.
Looking for Ways to HelpThe Federal Emergency Management Agency (FEMA) has been considering changes in the way it provides financial resources for victims of natural disasters. Given the frequency of disasters, aid programs and funders are becoming more proactive rather than reactive.
“We’ve seen this past year that while we’re reacting to Disaster A, Disaster B is hitting,” said Becher. “And when you look at what type of recovery aid is needed, there’s a gap between those who need immediate aid for basic necessities versus the need for long-term assistance.” Prepaid fills the critical gap to deliver funds immediately to those without bank accounts and to those who don’t have access to their bank cards due to disasters.
FEMA recognizes that prepaid cards are well suited to meet the distribution needs when disaster strikes. Traditional payment methods can be slow and costly, unlike prepaid cards that can be issued immediately, reloaded securely and simplify the reconciliation and reporting process. The flexibility of prepaid cards allows funders to set spend controls (closed-loop) for specific merchant purchases or (open-loop) allowing recipients to make purchases based on their individual family needs. Funders and recipients prefer the convenience and security of reloadable prepaid cards or virtual cards that can be used immediately for online purchases or loaded to a digital wallet. And the process is very streamlined.
Unfortunately, survivors of natural disasters are left to navigate complex bureaucratic processes and the painful task of putting their lives back together. Dealing with the loss of property, emotional trauma and potential change in employment is compounded when trying to navigate the complex financial aid paperwork leading to delays in aid disbursement,” said Becher.
“It can be months to years before funds are ever in the hands of those that need them. Most recently we’ve seen it with Maui, where over a year after those fires hit, there are still people who haven’t received any funds.”
Tracking InformationAnother benefit of prepaid cards is the ability to track how the funds are being used. These programs receive funds from many different organizations, and often, the funders want to determine how the money should be spent. With a prepaid program, they can restrict those funds to be used solely for food and housing, or make them inaccessible via ATM.
At the same time, the ability to track spending gives funders insight into the needs of those affected. They can see how much is being spent in each category, as well as how quickly the funds are being used—whether that’s within the first couple days or over a longer period of time. Features like dynamic spend control and just-in-time funding help organizations improve cash flow and reduce fraud risk.
“Accountability by both the recipients of the funds and also those who are in charge of distribution of funds is extremely important,” said Becher. “This information will help in the coming months and years as we continue to deal with natural disasters and build humanitarian aid programs to help. Based on the configurability of a program, the reporting and analytics can show that funds were distributed and used as intended.”
Doing the Prep WorkIt’s important that the entities behind these humanitarian efforts do their research and speak to various payment providers. Having multiple payout methods is key, whether it’s cash from a cardless ATM or a prepaid card. It could even be an ACH payment into someone’s existing bank account, although in the wake of a disaster, even those who are employed may not have access to their bank account or phone.
“I would much rather be providing a digital or physical card that has protection as opposed to giving somebody cash,” said Becher. “We’ve seen that in desperate times people will harm someone for very little financial gain.”
Another advantage of physical prepaid cards is that they can be pre-ordered and handed out to individuals in need, or at locations where food, water, and medical assistance is being provided.
“The beauty of prepaid programs is that for the most part, you don’t incur any expense until you actually start issuing cards,” said Hirschfield. “You can have a stack of cards that essentially have no value on them, and they’re valueless until you actually load and activate the card. What that means is that you’re not sitting on liability of cards for months at a time waiting for a disaster. You’re ready to act quickly and put these programs into place, because you have that setup work already done.”
While there’s a great deal of regulatory oversight in funding and distributing these cards, it’s even more important to be prepared and ensure that everyone is following the rules, collecting the information needed, and making sure the programs are compliant. Organizations providing aid to disaster victims should address all of these concerns in order to do the most possible good for those in need.
“No one’s bringing these disasters on themselves,” said Becher. “We can’t lose people when there are solutions out there that can help bridge the gap, get them back into the workplace and continue rebuilding their lives.”
The payments industry has seen such rapid growth and dramatic technological advancements in recent years that conferences have become a crucial way to stay connected to the pulse of the space. There are few bigger industry events than Nacha’s Smarter Faster Payments 2025, which will kick off in New Orleans next spring.
In a recent PaymentsJournal podcast, Peter Tapling, Managing Director of PTap Advisory and a member of the Conference Planning Committee, Ashley Mustico, Director of Education and Accreditation at Nacha, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the topics on tap for next year’s conference, the exhibitor experience, and the multitude of ways that payments professionals can make new connections.
The Payments PromNacha might be most associated with the ACH network it governs, but the Smarter Faster Payments conference encompasses the entire payments ecosystem. Last year, the conference drew over 2,200 attendees, including professionals from financial institutions, fintechs, and organizations that serve as end users of payments services.
“It’s like the prom of the payments industry,” Tapling said. “You’ll run into a lot of people who support the ecosystem, everything from consultants and service providers to regulators, not just the staff who write the rules around the ACH.”
Smarter Faster Payments also differs from other conferences because the speakers and leaders aren’t whisked away once their talk is complete. Attendees will get the chance to meet and engage with the speakers, exchange business cards, connect on LinkedIn, and carry the conversation forward.
“The attendees come because they know that the conference offers unmatched access to first class payments education,” Mustico said. “People know that when they come here, they’re going to walk away with fresh ideas, brand new partnerships, the exchange of business cards, and practical, tangible solutions to everyday concerns that they’re facing at their organizations.”
Covering the SpectrumThere will be 10 main topics, or tracks, that the educational sessions will cover. Many of these sessions will provide different solutions to the same central question—how do organizations provide the innovation that their customers deserve and the frictionless experience that they crave, while staying compliant and keeping them safe at the same time?
The tracks were selected to cover the full spectrum of the payments industry, highlighting innovations across various payment rails, evolving regulations shaping the industry, and strategies for mitigating fraud and risk.
One of the innovations being implemented in every facet of the payments industry is artificial intelligence. Organizations are using AI to detect fraud, enhance security, and drive efficiency, and that is why there is a new track at the Smarter Faster Payments conference that is dedicated to AI.
“We’re going to see a lot of Rule 1033 content, which came out of the CFPB quite recently,” Tapling said. “The conference planning committee had hundreds of session submissions, and it’s always a tough effort to read those, understand those, and make sure we have a great mix of content and speakers and not too much overlap.”
In addition to the informational content, there will be recognition for those professionals who have been selected by the 15 under 40 program. The program is for under-40 professionals who have made significant impacts on the payments ecosystem.
“I would be remiss if I didn’t mention our awesome keynotes this year,” Mustico said. “We have Mike Massimino, who’s coming to talk about the importance of cohesive teamwork, which he knows just a little bit about from his time as a NASA astronaut, where he worked on the Hubble Telescope. Then we have Kyle Sheely, who’s an author and an influencer, and he’s going to be talking about nurturing ideas that can lead to more innovation.”
Networking OpportunitiesThere will also be plenty of networking opportunities. There are openings to connect during breaks, in the exhibit hall, and plenty of chances to meet over breakfast or dinner.
“I throw in preparation, preparation, preparation,” Tapling said. “That means that once you get registered, if you go to the app you can see the attendee list and identify the people that you want to meet with. But you want as much as possible to not overlap the education sessions with meetings.”
To eliminate potential overlap with the sessions, there are dedicated networking events built into the conference schedule. Some of the events will be tailored to various audiences, such as a gathering for lawyers in the industry, and a reception for professionals that hold a Nacha accreditation.
There are also activities that are available to all registered attendees, such as the exhibit hall networking event on Monday. The event occurs in the exhibit hall after all the educational sessions are over, so attendees don’t have to miss an educational session to meet the vendors and see the innovations. The conference has historically had over 90 exhibitors.
Attendees can also check out the George Throckmorton Innovation Center, which is sponsored by the London Stock Exchange Group. The Innovation Center will have an array of fintech demos so professionals can see the new technology solutions coming down the pipeline.
And finally, there’s the Nacha accreditation awareness center, where attendees can consider one of the organization’s accreditation programs and learn about the scope of the exam and how to successfully prepare for it.
“My favorite event every year is the Tuesday Night Out, which is a fantastic opportunity to let loose with your new contacts,” Mustico said. “There’s usually dancing, there’s great food, and it’s just a great way to put an end cap on a fantastic event.”
Getting a BeignetIn the thriving payments industry, conferences are one of the most important ways to learn about trends and make contacts with other professionals. Nacha’s Smarter Faster Payments 2025 is a unique opportunity to learn, connect, and grow, and it takes place from April 27-30 in New Orleans.
“As an attendee, it’s important in New Orleans not to get hung up going for beignets at Cafe du Monde,” Riley said. “There’s a real purpose to this conference and the educational tracks are a big deal. Nacha has a prime name in the payments industry, and it sounds like the place to be. “
With so much going on, a booth in the exhibit hall is a great anchor where organizations can meet with customers and colleagues.
“If you’re thinking that you want to get in on the action of the exhibit hall, there’s still time to secure a booth at Smarter Faster Payments 2025, but our booth rates are going up after January 1,” Mustico said.
Learn more and register for next year’s conference
Money 20/20, one of the largest financial conferences in the world, has become a must-attend for payments, fintech, and banking professionals. This year, hot topics included instant payments, cross-border payments, and the integration of AI into fintech. However, the acceleration of payments innovations has also caused a decided shift in the show’s tone.
In a recent PaymentsJournal podcast, Oscar Munoz, Vice President of Sales at Euronet Worldwide, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, discussed their experiences at Money 20/20, their insights on the payments industry, and the factors driving payments modernization.
The Next GuyThousands of companies at Money 20/20 showcased innovations spanning everything from cards to account-to-account payments. Alongside these advancements, there was just as much emphasis on fraud prevention and risk management.
As payments continue to accelerate, security has become a pressing priority. One of the most talked-about topics discussed at Money 20/20 was the incredible growth of instant payments. The rising adoption of real-time payments has driven a demand for modernized platforms capable of supporting them.
At past conferences, financial services firms often adopted a “wait-and-see” approach, observing how innovations might impact the industry before diving in themselves. However, that mindset has shifted. The industry is already embracing next-generation payment solutions, including instant payments, cross-border payments, and stablecoins.
“There’s no more waiting and seeing, because to take advantage of any of those payment options for your customers, you must have a modernized payment infrastructure,” Wester said. “The assumption is you’ve used the last decade to modernize your payment infrastructure. If you haven’t, you had better get going, because everything that’s going to happen from here requires that you have gotten to that point.”
McKinsey conducted a recent study about the costs of delaying a payments modernization project, which found that keeping and maintaining legacy systems was draining roughly 70% of organizations’ IT budgets, and it would only become more expensive as time goes by.
“Many have thought that modernization projects are something for the next guy to do,” Munoz said. “When you see what is happening today, which is you have 30-year-old code that was great and built for purpose, but then that updates are coming out twice a year, minimum. People are realizing that you have to go through (payments modernization). It’s no longer the next guy, you are the next guy.”
Orchestrating OptionsDespite the various alternative payment methods available, cards are expected to maintain their dominance. The card market is projected to grow at a compound annual growth rate of 7.9% from 2023 to 2028, driven by an increasingly digital landscape. In three years, Euronet estimates that 95% of card payments in developed markets will be contactless, while virtual cards continue to gain traction.
While cards remain a staple, instant payments are experiencing impressive growth, especially in markets outside the U.S. For example, instant payments are growing at a CAGR of 30% to 40% in countries like India and Brazil. However, the appeal of instant payments extends beyond speed—they also play a pivotal role in accelerating financial inclusion by reducing costs and expanding access for underbanked populations.
As the array of payment options proliferates, payment orchestration is becoming essential. Recent studies show that 60% of enterprises with revenues exceeding $500 million are considering payments orchestration platforms. These platforms can improve rates by up to 20% while increasing security and scalability.
“It’s all about that optionality for businesses and consumers,” Wester said. “You have to support all those options, but then you have to be able to support them across the scale. You also have to think about risk and compliance across that scale, because there are no oopsies in payments. You have to be able to do it correctly from day one.”
The increasing number of options might be one of the factors that have some institutions on the sidelines. For instance, there are two instant payments rails in the U.S.—RTP and FedNow—and both are growing rapidly.
“Organizations might be waiting to see which one is going to win, but both are going to continue to grow,” Munoz said. “It’s important that you’ve got to have a foot on both rails. If you look ahead, at some point the ecosystem is going to converge in a way that it won’t matter if I pay from my bank account or if I pay from a card, I’m the same consumer no matter which form of payment I use.”
The Path to InnovationAs the payments infrastructure converges, consumers expect real-time information and access wherever they are in the world.
“When you ask a consumer what they want in terms of payments, oftentimes they can’t tell you what they want, but they know they want it,” Wester said. “What’s interesting is how quickly things become expectations, where consumers didn’t even know what they wanted until they experienced it. Once they experience, say, tap-to-pay, now they want it every time.”
Organizations that build payments products will have to anticipate customer expectations and design products with that in mind. To meet these demands, solutions should be cloud-native to maximize the flexibility and usability. They should also leverage modular microservices, with 100% API availability, enabling seamless integration and scalability.
Additionally, the platform must incorporate a distributed architecture to guarantee uninterrupted operations and ensure the organization remains always on.
“To make the switch, a lot of institutions are doing a phased approach,” Munoz said. “How do you do modernize when you have real traffic? A company can’t go from the ground to the cloud by flicking a switch, they need a platform to ensure their business today is taken care of. Then they are creating this day one, day two, day three path to innovation, without putting their current business at risk.”
The Rhythm of the DanceThe risks to institutions have been well-documented, and they are one of the main reasons that lawmakers have begun to implement a regulatory framework around fintechs.
“The first generation of fintech was more tech than financial,” Wester said. “There was that sense of move fast and break things, and that’s the way you come at a technology problem, but that idea doesn’t work in financial services. Tech is great, innovation is great, but when a customer goes into a store, they want to pay, the merchant wants to receive, and everybody wants to be whole at the end. That is a financial services arrangement, not a technology relationship.”
To modernize to today’s standards, an organization needs a platform that can speak the language of financial services. They also need a platform that can be a single technology stack for the myriad of payment types. However, just as important as the technology is the expertise of the company that provides it.
“Experience makes all the difference,” Munoz said. “It’s extremely important to be able to (modernize) with a company like Euronet. We have the robust, established organization to be able to manage these projects, not just at the rhythm we choose, but at a rhythm where we can dance with the client that is doing the modernization project.”
Organizations seeking more flexibility and sophistication in devising transaction fee and commission structures are increasingly turning to rules-based fees engines. Billing systems are designed to handle invoicing and collect payments, but they are limited in their ability to help companies create new fees and commissions.
Rules-based fees engines allow payment processors to stay competitive and profitable, enabling them to offer new value-added services, develop creative incentive programs, create new revenue streams, and respond quickly to market shifts. In a recent PaymentsJournal podcast, BHMI’s Chief Technology Officer Mike Meeks and Senior Program Director Cheryl Fitzgarrald spoke with James Wester, Co-Head of Payments at Javelin Strategy & Research, about the advantages of rules-based fees engines and who benefits from them.
Developing the SolutionRules-based engines allow fees and commissions to be configured from any combination of attributes, such as the payment method used, the amount, the merchant category, and the time of day the transaction occurs. Unlike traditional billing systems, a rules-based fees engine provides the ability to measure and test the financial viability of new fees and commissions before they are implemented.
“Back in 2004, we were approached by one of the country’s largest debit networks, which was not able to introduce new products or new pricing strategies without long software development cycles,” said Meeks. “All of their rules for how they price things were embedded in code, which made it very slow and costly to roll out new structures and to respond to what their sales teams were asking them to do in a timely manner.”
“They needed a solution that was flexible and could meet unforeseen future requirements,” he said. “That’s what drove us to the concept of a rules-based engine and the kind of open-ended capabilities it would provide. For more than 20 years now, we’ve been implementing these solutions for companies all over the world.”
This solution gives companies the ability to be creative and innovative, supporting any business opportunity, client relationship, or product offering that marketing and sales bring to the table. It also speeds up time to market, as new fee and commission structures can be quickly configured and implemented.
“Research is showing that there is a requirement now in payments for companies to be able to pivot quickly, to be able to bring products to market quickly and to not necessarily be held hostage by those development cycles,” Wester said.
A modern rules-based fees engine should have the flexibility to create any type of fee or commission on any type of payment transaction. This includes card-based transactions as well as account-to-account and real-time payments. It should also have no limitations on the types of fees or commissions that can be configured and should allow for additions and modifications without requiring software changes or downtime.
Another important factor is that the system must be able to access payments data in real time, applying the appropriate fees or commissions while the transaction is still in flight. Finally, rules-based fees engines should provide companies with a real-time view of fee revenues, enabling them to analyze the financial impact of those revenues and easily determine if adjustments are needed.
Under the HoodA rules-based fees engine integrates data from multiple sources. The most common way to access data from these sources is real-time APIs, but in some cases, automated file-based mechanisms are required, depending on what is supported by the originating data source.
“The typical sources that we see are credit and debit card transactions that an authorization system is writing to a transaction log file, a clearing system that creates a clearing file for POS dual message systems, and a card network that creates a settlement reconciliation file,” said Meeks. “A modern rules-based fees engine can use data from any and all of those sources to assess fees and commissions as a transaction is being processed.”
Once that data is collected, companies have discovered a wide variety of use cases for the technology. “The possibilities are unlimited,” said Fitzgarrald. “Some common use cases would include things like calculation of gateway fees, processing and service fees, and recurring fees. They are also used to calculate many different types of commissions. If you think about it, a commission is just like a fee, but the money goes the opposite way.”
Opening Up CreativityRules-based fees engines have allowed companies to be more creative with their services and pricing structures. Fees can vary based on time sensitivity, such as higher fees during peak business hours and lower ones during off-hours. Companies can also introduce fee models tied to loyalty programs or specific merchant partnerships, incentivizing behaviors that increase transaction volumes or customer loyalty.
Once a company implements a rules-based fees engine, the infrastructure allows them to better analyze and address important questions like which fees bring in the most revenue, which commissions provide the most incentive, and whether a particular service can be expanded or rolled out to other customers.
“One of the amazing parts of this is the approach to testing,” said Wester. “Testing is very difficult and time consuming. The idea that you can test a product or a fee, and pull it back if it doesn’t work, gives you a tremendous amount of flexibility.”
Any company that processes transactions and has a need to calculate fees and commissions can benefit from this technology. “Probably the single most important reason that I’ve heard for people adopting rules-based fee engines is that they are money makers,” said Fitzgarrald. “They allow the company to rapidly configure creative fee and commission models and let them pivot quickly in response to changing market conditions. All of this Is done without the cost and delay of code changes.”
Learn more about maximizing your pricing and fee structures.
As the world hurtles headlong toward real-time payments, speed and efficiency have often been prioritized over security. However, with faster payments comes faster fraud, and just as organizations deploy technology to streamline their systems, criminals are deploying complex schemes on a global scale.
In a recent PaymentsJournal podcast, Dal Sahota, Director of Trusted Payments at LSEG Risk Intelligence, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the prevalence of fraud, the challenges it presents as payments accelerate, and the ways organizations can defend themselves.
Sophistication at ScaleCriminals seize upon any weakness they can exploit. They might imitate genuine companies or individuals using deepfake IDV profiling and attempt to manipulate organizations, or use authorized push payment scams to defraud vulnerable individuals.
“Is there ever a day where I don’t hear a new anecdote about fraud, or new evidence of fraudsters’ sophistication?” Sahota said. “The sophistication is at a scale we’ve never seen before, and it’s across the globe. It’s not one or two individuals, its highly sophisticated networks that are creating a dramatic impact and financial consequences across the ecosystem.”
Traditionally, payment systems had built-in delay payment processing, particularly to provide a buffer for merchants, customers, and institutions. The added time gave all parties an opportunity to ensure that the transaction was legitimate and authorized.
As technology has accelerated payment processing, the objective has shifted to delivering funds to recipients in real time. However, this eliminates the longstanding safety net, as instant payments are often irrevocable.
“A good example is credit cards, which traditionally took three days to reconcile,” Riley said. “It was practical because the business model was built in the 60s and 70s and that delay was inherent. Now even debit card payments, or a clearance on a check, they happen in a snap. It’s important to have controls on the front end of the process rather than on the back-end settlement.”
A Perfect StormGuardrails are even more critical as cross-border payments gain traction. Fraud is more difficult to catch when payments are sent across different jurisdictions, and criminals know that.
“It’s a payments perfect storm where on one side you have faster payments, which create a lot of benefits across the marketplace,” Sahota said. “But at the same time, on the right-hand side of that storm, the deep clouds of fraud are exposing vulnerabilities due to the speed at which payments can move today.”
Faster cross-border payments face issues on several levels. Some countries have fraud controls built into their financial infrastructure that make it simpler to conduct bank account verification, and to identify and share data on fraudulent accounts and cards.
“Banks are typically linked through the central bank, so there’s an easier flow in countries like the U.S. or Canada,” Riley said. “Without that link, there’s no universal banking rule for fraud mitigation or vetting payments. You have that complexity where it’s going faster, it’s crossing borders, and countries have different standards for fraud management throughout.”
High ExposureFraud vulnerability is especially pronounced in industries that are less regulated or lag behind in adopting digital payment processing. These organizations are more likely to rely on paper-based or email-based communications, which create exploitable weaknesses for criminals.
Authorized push payment fraud, where criminals send phony invoices or pose as vendors, has become a rampant threat. Criminals know it can be difficult for larger organizations that receive invoices from multiple supply chains and multiple vendors to keep tabs on each invoice.
“When an update comes through from a vendor that their bank details have been updated, there aren’t effective ways for companies to carry out verification on all those types of invoices and all the updates coming through,” Sahota said. “That creates high exposure on the side of corporates, who might not have the anti-money laundering or fraud controls to mitigate that exposure.”
Within the payments infrastructure, there is often an assumption that companies will establish their own frameworks to manage risk. In contrast, regulators typically assume that consumers lack the knowledge or the resources to protect themselves. While consumers protection is crucial, the risks faced by organizations can be equally damaging.
“Instead of consumer payments where you’re moving high-volume, low-value payments in the thousands of dollars, corporates are moving low-volume, high-value payments in the millions, or tens of millions of dollars,” Riley said. “If you picture a multinational company where invoices are coming in, It’s a great environment for fraud.”
An Array of ProtectionsBecause criminals are constantly probing for weaknesses, organizations require multiple layers of defense. Protections should be in place at every critical touchpoint: during customer onboarding, when users make account changes, and as transactions occur.
“It’s not one defense, it’s multiple defenses,” Sahota said. “At any touch point where a customer—or a potential fraudster—is engaging with your business, you want controls and defenses in place. Continue to update them on a cyclical basis because as criminals get smarter, they’ll find ways to sophisticate and infiltrate an enterprise. “
One of the reasons why it is so critical to have ongoing fraud prevention initiatives is because, in many large companies, there can be delays in implementing new solutions and procedures. On the other hand, criminals don’t need meetings and approvals to shift course.
“How do we get in front of the problem and get ahead of the fraudsters, when they seem to be somewhat ahead, if not way ahead, of the market?” Sahota said. “The agility of the fraudster means not all these problems can be solved by one mechanism.”
The Right HandsIn discussions about innovation, faster payments, and new fraud prevention solutions, the impact of fraud can sometimes be dismissed.
“We should not lose sight of the emotional impact fraud creates,” Sahota said. “It could be for anybody—brothers, sisters, moms, dads, grandparents—there’s no immunity here. At the corporate level there can be reputational impacts, but there are also impacts to employees. If an accounts payable member pushes out a payment to a fraudulent vendor, they may have the fear of being fired or facing repercussions.”
Fraud has such far-reaching impacts on both a corporate and individual level that it should always be top of mind for organizations. That is especially true as faster payments continue to gain traction.
To combat that threat, many companies are turning to solutions like LSEG Risk Intelligence’s Global Account Verification platform. The platform was specifically designed to combat authorized push payment fraud—it is a global account verification product which allows customers to input key data elements and verify a recipient before a payment is issued.
“It provides greater certainty that you’re not getting duped out of funds, that you’re not getting scammed,” Sahota said. “There is greater certainty at the point of payment initiation, so an organization knows that the money is going to land in the right hands, and not the wrong hands.”
Prepaid cards are in the midst of a dramatic transformation. With the incorporation of digital wallets, contactless payments, and artificial intelligence, prepaid cards have quickly become one of the most popular payment tools.
In a recent PaymentsJournal podcast, Mani Farhang, Vice President of Product at Fiserv Gift Solutions, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the key innovations occurring in the prepaid space and the ways merchants can leverage them to drive customer engagement.
A Generational ShiftThe prepaid card market was once dominated by financial giants like Visa and Mastercard, but PayPal and Apple have emerged in the industry. And it’s no coincidence that these two companies also offer two of the leading digital wallets.
“The themes in the industry are the broader shift to digital payments and increasing integration into first-party and third-party wallets,” said Farhang. “Our research indicates that 70% of consumers have downloaded a merchant app to store gift cards and fulfill loyalty rewards. This is driven by a generational shift—millennials and Gen Z are more likely to use digital gifting and take advantage of stored value in loyalty programs.”
In the prepaid industry, Starbucks has been the beacon for other brands to follow due to its success with end-to-end loyalty programs. One important aspect of Starbucks’ prepaid program is how it bridges between physical and digital gift cards.
For many consumers, a physical gift card is their introduction to a brand. Organizations who follow Starbucks’ lead and offer customers the means to digitize their cards into a stored-value wallet can use the initial interaction to introduce consumers to their loyalty and reward program.
“That incentivization makes for a more immersive experience for the consumer, not just in gifting but in self-use,” Hirschfield said. “There is also the opportunity to engage customers beyond the value of the initial card. For merchants, they don’t want the initial prepaid card to be the only interaction—they want it to become the start of a cyclical relationship.”
Lifetime ValueMerchants have an opportunity to expand their prepaid program by upgrading their payments terminals to support contactless payments. Contactless payment through near-field communication (NFC) technology has revolutionized the payments industry, and NFC has begun to gain traction in prepaid.
There has also been the emergence of omnichannel, multi-purse wallets, which are first-party wallets that act as stored-value containers for multiple funding types. These wallets give consumers multiple ways to fund their stored-value wallet, whether through gift cards, pay-by-bank, debit cards, or credit. For merchants, it’s another way to engage and reward loyal customers.
“Moving forward, there is the opportunity for brands to offer rebates and rewards, and even integrate third-party health and wellness programs into their digital ecosystem,” Farhang said. “The orchestration of disparate payment instruments into one ledger is advancing the integration with contactless payments.”
These instruments are frequently contained in digital wallets, which are increasingly becoming the primary option for consumers, even in brick-and-mortar transactions. Businesses should have a strategy to leverage digital wallets so they can reward consumers and pre-load funds into wallets, which is a key opportunity to offer discounts and create exclusivity.
Many mid-tier businesses utilize platforms that provide white-labeled apps and digital wallets that can be integrated with a merchant’s existing app, which allows them to merge loyalty points from multiple brands into a single source. Though first-party wallets are a powerful tool, third-party wallets like Apple Pay and Google Wallet should also be incorporated in an end-to-end loyalty program.
“The more you engage with a customer the more you remove them from the traditional transaction process and bring them into a lifetime value scenario,” Farhang said. “Acquisition costs will decline because the brand is driving higher engagement. It can be a powerful tool for merchants because prepaid cards can increase the amount of the average order and drive repeated transactions.”
The Behaviors of PurchaseMaking prepaid transactions more secure is another way to increase customer satisfaction. Fraud is a hot-button issue within the prepaid space, but it’s also an area where another emerging technology—artificial intelligence—can make an impact. AI’s superior pattern recognition abilities make it an efficient tool for detecting fraudulent activities in real-time.
“AI can be implemented to understand if the behaviors of purchase match the existing behaviors of the customer we have engaged with and understand,” Hirschfield said. “The less anonymous the purchases, the more those technologies can identify when purchases seem suspicious. Fraud and scams won’t ever be eliminated, but the prepaid industry can take more steps to mitigate them.”
E-commerce merchants can use AI to vet both B2B and B2C accounts, because machine learning can collate signals from a range of business data and fraud detection programs in near real-time. This functionality can help merchants with decisioning and authorizations, which is often a convoluted and cumbersome process.
There are also ways to implement technology that can reduce fraud at physical locations. At a retailer, a cashier might get an alert if something about a purchase looks suspicious, and they could ask the customer a series of questions to ensure the purchase is legitimate.
Overcoming BarriersAlthough fraud will always be a concern, it hasn’t slowed the rapid expansion of the prepaid market. Many businesses want to offer branded prepaid cards, but there are often barriers to entry. For this reason, third-party platforms have emerged to provide merchants with a way to get their prepaid products to market sooner.
Prepaid-as-a-service has been driven by the overall shift to digital payments, but it is also extremely effective in certain use cases. In the gig economy, for instance, prepaid cards are often used as a payment instrument for freelance contractors.
Many governments utilize prepaid cards to disburse payments to their citizens for various reasons. Corporations are also increasingly giving prepaid cards to their employees as incentives for loyalty or performance.
“Whether it’s a retailer or a government entity, their priority is serving their customers or citizens,” Hirschfield said. “The best practice is often for them to focus on providing their products or services and implement best-in-class back-end systems to run their prepaid programs.”
The Core of ChangeTo achieve an optimized prepaid program, organizations will have to leverage new technologies, particularly platforms that facilitate personalization. Merchants have more customer information than ever, and AI can use that data to supercharge recommendation engines, making them more contextual and customized.
Artificial intelligence is also the engine used to create the artwork and messages that drive the personalized wrapping and unwrapping experiences that have become a popular part of digital gifting. “Digital gift cards are on the rise, and digital wallets will continue to be at the core of change as more of our lives become digitized,” Farhang said. “The move to digital will continue, and there will be a convergence with the physical in a single stored ledger. The ground is shifting rapidly in the prepaid space—though gift cards are one of the most common applications for prepaid.
As fraudsters become more innovative in their schemes, Nacha is rolling out new rules to address emerging fraud risks, particularly scams involving business email compromise, vendor impersonation, and the increasing use of money mules.
These key changes, centered around the ACH rules, began rolling out in October and will continue through 2026.
In a recent PaymentsJournal podcast, Glenn Fratangelo, Head of Fraud Prevention Product Strategy and Marketing at NICE Actimize, and Suzanne Sando, Senior Analyst of Fraud and Security at Javelin Strategy & Research, discussed what financial institutions need to do to enhance their fraud detection programs to better protect both banks and customers.
The Growing ThreatThere’s no doubt that authorized fraud is on the rise. Fraud threats have increased in both volume and complexity, especially as payment innovations evolve to keep up with advancements in technology, as well as consumer and business needs.
“Javelin has noted these increases over the last few years in terms of imposter scams, fraud, and other new activity,” said Sando. “Anecdotally, we’re hearing so much about imposter activity, which is becoming more sophisticated and convincing. It relies on that sense of urgency for the unsuspecting customer to act, and it’s not going to go away anytime soon. The digital and fast-paced nature of payments has really emphasized the importance of dealing with the problem.”
In the past, Receiving Depository Financial Institutions (RDFIs) managing ACH transactions on behalf of their customers could take a more reactive approach, handling each transaction as it came through. The responsibility for detecting fraud primarily rested with the originating institution, or ODFI. However, the new rules now hold RDFIs accountable for catching fraud in real time—or as close to real time as possible.
This shift means actively reviewing suspicious activity, flagging transactions that seem off, and taking the initiative in returning funds that do not belong in certain accounts. RDFIs can now return questionable transactions, and ODFIs have more leeway \to request returns when issues arise on their end. Starting in 2026, these monitoring requirements will become even more stringent.
Increasing the BurdenIn terms of operational burden, RDFIs will now bear greater responsibility for real-time fraud detection and case management to effectively identify and prevent fraud.
“Traditionally, that fell under the purview of the ODFI, but with the shift RDFIs will have to dedicate resources to monitor suspicious transactions and potentially fraudulent activity that is incoming, something they previously did not have to do,” said Fratangelo. “That’s going to create increased workloads for an already stretched operations team, which will now be required to flag and investigate suspicious incoming transactions in real-time.”
Larger financial institutions will need to implement new machine learning models, which will require additional governance time and introduce another layer of complexity to their existing fraud detection systems.
“Larger institutions may have the capacity and ability to scale their teams, but we all know quality investigators are hard to find,” Fratangelo said. That’s why there’s a ramp up period to train analysts and investigators and get them up to speed.”
Smaller institutions will face even more difficulty, as they often lack effective automation. As their transaction volumes grow and new alerts are added, scaling up their workforce can be cost-prohibitive. These costs are sometimes passed on to customers in the form of lower interest rates or higher fees.
Maintaining Business As UsualGenerative AI and deep fakes are making this situation even worse, exposing corporations to business email comprise and account takeovers. Previously, the RDFI took a passive approach to matching account numbers, but now it’s not just the account number that needs to match—the individual must also be verified, and the organization needs to ensure the recipient is not a bad actor.
“It can become more difficult to maintain business as usual if you’re a smaller institution, like a community bank or credit union,” said Sando. “With operational shifts like these, there are often also impacts to the customer experience for the customer, particularly when financial institutions personnel are now faced with spending significantly more time manually reviewing suspicious transactions instead of spending time with their everyday customer needs.”
For financial institutions, fighting these threats involves more than just securing incoming funds. They need to focus on the accounts and applications they receive, ensuring that they aren’t being created with synthetic or fraudulent identities.
“Fraud is all interconnected,” said Fratangelo. “It’s not just a singular fraud typology that’s coming through. But we have to follow the breadcrumbs, as we’re seeing more responsibility shift to receiving banks to address the current issues. Ultimately, it’s about protecting customers, and we need to ensure protections are in place to protect those customers. Bad actors can’t have access to these funds.”
The post How FIs Can Get Ready for Nacha’s Upcoming New Rule appeared first on PaymentsJournal.
The holiday season is here, bringing with it a host of celebrations. From office parties to family gatherings, shoppers are navigating an evolving landscape of gift-giving traditions. In our latest podcast episode, we dive into how consumer trends, new technologies, and the timeless appeal of gift cards are shaping the way people are gifting this season.
In a recent PaymentsJournal podcast, Sarah Kositzke, Director of Research, and Jonathan Soffin, VP of Global Brand & Product Marketing at Blackhawk Network (BHN), chatted with Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. They discussed the results of BHN’s Holiday 2024 Shopper and Gift Card Insights, the trends driving holiday gift card purchasing, and the accelerating momentum of the prepaid industry.
Moments of CelebrationOne of the most notable trends in recent years is that consumers are no longer buying gifts for just a single occasion. Instead, they’re shopping for multiple events throughout the holiday season, including school occasions, office parties, and get-togethers with friends and extended family.
“There are all these great moments of celebration throughout the holiday season that often require gifts,” Kositzke said. “One of the things that we’ve been tracking is how consumers determine what the right gift is for different people across different events. How are they going to figure out what’s the right thing to bring for grandma, their daughter, or a co-worker?”
According to BHN’s research, roughly half of consumers will directly ask recipients what they want, while others will source ideas from family and friends. Some shoppers even check social media to see the products or services the recipient has liked on Instagram or Pinterest.
An emerging tool for holiday shopping this year is artificial intelligence, with about half of younger consumers planning to use it for their gift shopping. The ways they’re leveraging AI range from finding deals to generating unique gift ideas.
“I have twin teenage boys, and when it comes to Christmas presents, they want to make sure one doesn’t get a better gift than the other,” Soffin said. “I asked ChatGPT which gift I should get them, and it came back with fashion tech gadget [recommendations] like wireless earbuds, gaming accessories, and sports gear. At the top of the list was a gift card to a gaming platform or a streaming service. If I’m not sure what specific brand of tech or fashion they want, a gift card to their favorite store is a great option.”
Shopping MotivationsHoliday shoppers are starting earlier than ever to find the perfect gifts for everyone on their list. Budgets are now spread across a longer period, beginning even before September and extending through December. However, only about a quarter of consumers’ holiday budgets are spent at the start of this period, with the remainder concentrated from Black Friday through the end of the season.
Younger consumers, in particular, are motivated by promotions and sales events. The BHN report found that Gen Z encounters more seasonal sales events than older generations, which drives many to wait for Black Friday and Cyber Monday promotions. What’s more, many Gen Z consumers have tighter budgets, as they may be recently out of school or in their first jobs.
“For all ages, what gets people out of bed are the sales and deals and promotions,” Kositzke said. “There are still concerns about the economy and inflation, coupled with the sheer number of people that consumers want to buy gifts for. Sales and deals have become an important factor in holiday budgets.”
Another consideration is there are five fewer days in the holiday season this year. The condensed holiday season is driving many retailers to push early holiday promotions to bolster sales.
“The shorter timeline could also impact the transition to digital formats,” Hirschfield said. “Many last-minute shoppers might not have time to mail a physical card, or maybe it’s just a consumer is concerned about misrouting or mail theft. Gift cards are shifting towards digital delivery in general, because it offers consumers the ability to send their gift quickly and confidently.”
Online and In-StoreGiven the growing digital preference among consumers, some retailers may be unsure whether their promotional funds are best spent online or in-store. However, all indications show that shoppers will use every avenue that’s available to them, shopping both in-store and online.
“The short answer is that it’s really a blend of both,” said Soffin. “Customers still prefer doing their holiday shopping in store, but online is closing the gap. Today, 85% of all consumers plan to shop in-store. When we ask consumers why they shop for physical cards, they say the convenience of already being at the store and completing their shopping all in one trip is the top reason.”
When dialing down on where consumers purchase gift cards, Javelin’s data indicates that the number one choice is a gift card mall at a retail store. The malls at grocery stores or drug stores give consumers a place to browse for the right gift card and pick up cards for various recipients at once.
The second most popular place to purchase gift cards is at a retailer’s physical store. Consumers may already be shopping for other gifts and decide to pick up a gift card while checking out. A retailer’s website ranks as the third most popular venue for buying gift cards.
It might be tempting for merchants to focus on in-store sales, but 49% of consumers also plan to buy a gift card online. There is a growing cohort of consumers who prefer online because it’s easier than fighting the crowds. The speed of ordering without leaving the house is almost second nature to younger generations, and many consumers still have health concerns about physical stores that are lingering from the pandemic.
A Reliable BetRegardless of where consumers buy gift cards, they plan to keep buying them. Data from the National Retail Federation found that gift cards are the number one requested gift for the 18th year in a row.
BHN’s research found that the average holiday spend will be $760, and consumers said they will spend roughly half of that budget on gift cards. Younger generations are leading the way, and they expect to spend 54% of their budget on gift cards.
Consumers were left wanting more gift cards after last year’s holiday season, and 84% of consumers say they will buy an average of 17 gift cards. The accelerating adoption should put gift cards at the forefront of a positive holiday season.
“With gift cards, the buyer doesn’t have to worry about the right color, the right size, or the right fit,” Kositzke said. “They don’t have to worry about their gift being returned. Maybe the recipient wants a bigger-ticket item that the buyer can’t afford, but they can give a gift card that can go toward the larger purchase. All those reasons are why people say gift cards are a reliable bet.”
To learn more, check out the resources below from BHN:* 2024 Outlook * eBook: Holiday 2024 Shopper and Gift Card Insights * eBook: Your 2024 Holiday Readiness Checklist * Webinar Recording: Consumer Shopping Insights to Transform your Holiday Gift Card Business
The post During a Hectic Holiday Season, Gift Cards Continue to Be a Reliable Bet appeared first on PaymentsJournal.
Artificial intelligence is fueling a major transformation in the financial fraud landscape. AI has democratized criminal sophistication and fraud at a very low cost of conducting business, generating more malignant actors that financial institutions have to fight against.
What can these institutions do to mitigate increasingly sophisticated frauds and scams? In a recent PaymentsJournal podcast, Kannan Srinivasan, Vice President for Risk Management, Digital Payment Solutions at Fiserv, and Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy and Research, discussed how fraudsters are using generative AI to hone social engineering and bypass authentication, and how we can fight back.
The Deep-Fake ThreatDriven by AI, deep fakes represent a new frontier in fraud. There has been a 3000% increase in deep fake fraud over the last year and 1200% increase in phishing emails since ChatGPT was launched.
Synthetic voices have been around for decades. They used to sound like a hollow robot, but recent advances in technology have allowed voices to be cloned from just a few seconds of audio. They are so realistic that fraudsters were able to use a deep-fake voice of a company executive to fool a bank manager into transferring $35 million to them.
“In banking, especially at the wire desk, talking to the customer is always considered the gold standard of verification,” said Apgar. “So if somebody sends an e-mail and says I want to initiate a wire, they’ll actually have to talk to a banker. But now, if the voice can be cloned, how do bankers know if it’s real or not?”
In business applications, single-channel communication should not be accepted, said Srinivasan. “If you get a voice call from somebody to do a certain thing, don’t just act on that,” he said. “Send an email or a text to confirm that you heard it from that person. Or hang up the phone and confirm through another channel that this is exactly what they wanted.
“We hear stories about a phone call coming in and saying your son has met with an accident and they’re in a hospital, you need to send $8000 for an emergency procedure. They prey on human emotions. We have to make sure that we step back, think about what’s happening, then call your family or friend to make sure that the news is accurate.”
A Range of Use CasesImposter scams have also exploded recently across other use cases. Large language models can take a phishing email, customize the content and iterate it until the scamster gets a successful response from the victim.
Sophisticated criminals are creating packages for less-sophisticated criminals to buy. For $100 a month, a would-be hacker can purchase a bot-as-a-service turnkey application. To conduct a fraud operation, they just need to upload the victim’s information, such as their phone number and the impersonating business name and phone.
The bot will automatically call the victim and impersonate the business, often requesting that they read out the one-time password. Once the criminal gets the OTP, they can do whatever they want with it, including logging into the institution under attack, authenticating transactions, and changing passwords.
The entry barrier to committing fraud has come down significantly. “There’s almost a multiplier effect on the attack vectors end,” said Apgar, “because AI is not only making it easier to crank out more and more phishing emails more efficiently, but it also makes them more realistic.”
How Are We Stopping Fraud?Machine learning models have allowed us to identify pockets of fraud and scam so that we can detect and stop them. Auto machine-learning tools have allowed Fiserv to perform this function at scale.
Srinivasan said that Fiserv is also deploying self-learning models, which will generate models at a more automated pace. Since the models can be generated much more frequently, they can more effectively detect any change in fraud patterns.
“We use more than 500 risk signals to identify any emerging trend and deploy preventative measures against them,” said Srinivasan.
Getting StartedFor a financial institution initiating a strategy against AI fraud, the first step is to make an inventory of all the touch points they have and conduct a vulnerability assessment. Determine all the possible risk areas that could be subject to a fraud attempt, such as the new account opening processes or login controls. Don’t forget about money movement, changes in user behavior, and brand-new patterns of usage.
Two other back-end processes are critical for assessment too. The first is customer education on scam awareness. Reach out to consumers via multiple channels to make sure they are aware of the nature of these new scams. When they are targeted by a scam artist, they should alert the bank to what is happening.
The second is to educate employees and frontline representatives on the techniques used in fraud, to ensure that they are not social engineered by fraudster when they are reviewing a transaction or removing a hold. Then, when a user calls, they can educate the consumer on potential scam activity to make sure that they are not falling into one.
The most successful fraud mitigation outcomes result from adopting a hybrid approach. Machine learning has to work in conjunction with an intelligent human to ensure a contextual application of the response being deployed. Make sure that the organization has absolute good governance and oversights on whatever results it’s giving, so there is no bias in the strategy.
“Having a variety of mitigation options offered to the client or the financial institution helps a lot,” said Srinivasan. “Pick and choose or deploy all of them, so that we can keep the consumer safe.”
While fraud attempts will always be an issue, Fiserv and financial institutions are working toward solutions that mitigate fraud while improving the customer experience. 1Working together, we should be able to manage fraud losses to very low levels. By combining layered security strategies, the industry can foster a more robust difference against both existing and new fraud payment threats.
Instant payments have been a global phenomenon, but the momentum for real-time payments is building in the U.S. There is a growing expectation among both businesses and consumers that when they send funds, the recipient should be able to access them instantly.
In a recent PaymentsJournal podcast, Justin Jackson, SVP, Head of Enterprise Payments, Fiserv, and Robert Clayton, Vice President of Product Management, as well as Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the increasing number of use cases for instant payments and the progress that has made toward adoption.
Instant Use CasesOne of the early use cases for instant payments has been in the gig economy, predominantly in the rideshare market. Drivers are constantly refueling, performing maintenance, and buying food and beverages. To keep them out on the road, it would be a great boon for rideshare drivers to refresh their funds throughout the day, any day of the week, through a real-time payments connection.
“There are similar needs in the marketplace space,” Clayton said. “There is a demand for real-time, around-the-clock payments so marketplace sellers can manage their inventory. Marketplaces traditionally have set payment boundaries around sellers, where they must wait a prescribed amount of time or reach a sales threshold before they can request a payout. Real-time payments have tremendous benefits for those sellers.”
The insurance industry is also seeing traction. Often, clients lose their car or house and it could be a massive competitive differentiator for an insurance company if they are able to settle a client’s claim in real-time during an urgent situation.
Instant payments could serve government agencies in a similar capacity. The Southeastern U.S. was recently hit by hurricanes that did significant damage, which created the urgency needed for many to receive disaster funds.
“Federal and state agencies are extremely focused on getting aid to the people who survived these events,” Clayton said. “They need to make those funds available as quickly as possible, but it can’t be location based. Even if the government could deliver checks same-day to disaster victims, many have evacuated or their homes have sustained extensive damage. The ability to pay a person digitally in real-time, wherever they might be, could be an incredibly important force for government agencies.”
Shifting the ConversationAlthough the amount of use cases for instant payments has increased, some of the financial institutions that were early adopters of RTP or FedNow aren’t using the rails to their fullest potential. Many of these organizations can only receive instant payments; they don’t have the functionality to send.
“Either they didn’t see the use case or the applicability, or those institutions are concerned about the risks,” Jackson said. “However, that mindset has shifted to where it’s not receive-only, it’s receive-first. They may not be ready to send instant payments now, but they want that capability in the coming months or years. They know they will have customers that want to make instant transfers or pay bills in real-time.”
The risks of sending instant payments, and the potential for fraud, has daunted some U.S. financial institutions because real-time payments are guaranteed credit transactions that are instantly available on the recipient’s end.
“It is a significant hurdle to clear to unwind an instant payment transaction if necessary,” Jackson said. “There is a need to have strong risk and fraud controls, many of which are already in place, but some institutions are still reticent on instant payments because they are not sure how they will handle fraud.”
Instant payment volumes will also hit an inflection point where exponential growth occurs overnight. In that scenario, many organizations are concerned they won’t have the infrastructure to support it.
There are additional concerns in corporations or government entities that are still reliant on paper checks. Many of those organizations have built their financial operations to account for the float between the time a check is issued and the time it is processed. A switch to instant payments would mean those organizations would have to drastically adjust their model.
Though it might cause short-term issues, there are benefits to moving from paper checks to a real-time payments model. Chief among those benefits is an increase in customer or constituent satisfaction if they receive their funds instantly.
“In the case of a natural disaster, if a government agency is able to send funds immediately, it shifts the conversation,” Clayton said. “Instead of a citizen who is focused on the hardship they endured, they can say they experienced a terrible act of nature, but their government was there to get them back on their feet. It shifts the conversation to a happy ending.”
Intriguing FrontiersWhile there are a variety of domestic use cases, one of the most intriguing frontiers for instant payments is cross-border transactions.
“Cross-border instant payments are compelling because there are already so many instant payments services that have been established in other countries,” Bodine said. “There is Pix and UPI, and there is FedNow and RTP in the U.S., but we can’t do a cross-ocean instant payment right now. It’s intriguing to see who will connect those disparate rails.”
The global card networks operated by Visa and Mastercard could be a solution to that problem. International messaging network SWIFT has also made headway toward creating a cross-border framework.
“There is a bit of reality in that there are so many disparate payment schemes locally across various countries and regions,” Clayton said. “However, RTP has discussed the potential of a SWIFT integration that would enable cross-border transactions from the U.S. into Europe. Europe is advantageous because there are consistent regulations in the region.”
Instant ExpectationsInstant payments are quickly gaining ground in the U.S. but are far from being implemented in every use case. Adoption is indeed growing. There will be an increasing expectation from commercial enterprises, consumers, and small businesses that they can send and receive funds instantly.
“Instant payments are very real and they are very here,” Jackson said. “Fiserv has approximately 700 financial institutions signed up or live for RTP and FedNow. We as an industry, including payments processors, financial institutions, merchant service providers, we all have to do our part to support instant payments adoption. Instant is fast becoming the expectation of the day, so we should continue to push that ball forward.”
In 2021, the Government of Canada passed the Retail Payments Activities Act, which required the Bank of Canada, the nation’s central bank, to begin overseeing payment service providers (PSPs). Under the legislation, Canadian PSPs—along with any entities involved in the electronic transfer or storage of funds—must register between November 1 and 15.
In preparation of these new regulations, Ron Morrow, Executive Director of Payments, Supervision and Oversight at the Bank of Canada, spoke with Brian Riley, Co-Head of Payments at Javelin Strategy & Research in a recent PaymentsJournal podcast. They discussed how and why PSPs should ensure they are ready to comply with the upcoming requirements.
Embracing the RegimeAfter the legislation was passed, the Bank of Canada worked with the Department of Finance to develop regulations for supervising PSPs. The focus is primarily on two key requirements for PSPs. First, they need to establish an operational risk framework to effectively manage business continuity, cyber threats, and other related operational risks. Second, if they hold funds on behalf of end users, they must ensure those funds are adequately safeguarded. In the event that a PSP holding client funds goes out of business, those funds would be considered bankruptcy-remote and could be returned to the end users.
“Many of the PSPs we’ve talked to actually embraced the regime,” Morrow said. “PSPs are largely unregulated in Canada, but coming into the regulatory fold will help their interactions with other regulated financial sector entities like banks and credit unions.”
Once payment service providers come under the supervision of the Bank of Canada, they will be eligible to become members of Payments Canada after the government passes some necessary legal amendments. This will enable PSPs who meet eligibility requirements to directly connect to Canada’s national payments infrastructure. As a result, eligible PSPs will be able to participate directly in Canada’s real-time payment system, which is currently being developed by Payments Canada and other payment infrastructure providers.
“The PSP, one way or another, is going to be dealing with regulated entities,” said Riley. “If they are not compliant with this, they’re going to have some downstream issues. If they are compliant, it sets the stage for being able to move into other markets and going deeper within Canada.”
Worldwide StandardsWhen it was building out the regime, the Bank of Canada examined the approaches taken by other jurisdictions regarding payment regulation.
“Wherever possible, we align our standards with what is already out there in the world,” said Morrow. “If there was a standard that was becoming common practice or best practice, and it made sense for Canada, we incorporated it into our own rules.”
This should help PSPs in two key ways. First, domestic PSPs will be well positioned to conduct business in other jurisdictions due to the consistency of the rules with those implemented elsewhere. Second, it will alleviate the burden on PSPs that already operate in multiple jurisdictions, as the requirements from the Bank of Canada will align broadly with regulations in other parts of the world.
Inside the ProcessEvery year, PSPs will be required to submit a standardized template of information to the Bank of Canada, including details about the volume and value of payments. They will also need to report any significant risk events that occurred throughout the year. Additionally, each year, the Bank of Canada will select a group of PSPs for a deep dive into their operational risk frameworks.
“We’ll be digging into the details about how they’re complying with the act, with a view toward whether or not there any gaps with the approach the PSPs are taking,” Morrow said. “If there are no gaps, great. If there are gaps, then we’ll have a conversation with the PSP around whether or not they agree. If there’s disagreement on the gaps or the PSP doesn’t feel they need to take action, we might move the issue to our enforcement division, but our enforcement is really based around ensuring compliance. We want people to comply with the act. We don’t want to be punitive or punish people.”
The Bank of Canada has identified over 3,000 entities that are expected to fall under the scope of the Act. Once the registration window closes, they will follow up with those they believe are PSPs but did not register, informing them that failure to register will result in enforcement actions.
For More InformationThe Bank of Canda’s website outlines the scope of the regime and the organizations to which it applies. If a PSP is performing one of five payment functions outlined on the site, they are potentially subject to being overseen by the regime.
The website offers guidance on both the safeguarding of end user funds and what PSPs need to take into account as they’re developing their operational risk framework.
“We have a number of scenarios on our website that highlight particular use cases or business models to help them help people get their heads around whether or not the regime applies to them,’” Morrow said. “If you’re in the business of moving people’s money electronically or holding their money electronically, and you’re not already prudentially regulated like a bank, it’s very likely that you’re subject to this regime.”
Artificial intelligence has had a dramatic effect across industries in a short time. Accounting is no exception, but there has been speculation of whether AI would replace those working in the profession.
In a recent PaymentsJournal podcast,Ted Callahan, Accountant Leader at Intuit, andAlbert Bodine, Director of Commercial Payments at Javelin Strategy & Research, explored key findings from the2024 Intuit QuickBooks Accountant Technology Surveyand their implications for the accounting sector – including how accountants are interacting with AI. The survey gathered insights from 700 accounting leaders to assess the impact of AI and technology on their firms.
Contrasting the NarrativeUnsurprisingly, respondents identified the top challenges for accounting firms as maintaining compliance with regulations and tax laws and driving profitability for both their firms and clients in the face of high interest rates and inflation.
“What was surprising was that in contrast to a common narrative, accountants don’t view AI as competition,” Callahan said. “Only 9% of the respondents said they were concerned about AI replacing their job. Instead, they felt that embracing technology would help them boost their efficiency and improve their client service.”
“In addition, 71% of the surveyed firms said accounting technology solutions were the driving factor in the increased profitability of their clients,” he said.
Another key insight from the report revealed that 30% of respondents identified the biggest competitive advantage of technology as its ability to enable customized services and advice through data analysis.
“There can be a bit of fearmongering with AI and, in some cases, it can be justified,” Bodine said. “However, I look at areas like cash flow analysis, which can be one of the most difficult things to forecast. As AI tools become more prevalent and integrated into accounting platforms, they can deliver substantial benefits, especially if an organization doesn’t have the staff to perform that kind of analysis.”
The Top PriorityPartly due to staffing challenges, the accounting industry has embraced AI on a large scale—98% of respondents reporting that they actively use the technology to enhance client service. Additionally, nearly as many (95%) said that adopting new technology is just as important as traditional accounting skills to succeed as an accountant today.
AI is also the top priority for new technology investments, according to accounting firm leaders. However, there are three main concerns hindering full-scale AI adoption: security, accuracy, and cost.
“Firms are primarily concerned that effective data and security safeguards are in place,” Callahan said. “However, when implementing new technology, accountants must always do stringent checks to make sure the inputs of the process are valid, and the outputs are accurate. Of course, there will always be concerns about how the service will be priced and rolled out in the cost, especially as more experiences become automated.”
A Vertical LeapTo address these challenges, the broader accounting community can collaborate with clients to drive change through AI. Since the pandemic, there has been a vertical leap in the demand for accounting services among small and mid-market businesses.
“Back in the dark days of COVID, the government offered assistance to ensure businesses didn’t go under due to staffing shortages,” Callahan said. “There was the Employee Retention Credit and other initiatives that were implemented. The sophistication level of the questions went way up because firms had to report to government entities, and client needs dramatically increased. Now, with inflation and rising interest rates, the questions are getting more sophisticated again.”
Accountants have adopted AI to address the growing needs of their clients, from data entry and processing to fraud prevention. AI excels in identifying irregularities in data and providing real-time financial insights.
On the firm side, accounting leaders are increasingly deploying AI in their operations—roughly 65% of firms in the study reported using AI to manage client portfolios and client communications.
The Talent GapOne reason accounting firms have deployed technology is to enhance efficiency and accuracy amid staffing shortages. Over the past few years, there has been a significant talent gap in the accounting industry due to a decrease in qualified graduates. While AI can help address some of these challenges, an optimized technology platform can also assist firms in attracting and retaining talent.
“Education and skills development can help a firm win the battle for talent, especially as more digital natives enter the workforce,” Callahan said. “A firm’s culture can be a strategic differentiator for attracting candidates, particularly non-traditional prospects, because there are fewer CPA-credentialed graduates. A robust training program that incorporates AI, coupled with positive culture, helps a firm retain its talent as well.”
Instrumental to SuccessConcerns that AI might someday replace accounting firms seems to be unfounded. While accountants will increasingly integrate AI into their operations with growing sophistication, AI will always serve to augment rather than replace human expertise.
However, the growing complexity of accounting platforms might cause apprehension among CEOs and business owners seeking the right partner for their organization. Fortunately, there are platforms that provide non-financial professionals with valuable insights into their company’s financial operations, which can be instrumental to a company’s success.
“Our mission is to see businesses be successful,” Callahan said. “We’re doing everything we can to make the QuickBooks platform a single place where business owners can manage their finances. It’s built to be an integrated, AI-driven end-to-end experience. Our platform is designed to provide both the data insights accountants can leverage to help their clients, and tools their clients can use to help themselves.”
When the topic is prepaid cards, the store-branded or general-purpose gift cards at grocery stores and retailers might come to mind. However, a substantial number of businesses and organizations continually use prepaid cards for a range of cases, including employee incentives and customer rebates.
In a recent PaymentsJournal podcast, Sheryl Shewman, Vice President of Business Development at U.S. Bank, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the types of incentive programs and how organizations can leverage them to maximize employee engagement.
A Must-HaveMore companies are offering some form of reward or incentive program. The reasons could be to improve productivity, increase engagement, or retain employees. A company might give a team member a prepaid card to recognize years of service or to show appreciation for hard work. Many organizations also give employees gift cards around the holidays.
Many businesses are increasingly giving employees health-and-wellness-oriented prepaid cards. Healthier employees are happier and more productive, and a prepaid card shows them that the employer cares about their well-being.
Even little incentives go a long way with a team. According to Hirschfield, Javelin’s data shows that roughly 83% of prepaid card recipients say an incentive increases their satisfaction with their employer.
“Over the years, rewards and incentive programs have gone from a nice-to-have to a must-have,” Shewman said. “Prepaid cards are now an integral part of those programs, but organizations are using them for many different functions. They’re being used for payroll cards, for expenses, and even for government disbursements.”
Fueling SalesCompanies are also increasingly using prepaid cards to drive sales in lieu of monetary rewards. Sales professionals are competitive by nature, and sales performance incentive funds are a great way to fuel their competitive fire.
A business could give a prepaid card as a reward for salespeople who achieve their objectives, such as when they meet their monthly quota or sell a specific product. A reward could also be given to the salesperson who cross-sells more products and services.
“Whether a company offers an incentive for perfect attendance or a sales accomplishment, there is still plenty of room to improve organizational rewards programs,” Hirschfield said. “According to Javelin’s annual prepaid survey, only 17% of all employees say they get any type of employee incentive. That’s a missed opportunity to establish a program that can benefit both employees and the organization.”
Brand AwarenessManufacturers and dealers often give prepaid reward cards to build brand awareness and add value to their products and services. These incentives are best given as a reloadable card so the same customer can receive multiple incentives and loyalty can be built.
“At a tire store, there are multiple brands to choose from,” Shewman said. “So a tire manufacturer might give the store’s salespeople an incentive to promote their brand over another. Or it could be that the manufacturer is discontinuing a tire or launching a new product, so they offer a prepaid card to incentivize those purchases.”
Manufacturers and dealers might also offer a prepaid card as a rebate, as reimbursement for a product return, or as a reward for participating in a survey.
A Special TreatAlthough there are many reasons for companies to give prepaid cards, organizations should also consider the type of card they are giving. In a small local company, the manager might want to personally deliver the reward to employees. Remote organizations, on the other hand, will have to rely on digital prepaid cards.
Rewarding employees with physical prepaid cards that can be digitized gives recipients the best of both worlds. They can use their cards in-store or load them into their Apple or Google wallets, where it can be reloadable.
Recipients also prefer open-loop cards like the Visa or MasterCard prepaid cards that can be used anywhere, as opposed to closed-loop options like branded gift cards.
“They want to use their reward for a special treat,” Hirschfield said. “They don’t want to use their incentive to pay a bill. In addition, organizations shouldn’t force employees into a gift card that doesn’t match their needs. Coffee shop cards are popular, especially when giving in lower denominations. However, only half of adults drink coffee daily, so that coffee gift card won’t exactly delight them, whereas a general-purpose card likely would.”
A Better SolutionIn many businesses, managers still go to their local grocery store or retailer to buy the prepaid cards they give as incentives. That takes time and can also be more expensive—many gift cards, especially general-purpose gift cards, require a small activation fee.
There are also fraud risks. Gift card fraud is infrequent, but there is a risk that criminals might have tampered with in-store prepaid cards. There is also a chance that card-buying employees defraud their organizations by buying extra cards for themselves. Even if they are trustworthy, there is the possibility that the cards are lost or stolen after the purchase.
Purchasing rewards cards from a bank or a financial institution can mitigate those issues and add significant value for organizations.
“Financial institutions will often conduct a performance assessment to understand the rewards and incentives program at a company,” Shewman said. “That means asking how a company will use the cards and why, and who will be on the receiving end. It’s a great way to ensure that an organization has the most cost-effective and optimized program.”
Buying from a bank is typically less expensive than buying prepaid cards from a retailer. If a card is lost or stolen, it can be deactivated and replaced. Financial institutions can also deliver cards that have a company logo on them, creating a customized solution that keeps the brand top of mind.
“When managers go out to Walmart or a grocery store and buy cards off the rack, there is no way for payroll and auditing departments to report which manager got what cards from where, and who received them,” Shewman said. “When companies order cards from a financial institution, they can track and manage spending in real time. A bank can also provide detailed reporting if an organization needs to run any 1099s.”
Financial institutions can also do instant issues, in which an organization gets physical cards that have no funds on them. The business doesn’t load the prepaid cards until it is about to deliver the cards to the recipients, which adds an extra layer of security.
Incentive ExpectationsAn optimized reward and incentive program can keep employees engaged and maximize an organization’s productivity. The key to creating an effective incentive system is to keep the recipient in mind when the program is developed.
Companies should give themselves a variety of options to make sure they deliver maximum satisfaction to employees. However, they should also be sure that the incentive doesn’t become an expectation.
“One of my favorite stories is about a uniform company,” Shewman said. “Wire hangers are expensive, and drivers were given an incentive to pick up wire hangers after they dropped off new and cleaned uniforms. Originally, the uniform company added the incentive directly to the driver’s paycheck, but after a while, the drivers stopped picking up hangers.
“It turned out that the incentive had become part of the drivers’ compensation, and they came to expect it. Once the reward was delivered on a reloadable prepaid card, it became a true incentive for their drivers.”
As of March 10, 2025, ISO 20022 will become the messaging standard for financial services in the United States. Yet adoption continues to be slow among large and small banks, with only about a quarter of American banks already using the new protocol. As some have put it, it’s like waiting until the last minute to do your Christmas shopping.
Are financial institutions ready for this conversion? In a recent Payments Journal podcast, Laura Sullivan, Senior Product Manager at Form3, spoke with James Wester, Co-Head of Payments at Javelin Strategy & Research, about the challenges and benefits banks are facing. The upshot: It’s up to the banks to determine how they can best take advantage of the new protocol.
The anecdotal evidence is that many U.S. financial institutions are ready for ISO 20022. The roughly 7,000 banks that already use Fedwire should be prepared. CHIPS (Clearing House Interbank System) migrated to ISO 20022 in April 2023, so the 30 or so banks using that protocol should be ready, That still leaves a significant number of banks that have work to do.
The Missing Killer AppOne thing that will move the process forward significantly is some sort of “killer app” that will significantly benefit customers while also making use of ISO 200022. “I was on a call today with some experts who were saying that customers need to drive banks to develop products for them, and I think that’s a tall order,” Sullivan said. ”Maybe the problem is payments aren’t sexy enough. Maybe the young people who are out creating killer apps don’t find payments interesting and don’t want to create these kinds of apps and delve into the minutiae of ISO 20022.”
Many industry people have been waiting for customers to indicate what kind of use cases would get them more excited about ISO 20022. But more realistically, it is incumbent on banks and fintechs to come up with these solutions.
There are two versions of successful integrations to ISO 20022. The first step is, can you continue to send and receive messages? Many of the organizations that can say yes to that may think they have completed adoption, but they may still be a long way from utilizing the format to its fullest capability.
Adopting the new standard can be the first step toward payment modernization. Many of the systems that support wire transfer today are fairly long in the tooth and not capable of running on the most modern platforms. Some organizations have done the minimum and patched their existing systems to make the ISO conversion. By building on that small step, they can devote more resources to modernizing and ultimately break down some of the silos that exist today in payment processing.
For example, API options work for a wide variety of platforms. “Rather than having discrete operations areas, discrete exception handling, and discrete interfaces to all of your back-office systems, you can leverage a product like the API we offer at Form3 that will work for all of those platforms,” Sullivan said. “It’s agnostic to the particular platform. Then we can help you route the payment to a particular rail based on the characteristics.”
Organizations can further sharpen their efforts by asking if the bank is the receiving institution on FedNow or the RTP network. Then they can utilize more customer-focused metrics to better gauge how they want the payment to flow.
One area where ISO 20022 can present immediate benefits is for customers receiving data from multiple banks. ISO standardizes that process so the institutions aren’t getting a different format for their data from every bank. They will receive and be able to understand the ISO format without having to develop specific code for it.
“Imagine the efficiency gains there,” Wester said. “The corporation no longer has those resources dedicated to just doing stuff like ingesting data from their financial institutions. Those resources and the cost associated can now run their business instead of having to pay attention to data file formats.”
Reducing SanctionsMany banks have seen their false positive rates on sanctions scanning increase, because they are including additional address data. But as senders move to truly structured addresses, the data will be in specific places, which should be able to vastly improve the checks on sanctions.
Example: If a payment was going to Cuba, Kansas, in the United States, under older protocols that would be all in one line of address. And it would be stopped by a sanctions check on the lookout for “Cuba.” But now, people can tell their sanctions system not to halt the payment if Cuba is in the city line. Those are the kinds of areas where ISO 20022 can really help banks improve their sanction scanning on the customer side and avoid such mistakes and slowdowns.
A simpler example is that there are many implementations by which the creditor on a payment is not the final beneficiary. That has always been a problem, because that data got inserted into some sort of “details of payment” field. This could even help the customers improve their relationships with their counterparties by exchanging this data.
Whatever the impetus for adopting ISO 20022, it’s important to move away from the idea that customers are going to somehow drive product development t. The fact of the matter is that payers and payees don’t really care about such details. They’re never going to come up with a use for a messaging standard to create a new product or demand a new product. ISO 2022 is about making sure that we are all speaking the same language.
No Time to WaitFor a while, the prevailing idea was that there could be a gradual transition to ISO 20022, which led to a lot of wait-and-see approaches. Many participants were happy to let the first movers go in and see what the reaction was.
By this point, that luxury is gone. The next step will involve actually using the data that will be included with these payments. The true winners in the ISO 20022 revolution will be those that can make the best use of all that data. “Start thinking about how you can leverage this new data to monetize the data and provide it to your customers,” Sullivan said. “ISO is not going to make you money in and of itself, because you have to continue receiving the payments. But never stop asking yourself: What are those killer apps?”
The post For ISO 20022, the Time Is Now appeared first on PaymentsJournal.
Banks allocate significant resources to fighting fraud, both in prevention and in maintaining reserves for potential losses. No matter how good the performance is, fraud losses remain a burden on their balance sheets.
Instnt, under the leadership of CEO and founder Sunil Madhu, has been at the forefront of developing innovative ways to combat bank fraud. Madhu recently sat down with Tracy Kitten, Director of Fraud and Security at Javelin Strategy & Research, in a recent PaymentsJournal podcast to talk about the kind of fraud he’s seeing now, and what banks can do to stop it.
A Fraud for Each SiloBanks have traditionally had to address various types of fraud in different areas of their operations. For example, first-party and stolen ID fraud are common in lending, while checking and savings accounts are vulnerable to fake ID fraud. Credit cards face challenges with e-commerce fraud, and the bank itself may encounter ACH and chargeback reversal fraud.
To fight this, each line of business puts together its own toolbox pattern. To stop the fraud risk while keeping compliant, each line of business assembles half a dozen vendor tools and data providers from the industry, which they then implement in an orchestration waterfall.
Regardless of how good each of those tools are, the overall toolbox performance is generally very poor. Banks constantly have to retool that toolbox to keep abreast of the different types of fraud. This is how the businesses have been operating for a very long time—in their own operational silos.
Too many financial institutions have come to see fraud as just part of doing business.
“But it’s not just about the fraud loss,” Kitten said. “It’s also about are you funding a terrorist organization? Is there something else behind some of these transactions that you as a financial services entity should be doing the due diligence on? It’s not going to be long, whether it’s in the decision or the Court of public decision or something legislative that comes down before financial institutions are going to be held accountable.”
Challenges from Changing Technology
Fraudsters are increasingly leveraging automation to expand their reach and impact. For instance, a scammer might use a collection of stolen or fake IDs to target numerous businesses, hoping to breach the security of at least one or two.
The financial industry is particularly susceptible to synthetic ID fraud, where fraudsters use fake IDs to open up new accounts and evade detection. In cases of third-party fraud, perpetrators can easily purchase identities of legitimate taxpayers online for minimal cost, bypassing a financial institution’s verification processes.
Within the lending industry, first-party fraud or credit defaults are significant concerns. Compliance regulations like Basel III require financial institutions maintain capital reserves to offset losses from first-party fraud. The requirement ties up capital that could otherwise be deployed for productive purposes within the institution.
“This is very expensive and inefficient use of resources of the institution, and we’re not talking, but small change here,” said Madhu. “We’re talking about hundreds of million or even billions of dollars in terms of first-party fraud loss. If you add the cost of compliance on the back of that, it’s really a terrible cost in terms of not only expenses, but resources allocated in tools they have to acquire and manage.”
The traditional way to stop first-party fraud involves approving the individual for the loan and then monitoring whether they make the initial payment. Typically, a fraudster will fail to make any payments, especially the first one, as they intend to abscond with the money. In contrast, a legitimate borrower would have initiated payment attempts. This type of fraud is commonly referred to as no-pay fraud.
According to the Federal Reserve, no-pay first-party fraud takes 10% to 25% of every dollar receivable for consumer loans, which is a significant amount of money.
“It’s a type of fraud that cannot be reduced to zero because it’s committed by real people,” said Madhu. “But what we can do is use insurance to reshape the loss curve.”
Insurance as a SolutionFraud loss insurance can not only offset these losses but also prevent businesses from incurring losses in the first place. Rather than having capital set aside for a rainy day, the CFO can convert those reserves into working capital for their businesses. By instilling trust in a customer who has already been onboarded and approved, insurance also increases the top-line revenue for the business. They can say yes to customers who otherwise might have been rejected because their existing risk system couldn’t accommodate a millennial or a thin-file individual.
As Madhu explains, the actual balance sheet risk is held by a separate entity, one of the world’s largest insurance companies. They write the policies and handle the management of the claims payments through instant Insurance agency.
“They’ve managed to create a unique and exclusive partnership with our company because the fraud prevention technology we’ve created allows us to be able to uniquely shift the losses,” Madhu said. “It’s an entirely different type of risk here, given that we’re talking about businesses onboarding new customers, creating new accounts, running transactions through the system, accessing additional products and services through upsells. It is different from liability risk insurance, which businesses hold in terms of handling personal information of customers, privacy, regulation compliance and data breach threats. It’s an entirely new way of dealing with the threat.”
The post New Tools for Limiting a Bank’s Exposure to Fraud appeared first on PaymentsJournal.
The ATM industry has undergone a dynamic shift that has taken automated teller machines far beyond cash dispensation. As the number of bank branches has declined, both banks and consumers expect ATMs to provide a wide array of services that were once only offered at a teller’s counter.
In response to the increased demand for ATM services, financial services company NCR recently split into two separate entities—NCR Atleos and NCR Voyix—with NCR Atleos overseeing the company’s substantial ATM ecosystem. Shortly thereafter, NCR Atleos reached an agreement with BHMI to resell the Concourse Financial Software Suite® as part of its software portfolio.
In a recent PaymentsJournal podcast, Robert Johnston, Product Marketing Director at NCR Atleos, Casey Scheer, Director of Marketing at BHMI, and Elisa Tavilla, Director of Debit at Javelin Strategy & Research, discussed the NCR Atleos/BHMI partnership and its impact on a shifting ATM landscape.
Mirroring FunctionalityIn addition to the services of a brick-and-mortar bank, consumers increasingly expect ATMs to mirror the functionality of the digital banking environment. Some banks have reached the point where they can replicate their entire mobile banking experience on their ATMs.
“Even as payment and banking behaviors have shifted, ATMs have stayed relevant,” Tavilla said. “About three-quarters of respondents in Javelin’s annual North American Payments Insights Survey said that ease of finding and accessing an ATM significantly affects their satisfaction with their bank.”
Meeting these rising expectations is easier said than done—it requires creating connectivity to systems beyond conventional ATM rails. For example, to give consumers access to all their accounts, the ATM must connect to a bank’s core banking system.
Platforms like Authentic from NCR Atleos can serve as the hub that connects core banking systems, other services within the bank, and even third-party services provided by companies like fintechs.
The Front-EndAuthentic is part of NCR Atleos’ ATM Management Platform (AMP) which offers a cloud-based suite of ATM management modules that includes the entire software stack required to operate an ATM. This includes the customer-facing application within the ATM, as well as cash management, device management, and security management software.
A cloud-based solution, Authentic gives banks a high-performance transaction processing and payment settlement solution that’s scalable. It’s also agile, with productivity tools which allow for rapid adoption of new services and products.
“Many of the traditional companies used to embed an ATM terminal handler within their product and now they’re stepping back from that,” Johnston said. “The Authentic platform provides one that’s not just a replacement; it’s a completely new level of technology for that function. We’ve also launched a new card management system based on Authentic that gets us closer to an end-to-end processing environment.”
The Back OfficeThe functionality of a platform like Authentic is substantially enhanced when paired with a back office processing software solution like BHMI’s Concourse Financial Software Suite. In this model, once a transaction is authorized by a consumer, it flows into Authentic for authorization.
Once authorized, the transaction is immediately loaded into the Concourse transaction repository, along with any corresponding data from card networks like Visa and Mastercard. Concourse operates on a continuous-processing architecture, so it begins processing as soon as this data arrives in the system.
This includes automatic reconciliation of transactions from disparate data sources, the assessment of fees and commissions based on transaction data, and the creation of settlement distributions and funds movement instructions. Additionally, it manages the entire workflow for chargebacks and disputes.
To give an example, when a customer makes a withdrawal from an ATM, the transaction is authorized by Authentic within seconds. By the time the customer walks away from the ATM, Concourse has already loaded the data from Authentic and determined the settlement impact of the transaction.
Concourse identifies which businesses are to be debited and credited, along with the amounts to be settled for each. It then determines which settlement account and distribution should be used and it creates the funds movement instructions.
“The continuous processing in Concourse is a huge advantage for financial services companies because it ensures they meet the strict service-level agreements and reporting requirements they have with their clients,” Scheer said. “It also gives companies a much-needed real-time view of their transaction data, so they can see the effects on their financial position within seconds of a transaction being authorized.”
In addition, the platform has a configurable rules engine, which gives organizations the ability to make alterations within the system without ever modifying code. That could include altering equivalency checks for reconciliation, changing a settlement distribution, adding a new fee, or modifying the workflow for managing disputes.
Three SegmentsIncreasingly sophisticated technology solutions in the field have had a dramatic impact on the ATM industry. NCR Atleos has evolved to address three main segments: self-service ATMs, ATM-as-a-service, and retail ATM networks.
The self-service segment includes the ATM hardware and the range of software services that support it. While ATM hardware might mostly look the same, it is changing, with an increasing uptake of cash recycling technology. Meanwhile, the software side has not only become more sophisticated, but it has also shifted to a subscription and SaaS (Software as a Service) model.
ATM-as-a-service is a relatively new concept, but as the demands on financial institutions have increased, more banks are adopting it. It allows them to focus on their core activities while leaving their ATM estate to be run by a trusted partner.
“Many banks have partners that run their entire ATM fleet for them, and the stability and predictability of the reoccurring revenue model suits them,” Johnston said. “They like the pace at which new updates and products can be deployed, which wasn’t possible under the traditional capital purchase and perpetual license models.”
The NCR Atleos retail ATM networks are a powerful differentiator, especially for smaller banks and credit unions. After signing up with a network, a bank that previously had a regional chain of ATMs can now have national reach.
Overcoming Processing BottlenecksAs the ATM industry moves forward, there will be an increasing need for solutions that can deliver the experience that financial institutions and customers demand. One of the biggest issues with current technology is that many front-end authorization systems hit a processing bottleneck in the back office, because most back office systems are batch-oriented and require code revisions when changes are needed.
“That’s not the case with Authentic and Concourse. Concourse’s continuous-processing and rules-based architecture can even keep up with a high-throughput platform like Authentic,” Scheer said. “In a nutshell, combining Concourse with Authentic means that financial institutions can get an integrated, end-to-end payment processing solution.”
The post As ATMs Do More, Financial Institutions Require Sophisticated Solutions appeared first on PaymentsJournal.
With no relief from inflation in sight, consumers are bracing for an expensive holiday shopping season, especially with only 27 days between Thanksgiving and Christmas this year.
To stretch their budgets, consumers will leverage every available method, and merchants’ loyalty programs can save customers money while strengthening brand relationships. However, another key pillar of a merchant’s successful holiday strategy is its gift card program.
In a recent PaymentsJournal podcast, Tom Niedbalski, Vice President, Global Sales and Partnerships at Fiserv, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the convergence of gift cards, loyalty programs, and technology—and the opportunities this creates for merchants in the upcoming holiday season.
Shopping StrategiesTighter budgets have driven consumers to shop earlier and spread out their purchases, a trend that retailers have encouraged with events like Prime Day. Consumers are also expected to take advantage of upcoming events like Black Friday and Cyber Monday.
Loyalty programs greatly influence where consumers shop during the holidays, as savvy customers use them to bolster their holiday spending. That’s why major retailers like Target, Walmart, and Amazon continuously drive engagement with their loyalty programs; it directly encourages consumers to participate in sales and promotions.
Gift cards should also be integrated into a merchant’s loyalty program. For example, a customer might receive a gift card for spending a certain amount or redeeming a specific number of reward points. However, a merchant’s gift card program takes on added importance during the holiday season.
“Gift cards have become the most popular gift,” Hirschfield said. “Roughly 63% of consumers say they will buy a gift card this holiday season, and 16% expect to spend more than last year. A loyalty program that is tied in with gift cards not only helps buyers purchase the items they need, but it’s also an inducement to purchase gift cards for others during the holiday season and beyond.”
Omnichannel ExperienceBrands need to meet customers where they shop and pay, so merchants must invest significant time ensuring their mobile experience includes payments, loyalty, and gift cards in an omnichannel wallet.
“The digital experience not only allows the brand to interact with its consumers, but consumers can see the value of interacting with the brand,” Niedbalski said. “For years, I’ve been saying that stored value is the vehicle that drives transactions out of interactions and interactions out of transactions. It’s a two-way street.”
A digital wallet can also serve as the platform for merchants to offer innovative loyalty programs, such as product-specific promotions. For instance, if a customer buys a particular product, they might receive a gift card from the manufacturer to buy related accessories.
Another growing trend is self-use, and consumers who use gift cards for themselves are heavily influenced by loyalty programs.
“It creates a cycle of promotions, and it all links back to the phone,” Hirschfield said. “The mobile phone holds a customer’s stored value account and their payment methods. The physical gift card is still the top seller, but nearly a third of consumers will redeem a gift card in a mobile app. That number is only going to grow.”
Personalization vs. PrivacyGift card personalization is a powerful way to connect with different demographics. With many faiths celebrating during the holidays, it’s important for merchants to cater to the diversity of their customer base.
Some brands have started offering print-on-demand gift cards. In the past decade, there has been a shift from traditional Christmas cards to postcards featuring personal images. This same concept is now applied to gift cards, allowing consumers to upload a family photo and include it with their gift.
“It connects with consumers, and these designs jump off the shelves, or the pegs, if you will,” Niedbalski said. “With e-commerce, there are a substantial amount of personalization options that give the gift a life of its own. Senders can include a written personal message, or they can send a voice message for friends and family in different areas.”
While personalization is a powerful tool, merchants should be cautious not to ask for too much personal data. Over half of consumers have distanced themselves from brands that request excessive information or send too many notifications.
“By nature, gift cards are incredibly private for the recipient—they can choose to utilize the card’s value without disclosing any personal information,” Hirschfield said. “That’s where merchants must strike a balance. They need to capture some customer data, but they don’t want to push too hard.”
Maximizing VisibilityWith a wide range of products and services available in-store, many merchants can often struggle to boost gift card visibility. However, as the holiday season nears, in-store gift card displays can be highly effective. Equally important is catering to online shoppers—gift cards should be prominently featured in website banners, included in customer email campaigns, and promoted across social media channels.
Merchants should also ensure proper in-store placement and signage for gift cards, and maintain sufficient inventory to compensate for stockouts on other merchandise. Gift card displays don’t have to be limited to the point of purchase; there’s a growing trend of retailers offering themed gift cards in each department.
“Imagine a sporting goods store, and in the golf section you have golf-themed gift cards, and in the athletic shoe section you have shoe-themed gift cards,” Niedbalski said. “You’re giving the consumer multiple points of purchase. Maybe they can’t find the item they want, but instead of leaving the store, they purchase a gift card.”
Improving gift card visibility can also mitigate fraud and theft. Criminals often take gift cards off the rack, steal their data, and return them. If cards are in an unmonitored location, it creates risk for both consumers and merchants.
“This is a perfect time of year for merchants to retrain their staffs, especially if they are hiring temporary help,” Niedbalski said. “Employees should know how to spot suspicious behavior and check gift card packaging for tampering, even at the point of sale. Fraud is a threat in the gift card marketplace, but oftentimes it can be avoided if a merchant’s staff knows what to look for.”
Flawless ExecutionPersistent inflation and the shortened holiday season make it critical for merchants to develop a holiday strategy now. That means establishing early holiday promotions and marketing them through appropriate channels.
“The key for all merchants is to create a plan early and execute it flawlessly,” Niedbalski said. “By running deeper promotions with longer promotional windows, it will not only encourage consumers to purchase gift cards for the financial benefits, but it’s also going to drive consumer loyalty. That will help merchants both retain existing customers and acquire new customers for their brand.”
Learn More about Fiserv Stored Value and LoyaltyThe post Merging Loyalty and Gift Card Programs for an Optimal Holiday Shopping Season appeared first on PaymentsJournal.
Access to emergency funds provides peace of mind, especially when many people find themselves scrambling to cover expenses.Given the needs of younger consumers, liquidity and cash flow issues are becoming increasingly important for financial institutions to address.
Changing regulations offer financial institutions an opportunity to rethink how they are meeting these customer needs through offerings like overdraft protection and small-dollar lending. In a recent PaymentsJournal podcast, Jeff Burton, Vice President and General Manager at Fiserv, spoke with Brian Riley, Co-Head of Payments at Javelin Strategy & Research, about liquidity products that can keep these customers in the fold.
Liquidity Affects Everyone In the past two years, just over half of consumers have needed access to short-term emergency funds to pay their bills. While lower-income consumers are more likely to need funds, nearly half those earning between $100,000 and $149,000 have also needed short-term emergency funds. It’s not a question of wealth, but of available cash flow.
For customers who maintain deposit relationships with financial institutions, liquidity is a key driver of success. Half of all deposit customers will need liquidity assistance at some point.
“Loyalty can be earned by how organizations bring these liquidity products to market,” Burton said. “Alternatives are good, options are good, but the key is addressing the client need.”
Consumers can’t necessarily predict if or when they’ll have a liquidity crunch. When a crisis arises, they want certainty in resolving the issue, to address the problem immediately, and assurance it won’t hurt them long-term. Having a suite of easily accessible solutions can provide peace of mind to customers choosing among institutions with otherwise similar product offerings.
Remember, cash flow is not necessarily linked directly to a customer’s net worth. While products addressing short-term cash flow needs can particularly appeal to younger or less wealthy customers, they offer real value across all generations and customer segments.
“Being able to get them through that without a long-term commitment on a credit card debt or a personal loan forms a good bridge with the customer that will have a lasting relationship,” said Riley.
Overdraft AlternativesMore than a third of account holders had an overdraft in their primary checking account in the past year. Among Gen Z, that number rises to more than half. These customers are precisely the ones institutions need to engage to grow deposits over the long term. To capitalize on this segment, many banks are offering smart alternatives to overdraft protection, providing value beyond replacing revenue from overdraft fees.
“There’s a lot on the table right now relative to pending overdraft regulation, specifically for the large institutions,” said Burton. “They’ve cut back on the amount of items that they can charge for on a daily basis. Programs like fee forgiveness give clients a specific period of time where they can effectively cover the overdraft. Those types of changes were all positive for the industry, but what the additional regulation will do is unclear. If they move forward with the benchmark fees being proposed, organizations would likely constrict the amount of credit they make available through the overdraft program.”
With about 30% of customers leveraging overdraft service, demand is not going away. It’s important for alternatives to exist within the bank’s framework, not just outside it.
Some clients needing overdraft protection don’t repay by choice, while others don’t repay out of necessity. By offering alternatives, banks can address both segments. Clients trying to protect their income can manage fees accordingly. For those struggling with their budget, an extended repayment period provides additional time. This transparency allows consumers to opt in and choose when to use the product.
Small-Dollar LendingSmall-dollar lending programs began in the ‘90s with the belief that clients who didn’t qualify for traditional lines of credit could benefit from smaller lines. Most clients needing liquidity typically require under $1,000. Small-dollar lending programs serve these clients by offering flexible repayment options, a critical concern for consumers who frequently feel strapped for cash.
The lack of exposure to these products represents an opportunity for financial institutions to provide an effective solution that many customers are unaware exists. Those who have used these programs tend to use them frequently and enthusiastically. Nearly half of those who have used a small-dollar lending program say it was better than any other similar option they’ve tried.
Four in 10 consumers say they would use a small-dollar lending program at least yearly, including 30% of Gen Z consumers. These programs could also be an attractive tool for deposit growth, as 44% say a small-dollar lending program would lead them to consider switching financial institutions.
For lending thresholds of $500 to $1,000, most organizations will not want to spend much time underwriting these loans. So the process has to be highly automated.
“There’s an axiom in banking that says it cost as much to make a $5,000 loan as it does to make a $500 loan,” said Riley. “Engineering that efficiency is essential.”
The flip side is small dollar collections. Integrating a program like this into a traditional credit collection process can be overkill, so many organizations have chosen to simplify that process as well. If the client is delinquent or missing payments, they’ll issue a notification advising their intent to perfect their right to offset. This way, they can manage all of these small data losses through the traditional deposit collection process.
Engaging the CustomerA well-constructed suite of liquidity products can help customers of all types, improving the banking experience, driving engagement and loyalty, and supporting deposit growth. However, these products must be tailored to a specific institution’s customer needs. Third-party vendors with extensive knowledge of proven solutions can help ensure financial institutions implement the right set of products to build a better future alongside their customers.
In combination, small-dollar lending programs and solutions reduce the conditions that cause overdrafts and give financial institutions tools to fill a potential void in a new overdraft environment. They also give institutions a way to offer depositors more flexibility than the competition, keeping customers better engaged over the long term as they build their wealth.
The post Filling the Gaps in Cash Flow Needs appeared first on PaymentsJournal.
The upcoming conversion to ISO 20022 presents both challenges and opportunities for banks. It allows them to drive potential efficiencies by redesigning operational processes around Swift messaging. However, there is also the challenge of data ingestion; banks will need to ensure every tech platform in their stack, particularly reconciliation and reporting tools, can effectively handle ISO 20022 messaging.
In a recent PaymentsJournal podcast, Nick Botha, Payments Sector Lead at AutoRek, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, explored where things stand with ISO 20022 conversion, and how workarounds may cause banks more problems than they solve.
What ISO 20022 PromisesISO 20022 introduces a single standard approach to facilitate communication interoperability between financial institutions, their market infrastructures, and their end users. The deadline for both corporate bodies and financial institutions to prepare their systems is November 2025.
As the adoption date approaches, banks are relying on Swift’s expertise and resources to ensure the transparency and validity of their transactions. Swift is preparing to introduce a messaging system with comprehensive data insights for many of the 11,000 participating firms. The goal is to create standardization across the market as the transition to a more centralized payments economy unfolds globally.
ISO 20022 messaging is designed to provide detailed information on recipients and participants in any payment. It aims to manage data processes and analysis more effectively, potentially reducing some of the cost associated with payments, allowing firms to achieve economies of scale. However, these economies of scale can sometimes be illusory.
Where Do Things Stand Now?Organizations are currently in a transitional period where many have adopted the ISO 20022 standards, but others are lagging behind. Migrating systems can be costly, and not all organizations have the resources and funds available to make the switch immediately. During this period, conflicts may arise in messaging when advanced firms transact with those that are still catching up, leading to some friction.
Significant resources will need to be allocated to this project to ensure interoperability not only with counterparts in the wider economy but also in within the organizations’ tech stack and IT communication systems. The move to ISO 20022 is already somewhat overdue, but for companies that have yet to make the switch, it’s not too late.
“A lot of workshopping has been happening across different geographies globally within the Swift network,” said Botha. “If you haven’t done it yet, understand how it will apply to the strategic direction of cross-border payments for your business, especially if you are in the Swift network. If you’re not in that network, it’s still worth adopting the principles behind how this can work, because those 11,000 institutions are working with another 50,000 or 100,000 institutions that aren’t a part of that network too.”
Diseconomies of ScaleAs banks and other financial institutions strive to keep operational costs down, they encounter a paradox. In the payments space, increasing transactional volume is typically seen as a path to profitability. But, producing additional volume comes with its own costs, such as expanding infrastructure, providing internal support, and implementing fraud reconciliation software.
The cost of adding transactional volume increases alongside the revenues generated by those transactions. Typically, the margins per transaction don’t increase over time.
“We’ve had some clients speak to us about how there’s actually a diseconomy of scale at some point,” said Botha. “We’ve seen some firms stop acquiring new clients because they’ve hit that point.”
The best way to counteract this effect is by creating operational efficiencies and reducing the operational cost per transaction on a daily basis. As margins per transaction increase, the company can gain more revenue from processing additional volume. This leads to benefiting from economies of scale.
“Do you really want to be the one who tells your boss you have to slow down volumes because you lose more each transaction?” said Riley. “That doesn’t seem to be something that would work well towards your bonus. This is real-time stuff that needs to get done in very short order.”
Working with a Trusted PartnerIf a company is handling a CSV file with a single line of data containing 10 to 15 fields, this task could probably be managed manually by one person. However, large companies deal with millions of transactional records and significant amounts of data that require automation. In such cases, a partner can be exceedingly valuable. They can manage not just payments data but automate the entire process.
“We save our clients a lot of time in their daily process of just handling the data,” said Botha. “When it comes to ISO 20O22, the major benefit is the reconciliation piece. The reporting aspect has been validated and reconciled.
“That’s where AutoRek fits—not just in the banking space but in the payment space, insurance space, and even the asset management space,” said Botha. “We are joining them on the journey of transitioning into ISO 20022 messaging. This is the global one-world economy of payments that we’re looking to move toward.”
Open banking has come to encompass so much that it can be hard to define. At its heart, open banking is about opening consumer financial data—once the sole domain of banks—to third-party service providers that manage the data using APIs.
In a recent PaymentsJournal podcast, Vladimir Jovanovic, VP of Innovation at Velera, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed open banking’s evolving regulatory framework, its benefits for banks and credit unions, and its accelerating adoption in the United States.
A Changing PerspectiveMost consumers don’t understand the infrastructure or the technological innovations driving open banking, but they are fully aware of its benefits.
“They understand it in terms of access to third-party services, streamlined onboarding processes, and embedded finance and payments,” Wester said. “They may not know the umbrella term, but they have adopted open banking, and they’ve come to expect it. Whether they know it or not, open banking has affected the way consumers view banking and financial services.”
The days of screen scraping, a method third-party providers used to access financial data, are over. Now platforms like Plaid and MX are, in many instances, required to use structured APIs to pull consumer financial data back. Banks and other payment ecosystem participants are joining with other providers of financial services to participate in consortiums like the Financial Data Exchange (FDX).
The members of the FDX consortium work together to standardize the APIs that enable data exchange between participants. Concerted efforts like the FDX will be a principal driver for U.S. open banking adoption in the years ahead.
The Regulatory EnvironmentIn other countries, governments have mandated the creation of open banking standards. Though there are many regulatory bodies in the U.S. banking space, such as the FDIC, there isn’t likely to be a government mandate any time soon for U.S. open banking adoption.
However, the Consumer Financial Protection Bureau is emerging as the regulatory agency that could help shape open banking requirements in the financial services market.
“The CFPB is going to be heavily involved because banks and credit unions are opening up protected consumer financial data to third parties,” Jovanovic said. “The CFPB is going to scrutinize that process and make sure any approach is aligned, centralized, and regulated properly, and centered around consumer rights and protections related to financial data sharing.”
To expand that reach, the CFPB proposed Rule 1033, which addresses personal financial data rights from a consumer standpoint. Though Rule 1033 has yet to be approved, banks and credit unions might have to make significant adjustments to their data management practices, privacy policies and security practices to comply with the new regulation.
In data management, organizations will have to determine the appropriate IT infrastructure to support consumer permissioned data sharing. When consumers give a third party access to their financial data, institutions must have the infrastructure to accept and standardize data sharing across different participants.
Banks and credit unions will also have to determine which privacy policies and security practices should be in place to prevent breaches and unauthorized access.
“Open banking might give financial institutions the chance to broaden their products and services, but it presents an opportunity for fraudsters as well,” Jovanovic said. “Banks and credit unions need to understand how they can deploy the right tools and processes to ensure the consumer has consented and any emerging fraud schemes are managed effectively.”
A Marathon, Not a SprintMany banks and credit unions might be tempted to trust the technological aspects of open banking to a third-party partner. However, they must still fully understand the process because the institution is ultimately accountable for compliance.
“Oftentimes, institutions look at compliance as a box to be checked and a cost to be borne,” Wester said. “But the open banking shift is an opportunity for banks and credit unions to rethink their overarching strategy and identify new revenue drivers. It shouldn’t be an onerous task. It’s a way to become more embedded in your customers’ financial lives.”
Though the switch to open banking might be daunting, the model has been implemented successfully elsewhere. In the European Union, open banking was regulated under the Payment Services Directive (PSD), which was subsequently replaced by PSD2.
However, when PSD2 was released, key financial innovations like crypto and blockchain weren’t part of the picture. That is why PSD3 will be implemented, and it will include additional data sharing, standardized APIs, and expanded financial services.
As in the EU, any regulations instituted in the U.S. are likely to evolve to accommodate new innovations, different business models, and niches that haven’t been considered yet. However, just because the regulatory framework might shift is no reason to delay implementation.
“Other open banking ecosystems have evolved in iterations, and they will continue to evolve,” Jovanovic said. “Many banks and credit unions are concerned about open banking, the new regulations, the unfamiliar ways to share data, and about selecting the right technology solutions. But the objective should be to develop a long-term strategy and work it incrementally. It’s a marathon, not a sprint.”
Leveling the Playing FieldConsumers want personalized experiences and services, and open banking offers ways to customize their services and get a consolidated view of their financial information across multiple institutions and providers.
More service providers are involved in the banking system than ever before, which will increase competition and create better products and services for consumers.
“The opportunity for collaboration with new financial players gives banks and credit unions a chance to reinvent the way they serve their customers,” Jovanovic said. “Consumers won’t have to open another account elsewhere, because they can obtain the products and services they need from their primary financial institution. Open banking levels the playing field and creates opportunities for community banks and credit unions to compete with their larger counterparts.”
Scratching the SurfaceThough the new model offers a substantial opportunity, the potential for the misuse of consumer data means any new open banking initiatives will face regulatory scrutiny.
“I would emphasize that regulation is coming,” Wester said. “Regulators care about this and they are very serious when it comes to handling consumer data. There may be polarized politics in the U.S., but all sides band together when consumers are victimized and their personal data is exposed.”
Most financial institutions enter customer relationships with the best intentions, but a few wrong moves can taint an organization’s reputation and draw regulatory attention. Third-party partners can help institutions mitigate those risks while giving banks and credit unions full visibility into the process.
Regardless of an organization’s strategy, open banking is gaining momentum. Banks and credit unions should plan accordingly to meet their cardholders’ rising expectations.
“There is still a long way to go, and we’re just scratching the surface,” Jovanovic said. “In the end, it might not matter if consumers understand open banking as a concept. Consumers are after an experience, and as long as they have the freedom to structure that experience, they are going to continue to demand open banking in the future.”
After companies have spent years struggling to build their own payments systems, the era of Payments 3.0 has arrived. This new domain is driven by technological innovators who take a product-centric approach to creating holistic payment systems from the ground up.
In a recent PaymentsJournal podcast, Danny Shader, CEO of PayNearMe, spoke with Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research, about the virtuous cycle of innovation that has driven the payments market forward. They looked at how payment technology will continue to evolve, focusing on enhancing user experiences, adopting artificial intelligence, and empowering every stakeholder in the ecosystem.
The Prehistory of Electronic PaymentsAt the onset of electronic payments, card networks emerged and left businesses to figure out implementations on their own. Clients had to work with multiple vendors to put together a holistic system. This was Payments 1.0.
In Payments 2.0, vendors consolidated various technologies under one roof, allowing clients to work with a single company. However, the disparate underlying technologies often resulted in service issues, driving up costs or reducing payment acceptance rates.
Payments 3.0 is about integrating these technologies into a holistic system, eliminating cracks, and allowing consumers to move seamlessly through the payment experience.
“The classic Payments 3.0 experience is Uber, where you don’t even realize that you’re making a payment,” said Shader. “If you think about your local utility payment, it’s probably horrific. It’s about as Payments 1.0 or Payments 2.0 as you can get.”
Miller encountered exactly that during a recent utility payment. “They would not accept a credit card, but they will accept PayPal. I can use a credit card in PayPal, so it’s clearly an experience that’s disjointed; one that they don’t have a clear vision on what the technology is that they’re using or how it fits into an overall payment strategy. There’s a gap for them as much as for me, he said.”
Payments 3.0 is technology-forward, with technology embedded in and even driving actual business processes. The word holistic is important. It’s not just technology that can be easily integrated; it supports and improves the entire payment experience.
Bringing AI into the MixThere’s an analogy between what’s happening with artificial intelligence now and the dot-com era, noted Shader. Back then, people talked about internet companies, and any company with a dot-com at the end of its name suddenly became more valuable. Today, nobody would describe a business as an internet company; everything is an internet company.
“Similarly, there are AI companies today, but AI should be infused into what all tech companies provide,” said Shader. “An observation we’ve made is that we shouldn’t build AI into our own help desk. We should rely on the innovation that Zendesk will build into their product. Since we provide the payments roadmap for our clients, it’s our obligation to incorporate AI into the payment experience that we deliver for our clients.”
What can be done with data today is very different from what will be possible with AI in the future. Consider a lender on the last Friday of the month, a peak period with many transactions happening rapidly, who wants to know how they’re doing.
First, it’s essential to have a complete data set to compare with previous periods. Additionally, it’s now possible to anonymize the data and compare it against others in the industry. This comparison can reveal whether there’s a broader trend affecting everyone or if there is an issue specific to one organization.
“That’s the kind of advantage that we have by sitting in the middle of so many clients in the same industry and helping them manage their experiences,” said Shader.
Becoming an InnovatorThe greatest expense in payments comes from managing exceptions. For example, because recurring ACH is incredibly inexpensive, a biller might think every consumer should use it, but that’s not correct. If that biller increased from 0% ACH usage to 80% recurring ACH or so, their transaction costs would decrease. However, the remaining transactions might encounter issues due to insufficient funds, leading to significantly higher costs from returns and customer service calls if they tried to reach 100% ACH usage.
Leveraging data to ensure the right customers are on ACH can help billers reduce exceptions and costs overall.
“With all the data we are exposed to across our clients we should be able to optimize the tender mix,” said Shader. “And, once we know what the right payment is for the right person, we can lead with it because we present the user interface.”
Shader divides the industry into innovators and followers. Successful innovators typically have a champion within the organization who recognizes the vision and benefits of Payments 3.0 across their organization and works across functions to make it happen. The challenge is identifying these innovators who can appreciate the advantages. Over time, the followers grow envious of the innovators and adopt their best practices. The innovation becomes mainstream.
“The followers may be tempted to believe the slides their legacy provider presents talking about how they’ll deliver Payments 3.0 experiences in the future,” Shader said. “But inevitably, those vendors fall short because they fundamentally lack the holistic systems required to deliver a 3.0 experience.”
“My advice to billers is to be careful, but don’t be afraid,” said Shader. He emphasized that payments are mission-critical, so it’s understandable that billers are afraid to take risks. Yet, if they don’t innovate, they risk being left behind.
Billers should work with a payments provider that has developed their platform with the future in mind, is reliable, and has a proven history of innovation.
As companies navigate the complexities of modern payment systems, adopting a Payments 3.0 approach not only enhances operational efficiency but also delivers better user experiences, more loyal customers, and better economics.
The role of the Chief Financial Officer has evolved significantly in recent years, with finance offices increasingly tasked with driving business growth. As technology requirements and banking relationships grow more complex, CFOs often find it challenging to maintain the cash visibility necessary to optimize working capital and make informed strategic decisions.
In a recent PaymentsJournal podcast, Leo Gil, VP of Product at Bottomline, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the expanding role of the CFO and the ways finance offices can use automation to drive change in organizations.
PaymentsJournalThe Elevated Role of Cash Visibility and Automation in the CFO’s OfficePaymentsJournal The Elevated Role of Cash Visibility and Automation in the CFO’s OfficePaymentsJournalProfound ImportanceVisibility into an organization’s consolidated cash position is important, especially in the face of macroeconomic headwinds like interest rate fluctuations, market conditions, and supply chain disruptions. The CFO’s office holds primary responsibility for cash management and visibility, and as the importance of these aspects has elevated, the strategic role of the finance office has been amplified.
“CFOs these days are in a unique position,” Bodine said. “They know the financial elements of the business better than anyone, but they have also become key strategic contributors in an organization.”
The finance office works to maximize returns by reducing interest expenses and borrowing costs. It also allocates funds to investment accounts that drive better growth and profitability. Over the past few years, finance offices have had to simplify their operations to get a better return on investment, especially from technology.
Companies have had mixed results in those endeavors, and the size of the organization isn’t always the determining factor. Some small companies have full cash visibility and make appropriate, strategic investments. Some larger companies lag because they have too many disparate systems and excess complexity.
Unfortunately, many companies still rely on manual processes. They might log into multiple banking portals, extract the data, and combine it all into a spreadsheet.
“Technology can mitigate manual processing, but issues arise when companies take a big-bang approach,” Gil said. “They allocate substantial capital and resources to implement sweeping changes in an organization, hoping for an immediate result. They’re not willing to go through a long-term revamp or implementation to see results.”
Complex Banking RelationshipsSome organizations have sought to solve their financial issues by increasing the number of banks they partner with. Other companies diversified their banking relationships in response to recent banking failures.
A company that previously managed three banks may now have expanded to 10 or more banking relationships, adding significant complexity. This expansion can make it challenging for the finance office to get a consolidated view of its cash position.
As the number of banking relationships increases, the importance of automation technology becomes even more pronounced. Businesses that rely on manual processes to manage multiple bank relationships will inevitably face the burden of constant financial aggregation in their daily operations.
“Aggregating bank statements might take two hours a day, then they must generate cash positions and cash forecasts, which takes three hours,” Gil said. “Then they need to generate liquidity forecasts and reconciliations, which takes another two hours. Before you know it, the day is over.”
Manual processes are inherently inefficient, and when data streams originate from multiple sources, finance offices struggle to manage daily operations effectively. If the finance team’s entire focus is consumed by operational tasks, they will never evolve into the strategic leaders that companies need.
Automated ConsolidationOrganizations should have a fully automated, consolidated view of all their cash positions. Once they have accurate cash visibility, the next step is cash forecasting. Businesses don’t just need to know their position today, they must know where the company will be at the end of the week, month, and quarter.
Finance offices operate in cycles. In each period, whether it’s monthly or quarterly, they manage cash and payments. They perform reconciliations and comply with regulations. They make sure operations and payments are secure. Then they close the period out.
“There’s always a rush at the end of the month or the end of the quarter, where everyone is trying to find information across different systems and in ERPs, and combine the data,” Gil said. “There’s always something missing, and it’s a constant struggle.”
That complexity can be reduced by automation, and that allows finance teams to become more strategic. They can weigh decisions about potential acquisitions, or how to allocate cash for investments. They can make decisions about borrowing, and about moving funds between banks.
If it’s a global company, the CFO’s office can give guidance on currency conversions or foreign exchange trading. The goal is to minimize expenses and to react quickly to business needs.
Preparing for Instant PaymentsThe acceleration of instant payments adoption will soon impact businesses substantially. Ultimately, every money movement will be affected.
“If you transfer money into an investment account, if you borrow from a line of credit, or if you move money between accounts across different banks, those transactions become payments,” Gil said. “For some businesses, the ability to react quickly and move funds without waiting three to five days for payment settlement can be critical.”
In industries that are tied to market conditions, such as the oil and gas industry, every minute counts. Instant payments give companies the ability to react to market conditions and allocate funds quickly, which could save organizations millions.
Simplicity and UsabilityEven though there are an increasing number of technology solutions, finance offices should concentrate on simplicity and usability. Instead of focusing on large systems with many complex features and functions, the CFO’s office should be agile and drive benefits to the business in an incremental way.
“There’s an inversely proportional relationship between value and effort,” Gil said. “Especially with technology, you can get 80% of the value with 20% of the effort. Of course, it can work vice versa. CFOs must be aware of those points in their organization and adapt accordingly. They must constantly work to drive return on investment, because that’s how CFOs help their organizations thrive.”
The post The Elevated Role of Cash Visibility and Automation in the CFO’s Office appeared first on PaymentsJournal.
The ACH Network is set to surpass 33 billion payments by the end of the year, marking a significant milestone. Consumer Internet-initiated payments are set to surpass 10 billion, a remarkable achievement considering the payment method was created just 20 years ago.
In a recent PaymentsJournal podcast, Michael Herd, Executive Vice President of ACH Network Administration at Nacha, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discussed this success story and the future of the protocol in a crowded payments landscape.
PaymentsJournalThe Ongoing Success Story of ACHPaymentsJournal The Ongoing Success Story of ACHPaymentsJournalThe State of ACHInstant payments rails like FedNow and RTP have received significant attention over the past year, but this hasn’t slowed ACH’s momentum. In Q2 2024, ACH payment volume increased by over 6% year-over-year, with an average daily payment volume reaching 132 million payments. The total value of payments flowing through the ACH Network topped $42 trillion in just the first half of the year.
“There are a few areas that are driving overall ACH volume growth,” Herd said. “The first is B2B payments, which are growing by more than 10% per year. That’s been a long-standing trend for the last seven or eight years. While there are still pockets of check use in industries like healthcare and higher education, overall check volume seems to be declining and the B2B space is moving towards ACH.”
ACH is also thriving in consumer single and recurring bill payments, as well as account transfers. This volume exceeded 2.6 billion in Q2 2024, up 8.3% year-over-year.
“With increasing automation of business processes and the digitization of payments, both businesses and consumers are looking for greater efficiency,” Tavilla said. “It comes as no surprise that there is now record-breaking volume being transacted over ACH. There’s more data that is available with digital payments and it also helps businesses improve cash flow.”
However, there was a recent slowdown in healthcare claim ACH payments, likely due to a large-scale ransomware attack on the healthcare sector. A major processor in healthcare payments was unable to process claims for a period, leading to a 2.8% year-over-year increase in healthcare claim payment volume in Q2.
Same Day ACHThere’s a strong demand for faster payment settlement, and Same Day ACH has a formidable use case in both consumer and business applications. For consumers, that includes transfers to non-DDA accounts like digital wallets and brokerage accounts.
Same Day ACH supports the two-way flow of funds in B2B, C2B and B2C payments, allowing for both debit pull transactions and credit push payments. This contrasts with many real-time payment networks, which are currently credit push only.
“To say Same Day ACH has a key role is an understatement,” Herd said. “Same Day ACH volume in 2024 is up 47% from last year, including 566 million payments in the first half of the year. April was a banner month, maybe because it was tax month, but there were over 100 million Same Day ACH payments in April. In all likelihood, Same Day ACH payments will exceed a billion this year for the first time ever.”
The payment landscape is trending toward digital and real-time payments. Consumers increasingly demand faster payment methods, and Same Day ACH is a key part of that trend.
A driving factor in the growth of Same Day ACH payments is the ACH Network’s firm establishment. ACH is ubiquitous, and businesses and consumers are familiar with it. Unlike some of the newer real-time payment rails, virtually all financial institutions are connected to ACH, facilitating money movement regardless of the customer’s bank.
“If you’re a business and you haven’t dipped your toe in the faster payments waters yet, start with what you’re familiar with, which is likely to be ACH,” Herd said. “Same Day ACH is just a faster form of what you already know. It’s the same system and the same processes. You will have to adapt to the faster settlement of funds, but ultimately there’s a much lower barrier to entry.”
Improving the ExperienceWhile the ACH Network is well established, there are three key areas where the platform can improve: risk management, exception resolutions and ACH scheduling. To mitigate risks, Nacha members have adopted new rules to raise the bar for payment monitoring among every participant in the ACH Network.
The objective is to better identify and recover from fraud attacks that target ACH and other credit push payments. As fraud attempts rise, it’s crucial to understand how organizations continue to fall prey to criminals. The new rules aim to define the network’s response to fraud and mitigate criminal activity.
Second, paper-based processes should be eliminated from the ACH payment exception resolution process. Exceptions are payments that don’t process directly through, and resolving those transactions often requires manual intervention from the two financial institutions involved.
The institutions must share documentation and information to resolve the exception, which is often still done through phone calls and faxes. Because the manual methods lessen the efficiency of the underlying ACH process, a better solution is to resolve exceptions through secure online platforms. The Federal Reserve’s exception resolution service and Nacha’s risk management portal are two examples of how exception resolution and information exchange can occur through secure channels.
The last area of opportunity is to expand the current Same Day ACH schedule to align with the close of business in the Pacific Time zone. Currently, the latest time a Same Day ACH payment can be sent is 1:45p.m. PT. There is significant value in supporting Same Day ACH processing up to the end of the business day for Pacific Time zone businesses and consumers.
Lower Hurdle to EntryThough the ACH Network has room to improve, there is little doubt that ACH will continue to have a place in the payments landscape for years to come.
“It’s not instant,” Herd said. “However, with ACH there is a lower hurdle to entry in nearly every situation. Wherever you’re transacting, wherever your employees have their bank accounts, and wherever your customers are, you’re going to be able to reach them with ACH.”
The post The Ongoing Success Story of ACH appeared first on PaymentsJournal.
Cards made from paper and other sustainable materials continue to gain in popularity. In addition to being ecofriendly, paper cards are more cost-effective and perfect for single-use purposes, such as gift cards.
To explore the future of sustainable cards, Peggy O’Leary, EVP, Prepaid and Digital Solutions for CPI, spoke with Elisa Tavilla, Director of Debit Payments for Javelin Strategy & Research, on a recent PaymentsJournal podcast. They discussed the flexibility available to consumers and providers with sustainable cards and looked at where the industry might be headed.
PaymentsJournalPaper or Plastic: Sustainable Cards Are the Wave of the FuturePaymentsJournal Paper or Plastic: Sustainable Cards Are the Wave of the FuturePaymentsJournal
Paper PowerSustainable cards are being made from a variety of materials, including paper, wood, recycled PVC and other substrates, as well as recycled plastic. All of these are much easier on the environment than traditional plastic cards.
“We’re seeing a greater effort toward fostering sustainability and protecting the environment across all industries,” Tavilla said. “For example, in the retail industry, there’s been greater attention and efforts toward things like consignment, thrifting, upcycling, focused on zero waste. In the payments industry and financial services, we’ve seen efforts to improve sustainability and help the environment, too.”
Single-use type prepaid cards (that is, not reloadable) are ideal for paper. Visa, Mastercard, and American Express gift products have increasingly moved toward paper cards. They are more environmentally friendly than traditional cards, and they don’t need to be as durable as credit or debit cards that people use more frequently. Paper cards are also more cost-effective for manufacturers than plastic cards.
Sourcing MattersThe market has been pushing for assurances that paper products—and even the packaging around the paper products—come from responsibly sourced materials.
“At CPI, we’re heavily investing in ensuring our materials are FSC-certified,” O’Leary said, referring to the Forest Stewardship Council, a group whose mission is to promote economically viable management of forests. “We’re making sure that our products have a trackable chain of custody and that our paper products come from responsibly managed forests. Not only are we creating something from a natural product that can break down after use, but the source itself is coming from a more ecofriendly supply chain as well.”
Financial institutions have seen plenty of new investment around environmental, social, and governance (ESG) initiatives, indicating a desire by consumers to minimize their impact on the environment. Many of these customers may not even realize that the plastic cards in their wallet could be replaced by something more ecofriendly. The effort extends to finding partners to ensure that the types of materials used are responsibly sourced as well. That is an important part of CPI’s manufacturing process.
“From the ESG perspective, CPI’s approach and strategy are very thorough and well-rounded, whether it’s from the cards and the products that they’re producing or the sourcing and the supply chain of the material,” Tavilla said. “Consumers are increasingly environmentally conscious of the products that they’re using and the providers that they buy from. A Javelin survey asked the key factors that users consider when they apply for a new credit card, and 26% said that having the card being made of sustainable material is an important factor.”
Expanding PossibilitiesSustainable card manufacturing allows for more than just environmentally friendly transactions. It opens up a new world of design for the cards as well.
“We have come up with innovative ideas such as gift packages that would have lights that lit up or scratch-and-sniff options for the holidays where you could definitely smell the peppermint,” O’Leary said. “When you think about what it takes to be able to deliver that kind of innovation, you need an extensive network of suppliers, partners, and innovators behind the scenes that help you bring that all together.”
It’s a misconception that an ecofriendly production means giving up uniqueness or special designs. CPI has developed hundreds of designs suitable for all kinds of occasions and personality types. Indeed, moving beyond simple plastic can give cards a variety of distinctive tactile feels. Special embellishment and designs focus on strong tactile experiences, which consumers love when they’re shopping for gift cards.
Similar developments can be expected in gift and retail cards. Even though these cards tend to be single use or limited use, consumers sometimes want them to have a certain degree of durability. Some people might leave a gift card in their wallet or in a drawer for months before they redeem it. Cards with a larger amount of funds attached may be used multiple times.
There are other reasons to look toward more sustainable products. California, for example, has introduced legislation limiting single-use plastics, which could have ramifications across the country. Obviously, it would not be efficient for card manufacturers to produce one card to meet the standards of one state and different cards for other areas. The result is likely to be a standard based on the most restrictive state laws.
For card providers and their customers, these trends are likely here to stay.
“From a cardholder perspective, it is ensuring that you’re meeting the new requirements that are coming more broadly from your market,” O’Leary said. “From a business perspective, businesses are taking steps to improve their impact on the environment. Overall, you can drive a really positive business outcome, not only from an investment perspective but also to win in the market.”
As a reliable revenue stream, recurring payments help both organizations and their consumers by giving them the option to “set it and forget it.” However, ensuring that these recurring payments run smoothly can be a challenge when businesses face returns or declines due to errors, outdated payment information, insufficient funds or even fraud. With the right partner, a subscription model can help businesses run smoothly while ensuring sustained cash flow.
In a recent PaymentsJournal podcast, Suman Chaudhuri, global vice president of revenue growth at CSG Forte, spoke with Don Apgar, director of the merchant payments practice at Javelin Strategy & Research, about how businesses can take advantage of recurring payments.
PaymentsJournalMaking the Most of the Recurring Payments ModelPaymentsJournal Making the Most of the Recurring Payments ModelPaymentsJournal
Building the ModelWhen Dollar Shave Club first launched its direct-to-consumer subscription model, the company garnered attention by combining a higher level of brand engagement with competitive pricing. This shift from one-time to recurring payments highlights a growing trend among businesses, bringing much-needed stability to their cash flow. That stable income allows them to forecast more accurately, allocate resources more efficiently and invest in growth opportunities with greater confidence.
A good example would be what has transpired in the car wash industry.
“When you look at a business like a car wash as something that’s heavily weather dependent and has extreme revenue swings from day to day or week to week, to be able to stabilize the revenue with the membership and recurring payments is tremendous,” Apgar said. “A business like a car wash was 100% card present, and the migration to a subscription model is moving that payments activity from card present to card not present. From a processing perspective, it presents additional challenges, and the businesses that are making that transition may not be ready for card-not-present transactions.”
There are broader benefits, too. Businesses can leverage data from subscription payment models to gain insights into customer behavior and preferences, enabling them to tailor their offerings and enhance customer satisfaction.
Customer retention is another key advantage. Subscriptions can help create an ongoing relationship between a business and its customer, increasing the likelihood of long-term loyalty and ensuring their ongoing business by automating the repeat purchases.
The Autopay RevolutionWhether from retailers like Costco or Dollar Shave Club or from utility and insurance companies, customers expect to see an autopay option at checkout.
However, it’s important to note that recurring payments can fail for various reasons. Customers might get a new credit card due to fraudulent activity, or they might have insufficient funds in their bank account. Such declines and returns can cause cash flow issues that put extra stress on customer service teams to contact customers and retry payments.
Businesses that experience declined card transactions can consider using an account updater solution, which automatically updates the cardholder information for Visa, Mastercard or Discover. When these cards get replaced or reported stolen or lost, the updater ensures you have the new payment information, reducing the chances of failed payments. Businesses can also automate sending payment reminders ahead of time, so customers are reminded to update their account information or ensure their accounts are funded for the upcoming payment.
Failed payments can lead to service cancellations, which ultimately cause customer satisfaction issues. An experienced payment provider can guide the business through these challenges and offer solutions to automate payment retries, alleviating the burden on the customer service team.
While it might sound counterintuitive, businesses also need to make it easy for customers to cancel their recurring payments.
“We’ve all worked with a business that has their cancel payment button buried seven layers deep inside their website or their application,” Chaudhuri said. “That can be very frustrating, because when a customer makes up their mind to cancel their payment, they will find a way to cancel that payment. If you don’t make it easy for them, you’re increasing the burden on your call center and customer service teams because the customer will fire off a ton of emails or make calls to your call center.”
The Mechanics of Recurring PaymentsCredit cards, debit cards and Automatic Clearing House (ACH) payments are all well-suited for recurring payments. However, ACH offers several advantages over credit cards. For one, accepting ACH payments usually costs the business less. Additionally, account numbers typically change far less frequently than credit or debit card numbers. Another benefit of ACH is that banks can automate retries when an ACH payment fails.
“If you’re using ACH, we would highly recommend using a top-of-the-line validation service to validate the payments before processing the payment,” Chaudhuri said. “When customers make manual errors entering their payment information or are accidentally using cards that have expired or are invalid, a strong validation service can validate this up front and reduce the chances of failed payments.”
A Lesson LearnedBusinesses that have relied on the subscription model in the past are now taking lessons from modern recurring-payments businesses.
“My cable company is happy to charge my rewards Visa card every month, even though for years companies like utilities and cable companies resisted billing on card-based transactions because of the interchange fees, processing fees, etcetera,” Apgar said. “But at the end of the day, when you look at the cost to print and mail the bill then wait for the payment process, in lieu of being able to just charge my card and receive the funds immediately, the fees become cost effective over time.”
As the cable example shows, the more small and medium business explore recurring payments, the more benefits they see. The consistent cash flow, the improved customer retention and the additional data available all contribute to an environment that benefits not just the enterprise but its customers as well.
Interested in learning how to offer a smooth and secure payment process?
Paying bills is an essential part of life, but it’s a task that has become increasingly complex. Because bills often come in various forms and require different payment types, it can be hard for consumers to stay on top of their finances.
In a recent PaymentsJournal podcast, Derek Swords, VP, Head of Product, Bill Pay at Fiserv, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the challenges consumers face when paying bills and the opportunities financial institutions have to provide value for their customers.
PaymentsJournalA Competitive Differentiator: How Financial Institutions Can Leverage Bill PayPaymentsJournal A Competitive Differentiator: How Financial Institutions Can Leverage Bill PayPaymentsJournalA Fragmented LandscapeThe volume of bills consumers receive has increased over time. In the past, consumers may have sent paper checks by mail to make those payments, but consumers now receive and pay bills in a wide array of methods.
Customers could pay a bill electronically through their bank, mail a paper check, or go to a biller’s website and make an ACH payment directly. Consumers receive bills via mail in some cases and email in others. All those factors have led to a significantly fragmented customer bill pay experience.
To consolidate that experience, new payment networks have been constructed on a digital-first framework. While the volume of bills is increasing consumers are increasingly paying billers directly. There has also been a rise in automatic payments from credit cards. Though checks can be problematic, it will take time for checks to be phased out because many smaller billers still rely on them.
Consumers are becoming more familiar with different payment methods, though many younger consumers may still not be aware that bank bill pay is an option. However, there hasn’t been significant innovation in the traditional bank or credit union experience, so many financial institutions are lagging customer expectations.
“Consumers are evaluating other payment methods because they want enhanced clarity, faster payments, and more payment choice,” Swords said. “They’re using their phone instead of the traditional desktop experience because it provides transparency and increased access. What they’re really looking for is an offering that rolls all their obligations into one, and that creates an opportunity for financial institutions.”
Around 85% of customers indicate that they would rather have a single, combined, integrated experience. Aside from simply viewing bills, consumers also want to make all their payments from that central, mobile platform, and financial institutions should keep that in mind as they design their experiences.
Beneath the HoodIn many cases, customers adopt a service based on the quality of their first bill pay interaction, so financial institutions should make it simple for customers to find their bills and enroll in applicable programs.
“Onboarding is extremely important because it lets customers know the capabilities beneath the hood, if you will,” Swords said. “It’s about informing customers about the offering and getting them engaged. Once they get there, the consumer should have full control of the payment, transparency on when the payment will occur, and confirmation the payment happened.”
Thorough onboarding will be critical as the market heads to faster and, ultimately, real-time payments. Instant settlement makes it even more important for institutions to provide an accurate, transparent experience. When customers get notifications, they should be able to immediately access their mobile app, make the payment, and get back to their lives.
“It’s not like the traditional bill pay model, where they stacked their bills by the desk and paid them one by one,” Swords said. “That’s not how consumers work today. They want an on-demand experience where they can get things done on the go and get advice along the way.”
An Advisory ExperienceThe advisory aspect is often overlooked in the bill pay experience, but innovative products now help customers proactively manage their finances. Timely push alerts and messages are critical functions. It’s not optimal for an accountholder to miss a bill because they were busy.
The advisory process should also be ongoing. After a customer sets up a bill, an institution might work to eventually transition them to an automatic payment. FIs might also offer customers the option to sign up for notifications or group certain types of bills. Banks and credit unions should inform customers about the different payment rails and the benefits of each.
“If a customer has a bill due tomorrow, they should be advised on how to use the fastest payment the biller accepts,” Swords said. “The goal is to make sure the payment is on time, the customer has a great experience, and users understand when money is sent or received.”
Financial institutions are constantly working to make it easier for accountholders to pay anyone, anywhere. There is an increasing demand for international payments, and that includes bill payments.
“It could be sending money overseas to family or paying for your daughter’s wedding in Italy, but customers want the ability to send money worldwide,” Bodine said.
The Future of Bill PayWhether a payment’s destination is domestic or international, the process should be seamless. The goal should be to design a user experience in which the customer doesn’t have to think about which rail to use or which tab to click on.
Many companies are incorporating intelligence that will make it easier for customers to discover the bills that are available for them to pay. From a ZIP code, for example, a user could be matched up to the local power company. With permission, a bank could do a soft touch to a customer’s credit report, which gives the institution insight into the bills a user pays.
Many upcoming bill payment initiatives revolve around small businesses. That includes a push for small businesses to self-enroll to receive electronic payments because checks are still a staple for many businesses. Card payments are also beginning to pick up steam with small businesses, because a credit card can offer an attractive short-term line of credit.
“Whether it’s for consumers or businesses, the goal is to create a profound, smart, all-in-one experience where users can see all their obligations and make any kind of payment in an advisory environment,” Swords said. “Bill pay is an essential service that drives digital engagement and loyalty for financial institutions, but it’s not enjoyable for most customers. For financial institutions, however, bill pay is a both a competitive necessity and a substantial differentiator.”
The post A Competitive Differentiator: How Financial Institutions Can Leverage Bill Pay appeared first on PaymentsJournal.
Facing a continuing rise in fraud and fraud attempts against financial institutions, Nacha has announced new rules to help organizations mitigate these risks. These new rules will take time to implement, so institutions should begin preparing now rather than waiting until the rules go into effect.
In a recent PaymentsJournal podcast, Brian Holbrook, Director of Product Strategy and Integrated Solutions at LSEG Risk Intelligence, spoke with Elisa Tavilla, Director of Debit at Javelin Strategy & Research, about how to prepare for the changes and ultimately reduce the success rates of fraudulent activities. They explained how the new rules provide institutions an opportunity to rethink their entire approach to the ever-evolving nature of fraud.
PaymentsJournalNacha’s Upcoming Rules Take a New Approach to Fighting FraudPaymentsJournal Nacha’s Upcoming Rules Take a New Approach to Fighting FraudPaymentsJournalThe New Nacha RulesIn 2023 alone, 80% of organizations fell victim to payment fraud, a 15% increase from the previous year. ACH payment methods have, in some circles, become the most targeted in business email compromise fraud situations.
The proposed Nacha amendments provide new tools for combatting this issue. These changes are staggered to take effect between October 2024 until June 2026. For many organizations, the effort will require significant planning, budgeting and operational changes. Noncompliance with the rules can lead to monetary fines, increased scrutiny from regulators, reputational damage, and in severe cases, legal and regulatory actions.
Another important aspect of the new rules is the encouragement of a more collaborative approach towards mitigating ACH fraud. In particular, they enlist both sending and receiving financial institutions into combating unauthorized transactions as well as authorized push payment transactions, such as credit push fraud.
While Nacha specifically addresses ACH credit push transactions, other payment rails also use credit push, including wire transfers, peer-to-peer payments, and real-time payments like RTP and FedNow. By preparing for the new rules and risks associated with credit push for ACH, organizations can also better prepare for other payment methods.
How It WorksIn traditional fraud monitoring, most of the focus was on debit pull transactions. The new rules would empower the receiving financial institution to play a key role in monitoring ACH fraud risk as well. A receiving depository or financial institution may decide to return funds to the originating depository financial institution if it determines that the transaction is suspicious.
“When you look at the responsibilities of both a sending and receiving organization, the operational adjustments are going to take time,” said Holbrook. “You have to take into account the entire customer lifecycle. Receiving financial institutions are now going to have more time to review transactions and potentially return those funds to the originator.”
Early preparation is key to success. LSEG has put together a preparation playbook focusing on three critical aspects to consider before the rules take effect.
The first step is for organizations to review their current capabilities and identify where fraud is most likely to occur within the existing life cycle.
“Start thinking about not just a customer life cycle but a transactional life cycle,” said Holbrook. “Think about your capabilities in terms of ongoing KYC of not just your customer but of their transactions.”
Next, define what success looks like within your organization. While reducing fraud is the primary goal, it must be balanced against customer friction and proper monitoring capabilities. Identify where significant impact can be made, not just to comply with regulatory or Nacha rule changes, but to enhance the customer experience, reduce fraud, and improve your organization’s reputation for prioritizing customer protection.
Lastly, identify areas for improvement, both internally and in terms of the customer experience. Ensure you’re educating customers so they understand how you are protecting their transactions, whether it involves money coming in or going out.
Be PreparedOrganizations that aren’t prepared for these new rules can leave themselves more open to fraudulent attacks.
“Some of the risks of not being prepared for these new Nacha rules—or just for ongoing more sophisticated fraud risks in general—is the fact that if all other players in the industry and your peers are prepared, that can make your organization more vulnerable,” said Tavilla. “You wouldn’t want to make yourself a target.”
Complying with the new rules will rely on an integration of technologies, processes, and people.
“It’s going to take all three of those things in order to be successful here,” said Holbrook. “It’s important to think of this as not just something that needs to be complied with, but as an opportunity for organizations to have a key differentiator. Are you looking for a vendor to check a box, or are you looking for a partner who’s going to be there with you day in and day out to help mitigate the instances of fraud?”
The expected benefit comes down to a long-term strategic planning vision that will allow organizations to not just view these changes as a point in time, but to put in processes and procedures that will allow them to be flexible as the fraud landscape continues to evolve.
“When we look at the rise of AI, the fraudsters are getting more and more sophisticated with their abilities,” Holbrook said. “This is the right opportunity to find the right tools, the right partners, the right processes to in effect do as much as possible to future-proof any additional nuances or changes or new fraudulent activity that we see in the industry.”
The post Nacha’s Upcoming Rules Take a New Approach to Fighting Fraud appeared first on PaymentsJournal.
One of the most disturbing aspects of present-day fraud is just how prevalent it has become. Around 80% of respondents to an Association of Financial Professionals survey said they were victims of payment fraud in 2023. It was a 15% increase from 2022 and the highest number since 2015.
In a recent PaymentsJournal podcast, Ryan Clayton, Director of Solution Consulting at Bottomline, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the technology and tactics criminals employ and the ways organizations can defend themselves.
PaymentsJournalOut of a Spy Novel: Mitigating Modern-Day FraudPaymentsJournal Out of a Spy Novel: Mitigating Modern-Day FraudPaymentsJournalThe Wide-Open WorldCriminals are becoming more sophisticated every day. They use technologies like ChatGPT to create more convincing phony emails and voiceover deepfakes to trick finance offices. Business email compromise is on the rise, causing losses of over $300 million per month.
“It’s hard for organizations to stay above water because fraudsters are always one step ahead,” Clayton said. “It’s under any and every vertical, all industries are under attack. Public entities like higher education institutions, healthcare facilities, and government agencies are at higher risk because their data is much more readily available. But fraud is everywhere.”
Criminals especially target companies that process a high number of payments. In commercial real estate, for instance, where invoices come in and payments go out rapidly, it’s easy for something to fall between the cracks. Companies that have high turnover, or are understaffed, are more vulnerable to attacks.
The continued use of paper checks exposes companies to fraud risk as well. More than 80% of organizations still accept paper checks, and more than 90% still use checks to make payments. The Financial Crimes Enforcement Network reported in 2021 there were 350,000 cases of check fraud, and that number rose to 680,000 cases in 2023.
“It’s so susceptible,” Clayton said. “Once that paper instrument leaves a company’s hands it’s out in the wide-open world. It may seem like something out of the Wild West, but the United States Postal Service has had postal carriers held up at gunpoint, and what they’re really looking for are business checks. If they find one, there’s no tracking it. It’s gone.”
Social EngineeringCriminals have increasingly employed tactics that exploit social engineering to manipulate employees’ actions. They study businesses to learn their behaviors. Because organizations have so much data that’s readily available online, it’s not difficult to learn how a company operates and who its partners are.
Someone posing as a vendor might call claiming their company will lose its business license if it doesn’t receive a payment today. The criminal is hoping the employee will have an emotional reaction and break protocol. Though it might seem like a spur-of-the-moment call, these criminals have likely been targeting the companies they go after for months before an attack.
Criminals have also hacked voice-over-internet-protocol (VoIP) phones. Once the phone system is breached, they can listen in on business conversations, record them, and use them against the organization.
“There have been instances of account takeover,” Clayton said. “When there are corporate phones across an organization, there have been SIM takeovers. There’s one famously involving former Twitter CEO Jack Dorsey. They took over his SIM, swapped the phone number to another phone, and acted as though they were him. To prevent that, organizations should add SIM PINs across all their phones.”
Although it’s important to leverage technology, social engineering methods mean it’s equally important for an organization to train its workforce to spot criminal tactics. However, fraud prevention training can’t be a one-time thing.
“It’s so critical that this is not just something that’s done once a year,” Bodine said. “Many companies get a survey about fraud, and they fast-forward through, check the box, and get the approval from the fraud and risk management team. Then they never hear anything about it until next year.”
Companies must continually audit themselves and stay vigilant because criminals are extremely patient. Criminals will pose as a fictitious company and charge the organization an amount that’s too small to be flagged. Over time, they gradually increase the amount. Once they have established trust, criminals will conduct a concerted attack for substantial billings. By the time the company finds out, the attackers are gone.
Prevention is KeyIt’s extremely rare to recuperate funds from fraud, especially when the attack involves checks. That means prevention is the key aspect of fraud mitigation.
“Protecting yourself against business email compromise is critical, because it’s targeted at a business directly in those cases,” Clayton said. “In spear phishing, fraudsters target payers in an organization and impersonate a vendor. Sometimes public entities have a contract out for bid and the fraudsters pose as the winner of the contract, because all that information is public.”
In those instances, criminals will often ask for funds upfront, or at least a certain percentage for services or materials. Once the check is cut, the funds are lost. One way to mitigate that risk is to use a virtual card, which is a safer and faster way to pay vendors. ACH is an option, but there are risks involved if businesses don’t fully verify the vendor’s information before sending the payment.
Accurate vendor verification should include digital bank authentication and follow-ups to ensure the organization is routing the payment to the correct vendor and bank account. Another way to verify vendors is through device fingerprinting. If a vendor normally logs in from Chicago and one day the login comes from Nigeria, it’s a red flag.
Verification should include an Office of Foreign Assets Control check to make sure the vendor isn’t on a terrorist watch list, plus a validation to ensure the vendor isn’t operating from a blacklisted IP address. Another way to spot fraudulent websites is to confirm the age of a site’s URL. Criminals will often create new websites to impersonate vendors.
Integrated LeadershipA fraud management plan should be integrated into every aspect of an organization, including its leadership.
“Make your fraud mitigation leaders a meaningful part of the leadership team,” Bodine said. “Much too often, organizations reach out to their fraud and risk management team after it’s already too late. Don’t put those people in a closet and take them out once a year.”
Though training is a critical step in fraud prevention, many aspects of modern-day fraud require technical solutions. Unfortunately, many companies don’t have the bandwidth to research and implement them.
Partners can help companies upgrade to electronic payments like virtual cards and facilitate the elimination of paper checks. They can also conduct vendor verification and email reviews and can deploy multifactor authentication across an organization.
“Ask yourself, what do I have the capability to do?” Clayton said. “Most organizations don’t have network-wide shared threat intelligence. That may sound like something out of a spy novel, but those are the kind of tools that are required to beat the fraudsters at their own game. There are so many facets to this, and if a company can’t check all these boxes, it’s time to talk to a partner that can help.”
Discover more actionable ways to protect against payments fraud in this guide from Bottomline.The post Out of a Spy Novel: Mitigating Modern-Day Fraud appeared first on PaymentsJournal.
Payments data has become a crucial cornerstone for any company that processes transactions. Despite the availability of powerful analytics tools, many companies can’t leverage the true potential of their payments data because their information is siloed and scattered across multiple systems.
In a recent PaymentsJournal podcast, Mike Meeks, Chief Technology Officer at BHMI, Jon Protaskey, Director of Software Engineering at BHMI, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed the approaches that enable companies to tap into the power of payments data.
PaymentsJournalThe Competitive Advantages of Payments Data ConsolidationPaymentsJournal The Competitive Advantages of Payments Data ConsolidationPaymentsJournalTransforming Transaction DataPayments data is consolidated through a secure centralized repository where transaction data is stored, managed, and accessed. The first step is to pinpoint all relevant sources, such as data from authorization systems, information from external transactional systems, and even data from internal CRM systems.
Then the data is extracted using methods like APIs, parsing of structured files, and database queries. That captures a wide variety of payment-related information like transactions, customer details, and financial records.
After extraction, the data is transformed into a standardized format and enriched, where necessary, with details like client participation, programs, relationship with other participants, and billing terms. The data is then integrated into a central repository.
“There was a time when it made sense to have payments data in silos, whether it be for security reasons or simply the limitations of technology,” Riley said. “However, now being able to bring it all together into an actionable form is truly transformative.”
Key Competitive AdvantagesThroughout the process, consolidation providers should prioritize data governance, delineation of ownership, implementation of access control, and compliance. Once the consolidation is complete, businesses will have several key advantages.
“The biggest advantage of a consolidated payments data platform is it gives companies a uniform enterprise view of all their transactional data,” Meeks said. “It’s a challenge to implement an enterprise-wide data management strategy that provides access to all payments data regardless of transaction type or source. However, the centralized viewpoint makes it worth the effort.”
A data repository can eliminate challenges like duplicate data or missing data due to silos. It also allows businesses to normalize data from disparate sources to make it more understandable. Payments data consolidation sets up companies to leverage advanced analytics and reporting tools that can generate real-time insights. That enables informed decision-making and improves operational efficiency.
As data is ingested, a company could calculate fees, reconcile transactions from different sources, and link transactions from diverse sources to create transaction life cycles. The business can also process disputes as soon as the data arrives.
“On top of those benefits, there’s a substantial cost savings that goes along with it,” Protaskey said. “Eliminating data silos from redundant systems reduces overall maintenance costs and lowers a system’s complexity. It allows companies to allocate resources more efficiently and focus on innovation and value-added activities, instead of wrangling data and reconciling disputes.”
The Right RepositoryPayments data consolidation hinges on the data repository, so it’s important to select the right platform from the start. The process starts with examining disparate systems and detailing how they will be tied together.
“It takes time and expertise to do it right, but putting in the effort to create an effective system is just good data hygiene,” Riley said. “The beauty of the process is once it’s set up properly, the inputs become routinized and the structure can be repeated, or enhanced, as time goes on.”
Because there are a wide variety of data sources that all have unique characteristics, automating data loading can have a significant impact. It simplifies the data-gathering process and takes the load off operations staff.
Data should be continuously loaded through a real-time feed or by chasing an authorization log file. That allows a business to substantially improve their ability to meet tight SLA windows at the end of the business day. It’s also important to have a repository that can ensure data quality. If a transaction record doesn’t pass validation checks, the system shouldn’t stop processing.
“A best practice is to set the transaction aside into an exception list, continue processing, and notify operations staff,” Meeks said. “Oftentimes, it is a simple issue like a new merchant has been onboarded, but their configuration wasn’t entered into the system. Operations staff can correct the issue and resubmit just the exceptions for processing.”
Right for the FutureAnother important aspect of a data repository is that it’s scalable, and not just in terms of supporting increased transaction volumes. The system should also support constantly evolving payment types. For instance, the protocol for card transactions is ISO 8583, but systems should also be able to handle ISO 20022, which supports the emerging real-time and cross-border payment types.
“It’s important to address your current needs, but it’s just as important to get it right for the future,” Protaskey said. “The repository should be flexible enough to leverage future technologies like AI and custom data analytics tools. It’s difficult in a constantly evolving environment, but you don’t want to be stuck in a system where you can’t move forward as the technology and the industry advances.”
Payments have a short SLA, and companies need to respond quickly to complete transactions. That means a data repository shouldn’t impact the performance of the system. To that end, the repository should be externalized from the production system so it can be managed independently and leave payments unaffected.
If it’s externalized, however, the repository should have a secure PCI compliant user interface where authorized users can navigate and find payment data in one location. In addition, an external data repository should have extensive security protocols, so there’s no way for an unauthorized user to access the data.
Overall, consolidated payments data repositories can improve compliance, mitigate risk, perform back office processing, and even optimize marketing functions.
The post The Competitive Advantages of Payments Data Consolidation appeared first on PaymentsJournal.
Affluent families are increasingly targeted by criminals and financial advisors must take a more proactive stance to mitigate the cyberthreats, for both clients and their children. According to Javelin’s wealth management research, a large 45% of investors say they expect their wealth management advisors to educate and shield them from cyber and fraud risks.
In a recent PaymentsJournal podcast, two Javelin Strategy & Research analysts—Tracy Kitten, Director of Fraud and Security, and Greg O’Gara, Lead Wealth Management Analyst—discussed the emerging cyberthreats to families and how wealth managers can safeguard their clients against.
PaymentsJournalCyber Risk Management for Children, Families: A Wealth Manager’s RolePaymentsJournal Cyber Risk Management for Children, Families: A Wealth Manager’s RolePaymentsJournalBuilding on TrustOngoing financial advice requires a bond of trust between advisor and client. With the expansion of digital engagement, and the ability for consumers to seamlessly spend and move money, advised clients now expect wealth managers to extend this bond of trust to their cyber well-being and digital financial security. Often, the same advisor has been with a family for decades, and the client-advisor relationship can span generations. As new cyber threats emerge, clients will increasingly lean on wealth managers for support.
“Advisors must consider their value proposition and move toward holistic financial planning,” O’Gara said. “They must foster engagement through ongoing conversations about risk in terms of goals and investments. Once that level of engagement exists, advisors must further nurture their clients and educate them about cyber risks and how they can protect themselves.”
Because cyber risks often extend to a client’s entire family, it’s critical for the financial services industry to protect children and elderly relatives, those who are increasingly vulnerable.
“Most adults are relatively savvy,” Kitten said. “They’re doing a good job of keeping up with the new types of scams and emerging fraud trends. Elderly populations, on the other hand, don’t often have that digital know-how. Children between 10 and 14 know the technology but they aren’t as well-versed in identifying fraud.”
Standing up for ChildrenOrganizations like AARP have taken a proactive stance with elder fraud and corresponding tactics criminals use to target older consumers. With children, however, it’s often assumed that a parent or guardian has a child’s best interests at heart. Unfortunately, many parents simply aren’t aware of the risks.
Affluent households are increasingly popular targets for cybercriminals. Affluent children are more likely to have their own tablets, mobile phones, and other devices. They use gaming and social media apps more frequently, and they can typically purchase and download apps more freely. Those factors dramatically increase affluent children’s digital footprints, and with that increased footprint comes increased cyber risk.
“Criminals manipulate their targets, and that’s why they often target children under 18,” Kitten said. “Gaming and social media are the primary platforms cybercriminals use to communicate with children.”
Parents often aren’t fully aware of the interactions their children are conducting online. Another main reason many children are vulnerable to fraud: Their parents give them unlimited and unsupervised access to the internet.
Social OversharingExperts mostly agree that children under 14 shouldn’t have social media accounts; but 10- to 12-year-old children from affluent households are more likely to have social media accounts than their less-affluent peers.
“It could be due to how parents themselves feel about social media,” Kitten said. “If parents are oversharing about themselves on social media, they’re probably oversharing about their children, too. Criminals pick up on that. Once they target a kid, the child can be socially manipulated into perpetuating a scam.”
It can be even more damaging when a child’s identity or persona is taken over or mimicked. Criminals can then use that stolen identity or mimicked persona to manipulate other members of the family or to open new accounts using the child’s name.
Getting Cyber SupportFinancial advisors do not have to become cybersecurity experts. Identity protection services (IDPS) providers specialize in identity fraud prevention, and many such companies offer turnkey solutions.
“Financial advisors could do a much better job of partnering with identity protection services providers, or at the very least recommending them to their clients,” Kitten said. “Portfolio planning should always include identity protection for the entire family.”
Family offices, for example, often focus on physical client protection, travel protection, medical backup, and security for their inhouse systems, but there’s a gap when it comes to cyber fraud protection for the client, O’Gara said. Closing the client gap starts with education.
“It should be a topic that drives engagement with clients [across wealth models],” O’Gara said. “It’s a great way to show empathy and interest in your clients’ families. If you’re doing financial planning, you’re already discussing beneficiaries and learning about their holistic financial picture. Discussing fraud prevention is a great way to further the relationship and show more value to your clients. There’s an opportunity to expand that conversation all the way from ultra-high-net-worth individuals to the middle market.”
The post Cyber Risk Management for Children, Families: A Wealth Manager’s Role appeared first on PaymentsJournal.
The payments industry has undergone more change in the past few years than it has in the preceding few decades. The rise of instant payments, the arrival of fintechs, the consumerization of payments, and the onset of open banking have driven significant shifts in the business payments terrain.
In a recent PaymentsJournal podcast, James Richardson, Head of Global Product Solutions at Bottomline, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed how businesses can revolutionize the way they pay and get paid.
PaymentsJournalRapid Time to Value: Modernizing Business PaymentsPaymentsJournal Rapid Time to Value: Modernizing Business PaymentsPaymentsJournalSearching for Watering HolesTwo of the most common business payment themes on the minds of chief financial officers are how to solve for fragmented technology and how to integrate fragmented processes.
“Generally speaking, corporates believe there are smarter ways of solving for business payments than the technology that’s accessible to them provides,” Richardson said. “They’re rationalizing their vendor relationships and looking for more meaningful strategic partnerships to help them streamline business payments.”
Many large corporations simply don’t have the staff to pursue new revenue streams. Though they realize fintechs can address those gaps, companies are often unsure how to proceed. Fintechs can also be uncertain how to position themselves to businesses.
Optimizing business payments is that much more difficult because of the sheer amount of information available to companies. It can be tough for businesses to get tangible insights into what is changing in their industry.
“They’re looking for sources,” Richardson said. “They’re searching for the watering holes where they can find the latest on the industry, because it’s critical to find out what the best in class is doing. It used to be businesses could speak to their bank and get all the information they needed. Now corporates have more multibank relationships than ever before.”
Companies recognize that they should be more independent and less reliant on their bank. Financial institutions and fintechs have rushed to offer solutions, fueling competition. The competition has been beneficial for businesses because they now have an array of solutions to choose from.
A New Wave of ChangeIn European markets, there are more payment types, a situation that creates choices for customers and companies. As more options become available, U.S. CFOs must consider the most effective way to modernize payments. It could mean moving from paper-based payments to electronic payments or making cross-border payments more effectively.
The ability to modernize through connected solutions is greater now than it has ever been, but adoption has been slow. According to a 2022 AFP Payment Survey, over 90% of U.S. businesses accept checks for incoming payments, and 86% use checks for outgoing payments. In most cases, it’s not for lack of better options; it’s because that’s the way things have always been done.
“Cracking the behavior is critical,” Richardson said. “Frankly, it’s a cultural thing. It’s already being done in other countries, but over the next few years, moving away from checks will be significant to overcome for U.S. companies. Once that happens and CFOs’ eyes are opened, they will see a new wave of change within their organizations.”
Though many businesses don’t want to process paper in and paper out, they are concerned about fraud. That means checks might stick around.
“We aren’t likely to see a government mandate in the United States where checks would be completely mandated out of the payment system,” Bodine said. “That means we aren’t likely to see an eradication of checks until there is a concerted effort by the largest corporations in the world to get rid of them.”
Navigating the Fraud CrossroadsThe complexities of fraud have brought companies to a tough juncture. Criminals now operate as if they are businesses, and if an organization is targeted, it’s not by chance. Bad actors are looking for weaknesses. If they find one, they will conduct deliberate, purposeful attacks.
“The opportunity for corporates is to actively search out best practices and not become the laggard,” Richardson said. “If you’ve got your head in the sand with fraud, you run the risk of getting hit twice. One, it’ll affect your cash flow because you’re making slower payments. Two, fraudsters will prey on those that are the weakest or the slowest to move. You don’t want to be in that category.”
In addition to outside threats, businesses must be aware of insider fraud, which can hurt an organization just as much. To mitigate that threat, businesses should create a culture where the company’s money belongs to every employee. It’s everyone’s responsibility to make sure those funds are safeguarded.
Employees should know it’s appropriate to challenge suspicious transactions. It will become even more important as tech develops and criminals have better tools. Although new technology can increase fraud risk, it can also mitigate it. For instance, business payment networks can provide absolute verification of the relationship between the account sender and the account receiver.
“Fraud prevention should be a priority, but it’s also an ongoing process,” Richardson said. “That’s when it’s important to have those watering holes, to check your sources to find out the latest on fraud prevention. More knowledge makes corporates more independent. It’s critical if they’re thinking about a broader payments structure that reaches beyond their own shores.”
Rapid Time to ValueIf companies embrace the technology that’s available as a service solution, they will find it won’t take long to get up to speed. Partners can quickly connect solutions that will optimize a company’s payments systems.
“Partner, partner, partner with an exclamation point,” Bodine said. “The data shows that if you want to see improvements in efficiency, costs, and long-term sustainability, it’s best not to attempt payments modernization internally.”
Payments partners can now onboard businesses in days or weeks as opposed to months or years, so there is a rapid time to value. Though some U.S. companies may be cautious, the businesses that modernize their payments systems soon will be best positioned to reap the rewards.
“Recognize the payments landscape has changed quite significantly,” Richardson said. “It’s a smaller world now. But if you look at what other countries are doing, you’ll be encouraged about what’s coming your way.”
The post Rapid Time to Value: Modernizing Business Payments appeared first on PaymentsJournal.
After years of restrictions and uncertainties, people are eager to travel the world again, whether for leisure, business, or reconnecting with loved ones. As a result, international travel is getting back to—and in some cases even surpassing—pre-pandemic levels.
Dynamic Currency Conversion, or DCC, is making the travel experience more seamless. On a recent PaymentsJournal podcast, Ed Robles, Senior Director of Sales, Business Development at Euronet Worldwide, spoke with Albert Bodine, Director, Commercial and Enterprise Payments at Javelin Strategy & Research, about how simplifying currency management can create new revenue opportunities for financial institutions.
PaymentsJournalReinventing Currency Exchange for Global TravelersPaymentsJournal Reinventing Currency Exchange for Global TravelersPaymentsJournalFinally, Transparency in Currency ExchangeTravelers today expect to manage their finances abroad with the same ease and convenience they enjoy at home. Historically, this has been a challenge given the range of currencies international travelers have to deal with and the limited number of exchanges available. DCC is changing that.
DCC, which is offered at ATMs and point-of-sale terminals, allows international travelers to pay or withdraw money in their home currency instead of the local currency. Essentially, when a traveler uses their credit or debit card abroad, they’re given the option to convert the transaction into their home currency at the point of sale. Travelers can lock in the exchange rate at the time of the transaction, avoiding the uncertainty of fluctuating rates.
One primary benefit is transparency. Travelers can see the exact amount they’re spending in a currency they understand, which helps with budget management and eliminates the guesswork of exchange rates. DCC also provides a better exchange rate compared to traditional currency exchanges, reducing the overall cost of foreign transactions.
“If you are withdrawing pesos in Argentina and you don’t know what the conversion rate was, DCC will convert and provide the rate for you,” said Robles. “You have the option as the cardholder to accept or deny the transaction based on the conversion. If you accept, your receipt will give you exactly the same numbers you’ve seen on the screen, so you know what you paid for in your home currency, even though the money you’re withdrawing is the local currency.
“As it gets back to your bank, that same amount will be on your statement at the end of the month,” he said. “You don’t get hit with international fees or any other conversion fees.”
One common difficulty travelers face is the high fees associated with withdrawing cash abroad, along with fluctuating exchange rates that make it hard to know exactly how much they’re spending. Finding ATMs that accept their cards and offer reasonable rates can be an added inconvenience and time-consuming.
“At Javelin we analyzed some of the routes around the world,” Bodine said. “We found that if you were to send $200 through traditional correspondent banking means, in some cases that would cost you $104 in fees on one of the routes. You’re talking about 52% of the transmitted amount in fees that the intermediaries are taking.”
“I remember the days where, whether it was for a personal transaction or even a business transaction, cash was required, and we had to partake in some type of hedging activity,” he said. “I love the transparency aspect of dynamic currency conversion, where you can see the fee structure on the front end, and the cost that it drives down.”
Reversing the TransactionOn the other hand, some travelers may have leftover local currency as they prepare to return to their country of origin. While not yet widely available, technology exists to convert foreign currency back to dollars or another home currency. Euronet is in the process of certifying certain ATM models to handle this conversion.
Robles pointed out that this is an important service for overseas travelers to avoid the double whammy of currency exchanges. “We get hit by a 17% to 20% conversion rate at the airport kiosk,” he said. “When we want to exchange it back to our local currency, we get hit again.”
Benefits for Financial InstitutionsFor financial institutions and merchants, DCC brings several advantages. By enhancing customer satisfaction and providing a valuable service, it can lead to higher transaction volumes as customers are more likely to use services that offer transparency and convenience. Moreover, financial institutions and merchants can find additional revenue streams through better exchange rate margins and increased usage of ATMs and POS terminals.
Euronet recently noticed an emerging trend after reviewing reports with one of their clients. They noticed a significant number of exchanges involving the Australian dollar in a particular area with a large Australian population. Euronet notified the bank, which then notified their merchants.
One of the merchants, a restaurant, decided to incorporate an Australian beer into their menu and advertised it to the local community. As a result, Australians started coming to the restaurant for dinner, drawn by the familiar offering.
“And the way that happened was through the DCC analytics that we provide our customers,” said Robles. “By noticing that there were a lot of Australians in the area, ready to spend money, their revenues went up.”
The post Reinventing Currency Exchange for Global Travelers appeared first on PaymentsJournal.
In an era marked by rising inflation, prepaid cards have become more than mere financial tools. They are increasingly seen as strategic assets in managing the economic pressures felt by consumers and retailers alike. The benefits of gift cards extend beyond financial transactions, helping retailers build personal relationships and loyalty with their customers.
In a recent PaymentsJournal podcast, Sam Lituchy, Vice President and Head of Gift Solutions at Fiserv, spoke with Jordan Hirschfield, Director of Prepaid Payments at Javelin Strategy & Research, about how prepaid cards have evolved into multifaceted tools and how the benefits for consumers can also benefit the issuers.
PaymentsJournalIt’s a Gift: The Hidden Benefits of Prepaid CardsPaymentsJournal It’s a Gift: The Hidden Benefits of Prepaid CardsPaymentsJournalAdvantages from All AnglesThe reasons for businesses to offer strong gift card programs are many. Fiserv data shows that revenue growth is about 15% to 25% greater when customers are engaged in a merchant’s loyalty offering or program. That tends to show up in a variety of ways, whether from increased frequency or greater average order value.
On top of that, prepaid cards can provide a more cost-efficient customer acquisition tool than other competitive advertising or marketing channels. “A strong loyalty program can turn a traditional consumer or user of that program into a great advocate,” Lituchy said. “Once that happens, the user often starts a social recruitment journey, bringing in friends or family members into that program.”
Lastly, the data captured from these loyalty programs is extremely powerful.
Merchants have an opportunity to leverage this data, gaining insights into demographics, engagement patterns, and purchasing behavior. It allows them to analyze what is working well, what is not, and what they should double down on.
“Customer acquisition costs are worth keeping an eye on here,” Hirschfield said. “What we see in our research is if you use incentives in concert with your loyalty program, you might get $20 savings to acquire a new customer. That’s pretty impactful, and all those benefits have a knock-on effect on spend.”
There’s also a spending uplift when a retailer can rely on loyal customers. The small things you might do to bring customers into your loyalty program pay off time and again through not only the first customer but also the social aspect of getting more customers in.
More Than the ValuePrepaid cards can also be a more cost-effective payment method, driving top-line growth and bottom-line savings. Many merchants are unaware of the benefits of the upfront cash that a gift card sale can generate for merchants. Those funds can be invested in a variety of ways.
Consumers tend to spend more than the face value of the card when they come in. They may come into a store with a $50 card and ultimately spend more than that. Javelin’s research indicates that 40% of gift card recipients will always or usually spend more than the value of a card. Another 25% splurge on a more expensive item than the card’s value, and 30% say they will visit the store more often. By getting people to come into their store and have that tactile experience, merchants might have another 20% that try a new brand or product or service.
“The TV that my kids use for their video gaming went out,” Hirschfield said. “I used a gift card and ended up buying a more expensive TV than I was anticipating. It was a better brand than maybe I would have normally done for the less technical TV they play their video games on. Without really planning to, I maximized the value of that gift card that I had sitting here.”
The Self-Use CycleOn the flip side, smaller balances do get left on cards. Those unused balances over time can continue to build and ultimately get recognized as revenue, which is obviously a benefit for the business. A few businesses have been able to build a lot of remaining balance, which increases revenue.
The self-use cycle allows those stored values to always remain in the merchant’s account. That merchant can put that money to work while the consumer is waiting to use it. While those funds are a liability on the balance sheet against future use, they can be interest-bearing.
Consumers in the loyalty program provide more value to the retailer when they reload the card. It may have started as a gift, but the card becomes a cyclical self-use item if it’s constantly being decreased, never reaching zero but always providing continued benefits to the consumer and the merchant. That arms the merchant with much more powerful information and at a reduced cost rather than doing such research through a third party. These cost advantages become amplified because 80% of self-purchasers anticipate buying more cards for self-use in the coming year.
Beyond Gifts“Gift card” has become in many ways a misnomer because self-use is what drives the repeatable business for prepaid cards. When people buy a gift card for themselves, they’re doing it to earn rewards. Javelin’s research shows that among people buying prepaid cards for self-use, 40% do it to earn loyalty points, while 48% do it to take advantage of a promotion.
One of the least-known benefits of offering gift or stored-value cards is that payment processing fees are reduced. The total cost between a gift card sale and its subsequent usage tends to be lower than a traditional interchange driven payment. There are further savings when merchants can incentivize consumers into their first-party app or wallet, to continue bringing them into the merchant ecosystem.
A handful of examples in the marketplace, like Starbucks and Walmart, have done an exemplary job of bringing consumers into their experience, keeping them involved in that ecosystem. That drives down the cost of acceptance for those merchants on each transaction. The most successful gift card programs will use synergy and consumer habits to bring advantages of all kinds to the issuers and the customers.
“I have been a loyal Delta flyer for years, and my Delta account is tied to my Starbucks account,” Hirschfield noted. “If I load up my card with $25, I get something like 250 miles. If I load $100, it’s more like 2,000 miles, for money that I’m going to spend at Starbucks anyway. These programs not only reward regular use but can tie in like-minded partners to do so in ways that engage the consumer on multiple aspects to do a bigger initial purchase. And that $25 to $100 purchase at Starbucks reduces their cost, when you consider the average price of going to Starbucks is probably somewhere between $5 and $10 per person.”
Any well-run loyalty program combines all those advantages. It’s not just about enticing people to buy a gift; it’s getting them to also buy for themselves, to be more engaged, earn those points, earn those rewards, and build that loyalty.
The post It’s a Gift: The Hidden Benefits of Prepaid Cards appeared first on PaymentsJournal.
With the growing demand for immediacy and a seamless experience in personal finance, credit unions must keep up to remain competitive. While many of these institutions have remained competitive with lower rates, they often lag behind banks and other lenders in the digital lending space in convenience. In an era of instant credit, speeding up the loan origination process is essential for maintaining and expanding credit unions’ market share.
In a recent PaymentsJournal podcast, Scott P. Young, Senior Vice President, Emerging Services at Velera (formerly PSCU/Co-op Solutions), spoke with Brian Riley, Co-Head of Payments at Javelin Strategy & Research, about how credit unions can move confidently into a digital future.
PaymentsJournalIn a Digital World, Credit Unions Find Their FootingPaymentsJournal In a Digital World, Credit Unions Find Their FootingPaymentsJournalThree Roadblocks to the Digital WorldAccording to Young, credit unions face three major challenges in the realm of digital account opening and credit card origination. The first is a lack of automation, combined with a lack of digitizing and communication. Many credit unions don’t fully grasp the operational efficiencies that can be gained and the human error that can be lessened through automation. And they don’t appreciate that even regulatory disclosures or adverse action notifications can be digitized and automated as well.
The second is fraud. Digital lending can be perceived as high-risk for a credit union, but there are tools that can make lenders comfortable even when they’re not able to see a member in person. With a layered approach to authentication and know-your-customer rules that employ machine learning, employees can be confident that they’re dealing with the right person.
“We like to say fraudsters don’t like to take selfies,” Young said. “Technology now allows us to match a selfie with the face on a driver’s license. In one instance, we actually went to the DMV and validated that a license was fake, and we were able to stop that fraud.”
Finally, there’s the ability to build real-time integration, so transactions can be processed in real time, including ones made through an app. That level of service drives member engagement, although the technology at many credit unions can struggle to keep up with the demand.
Taking Advantage of TimeGetting a card activated rapidly is one of the biggest challenges financial institutions face. They need to make sure it doesn’t sit dormant in someone’s wallet. Once usage begins, consumers quickly develop a muscle memory and often keep using it. That’s one of the reasons that quick activation and the whole digital play are essential.
“One of the biggest challenges credit unions have today is the age of its membership, and it plays right to the sweet spot,” Riley said. “These are all things that are native to Gen Z and the younger age cohorts.”
It’s a challenging time for credit unions wanting to hold true to their ethos. They must drive more instant approvals to get engagement, especially with younger members. Credit unions are about people helping people, so if there is a chance to approve an application, it’s important to at least keep it pending rather than simply respond with a hard decline.
“That is one of the advantages of a smaller lending institution,” Riley said. “You get to move outside the automated lending model into judgmental lending, looking at things that go beyond your basic FICO score. It’s knowing more about your member.”
Gaining Share of MindGen Z and (very soon) Gen Alpha are the smallest cohorts of credit union members. The challenge for credit unions is to capture their share of mind. The differences in the generations can be a means for approaching this problem.
“One of our credit unions shared recently that there was a gentleman in his 70s,
clearly not tech-savvy at all,” Young said. “His granddaughter was opening an account with a credit union and said how easy it was. So he did the same and was surprised at how seamless the process was. He didn’t really know what a digital wallet was at that time, but he soon found out. He is using his digital wallet everywhere to shop now.”
Don’t Be the Soda MachineTo deliver the immediacy and seamless experience members expect in the application and approval process, credit unions must first evaluate their current technology. Some credit unions “set and forget,” without going back to review and assess if they need to modernize. Young’s recommendation: Reinvent the member experience with a digital-first mentality. Map out your member experience journey, then challenge yourself and your teams to digitize steps in the experience wherever possible.
As Young pointed out, looking at your own day-to-day life can help you understand where improvement is needed. “I want to share a day in the life of Scott on a business trip,” he said. “As I’m driving to the airport, I pay for my tolls digitally. At the airport, the parking garage tells me how many spots are available on each floor digitally. I do say hello to the TSA agent, so I’ve talked to somebody that day.
“I’ve already checked in for my flight, received my boarding pass, and selected my seat. As we’re landing, I check in with my car rental company, choose my car, and go straight to a car with the keys already in it. I use a QR code to exit the garage and drive to the hotel. Do I go to the counter? No, because I’ve already used my app to check into my hotel room and request a digital key. I can go right to my hotel room, use my phone, and open the door.”
“I’ve lived my entire day digitally. Then I got thirsty and thought I really could use a soda.
So I went to the soda machine at the end of the hall and guess what? It only took coins.”
“When you’re faced with digital experiences and digital convenience all day long and you come to a legacy process, that really stands out. Don’t be the soda machine in a day full of digital experiences.”
The post In a Digital World, Credit Unions Find Their Footing appeared first on PaymentsJournal.
New cross-border payments solutions are offered seemingly every day. These solutions use everything from stablecoins to pay-by-bank platforms. However, international wire transfers still play a crucial role in money movement, and that’s not likely to change anytime soon.
In a recent PaymentsJournal podcast, Justin Jackson, SVP, Head of Enterprise Payments at Fiserv, and John Min, Chief Economist at Monex USA, discussed the present and future of international wire transfers and the methods financial institutions can employ to leverage this powerful tool.
PaymentsJournalA Win-Win: Leveraging International Wire Transfers and Foreign Exchange ServicesPaymentsJournal A Win-Win: Leveraging International Wire Transfers and Foreign Exchange ServicesPaymentsJournalFunctional, Secure, and ReliableWire transfers have a place in the payments landscape because they function more efficiently than the alternatives. They’re secure because banks on both ends of the transaction are constantly monitoring its status. Wire transfers are also more reliable because of the beneficiary information that accompanies the transaction and ensures that the payment is routed to the right account.
Account-to-account and P2P payments, which have grown immensely in the past few years, have limits on transfer amounts. Wire transfers can far exceed those limits, moving tens or even hundreds of millions of dollars. They also have international reach, which is vital to companies doing business around the globe and are often a lifeline for consumers with family overseas.
International wire transfers do have downsides, however. Issues often arise because financial institutions aren’t aware of all the aspects of the transfer process.
“One theme that keeps coming up is transparency,” Jackson said. “You don’t know how many intermediaries are going to be handling the transaction and what their timelines are. How long is it going to take them to deliver your funds to the next link in the chain? Most importantly, you don’t know the fees they’re going to charge you.”
The Hidden CostsWhen sending overseas, American institutions can wire funds in U.S. dollars or in the recipient’s currency. It can be convenient to send in dollars because the institution doesn’t have to calculate foreign exchange (FX) rates, but convenience comes at a cost.
“Once the dollar hits the foreign account, it has to be converted,” Min said. “At this point, you have no control over the exchange rate or the markup on that transaction. The recipient bank or the financial institution can apply whatever rate it wants, and therefore the hidden costs could be significant. It could be as much as 2 to 3 percentage points.”
The fees come directly out of the transfer’s funds. A business owner, attempting to pay an invoice for €10,000, might find out that only €9500 of the wire transfer was applied to the invoice. That leaves the owner no choice but to send another wire transfer to cover the shortfall, and that payment could also incur fees.
Because of government regulations, institutions might run into roadblocks when trying to conduct transfers in certain currencies. The U.S. State Department has mandated a list of currencies that are prohibited for foreign transfer.
“Some transactions are in a gray area,” Min said. “Sending money into Brazil, for instance, is cumbersome. It’s not just sending the funds. The recipient has to receive paperwork and complete it. Sending money into China can be very difficult because of the regulatory oversight. If you send U.S. dollars into different foreign currencies, then different regulations apply and different fees apply.”
Value-Add FeesBecause of fluctuating FX transfer rates and shifting government regulations, international wire transfer fees can vary substantially.
“The fee could be as low as zero dollars,” Jackson said. “It’s not exactly free; it’s included in the relationship with the financial institution. Fees could also be as high as $50 per wire transfer, but they average around $45. It’s typical for the sender to pay a fee to send a wire transfer, and it’s not atypical for the recipient to be charged a fee by their own financial institution.”
Fees can be a value-add for banks and credit unions because they create an income opportunity. All pricing is negotiated in every FX transaction, so institutions can earn revenue from the markup on currency conversion.
“There’s no one fixed price or one fixed markup rule, so it’s up to each institution to mark up whatever they can get away with to some extent,” Min said. “If you’re doing an FX transaction with a company like PayPal, you could be facing a 250 to 300 basis point fee. It’s a very lucrative revenue source for financial institutions.”
At a 300 basis-point rate, a $10,000 transfer sent overseas incurs a $300 charge. The financial institution gets all the markup share if the transaction is originated through the bank or credit union instead of a third party. Reducing the fee to 100 basis points would still mean $100 of income to the institution and a $200 savings for the sender of the payment.
Asking the Right QuestionsBecause of the complexity involved with international wire transfers, many institutions have turned to partners. There’s a level of due diligence that should always be applied to partnerships, but it’s especially true of foreign exchange services. Banks and credit unions must ask the right questions to ensure a partner can truly support their needs.
“Institutions should look at their customer base and the types of transactions they’re likely to perform,” Jackson said. “Then ask partners about the currencies they support. How do those line up against the transactions my accountholder base wants to execute? What are the exchange rates? What are the fees? They should also find out any additional fees based on markup.”
The duration of the transfer is another key question. The standard banking practice for international wire transfers is the day the transfer is initiated plus two. If the transaction is conducted today, the money usually appears two days later. That delay is caused by batch processing, because many banks can conduct transactions only during set hours.
Partner companies often operate 24/7, so transactions can be completed the same day or the next day. Many partners have also established branches in other countries, which can speed up transactions and make exchange pricing more competitive.
“The benefit of working with a fintech partner is they’re plug-and-play,” Jackson said. “It connects into your core account processing system; it’s wired into your institution’s online banking system. It fits into your existing reporting structures and data structures and uses existing connectivity. It’s easy and simple, and there’s not a big technical lift.”
While there are strong benefits to working with partners, institutions must ensure they’re working with a regulated money services company. In the United States, that means they’re licensed to operate in every state and at the federal level. It’s critical that financial institutions aren’t assuming any additional risk by working with a third-party partner.
Growing GlobalizationInstitutions that are using their own systems to send U.S. dollars through an intermediary are leaving an opportunity on the table. Despite talk of deglobalization, more businesses than ever are getting involved in international commerce. As that trend increases, companies will look for more efficient ways to send money.
“You’re able to give your customers a better service while providing them cost savings and generating income for your institution,” Jackson said. “Foreign wire transfers and foreign exchange services can be a valuable offering because they’re a win-win for your institution, your customers, and the recipients of their payments.”
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In the past, the chief financial officer’s role has been somewhat relegated to the financial aspects of a business. Now, CFOs face a challenging array of responsibilities that include payments modernization, fraud mitigation, and the selection and implementation of technological solutions.
In a recent PaymentsJournal podcast, Jeff Feuerstein, SVP of Paymode-X Product Management and Market Strategy at Bottomline, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the obstacles CFOs face and the role technology plays in the finance office.
PaymentsJournalWe Speak Tech: How CFOs are Reinventing the EnterprisePaymentsJournal We Speak Tech: How CFOs are Reinventing the EnterprisePaymentsJournalThe CFO’s AgendaThough CFOs have a lot on their plate, three key themes highlight their agendas. The first is payments modernization, which is an integral part of a company’s digital transformation. This could include the migration from paper checks to electronic payments. It could also involve the transfer from paper invoices or documents to data that can be leveraged across the enterprise.
“The next big theme is fraud and risk mitigation,” Feuerstein said. “Recent research shows business email compromise has grown over 70% year over year. Fraud is riddling organizations in such a way that CFOs are concerned about when, not if, their company will get hit by an attack. How do we protect ourselves and our businesses?”
Because of the tough interest rate environment, the last priority on CFOs’ agendas is their organization’s cash position. Understanding their working capital enables leadership to fully grasp where they stand at all times and make more informed business decisions. On top of those three themes, CFOs must keep their organizations up to speed with the latest technology, which hasn’t traditionally been a part of the role.
“What’s surprising about some of these discussions is they actually involve CFOs,” Wester said. “In the past, CFOs were tangentially involved with discussions about technology, especially payments, but not in a way where they were decision-makers. CFOs are now coming into these discussions fully informed on what’s going on in the space.”
Companies were often divided between the business side and the tech side, but that division has eroded over the past few years.
“This side spoke business, this side spoke tech, and someone had to translate,” Wester said. “Though there are still times when that divide exists, now everyone in the CFO’s office has a strong understanding of what’s going on in the technology side.”
Obstacles Facing Finance OfficesAnother change to the CFO’s role is that, 10 to 15 years ago, the finance office was very focused on the enterprise resource planning as the general ledger.
“There were not as many of what I’d call ‘point solutions,’” Feuerstein said. “Today, you’ve got several different point solutions, whether it be AP automation, AR automation, cash management products, cross-border solutions. CFOs are leveraging all these solutions and tying them together in a way that’s interoperable across the organization. It doesn’t just improve the efficiency of the CFO’s office; it brings revenue to the bottom line.”
One of the main responsibilities of today’s CFO is to understand all the solutions that are offered and how they can be leveraged. Given the number and complexity of those solutions, it can make for a difficult task. But the different perspective can also lead to new insights and improved partner relationships.
“They’re much better equipped to engage with partners,” Wester said. “They know what they should be able to get, and they’re judging those partners accordingly. It holds the partners’ feet to the fire somewhat, because they now have an entirely new constituency they have to serve.”
Though that represents a challenge for partners, it’s an opportunity as well.
“The bar has been raised for partners, and the competitive landscape for them is tougher than ever,” Feuerstein said. “But it also creates opportunities for partners to work with customers who are well-informed and fully understand their solutions. If partners are looking to elevate their game, those are the types of customers they should look for, because it elevates both companies.”
Leveraging Tech and AIFinance teams are no longer simply cost centers for organizations. Payment strategies delivered by the CFO’s office are driving not just product innovation but also accounts payable automation and revenue back into the organization in the form of rebates.
Payment networks that can improve automation and generate rebates are a vital part of the transition away from the cost center model. Leveraging technology is the key, which could be through a virtual card, a premium ACH product, or a financing solution. The most powerful technology for finance offices, however, is likely to be artificial intelligence.
“In regard to AI, there will be both sustained innovation and disruptive innovation,” Feuerstein said. “The sustained innovations are those marginal gains that are improving existing processes, like answering questions faster at the customer support center. Disruptive innovation will be in areas like supplier onboarding or contract management that will be completely reinvented because of new language models.”
AI can also be a critical tool in the fight against fraud. AI can mitigate fraud in several ways, including:
- Identifying anomalies in customer spending habits
- Cross-referencing account behaviors against fraudulent characteristics
- Flagging fake account creation
- Analyzing customer communications for suspicious activity
- Neutralizing credentials-based attacks by malicious bots
Though companies should use technology to the fullest, they must also understand its limitations. For example, as the tech develops AI is likely to flag false positives.
“AI is clearly the topic that everyone wants to talk about, but we know that AI isn’t a magic wand,” Wester said. “It’s not going to fix substantial problems that exist within an organization. And AI is being offered and implemented everywhere. If everybody is using the same tools, then the gains will be the same across all organizations. The real question is whether your business is using the tool in ways nobody else is.”
Though companies must get creative with AI, they shouldn’t wait for inspiration to strike. There will be a first-mover advantage for those companies that adopt AI early and find ways to use it in their businesses.
Final ThoughtsA recent U.S. Bank survey found that 45% of CFOs say they’re just starting their journey toward digital transformation. For finance offices, the landscape is far more complicated than it’s been since the financial crisis. Interest rates are still rising, and cash flows are king.
“Look for the areas where you can drive the most amount of change in your organization,” Feuerstein said. “It could be working capital, security and risk mitigation, or automating those paper-based processes that are sticking in your organization. In the U.S., there’s going to be $32 trillion in spend flowing around, so there’s tons of white space in this market.”
“We’ve been talking about digital transformation for a long time, but we’re still really at the beginning,” Wester said. “The most important message to decision-makers is that this is the time to do it. Just because there’s a lot of white space doesn’t mean other companies aren’t doing the same things. It’s an important time to evaluate your payment strategy and digital transformation plan and make those moves.”
Discover other trends and topics being discussed in the CFO’s office in the Bottomline 2024 Business Payments Outlook. Get insights from Bottomline subject matter experts, along with industry partners and influencers.
The post We Speak Tech: How CFOs are Reinventing the Enterprise appeared first on PaymentsJournal.
Organizations have faced the challenge of deriving insights from their data for a long time. Some enterprises have the ability and resources to do this, but others are far behind. Artificial intelligence (AI) has the capability of catapulting data analysis into the future, allowing enterprise analytics to fit into the daily, general health and success of a company.
Billtrust has been at the forefront of using AI to build out analytics processes, especially within the payments landscape. In a recent PaymentsJournal podcast, Ahsan Shah, Billtrust’s Senior Vice President of Data Analytics, talked about the AI-fueled future of data analytics with Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research.
PaymentsJournalWhere Will AI Take Data Analytics? The Sky Is the LimitPaymentsJournal Where Will AI Take Data Analytics? The Sky Is the LimitPaymentsJournalThe Democratization of AIOrganizations can no longer say they are not looking at AI. The success for most is going to come with the democratization of generative AI as opposed to a top-down mandate.
“Some companies are more advanced than others, just by allowing people to try it in the form of their goals and their own self-training,” Shah said. “Some of our teams here at Billtrust are doing hackathons where they just learn how to do this amazing thing. I think it’s going to flourish organically, and I think that’s the right way.”
AI is poised to go from a foundational model universe to a large set of tools, tooling, infrastructure, and services. The technology advancements are moving much faster than the rate of adoption. OpenAI is already at the forefront of multi-modality.
“There has been an explosion in the number of different systems that are monitoring various parts of how a business operates, ranging from frontline customer success to the nitty-gritty details of actual payment processing or chargeback processes, all the way up to when is revenue recognized and how is cash managed,” Miller said. “One of the challenges for teams has been to figure out how to put together those different pieces.”
An Explosion of DataMost companies ask someone to piece together various pieces of information or cut and paste some data in a spreadsheet. Maybe they have a dashboard that brings together different pieces, but even maintaining that dashboard, adding new data as it comes to the forefront, can be a challenge. The explosion of data creates opportunities for insight but also challenges in terms of the sheer scale, especially for organizations with limitations in teams and resources.
This idea of cross-functional analysis is a challenge not just because of the volume of the data but also because of its structure. “You have three different kinds of vectors happening here,” Shah said. “You have the insane amount of data, the urgency of trying to act on it, and the explosion of the different functions. Enterprises need a better way of synthesizing the data across the functions and to be able to get it to the right person who can act on it, which is often overlooked.”
Emerging generative AI technology may offer one way to solve some of these problems, such as a new way to create reports other than simply handing a definition to an engineering team that produces the report. Rather than being pushed from the systems, data can be pulled from the systems by precisely the people who are in a position to act on those insights.
The new term is generative BI, for generative business intelligence. You can simply ask a specific question in human language, such as “What anomalies are you seeing in my payment patterns for buyers in the West Coast?” That’s something that traditionally would have taken weeks of engineering analytics.
“It’s an exploding space,” Shah said. “Six months ago, there might have been one or two names that had LLM products in market that we could use. Everyone had written a poem in ChatGPT and experienced firsthand the power of the language model. But most people had also run headlong into the challenges of the data-gathering side of that model, which offers an interaction layer and doesn’t necessarily offer the insight. That’s the next step.”
Moving Beyond ChatGPTUsers of ChatGPT are limited to the context window. You can type in your question, but the tool doesn’t know about you, your enterprise data, your CRM, or your transactions. Integrating the data layer and the analytics layer into the LLM directly requires engineering and domain fine-tuning of the models.
There’s only so far you can go with a foundational model. How do you expose and make your data scalable and engineered in a way to take full advantage of generative AI? That is something Billtrust is actively working on.
“We are in the process of launching our Copilot product, essentially embedding a ChatGPT-like enterprise secure interface into it,” Shah said. “Rather than going back to the old way of hiring a data analyst and saying build me a report, you’re now going to Copilot and asking a specific question. We should not think of this as a profoundly transformative thing but rather a way of making what you do better.”
Some companies are already blazing through the capabilities. It’s not just Open AI, but also Facebook Meta and AWS and Claude Anthropic integration. You’re going to be hearing a term called agentic workflows.
“While this seems super forward-looking, I don’t think it’s that far ahead at all,” Shah said. “You’re going to see a universe where people are going to log into SaaS products or B2C products and simply ask it, “Book a trip for me and my family,” and it’s just going to do a multi-step flow to book your hotel. You could translate that to B2B now. Instead of booking a travel reservation, you might say run a campaign or target these customers.”
The Need for GovernanceWhen systems act based on limited cues from human beings, the interoperability of those systems becomes critical. This suggests the need for standards and essentially another layer of API development.
“It’s important to have governance to avoid the problematic and even catastrophic implications of AI,” Shah said. “But it cannot be done in a way which impedes the ability of companies to innovate and build great products.”
One other concern is cost, which is high and still going up. The unit cost is slowly starting to bend, but the absolute cost is growing as the models exponentially add tokens, which creates additional computing demands to support them.
But the possibilities far outstrip the challenges. “You’re only limited by your imagination,” Shah said. “The best implementations on the agent level will create the biggest universe for that imagination to run wild. It’s almost like giving an artist the capability to focus on what they’re best at and removing the friction or the redundancy of other tasks. The technical capability will be there far before the implementations are there to support that kind of imagination.
“There’s going to be an entire knowledge of how to use different models effectively for different businesses. I see this explosion of options. It just might be a little bit of a zoo for a while till the dust settles.”
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Instant payments systems have gained traction in countries that had cash-based payments infrastructures. While services like FedNow and the RTP network have launched in the U.S., instant payments haven’t taken hold due to the firmly established financial system.
In a recent PaymentsJournal podcast, Abeer Bhatia, CEO of Personal Lending & Head of Enterprise Payments at Wells Fargo, and Elisa Tavilla, Director of Debit Advisory Services at Javelin Strategy & Research, discussed the past, present, and future of instant payments.
PaymentsJournalA Powerful Nexus: The Present and Future of Instant PaymentsPaymentsJournal A Powerful Nexus: The Present and Future of Instant PaymentsPaymentsJournalAn Infinite List of TrendsThe payments space has undergone massive shifts in the past few years, driven by a few central undercurrents.
“There’s almost an infinite list of trends happening, but two stand out most,” Bhatia said. “One is the increase in instant payments and the attention it’s received since the launch of FedNow and RTP. The second is the expanded availability of data that companies have within the new formats.”
Instant payments services allow for much richer data to be transmitted between sender and recipient. It’s facilitated by the ISO 20022 messaging standard, which acts as a universal payment language. So far, countries outside of the U.S. have been swifter to adopt the new model.
“There are unique aspects about markets like Brazilian and Indian which caused instant payments to take off there,” Bhatia said. “The main reason is it’s needed. It’s a compelling alternative to cash payments, and it allows them to conduct both P2P and customer-to-business (C2B) payments.”
Barriers to U.S. UbiquityIn India and Brazil, the government has effectively mandated the use of instant payment rails, making growth fundamentally faster. The U.S. isn’t likely to get a government mandate anytime soon, but that’s not the only factor slowing instant payments adoption.
“The U.S. is highly card centric,” Tavilla said. “Cards are convenient to use and accepted virtually everywhere. There are also over 9,000 institutions in America and two real-time settlement systems. Getting all the financial institutions on board and connected to the networks will take time.”
“P2P has been a primary instant payment use case in markets like Brazil and India,” she said. “P2P has been adopted in the U.S. but, behind the scenes, it’s not really an instant payment. The settlement is asynchronous, but it appears instant to the customer, so there’s no urgency to transition to something else.”
Future SpeculationThere’s been increasing speculation on the future of instant payments, but there are more practical matters at hand first.
“A financial institution might be able to send money immediately, but there’s a separate question,” Bhatia said. “Can the recipient accept money immediately? Oftentimes, that’s not the case. It will require systems that are currently geared towards batch processing to be redesigned to handle real-time payments.”
Once the infrastructure for instant payments is established, much of the initial adoption might be in industries outside of traditional C2B payments.
“It could be in earned wage access for the gig economy or in payouts in the gaming industry, but those are the types of areas where instant payments will take root in the U.S.,” Tavilla said. “Real-time payments aren’t going to substitute for the existing rails that work.”
Once U.S. consumers begin to understand the capabilities of the rails, real-time payments will take off. The newly launched FedNow will play a significant role in that growth.
“I’m excited to see the network has over 700 financial institutions participating now,” Tavilla said. “It’s still growing, but it’s also iterating more robust features and functionality. That drives more use cases which creates greater value and increases transaction volume. It will be interesting to see how the U.S. Treasury leverages FedNow, given the success of government mandates in other countries.”
Instant and IrrevocableNew fraud vectors are likely to emerge, presenting a critical challenge for the real-time payments industry, especially given the irrevocable nature of instant payments. It’s paramount for organizations to remain vigilant in identifying fraudulent transactions and preemptively stopping them. Preventing fraud is far preferable to remedying it after the fact. Both FedNow and RTP have implemented multiple controls to combat fraud.
At the network level, both rails have implemented transaction limits, negative lists, and other fraud mitigation tools. The comprehensive data provided by instant payments rails also serves as a deterrent to fraud. Effective security management is essential to instill trust in the networks amid the transition to real-time payments.
Establishing that trust will involve educating consumers about fraud risks and the irreversible nature of instant payments.
“One feature customers value is payment confirmation,” Tavilla said. “Payments are posted in real time with full transparency, which can also mitigate fees or late charges. The customer starts to feel more confident. And the payment details are there so the merchant or payee can easily match the transaction with the payer.”
A security aspect that is still lacking from instant payments is purchase protection. It’s one of the reasons U.S. consumers have been reluctant to switch from credit cards.
“Another reason is consumers love their rewards cards,” Tavilla said. “Until real-time payments can offer comparable incentives and the customer protection piece, the value won’t be obvious enough for consumers to change their payment behaviors.”
Digital WalletsGlobally, commerce is rapidly shifting towards e-commerce, with card-not-present transactions experiencing much faster growth compared to card-present transactions.
“It’s much easier to use a digital wallet than to type in the card number, address, email, etc.,” Bhatia said. “Digital wallets are a mainstay of online commerce, so maybe the better question is whether one or two wallets will dominate, or if multiple wallets will spring up.”
Digital wallets offer consumers a more convenient checkout experience, which will further drive their adoption.
Tavilla emphasizes that mobile wallets are a permanent fixture, thanks to their one-click checkout simplicity. Financial institutions should prioritize offering customers various payment options to enhance their experience and boost transaction volume. While payments are the primary use case for digital wallets, their potential extends far beyond that.
“It will be interesting to see if the U.S. adopts the super-app concept like Asia,” Bhatia said. “Culturally, Americans prefer to keep their financial operations more compartmentalized. Digital ID cards, however, that’s something that could be adopted sooner rather than later.”
A Powerful NexusInstant payments may be catching on slower than expected, but they will play an integral part in the coming payments landscape.
“Speed is one of the top trends,” Tavilla said. “Aside from FedNow and RTP, same-day ACH is growing rapidly. The use cases for real-time payments will only increase in the U.S.”
“Systems and processes will need to be retooled to support instant payments before people truly see the benefits,” Bhatia added. “That will take time. And we’ve just begun to explore the concepts of identity and data. There’s going to be a nexus of payments, identity and data that’s going to be very powerful.”
The post A Powerful Nexus: The Present and Future of Instant Payments appeared first on PaymentsJournal.
Organizations turn to fintechs for payment solutions that are as efficient and seamless as the transactions they facilitate. However, behind these smooth interfaces lies a labyrinth of challenges. Security concerns, regulatory compliance, and constant technological upgrades are just a few of the hurdles fintechs must navigate to provide what appear to be simple solutions. For clients, the expectation is straightforward: a payment solution that works flawlessly. The intricate complexity involved in meeting this expectation, though, often goes unnoticed.
It’s easy to make something simple complicated. But it’s difficult to make something complicated simple. In a recent PaymentsJournal podcast, Kieran Draper and Tom Jennings, the U.S. and EU/UK CEOs of B4B Payments, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, spoke about the strategies fintechs employ to ensure their solutions remain both effective and invisible to the user. Highlighted is the delicate balance between simplicity and complexity, especially in the world of international embedded payments.
PaymentsJournalMaking a Complex Payment Situation Simple for Your CustomersPaymentsJournal Making a Complex Payment Situation Simple for Your CustomersPaymentsJournalFintechs Deal With a World of ComplexityIdeally, payments get processed with the press of a button, no different from dialing a number and knowing, without having to think about it, that the right person will answer. Customers making payments expect something simple and effective.
But it’s a challenging environment for fintechs right now as they try to deliver that experience, with their funding drying up and regulators coming down on them. On the upside, it’s also a vibrant market. Demand is expanding, as more and more businesses seek to make payments across geographic boundaries and across platforms.
“For a fintech like us, there are a tremendous number of things that we need to take into consideration,” Draper said. “The transactions need to be secure, we have to be compliant in multiple jurisdictions, and the solution needs to be auditable. The trick is to try and figure out how to present a solution to these businesses that shields them from all of this complexity.”
One area with great complexity for companies is offering services across borders and the need to juggle varying regulations and payment methods. To take one example, B4B works with maritime businesses that make and receive payments in multiple currencies, preferably on local rails to keep the costs down.
“Sometimes a ship won’t be allowed to leave port, for example, until they’ve made a payment,” Jennings said. “They need to provide the proof of payment. Traditional banks don’t provide you that information in an easy way, but with our platform, you can just download proof of payment and show it to the port authorities, and the ship can leave the harbor.”
This is the essence of “embedded finance”. When they subscribe to a payment solution, they can embed it into their experience to the point that it becomes transparent to anybody who has to interact with it.
Keeping Up With RegulationsAnother layer of complexity comes from the increasingly stringent anti-money laundering (AML) laws, consumer protection regulations, and information risk management requirements. Navigating these regulations is a daunting task for clients. In the U.S., multiple layers of federal and state AML laws create a challenging compliance landscape, while globally, each country has its own specific AML requirements that continuously evolve. Managing these diverse and ever-changing regulations is an overwhelming burden that clients cannot be expected to handle on their own.
“The market is moving so quickly that you can’t even imagine where we’ll be six years from now, let alone six months,” Riley said. “Regulators have to be more conservative, because they don’t know where the markets are actually going. And then you have business risks that move quicker. Fraud increases when criminals can move quicker than large institutions. Just being able to keep the pace becomes essential.”
“The bar is so high now,” Jennings said. “It’s not just what’s current, but it’s also the horizon planning. You’ve got Dora in Europe, you’ve got PSD 3 coming up, and we’ve got no doubt new AML directives around the corner. It’s constant.”
To help address this, B4B has built a single global platform that is common across all territories of the world, with a single global data processor and a single set of APIs. That allows customers to subscribe to one solution, one set of services that gives them access to tremendous capabilities in the background.
Payments From Every DirectionB4B’s channel partners are typically very well established in their own industries and have tremendous experience, but they are also busy and expanding. They are typically good at managing their core business and managing their own customers. But they’re not adept at managing the payments or banking functions that they need to operate smoothly.
Universities are a great example. The payment functions that go with a university’s basic functions are incredibly complicated. Tuition is coming in directly as well as through multiple government sources and scholarships. There’s a whole infrastructure for things like tickets to football games or baseball games, with maybe a different one for the arts department. The best strategy, and the best use of resources, is to let the university target what it needs to do and let the back-office functions get optimized.
“They can very easily find justification for working with a fintech like us,” Jennings said. “Both the students and the administration can see exactly in real time how their money is being spent. It’s convenient for the students, because they’re not very good at handling physical cash and loose cards and that kind of stuff. And we can manage all of that.”
Simplifying financial services is vital to retaining customers. Organizations of all sizes and services must make the complexities of payments invisible for their clients—no matter how complex those things are for the back office.
The post Making a Complex Payment Situation Simple for Your Customers appeared first on PaymentsJournal.
With gift card spend projected to reach $267.3 billion by 2028, it’s clear that gift cards are an influential force in the market. And the rise of digital gift cards, a trend that continues to gain momentum, is opening up new avenues to engage younger generations.
During a recent PaymentsJournal podcast, Blackhawk Network’s (BHN) Sarah Kositzke, Director of Research and Hilary Spidaliere, Director of Product Marketing, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, explored, analyzed, and amplified the insights from this year’s Benchmark Report: 2024 Digital Gift Card Leaders, conducted by NAPCO research in partnership with BHN. This market-leading report on the gift card industry, which evaluated the digital gift card programs of 100 U.S. merchants, identifies best practices and opportunities for how retailers can optimize their own gift card programs.
PaymentsJournalBuilding Brand Advocacy Through Gift Card ProgramsPaymentsJournal Building Brand Advocacy Through Gift Card ProgramsPaymentsJournalGift Card Industry TrendsDuring the 2023 holiday season, the average individual received around three gift cards, totaling roughly $160 in value. However, when recipients made their purchases, they spent an average of $78 more than the card’s value1. Leveraging a gift card to purchase a bigger-ticket item is commonplace and one of the reasons why gift cards are so valuable to retailers – driving that additional overspend and store visits.
“About a third of people said their favorite gift was a gift card,” Kositzke said. “Most people are still getting single-branded cards, like Starbucks or Amazon, which account for 75% of gift card buys. The Visa and Mastercard options and multi-branded cards are picking up steam though1.”
According to BHN, 77% of purchases were physical cards, even when the transactions occurred online. Physical cards are considered more personal, especially when there’s an option to customize the card. Despite the increasing popularity of online shopping, most gift card transactions still happen in-store, making up 85% of purchases1. But that is likely to change.
“Looking a little further out to 2030, digital cards are going to continue to gain ground,” Hirschfield said. “By the end of the decade, it’s likely to be a 50/50 split. That’s driven by Gen Z and Millennials, who are also significantly more likely to extend their purchases beyond the gifted amount. Digital options are going to be a great way to reach those generations.”
2024 Gift Card Benchmark Report CriteriaNAPCO Research, in partnership with BHN, examined the gift card programs of 100 U.S. merchants with a specific emphasis on the e-commerce gift card experience. NAPCO developed 130 criteria, across to four major categories.
“First and foremost is discoverability,” Spidaliere said. “How easy is it to find that brand’s gift card program? Next, they’re looking at personalization. Can I pick my own gift card design, or add a personal message? Third, they’re evaluating the checkout experience for efficiency and payment flexibility. Finally, they’re evaluating the recipient experience. Does the card feel like a gift? Is it easy to redeem?”
The end goal was to fully evaluate the purchase and recipient experience for each of the merchants across all platforms.
Speaking to the assessors who reviewed each gift card program, “They’re like a secret shopper,” Spidaliere said. “During the process, they capture hundreds of screenshots and use them to score each of the merchants across the established criteria. Then they crunch the numbers and not only come up with the rankings list, they also identify industry trends and best practices.”
Areas of OpportunityOne of the main takeaways from the study is there’s plenty of room for improvement—even for the companies that ranked in the top ten.
“Everybody across the board has something that can be fine-tuned,” Kositkze said. “These are opportunities to drive additional revenue. It could be the placement of cards or making the most of the fact that 9 out of 10 people are buying other gifts are the same time they’re buying gift cards. That’s a perfect chance to build loyalty1.”
The report found several common denominators among the bottom 20 companies. For one, they were less likely to sell cards across all their devices and channels. Lower-ranked companies were also less likely to support gift card purchases in their app, which is a missed opportunity with younger users especially. But that wasn’t the only issue.
“The most concerning thing with the bottom 20, in some cases the assessors just were not able to fulfill the purchase,” Kositzke said. “They tried several times, probably more times than a customer would, and it doesn’t go through. ”
Issues in the gift card experience can be costly because it can be a customers’ first impression of a company.
“A gift card often kicks off a customer’s relationship with your brand,” Hirschfield said. “It’s a challenging, but also an amazing opportunity, because many times the gift card leads to additional purchases of both your material items and more gift cards.”
Best Practices of Top PerformersOne of the key differentiators for the top performers in the benchmark report was a dedicated gifting section on their website and app.
“All the top-performing brands had a clear path to gift cards,” Spidaliere said. “It was clear what customers needed to do, how to personalize, all the ways they could buy the card. The best-performing brands promoted their cards on multiple places on their site, and marketed their program outside of the website and app.”
Top-tier gift programs used social media and emails to attract new customers. Those merchants also found innovative ways to offer personalization, like giving buyers the ability to upload a photo or video to accompany the card. Top-ranked programs also connected their gift card programs to their loyalty programs to incentivize gift card purchases.
“The recommendation here is to get creative,” Spidaliere said. “Align your promotions to what’s most important to your brand. The top performers had recipient experiences that were really thoughtful and considered both the recipient and the buyer. What’s meaningful to your customers? For instance, you could consider a partnership with other brands that are important to your customers and produce a co-branded promotion that leverages both audiences.”
Key TakeawaysThe 2024 evaluation offers clear takeaways merchants can use to identify untapped opportunities for their gift card program –
Companies should continuously strive to raise awareness of their program, prioritize creating an optimal customer experience with a mobile-first approach, and consider offering options for gift card personalization.
Integrating loyalty programs with gift card programs is another best practice. Companies should explore opportunities to sell and redeem gift cards across all customer touchpoints. A great gift card program also requires the ability to detect and prevent fraud `, often requiring a partnership with a third-party expert.
Finally, functionality should be the top priority. Companies should regularly evaluate their gift card programs through the eyes of the customer to ensure seamless processes. This approach not only ensures efficiency but also helps identify opportunities for improvement and ways to differentiate the program. Company websites should include site search keywords that make it easier for customers to find gift cards.
“Gift cards pay off,” Hirschfield said. “It’s an easy and low-cost way to turn someone from a stranger to your business into not only a loyal consumer, but an advocate for your brand.”
Source: 1. BHN EQ Global Spring Gifting Study, n=2,019 US consumers 18+, Feb 2024
Learn more about this year’s Benchmark Report: 2024 Digital Gift Card Leaders, conducted by NAPCO Research in partnership with BHN.Let’s Start a Conversation!Fill out this form to talk to BHN:
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Reconciliation is an essential aspect of the accounting process that improves transparency, maximizes decision-making, and ensures regulatory compliance. However, many merchants and payments organizations still rely on inefficient processes that can result in errors, financial losses, or violations.
In a recent PaymentsJournal podcast, Nick Botha, Global Payments Sales Manager at Autorek, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the importance of optimizing the payments reconciliation process and explored the influence of automation on its efficiency.
PaymentsJournalAutomation’s Impact on Payments ReconciliationPaymentsJournal Automation’s Impact on Payments ReconciliationPaymentsJournalAn End-to-End ProcessThe reconciliation process is often fragmented among business divisions, which can lead to inaccurate reporting.
“It should be viewed as an end-to-end process,” Botha said. “That includes financial controls, operational processes, payment flows, the whole of financial operations. Reconciliation has become integral to the success or failure of a middle and back office these days, and it must be a single, continuous process.”
Another pain point is the reliance on legacy-based processes or manual workarounds to process complex financial data. As a business scales, inefficient methods increase the potential for a costly reconciliation error.
“A function of paying money out is reconciling it,” Apgar said. “There’s been so much growth in the fintech space, and so many companies have stepped in that don’t realize how complex it is. They don’t understand the sheer number of data sources there are, the number of categories, and how many feed types to apply.”
The move to faster payments is likely to compound reconciliation challenges. As instant payments rails like FedNow and RTP gain traction, companies will be compelled to adopt reconciliation processes capable of operating in real-time environments.
Fit for PurposeMastercard and Visa recently settled with merchants, agreeing to relax certain restrictions and reduce credit card interchange fees. The settlement is expected to save merchants $30 billion over the next three years.
“It’s a splashy headline,” Apgar said. “It boils down to a four-basis-point rate reduction for merchants, which is not much. The big news was the rules changes that allowed large enterprise merchants to negotiate their own interchange fee deals with large issuers. For example, Target could cut a deal with Chase for a lower interchange fee in exchange for ‘We Prefer Chase’ signage at the point of sale.”
The settlement also allows merchants to charge customers more to accept rewards cards that often have higher fees, such as airlines rewards cards.
“It will only be effective if merchant operations are improved,” Botha said. “A large, global merchant that’s still processing manually with spreadsheets and a team of 40 or 50 people, the new rules won’t have much of an impact because they aren’t efficient enough to take advantage of them. They’re using methods that are no longer fit for purpose.”
Though the settlement may provide short-term relief, many merchants and payments companies are operating on thin margins. If volume increases, they’re not prepared to scale accordingly and keep their margins secure.
Safeguarding RegimeIn the interest of protecting consumers, regulators have established requirements stipulating that clients will receive 100% of their funds back in the event of liquidation by the payment services firm. In addition, the safeguarding regime ensures payment companies aren’t allowed to commingle their operational funds with their clients’ funds.
According to Botha, safeguarding extends beyond individual businesses. Partnerships are critical to the reconciliation process, necessitating collaboration with acquiring and technology partners that share the same values as your business.
Internal and external audits are another critical tool often overlooked by businesses. Regulators are intensifying scrutiny of merchant-bank relationships and payment ecosystems. With regulatory inquiries from the FTC, the CFPB, and the FDIC becoming more common, businesses should conduct self-audits to precisely assess their standing.
“For those companies that are still using legacy processes, creating even a basic report for regulators could be a nightmare,” Apgar said. “Automating the settlement function and having the data organized and accessible is crucial for accurate reporting. It’s not just about organizing your daily functions; it’s about preparing yourself for compliance inquiries so you can respond without manual intervention.”
Internal and external reconciliation are the biggest issues regulators have identified in organizations.
“It’s not just the manual processes,” Botha said. “There’s not enough control around these functions. Businesses must know what their workflows are, how they’re managed, and the tools used, simply to produce accurate reports. Many times, regulators aren’t just looking for data, they’re looking for insights into a company’s operations.”
A Single Source of TruthMany reconciliation issues could be resolved by improving the communications between business segments.
“In today’s world, a data team might be handling day-to-day financial data,” Botha said. “You might have one team dedicated to reconciliation and month-end functions, and then a different team that’s handling stakeholder reporting. Even though there’s all these different business units, it’s one process. Companies must fold all those functions into a single source of truth.”
Every business has its own culture, but gaining an understanding of how competitors or similar organizations operate can provide valuable insights. Companies should also consider macroeconomic factors beyond their own geography, given the increasingly global payments economy.
When a business is fragmented, automation can do more harm than good because it’s based on inaccurate information. However, once a company has centralized its data, automation can have a substantial impact, especially as the company scales.
“Businesses spend so much money on customer acquisition and experience,” Botha said. “I would strongly suggest allocating an effective budget to your technology stack over the next few years. Funds rarely go to the back office, but that’s the piece that ensures you can scale as you acquire customers.”
Apgar added: “At some point you have to step back and build infrastructure. Often, if it’s not visible to the customer today then the money doesn’t get allocated toward it. But those processes will become visible to the customer when they don’t work.”
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The United States is a unique banking market, with more than 11,000 financial institutions and some of the most stringent regulations in the world. With the launch of FedNow last year, The Clearing House’s RTP network, and a new messaging standard in ISO 20022, U.S.real-time payments have finally arrived. There’s only one problem: The infrastructure here is not ready.
In a recent PaymentsJournal podcast, Himanshu Pujara, Managing Director for Euronet Worldwide, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, spoke about how instant payments are happening around the globe today, and how banks can develop payment platforms that take advantage of increased standardization and interoperability, as regulatory bodies push for a more interconnected financial ecosystem.
PaymentsJournalGetting the U.S Banking Market Ready for Instant PaymentsPaymentsJournal Getting the U.S Banking Market Ready for Instant PaymentsPaymentsJournalPlaying Catch-Up With the WorldThe state of global payments varies depending on where you look.
“We’ve connected to many RTP networks and have been processing instant payments for over a decade now,” Pujara said. “In India, the Unified Payments Interface has been a game-changer, enabling billions of transactions monthly with its simple, mobile-driven approach. Then there’s the EU’s SEPA Instant Credit Transfer, which streamlines cross-border payments efficiently within Europe. In Brazil, the Pix system has revolutionized the speed of payments, quickly becoming a mainstay in their financial ecosystem. We process millions of transactions every single month for our customers in the emerging markets, and in all of these markets real-time payments has become a dominant form of payment in the day to day lives of consumers.”
These global trends have not yet matured in the U.S. market. While the United States has had limited access to instant payments in the past, FedNow has sped up the timeline for banks to offer such payments to consumers and merchants. This gives banks the opportunity to enhance transaction efficiency, financial inclusion, and economic growth.
Seeking HarmonyAlthough there are different U.S. regulatory and market environments, the future points toward more collaborative efforts to harmonize regulations and technical standards, making it easier to transact instantly and across borders. Financial institutions have the opportunity to use the real-time payment rails to launch innovative use cases for customers such as insurance companies or payroll service providers.
Under the new rails, banking teams could offer a cash management solution or a liquidity management solution to make sure the merchants they support get their funds in real time. In other parts of the world, fintechs have taken the lead by converting their closed-loop stored-value wallet propositions and making them interoperable on the back of real-time payment systems. U.S. fintechs have the same opportunity.
Architecture and Use CasesThe challenges lie primarily with legacy applications and their architecture. How does a bank make sure it’s able to connect to these systems in the shortest possible timeframe, knowing there will be new services or functionalities launched by the Fed or TCH? And how do consumers recognize the benefits of adopting instant payments?
“We all know consumers in the U.S. are very card-centric,” Tavilla said. “They like using credit and debit cards and have been accustomed to their rewards and incentives, as well as the purchase protection that cards provide. It’s important for providers to offer comparable benefits to give consumers a reason to convert from card payments to other types of payments.”
U.S. consumers often expect inconveniences in their financial transactions, not realizing that an instant payment system could ease issues. “Last week I unexpectedly had to go shop for a new car,” Tavilla said. “On Sunday, I picked out a car and negotiated the price. The dealer offered to put $3,000 on my credit card but asked for the balance by the day after tomorrow, which was a Tuesday. I don’t keep tens of thousands of dollars in my checking account, so I had to transfer it from my savings account via ACH, from one financial institution to another.”
Such transactions can take a few days to transfer and cost the consumer $30 or $40 each. Real-time payments and ISO messaging can help alleviate such pain points by automating and reducing the time and heightening the efficiency of the entire process.
“Elisa’s story is a classic example where the customer would want some sort of a payment rail, where the money can move on a real-time basis,” Pujara said. “She had an urgent requirement, but even on an ordinary basis, we’re all used to instant gratification. Whether it’s ordering a ride or shopping for goods, the real time element is there pretty much in every part of our lives, other than money movement.”
U.S. financial institutions have decisions to make as they move into instant payments. In addition to having connectivity to RTP systems, banks can build an orchestration layer on top to decide on the rules they want to put in. They have the flexibility to scale their processes based on cost, availability, or which network to route the transaction.
A Range of SolutionsTo navigate and capitalize on the evolving landscape of instant payments, organizations must be technologically adaptable, savvy with regulations, and customer-centric, ensuring they can meet the demands of a rapidly changing global payments environment. This means investing in payment technologies that can quickly conform to new standards and regulations. Cloud optimization is just one example of innovative technology that can enhance performance, security, and cost-efficiency.
The future points toward increased standardization and interoperability, as organizations and regulatory bodies push for a more interconnected financial ecosystem, enabling seamless transactions and enhanced user experiences globally. We’re likely to see more collaborative efforts to harmonize regulations and technical standards, making it easier to transact across borders.
As those efforts come to fruition, Euronet offers an example of the flexibility available to U.S. banks. “We have a flexible deployment architecture depending on the size of the financial institution,” Pujara said. “We could provide a license that the bank can deploy in their own data center. For some of the smaller banks, we have a fully managed services offering with a hosted solution, which includes not just processing these transactions, and routing the transactions to instant payment schemes. It also includes services like reconciliation, settlement, unified dispute resolution, fraud, and risk monitoring.”
The post Getting the U.S Banking Market Ready for Instant Payments appeared first on PaymentsJournal.
The end-of-the-year flurry of holiday shopping is a classic example of business seasonality. As fraud professionals have long observed, fraud activity also follows seasonal patterns, with seasonal upticks and slow-downs. The challenge has been reacting to seasonality with precision in real-time, instead of just recognizing them in the rear-view mirror. And new data shows that this seasonality doesn’t correlate to the business year as much as one might expect—fraudsters have a seasonal calendar all their own
In a recent PaymentsJournal podcast, NeuroID Head of Operational Strategy Nash Ali and Tracy Kitten, Director of Fraud & Security at Javelin Strategy & Research, discussed the seasonality of fraud. They analyzed the methods criminals use and offered solutions to keep businesses safe.
PaymentsJournalSeasons of Fraud: How Fraud Patterns Shift Throughout the YearPaymentsJournal Seasons of Fraud: How Fraud Patterns Shift Throughout the YearPaymentsJournalWinter FraudFraud attempts are rising overall, up 57% from 2022 to 2023. Due to the holiday frenzy, December might seem like the logical peak of fraudulent activity.
“In fact, it’s January,” Ali said. “January has a 78% higher fraud attack rate than the average monthly rate. That includes a 59% increase in application fraud, where criminals falsify data or misrepresent themselves to business owners. There’s also an 85% increase in the hours businesses are under attack in January compared to the rest of the year.”
After a February slowdown, there’s a 44% higher fraud attack rate in March compared with the typical monthly average. A higher portion of March attacks consists of identity fraud, identity theft, or creating synthetic identities with bots and scripts. After another lull in April, fraud picks back up in May.
“We see 50% more application fraud in May compared to monthly averages,” Ali said. “A lot of that fraud is concentrated fraud attacks committed via fraud rings. After a slow summer, fraud rates pick back up in the fall, peaking again in October.”
Identify the CompromiseCriminals are constantly looking for weaknesses, and seasonal fraud trends are no doubt spurred by company vulnerabilities. Business owners should also understand that there can be a delay between when their business is breached and when fraud actually occurs.
“Company information is likely being compromised during these high-usage months, like the holidays,” Kitten said. “Then we don’t start to see the fraud until several weeks to a couple of months later. When does a compromise happen and when does the actual fraud result?”
In the drive for year-end sales, companies often open themselves up to fraud attacks.
“They’ve relaxed controls, they’ve let their guard down in order to attract more volume,” Ali said. “They also staff additional people to meet the additional volume. In January, businesses are scaling down their workforce and there are less eyes on fraud.”
Dark Web TrenchesThe spike in March may also be attributed to the end-of-the-year rush. It takes time for data obtained from end-year breaches to circulate to the bad actors who exploit it.
“By March, it’s made its way through the trenches of the dark web and into the hands of fraudsters who will actually do something with it,” Ali said. “That’s why we see more identity theft, identity fraud in March.”
Data breaches are increasing in frequency, to the point that it’s no longer shocking. That trend is likely to continue.
“Breaches don’t raise flags anymore,” Kitten said. “But there are still things companies and security teams should continually look for, including on the dark web. They must keep searching for indicators that a larger breach has occurred and company information has been compromised.”
The high-tech means criminals have at their disposal, especially since the advent of AI, increase the difficulty of preventing attacks. Cybercriminals have sophisticated ways of creating forged documents, like passports and driver’s licenses. Businesses that rely on document-based verification will likely see fraudulent documents that are difficult to detect, even with physical biometrics.
The May fraud spike is also a reaction to a time when businesses are vulnerable.
“The first quarter of the year tends to be a time when many companies release new products, new offerings,” Ali said. “In the financial services world, they release new loans. Fraudsters home in on that, which is why we see a resurgence of fraud in May. New products tend to have lower controls as they’re rushed to market, so in May criminals are looking to exploit that.”
Probing AttacksCriminals often spend a lot of time conducting probing attacks. Criminals will explore perimeters, controls, and boundaries to measure a company’s effectiveness at identifying and preventing fraud.
“They’re testing companies to see what they can get away with,” Ali said. “Probing attacks are these short bursts of fraud activity, and most institutions don’t even react. If they do detect it, often they’ll ignore it because they’re looking for larger-scale fraud. When the real attack comes, they won’t realize it until it’s too late, because fraudsters found vulnerabilities through probing.”
The holidays are a common time for probing attacks, when thresholds are down and companies provide customer incentives and promotional products. That’s why it’s crucial for businesses to place a special emphasis on fraud prevention at the end of the year and install systems that will be attuned to detecting probing attacks.
New technology has made it increasingly difficult to detect fraud, because bots can be programmed to perform probing attacks. They can create new identities or attempt entry through permutations of personal data.
“It’s important to have tools that can detect whether an attack is an automated script or a human,” Ali said. “Businesses need proactive, real-time, technology-based solutions. You can’t rely on humans doing manual reviews. It’s not scalable, especially at the holidays. If you do install automated tools, however, they must be fine-tuned to lower false-positive rates.”
New Attack VectorsOften, businesses go too far and use outdated methods that end up placing undue friction on consumers.
“Enterprise fraud mitigation solutions have to equally evolve with fraud, if not be ahead of the game, especially since AI has been used in fraud attacks,” Ali said. “The best way to be prepared is not to rely on the same legacy fraud mitigation solutions to try to solve new fraud attack vectors. Behavioral analytics complements traditional fraud tools, and you can passively detect fraud.”
A combination of behavioral analytics, technology, and skilled oversight is the most potent defense. To that end, NeuroID offers an array of fraud detection and prevention solutions that harness the power of behavioral analytics.
“It has to be a multilayered approach,” Kitten said. “As things continue to evolve, the amount of friction on the customer is also a critical consideration. It’s increasingly important to do whatever can be done on the back end to authenticate and verify the authenticity of a user in a transaction. That’s where behavioral analytics come into play.”
The post Seasons of Fraud: How Fraud Patterns Shift Throughout the Year appeared first on PaymentsJournal.
Now that the Payment Card Industry Data Security Standard 4.0 has gone into effect, merchants have a year to conform to the 63 new or updated requirements. With many moving parts to the standard, some businesses may struggle to understand their compliance obligations. Simultaneously, they also don’t want to risk creating friction in the customer experience as they introduce the new security measures.
In a recent PaymentsJournal podcast, Sukanya Madhavan, Payments Chief Product and Technology Officer, at CSG Forte and Don Apgar, Director of Merchants Payment Practice for Javelin Strategy & Research, discussed the new rules. They examined the implications of the change and mapped out steps business owners can take to ease the shift to the new standard.
PaymentsJournalThe Clock Is Ticking on PCI DSS 4.0 Compliance: Is Your Business Ready?PaymentsJournal The Clock Is Ticking on PCI DSS 4.0 Compliance: Is Your Business Ready?PaymentsJournalEvergreen and OngoingOne of the main things to know about PCI compliance is that it’s an evergreen and ongoing process. The purpose of the compliance program is to build a safety net for consumers to make sure they’re protected against bad actors. It also streamlines merchants’ card payments operations.
“The program is designed to ensure that customers have peace of mind when they provide their data to us,” Madhavan said. “It should be considered a continuous improvement process, where businesses look for innovative ways to solve the evolving challenges.”
In response to ongoing data breaches, the PCI standard mandates that merchants conduct quarterly internal and external vulnerability scans. Due to the sophisticated technology involved, it’s critical to have an individual who is well-versed in the systems to review these scans.
If merchants need help, quality security assessors (QSAs) and payments processors can give guidance. Often, the issues turn out to be basic security vulnerabilities involving passwords, such as password sharing or passwords that aren’t strong enough. There is help, however, if the issue is more complex.
“Merchants should know they can reach out to their processors, and there is a whole network of support,” Madhavan said. “It’s a partnership between the processor and the merchant to ensure that they are jointly taking care of the consumers’ data. Some processors have gone so far as to create instructional webinars, and there’s even a hotline.”
Not a BurdenMaintaining PCI compliance isn’t just about protecting customers. It’s also about safeguarding businesses. When there’s a substantial PCI violation or a significant data breach, it’s often newsworthy. But it’s not the kind of publicity businesses want.
“With the sheer volume of data and the high profile of many companies, it’s a reputational risk,” Madhavan said. “The consumer data that companies store is there to fuel business growth, and it’s a critical part of doing business. [The costs of switching brands] have decreased so much these days that you must ensure your customers trust you to take care of their data.”
“Many merchants view the PCI compliance requirement as a burden,” Apgar said. “They’re just looking to check a box. They don’t understand that this is a great opportunity for them to take a step back and review where data is being stored, what its uses are, and what rules govern it. PCI is not there to be burdensome to businesses. Keeping cardholder data secure should be viewed as a benefit.”
The Timeline to 4.0Merchants that take card payments can already start the switch to DSS 4.0, but there’s still a one-year period before all companies must be compliant. Although some of the new requirements are process enhancements, others are technology-driven. For example, multifactor authentication and passwords with a minimum of 12 characters are now required.
Depending on the business, that switch could take time and affect customers.
As Apgar noted, “Merchants are hesitant to implement some of these things because they don’t want their customer experience to have more friction than their competitors. But if they’re able to introduce new security capabilities, even if the authentication requirements may be more cumbersome, the benefits will offset the drawbacks.”
One of those benefits is added protection from fraud. The advent of newer technology, including generative artificial intelligence, brings a new set of challenges as well.
“It can be a lot for merchants to consume,” Madhavan said. “Should I focus on running my business? Should I focus more on the technology and the security side? It’s important for us as solution providers to make it easier for businesses to operate because they have all these other tasks to perform. We need to support them so they can focus on the core business.”
No Magic BulletSecurity practices are continually evolving to combat new threats. That means companies should be prepared to evolve with those practices, even after they reach compliance with PCI DSS 4.0.
“There’s no magic bullet when it comes to the security side of it,” Madhavan said. “And it takes a village. It takes all of us working together to make sure that the systems are secure. If you don’t know what works for you, there are providers and approved QSAs who can help you. You can also take ownership by continuing to review security best practices and conducting vulnerability scans.”
Another key takeaway is that even though there’s a grace period, merchants should start to work on their gaps to comply with DSS 4.0 as soon as possible. A requirement for more secure passwords, for instance, works only if all of a company’s customers have updated their passwords.
“All these things have to be mapped out; otherwise, you risk a really poor customer experience,” Apgar said. “A year may sound like a long time, but when you start to map out the items that need to be completed and all the moving parts, it’s not so long, after all.”
Learn 3 quick tips to keep your payments data secure in CSG Forte’s white paper.
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Though most people still refer to prepaid products as gift cards, that term has almost become a misnomer in today’s payments industry. Prepaid cards do so much more than carry gifts—not just for consumers but also for issuers. Savvy businesses use them to drive more consumer spending while increasing brand loyalty.
To that end, Fiserv recently worked with Javelin Strategy & Research on a survey of more than 500 buyers in the incentives area to find out what’s driving their purposes. The survey provided a jumping-off point for a recent PaymentsJournal podcast with Tom Niedbalski, Vice President, Global Sales and Partnerships at Fiserv, and Jordan Hirschfield, Director of Prepaid Advisory Services with Javelin Strategy & Research.
PaymentsJournalThe New Strategies Driving Digital Gift CardsPaymentsJournal The New Strategies Driving Digital Gift CardsPaymentsJournalThe survey was conducted from the buyer’s perspective rather than that of the consumer. Javelin spoke with individuals who are buying incentives for purchasers of their brands, spanning a wide variety of companies, each with revenue of $20 million or more. Their responses provided an incisive look at what the benefits these buyers are seeking in an incentive.
Seeing the Buyers’ SideJavelin’s research has shown that loyalty programs and rebates are highly beneficial for building long-term relationships. This can have a significant impact on customer retention but can also improve the efficiency of onboarding new customers as well.
“It’s expensive to acquire a new customer, but these incentives had a very material impact on lowering acquisition costs and subsequently on improving customer retention,” Hirschfield said. “With so many useful benefits of offering an incentive to a consumer, you can have a material impact on your bottom line.”
Despite a reliance on physical gift cards, the shift to digital formats is going strong, consumers by and large prefer digital, and the research shows that the balance is continuing to shift that way. On the buyer side, people are still purchasing incentives by going to physical stores and buying hundreds of gift cards. They don’t seem to realize they could be doing this through a relationship with a provider in an easier distribution model that can save on costs.
On the consumer side as well, retail purchases remain popular. There’s an opportunity here to bring in a provider and transition those purchases to a digital distribution method. That can be easier for the buyer and can foster a positive ongoing relationship with consumers or employees. It tells the employee “we value you.”
“Many buyers do not realize that there can be an economic benefit to buy through an aggregator, or through a brand’s website,” Niedbalski said. “In many cases, they will not only get a discount for that purchase but also build a strategic relationship with the brand, where there could be additional cobranded opportunities and synergies for the two companies to leverage.”
Consumers Are Controlling DigitalAccording to the research, 40% of consumers will receive some sort of incentive this year.
“When we look on the buyer side for the B2B side of the equation as opposed to the B2C side, that’s where the digital’s coming in,” Hirschfield said. “On the buyer side, 60% of purchases are digital, which makes sense, because around 70% of the recipients prefer that.”
But the survey found that 39% of buyers are still giving out physical cards, even though 46% of them preferred digital. On the consumer side, the individual will control that relationship.
Niedbalski noted that Fiserv is seeing use cases evolve because digital enables integration into various distribution vehicles. “Brands are now using this platform not only for loyalty but for rebates, for warranties, for specific product couponing, and for customer appeasement,” he said. “And of course you’ve got the foundation of a giftable program as well, where the card just remains a gift.”
Everything’s DigitalEverything seems to be moving to a digital format, whether it’s credit cards, library cards, gift cards, or loyalty cards. Wallets, like George Costanza’s in the famous Seinfeld episode, have gotten too stretched to carry around those cards in a physical format.
“But even our digital wallets are also starting to get overcrowded in some sense,” Niedbalski said. “With Google Wallet and Apple Wallet, we’re seeing a lot more brands invest in their own vaulting solutions. They’re creating branded apps to drive consumer engagement. The convergence of all their payments along with their loyalty programs into a branded wallet could prove to be a pivotal point for adoption of digital both at the consumer level as well as the merchant level.”
Since the pandemic, brands have reprioritized their consumer engagement model. Although they still want foot traffic in their stores, they’re seeing a lot more traffic outside of their stores, whether it’s via curbside drive-through, delivery, or online shopping. How do you maintain personal engagement with a consumer virtually?
Many brands are dealing with this by bringing the in-store experience into a mobile environment. “They need to provide enough value within their app to keep the customer clicking that icon on their mobile phone,” Niedbalski said. “A lot of these use cases are being integrated in a way that makes it easy for brands to connect with their buyers and with their consumers. Along the way, it’s driving convenience and value.”
A virtual card has another value over a physical card: It is easier to use, even in impromptu shopping situations. “I’ve got a stack of probably 20 to 30 gift cards sitting at home on my on my office desk,” Niedbalski said. “Some of those gift cards are 20 years old and still have value on them. I’ve never redeemed them because I’ve got too many cards. I can’t carry these around with me every day. With digital, you are able to access your gift cards on demand anywhere, anytime, which helps drive that redemption of those gift cards.”
In modern society, our phones are always with us, which means that our digital wallets are always with us. For many people, their phone is their wallet. “Last week I was traveling, and when I got to the airport, I realized I forgot my wallet at home,” Niedbalski said. “I had no credit cards, no driver’s license, and I’m already trying to figure out how to get through airport security without an ID. Luckily, I was able to pull up my driver’s license through the DMV app for California. I was able to pay for my hotel and my meals using my Apple wallet and the credit cards that I had stored in there. Airline tickets, hotel reservations, loyalty programs, everything I needed was there. I would panic more not having my phone than not having my wallet.”
Learn More About Fiserv Gift & Branded Currency.The post The New Strategies Driving Digital Gift Cards appeared first on PaymentsJournal.
The banking industry infamously divides itself into silos to address different aspects of the business, which can be problematic for customers who think they are dealing with a single entity. This can be especially difficult during onboarding and security checks, when different silos at the bank ask repeatedly for credentials.
In a recent PaymentsJournal podcast, Sunil Madhu, founder and CEO of Instnt, a fraud loss indemnification that covers the entire customer lifecycle, and Jennifer Pitt, Senior Analyst of Fraud and Security at Javelin Strategy & Research, discussed the challenges of providing an easy, frictionless process for consumers while still safeguarding their privacy.
PaymentsJournalReducing the Friction in Bank Customer OnboardingPaymentsJournal Reducing the Friction in Bank Customer OnboardingPaymentsJournalBreaking Down SilosRetail banks have separate organizational units handling checking accounts, savings accounts, loans, and mortgages. Each of these silos has its own requirements for risk and compliance, comprising a half-dozen or more tools, that are used to vet individuals who are signing up for a particular product or service. Each has its own know-your-customer (KYC) protocols for compliance purposes.
The consequence of this is that anyone who signs up for a checking account has to go through a whole series of checks pertaining to KYC and other types of fraud. If that person comes back six weeks later and applies for a loan, they may have to provide the same information again, even though they have a relationship with the bank.
Obviously, different products have different types of risk, which is one of the reasons for these operational silos. But customers don’t care about that. They perceive themselves as working with a single bank, whether they’re dealing with a mortgage or a small-business loan or a checking account.
So there are advantages to connecting the silos with the technology that allows each line of business to have its own the independent risk and compliance management requirements. That can give the bank’s divisions the flexibility they need to maintain independent control while simplifying the user experience by giving customers a reusable, verifiable credential.
“We get a lot of reports that consumers are not happy with onboarding processes,” Pitt said. “They always say, ‘I thought I already gave you my information. Why do I keep having to give you this information?’ Having one place where that information is kept on the consumer’s device, and the consumer can dictate how they give that information. Not only can this help the consumer, but it can also save time for businesses as they onboard people.”
Relying on the BlockchainBusinesses can frictionlessly sell multiple products and services without repeated signups that can leave customers frustrated. It’s time to rethink this kind of infrastructure so that it focuses on less friction for the user and easier onboarding experiences.
The past few years have seen new compliance standards, including verifiable credentials and decentralized ID, based on the notion of the blockchain. These two technologies combined have enabled businesses to issue reusable passes to customers who sign up.
“If I were to open up a checking account,” Madhu said, “I might get a pass back, which essentially is a tokenized identity document that helps to identify who I am. It also contains assurances from the verifying authority that issued the document, that the information has been vetted and verified. There’s also a KYC verification component to it.”
From a compliance perspective, the presenter of that pass has passed the necessary KYC checks and any other standard that needs to be met. The decentralized ID protocol helps prove the ownership of the document so the recipient can verify that the data belongs to the user. No one else could have stolen the pass or modified its contents.
These two technologies enable a user to get a comprehensive pass when a checking account is opened. When the user logs back into their checking account, they can present the pass again as the authentication token in lieu of a password. When they want to access other products or services, they don’t have to go through a whole other signup; they simply re-present the pass. As long as the level of assurance of the issued pass matches the requirement of the product or service the user is trying to access, they’ll get one-click access into the system.
“The new technology is as strong as multifactor authentication, but unlike other technologies like pass phrases and pass keys and multifactor authentication itself, it’s fully decentralized,” Madhu said. “There is no central point of attack for a hacker to compromise the database and steal the data and authenticating tokens. All of that risk goes away because the technology ensures that the credential is in possession of the end user, securely vaulted into their mobile devices with very mature mechanisms that essentially cancel a pass from a device that might have been lost or stolen.”
The technology is omnichannel, meaning that the person can be authenticated and vetted consistently whether calling into a call center or accessing the application through the web. If someone tries to use social engineering to get the call center to provide them with something like push notifications, the technology essentially thwarts all of those attack vectors.
Multipass: The Newest SolutionInstnt has combined verifiable credentials and decentralized ID in a new product called Multipass.
“We provide a toolkit that basically allows the Multipass issuance and verification capabilities to be embedded in your application and provides secure mobile vault for any passes that have been issued to the user,” Madhu said. “All you need to do is load this toolkit into your application, and you have the full capabilities when the user is first registered and onboarded. At the end of the journey, the user will be asked if they wish to receive and store the pass.
“Behind the scenes, the system issues the pass with the data that was collected from the user that went through identity verification, fraud checks, KYC checks, and whatnot. Any additional information, such as the user’s bank account or other information the financial institution might need later on, can also be packaged up into the pass. The pass is then signed with two sets of keys, one that belongs to the user receiving the pass and the other issued from the business conducting the verification.”
The pass itself contains all the necessary information to non-repudiate the pass and verify that it’s not been altered.
“We essentially match the public record of the public keys of the key pairs that were used for the signature and the encryption of the data in the past,” Madhu said. “By virtue of the blockchain being immutable, you get the assurance that this pass was in fact issued to Sunil, for example, by Acme Bank or whomever issued it, and that all of the data in there was verified by Instnt. That assurance is intrinsically built in using the verifiable credentials document and the DID protocol.”
The Right to PrivacyFinancial institutions no longer have to store such data in their database, which removes the liability of being hacked. They’re protected from the possibility of consumer data being stolen. From users’ perspective, they’ve simply clicked a consent request saying, “Yes, I want to share the pass.” That’s the only friction they’ll have to face, but their privacy is maintained, and their data is safe.
“Privacy is a very important issue for consumers,” Pitt said. “We found that consumers will actually cancel their bank accounts if their privacy concerns are not met. Giving back control to the consumer about what can be done with their data, how their data can be used when it’s deleted, essentially, is a great thing.”
That type of comprehensive solution is possible only if banks break down those silos. Customers want to work with a single bank. Those banks should take care not to put obstacles in their way—and give them an incentive to seek another provider.
The post Reducing the Friction in Bank Customer Onboarding appeared first on PaymentsJournal.
As awareness of the dangers of identity theft grows, it’s important to highlight a particularly insidious threat: stealing children’s identities. Although children have very limited financial activity, this ironically makes them appealing targets for fraudsters.
According to Javelin Strategy & Research, 1.7 million children had their personal information stolen in 2021-2022, resulting in nearly $1 billion in identity fraud loss. In a recent PaymentsJournal podcast, Tracy Kitten, Director of Fraud and Security at Javelin, explained what makes children so vulnerable to identity theft and what parents and guardians can do to protect them.
PaymentsJournalA Silent Threat: Protecting Children From Identity TheftPaymentsJournal A Silent Threat: Protecting Children From Identity TheftPaymentsJournalChild’s PlayObtaining a child’s personal information is alarmingly straightforward. When a criminal gets a child’s Social Security number, along with their physical mailing address and/or date of birth, that criminal possesses enough information to commit various forms of fraud, such as fraudulently opening bank accounts or applying for loans using the child’s information.
The COVID-19 pandemic exacerbated risks to children’s identities. Government recovery programs, in particular, saw a fair amount of stimulus-related fraud. Additionally, the increase in online transactions revealed authentication gaps that were challenging to address. While strides have been made to close some of those gaps over the past year, vulnerabilities still exist.
What’s tempting about using children’s identities is that they have no complicated background to deal with. “These kids don’t have bad credit,” Kitten said. “They don’t have any credit at all; so any type of account could be opened with a clean slate, maybe even a job application for someone who is here illegally.
What’s more, parents don’t readily detect this type of fraud. Since children aren’t applying for credit cards or mortgage loans, identity theft is not noticed until the child has reached maturity.
More Information in the WildFor many of us, our Social Security numbers, along with our email addresses and passwords, are floating around the dark web. We’ve become more adept at handling breached information and are increasingly mindful about the information we share about ourselves online. However, all it takes is one slip—such as the exposure of your Social security number—to cause significant and long-term challenges.
“We like to think that the government is this well-oiled machine that knows everything,” Kitten said. “The reality, however, is that our information is everywhere, and we don’t have good checks and balances in place to detect and determine where it goes.
“You would hope that if someone were to steal my Social Security number, there would be a red flag raised somewhere, maybe at the Social Security Administration, to say, ‘Wait a minute, Tracy Kitten actually uses this Social Security number, but she doesn’t have this same date of birth, and she doesn’t have this same mailing address.’ But that’s not the case. That is why, oftentimes, you see identity theft that ultimately results in fraud taking place and going undetected for years and years.”
This problem is worse for children, because they aren’t actively managing and monitoring their personal information regularly. When a child’s data is breached, there is no system in place to immediately notify parents. Frequently, parents and guardians only discover such identity compromises when applying for a student loan or when their child seeks first-time employment. Sometimes, the realization doesn’t occur until the child attempts to buy a car or rent an apartment.
“We strongly recommend that financial institutions step in to provide assistance, even though they aren’t necessarily going to be the entity that will resolve all of this,” Kitten said. “At the very least, financial institutions can step in and give guidance, and assist their customers and their members.”
Without such oversight from their financial institutions, parents and guardinas should take proactive steps to safeguard themselves and their children. Kitten recommends several steps :
- Shortly after a child is born, contact the credit bureaus and take steps to establish credit in the child’s name, and then freeze the credit. Subscribe the entire family for identity theft protection coverage. An identity protection service can conduct in-depth monitoring of children’s identities. They proactively send alerts if they detect anything that might raise a flag about the compromise of a child’s personal information.
- Scale back what you post on social media, both about yourself and about your children. Take steps to limit what your children are putting out there. For example, date of birth is one of the key pieces of information a fraudster can use to steal someone’s identity, so be very careful about putting birthdays on social media.
- Look into additional security features that can keep your data safe. For example, using a virtual private network (VPN) for your home can add an extra layer of security for the entire family.
Finally, it’s important to highlight the emotional toll identity theft takes on the entire family. Beyond the financial implications, the thought of your child’s information circulating among cybercriminals and scammers can be overwhelming. The gravity of these concerns should motivate parents and guardians to take proactive measures to protect their children’s identities.
“If they know enough about my child to open up all these accounts, what else could do?” Kitten asked. “Not only does it take an emotional toll; it wreaks havoc with us psychologically. Are we physically safe? Are our children physically safe?”
The post A Silent Threat: Protecting Children From Identity Theft appeared first on PaymentsJournal.
Even though the number of checks written continues to decline, mail theft remains on the rise. Beyond the theft of checks directly from mailboxes, there have been instances of stolen mail trucks. The ease of modifying checks allows criminals to simply wash and modify the payee’s name.
Q2’s positive pay system, used by roughly 550 banks across the country, is on track to stop more than $2.5 billion in fraud this year. In a recent PaymentsJournal podcast, Bruce Dragoo, Manager, Solutions Consultant for Q2, and John Byl, SVP Product Development at Mercantile Bank of Michigan—a Q2 customer—discussed how to get people on board to combat check fraud with Albert Bodine, Director, Commercial and Enterprise Payments for Javelin Strategy & Research.
PaymentsJournalPositive Pay: An Underused Tool for Fighting Check FraudPaymentsJournal Positive Pay: An Underused Tool for Fighting Check FraudPaymentsJournalA Problem for Businesses of All SizesIn 2022, around $720 million of fraud was identified and stopped by Q2’s positive pay system. Last year, that number doubled to $1.4 billion.
“It seems like it’s wider-reaching at this point and coming downstream to smaller businesses,” Byl said. “It had been historically viewed as a large corporate need, but it’s indiscriminate at this point—and it’s affecting everybody.”
A third of commercial payments globally are still made by check, which presents a huge opportunity for criminals. But only 30% of eligible businesses use positive pay, which matches the details on a check to the details on file with the bank to ensure its validity. Some related solutions cover just checks, and others cover ACH transactions, but they don’t address the gamut of everything a business may need.
“In some cases, having a great technology provider that can provide not only check but ACH positive pay, along with full reconcilement capabilities, can be a barrier to some of these institutions signing up for a full breadth of what they need,” Dragoo said. “It’s about being either reactive or proactive in regards to the financial institution selling positive pay. At some financial institutions what I’ll hear is that the only time that they sell positive pay to a customer is when they’ve had check fraud on their account and they’re reacting to the situation.”
Talking to customers before they open a checking account can be critical. If they are a small business or a corporate client, financial institutions can say, “We have a great solution for you that can help identify and stop check fraud before it even happens.”
The best value proposition for positive pay is stemming or eliminating the flow of funds out the door to fraud.
“We’ve gone through the evolution of being reactive and only bringing up positive pay when we’ve had check fraud or a customer’s asking about it,” Byl said. “What we’ve realized with this whole process is that many customers are not aware of what positive pay is, or why they might need or want it. We need to create awareness for our customers and help them understand how they go about implementing something along these lines.
“I’ve worked for institutions where we haven’t had a great solution in place, one that hasn’t been very user-friendly to work with. Thankfully, we have a solution today that is user-friendly and adaptive to our customers, so we can remove those barriers to entry for them and make it as an easier process as possible.”
Moving Beyond Legacy SystemsSome financial institutions are limited in how they can build out new revenue streams. Many of their resources go into supporting legacy systems. Having organization partners enables FIs to bolster the security of the products and services they offer.
“While 30% of the institutions we’ve surveyed are not charging for positive pay, of those customers that use it, 47% of them said they would pay for positive pay,” Dragoo said. “They understand the value of the solution itself in helping to stop any type of fraud that may be coming through their checking account. Several of our financial institutions actually have turned their treasury management team into a revenue generator just by selling positive pay at a nominal fee of $30 to $50 an account.”
Customers respond best to thinking of positive pay as a form of insurance against fraud. Q2’s approach has been not to nickel-and-dime their customers for each little tick mark that happens as part of the positive pay process but rather casting at it as a holistic product that can protect customers.
“It’s easy to build revenue models for positive pay, taking into account the mitigation of the fraud losses,” Bodine said. “Even if you’re partnering with somebody from the outside, it’s pretty easy to cover those transactional costs by eliminating those fraud dollars that are going out the door.”
Making the CaseFinancial institutions can’t assume their customer base knows or understands what positive pay is and how it can protect them. Q2 has identified some essential items that financial institutions can use to increase the adoption of a good positive pay solution. Rolling out a solution that has check and ACH positive pay in it—and has great pay-name match reporting self-service for the customer—is a good first step.
Secondly, financial institutions should sell positive pay proactively by talking to customers at account opening. They should educate them on check fraud and what it looks like. Although some consumers may not have encountered fraud yet, they will understand the risks, especially when they hear a broader value proposition.
“Part of what where our successes come from has just been in helping our staff understand who our customers are and what sorts of fraud scenarios we’re seeing taking place in the market area,” Byl said. “We make it more real to people—this isn’t something that’s happening on one of the coasts. It’s happening around the corner where a mail truck has been robbed. Or these people dropped stuff in their mailbox and put the flag up and just walked away and didn’t realize people would have the audacity to just take that stuff out of there.”
Partnering with a dedicated provider is vital. “One of the strongest recommendations that we’re making at Javelin in the commercial enterprise practice area is that legacy bank structures are not really set up to do well moving forward,” Bodine said.
Q2 is looking at enhancing its pay-name match to make it even better. The company is also looking at embedding AI technology into the solution to help not only FI customers but also frontline bank staffers to sell positive pay to existing customers and prospects.
“As a Q2 customer, the biggest thing is having a partner who is willing to listen to you and engage in the conversation,” Byl said. “They listen to the feedback of their customers and make their product better. That’s been huge to know not just what’s happening in your neck of the woods, but how other FIs that they work with are implementing their best practices. Having that collective learning going on makes such a huge difference.”
Said Dragoo: “You’re the one that’s bringing us the ideas and bringing us what is happening in the market that we may not be seeing. We appreciate that partnership so that we can develop leading technology and make sure that we can help identify and stop fraud in the future.”
The post Positive Pay: An Underused Tool for Fighting Check Fraud appeared first on PaymentsJournal.
The evolution of digital card management has given financial institutions new opportunities to cultivate enduring customer relationships. By making consumers’ lives more convenient and complimenting physical cards, so consumers have the options that work for their lives at a particular time, issuers can foster ease of use and brand loyalty, leading to decades-long relationships.
In a recent PaymentsJournal podcast, Wesley Suter, Senior Director of Product Solutions at Fiserv, spoke with Elisa Tavilla, Director of Debit Advisory Services for Javelin Strategy & Research, about the future of digital cards. They discussed what strategies can make cardholders develop loyalty to their issuer—or lead them to end the relationship.
PaymentsJournalPaymentsJournalPaymentsJournalThe Advantages of Digital CardsDigital card management addresses two issues: Making it easier to do business with a financial institution and making consumers’ lives more convenient. The goal is to ensure that customers are more willing to use your card over a competing card in their wallet.
To understand where we are today, it helps to take a step back. During the COVID-19 era, many merchants amplified their touchless point-of-sale capabilities, and thus digital wallets such as Apple Pay and Google Pay became even more attractive.
“COVID accelerated consumers’ preferences toward the digital channel,” Tavilla said. “Our Javelin research has shown that consumers are using both credit and debit cards in digital and mobile wallets. And the expectations that consumers have, whether it’s in commerce or in online mobile banking, have trended more toward digital capabilities.”
In this digital environment, cardholders can handle most service issues more easily than calling into a call center or discussing their card relationship by going into an in-person branch.
Consider how information is more readily available with a tap of a finger: When you use Uber or Lyft, you can track the precise location of a vehicle. And when you order packages online, you can track every movement of the shipment—from the order confirmation to when the packages leave the warehouse to when they arrive on your doorstep—solely through your phone.
“I don’t necessarily walk out of the out of the house or out of the room with my wallet, but I always have my phone on me,” Suter said. “As we can drive more of that phone experience into the digital banking platforms that many financial institutions leverage, that’s going to create the adoption and loyalty that many issuers are looking for.”
Said Tavilla: “Just a few days ago, I left my house without my wallet, and it was an hour or two later that I realized I didn’t have it. If I had left my phone, I’d have realized that in two seconds. But I had my credit card and debit card loaded into a digital wallet, so I was able to make it through the rest of my evening without needing my physical wallet. I find that to be very convenient and a positive customer experience, and I’m sure I’m not the only customer who feels that way.”
Building RelationshipsWhen it comes to digital card management, banks do not differentiate themselves based on the ability to activate a card or set a PIN. The focus should be on acquiring new relationships or leveraging newly onboarded customers for cross-selling opportunities at a later stage in the relationship.
“CardHub, the digital card management solution from Fiserv, handles all the other stuff while our issuers are really focused on that acquisition of new relationships,” Suter said. “We’re focused on deploying CardHub in a manner that makes it easy and convenient for a consumer but also drives that necessary relationship into all of those subscriptions, recurring payments, card-on-file merchants.”
“Let’s say Elisa opens up a Hulu account and puts her preferred payment to that relationship,” he said. “The likelihood for her to swap that out with a competing card is very, very low. How do we generate more of that type of card-on-file connectivity in relationships so that our card issuers are winning that default card position? That leads to customer loyalty and bringing the ideal customer experience through their entire journey.”
If FIs can get to a position where they can educate cardholders that a digital card is more secure and a more convenient checkout experience, they’re going to attract Apple Pay and Google Pay wallet experiences as a default.
Another factor involves the proprietary apps that every merchant built after the pandemic. How do you drive those interconnected relationships with in-app payment experiences? If FIs provide solutions to those with their own card portfolios, they’re going to win in the long term across debit and credit payments.
Helping Customers Solve Their ProblemsIf consumers lose their physical card, they can call and ask for a replacement that could be sent traditionally through the mail. But it’s not instant. With digital issuance, FIs can replace that card and have it in the customer’s phone or hand in minutes. That ensures a continuous, seamless experience that allows the customer to keep using the card as top of wallet. That’s important because lag time could cause customers to use a different mode of payment.
The most sensitive chapters in the relationship between a cardholder and the card issuer are those disruption events when the customer has to replace the card or get a new PIN. That’s a vulnerable position for the consumer because if a replacement card isn’t received quickly, they’re likely to move on to a different form of payment—perhaps a competitive card in their wallet.
“If I’m a debit card holder, I’m doing 25 transactions on average per month,” Suter said. “So you do not want to miss that gap where there is a disruption.”
The post FIs Are Building Long-Lasting Relationships Through Digital Card Programs appeared first on PaymentsJournal.
As fraud related to artificial intelligence (AI) becomes increasingly sophisticated and accessible, many legacy lines of defense are no longer able to effectively protect financial institutions and their customers. Financial institutions need to take a more proactive approach to fraud. By collecting and analyzing real-time data and using AI to identify patterns, FIs can quickly detect suspicious activity and clamp down on fraud.
Karen Postma, Senior Vice President of Risk Solutions at PSCU/Co-op Solutions, has long been a leader in detecting and deterring financial fraud. In a recent PaymentsJournal podcast, she sat down with Jennifer Pitt, Senior Analyst in Javelin Strategy & Research’s Fraud and Security practice, to discuss the nature of the latest attacks against credit unions and their members as well as the scourge of first-party fraud.
PatmentsJournalFighting Financial Fraud When the Bad Guys Are Armed With AIPatmentsJournal Fighting Financial Fraud When the Bad Guys Are Armed With AIPatmentsJournalThe Old Rules Don’t ApplyConsumers have learned that if an email doesn’t sound quite right or contains suspicious punctuation or misspellings, then it may not be legitimate. However, fraudsters are now leveraging generative AI like ChatGPT to create content that more effectively looks like a normal email than a phishing email.
“We can no longer tell consumers to look for those basic things like spelling errors, grammar errors,” Pitt said. “We need to be better at giving more generic advice to consumers about emails. If you’re not intending to get this email, if you don’t know the sender, don’t answer it. Instead, contact the company directly yourself.”
Another way non-technical individuals use AI is with a tool called WormGPT, which effectively writes code or malware with fraudulent intent.
“I don’t have a technical background, but I could leverage these tools to create malware that I could embed in a phishing email or in other content to put keyloggers on a consumer’s computer or other device,” Postma said. “That’s probably one of the most unnerving components of AI utilization by cybercriminals.”
AI is also targeting employees at large companies. Several recent data breaches that Postma has seen have been phishing campaigns targeted at high-level employees whose credentials have been compromised, which can lead to an entire company being compromised.
AI is being leveraged to trick identity verification and circumvent know-your-customer (KYC) protocols via deepfakes using voice, photo and video. Criminals are also using AI to get around multifactor authentication.
“These scams are looking for anything from passwords to financial payment to one-time passwords to absolutely anything that they can get their hands on,” Postma said. “As soon as fraudsters have convinced the consumer that they are their financial institution, those multifactors become very compromised.”
The Fourth LayerPostma’s team at PSCU/Co-op Solutions has been talking to credit unions about adding a fourth layer to multifactor authentication: the data aspect. This data becomes a validation for the transaction, and that verification at the end offers a red flag that there might be a scam happening.
This is not data that you would typically get in an authorization component; rather, it would be data obtained through online banking, through the contact center, or through various components that will confirm if the IP address is one the consumer has used before, if the consumer has used the device before and/or if the inquiry is coming from overseas or within the geographical location that would be expected for the consumer.
“These likely aren’t variables that most contact centers would have a hard-and-fast yes or no on,” Postma said. “But they would be a red flag that will allow an extra layer of validation or an extra layer of protection for that member.”
Being able to leverage data on the fly, in real time, will be imperative for all financial providers. Leveraging different technologies to be able to use the IP addresses, geolocation, different alerts, and consumer alerts in real time to detect those scams will be crucial.
Another development will be leveraging the technology for KYC and detection techniques. The financial professional can interact with a live likeness to see if it is a real person or a deepfake.
Many consumers are leery of enabling data geolocation because of privacy concerns. Credit unions should educate their members on how they will use that data to help overcome that barrier, while protecting their assets and data.
“Most people want to know why something’s being done,” Postma said. “When consumers are onboarding, you need to tell them not only that this is the data we need, but this is why we need it, and this is what we’re going to do with your data. Some of those privacy issues center on data that we’re collecting for third-party reasons, data that we would like to have. If it’s not a need to have, then allow the consumers to opt out. That will really build consumer trust with financial institutions and credit unions.”
First-Party FraudSince the pandemic, the credit union industry has seen a huge influx of what is known as first-party fraud, which entails members either knowingly or unknowingly reporting legitimate transactions as fraud. In the post-COVID-19 environment, a great number of transactions shifted from card present (CP) to card not present (CNP) as consumers deal with merchant aggregators, billing nuances and instances in which they did not receive their merchandise. With all those factors, it’s easy to understand why there’s an increase in fraudulent claims.
Anywhere from 30% to 70% of initially reported fraud is first-party fraud. This volume of first-party fraud is adjusting the scoring models—which is, in turn, changing how institutions address fraudulent claims and processes. The other component of first-party fraud is that credit union members are owners of the credit union. If the institution takes that loss, there is a financial impact on members.
“What financial institutions have to do is balance the upfront experience with verification on the back end,” Postma said. “If you have valid proof and you can do a little investigation as to the fact that that member was engaged in that transaction, you have the ability to make them liable for it.”
Gathering InformationBalancing the needs of member service and fighting fraud is essential. Every interaction or every member contact, whether lasting a minute or an hour, is basically an interview. It’s an opportunity to make a good impression, build trust, and get information from the consumer.
“There are things that you can listen for, like tone changes or hesitation as if they’re talking to somebody else,” Postma said. “There are definitely red flags that investigators can learn to identify if the caller is an attacker. If they are not, trust but verify.”
Financial institutions sometimes think that education is the easy, non-technical part of the equation. “Part of what we need to improve on as a whole in the financial industry realm is being intentional with everything we do, being proactive instead of reactive,” Pitt said. “We’ve been behind the fraud curve because we’re not doing targeted education. We’re not intentional about what we want the consumer to achieve and the outcome that we want to get.”
“Everyone—from your contact center agents to your frontline staff to your back office—needs to be educated on what scams look like, what first-party fraud looks like, and all the different types of technology we use to fight these things,” Postma said. “It isn’t just a small handful of people that fight fraud. It is truly in every channel.”
The post Fighting Financial Fraud When the Bad Guys Are Armed With AI appeared first on PaymentsJournal.
The rise in e-commerce fraud, combined with consumers’ increasing willingness to file chargebacks, has left issuers and acquirers scrambling to shore up their dispute management processes. With a complicated process that varies depending on the payment network involved, chargebacks have become a huge operational challenge for many merchants.
In a recent PaymentsJournal podcast, Cheryl Fitzgarrald and Kate Knudsen, Senior Program Directors at BHMI, and Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research, discussed why chargebacks are an increasing concern for so many merchants—and what they can do to combat the problem.
PaymentsJournalNew Approaches to the Persistent Problem of ChargebacksPaymentsJournal New Approaches to the Persistent Problem of ChargebacksPaymentsJournalWhat Makes Chargebacks So Complex?A chargeback allows consumers to dispute a transaction and request a refund for a variety of reasons, such as fraud, unauthorized charges, or dissatisfaction with goods or services. When a consumer initiates a chargeback, a detailed workflow process for handling the payment dispute unfurls. This process is meant to provide a standard method for dispute claim management.
One of the main reasons chargebacks tend to get complicated is the number of parties involved. There’s the cardholder, the issuer, and the merchant that sold the goods or services being disputed. There’s also the acquirer, which acquires the payments on behalf of the merchant. Finally, there are the card networks, such as Visa and Mastercard, that oversee the entire process.
“Most of our clients support a wide range of payment networks, from the global giants like Visa and Mastercard to regional players within the client’s own country,” Knudsen said. “Each of these networks comes with its own set of dispute regulations. And in the U.S., we’ve got federal regulations, like Reg E and Reg Z, to keep in check too. These regulations tend to be very stringent and lay out the requirements, process, and timelines for handling disputes.”
That means handling chargebacks can require not just a group of trained personnel but also flexibility.
“We’ve got a dedicated team focused on tracking every mandate from the networks and integrating them into our dispute workflows,” Knudsen said. “It’s a constant cycle of review and modification. We’re always poring over that mandate documentation and identifying the necessary changes to our workflows to ensure compliance. It is a tedious and meticulous process but one we’re fully committed to because managing disputes effectively and compliantly is vital to our clients.”
Driving the Increase in ChargebacksData breaches and hacking have resulted in more card numbers and consumer credentials for sale on the dark web than ever before. But other factors are also driving the increase in chargebacks.
One is the growth in e-commerce merchants. It’s never been easier to launch an e-commerce storefront and sell products online, but many retailers focus on the site and not necessarily on customer experiences. Consumers often have a question about their bill and want to request a refund, maybe because something was damaged or didn’t arrive. And if they can’t find a way to connect easily with the merchant, they’ll contact their card issuer and initiate a chargeback.
Another factor is recurring billing that’s difficult for the consumer to cancel. Consumers often find it easier to initiate a chargeback with their issuer rather than weave through customer service at the recurring billing provider.
“Many companies find it difficult to invest the time and money required to continually analyze the ever-evolving mandate changes,” Fitzgarrald said. “But if they are not up to date, this results in penalties and claim losses. And many companies are still using legacy systems that require a lot of human intervention. For instance, some companies still use spreadsheets and manual processes that make it difficult to keep up with the regulation changes and the growing number of disputes.“
“Another area we see is on training,” she added. “It’s difficult to hire somebody with experience in chargebacks, and there is a high turnover in this area. Then you have the complication of the different networks involved with different rules and regulations.”
The Swivel Chair ApproachWhat many companies use is a swivel chair approach. This refers to the manual process of navigating back and forth between internal applications and external card network dispute systems like Mastercard Claims Manager and Visa VROL. The changing protocols and lack of automation and integration with the networks can lead to inefficiencies, errors, and unnecessary claim losses.
“Naturally, as the number of chargebacks increase, so does the overall cost of managing them,” Knudsen said. “And another reason that goes hand in hand with the increasing volume of chargebacks is that, due to the complexity and the ever-changing regulations, claim losses can be high. Many acquirers opt not to even pursue a certain portion of their chargebacks because of the cost and the complexity.”
Apgar noted that a lot of companies and merchants aren’t prepared for chargebacks. “They will provide customer service and answer a phone call or an email from a customer,” he said. “But if that transaction turns into a chargeback, the merchant hasn’t organized and categorized that data. They don’t have the information in one place and organized so that when the chargeback comes in they can provide a definitive story to the card-issuing bank.”
One of the most impactful things businesses can do is to streamline the management of disputes with consolidation and automation. Many companies juggle multiple systems and rules and processes, but there are solutions that allow companies to manage all disputes within a single integrated solution. This includes various transaction types, card-based and non-card-based, like account-to-account or peer-to-peer payments.
API integration is a game-changer here. The swivel chair approach can be replaced with two-way APIs that interface with Mastercard Claims Manager and Visa VROL. This automation streamlines the exchange of dispute data with these networks and eliminates the need for manual intervention.
When companies replace manual processes with preconfigured workflows that guide dispute workers through each step of the workflow, the percentage of claim wins dramatically improves—and so does employee satisfaction.
Self-Service FunctionalitiesSelf-service capabilities are another cost-saving option. For example, a payment service provider could provide a solution that allows its merchants to access their own transactions and manage their own disputes.
“From a merchant’s perspective, the two most important things they can do is first to audit the customer journey, especially in the e-commerce world,” Apgar said. “Are the descriptions of the products accurate? Are the expectations being set in terms of when and how it’s going to be delivered?“
“Secondly, use a platform to organize and collect all the data that the merchant tracks. Most of the fraud prevention and other customer contact information comes from third-party systems. Keeping that information organized in one spot so that they can quickly respond to a chargeback and tell their side of the story is vitally important.”
With the proliferation of digital shopping, and particularly the growth of the subscription economy, retailers should expect chargebacks to continue to increase. As BHMI’s experience shows, anticipating that chargebacks will happen—and building the infrastructure to handle them—will be key to combating this erosion of profitability.
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Successful companies must constantly change to preserve their success, but digital transformation may be the most radical overhaul most of us will ever see. For organizations to make this transformation a success, getting employees on board and fully engaged is a requirement.
As the head of Corporate Strategic Planning and Management for Wells Fargo, Amy Downey understands the optimal ways of steering a company’s strategic direction and organizational design. In a recent PaymentsJournal podcast, Downey spoke with Emmett Higdon, Director of Digital Banking for Javelin Strategy & Research, about how to maximize employee engagement amid a digital transformation.
PaymentsJournalTurning the Ship Around: Insights for Navigating Digital Transformations PaymentsJournal Turning the Ship Around: Insights for Navigating Digital Transformations PaymentsJournalThe Scope of Digital Transformation Digital transformation is a multifaceted concept, but a more suitable characterization may be: effectively aligning with customers’ preferences. It necessitates alignment across all facets of a business, ensuring consumers and the companies serving them anticipate an on-demand, hyper-personalized approach to banking services. In that light, digital transformation revolves around adapting an organization’s processes to create a sense of customization for each individual.
Employee engagement is a critical part of that transformation.
“I read an article in the Harvard Business Review called ‘How Companies Can Improve Employee Engagement’* that outlined two ways that employees want to engage,” Downey said. “One is they want to know that their work is connected to a larger purpose. And secondly, they want to make sure that their work is enjoyable and not very stressful.”
Sometimes people think of digital transformation as involving just the IT department, but it affects every division in an organization. “I often tell my banking clients, let’s stop calling it digital banking,” Higdon said. “It’s just banking. Banking today is digital. And we need to transform every aspect of how we go to market with consumers today to meet the enormous expectations that they have.”
Act with UrgencyBanking will always involve human interaction. Decades ago, many assumed that we eventually would not have branches because ATMs represented the future. But branches and bankers are still very much around. People want to talk to people, and interaction with a human being is still important to some banking customers.
Given the urgency in making a digital transformation, Downey stressed the importance of acting quickly. “How do you get customers what they need in both physical and digital terms?” she said. “How do you approve requests quickly enough to satisfy your customers every time? When employees of the bank know they’re the face of positive change, it causes less stress and reduces fear.”
The Critical Skills Downey identified four critical skills for product transformation.
- Knowing the financial products thoroughly, whether it’s a mortgage or a treasury product.
- Knowing how the data works and how customers interact with that data.
- Understanding the technology that is part of the digital transformation.
- Having leadership and followership.
When companies examine how their customers navigate digital transformation, it’s crucial to leverage capabilities across the entire bank enterprise. Customers are indifferent to how their bank is structured or which team handles their request. They simply want to get what they need, whether it’s putting a down payment on a home or paying for a snack at the local deli.
“Brains only take you so far,” Downey said. “You can become the world-class expert on whatever topic, but you also have to have the brawn. You need the courage, the leadership and the ability to influence. If you don’t have those influence skills, it doesn’t matter how great you are in terms of the technical skills.”
Using the Entire Organization Long-tenured employees can be vital to making digital transformation a success. Often, organizations assume that they’ll need to bring in new individuals to ensure a change can happen, but it can be helpful to turn to those who have been around for a long time and have seen the ups and downs, the economic cycles, and the leadership changes. Those long-tenured employees bring a wider perspective.
“If there’s a role where someone has part of the necessary skill set, take a chance on a long-tenured person before you bring in someone new,” Downey said. “If you bring in all new people, then you’re basically saying we’re going to reset everybody, right? A necessary part of the change is showing the organization that you’re bringing them along.”
“When I was managing mobile strategy at TIAA-CREF, I met a younger gentleman in his 20s who said to me, ‘Oh, really, a guy of your age managing mobile, that’s great,’” Higdon said. “It was like he was patting me on the head. But when you’ve been around for a while, you can look at a tool and see many different opportunities and many ways to use that tool.”
One way to make use of all the talent on a team is to set up small focus groups with eight to 10 people. Tell them: “Here’s what we’re thinking. What do you think based on your experience?” That can resonate with people, whether they’re new to the workforce or have a long tenure with the company.
“More important than any of the insights, we got was responses like ‘Thank you for listening to me,’” Downey said. “’Thank you for making me part of it. I feel like I’m part of that digital transformation. That makes me committed to you as leaders but also to you as a bank, that you actually cared enough to ask me.’”
There’s also value in listening to detractors. They shouldn’t be ignored, but it’s also important to ensure the project is moving along. Listening to the detractors doesn’t mean allowing them to derail things or to become a continual distraction.
“Meet employees where they are and understand the different perspectives,” Downey said. “You’ve got to get in front of people. There’s no substitute for in-person.”
“The key to all of this is communication. Change isn’t easy, but at the end of it, you’ll see benefits. Your customers will be happier about what you offer to them, and you’ll see benefits in the day-to-day life of employees, resulting in a seamless experience. And that’s ultimately the goal of the digital transformation.”
The post Turning the Ship Around: Insights for Navigating Digital Transformations appeared first on PaymentsJournal.
While fintechs and banks may have once been seen as competitors, their relationship has grown over the years. With market shifts and evolving customer needs, new models of working together have emerged, expanding customers’ options and opening doors for new ways of fintechs and banks to work together in mutually beneficial ways.
A recent PaymentsJournal podcast looked at the state of these partnerships and how they’re driving embedded payments growth. The episode features Bryan Schneider, Product Head for a Fintech Strategy and Partnerships for U.S. Bank who recently helped launch the bank’s Connected Partnership Network, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. They discussed how innovations like open banking have fueled cooperation between banks and fintechs.
PaymentsJournalFintechs and Banks: How the Partnership Is EvolvingPaymentsJournal Fintechs and Banks: How the Partnership Is EvolvingPaymentsJournalOpening doors through open bankingHistorically, banks aimed to serve as a one-stop shop for meeting their customers’ needs by building in-house solutions or partnering with third-parties to white label their solutions. While this approach enables banks to meet many broad customer application needs, it can often cast aside the specific front-office or back-office functionality needed to meet unique industry workflows or use cases. Fintechs have successfully helped fill such voids by creating specific user experiences, workflows and connectivity to address the market needs. In some cases, this has meant even competing with banks by delivering their solution with fully integrated payment capabilities traditionally provided by their bank. But buying behavior has changed, and customers demand more control over choosing their desired banking and technology partners. Gone are the days of either-or, says Schneider. Open banking has opened new doors.
Powered by interoperability and collaboration between banks and fintechs, embedded banking revolves around creating a streamlined process for companies to originate everything in one place versus having to log into multiple systems. It puts the control back in the hands of the customer, and the expertise in the hands of the most capable banking and technology partners.
“It might seem ideal to be all things to all clients, but the reality is that it’s nearly impossible, as evidenced by the massive ecosystem of general fintech and software solutions in the market,” Schneider said. “They support these different partnership models with more of a plug-and-play experience, where a customer can choose the software and choose their banking partner based on counterparty risk and payment capabilities.
Banks and fintechs alike want to make decisions around what their clients expect from them. And because those expectations and needs vary with each customer, there must be different models for meeting those needs.
“In the conversations I have with banks, we always talk about the importance of having a pursuit profile that fits what you’re trying to do,” Bodine said. “You can’t be everything to everyone, especially with regard to the tech stack. You can get mired in unnecessary, counterproductive things.”
Solutions that add real, tangible valueHoning in on the key strengths and priorities of individual banks and fintechs means customers now have the ability to build solutions and workflows—collaboratively—that are most powerful for them. “That’s where these partnership models are helping us meet our clients where they are in their digital journey,” Schneider said.
For example, companies want to reduce expenses through the automation and optimization of their processes. Paper checks are expensive to deal with, so the focus shifts to driving digital payments to mitigate costs. And when they learn the cost savings or even rebate revenue potential through automation and other solutions, they realize there’s tangible value in pursuing them.
That’s when companies start to view their accounts payable groups not just as cost centers. They have unprecedented opportunities to turn their payables into a profit center that can even, at times, start to cover the expense of running their business.
However, we know many companies face obstacles in moving toward these models because they rely on outdated tech stacks. It’s important to dig into the details and bring in consulting partners and research strategists who possess the expertise to ask the right questions. It’s in this deeper exploration that vulnerabilities, risks, and true opportunities for success become evident.
One of the biggest struggles is maintaining connectivity across these systems and standardizing data. That can take some of the risk out of the equation. The end-to-end experience becomes much more powerful than it would be otherwise, when companies try to wire things together that were never meant to be merged.
“We’re starting to see powerful user experiences that solve problems beyond simply making payments,” Schneider said. “Folks are biting off pieces that are very doable, then bolting these systems together to create powerful integrated solutions. I’m curious to see what’s going to unfold here, especially with open banking.”
Working With Trusted PartnersOpen banking extends the capabilities to which companies have access to in ways that may not otherwise be possible without such bank and fintech collaboration. But the value goes well beyond the functionality. Customers not only regain control over who they work with but regain control over the trust and security of those choices.
Counterparty risk is critically important, particularly in light of recent bank failures. Companies are grappling with essential questions: Who are our partners? What risks may be associated with this partner? Can we future-proof and retain the flexibility needed to evolve?
In partnering with a fintech, it’s important for a company to inquire about the entity responsible for processing payments behind it. Companies need assurance that, should an issue arise during payment initiation through the fintech, they retain control over access to their funds.
According to Schneider, recent bank failures made clear the importance of being able to pick your fintech software and your banking partner, where companies have a lot more control, direct visibility, and access to their cash.
As companies do their due diligence on any third party with which they work, it’s critical they understand a fintech’s financial stability, the measures they have in place to mitigate potential risks, and their ability to support a desired integrated banking partner. If the fintech processes all payments through a single bank, ascertaining the percentage of payments that this company represents is also important.
“We’ve seen some fintechs that partnered with smaller banks who are probably the best aligned to handle transaction flows, but maybe the client who had contracted with the fintech was expecting that from the fintech,” Schneider said. “We’ve seen a fintech partnered with another third-party payment processor. An ACH (payment) that might take two or three days could take five, six, or seven. That lack of visibility for an ACH payment has been something that our clients are starting to ask questions about.”
“It’s surprising to me how few organizations actually do the level of diligence that they should be doing,” Bodine said. “The natural one is to look at financials, but I’ll ask basic questions like, ‘What’s the burn rate?’ (and) ‘How much money does this company have in the bank?’ I’ll hear, ‘Not really sure’ or ‘We didn’t really ask that.’ When I ask about a bank’s API-first approach, I often hear, ‘What do you mean by API-first’?”
Looking aheadThe relationship between banks and fintechs still has a long way to go, if for no other reason than banking models in the U.S. will continue to grow as embedded payments continue to mature.
As Schneider points out, banks and fintechs alike are prioritizing and investing in systems integrations and delivering frameworks at scale that meet customers’ needs. Embedded payments are here to stay, he says, and will drive exciting change in the months and years to come.
“It’s going to be fascinating to see how things get more efficient and drive a lot of cost out of the system.” Schneider says. “That’s what we’ve always been after: delivering value back to our clients in a way that has integrity and trust in the system.”
The post Fintechs and Banks: How the Partnership Is Evolving appeared first on PaymentsJournal.
As businesses strive for innovation, efficiency, and scalability, the path to digitization is fraught with challenges. It’s a journey that requires addressing outdated processes, adopting new technologies, and most important, gaining buy-in from leadership and colleagues.
In a recent PaymentsJournal podcast, Reetika Grewal, Executive Vice President and Head of Digital Transformation at Wells Fargo, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, delved into how Wells Fargo is helping its clients with digitization and optimizing digital experiences for customers, as well as what makes fintech partnerships successful.
PaymentsJournalNavigating Digitization Through Strategic Fintech PartnershipsPaymentsJournal Navigating Digitization Through Strategic Fintech PartnershipsPaymentsJournalKey Focuses for 2024Businesses face many challenges in running their operations smoothly. Prioritizing efficiency and productivity is crucial, and can be achieved through the automation of manual tasks, streamlined workflows, and enhanced accuracy in record-keeping. Leveraging advanced software for data analytics empowers businesses to make informed decisions and gain valuable insights.
“At a very simplistic level, companies need great software to help run their business,” Grewal said. “That is one of our core missions, and that’s what we rolled out last year with Wells Fargo Vantage.
“It’s a singular place where a company can go and find that dashboard of the activity on their accounts, determining what things need their attention.” It also gives them opportunities to manage their users, tailor their online experience, and manage anything new with their company.
Access to data is a significant competitive advantage, enabling businesses to tailor solutions to customers’ needs effectively. Without proper integration, however, this valuable data remains inaccessible, undermining competitiveness and impeding growth prospects.
“Something that midsize companies struggle with is not having partners that have the comprehensive set of tools to integrate those other systems as the business grows,” Bodine said.
Exploring the Digitalization JourneyWells Fargo has adopted a client-first mindset, creating resources that help the company tailor the company’s experience—and address client pain points.
“We have built a library of personas that covers a variety of company sizes and company industries,” Grewal said. “We also talk about archetypes because in this space you have a variety of user types that come in. In a smaller company, it may be just a couple of people in the company that are interacting with the Vantage software. But at the higher end, it could be 200 people logging in.”
“So how do we make sure we’ve got that right Rubik’s Cube of who you are, what are you trying to do, what problems are you trying to solve, and how do we get the right information in front of you?”
When selecting a partner, companies feel it is crucial to assess their ability to scale with a growing business. While it may be tempting to focus solely on immediate needs, considering future scalability is essential. Overreliance on multiple vendors can introduce unnecessary inefficiencies and complexities down the line.
“One of the big areas I see with organizations that are growing is that they might start as a garage business,” Bodine said. “Then fast-forward five to 10 years, and all of a sudden they have 20 vendors that they work with because the original vendor was not intended to scale in a bunch of different areas. The ability to be with a partner that has that scalability element is very important.”
Key Elements for Effective DigitizationTransforming processes from an analog version to a more digital version is not just a matter of plug-and-play. Digitization is never a streamlined process, and therefore, the more leadership provides support, the easier it will be. It will be easier not only to educate corporate culture but also to make decisions and allocate the necessary resources to make digitization happen.
“When we think about the strategic elements, it’s about making sure that the change management goes along with it,” Grewal said. “If you’re implementing a new process to drive some automation, how do you make sure that the tools that people are using are the right tools and then all the processes change along with it?
“If you’re moving from paper to electronic payments,” Grewal elaborated. “How do you make sure that you understand the timing differences and the information needs and things like that? That is also part of the digitization process—making sure that all the things that go around driving a change are also there to support the change holistically.”
Success hinges not only on technology but also on getting people on board. Effective communication of benefits is essential to ensure buy-in from all stakeholders.
“Change management is critical, and I like to call the antithesis of that ‘digitization for the sake of digitization,’” Bodine said.
Optimizing Digital Payment Experiences for CustomersConsumers expect digital payment experiences to be fast, convenient, and secure. Failing to meet these expectations could drive them to seek alternative solutions. Therefore, companies must prioritize offering the preferred payment methods for customers, with mobile being a basic requirement given the prevalence of mobile banking and shopping.
“It’s knowing your customer, knowing how to motivate them, knowing what the right size solution is for them. That is how I would encourage others to approach it,” Grewal said.
To foster customer loyalty, digital payment experiences must be convenient. Seamless transactions not only enhance customer satisfaction but also encourage repeat business. Cumbersome checkout processes are a turn-off for customers.
“I would add ease of use and minimal friction in everything we do. I’m a proud Wells Fargo banking customer, and I use my Wells Fargo app every day. One of the reasons I use it is because it’s easy to use and I use it over using my laptop or desktop to pay bills,” Bodine said. “We’re starting to see a lot of that coming to the stodgy old commercial world. Wells is taking a page from the consumer side. So it’s nice to see.”
Working with FintechsFinancial institutions can leverage the forward-thinking ideas and agility of fintechs to respond to evolving customer needs. These collaborations enable the introduction of innovative products and services—something Wells Fargo has been exploring.
“We look to partner with companies that will supplement and enhance what we’re doing, either to help us deliver a really unique product or service to market or help us accelerate our client experience,” Grewal said.
“Bringing new opportunities to our clients that maybe we don’t offer ourselves and finding that partner that is willing to spend the time with us, work with us, understand the integration options, understand the partnership options. That’s important.”
The Opportunities and Challenges of Fintech Partnerships
When it comes to partnerships between FIs and fintechs, aligning with a partner that shares the same visions and goals is crucial. Being open about challenges, expectations, and wins only solidifies trust and collaboration.
“We’re going to be really deliberate in terms of how we go about it,” Grewal said. “We’re going to make sure that we leverage the collective expertise at Wells Fargo to do this well.”
“Partnering with technology, partnering with risk, partnering across the organization, we bring our experts to the table to make sure that we do this well. In terms of challenges, it’s just making sure that we’re all operating on that same rhythm. It is important that we all have that shared goal of ‘this is the problem we’re trying to solve, this is how we’re anticipating solving it.’ And then, as we learn more, we can put more structure around any kind of partnership.”
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With the Clearing House’s RTP network and the Federal Reserve’s FedNow, the demand for instant payments continues to grow from consumers and small businesses. How can businesses best accelerate this process?
Debbie Smart, Senior Product Marketer at Q2, and Keith Gray, Vice President of Strategic Partnerships at the Clearing House, sat down with Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, for a PaymentsJournal podcast and explored the landscape for instant payments. Although the path can be different for different institutions, it’s clear that customers have come to expect real-time payments. Late adopters beware.
PaymentsJournalPreparing Your Organization for Instant PaymentsPaymentsJournal Preparing Your Organization for Instant PaymentsPaymentsJournalPayroll: A Critical Use CaseFrom the beginning, account-to-account payments have been driving many of the real-time use cases. The growth of providers like Zelle and Chuck has fueled the expansion of business-to-consumer payments.
One application that has been frequently overlooked is payroll, including daily payroll and earned wage access. These functions are already key users of the RTP network—and they’re growing every day.
“Who would have thought that six years ago when we launched this that a lot of people would prefer getting paid every day for what they do?” Smart said. “Now all of the rideshare companies and the companies like Grubhub are using RTP to push money out to their contractors.”
Exploring Business-to-Business PaymentsOn the commercial side, especially with business-to-business (B2B) payments, the most significant value is in the data. The rich messaging on the new payment rails doesn’t exist in the older payment rails. Commercial customers are increasingly excited about the possibilities as they learn more about this.
Another important usage involves paper checks. A third of all B2B payments are still made with a check. But 78% of the time, when a business pays another business via ACH, the identity information or remittance information doesn’t go along with the transaction. It goes in an email or via U.S. mail, which makes it time-consuming for these businesses to complete reconciliation. Part of the excitement around the power of instant payments lies with the ability to have that remittance information from the start.
It’s not just the immediacy of the payment. Timing is critical in a B2B transaction as well. “If I owe a supplier a million bucks tonight at midnight,” Gray said. “I can keep that in my account till 11:59 and 45 seconds, and then I’ll shoot it out. I’ll get a confirmation back and everything will be closed and settled literally within seconds. That perfect timing and visibility of an immediate payment is a key part of the value proposition of an instant payment.”
Other use cases are being explored, if not offered already, in payments that traditionally have been limited to business hours. “In the auto industry, most consumers tend to shop for cars after work or on weekends, when the banks were closed,” Tavilla said. “With real-time payments, the 24/7/365 enables more convenience and better business processes.”
Start With Receive OnlyStarting real-time payments with receive only makes sense for several reasons. It allows a business to get connected to networks and get the plumbing in place, so to speak, for using the new rails.
“The biggest benefit is what they can bring to their accountholders by receiving instant payments,” Smart said. “I’ll give you an example. We’ve got a customer, a $9 billion credit union, who started with receive only in January of 2021. The first month, they had 3,400 incoming transactions. By December 2023, that number was almost 38,000. They didn’t promote it, or even announce that it was available—they just enabled it. What’s even more interesting to me is the fact that the day they went live, the first payment hit within 60 minutes.”
Smart pointed to Grubhub as an entity where real-time payments grew from demand by the users of the app. When a Grubhub driver opens the Grubhub app, a message says: “Would you like to be paid immediately? If your bank doesn’t support it, click here for a list of banks that do so.”
Eventual Move to Two-WayFinancial institutions should plan to eventually support send and receive capabilities. That enables FIs to take advantage of all the capabilities that RTP and FedNow have to offer. For example, you must be able to receive and send in order to receive requests for payments. If you can’t send, you wouldn’t be able to push payments out, given that RTP and FedNow transactions are push only or credit push payments.
“An analogy I often like is that if you have a phone and can only receive calls, you can’t really take advantage of the technology,” Tavilla said. “It’s just a one-way system. Whereas if you have a two-way system, there are many more possibilities and value that you can take advantage of with the network.”
Joining Multiple NetworksFIs have always had multiple payment networks to choose from, across all payroll and payment types. Since FedNow launched, there has been a lot of concern in the industry about how to deal with these choices.
“My point is that we’re used to it and we’ll figure it out,” Gray said. “In the meantime, what we’re seeing is that most of the banks that are joining FedNow are also on RTP, or are getting on RTP. That’s also true of all of the technology providers that I deal with, both the big guys and the smaller guys.”
Over the long term, it’s possible that the networks will become interoperable, as they are on other payment rails. But the fact that the connectivity partners all support being able to connect to both networks makes it easier for financial institutions.
The bottom line for most FIs is this: What am I doing for my accountholders to enable them to move money the way they want to be able to move money?
“When financial institutions are considering implementing real-time payments, look at your own customer base and their financial needs and pain points,” Tavilla said. “Think about how real-time payments can complement the existing payment methods that your financial institution currently supports. Think about how you can help solve your customers’ problems and improve the customer experience.”
Download the Q2’s Instant Payments white paper, “What to Know and Where to Start“
The post Preparing Your Organization for Instant Payments appeared first on PaymentsJournal.
As anti-money-laundering challenges escalate and new liability shifts loom on the horizon for 2024, fintechs must be prepared. Proactive measures are crucial for establishing a firm foothold in the fintech landscape. Reactive approaches will only leave businesses vulnerable to attacks and financial losses.
In a recent PaymentsJournal podcast, Matt Herren, Director of Product Management at CSI, and Jennifer Pitt, Senior Analyst of Fraud and Cybersecurity at Javelin Strategy & Research, delved into how the regulatory landscape has evolved, the importance of security for growth, and the proactive vs. reactive approach to risk mitigation.
PaymentsJournalFintechs Can Navigate the Waves of Prosperity with Proactive Fraud PreventionPaymentsJournal Fintechs Can Navigate the Waves of Prosperity with Proactive Fraud PreventionPaymentsJournalThe Evolution of RegulationFrom the start, fintechs functioned within a less stringent regulatory environment. However, even then, they were obligated to adhere to anti-money-laundering (AML) and know-your-customer (KYC) regulations. As fintechs expand in scale and impact, new regulatory frameworks have emerged to address issues such as data privacy and security.
“The regulatory landscape for fintechs is in an emerging evolutionary state right now,” Herren said. “It might be less stringent than banks, but as they grow—and their services become more complex—it’s an inevitability to be subjected to additional levels of scrutiny.”
FinCEN publications, issued by the Financial Crimes Enforcement Network, regularly communicate new or revised regulations for financial institutions to remain in compliance with AML and Combating the Financing of Terrorism (CFT) rules. Some regulations, including the Customer Due Diligence (CCD) rule, have included FIs and non-banks. This requires FIs and fintechs to authenticate the identities of their customers to stop money laundering and terrorist financing.
“We’re also going to see a shift toward the FRAML (fraud and anti-money-laundering) framework,” Pitt said. “The convergence of fraud and money laundering are often intertwined with money mules or predicate crimes. Regulatory aspects of fintechs are going to have to incorporate a FRAML framework—not only with the actual fintech products but also investigations on both fintech providers and financial providers.”
Shifting Fraud LiabilityFaster payments have brought about heightened concern regarding fraud risks, allowing malicious actors to exploit vulnerabilities. Although new fintechs seek rapid customer expansion, it’s crucial to complement growth strategies with robust security solutions. Failure to do so could undermine customer trust and jeopardize long-term success.
“You see startups, upstarts who are in customer acquisition mode—they’re not necessarily thinking about these [fraud liability] things,” Herren said. “But subsequent fines and lawsuits, they really do have an impact down the line because they’re not able to keep going. A suspension of operations to a company that’s 18 months old is essentially a death sentence.
“Any organization in that situation has to be thinking, ‘You know what, what would happen if we were to encounter that and try to avoid it on the upfront?’”
In most of these fraud incidents, consumers are stuck in the middle, losing large sums of money without a resolution. Understandably, they’re looking for better protection, and one way to give it to them is through a collaboration with FIs.
“We’ve seen the fraud, the consent orders come through banks recently, but there’s also been fintech fraud and money laundering,” Pitt said. “You look at the NFT (non-fungible token) and cryptocurrency space, at some of the online platforms like Venmo, PayPal and GoFundMe, and there is a lot of fraud that’s happening with that, and customers are really not happy about that.
“In the U.S. we’re going to start to see some fraud liability shifts like there is in the UK. It might be shared liability, but we’re at least going to see everything get back to a more customer-oriented realm of servicing people. If that means giving a partial reimbursement one time, then that’s the general direction we’re going to go in.”
Security First, Then GrowthWhen new businesses come to the fore, fraud is seldomly on their immediate radar. However, this could be a costly mistake, leaving the organization vulnerable to fraud attacks. It’s a balancing act to juggle customer acquisition and security—but a necessary one.
“They know there’s trade-offs in being too aggressive in their fraud mitigation, and so often they seem to err on the side of, ‘We’ll figure it out later and let’s get the customer onboarded,’” Herren said. “I’m a huge advocate for balancing false positives, but if your organization is only focused on successful onboarding, it may be easy to overlook some of the details around assessing risk.“
When it comes to fraud prevention, it really is about a shift in priorities. It’s better to make the necessary investments from the beginning rather than implement anti-fraud solutions down the line.
“Fintechs and financial providers can really cost-effectively do that if they just creatively shift around their resources,” Pitt said. “If more resources are focused on the detection and prevention of fraud, you’ll have less fraud to investigate.
“You can shift some of those investigators toward the detection or shift your detection models away from people and shift it more toward the AI, machine learning aspect, once the security issues are kind of figured out.”
Mandating Multifactor AuthenticationWith regulatory bodies and governments cracking down on fraudulent attacks, the reliance on passwords alone is diminishing in efficacy against these threats. As a result, mandating multifactor authentication will become crucial.
“We’ve seen a lot of data breaches,” Pitt said. “Some of what’s come out of the investigations is that companies are not securing their information well or employees are clicking on that email, or victims of social engineering attacks.
“Making sure you’re having end-to-end encryption with all of your data, all your information, making sure security policies, compliance policies are in place and understood by all fintech and financial provider employees is going to be essential.”
Being Proactive vs. ReactiveTaking a proactive approach to risk mitigation is far more advantageous for businesses when it comes to compliance. It is more cost-effective, and implementing security protocols from the outset could also prevent data breaches, potentially saving organizations from legal fees, hefty fines, and reputational damage.
“Risk mitigation and compliance are about business success more than anything else,” Herren said. “Including them at the foundation of what you do is also going to keep you from having to try to shoehorn a process in after the fact, either by regulatory decree or in the wake of a major event, either a loss or a fine.
“Starting off with active monitoring is going to be far easier and it’s going to have the added benefit of data that you can glean insights into your processes as well.”
When organizations choose to play catch-up to compliance measures, this can lead to myriad problems, such as inefficiencies, hurried decisions, and greater costs due to the poor planning of strategies. Reactive responses can ultimately hurt an organization’s image, reflecting a lack of foresight with stakeholders.
“Part of the issue with being reactive is we’re already behind the curve,” Pitt said. “An incident happens, we learn from our mistakes, they make regulatory changes or implement mandates, and then we go on. The problem is we’re basically playing games of whack-a-mole, and we’re behind the curve.
“Fraudsters are way ahead of us and thinking forward. One of the key things going forward is to hire forward-thinking people who can think several chess moves in advance on, ‘This is what fraud and money laundering are going to look like in the future, you know, five to 10 years down the road.’”
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The term “fraud” has become a catch-all for some financial institutions, which sometimes downplay these occurrences as mere nuisances rather than genuine threats. However, the stark reality is that fraud has given rise to a multitude of attack methods, each carrying its own nuances and varying degrees of impact on customers and financial institutions.
In an age of escalating cyberattacks, the proverb “knowledge is power” holds truer than ever. A financial institution’s familiarity with various fraudulent tactics becomes central to its ability to prepare for and safeguard against potential threats. By delving into the intricacies of these attacks, institutions can strategically invest in the right fraud prevention solutions that address particular types of fraud.
According to a Javelin Strategy & Research webinar, Cybersecurity: 2024 Trends and Predictions, more serious fraud attacks are set to wreak havoc for FIs in 2024 in the form of deepfakes and other artificial-intelligence-related scams. FIs that don’t take these types of attacks seriously could face reputational and monetary damage.
Sunil Madhu, CEO and Founder of Instnt, and Tracy Kitten, Director of Fraud & Security at Javelin Strategy & Research, further delved into this topic during a recent PaymentsJournal podcast. They discussed the current types of fraud that face financial institutions, why first-party fraud is complex to resolve, and what steps FIs can take to resolve first-party fraud.
PaymentsJournalOutsmarting First-Party Fraud with a More Proactive SolutionPaymentsJournal Outsmarting First-Party Fraud with a More Proactive SolutionPaymentsJournalUnderstanding the Various Types of FraudThe pandemic brought on an acceleration toward digitalization, and this opened the door for cybercriminals to leverage the latest in tech innovation to detect vulnerabilities in their targets and launch attacks. These attacks have been especially felt within the banking sector.
Madhu outlined the types of fraud having the biggest impacts on financial institutions today:
Synthetic ID fraud: This is also referred to as synthetic identity theft. Fraudsters create a fake identity by using real and fictitious personal information. Criminals begin by stealing a real Social Security number through the dark web or other data breach, then create a fictitious name, date of birth, and address. This new “synthetic” identity is then used to open credit cards and bank accounts and to take out loans.
Third-party fraud: Also known as identity theft, this occurs when a fraudster uses a person’s stolen identifiable information to open new accounts without the consent of that individual. This type of fraud has a shorter lifespan; the victim quickly learns of the compromise and can take immediate action to bar further malicious activity.
First-party fraud: This occurs when a consumer takes out a loan or opens up a credit card without intending to pay it back.
Madhu explained that first-party fraud is the most difficult to detect because there is no way of knowing beforehand whether a consumer will default on a loan. Although there are genuine consumers who will default on loans because of economic reasons, such as a loss of a job, some premeditatively take out loans with the clear intention of not paying them back.
“You can’t put [genuine consumers] in the bucket of fraudsters,” Madhu said. “That would have legal dire consequences for people already in dire circumstances. So the industry as a whole cannot preemptively solve this problem.
“You can examine and cross-reference people’s personal information and figure out if the ID is fake or stolen. At the time when the loan is issued, you can’t really say, ‘I’m going to call you, I’m going to mark you as a fraudster because I think you’re going to default on the loan.’ So what the industry does is they make the loan payment after looking at all of the historical and financial data of the individual.”
After a loan is issued, the mode of operation for banks is to simply wait and see if the first payment is made by the consumer. If not, the next course of action is to use collection as a means of identifying whether the account is fraudulent.
This may not be the best tactic for banks, as it can expose them to more financial losses—the fraudster could spend more money before being detected, for example. And if this is a genuine customer who unfortunately can’t make that first payment, being labeled a fraudster would be a wrongful accusation.
“This emergence of what we define as scams—where you have a consumer who is conned or convinced in some way to open up a loan to transfer funds to use an account in a way that they have not historically used it—it just adds to the complexity, because it’s going back to the fact that this is a consumer, a trusted consumer for whatever reason, something has changed,” Kitten said. “The habits or the use of that account have changed.
“What makes it very challenging for financial institutions is to know when this consumer is under duress and at what point does an institution step in to take some kind of action.”
Kitten also pointed out that financial institutions continue to struggle to detect synthetic identity fraud. She recommends stronger verification and authentication at the early stages.
Why First-Party Fraud Is Difficult to ResolveFirst-party fraud is one of the most challenging types of fraud for financial institutions to resolve. The main reason is first-party fraud involves the legitimate accountholder. It’s difficult for FIs to accurately gauge the intent of the accountholder, and it’s even more complex to differentiate between a legitimate activity and a fraudulent activity.
“The challenge for FIs with first-party fraud is the very intrinsic nature of it and that it’s a psychographic behavioral change of the individual or some financial change, or economic circumstance change that may be outside of the view of the financial institution,” Madhu said.
“Traditionally, the leading indicator for first-party fraud is that the very first installment payment from the loan or the charge is missed.”
Adding more to the complexity is how most financial institutions operate, by taking a less proactive approach and simply waiting for missed payments before proceeding to the collections process.
Another indicator for FIs that a missed payment is the result of first-party fraud is an inability to contact the borrower. After 120 days of missed payments, the bank simply takes the loss. Over time, this will not be a sustainable approach.
What FIs Can Do to Resolve First-Party FraudConsumers from younger generations often lack credit histories and therefore are not accepted by traditional credit models, leaving them vulnerable to predatory loans. This can place them in a more difficult financial situation if they default on their loan because of something like the loss of a job.
A preemptive measure, according to some in the industry, is to take the data of these individuals and compile it into a consortium block list database, categorizing them as fraudsters and thus avoiding any potential risk. The problem, Madhu points out, is that this could block these individuals, who are already in dire financial circumstances, completely out of the financial industry.
Another solution is to use a universal identity. It will be a form of digital identification through which consumers pass know-your-customer requirements and build a good reputation. This will reward them with a reusable pass and identification to demonstrate digital proof of ownership. Those in the financial services industry will be able to see beforehand what level of risk that individual is approved for, without having to worry about taking on a fraud loss.
Madhu also proposes the use of Instnt’s solution, which can assess the risk of first-party fraud, assign a financial value to the risk, and transfer the risk off the balance sheet.
“We came up with an underwriting mechanism looking at the first-party loss rate of a particular business to price the losses using technology that we’ve built end-to-end so we can control all the aspects of false positives through the system instead of layering different technologies together,” Madhu said.
“We can therefore say yes to more people than businesses could traditionally do themselves. We can offer to transfer the risk that they’re holding on their balance sheets up to the tune of $100 million a year off through our SaaS platform and on to the insurance industry, which has studied that risk and studied the underwriting algorithms and has agreed to partner with us to create an insurance product in the marketplace to transfer that risk.”
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Amid a rapidly evolving digital landscape, cybercrime continues to be a persistent and growing threat for financial institutions, which need to remain vigilant and proactive in safeguarding their systems and customer data. In a recent PaymentsJournal podcast, Patti Reid, Vice President of Card Risk Solutions at Fiserv, and John Buzzard, former Lead Analyst for Fraud […]
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Unified commerce is table stakes—but often misunderstood. For a truly compelling customer experience, retailers need to adopt a truly unified solution that brings their business’s backend closer to their customer.
Whether a customer is shopping in-store, online, or via their mobile device, unified commerce guarantees consistent pricing, promotions, and inventory levels—and establishes a fully integrated customer journey.
During a recent PaymentsJournal podcast,Max Kirby, who works in Comms and Strategy at Stripe,Dil Hussain, Co-founder and CEO at Dines, andDaniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, dug into unified commerce, its role in the customer journey, and how it can enhance the overall consumer experience.
PaymentsJournalUnified Commerce Is More Than “In-Store or Online”PaymentsJournal Unified Commerce Is More Than “In-Store or Online”PaymentsJournalUnderstanding Unified Commerce When merchants first hear of unified commerce, the idea of omnichannel strategy also comes to mind—particularly as both involve developing a cross-channel shopping experience online and in-person. However, it’s much more than that, Kirby explained. Unified commerce means meeting customers where they are, throughout various channels and at any stage of the buyer’s journey.
“I think people miss that it’s about bringing the front office and back office together,” said Stripe’s Kirby. “Unifying commerce means unifying both the customer’s commerce experience and the merchant’s commerce infrastructure.
“Merchants today want to sell direct to the customer, but also through retail partners. Maybe they’re an online marketplace, they may want to set up a loyalty scheme, they may want to offer membership subscriptions, and no matter the interface, they want to have a really coherent experience with the customer. So that’s how we think about unified commerce.”
Through unified commerce, merchants can gather and connect all the essential data points as well as customer interactions, revealing a comprehensive view of their customers. Hussain, a Stripe client, explained it this way: “Unified commerce is about bringing all the data, all the information, all the kind of personalization that a customer may have remotely or on-site in a retail or a restaurant environment and bringing them together.”
There is a distinction between omnichannel and unified commerce, but they’re often used interchangeably. Whereas omnichannel speaks to consistent experiences across siloed channels, unified commerce speaks to consolidating systems and data into a single integrated platform.
“Unified commerce allows you to do much more,” said analyst Daniel Keyes. “It connects data, it connects experiences, it connects backend processes, these things that are really important and really do transform the experience much more than just the ability to be in-store and order a product shipped to your home.”
The Importance of a Unified Commerce StrategyUnified commerce aims to offer a seamless, efficient, and consistent customer experience across all channels and touchpoints, including transactions made on mobile devices, in-store, and online. As the demand for frictionless commerce increases, adopting a unified commerce strategy can deliver on that front.
“We start from the premise that customers will choose experiences that are convenient, secure, and intuitive,” Kirby said. “And if you don’t have a unified commerce experience that delights the customer, then they’re going to go elsewhere.”
Hussain explained: “If you’re thinking about what’s so powerful about unified commerce, it’s a quick win in my opinion. If you’re thinking about the different ways that you can try and make the customers’ experience better—across any channel and within any industry—then you need to create something that’s unified, something that feels like the customer is being remembered, regardless of how they engage with the business. That is just a very surefire, quick way to delight them. And it’s not that hard if you think about it, with the rails and the platforms available to you now.”
Amid the proliferation of personalized customer experiences, businesses can’t afford not to have a unified commerce strategy. Not having one puts them at risk of disappointing their customers. It’s no longer a “nice to have” strategy. Rather, it should be regarded as “should be done.”
Dines reported simplified back-of-the-house operations with unified reconciliation and reporting across mobile and in-person payments, saving up to 40 hours a week on administrative duties and boosting staff satisfaction. Additionally, after introducing a solution from Stripe, Dines has seen a 150% increase in revenues per venue.
“It’s becoming closer to table stakes,” Keyes said. “And that means if you don’t have them, you’re losing sales as much as you might be gaining sales by having these experiences. So it really does need to be a priority to build this sort of experience with unified commerce.”
Connecting the Online and In-Person ExperiencesConnecting the online and in-person experiences, Kirby explained, comes down to the business’s mindset. A business must ask itself how it views every transaction. Is it simply a purchase that is disconnected from other transactions? Or is it a critical touchpoint that a business can leverage to develop a long, meaningful customer relationship? By adopting unified commerce, businesses simultaneously adopt the consumer’s mindset and perspective.
“It’s the data that underpins a truly composable architecture so that your business applications work seamlessly together,” Kirby said. “A prerequisite for unified commerce is having a unified view of the customer. Can you recognize an existing customer when they walk into a store? If you’ve visited a store, do you recognize them online? Is your inventory database unified? If someone buys something in the store, does that mean you’re now sold out for an online customer?”
In speaking to merchants, Stripe has found that many have in-store systems complete with point-of-sale terminals that are completely siloed from their online system. In essence, they’re running two businesses. The aim of unified commerce is to merge systems, consolidating them into one business.
Unified Commerce—Reaping the BenefitsThe benefits are clear: businesses with unified commerce strategies stand to remove unnecessary overhead, implement a unified tech stack for online and in-person payments, and run more efficiently, all while elevating the customer experience.
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In the first half of 2023, the ACH Network saw consistent transaction volume growth, handling 7.7 billion payments valued at $19.7 trillion in Q1—a 6.4% increase over a year prior, and a processing 7.8 billion payments transferring $20 trillion in Q2—a 4.3% and 2.9% increase respectively. The steady rise underscores the ACH Network’s indispensable role in various financial operations, including payroll, tax refunds and business-to-business payments.
In a recent PaymentsJournal podcast, Michael Herd, Senior Vice President of ACH Network Administration at Nacha, and Elisa Tavilla, Head of Debit at Javelin Strategy & Research, discuss the current state of ACH, offering insights into its trajectory and impact.
PaymentsJournalACH Drives Efficiency in Healthcare and B2B TransactionsPaymentsJournal ACH Drives Efficiency in Healthcare and B2B TransactionsPaymentsJournalACH is a Booming MarketIn March 2022, the dollar limit for Same Day ACH payments increased to $1 million from $100,000. This change led to a noticeable rise in the use of Same Day ACH for higher-value payments.
“The value of Same Day ACH payments for the first half of 2023 reached almost $1.2 trillion, which is more than 50% higher than the previous year,” Held said.
The higher transaction limit has influenced various areas, including payroll and consumer disbursements. Insurance companies, for example, have found it beneficial for making larger insurance payouts, including homeowner claims.
The new limit has also been advantageous for businesses making vendor payments and inter-business transfers. Such transactions often involve larger sums, and the increased limit has allowed for wider adoption of Same Day ACH.
“People are also showing a lot of interest and enthusiasm for faster payment options, including both Same Day ACH and other rapid payment systems,” Tavilla said. “There are numerous areas where these faster payments are valuable, like healthcare, payroll and real estate. It’s clear that the increased transaction limit has opened up more opportunities for businesses to make the most of these faster payment methods.”
And the demand for faster payments is set to continue to grow.
“Various payment systems will likely experience simultaneous growth, especially as transactions move away from checks,” Herd said. “It’s a reasonable forecast considering how many businesses are already accustomed to using ACH. While they become acquainted with alternatives like FedNow and RTP, they will likely begin by utilizing ACH, a method they are familiar and comfortable with.”
ACH in the Healthcare SectorHealthcare organizations are increasingly leveraging ACH—and this adoption is driven by the need for efficiency and convenience in processing medical bills, insurance claims and reimbursements.
“People are adopting digital methods to split bills, share expenses and transfer funds among friends and family,” Herd said. “The ease of ACH transfers is contributing to this trend, making it more convenient for individuals to manage their finances seamlessly.”
Unlike retail, where payments happen at the point of sale, healthcare payments often occur after care is given. Although electronic bill payments have been common for decades, medical practices still use paper for these transactions. But the pandemic accelerated the shift to digital, with more insurance providers encouraging electronic form submissions and reimbursing providers through digital payments. But that shift is not complete throughout the industry.
“Healthcare organizations have documented the potential savings in administrative processes by transitioning from paper-based transactions to electronic methods,” Herd said. “In 2023, there remains a significant opportunity to embrace electronic submissions and payments in the healthcare industry.”
A similar shift is also occurring in the business-to-business (B2B) sector. “Efforts over the years have led to making electronic B2B payments more convenient and user-friendly than checks,” Herd said. “The need to adapt during the pandemic pushed businesses to use ACH for B2B transactions instead of checks.”
Even though some employees are returning to their workplaces, the shift back to checks hasn’t happened. Once a switch to ACH is made, it tends to stick.
These trends suggest that payment systems such as ACH will shape the landscape of payments in the coming years.
Check Fraud: A Reason to Move to ACHAlthough the use of checks is diminishing, it remains active. And those still using checks should reconsider, Herd stresses, particularly because of fraud.
“When it comes to the ongoing issue of check fraud, my advice is quite straightforward: Stop using checks,” Herd said. “The irony lies in the fact that while check usage has decreased, check fraud has remained a persistent problem. Financial institution filings about check fraud have doubled in a year, and checks are the payment method most impacted by fraud.”
To reduce vulnerability to fraud and unauthorized payments, it’s best to look at electronic payment methods, such as recurring electronic debits, which offer greater security and efficiency.
“From a consumer’s standpoint, I’ve noticed news stories about thieves stealing checks from mailboxes,” Tavilla said. “It’s a bit like the scenarios portrayed in ‘Catch Me If You Can,’ which we might assume were things of the past. But check fraud remains an issue.”
For financial institutions dealing with check fraud, Nacha offers a helpful tool called the ACH Contact Registry, which provides contact information for the personnel responsible for check payments at various financial institutions. This resource helps resolve check fraud cases effectively.
ConclusionThe ACH network is steering the course of financial transactions toward greater efficiency and security. The growth in transaction volume during the first half of 2023 cements the ACH Network’s pivotal role in powering a multitude of financial operations. The industry’s embrace of electronic methods, guided by ACH’s stability and security, continues to transform the payments industry, particularly in the healthcare sector and with B2B transactions.
The post ACH Drives Efficiency in Healthcare and B2B Transactions appeared first on PaymentsJournal.
Security is a top concern at checkout for many consumers. In a recent survey, TrueLayer spoke with 4,000 European shoppers and found that nearly two-thirds (64%) prioritised security over all other factors.
But there’s a limit to that cautiousness. Although businesses need to protect customers and foster trust, some security measures can cause friction, which in turn can drive customers away.
PaymentsJournalHow Merchants Can Deliver an Effective Payments ExperiencePaymentsJournal How Merchants Can Deliver an Effective Payments ExperiencePaymentsJournalFinding the right balance can seem daunting. But without the proper measures in place, businesses risk losing customers to competitors that offer a much more seamless payments experience.
During a recent PaymentsJournal podcast, Michael Brown, Head of Commerce at TrueLayer, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discussed how merchants can make customers feel secure during the payments process, including the use of familiar logos to provide consistency and open banking solutions to reduce friction.
These are just a few of the ways merchants can better live up to their customers’ payment expectations. For more information, read TrueLayer’s latest report, The Payments Experience Playbook: what really matters to your customers.
Customers Want Security in PaymentsCustomers want to feel safe when making a purchase, and for the most part, consumers feel safe paying with brands they’re already familiar with. In many cases, smaller businesses struggle to establish that trust. One option is to leverage familiar and established payment methods.
“Using logos from well-known banks at checkout can make customers feel secure,” Brown said. “Since people often use these logos in their mobile banking apps, seeing them at checkout gives an extra sense of safety.”
Keyes also noted that recognisable logos help consumers know what to expect from a payment. “Paying on every single website is different, so any kind of consistency you can offer can really help with conversion and can really create a better experience,” Keyes said. “Otherwise, consumers can get lost and frustrated.”
Open banking can also help establish that trust. Consumers use online banking daily, so by offering open banking payments, merchants can leverage that trust and familiarity at the checkout. Strong customer authentication (SCA) is also built in to these payments, protecting customers while offering a smooth experience.
Finding Balance Between Safety and FrictionBecause security is so important, many customers will accept and even welcome extra steps at checkout—especially when purchasing of high-ticket items. But as always, too much friction can lead to lost sales.
“In the UK, 60% of consumers say a slow and frustrating checkout experience would stop them from shopping with a merchant again,” Brown said. “This is especially concerning for online businesses that rely on repeat customers.”
Authentication, the process of verifying payments, is a big reason for this friction. Measures such as SCA have made this even more challenging, particularly for businesses that mostly accept credit and debit cards for payments.
“Around 56% of merchants have seen their card payment success rates drop due to these authentication requirements, and for 36% of them, the drop is quite significant,” Brown said.
Bigger merchants with well-equipped payment teams have found ways to lessen this impact. It’s the smaller businesses, which can’t focus as much on optimizing their checkout processes, that really struggle to maintain their conversion rates in the face of new authentication requirements.
The Right Amount of ChoiceOver the past couple of years, many payment options have emerged at checkout, and today, consumers expect their preferred option to be readily available. At the same time, merchants are working to figure out how many payment methods they should offer.
“Our research found that about 63% of ecommerce merchants believe having five or fewer payment methods is ideal,” Brown said. “But it’s not as simple as just picking five and sticking with them. Consumer habits and the market are always changing, and merchants must stay flexible.”
This can get rather complex. International businesses may need to offer various payment methods in different markets, and these methods each need to work on different devices and platforms, all while keeping costs low.
Having too many options isn’t a good thing, either. “You want to avoid what’s often called the NASCAR problem—slapping checkout buttons all over and confusing consumers,” Keyes said.
Determining the right number of payment options should vary based on the customer base and the cost of items sold. “If a merchant sells expensive stuff, offering installment or buy now pay later plans could be important,” Keyes said. “But for a merchant selling smaller items, this might not matter as much.
Best Practices to ConsiderOverall, the checkout process needs to strike a balance: it should be secure enough for customers to trust yet smooth enough to guide the customer to complete the sale.
“Customers don’t really care if a business is small or big, they want a smooth shopping experience,” Keyes said. “If a smaller merchant’s process isn’t up to par, customers might switch to a bigger one with a better process. Small businesses need a plan to tackle these new changes and payment methods to keep their customers happy.”
Alternative payment options can help merchants do this. For example, open banking payments can help improve conversions by making customer authentication quicker. In Europe, new regulations, such as the Payment Services Directive (PSD2), require verification for online transactions. With open banking, customers can authenticate their info through their banking app, reducing friction.
Retaining customers is important, too. After spending effort and money to get consumers to make their first purchase, merchants need to make subsequent visits seamless and enjoyable.
“Once you spend all those marketing dollars acquiring that customer and you get them to do that first-time payment, the next time they come to visit your site you want to make sure that the checkout experience is smooth—so they keep returning and you can really extract that lifetime value out of that customer,” Brown said.
“Ultimately, we have to remember why merchants are doing this,” he said. “This is about enabling sales, driving those high conversion rates, and delivering that lifetime value.”
To get the full insights from TrueLayer’s latest research, download The Payments Experience PlaybookThe post How Merchants Can Deliver an Effective Payments Experience appeared first on PaymentsJournal.
With more than 100 countries mandating some form of e-invoicing, the move to streamline tax collection and improve overall economic efficiency is well underway. Navigating the changing landscape, however, isn’t simple. The lack of standardization around e-invoicing makes it a challenge for international businesses. In a recent PaymentsJournal podcast, Marco Eeman, Managing Director at Billtrust, […]
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Gift cards continue to grow in popularity in the United States, with roughly 75% of consumers having purchased a gift card within the past 12 months, according to recent data from BHN (Blackhawk Network) Research. For the sixth year in a row, BHN has joined forces with NAPCO Research to conduct a comprehensive benchmark study, […]
The post U.S. Gift Card Market to Reach $260 Billion by 2026 appeared first on PaymentsJournal.
Loyalty reward programs have long been primarily the province of credit cards, but rewards for debit programs are emerging as a big opportunity for financial institutions to stand out in this competitive space. During a PaymentsJournal podcast, Jeri Scheel, Senior Director of Product Strategy at Fiserv, and Brian Riley, Co-Head of Payments at Javelin […]
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Real-time payments through the RTP® network have gained significant traction, presenting valuable opportunities for businesses to optimize cash flow and improve their operational efficiency. As the the FedNow® Service expands availability in 2023, the impact of instant payments is set to grow even more. Industries such as payroll and transportation have been early adopters, leveraging […]
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One of the most significant shifts in the payments landscape is the digital-first revolution. Digital payments have become pervasive, making financial transactions faster, more secure, more convenient, and more efficient. During a PaymentsJournal podcast, Erika Dietrich, Vice President, Global Fraud Prevention Risk Services at ACI Worldwide, and John Buzzard, Lead Analyst for Fraud & Security […]
The post Payments Revolutionize, Journeys Hybridize, Fraudsters Capitalize: Unveiling the Power of Digital Identity appeared first on PaymentsJournal.
It’s a mistake for financial institutions to not offer commercial and small-business card programs. If businesses don’t obtain the desired card program from their current institution, they’ll seek it elsewhere—and this not only jeopardizes the immediate relationship but also opens the door for competitors to capitalize on the opportunity. During a recent PaymentsJournal podcast, Bob […]
The post FIs Should Offer Business Card Programs or Risk Losing Business appeared first on PaymentsJournal.
With the rise of digital banking and online payments, the use of checks has undergone a massive shift. In 2021, the Federal Reserve processed 14.5 million checks per day, a dramatic drop from the daily 26.7 million daily it processed 10 years earlier. The average dollar amount of checks went up during the same period—from […]
The post With Check Fraud on the Rise, Financial Institutions Must Implement More Effective Solutions appeared first on PaymentsJournal.
Open banking holds significant promise for changing the financial system for the better. With the ability to access and share their own financial information, individuals gain greater control over their data while enabling more efficient and tailored financial services. For banks, it has the potential to reduce security risks and open up new product ideas […]
The post The State of Open Banking: Empowering Individuals and Redefining Data Control appeared first on PaymentsJournal.
Consumer lending in the on-demand economy has created new opportunities for individuals and businesses with limited credit histories or financial data, commonly known as “thin files.” The rise of alternative credit scoring models, driven by technological advancements and changing consumer preferences, has allowed these individuals to participate in the economy based on their performance and […]
The post Verified Digital Identities Will Revolutionize Consumer Lending appeared first on PaymentsJournal.
The adoption of ISO 20022 is well underway, especially within central banks and larger institutions. This International Organization for Standardization (ISO) format for electronic payment data interchange between FIs is heralded as the solution to boost efficiency, cut costs, and enhance transparency between organizations. In a recent PaymentsJournal podcast, Laura Sullivan, Senior Product Manager at […]
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Alternative payment methods have become increasingly popular among consumers due to their easy, efficient, and secure way to pay. Mobile payments, P2P payments, and digital wallets are just a few of the many alternative payment methods consumers are choosing aside from credit cards and cash. In a recent PaymentsJournal podcast, Matt Nilles, Senior Director of […]
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An increase in product returns and less patience from customers have made the returns process a nuisance. Many businesses feel that they are in a bind—returns chomp at their profits, but they fear driving customers away by charging for returns. That’s for good reason—most consumers now carefully check for a free and easy return policy […]
The post Happy Returns Improves Returns Process for Merchants, Customers, and Environment appeared first on PaymentsJournal.
Having an outstanding and forward-looking loyalty program is a must for businesses in this highly competitive environment. Turning customers into fans is the ultimate goal for those seeking to secure a significant market share while delivering the “wow!” factor for their customers. Today’s conversation features Mladen Vladic, VP of Loyalty Operations at FIS, and Daniel […]
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Real-time payments are changing the way money moves within the U.S. With payments processed securely, efficiently, and instantly, this can be a game-changer for both consumers and businesses. However, to implement real-time payments on a national scale, there are challenges that must be overcome, such as the need for a solid infrastructure. During a recent […]
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For merchants, the customer payment experience is paramount to boosting conversions and avoiding involuntary churn. By taking a more proactive approach, merchants can leverage network payment tokens and account updaters—eliminating customer friction in the process. During a recent PaymentsJournal podcast, Jason Harding, Product Director of Optimization at Worldpay from FIS, and Daniel Keyes, Senior Analyst […]
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In the rapidly expanding world of buy now, pay later (BNPL) services, credit unions are finding ways to compete and thrive using Credit Union Service Organizations (CUSOs). CUSOs are formed by credit unions to collaborate and pool their resources to offer efficient and cost-effective payment solutions for members. By partnering with a CUSO, credit unions […]
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According to Stripe’s latest Insights Report, businesses are treating the impending slowdown with a motto: The best defense is a strong offense. Businesses are using this as an opportunity to improve their online operations by offering better payment experiences and removing friction from checkout. In a recent podcast, Nicole Paglia, product marketing lead for Stripe, […]
The post How Businesses Are Tapping Into Payments to Increase Revenue appeared first on PaymentsJournal.
Real-time payment systems are becoming more common around the world, and the United States is about to hit its stride in that domain when FedNow debuts. This will have significant implications for all sectors of payments, including the business-to-business (B2B) sector. In a recent PaymentsJournal podcast, Mike Kresse, Head of B2B and Money Movement at […]
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Despite technology’s move to the cloud over the past decade, many payment processors still use old, outdated platforms that are inflexible and costly. Payment processing companies such as PayiQ, a division of Quisitive, are creating new payment processing platforms that use cloud technology. These systems provide everything traditional payment services do but also leverage cloud-based […]
The post Cloud-Enabled Payments Processing Helps with Demographic Headwinds appeared first on PaymentsJournal.
Check deposits have been a constant focus for fraudsters, but during the pandemic we saw a significant decrease in check fraud as government stimulus programs were targeted. By the middle of 2021 however, check fraud was back with a vengeance and the water level has seemingly risen to historic heights. To mitigate risk and losses, […]
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As the world increasingly becomes digital, digital wallets continue to grow in popularity. As a preferred method of payment for many customers, they offer a host of benefits. These include the ability to simply tap a smartphone to purchase goods and services, the capability to store numerous debit and credit cards, as well as to house loyalty program information. What’s not to like?
The PaymentsJournal podcast was joined by Damany Abernathy, Executive Director of Solution Engineering at CSG Forte, and Christopher Miller, Lead Analyst in Emerging Payments at Javelin Strategy & Research, to discuss the expanding popularity of digital wallets, as well as the security challenges and inherent risks of their growing use.
PaymentsJournalDigital Wallet Use Delivers on Convenience and SecurityPaymentsJournal Digital Wallet Use Delivers on Convenience and SecurityPaymentsJournalWhat Has Driven the Growth of Digital Wallets?Amid widespread fear of contracting COVID-19 during the start of the pandemic, contactless payments became increasingly important for consumers. According to Abernathy, the pandemic contributed to the disruption of payments, bringing about a new normal. Paying with cash was no longer desired, and anything that provided a cashless environment reigned superior.
“From a U.S. perspective, I don’t believe there was a singular event, but rather it seems there was a trifecta of sorts that aided in its surge—that being EMV (Europay, Mastercard and Visa, an embedded-chip technology designed to limit fraud), COVID-19, and Millennials, including those generations after,” Abernathy said.
“I do recognize that the weights of the aforementioned aren’t equal, but each played their respective part. EMV was the primer that forced the shift in tendering behavior.
“Then we moved from swiping to inserting and tapping. But it was the cost and complexity of integrating EMV that caused many merchants to seek alternative acceptance methods that aided in digital wallet normalization.”
On the merchant side, Abernathy added, digital wallets presented many benefits, including a faster checkout experience, a reduction in cart abandonment, and enhanced levels of security that nearly eradicate the risk of fraud.
“One thing that we have seen is a reemergence in some cases of cash transactions, at least even in younger generations,” Miller said.
“The notion of envelope budgeting as a way of controlling expenditures had, to a certain extent, grown out of control because of pandemic-era habits.”
As for the future of digital wallets, Miller asked whether we should expect “persistent, continual growth.”
Abernathy mentioned that the younger generations are the “final catalysts.”
“The younger generation really pushed the envelope regarding their finances, credit card ownership, and how they want to pay and be paid,” he said. “This is forcing wallet ubiquity, at least for peer-to-peer payments, as that is the easiest means of payment across social mediums.
“Businesses are recognizing the need to attract these younger buyers, and they’re helping to tip the culture shift of payment options.”
Consumer Concerns About Digital Wallet SecurityAlthough digital wallets are relatively safe, consumers will always be fixated on the security of their personal and financial information. Organizations must continue to take the necessary measures to ensure this security and ease the minds of their customers.
Abernathy said he believes that digital wallets deliver on the security angle and customers can rest assured that their data is well protected.
“Not to say that there aren’t ways to fraudulently use someone else’s credentials, but the security framework on the cryptography is very solid,” he said.
“The provisioning process alerts consumer banks and the associate networks to the wallet and payment credential that’s being married, and so you know ultimately what you’re obtaining in your application or this mobile app.”
Whereas losing cash can be an irrevocable loss, as there is no true ownership, and credit cards can be easily stolen and used, Abernathy explained that digital wallets have the “liability and security” baked within the technology, making it a more successful payment vehicle for customers, merchants, and even banks.
How CSG Forte is Building Solutions Amid Digital Payment TrendsAny business that wants to remain relevant and profitable must keep a close ear on its customers’ needs and wants, especially in this rapidly evolving digital payment space. CSG Forte has determined that this is its secret sauce, developing and tailoring the solutions its customers want.
“Ultimately, market listening is more than just a skill. I attribute it to a guiding truth,” Abernathy said. “We have a well-understood target market, and the solutions we bring need to meet the demands of our vertical focus.
“Much of our clients fall within the SMB (small and medium-sized business) space, and for them, there’s no appetite to develop huge amounts of code and logic supporting the request and decryption of wallet payloads for each wallet scheme they would like to support.
“Our focus is on solutions that enable frictionless integration and deployments that aid in enhancing the checkout experience for both the customer and merchants.”
Abernathy went on to say that it is important to continually assess the needs of clients. Based on the next trend, CSG Forte’s focus is to facilitate the adoption of that new technology.
He also emphasized the importance of partnering with a solution provider that can provide the best-tailored solution for a business based on the organization’s desired strategy for growth.
What’s AheadWhen asked about what he sees next on the horizon, Abernathy mentioned that cryptocurrency, although once hailed as a valid asset, will now be seen as a currency tool, especially in regions where there is a lack of banking infrastructure. It will be interesting to see how this new payment method unfolds, he said.
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Traditional banks are struggling to make the pivots necessary to keep up with the latest technological trends while still delivering on customers’ needs. With many depending on legacy systems to conduct daily operations, it has been difficult for these long-established players to be nimble, and they often lose out to competitors that can launch the newest technology.
During the PaymentsJournal podcast, Tom Kleinsorge, Vice President of Global Software Sales at Euronet Worldwide, and Brian Riley, Director of Credit/Co-Head of Payments at Javelin Strategy & Research, explored the delicate balance traditional banks must strike to attract the new generation of banking consumers while keeping longtime loyal customers happy.
PaymentsJournalHow Traditional Banks Can Modernize Without RiskPaymentsJournal How Traditional Banks Can Modernize Without RiskPaymentsJournalNeobanks Continue to Scoop Up Traditional Bank Profit MarginsNeobanks have been disrupting the traditional banking system for some time. Without the time and costs allocated to staffing and maintaining physical branch offices, these new online banks are freed up to be agile and pour their efforts into delivering top-notch customer service, using the latest in innovation to enhance the overall consumer experience.
Where are traditional banks missing the mark?
“Banks are challenged with understanding who their customers are and how they can serve this wide variety of customers that they have to deal with,” Kleinsorge said. “Traditional financial institutions are in business to make money, and they need to provide the services that their customers are going to use.”
He added: “What FIs around the world are grappling with: How do they provide this, maintain the stability, and offer the services their clients need? The next challenge is: How do they expand for the next generation of customers coming in? They’re challenged with this in a lot of different ways. They need to be able to adapt quickly.”
A banking customer’s lifecycle, Riley said, is the key to unlocking what a customer needs.
“People go through cycles,” Riley said. “You have different needs as you go through financing. That’s why it’s important to capture this segment because it’s like your first date. You always remember it. And you remember that first relationship you have with a bank. And people go through this lifecycle, they start coming out with college loans, which was not something that was prevalent a few decades ago to the extent that it is now.”
The cycle continues after that, Riley said.
“They start getting their first job, finding a partner or a spouse or whatever that means. And then moving into a spending mode,” he said. “Then they start maturing and it’s time to shift from spending to saving and investing. They’re going to ultimately get into financial service products, like shelter products, mortgages, and so forth.
“So it’s so important to address this universe of people that are aging through the process.”
Adopting new technology is not without associated issues. Traditional banks can still rely on being the stalwarts of stability.
“New innovation brings its own challenges with compliance, regulation, and security,” Kleinsorge said. “The traditional FI has always been the bank. It was a trusting place to do financial transactions of financial activity.
“New entrants and new emerging technologies are coming out with PSPs (payment service providers), wallets, and alternative channels and new providers. The fintechs are coming out with all kinds of really cool technologies that challenge the banks and the traditional way they do the business. They (banks) are trying to find the balance of how they can support the new emerging customer requirements and needs that are coming out so fast, as well as providing the stability and the legacy capabilities that they’re known for and the world depends on.”
Critics continue to focus on the reasons traditional banks should modernize their legacy systems. Not doing so will pose a significant hindrance to their ability to compete with more nimble competitors, they say.
“The legacy technology is real because it’s reliable, it’s stable, it does what it does,” Kleinsorge said. “It’s been around for a long, long time. But there’s also emerging technologies that are coming out that these legacy applications just have a hard time adapting to.
“Euronet has been working in international and emerging markets for the last 30 years. And we keep seeing this leapfrog where you’re seeing the smaller economies, the smaller banks, some of the new entrants like the new digital banks, they’re leapfrogging some of the established providers and players in the market because they don’t have that legacy infrastructure.
“So they’re able to use some of the newer (technologies) that are coming out quicker. We have some customers that are jumping right into contactless and cardless technologies.”
Although new technology is always welcome, the two features that should be table stakes involve security and the user experience. Younger consumers want speed and convenience. The older folks don’t mind waiting but also certainly like to have the “wow factor.”
“There’s a different expectation, but that security theme goes throughout, and that’s where the process can blow up,” Riley said. “The nimbleness of these systems is important. A lot of this stuff has to be real time, and that’s how you keep a competitive edge.”
Why Stay with a Traditional Bank?Even with all the innovations in the fintech industry, something about the bank as an institution gives off an air of stability. Kleinsorge agrees that banks still have robust stabilizers in place to protect them, by harnessing consumer trust.
“I think you still have the stability of what the financial institutions do and the regulation, the insurance and the FDIC in the U.S. and just the stability of the economy,” he said. “The economy relies on the banking and the financial services industry to maintain that level of requirements compliance (and) structure that that’s out there.”
With innovative new products coming to market, consumers will still have to face potential risk. As a result, financial institutions will always have a key role to play in the financial space.
“There will always be a requirement for the financial institutions to do the money management, the regulation, the compliance, and everything that the stability that is still out there,” Kleinsorge said. “But there will be new entrants that are going to offer new services that are going to be different. So, some of this is going to come down to an individual decision about what level of risk they want to take and what they want to tolerate and see where that goes.”
How Banks and Credit Unions Can Be More Competitive, Convenient, and StreamlinedAmid all the rapid changes, technological innovation, and new entrants disrupting the financial industry with new solutions, what can traditional FIs do to stay relevant and competitive? Kleinsorge said it’s about knowing customers and their needs and delivering those things fast. It’s also about making an abrupt change from current legacy systems, especially if those systems are in-house.
“It’s important that FI’s and the banks know that they can move forward with new technologies without destroying what they’ve already done, because a rip-and-replace technology is terrifying, it’s scary, it’s expensive, it’s risky,” he said. “So being able to move forward with some of the newer capabilities and work with companies that can provide those new services (is the answer).”.
This may go against what is typically advised in the financial space, but it provides FIs with a middle-of-the-road solution that can be more cost-effective and less risky.
The post How Traditional Banks Can Modernize Without Risk appeared first on PaymentsJournal.
For businesses, regardless of size, not all payments partners are equal. Finding the right partner to manage payments can be a key to improving cash flow and simplifying the payments experience, as well as making cross-border payment a piece of cake.
In a PaymentsJournal podcast, Rupert French, Product Lead at Worldpay from FIS, and Daniel Keyes, Head of Merchant Services at Javelin Strategy & Research, discussed what businesses can expect from a high-quality payments partner and how they can differentiate the best from the rest.
PaymentsJournalCross-Border Trade is a Cinch with the Right Payments PartnerPaymentsJournal Cross-Border Trade is a Cinch with the Right Payments PartnerPaymentsJournalDifferentiators in Payments PartnersBusinesses barely have enough time to manage the core functions of providing products and services, so partnering with a third party to manage and optimize their payments is a wise move. It’s an opportunity to outsource a level of complexity to a third party and make sure that there’s as little friction as possible in payments.
“Your payments partner should be specializing in fund flow and simplifying the payments experience,” French said. “And there’s a huge amount of trust that business offloads to their payments partner, which has to be respected. We’re empowered with managing the primary revenue source in most cases for a lot of small, large, and medium businesses.”
A payments partner, such as Worldpay from FIS, can help with transaction data and cash liquidity in a bank account. As French notes, those two are key drivers behind the success or failure of businesses, particularly smaller ones.
In particular, improved transaction data enables a high percentage of payment acceptance with lower risk.
Payment Flexibility is Prime for Gig EconomyGig workers often have to wait to get paid, sometimes as long as weeks after they’ve completed their work. The ability to pay gig workers any time, particularly on the weekend, is an important differentiator small businesses should look for in a payments partner.
“The possible competitive advantage presented by being able to pay those gig economy workers on non-business days with funds from online commerce could be enough of a competitive advantage to help keep that business above the waterline,” French said. “For example, consider competition for takeaway drivers on a Friday night. If you’re able to guarantee that you’ve got cash in your bank account to be able to pay that delivery right driver on the Saturday morning or on Sunday morning, that could help you keep that driver.”
Another important piece is the accuracy of data. “Being able to trust your payments partner to provide you not only the funds but also the data—which you need to be able to reconcile your prior days’ activity services requested or services provided—is absolutely critical,” French said.
Cross-Border Payments Optimization is the New StandardFor small businesses that are international and use international gig workers, moving funds across borders at the lowest possible cost and at the highest possible speed can be crucial.
But cross-border payments can be complex and a headache to deal with.
“The rails operated by the banks invariably have cut-off times, depending on the geographies in which you operate,” French said. “There can be significant layers of regulatory control which can further complicate payment movement. What your acquirer should be aspiring to do is operating on the best possible domestic schedules on clearing card payments.”
For many small to medium-sized businesses, expanding into new markets abroad can be daunting, and not just because of learning the new market environment. Sorting out the currency conversions and payments infrastructure can be devilishly complex, and this causes many businesses to shy away. But this can be ameliorated by the right payments partner.
“By leveraging the power of your acquirer to access markets that would otherwise be fabulously complex to access, small to medium-sized business can try out explorative initiatives abroad,” French said. “So with a great payments partner, you can trial product sales within a market that you don’t want to enter fully, to engage real-world market appetite. Based on that, you can then better inform the level of investment you want to put to move into that new market.”
All of this falls under the rubric of value-added services, which Keyes said is important in differentiating payments providers.
“A lot of providers can offer other varying interfaces and so on,” Keyes said. “But when you add more value-added services, you better meet the needs of a merchant and you can really stand out from other payment providers. These value-added services are increasingly necessary for businesses and merchants to survive and succeed.
“As alternative payments became more popular, these value-added services become less of a value added (and) more of a requirement.”
French noted that just figuring out the payments aspect can be a huge task for cross-border businesses. This can distract business owners from focusing on the core aspects of their business.
“Removing the complexity of cross-border funds transfer and the regulations associated with it, to just enable our customers to really focus on what they care about, is really a motivating aspect of my own role,” French said.
In general, reach and breadth of services distinguish the haves from the have-nots among payments providers.
For reach, businesses should look at where the provider has customers or partners and how those align with the customers the business is interested in serving.
Depth refers to the depth of features offered by the provider. This could involve cross-border payments, as previously mentioned. Another popular one is the ability to advance funds based on a forecasted receivable due the following morning.
Overall, the outlook is bright for companies looking to expand abroad. By finding the right provider, they can lean on that payments expertise to get all of the infrastructure in line and have it ready to deploy when the company is ready to try out a new market.
The post Cross-Border Trade is a Cinch with the Right Payments Partner appeared first on PaymentsJournal.
Gen Z, Millennials, and Gen X prefer frictionless experiences in all areas of their lives and have embraced contactless payments. Baby Boomers also prefer this payment method in many circumstances, but are often bamboozled by a lack of standardization in contactless payment technology.
Unlike credit card terminals, contactless payment experiences are not as standardized, which creates friction and confusion. And as merchants continue to elevate the consumer experience, and meet their customers where and how they want, they’ll need to prioritize accepting payment methods such as Apple Pay and Google Pay—ensuring their use in-store is as frictionless as possible.
During a recent PaymentsJournal podcast, Suresh Dakshina, Co-Founder of Chargeback Gurus, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discussed how the pandemic pushed more consumers to try contactless payments, as well as the security benefits they present for consumers and merchants.
PaymentsJournalThe Importance of Enabling and Simplifying Contactless PaymentsPaymentsJournal The Importance of Enabling and Simplifying Contactless PaymentsPaymentsJournalHow Contactless Payments WorkContactless payments are a popular way to make purchases without physically touching a card or exchanging cash. There are several ways to make a contactless payment, among them tapping a card, scanning a QR code, and using a mobile device to access digital wallets, such as Apple Pay or Google Pay.
Although contactless payments have been around for a while, the pandemic accelerated adoption as many consumers avoided touching payment terminals. “Contactless payments became even more prevalent during the pandemic and transactions really skyrocketed,” Dakshina said. “Now, it’s become a way of life.”
Keyes agreed that the pandemic sped up the inevitable.
“Just before the pandemic, contactless payments were starting to gain a little bit of steam in the U.S., but they were not as popular as overseas,” Keyes said. “People didn’t want to change how they were paying because they were very set in their ways. I remember thinking and writing at the time that something significant would need to happen to drive adoption. The pandemic did that because it forced people to consider this option that’s convenient.”
Security and Comfort Drive AdoptionAs with any payment method, security is of the most importance. With contactless payments—unlike swiping a card or entering a card number at a payment terminal—merchants don’t see a credit card number, and the transaction details are encrypted. This reduces fraud significantly in retail stores, especially from practices like card skimming.
“Contactless payments are truly secure because the data on the credit card is transmitted through encryption,” Dakshina said. “And that is the maximum protection you can have. It’s very challenging to hack a contactless payment.”
Although merchants are aware of how secure contactless payments are, there may still be some uncertainty among consumers. “People feel like someone could hack into your phone if you’re using a mobile wallet,” Keyes said. “But it’s still extremely safe. There’s room for education there.”
Among younger consumers, mobile wallet adoption is reaching a point where a significant percentage are using digital wallets exclusively and refuse to carry credit cards.
“I saw a person who walked into a smoothie shop asking the store owner if they accept Apple Pay. The owner said no, and the customer said, ‘I don’t have a credit card. If you don’t accept Apple Pay, then I cannot do business with you.’ There’s a large volume of consumers who do not want to carry credit cards and want to use a digital wallet to pay for their transactions. Businesses, especially retail stores, can capitalize on this younger generation who embrace cardless payments,” Dakshina said.
What’s more, merchants have an additional financial incentive to accept contactless payments.
“Contactless payments are considered a card-present transaction and provide security to the merchant as the liability falls on the issuer in the case of fraud disputes,” Dakshina said.
Keyes noted older consumers may be intimidated by the inconsistency of contactless payment experiences across various physical stores.
“If you swipe your credit card, it’s pretty much the same experience every time, even if you use a chip,” Keyes said. “But when you’re tapping [to pay], there are a lot of different terminals, which have different readers, and you’re not sure what you’re tapping especially if it’s a phone vs. a card.”
But, as older consumers consistently pay this way, any intimidation they may have initially felt with contactless payments will decrease.
Trends In Contactless Payments Among Young PeopleYounger consumers flock to frictionless experiences, where they have fewer steps to get what they want, Dakshina noted. And they want seamless experiences in all facets of their life.
“I have seen apartment complexes that target younger consumers. Their apartments are accessible exclusively by keypads instead of traditional keys,” Dakshina said. “The younger generation doesn’t want keys because they might lose the key and it [creates] friction. The world is starting to adapt to the needs of the younger crowd, which oftentimes goes untapped.”
Traditionally, merchants don’t target younger consumers—at least not right away. But this group has a great deal of spending power, and those in it expect merchants to meet them where they are and accept the payment methods they prefer.
“Merchants [need] to adapt to these technologies, because this is the crowd they want to attract, the ones going into the workforce,” Dakshina said. “They’re the ones who are very open to spending money on things they like.”
According to Keyes, merchants should prioritize mobile wallet acceptance. “Accepting Apple Pay and Google Pay is a good baseline,” he said. “The next step is making it clear that you accept those payment types and making it easy to use them in-store.”
Contactless Payments Catching on Throughout the WorldThe adoption of contactless payments is increasing worldwide, though use cases vary depending on where you look. For example, China and Europe have advanced in simplifying the checkout process by using mobile wallets that allow users to add items to their cart and pay through their phones before leaving the store.
India is also moving toward a cashless society, with more people using mobile payment apps instead of credit cards or cash.
“In India, more people are sending payments through peer-to-peer apps,” Dakshina said. “In our office, the younger crowd does not carry credit cards since they use mobile wallets for their transactions. They don’t carry cash anymore. Even a street vendor accepts contactless payments.”
The United States, by contrast, has been slower to adapt—though that’s changing.
Keyes noted that more sophisticated point-of-sale technology will ease the transition.
“Eventually every merchant in the U.S. will accept contactless payments soon,” he said. “For small businesses that don’t want to invest in any large terminal product, this will keep costs low.”
“Contactless is only going to get more popular. It may become the default and even the exclusive option at certain merchants, just like how some places used to only accept cash and not credit cards.”
Dakshina agreed and said contactless payments will see continued growth in the U.S.
“Payments are the lifeline for any merchant, and you have to make it seamless for your customers to do business with you,” he said. “Less friction in your customer experience always leads to more revenue.”
Find out how EMV will simplify contactless payment acceptance.The post The Importance of Enabling and Simplifying Contactless Payments appeared first on PaymentsJournal.
Real-time payments adoption has become widespread, and as a result, financial services companies need to be better equipped to overcome any operational challenges that may come up.
During a recent PaymentsJournal podcast, Reed Luhtanen, Executive Director of the U.S. Faster Payments Council, Tony Cook, EVP of Payment Operations & Real-Time Payments at FirstBank, and Cheryl Fitzgarrald, Program Director at BHMI, delve into what is needed to get an organization up and ready to support real-time payments.
PaymentsJournalHow to Become Operationally Ready for Real-Time PaymentsPaymentsJournal How to Become Operationally Ready for Real-Time PaymentsPaymentsJournalCurrent State of Real-Time PaymentsPayments have undergone a massive shift in just a few years, with real-time, remote, and digital forms of payments becoming the norm. “Lots of folks are getting engaged through the Fed, The Clearing House, and the Faster Payments Council to learn about what faster payments are and how it might affect them,” said Luhtanen.
“We recently conducted a Faster Payments Barometer survey and about 90% of our respondents said that they are either in the process of implementing [real-time payments], they’ve already implemented, or they’ll be implementing in the next two years.”
According to Luhtanen, businesses are looking to leverage this new technology for payroll, funding loans in real-time, and to pay bills.
The main benefit of real-time payments, according to Cook, is to get funds into customers’ hands faster. “At FirstBank, we’re starting with the ability to receive real-time payments only, but we see enormous benefit just from starting at that point alone.”
“If you think about all the great opportunities, especially in areas like payroll or the gig economy—as well as the ability to defund wallets—we’re excited about the opportunities there and for our customers to get paid faster. Some of the other core benefits that we get really excited about is just the overall 24/7 availability,” he said.
“Most of BHMI’s clients are large processors and financial institutions that are processing on behalf of banks, credit unions, and merchants, said Fitzgarrald. “Over the last five years, we have seen the use of real-time payments grow dramatically. Our clients are offering a wide range of new real-time payment services to their retail, business, and corporate customers. This has ranged from simple account-to-account payments to more complex business payments.”
With Opportunities Come ChallengesWith any introduction to a new technological advancement, there will be inevitable kinks that will need to be ironed out. While there will always be early adopters eager to try out the latest innovation right around the corner, bad actors will be nearby, just as eager.
“Anytime a new payment technology comes about, some of the earliest adopters are going to be the folks who are going to try to steal money from other people,” Luhtanen said. “There’s going to be a lot of work to be done to figure out where the best lines of defense are, where the layers need to be put into place. Working collaboratively is going to be critical on that front.”
So, what are the steps that financial institutions can take to ensure they can implement real-time payments effectively? It all depends on where your organization currently stands.
In terms of the operational changes that FirstBank has implemented to support its foray into real-time payments, Cook said, “From a receive-only perspective, there’s definitely a lot that must be put in place operationally and it’s maybe not as complicated as you think. We haven’t found the need to make any wholesale or major operational changes or upgrades like bringing in a large amount of staff for 24/7 support. It’s really an expansion and extension of what we’re doing to support other payment rails.”
According to Cook, liquidity management, fraud prevention, compliance—in addition to both customer and employee education—are crucial factors to implement real-time payments successfully. But while many companies would like to jump on board and implement real-time payments, there are significant hurdles to overcome first. And many are already finding themselves in front of some of these hurdles.
“One of the biggest challenges we see companies facing is how to overcome their dependencies on legacy systems that were designed decades ago and not designed for real time payments,” said Fitzgarrald. “This is primarily the case with back-office systems that cannot match the real time capabilities of payment front ends.”
How To Support Real-Time PaymentsReal-time payments adoption will only continue to accelerate on a global scale, but as noted, before real-time payments are deployed, a strategic plan is imperative.
“What is it you’re trying to do with your business? How could faster payments really affect you and provide advantages to you? There’s lots of folks out there who can help you connect the dots both on the solution provider side, but also on the intellectual service provider side,” said Luhtanen.
“Identifying those trusted resources to bring in as partners is going to be critical to building that strategy and figure out how you put it all together from a financial institution perspective,” he said.
According to Cook, aside from implementing the software solutions and other technological tools necessary, we must not forget about one of the most important resources in the faster payments puzzle: the people.
“Something that’s important to the adoption and onboarding of real-time payments is education and awareness for your employees,” he said. “Internal employees are used to how ACH wires and checks work and it’s hard to understand some of those fundamental differences.”
“Focusing on those fundamental differences and making sure there’s a broad understanding, as well as painting a picture of what the future holds with real-time payments and all the possibilities with innovation, those are really important pieces to make sure your teams understand.”
But it’s also important not to forget the role that software plays in the implementation of real-time payments.
“Software is at the core of every payment and it’s the heart of every company’s payment operation. So, software plays a huge part in the modernization of payment operations for real- time payments,” Fitzgarrald said.
Looking AheadGetting onboard with real-time payments will certainly open many opportunities for businesses, banks, and customers. What remains to be seen is what the implications for real-time payments will look like. As an example, retail businesses, according to Luhtanen, may be used to operating 24/7, but are not necessarily used to receiving constant settlement payments throughout the day. Luhtanen recommended having guidelines and best practices in place.
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Real-Time Payments appeared first on PaymentsJournal.
Economic conditions have a way of shaking up the marketplace and the ability of e-commerce to produce goods and services for end customers. Factors such as inflation, interest rates, and layoffs are powerful economic forces to be reckoned with. In a recent discussion, Sunny Thakkar, Director, Head of Merchant Fraud Solutions at Worldpay from FIS, and Daniel Keyes, Senior Analyst for Merchant Services at Javelin Strategy & Research, discussed another economic force that needs to be confronted, the increased incidence of fraud. They expound upon some concerning stats, explore why fraud tends to increase during a macroeconomic impact, and examine the solutions to mitigate fraud.
PaymentsJournalMacroeconomics Play a Key Role in Increasing the Incidences of FraudPaymentsJournal Macroeconomics Play a Key Role in Increasing the Incidences of FraudPaymentsJournalMacroeconomics and Its Impact on MerchantsAs today’s world becomes increasingly interconnected, the macroeconomic impact of events, which deal with the economy at a global level, can be felt down to everyday merchants and their businesses.
Instability within the economy seems to create the perfect breeding ground for fraud, and bad actors stand ready, willing, and able to target the weakest links and take advantage by using the latest technology and sophisticated fraudulent tactics.
“I apologize for leading with all these scary stats,” Thakkar said, “but I wanted to highlight the current macroeconomic state because it not only plays a role in impacting merchant sales and growth, but as we’ve found from history, macroeconomic factors are also known to amplify fraudulent activity. Recession or not, when it comes to the current global macroeconomic climate, things are looking far from ideal.
“The UK right now is experiencing very high inflation. Their customer price index is at over 10% right now. Many of us know that two U.S. banks were recently shut down by regulators. That created two of the largest bank failures in modern history, and the only one larger than that was in 2008. That was at the height of the financial crisis.”
All these looming microeconomic factors are also requiring businesses to make difficult cost-cutting decisions such as mass reduction in forces. And that’s evidenced by the large number of layoffs already reported by corporations. A website called Layoffs.FYI that tracks layoffs has reported over 150,000 layoffs in 2023 alone. That almost surpasses all of 2022 combined.
“All this is leading to impacts on the overall global economic growth, and that’s already forecasted to slow by 1.7% in 2023. That’s the third-weakest pace of growth in nearly three decades,” Thakkar said.
“As far as general impacts to the businesses, the drive to e-commerce has obviously been a good thing. It’s allowed businesses to thrive during a global pandemic. But industries such as retail and grocers have also experienced a major added cost because of the drive to e-commerce. Things like logistic fees, that’s from sales but also from returns,” he added.
“You think about digital advertising expenses, managing a website with all your products and goods and service. It’s a lot of expense that goes into that. “Then there’s the increase in chargebacks costs that merchants are facing today. That’s due to the increase in fraud that merchants are seeing through channels in e-commerce. As you may know, e-commerce merchants bear more of the burden of the liability of chargebacks that result due to fraud.”
Then there’s the traditional pain points that are now being amplified for merchants, including payment friction, which can lead to cart abandonment. “That’s resulted in over $260 billion and impacted sales from merchants already that we found in a report in 2023,” Thakkar said.
Although the growth of e-commerce has been on everyone’s radar, it comes with its own challenges that businesses must be prepared to deal with.
“You laid it out very nicely,” Keyes said. “E-commerce sales are great. The increase in e-commerce is beneficial to a lot of merchants, but it opens a whole other can of worms, as far as their challenges, problems, and costs that a lot of merchants aren’t prepared to handle. At least not prepared to handle efficiently, and they need to really consider their strategy to go forward as e-commerce grows more and more popular.”
“It’s not slowing down, either,” Thakkar said. “We just released our Worldpay Global Payments Report, and we found that the growth in e-commerce is continuing to rise.”
“Global e-commerce transaction value grew by a healthy 10% YoY from 2021-2022. We project global e-commerce transaction value will rise from roughly $6 trillion in 2022 to over $8.5 trillion in 2026,” he added.
The Cost of Returns for E-Commerce BusinessesEase of returns makes or breaks an e-commerce business these days. Free and easy returns and shipping are also the cherry on top and a key differentiator as customers determine where to do their shopping. Not offering these features as table stakes will take businesses out of the e-commerce game in no time.
What is not readily talked about is just how much it costs a business to accept returns. It is not cheap.
“A study done in 2021 estimated that the cost of a return to a retailer was 66% of the price of the item itself,” Thakkar said. “A $50 item cost over $33 for that retailer to fully process and then return it for resale. It’s a very expensive process. But it’s also a great customer experience, which is very important today, and it’s one of the things that online shoppers have become accustomed to.”
“Research shows that retailers are adopting this, as 45% of the top 1,000 retailers are offering free shipping today,” he said. “Not having that as an option can lead to loyal shoppers shifting their business elsewhere. It’s very easy to do in an e-commerce situation. Just type in a new URL and I can start finding goods where free shipping is offered now.”
Economic factors are squeezing the bottom line for businesses as they navigate a tougher economic environment, one that’s difficult for consumers and companies alike.
“Now the tough challenge for companies will be combining all these added expenses, especially with recent cost-cutting pressures and then just the general looming economic hardship that’s being faced by consumers,” Thakkar said. “This is all going to require merchants to capitalize on every genuine transaction as possible. Now the keyword here is ‘genuine,’ and that’s because as I mentioned a little while earlier, there’s numerous data points showing that an increase in fraudulent activity occurs during financial crises.”
“Everything from insurance fraud, identity theft to payments fraud, all have seen increases in fraudulent behavior in the past. So having fraud mitigation at the time of checkout is going to be critical for these merchants.”
That’s a product of e-commerce’s rising viability, Keyes noted.
“As e-commerce gets more popular, it just enters new challenges with fraud and new opportunities,” he said. “It shifts the focus from in-store fraud to online fraud. And it’s not going away anytime soon. Merchants need to figure out how they want to deal with it and deal with it efficiently.”
With Macroeconomic Impact Comes Increased FraudIt’s clear that most fraud is incited by outside economic pressures that create desperate financial situations, which is the perfect storm for fraudulent activity to spike. Further encouraging individuals to commit fraud is the perceived anonymity, as they are not physically stealing from a store but instead are doing so privately, in their own home, which seemingly lessens the guilt.
“Macroeconomic factors create the ideal environment to enable fraudsters,” Thakkar said. “There are anti-fraud researchers that have studied model conditions that lead to higher risk of fraud and have coined this term called the ‘Fraud Triangle.’ This is where individuals are motivated to commit fraud. When three elements all come together, those three elements are motivation or some type of pressure. It’s an opportunity, and then there’s rationalization.”
According to Thakkar, the pressure or motivation to commit fraud, that’s the one that is most influenced by economic hardships. It’s because individuals are experiencing a financial burden. They’re losing a job or there’s increased cost due to inflation. This is leading to desperate measures to provide for themselves and their families.
“The second piece is that of the perceived opportunity,” Thakkar said. “Looking at fraud and e-commerce as an example, the anonymity and the ease of deception that’s present in the online shopping world can tempt an individual to commit fraud. It’s not like I’m going to a store and shoplifting and have that risk of being caught. This e-commerce environment has allowed someone to be in a safe environment within their own home and be able to commit this fraud with relative ease.”
“Finally, there’s the way to rationalize fraud and that’s not being consistent with one’s values. An example would be there’s a rationalization that credit card fraud is a victimless fraud and that billion-dollar companies and banks can afford it. You’re rationalizing why this is OK,” he added.
Another reason that we see fraud increase during macroeconomic impacts is that people are more vulnerable due to the general anxiety of the current economic situation. This is where fraudsters take advantage of emotions and use it against the victim to successfully carry out deceptive practices.
“The COVID-19 pandemic was our last microeconomic event. We’ve seen that cost of data breaches during this time reached a 17-year high in 2020,” Thakkar said. “And the FTC also cited that the pandemic was responsible for a 70% increase in consumer-reported fraud in 2021. These are direct data points relating to macroeconomic factors creating higher fraudulent events.”
With technology growing more sophisticated, fraudsters will benefit from the accessibility and ease of committing fraud. Therefore, the incidents will simply increase.
“There’s just so many ways to commit this kind of fraud with the rise of e-commerce that were more difficult or just different with in-store shopping,” Keyes said.
“And they’re going to only grow this. Fraudsters always find a way to take advantage of people and companies. There’s a lot of room to run for them online, and it’s going to be an ongoing problem.”
The structure of businesses themselves is another factor, Thakkar noted.
“Another reason that fraud increases during this time is because there’s a reduction in workforces,” Thakkar said. “That often creates resource gaps in fraud and risk organizations. That allows these bad actors to exploit unanticipated vulnerabilities by the companies, and fraudsters are constantly testing the waters. They’re slowly pushing the boundaries until they finally find the perfect gap or loophole.”
“Once they find that, it’s often too late to mitigate and fraudsters may have already fully exploited that long before any mitigation steps can be put into place,” he said. “If you’re in a situation where staff is light, ensuring there’s some right automated tools and processes put in place—that’s going to be critical for successful protection of your business.”
“Further cost-cutting measures beyond just reduction in forces that companies are taking is cutting the expense of technology. Fraud technology is one area that we’ve seen be an expense that’s being cut. That’s where it can get really tricky. If you already have staff shortages and gaps, now there’s the potential for wide-scale attacks that can become even more severe.”
Managing a Balance Between Identifying Fraud and Reducing FrictionHitting the mark on two ideals—managing fraud and providing a seamless, frictionless customer experience—is a constant and ongoing challenge for businesses. If businesses do not have the right anti-fraud tools in place, they can lose money and consumers. But they also stand to lose money and customers if they don’t offer a hassle-free payment experience.
“It’s certainly not easy to manage this balance,” Thakkar said. “It’s going to be tough, especially since every impact to a genuine transaction, even if it’s just an impact due to added friction at checkout, can lead to decreasing sales—not only for a single transaction, but you can risk losing that entire customer’s lifetime value. We call that insulting or customer insult. If I decline a customer at checkout, someone who’s valuable, it’s easy to type in another website and find another good on another competing business. Making sure that the experience stays seamless and frictionless for those good customers is incredibly important.”
“That’s why maximizing conversions, while not losing focus on an effective fraud strategy for e-commerce sales, is going to be critical for merchants,” he said. “If you don’t have the right fraud strategies in place, then you’re opening yourself up to another situation. Traditional fraud management, especially ones that operate with a strictly rules-based technology, is not going to be the best option.”
“We must consider fraud management as payment optimization. If you think about what traditional fraud management focuses on, it’s mitigating fraud. The buck stops there. When you look at fraud management with a payment optimization lens, the focus should be on preventing the riskiest of transactions while maximizing genuine authorization approvals, while involving the least amount of friction to the payments experience as possible. That means real-time decisions using sophisticated artificial intelligence and machine learning.”
The most important piece of the puzzle in making accurate determinations and approving transactions is data.
“The data piece is important here,” Thakkar said. “Think about a jigsaw puzzle. Every transaction is essentially a jigsaw puzzle that you have milliseconds to solve. The more data I have, the better I can put this puzzle together. If you don’t have enough pieces, you risk getting that decision wrong. Sometimes you might not have the right pieces and you can’t put that puzzle together. And either way, you don’t have enough information to make an informed decision of ‘do I approve or decline this transaction?’”
“Data is incredibly important. It needs to be coupled with a limited to no step-up authentication, which introduces an opportunity for cart abandonment and lost sales,” he said. “If I’m at checkout and I’m about to make a payment and all of a sudden, I get a pop-up window that wants me to confirm details about myself, that’s introducing friction and can cause someone to get concerned and leave that sale, and they’re out the revenue in that situation.”
“For merchants who are shipping physical goods—a lot of those merchants are doing manual reviews before shipping those goods out to check one more time for fraud and ensure that as they ship that good, they’re making sure it’s going out to a genuine customer so they don’t get a chargeback on the back end of that. The problem with that is it creates more friction and a bad experience for the consumer, so (it’s necessary to have) the ability to execute the fulfillment of goods instantly as soon as I hit checkout.”
What Businesses Should Seek in a Fraud Protection ProviderThe challenges for e-commerce businesses can seem insurmountable, but luckily, there are plenty of ways to tackle these problems and improve your current strategy. A key is choosing the right fraud protection provider.
“There are several things to consider here,” Thakkar said. “The first one, consider what KPIs are a priority for the fraud provider. A provider who only focuses on fraud, chargeback reduction, or reduction of fraud can be harmful to overall sales. Providers should be transparent about the value that they can provide in terms of the overall approvals. So that should be approvals due to fraud.
“The second piece is ensuring that the provider doesn’t operate in a black-box method. That’s where fraud decisions are being made in this funnel without any real clarity back to you on what or why these decisions are being made to protect your businesses,” he said.
“I’ve worked with a lot of businesses over the years, helping merchants find the right solution for them. And every merchant that I’ve worked with has some difference in their operating model. If a business operates in a black-box method, the business doesn’t have an opportunity to add input on why they need to operate differently in their business. Ensuring that businesses see why decisions are being made offers businesses the opportunity to provide feedback on changes for a successful fraud management strategy. Then look at solutions that create a strong ROI, a return on investment, for your business.”
There’s also reduction and staffing. According to Thakkar, if you’re not able to hire more staff during peak seasons, you can’t slow down your fulfillment for goods—you still have to keep up with that demand. It’s important to find a solution that can offer automated fulfillment opportunities. That reduces the need for manual intervention that can be key in using technology to accomplish your operational goals. The problem is fraud providers are not using the right technology, and they’re not applying the right data to accomplish this.
“Ensure that providers have a strong artificial intelligence or AI and machine learning also known as ML-based fraud detection, and that can generate all the data that we can collect and come up with real-time and accurate decisions,” Thakkar said. “Adding as much data as possible at the time of checkout can lead to a better outcome at the end of the day. That’s an outcome that can get you to the right decisions and reduce the amount of false positives (I.e. insults to your customer), but also ensure that you’re not increasing fraud as well.”
Navigating all the ways to prevent fraud and providing the best customer service experience can be complicated, to say the least.
“It’s a tightrope that merchants and their service providers need to walk in preventing fraud,” Keyes said. “Which can be extremely costly, also ruining the experience for customers. There are many different facets of the customer experience where you would like to check for fraud but where it could cause a customer to bounce off at the same time. You can’t allow fraud. So you need all these different types of solutions.
“All these are potential ways to check but that ideally don’t disrupt the experience for the customer. It’s complicated telling merchants and their service providers that they always need to keep in mind,” he said.
Guaranteed Payments SolutionAs a way to circumvent all the aforementioned challenges businesses face in today’s macroeconomic environment, FIS has created Guaranteed Payments. It offers real-time, seamless fraud decisions.
“We recently launched Guaranteed Payments, which uses exactly the framework of payment optimization, focused fraud protection,” Thakkar said. “It focuses on overall sales conversions and approval rates. That’s our primary KPI guarantee. Payments offer real-time, frictionless fraud decisions, and it’s all backed with a 100% financial liability shift on fraudulent chargebacks.
“Chargeback guarantee orders can also be instantly fulfilled without the need for manual reviews to achieve things like expedited or same-day shipping and that meets the demands of today’s e-commerce shopping experience that we’ve all become accustomed to, without the fear of liability of losses that come to that business,” he said.
As we enter further into this next macroeconomic event, staying vigilant towards fraudulent activity will be critical, but being too restrictive can also be detrimental. The focus behind every set of KPIs for fraud management needs to be not just to focus on reducing chargeback rates or the count of fraud prevented, but the percent of transactions that are being approved as a result of your intelligent fraud management. As the competition in today’s market is far too great, we risk the loss of not only a single transaction but the loss of loyal, returning customers. You may only have one chance to really get this right.
It’s a high-stakes proposition, Keyes said.
“If you know if you get this wrong, you disenfranchise your customers,” he said. “You lose sales. If you get this wrong, it’s very costly. It’s something that every merchant needs to take seriously and take the time to make sure they’re doing what’s right for their particular business.”
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Help is on the way for merchants that are swamped with friendly-fraud chargebacks. Friendly fraud occurs when a customer makes a legitimate purchase, then requests a refund, often because the consumer has forgotten the transaction took place.
Visa is introducing its Compelling Evidence 3.0 rule set, which allows merchants to submit historical purchase evidence to prove a legitimate cardholder was behind an order. The rules are based on the assumption that if a cardholder has engaged in previous transactions with a business and those transactions were not disputed, then the current transaction is not fraudulent.
The new rules require the same data elements to match across undisputed and disputed transactions, with transactions using the same payment method and settled at least 120 days prior to the dispute. Importantly, the new system allows evidence to be submitted before a chargeback is filed. If certain elements are decisively proved, the fraud claim will be denied.
For merchants, this is all good news that is likely to reduce their chargebacks dramatically, but it also means they must get their data collection in tip-top shape to meet the standards of Visa’s new rules.
In a recent podcast, Navin Sequeira, VP Global Chargeback Operations at Chargeback Gurus, and Brian Riley, Head of Credit at Javelin Strategy & Research, discussed the size of the friendly fraud problem for merchants, how VISA CE 3.0 rules are going to change the lives of merchants, and how merchants can best prepare. This article provides some of the key highlights.
PaymentsJournalNew Visa Chargeback Rules Are a Game-Changer for MerchantsPaymentsJournal New Visa Chargeback Rules Are a Game-Changer for MerchantsPaymentsJournalFriendly Fraud: The Nemesis of Merchants?Friendly fraud is a growing issue for merchants, causing significant financial losses and reputational damage. This occurs when a cardholder disputes a legitimate transaction, often because of confusion or forgetfulness, but such disputes can also result from deliberate misuse of the chargeback system.
From the merchant’s perspective, if the same cardholder has made similar purchases in the past without disputing them, there is a good chance that the transaction in question is also legitimate. However, current Visa regulations don’t require banks to consider this evidence, making it easier for customers to commit friendly fraud.
“Estimates suggest that friendly fraud accounts for 60 to 80% of all chargebacks, which cost merchants approximately $40 billion annually,” Sequeira said.
The impact of friendly fraud is far-reaching, with costs including the value of the disputed sale, chargeback fees, administrative expenses, and lost revenue. Reputations can also suffer, particularly if chargebacks result from misunderstandings or mistakes, thus leading to increased scrutiny from payment processors and financial institutions.
“Focusing on that largest population (friendly fraud) really makes a big difference when you’re managing the fraud process and looking where the vulnerabilities are,” Riley said.
What is Visa CE 3.0 and How Will it Help Prevent Friendly Fraud? On April 15, Visa will introduce Compelling Evidence 3.0 (CE 3.0), the latest version of its CE process, which includes enhancements designed to help prevent friendly fraud chargebacks and remedy card-not-present fraud disputes.
To prove a dispute is associated with two previously undisputed transactions, sellers will need to provide three classes of evidence:
- Item descriptions and/or proof of merchandise or services provided.
- Evidence of two previous transactions processed and settled between 120 to 365 calendar days before the current dispute.
- Data elements about the device used, including device ID or fingerprint and IP address, that match the two prior transactions. Other elements can also include login ID and delivery address.
Sequeira notes that using multiple data elements about the device used for payment is crucial in preventing chargebacks, as sometimes one data element is not enough to make a case.
“I could make the first order at home, and tomorrow I could make a second order at the beach with a different IP address,” Sequeira said. “If there is a chargeback, and the only device data element that is submitted is the IP address, Visa will say that’s not a match. But if device ID is also submitted, the picture becomes clearer.
While the exact impact of this new regimen is difficult to predict, it is reasonable to assume that the new rules will reduce chargebacks.
However, merchants need to put in considerable IT work to collect and store the required data for CE 3.0, then retrieve and pass on the data in less than two seconds to respective channels. With cost-cutting, layoffs, and macroeconomic factors, many merchants may not have the budgets to make these changes. As a result, many will partner with third parties to implement the system.
“Bringing in experts on this to deal with this important function within payments is really important,” Riley said. “It’s just like with taxes—do you want to do your own taxes, or do you want to deal with the IRS directly? The same thing applies here: Bringing in an expert makes a lot of sense, just as a normal course of business.”
To prepare for CE 3.0, merchants should determine if they have the necessary data elements to implement it, then work with their chargeback management company and IT teams to ensure compliance. Although the pre-dispute stage will not be more time-consuming with CE 3.0, the post-dispute stage could be if merchants do not upgrade their systems.
“If merchants do not have the ability to record all of these data elements and retrieve it when a chargeback comes in, it’s really essential for them to really strengthen what they’re doing,” Sequeira said.
CE 3.0 is designed to fight specific types of fraud, and not all merchants fit the bill. Furthermore, merchants can choose how much effort and money make sense to put in based on how many 10.4 (card not present) chargebacks they have.
“Merchants have to look at how many 10.4 transactions they have when compared to the rest of the results,” Sequeira said. “If it’s a small subset, if the dollar value is not very high, then they may want to continue with what they’re doing. But if they have a very large population of 10.4 transactions and the dollar value is high as well, they should evaluate with their IT and finance team putting into place a chargeback strategy.”
In any case, Visa is offering more tools for businesses to dispute certain kinds of chargebacks. So even if a merchant is not in a place right now where this solution is needed, it could be helpful in the future.
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With exceptional customer experiences they have derived from giants such as Apple and Amazon, consumers expect choice, speed, and control in the methods they use to pay. And they’re looking for these very features from their financial institutions.
FIs, steeped in legacy systems, are simply not geared up to offer these features, which should be table stakes. Not offering these features could mean a loss of customers and an impaired ability to attract new ones. This discussion—between Marcell King, Product Innovation Officer of Banking and Fintech Solutions at Paymentus, and Brian Riley, Director of Credit and Co-Director of Payments at Javelin Strategy & Research—delves deeper into what FIs can do to give customers more convenience and control with a modern loan experience for customers.
PaymentsJournalOmnichannel Experience, Real-Time Payments, and Payment Choice: The Keys to FI Payment InnovationPaymentsJournal Omnichannel Experience, Real-Time Payments, and Payment Choice: The Keys to FI Payment InnovationPaymentsJournalWhat Customers Want: Convenience, Control, and SpeedPayment innovation and consumer demand drive the need for choice, speed, and efficiency of payments. Businesses and FIs alike must continually keep their finger on the pulse of what is happening within the payment landscape. This will ensure that banks offer what consumers want when it comes to payments.
Millennials, for example, expect more when it comes to their digital experiences. They’re less patient with organizations that don’t give them the control, convenience, and autonomy to make their own decisions.
“It is about giving consumers control over how, when, and what they pay with,” King said. “Millennials are entering their prime spending and borrowing years. The demographic studies show they’re less patient. They want more convenience. They want more control, and so they have different expectations than an older demographic.
“It’s about how do you give them what they want. They’re really looking for the payment options that they prefer, whether that’s their debit card, their PayPal account, or paying it through a retail store. It’s about giving consumers more human optionality and the ability to pay through whatever channel they choose, giving them the convenience to control that experience as much as possible.”
Payment options should match what everyday consumers deal with, such as when they get paid and when their bill payments are actually due. Therefore, flexibility is a key.
“When you think about how pay periods come, people get paid once every two weeks, and that doesn’t always stack up if I have a recurring payment to pay, like a car payment on the third of every month,” Riley said.
“That doesn’t always perfectly align with how the consumer’s budget goes. Rather than just setting it and forgetting it, it’s the ability to allow people to navigate that. If I’m a consumer, I can make that on the paycheck that precedes it, or I could make it really close to the end. That flexibility is an interesting opportunity.”
“As you think about how workers are traditionally paid, the payroll tends to be weekly, biweekly, semi-monthly or monthly. But with the on-demand economy, gig workers don’t have that same recurring frequency or predictability in terms of how they’re earning their income,” King said. “You want to be flexible enough to allow those consumers who have much more variance in their payment cycles to pay when they want and as quickly as they want.
“An Uber driver with earnings going to their PayPay account might work for 12 hours for the next couple of days to make their car payments. You want them to be able to pay with their PayPal account as quickly as possible. Give them the opportunity to receive a payment or text and pay immediately with that text. Or go right into their mobile app in between rides and pay it from their mobile app. Giving them the flexibility to pay whenever they need to and where their income flows support their expenses.”
As the highly anticipated FedNow launch approaches, faster, real-time payments will become more mainstream. FIs must prepare for the implications.
“You’ve got real-time payments coming to fruition,” Riley said. “You already have The Clearing House RTP network online version. FedNow is coming up on July 1. So, this really bolts into having faster funds in your account and then being able to deal with them effectively. That’s something that’s really needed.”
FIs Are Falling Short in Payment InnovationNeobanks and fintech companies have long filled the gap for banking customers by offering more affordable and personalized financial services. These organizations have done much to disrupt the traditional banking system as their focus has been on delivering what customers really want from services.
“Think about consumer expectations today, whether it’s Amazon or Apple, everything is very convenient,” King said. “It’s all about low friction, and these companies give consumers the ability to execute on whatever they want as quickly as possible so that they can get on to other things.
“When you think about the competition from a banking perspective, of all the non-traditional banks that are providing services to consumers for payments, whether it’s a mortgage or auto loans, there’s the expectation of convenience, of control, and of speed.”
“Traditionally, legacy technologies don’t support all those components. You may be limited to only the website because there’s no mobile app, or you may only offer an ACH payment to your loan from a checking account when you know a lot of consumers may not have checking accounts. I think that’s where the FIs are falling short.
“Giving the consumers those three things that are most important to consumers; together, not one or the other, but all three consistently.”
It’s not only about giving customers convenience, control, and speed. FIs must also fine-tune their offerings, providing innovative services that customers actually need and differentiating themselves from the competition.
“It boils down to account retention,” Riley said. “At the end of the day, that’s an expensive thing to manage. In the credit card business, you lose about 15% of your volume, and in the retail banking world that’s a consistent number also. It’s not just keeping the customers you have; it’s creating an offer that’s compelling to new customers that you bring in.”
Reshaping the Loan Payment ExperienceWith the wealth of innovative payment methods and the growing gig economy, FIs should put flexibility and choice of payments at the forefront. Payments must be fast and from customers’ preferred methods.
“Going back to the three buckets: Number one, it’s convenience,” King said. “How do you make it as easy as possible for consumers to pay their loans through any channel they want, as quickly as possible? You may have a consumer who banks with you but has an external account that they want to make their payments from.
“You may have a consumer whose primary income is from driving Uber or Lyft. How do you make it convenient for them to make payments from their mobile phone quickly? How do you give them the ability to pay with whatever payment method they want, where they’re keeping their dollars? It may not be at your institution; it may be at another institution.”
“It could be PayPal, Apple Pay, or Google Pay. They may want to pay with one of their digital wallets. They may want to pay with cash. Maybe they’re a service worker and use their tips to pay their car loan. We want to be able to give them the choice of how they want to pay. And then … control. How do you give them the ability to control where they’re paying from? It ties back to convenience. It comes down to giving them as many payment options as possible to pay their loans. And giving them the channels that they want to pay from.”
“The third one is around speed. Consumers expect real-time (payments) now. How do you make it real time so that when you make that payment, it is being posted immediately, not two or three days later and now I’ve got a late fee?”
With all these critical needs from consumers, how will FIs deliver? It will be a tricky hurdle to overcome.
“Orchestrating all this gets interesting,” Riley said. “You have installment-type loans that have set amounts every month. Or you have bills to pay like your electric company, water company, and those vary every month. So, it’s not one-size-fits-all. Do you want to push in the payment? Do you want to pull out the payment? Orchestrating that really takes a very strong solution to make this all fit into the ecosystem.”
“That’s the challenge,” King said. “There’s a lot of legacy payment technology infrastructure that’s been in place for 10 to 15 years based on legacy payment methods like ACH when there are so many more payment options. Now you must deploy newer technology, more modernized technology that allows you to take advantage of all the new payment capabilities that the market has created and built over the last 20 to 25 years.”
Driving Value from Payment Modernization EffortsCustomer satisfaction scores reveal that fintech companies are doing something right for their customers, and banks should take notice.
“Number one is customer satisfaction,” King said. “There’s data out there that shows that banking NPS and customer satisfaction scores for making repayments are lower than some of the newer nontraditional bank fintechs, whether it’s Rocket Mortgage or other organizations that are deploying modernized technology and interactions with consumers.”
“Customer satisfaction and NPS scores is one way to think of it. If you have strong NPS scores, that means that your customers or members are willing to refer other customers to your institution. Reducing late payments and delinquencies create economic impacts on the business model. The cost to serve. Consumers want to do things themselves, and therefore providing as many self-service channels to those consumers to make their payments has a strong economic value from an operational efficiency.”
“So being able to reduce your cost to serve those customers with information that they need and that they can access over their mobile phone or their desktop drives ROI as well. Reducing PCI exposure, that’s another value that can be brought when you’re modernizing technology for payments.
“We have a product called Secure Service and instead of a member or customer providing their debit card number to a customer service representative over the phone, we can send a text message link to the consumer. They open the link and there’s a secure page that allows them to enter their card information directly into that page, which mitigates and eliminates the PCI requirements that you’ll need to maintain internally, reducing the number of vendors. We talked to many institutions and they’re running multiple systems to support loan payments. There are some capabilities at the core, but then there’s third parties that offer silo solutions like just web or just IVR or just collections.”
“Some institutions have three or four systems that they’re operating to manage collection of repayment on loans. Being able to consolidate into one platform, creates operational efficiency.”
“There’s a cross-sell opportunity. That’s a big area of focus for institutions who provide indirect auto lending. The customer may not have a banking relationship with you, but they have a loan with you because they bought a car at a local car dealership. If you provide great service interactions, and you give that consumer the convenience, choice, control, and speed, there’s opportunity to upsell and cross-sell.”
“You look at those buckets and you start holistically looking at the ROI. It becomes very strong when you’re providing things that the customer needs to manage and repay their loans.”
The post Omnichannel Experience, Real-Time Payments, and Payment Choice: The Keys to FI Payment Innovation appeared first on PaymentsJournal.
Digital payments continue to evolve, and consumers are here for it. If businesses or financial institutions are not equipped to deliver embedded payments, today’s customers will simply seek the ease and convenience of a seamless payment experience elsewhere.
A recent discussion between Hal Ramakers, SVP of Global Solutions at Brightwell, and Brian Riley, Director of Credit and Co-Director of Payments at Javelin Strategy & Research, probes deeper into embedded payments and what businesses can do to meet evolving needs in the global digital payment landscape, how to facilitate cross-border payments amid myriad regulatory infrastructures, and how to gear up their businesses for new user expectations in cross-border payments.
PaymentsJournalEmbedded Payments Are the Future: Is Your Business Ready?PaymentsJournal Embedded Payments Are the Future: Is Your Business Ready?PaymentsJournalThe Importance of Integrating Global Payments Solutions into Business Product LinesThe secret to building retention and loyalty is to innovate the consumer experience. As more consumers choose digital payments to conduct their everyday business, they want something that is seamless and streamlined, rather than having to jump from one platform to another.
“If you look at the industry today, most consumers work with third parties,” Ramakers said. “They’re leaving their banking app to send money, which is not an optimal experience.”
Embedded payment solutions allow customers to purchase items directly from their TV, pay for a cab ride, and even send and receive funds from all over the world, all without taking out their wallet. This trend will only continue to grow.
“There are over a billion people today that send or receive international money transfers. That’s about 30% of the global (consumer) population.”
“Globally, checks are still being sent across borders for vendor payments and consumer payouts. The pandemic shifted the world and moved us five years forward. As a result, consumers changed how they interact with companies and their financial institutions. They’re looking for embedded solutions when they conduct business whether in their bank accounts, through their banks, or through a program managed using a digital solution.”
Embedded Payments Solutions as Key Drivers for Customer LoyaltyEmbedded payments solutions, which allow customers to seamlessly and securely make transactions within a product or service, can enhance customer loyalty by providing a convenient and efficient payment experience. By integrating payments into the customer journey, businesses can improve overall customer satisfaction and increase the likelihood of repeat purchases.
“If it’s a service that a financial institution doesn’t offer, the consumer’s going to find it elsewhere,” Riley said. “Do you risk having that customer go to a money transfer operator, where they can get distracted by cross-sells that happen within their ecosystem? Having that as a service option embedded becomes a no-brainer.”
“From the consumers’ side, they want to conduct the business where they get paid,” said Ramakers. Getting paid within an app and having the option of global remittances can be a convenient and seamless experience for users, making it a sticky feature that encourages continued usage.
“They go in (the app) to check their balance and realize they just got paid. They then remember that they have a family member in the Philippines that they need to send some money to, so they want to send money right through the app. This process is more streamlined than signing up for another money transfer application in addition to their banking app.”
Riley hit on another aspect of embedded payments that provides valuable insights.
“When you get the social aspects of this, too, it gets fascinating because people align themselves to the components of the products they need,” he said. “Making my mortgage or rent payment is an unemotional experience, and it’s just a function of what I have to do when paying bills online.”
“But moving $500 to my mother in the Philippines, for example—that’s a need-to-have function. It improves the whole stickiness of that relationship where the household payment is a commodity item. This is a special item a person wants to do, and they’re going to be doing it for years to come.”
“It’s also important to understand the cultural needs of your users and also why cross-border payments are important,” Ramakers said in picking up that thread. “In many cases it’s about supplementing and taking care of their family incomes, the family unit, etc.”
“Although one person is living here in the U.S., the rest of their family is still in the Philippines, India, or even Latin America. They are supporting their families back home.”
Remittances often provide crucial financial support to families and can help improve their standard of living. It plays a vital role in supporting family members by providing financial assistance for basic needs such as food, housing, and healthcare. In many cases, it can also help families afford education and other investments in their future, improving their long-term prospects and economic stability.
Utilizing Cross Border Payments Data to Uncover Growth OpportunitiesAnalyzing cross-border payment transactions can uncover a treasure trove of opportunities.
Many businesses lack the data necessary to see what their customers are doing when they send and receive payments.
“A lot of companies don’t realize how big the cross-border industry really is. When you start talking about 13% of people, sending money or receiving money, it’s a large number and you have to look deep into your data to be able to see that,” Ramakers said.
“It could be your ATM transactions where money is being pulled out and going to a retail location that’s out there or a POS transaction that’s occurring. It’s interesting when we’ve looked at some key companies interested in understanding what their consumers are doing.”
By utilizing cross border payments data, businesses can gain valuable insights into customer behavior and preferences across different markets, which can help identify untapped growth opportunities. Analyzing transaction data can reveal patterns and trends that businesses can leverage to develop targeted marketing strategies and tailor their products and services to meet the specific needs of customers in different regions.
“When we look with our partners at the data, we see all these transactions. It becomes very enlightening to a company when they start looking at the data and realizing what is happening and it presents some great opportunities for sure.”
That said, we want to enable banks, program managers, and corporations to keep those users in their ecosystem.
Knowing Where to Begin is a Common Challenge for CorporationsWhen it comes to developing an effective embedded payments solution, there is no one-size-fits-all product. Business-to-consumer (B2C) and business-to-business (B2B) transactions have their own payment nuances that need to be addressed.
“There’s a couple of things about cross-border payments that are significant,” Riley said. “First, you have two worlds. You have B2B and B2C — those different ecosystems bring some specific challenges. What you need is to have the infrastructure that makes it work seamlessly.”
“You can’t have someone try to make a payment in a foreign country and then get bogged down in slow or ineffective processing.”
“So, consider this: there’s over 200 countries in the world that have different compliance requirements. Then there’s the data that’s needed to complete those transactions. This isn’t just a simple build. For the average company, it can take up to a year to build their own solution.”
That’s why many banks, program managers, and corporations are turning to remittance and disbursement platforms to bring solutions to market for their consumers far faster than developing them in a silo. Further, platforms that collaborate and partner with the right payment networks will fuel more innovation within the cross-border-payment space.
“A good cross-border solution is difficult to create with a single partnership,” Ramakers said. “You need to integrate into multiple connection points, which is one of the things that makes it so complicated. You need to have access to bank account payments.”
“At Brightwell, we do that in over 180 different countries globally. We also have access to over 290K cash-out locations globally. And with the addition of our recent Visa partnership, that’s going to hit over 5 billion card account endpoints that lead into an account.”
“We’ve integrated into over six different providers, and on average, that’s a real drain and it’s extremely expensive from a product and development perspective. You take five to seven months to do those integrations, and that’s a hard case to build.”
“Once you start working on the integrations, you’ve got to deal with the compliance components behind it. There’s a lot of heavy regulation around making cross-border payments, and that expertise isn’t based in a lot of the companies and the financial institutions today.”
Anti-money laundering (AML) and Know Your Customer (KYC) are some of the many compliance and regulatory elements that are required to enable digital remittances to work safely and securely.
“How do you simplify that? This is one area where we’ve focused on. We’ve taken our experience and asked ourselves: How can we take what we have learned and our expertise? How can we apply that to the industry? That’s what we’re doing today with our new ReadyRemit platform.”
After years of servicing global workers and integrating with countless remittance partners, Brightwell understands the arduous process of building out a compliant and user-focused payout solution. ReadyRemit solves these challenges, making it easier than ever to enable cross-border payments.
Integrating Global Payments into Companies is More Possible Than Ever“First, if you’re going to integrate it into your app, ease and cost are priority,” Ramakers said.
“You need to find a platform like ReadyRemit where we have that capacity and we’ve done the work for you. We are integrated into all of the best rails across the board. We have simplified the experience.”
“We’ve created APIs and SDKs where now clients can integrate the service easier and faster in 30 days or six weeks into their solution. You need to find a creative solution to that and, secondly, compliance. Remember: These are not just domestic payments.”
“We’ve learned a lot in 10 years in our experience dealing with cruise lines and global crew members. So over that period, we’ve been doing substantial cross-border payments around the world. We had our own card program and still do this today. Now we see that there is a need to enable other companies to take advantage of the kinds of expertise that we have. Most companies out there are more about building their brands. They have partial networks, and they have pieces of the program. There hasn’t been a great unification aggregation platform to bring it all together and make it simple and easy. That’s what it really comes down to,” Ramakers said.
“There isn’t one provider that can give you the fastest payments into every corridor, or the best coverage globally into a corridor. By using an aggregation and embedded platform like what we do with ReadyRemit solves a lot of those problems for you.”
The post Embedded Payments Are the Future: Is Your Business Ready? appeared first on PaymentsJournal.
If you are looking more carefully at cash flow after the collapse of Silicon Valley Bank, you are not alone. One place to look is automating accounts receivable (AR).
With the increasing digitization of all aspects of finance, AR sticks out for its antiquated processes. Most businesses still do AR manually, and changing from that process has not been top of mind. But it should be.
Automating AR has the potential to increase cash flow, save businesses a lot of money, improve customer service, and be more environmentally friendly. Digitizing AR also makes it possible to use artificial intelligence and machine learning to parse AR data and find patterns that can be used to improve the business in surprising ways.
In a recent PaymentsJournal podcast, Steve Murphy, Head of Commercial and Enterprise Payments at Javelin Strategy & Research, and Bob Purcell, CFO of Billtrust, discussed the many benefits of automating AR. Many people think that it isn’t worth the cost or effort to automate AR and that there are no synergistic benefits for a business by doing so. Their conversation counters that assumption.
PaymentsJournalAccounts Receivable Automation Pays Off With Increased Cash FlowPaymentsJournal Accounts Receivable Automation Pays Off With Increased Cash FlowPaymentsJournalFinancial Resilience Starts With Perfecting AR Cash FlowThe pandemic and the recent bank collapses have reanimated the importance of managing working capital.
The pandemic led to a significant disruption of supply chains and increased uncertainty in the economy. The bank collapses have also highlighted the importance of working capital management as businesses have struggled to find alternative sources of financing. Many companies were caught off-guard by the bank collapses and have had to scramble to find alternative funding sources to maintain their operations.
In preparing for a downturn, companies should focus on what they can control and make their businesses more efficient. Shifting from manual AR to automated should be at the top of the list.
Manual AR tasks inhibit cash flow and increase operating costs. Automated AR processes improve cash flow and reduce costs.
“We’ve reached an inflection point in our profession,” Purcell said. “Finance leaders across our customer base are beginning to understand that digitally transforming AR and adapting technology bolsters our financial resilience.”
This shift has been a long time coming.
“AR software penetration is only around 24% of companies today, meaning that over three-quarters of businesses are still relying on manual processes and working with cumbersome legacy systems that slow down cash flow,” Purcell said.
“According to AFP,.33% of B2B payments in North America, and 31% globally, are still made by a paper check. So, it’s really time for corporations to fortify their businesses through AR digital transformation.”
Leveraging Data From Automated ARAutomated AR allows companies to forecast their cash flow better. It is particularly helpful for companies with lots of remote employees, as payments can be moved quicker, without having to rely on the mail.
But there are likely to be additional payoffs in efficiency from automating AR, the kind that can’t necessarily be seen in advance.
“Once companies start processing AR in digital software, they can then take advantage of the machine learning and other AI capabilities,” Purcell said.
Purcell gives a few examples of how this data could help make a business more efficient.
“AI and machine learning can potentially inform you about what segments of your market pay faster than others, thereby helping you determine your ideal customer profile,” Purcell said. This information can help the company decide which customers to target in advertising and outreach.
Automation Hits Many Birds With One Multifaceted StoneWhen humans are involved, human error follows. So reducing human involvement in AR has the potential to reduce costly errors and produce savings on labor.
Moving toward automation makes things more efficient, predictable, and reliable across the board, thereby improving customer service. “After implementing our software, our customers say they have around 25% better customer service levels,” Purcell said.
The move toward automation also improves liquidity.
“Two of our many responsibilities as CFOs are safeguarding our assets and improving cash flow, right? The banking crisis has definitely caused us to step back, take stock, and create an alternative plan to what we do,” Murphy said.
Automating AR can interface nicely with new methods of customer service, including chatbots. With ChatGPT-4 now on the market, companies are hustling to incorporate it into their products, and AR will be no different. Doing this well can allow a company to downsize its AR staff and customer service staff, generating significant savings.
“There are exceptional companies out there that embrace AI and machine learning, that are making it a lot easier to manage your money without needing to contact a customer service rep,” Purcell said. “You’re told (in) real time what things look like.”
A bonus to automation is that it involves less paper, which makes a company’s operations more sustainable.
“The environmental effect of having automation can be really substantial,” Purcell said. “One of our customers digitized nearly 1.5 million of their invoices, in 2021. They found that automation saved them over 170 trees, 159,000 gallons of water, and 189 million BTUs of total energy.” Another big benefit is that automation positions businesses in a way that is attractive to Generation Z customers. Gen Z prefers convenience and a digital pathway in B2B payments. Companies that develop systems that are as sophisticated and convenient as the best P2P applications will be the most successful at keeping Gen Z as clients.
The post Accounts Receivable Automation Pays Off With Increased Cash Flow appeared first on PaymentsJournal.
Real-time payments (RTP) continue to become more of a part of everyday life for consumers. While RTP systems are more mature in other parts of the world, the U.S. is slowly catching up. The Clearinghouse launched its RTP Network in 2017, the first payments rail in the U.S. designed to handle real-time transfer of settlement and funds. The Federal Reserve is scheduled to launch its FedNow RTP service sometime in 2023.
The manner in which real-time payments evolve in the U.S. may be a bit different than in the rest of the world, however. This is due to the massive number of financial institutions in the country (more than 9,000 combined banks and credit unions) as well as a different regulatory environment.
To discuss the unique ways in which real-time payments may evolve in the U.S., PaymentsJournal recently hosted a podcast with Rodrigo Figueroa, COO of Chargeback Gurus, and Brian Riley, Director of Credit Advisory Service at Mercator Advisory Group.
PaymentsJournalHow the Real-Time Payments System Will Evolve in the U.S.PaymentsJournal How the Real-Time Payments System Will Evolve in the U.S.PaymentsJournalHow Do Real-Time Payments Work?Simply put, a real-time payment is when a sender initiates a payment, the RTP provider validates it, the funds are immediately settled in the receiver’s account, and a confirmation message is sent back to the sender. RTP transactions allow for open loop transfer directly between bank accounts, unlike services such as Venmo, which tap into a prepaid fund balance managed by that payment platform.
“More importantly, each bank has an immediately updated ledger; when you have a debit shown on one bank, that same position is recorded immediately on the ledger of the receiving bank,” Figueroa said.
He added that digital trends in other aspects of life and consumer expectations are forcing banks and payments providers to offer real-time payments capabilities.
“From a behavioral perspective, we are getting used to everything being in real time,” Figueroa said. “So, this isn’t coming out of nowhere.”
Eventually, we will have a global set of interoperable, connected real-time payments rails, though the industry is not quite there yet, he added.
Benefits of Real-Time PaymentsReal-time payments have several benefits. The obvious one is the convenience for sender and receiver to immediately see their updated accounts after the payment is sent. Real-time payments are especially desired by those who work in the gig economy and perhaps cannot wait weeks or even a month to get paid for the work they do, Figueroa noted.
“For a lot of people, cash flow matters,” he added. “They can’t wait until the end of the month for a check.”
In general, consumers have come to expect “instant gratification. Everything on our phone is a few clicks or swipes away,” Figueroa said.
Another key benefit of real-time payments is the extra data involved in them. The payment record includes all of the data associated with the transaction, thus eliminating the confusion that can result when a pending transaction is settled with an unclear or cryptic description days after it was initiated.
Figueroa also noted real-time bill payments as a key benefit, since RTP funds settle the instant, the payment is made. This helps consumers avoid situations where they pay a bill online on the date it is due, but it doesn’t settle until a few days after that.
Challenges to OvercomeStill, real-time payments are not without their own unique challenges. One is fraud, noted Riley. Since the payments are immediately settled, criminals can engage in payments fraud and make fraudulent transactions before anyone notices.
“The easier you make it for consumers, the easier you also make it for crooks to take advantage of,” he added.
Another issue is difficulties with refunds and chargebacks, Riley added. For example, when making a payment now on the Visa or Mastercard network, it takes a few days to settle. If a consumer wants to return a faulty item or wants a refund on a service that was not provided as described, it’s easier to initiate a dispute and return the payment during this intermediate time. It becomes much more difficult in a real-time environment.
“It will be interesting to see how the regulations develop around this,” said Riley. “This is a really important piece that affects the whole ecosystem.”
This will be exacerbated by the sheer number of transactions made daily in the U.S. Riley noted the real-time payments system M-PESA in Africa, which may process 100,000 transactions a day.
“That’s similar to the volume we might get here just in the state of New Jersey,” he said. “In the whole U.S., we’re talking billions of transactions. It’s a massive amount of volume”
It’s not just sheer volume, but the unique regulatory environment in the U.S. that will make real-time payments implementation here different than in the rest of the world, noted Figueroa.
In other countries, the regulatory statutes are generally created before innovation is built, whereas in the U.S., often technology innovation gets ahead of regulations.
“I’m not saying that’s good or bad, it’s often just how it is here in the U.S.,” Figueroa noted.
On the flip side, being a bit late to the RTP game means that “the U.S. gets the benefit of looking at what happened around the world [as it relates to RTP] and seeing the good and bad and creating a better product,” he added.
Furthermore, given the fragmented nature of the U.S. financial system, there may never be one cohesive real-time payments network that everyone uses, said Figueroa.
“The U.S. may never have one standard because we have so many competing entities,” he observed. “Having such a big market allows all these elements to compete with one another. Don’t take it for granted that it will eventually all consolidate into one network, like in other countries. The key is having interoperability between all these competing networks.”
The post How the Real-Time Payments System Will Evolve in the U.S. appeared first on PaymentsJournal.
With FedNow launching this July, successful implementation of real-time payments systems will require banks to test both the technical and operational side of their operations. In a previous discussion with PaymentsJournal, Form3 touched on the importance of banks having not only the technical aspects in place, but also transaction reporting and operational considerations.
Testing early is key to ensuring that both real-time payments (RTP) and FedNow functionalities operate at their peak, delivering on the benefits they set out to bring. During a recent PaymentsJournal podcast, Miriam Sheril, Head of Product, US, at Form3, and Steve Murphy, Director of Commercial at Javelin Strategy & Research, discussed why testing — which is typically an afterthought for many banks — should be more of a priority.
PaymentsJournalTest, Test, Test: Setting Up to Succeed With Real-Time PaymentsPaymentsJournal Test, Test, Test: Setting Up to Succeed With Real-Time PaymentsPaymentsJournalThe Importance of Being AgileThe race to ubiquity for real-time payments should not just involve throwing money into the latest technology to support real-time payments. Careful testing early on should be at the forefront before full implementation can happen successfully.
“It’s not just having the best technology and technology that’s fit for purpose, but it’s also how you go about your entire project and life cycle of getting that technology in place,” said Sheril. “Testing becomes an afterthought for banks – and for all companies, frankly.”
“They build it, they do their documentation, they work on the operations around it, they implement the ecosystem [of tools needed (like a UI)] around the new solution, and then start testing it end-to-end and find issues — whether it’s a technical error that’s wrong or the procedure that’s wrong,” she said. “[They find those issues] late in the game, which means they have to go back and fix it. It’s more costly, it takes more time, and it’s difficult.”
“For real-time, if you wait until the end to do all this testing, you’re going to end up having an issue. Your project might end up getting pulled if it costs you double the amount of time to fix that. Being an afterthought is a mistake in this new agile world. For real-time payments specifically, you can’t do it so late because it’s 24/7, it’s all brand new.”
According to Sheril, RTP and FedNow won’t interoperate, so even if a bank is on RTP, if it wants to receive the FedNow payment, it’ll have to connect and get its solution working for FedNow. “There are similarities, but there are also differences, and you have to test those differences,” she said. “If there are enough differences, that means you need to adjust your solution and you need to test how that solution works for FedNow.”
“There are some things that should be the same, and banks should try to make them the same so they don’t have to retest. Hopefully, many banks can align to whatever they’re doing for RTP, if they’re already on RTP, in which case, light touch testing might be appropriate. This is another example of where testing earlier will help you. The only way to know that it’s going to be the same is if you test it as early as possible. This is the shift in mindset that we need to see happen so we’re not all facing the issues later in the game.”
Rethinking Testing Strategies for Real-Time PaymentsAlthough real-time payments have already been around for roughly five years, it’s still a new process that has plenty of room for error. That is why preventative maintenance in the form of early testing is necessary.
“Real-time is interesting, there’s the good and the bad,” said Sheril. “The good is that it is brand new, and brand new is helpful. You’re not building or adjusting something that’s already in production. Since RTP and FedNow are new, those who are implementing it are implementing new solutions, new systems. Many are using it as an opportunity to do their first stage of modernization and put in a new core just for this. That gives them a little flexibility because they’re not worried about breaking something that already exists. The flip side is that it is brand new. Brand-new things can also be risky.”
When it comes to testing, there’s the technical aspect of it and there’s the operational part — with each having its own level of difficulty, according to Murphy.
Sheril agreed. “That technical piece, it’s kind of the same for everyone,” she said. “The gateways provide messages; they put rules and different error codes around the messages. It’s not very nuanced. You can build and test that pretty early on and use an experienced service provider, who can test that holistically for everyone, and it doesn’t have to be nuanced.”
“When we go live with our RTP solution, we’ll have tested the gateway piece. Holistically, it’s going to work because if it works with one bank, it works for the other bank. Then there’s that whole second part of it that’s really specific to each bank and each customer. How do I plug it into my operations, into my core banking, into my resiliency posture, my risks, etc.? And that has to be tested as well,” she added.
“I have to test that my operations team, who suddenly had to go 24/7, can support that 24/7, that they know what to do when [an] alert comes out, that they can follow those next steps, that they can get the money to where it needs to go and make the funds available [if an exception occurs] — and that part’s harder.”
The Testing Process for BanksWhen it comes to testing, it will largely depend on the type of use cases carried out — and also depend on the bank. It’s not a one-size-fits-all approach.
“If you’re a bank that has a lot of bill pay that you support, you’re going to test the request for payment flow,” said Sheril. “Not every bank’s going to do that. But at the end of the day, there’s a set of messaging that these schemes provide and you test those. Form3 is going to test all of them and have them ready and available whether you use it or not. It’s going to depend on what core you use, and what your operations procedures look like. It’s going to depend on how you integrate into other systems within your environment.”
Learn more about Form3’s instant payments testing simulator here.
Will FedNow Revamp Testing Methods?For those who have already implemented real-time payments, the testing methodology is probably already there, and it may need to be adjusted.
Those who are waiting for the launch of FedNow have a golden opportunity to start on the right foot, honing in on the end-to-end process.
“If you’re a bank that’s been on RTP, you’ve done that, you have a head start, and it’s not that different,” said Sheril. “There are differences so you should test that gateway differently, but your end-to-end processes should be pretty aligned.”
“If you haven’t been on RTP and you’ve just been waiting for FedNow, this is something that’s brand new,” she said. “You have an opportunity to do this differently. You don’t have to go in and touch something that’s already in production. Anytime you can start something from the scratch, you have an opportunity to do it right and really focus on end-to-end process.”
“Consider a modernization effort. We have seen a few banks who have said that for real-time being new in the U.S., the volumes haven’t picked up yet. It’s also an opportunity for me not to just put in a new gateway scheme connection, but a new modern core.”
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Checks have seen a steady decline in use — with a 2021 Federal Reserve survey finding a decrease of 7%-8% in check volume annually — but the same clearing processes must still be performed by financial institutions. This reduced volume is prompting financial institutions to consider ways to minimize costs and increase efficiencies in the item clearing and settlement process.
PaymentsJournalAs Check Volumes Decrease, Financial Institutions Need to Consider Alternative Clearing OptionsPaymentsJournal As Check Volumes Decrease, Financial Institutions Need to Consider Alternative Clearing OptionsPaymentsJournalThe Current State of Item ClearingWhen Check 21 was instituted in 2004, there was great excitement about the new process of handling checks electronically. However, as with any innovation that involved image and electronic processing of checks, it was expensive. Over time, as more financial institutions adopted this technology, the costs did eventually decrease as these processes became more efficient and refined.
“I think the death of the check was greatly exaggerated,” said Tony Rosetti, Director of Fiserv Clearing Network at Fiserv. “Checks are still going to exist. And as the volume continues to decrease, financial institutions are at a tipping point where prices will increase.”
“Checks aren’t going to die,” said Brian Riley, Director of Credit and Co-Head Of Payments at Javelin Strategy & Research. “They’re going to decrease — I agree with that. But there are still times when consumers and businesses need checks, and that brings out the importance of engineering your clearance network properly.”
“You shouldn’t just set that and forget it. As volumes go down and pricing models change and the whole dynamics change, it’s really a good time to understand what’s going on in your clearance process and to make sure that it’s really managed and engineered to the best possible way.”
Banks currently have a few options for their check-clearing needs. These include the Federal Reserve, private sectors, and private exchanges.
According to Rosetti, the private sector was the catalyst that drove the costs of check clearing down through its less expensive channels over the years. Although the Federal Reserve basically sets industry pricing, they have increased fees over the past few years. The pricing increase is actually a participation fee that is assigned to every financial institution.
What Should FIs Expect from Their Clearing Network?When it comes to the check-clearing process, financial institutions want to take the most affordable route.
Rosetti added, “Financial Institution’s want the least expensive way, but also want speed and accuracy with their available technology to present, process, and collect funds.” The Fiserv Clearing Network has a 24/7 processing window. The collection process starts in the early afternoon and continues throughout the day. Checks collected are transmitted for presentment within hours and the speed of collection is key to mitigating risk. Fiserv Clearing Network is poised with Fiserv technology to reduce collection time to transmit checks in a more “real time” environment.
Customer service is also very important to financial institutions. Private clearing networks, like the Fiserv Clearing Network offers an end-to-end experience including detecting duplications, adjustment processing, acceleration of exceptions, and mitigating fraud.
In addition, Fiserv has incorporated the collection of Canadian checks and is able to capture, transmit, and settle these items as well. The Fiserv Clearing Network Canadian Image Service, in partnership with PCBB, removes manual processes and any physical shipping, as well as significantly reduces collection time. The service provides collection for items in Canadian or US funds, offers daily exchange rates guaranteed at capture through presentment, delivers real time OFAC verification and 100% funds settlement within two business days.
Key TakeawaysAs previously discussed, checks, much like cash, will never become obsolete. “Checks are still going to be around” said Rosetti. “As the check-writing generation ages, we are going to see less check writing, but they’re still going to be there. They are still an important payment vehicle.”
Their continued existence within the payment universe means that checks will need efficient processes in which to settle faster.
“With the Fiserv Clearing Network and Fiserv technology, we’re going to continue to provide the services and improve the services of check collection,” said Rosetti. “Whether it’s the last five checks that are out there, we’re going to make sure that they get presented and received and processed as quickly as they can.”
“Checks aren’t dead — they’re still going to be out there for a while,” said Riley. And you still need your check processing to work well. It’s not just submitting a check for payment; there’s settlement and clearance processes that need to be worked out. What do you do with exception items? That’s where service private network comes into play. You have the infrastructure there that allows leading-edge equipment and well-engineered processes to apply to financial institutions of any size.”
The post As Check Volumes Decrease, Financial Institutions Need to Consider Alternative Clearing Options appeared first on PaymentsJournal.
Artificial intelligence (AI) and biometrics are revolutionizing regulatory compliance in fintechs and banks by providing more accurate and efficient methods of identifying and preventing fraudulent activity, as well as streamlining compliance processes.
Traditionally, compliance has been a tedious and time-consuming process, requiring manual checks and reviews of transactions and documents. But with the help of AI and biometrics, compliance is becoming a lot more efficient and effective. In a recent PaymentsJournal podcast, Micheal Sheehy, Chief Compliance Officer at Payoneer, and Marco Salazar, Director of Technology and Infrastructure at Javelin Strategy & Research, discussed the future of meeting compliance challenges.
PaymentsJournalThe Importance of AI and Biometrics in Regulatory Compliance in FinancePaymentsJournal The Importance of AI and Biometrics in Regulatory Compliance in FinancePaymentsJournalThe Future of Compliance ChallengesThe biggest challenge for fintechs in compliance is the cost of implementing Know Your Customer (KYC), a process fintechs use to verify the identity of their clients and assess their potential risks for money laundering or financing terrorism. Fintechs may need to go through a KYC process when onboarding new customers, setting up new accounts, or conducting certain financial transactions. This typically involves collecting and verifying personal and financial information, such as name, address, government identification, and employment status. Fintechs may also need to monitor their customers’ activity over time to ensure ongoing compliance with KYC requirements.
“Especially when you want to be global and operate in multiple jurisdictions, you know, the different KYC nuances can be costly,” explained Sheehy. “The repercussions of not having an adequate KYC program or adequately funded compliance programs are significant. [That] there are $10 billion in just KYC fines last year globally just shows you how serious regulators are taking KYC.” Furthermore, different countries are developing different regulations so staying on top of everything is a challenge.
“Criminals are always trying … to find loopholes in the system,” Sheehy said. “So [compliance] is about being proactive. This involves having processes and procedures in place to analyze the trends that you’re seeing not only in your own transactions, but also at a more macro level within the environment that you operate in.”
As a company that interfaces with regulators and fintechs looking to meet those regulations, Payoneer acts as a steward of the global economy and makes the complex world of regulatory compliance simpler. “The complexities outlined by Micheal drive this desire for simplification, which will require an iterative process to attempt to get there,” Salazar said.
To meet different stringencies of KYC regulation around the world, many companies use the approach of just trying to meet the strictest requirements. But this can backfire for companies based in heavily regulated countries, such as Singapore, seeking to grow globally. For such companies, “when you’re dealing with customers in the U.S., where the KYC requirements aren’t as stringent in the regulations, you’re putting yourself at a competitive disadvantage compared to your other peers that may not be operating globally,” Sheehy said. Complying with local regulations is challenging even for the biggest multinational companies. “Apple and Google are trying to scale globally but are restricted by local legal mandates,” Salazar said. “They’ve run into regulatory issues where they have to decide whether to [incur] fines or scrap complete products.”
The Role of AI in Payments ManagementOne way AI is improving compliance in fintechs and banks is through the use of machine learning algorithms. These algorithms can analyze vast amounts of data, identify patterns and trends, and make predictions about future events. This enables banks and fintechs to identify and prevent fraudulent activity before it occurs, rather than reacting after the fact.
“Historically, compliance was, you know, detect and report, detect and report. Now we’re moving into effective prevention and also more real-time reporting,” Sheehy said. “Machine learning and AI really allows you to operate in more of a real-time environment versus a traditional rules-based environment. The traditional model involved using rules such as if A happens, do B, or if C happens, do D. In contrast, machine learning will enable you to enact preventative measures and have more insight into how your customers transact. And it also enables you to operate in a more real-time manner.”
For example, Sheehy described how Payoneer used AI and machine learning to model merchant behavioral patterns in a certain jurisdiction selling certain goods. “Is a merchant new to the market? Or is it an established merchant and [has] been operating for 10 years? You’re not going to treat them the same,” Sheehy said. “Someone who’s growing and starting a business will have smaller payments that ramp up over time. A more established customer that will have large volumes that peak throughout seasonal periods.”
AI models can help fintechs segment their merchants by type and predict what will happen in the future. “If somebody receives a large payment, your model could say, well, I think that x is going to happen. This could trigger a request for additional KYC verification or pause that customer’s activity.
With AI, machine learning models can be tailored to specific countries or markets. “With the emergence of technology and new platforms, we’ve had this acceleration of data governance standards, even though they’re still very disparate across regions,” Salazar said. “We’re starting to see the ability for these models to really learn and … drive impact within those regions, which makes a big difference.”
Biometrics and ComplianceAlongside AI, biometrics is also making waves in the compliance world by using physical characteristics for identification and authentication. This allows customers to easily access their accounts by simply looking into a camera, eliminating the need for passwords or other forms of authentication. Banks are also using voice recognition software to verify the identity of customers over the phone, as well as fingerprint scanners to ensure secure access to accounts. It’s a lot harder to impersonate someone else’s facial features or voice or fingerprint than it is to guess their password.
“Everybody uses biometrics, when they unlock their phone, when they use Apple Pay, when they use a fingerprint on something. It’s already kind of a standard,” said Sheehy. “I think biometrics is tied significantly with digital identities, which I’ll go into in a second. After the Equifax data breach, COVID unemployment scams, and PPP loan scams using stolen identities, it really became obvious that the only way to prevent this fraud is a live biometric check. Tying this together with digital identities is super important. By leveraging a government database to pull someone’s digital identity and cross-checking it with a biometric test, you can tie the two of them together.”
Globally, digital identities and biometrics are much more advanced in Africa and Asia, with Europe and the U.S. lagging somewhat. But Sheehy claimed that biometrics will be the standard globally within the next two years. “Singapore and Malaysia have actually mandated biometrics in their KYC. They’re telling the financial institutions in those markets, if your customers are not in front of you when you’re selling financial products, you need to have a liveness and KYC check. They go so far as to claim that they will not accept identity theft as a typology within their economy anymore.”
Looking ForwardArtificial intelligence and biometrics are more than just cool gadgets — they’re improving the compliance function in fintechs and banks in a big way, helping keep our money and assets safe and secure. Biometrics are still not perfect, “but it’s a significant change from five years ago, where people were just taking pictures of their IDs and uploading them and applying for mortgages and things like that,” Sheehy said.
In the United States, looking forward, for biometrics to have wide-scale adoption, it requires standardization and government regulation around data. “Right now, regulation of biometrics is at the state level. We need more of a federal mandate, which I believe is coming. Until then, it’s kind of the Wild Wild West.” Part of this regulation could be in the Consumer Data Privacy Act that is currently being debated in Congress.
As various KYC regulations change throughout the world, Sheehy is optimistic that Payoneer can be part of the solution in making payments more secure while complying with regulations and innovating in machine learning and biometrics. The future certainly seems bright for companies that can help simplify international regulatory complexity while making better use of customer and business data.
The post The Importance of AI and Biometrics in Regulatory Compliance in Finance appeared first on PaymentsJournal.
With the upcoming launch of the FedNow Service, real-time payments continue to be a topic of discussion as demand grows among customers and businesses. More financial institutions are seeing the importance of enabling a range of real-time use cases to remain competitive and enhance the customer experience.
Where Real-Time Payments Stand in Availability Less than 10 years ago, real-time payments capabilities were limited to specialized and sometimes costly options, such as wire transfers. Since the launch of Zelle in 2017 and The Clearing House RTP® network a few years ago, real-time payments have become increasingly accessible.
“Fiserv has about 1,200 financial institutions that have launched some form of real-time payments,” said Tim Ruhe, Vice President of Real-Time Payments at Fiserv. “And a lot of that is Zelle person-to-person payments. And now most of those financial institutions are looking at how they expand their real-time payments capability for consumers and businesses and how they connect to The Clearing House and/or the FedNow Service so they can launch a whole new generation of real-time payment capabilities.”
PaymentsJournalEveryone Benefits from the Real-Time Payment Networks PaymentsJournal Everyone Benefits from the Real-Time Payment Networks PaymentsJournalUse cases grow when financial institutions partner with technology solution providers.
“Here in the U.S., five years ago we launched the RTP network in order to provide true real-time payments all the way from the front-end customer experience to the back-end clearing and settlement,” said Keith Gray, Vice President of Strategic Partnerships at The Clearing House. “We have 300 banks and credit unions that are offering some form of real-time payments via RTP to their customers, receiving and sending as well in many cases.
“That covers about 65% of the U.S. account base. If you’re a company using the network, you can reach about 65% of your customer base with a real-time payment right now. And that number continues to grow every week as we add new financial institutions through technology partners like Fiserv and many others. The types of use cases continue to grow and evolve. Things like same-day payroll, where you work your shift and get paid today, are a growing trend.”
Gray also mentioned that Square and Elavon use the network to allow their merchants to instantly transfer money from merchant accounts into their bank accounts.
As the use cases grow, the launch of the FedNow Service will help drive real-time payments toward ubiquity.
“We still have a little bit of work to do to get to ubiquity, which would be when every individual or financial institution in the country has access to these new payment capabilities,” said Dan Gonzalez, Vice President of Customer Relations at The Federal Reserve. “But as we get ready to launch the FedNow Service this year, we’re excited about the possibilities it’s going to bring in connecting with every financial institution. So, while there are 300 [FIs] connected to RTP today, there’s still 9,000-plus financial institutions that we need to work to get connected to an instant payment system.”
Gonzalez likened the rollout of the FedNow Service to passengers eagerly awaiting to board a plane.
“We’re in the process of queuing everybody up and boarding participants onto the airplane,” he said. “We’ve got a number of service providers, and a number of financial institutions that are currently in the testing process. They’re exchanging messages through our network in a test format to get ready to go. We’re going to continue that for the next few months to get folks ready.
“Once we have that airplane boarded, we’ll close that door for those first organizations, take them out onto the runway, get them taxied up and then ultimately launch that airplane later this summer. We’re excited about what’s coming and ultimately creating that path for a seamless experience to get more financial institutions connected to the network.”
Gaming apps use real-time payments to enable money movement into and out of the apps. Although many real-time use cases are at the consumer level, soon the business-to-business (B2B) ecosystem will be benefitting from this capability.
“The awareness factor has really leapfrogged over the past several years,” said Steve Murphy, Director of Commercial Payments at Javelin Strategy & Research.
“If you went back to 2018 and I said to my kids, ‘I’m going to Zelle you some money for Christmas,’ they would have said, ‘What’s a Zelle?’
“And now that’s really at the tip of the tongue. Everybody knows that brand name. I think that’s moving rapidly into the B2B space as well.”
The Beneficiaries of Instant Payments Instant payments are about more than just moving money quickly, and it’s not just financial institutions that stand to benefit. Consumers are top of mind when it comes to real-time payment use cases. It’s about getting the money they need, right away.
“The initial benefits we’re seeing are for consumers because consumers don’t have the big lines of credit that businesses do,” said Ruhe of Fiserv. “So cash flow is super important, especially for getting paid. That’s why you see a lot of real-time use cases not just for person-to-person payments but claim payouts and gig economy payments because getting paid is really important.”
“Consumers will benefit by having better visibility into their account balances and a greater understanding of when funds are available and usable to them,” said The Federal Reserve’s Gonzalez.
The next strategy for increasing use cases will be serving small businesses. “As we talk to financial institutions, they’re developing roadmaps for capabilities for all their customers, for consumers, and businesses and small businesses, said Ruhe.
“But I predict one of the next big focus areas will be on small businesses. Small businesses also have to have a careful eye on cash flow. Real-time payments definitely help with cash flow. We’re seeing a big push to help small businesses with that cash flow by enabling more real-time payments capabilities for them.”
“Businesses will benefit by having better control over their funds, understanding or having the ability to pay invoices in real time, taking advantage of payment discounts, and having various opportunities to manage those funds in real time with greater visibility,” added Gonzalez.
In a digital world, The Clearing House’s Gray noted, payments need to be faster, cheaper, and easier.
“Another thing we hear from the banks on the network is that there’s a huge value in being able to get paid faster or pay faster,” Gray said. “The immediacy is a big deal. We call it RTP for a reason. If I owe a million bucks, I can wait until midnight tonight, I can hold it in my account to 11:59, and then I can send it. And especially in a rising-interest-rate type of an economy, that’s a thing that becomes a huge deal as well.”
Said Ruhe, “It’s not just about real time. The money gets there instantly. There are two other important features. One is it’s guaranteed, it’s confirmed. If you hit send and you get the confirmation, you know it’s there.
“But just as important is it’s 24×7 now. That’s not in the name. We don’t call it 24×7 payments. We call it real-time payments. We as consumers operate 24×7. If I have to wait till Monday for the payment to get there because I’m trying to send money on a Friday evening, that’s a problem.
“Our digital world operates 24×7, and the legacy payment systems do not. These new real-time payment rails do. These payments work evenings and weekends, which is important.”
Leveraging Multiple Real-Time Networks To determine whether leveraging multiple real-time payment networks is possible, we must unpack the current capabilities of each platform and its role.
“There are going to be two live real-time payment networks,” Gray said. “Both networks speak the same language, both are built on the same platform, ISO 20022.
“I believe there will be some level of ubiquity across both networks. The networks will be able to talk to each other in some form. That’s the intent, anyway. The Fed is going live with the FedNow Service this year, and I’m sure we at The Clearing House will pick up those discussions down the road. I don’t think it’ll ever work exactly like ACH does because of the nature of the networks.
“ACH works in a batch process. We send files back and forth to the Fed. It’s a very straightforward process. And a bank just connects to one ACH network.”
“With real-time payments, each transaction is processed individually within seconds. There is no concept of a batch. To get full ubiquity across the industry, you’re going to need to be connected to both networks, and you will need some type of routing capability like the Fiserv payment hub solution, as an example.”
On that road to coveted ubiquity, financial institutions must first analyze their own goals.
“Having ubiquity is going to be key, but there will be different ways for that to be facilitated,” The Federal Reserve’s Gonzalez said. “If one endpoint is on one network, that transaction would go to that rail. If it was on another, it would go to a different rail. I think it’s really going to be up to the financial institutions to look at their needs and see how those can be fulfilled by either network. A lot of that will be driven by the complexity of the organization, what their objectives are with real-time payments.”
“There’s going to be a certain amount of overlap, but there won’t be 100% replication,” Mercator’s Murphy said. “Depending upon who the banks are trying to get to on the endpoints, they have to consider both networks.”
The FI View on Sending Real-Time Payments Although a growing number of FIs can receive real-time payments, sending them requires additional capabilities.
“Many FIs have started with enabling receipt of payments,” said Ruhe of Fiserv. “That doesn’t require any change to their user experience. They can just start getting payments and letting customers get paid faster.
“Once they move to originating real-time payments, they must present some new capabilities to the user. They must change something they already do. If they have a digital payouts capability, they’re going to make changes to the service that they offer the customer for digital payouts.
“If they are offering real-time transfers, they have to update the real-time transfers application, and that’s what their road maps really are taking into account. ‘How do I enable more of these send capabilities, a real-time bill payment capability, a real-time payables capability’?
“Part of this is just working through the project backlog of making the changes to those applications to enable real-time. Because a real-time payment is not just a new standalone thing. A real-time payment is a new feature of a service you probably already offer.”
The ability to both send and receive a real-time payment will quickly become a baseline expectation of a financial institution, Gonzalez noted, although send capabilities will be more challenging to acquire.
“As these networks continue to grow and develop, and as we launch the FedNow Service later this year, the receiving capability is really going to be table stakes,” he said.
“It is more challenging to implement the sending capabilities because of the interfaces and updates that need to be made. However, a lot of the technology providers and service providers are starting to ramp up their capabilities to send and make it easier for financial institutions to implement the send capability.
“As we evolve and continue to grow the network, the process will become more streamlined and easier for those downstream financial institutions to be able to send for their customers.”
Murphy offered a history lesson on how real-time capabilities have evolved.
“Mercator did some research back in middle to late 2018 after The Clearing House RTP Network launched,” said Murphy. “We talked to eight of the larger financial institutions that were doing direct connects.
“We asked about the challenges and how they were implementing. Most were doing receive first. A couple of them are doing receive and send simultaneously. When we asked them about the challenges from a technology standpoint, they were rating it about 5 to 6 out of 10. The larger concern was internal communications, the operational procedures that had to be in place to support sending. This is something that most of the institutions now will be looking at.”
“A receive is a very easy pass for most FIs because technology providers like Fiserv can turn that on for you very easily,” The Clearing House’s Gray said. “Phase One has always been that we want to enable our customers to get paid faster. It’s a service they want, it’s a service they expect, and it creates a new deposit channel into the bank.
“Now, it’s technology providers that most banks leverage. The vast majority of banks rely on a technology provider for their real-time payment-based connectivity and services. Each of those technology providers offered receive first.
“Now they’ve all moved into or are moving into different send-based applications. Send is different than receive in that there are many use cases that are spend-based use cases where receive is one capability. You can’t just flip a switch and ‘turn on send’ because it could be a small business app, it could be a Treasury app, it could be a consumer app.
“We see new use cases coming on board every day and most are being driven by a technology provider working with their banking relationship. It’s a technology provider that is providing a bank a service or an application they can turn on.”
A Look Into The Future Of Real-Time Payments With many U.S. banks working toward providing real-time payments for customers and businesses, the innovation does not end here. New capabilities and solutions are in the works.
Gonzalez of The Federal Reserve sees strong potential for merchant-focused offerings.
“One large technology provider just made an announcement that its created a new platform to enable pay-by-bank for merchants,” Gonzalez said. “I do think the use of an instant payment or real-time payment network to facilitate point-of-sale and other merchant transactions will come around. There’s been a lot of discussion in the industry about that capability as an alternative to some of the traditional payment methods. Pay-by-bank is one that I think is interesting and certainly worth the industry keeping an eye on.”
Ruhe of Fiserv agrees and anticipates a focus on small businesses as well, adding, “A lot of the focus has been on consumers so far. At some point, the ability to use this in a merchant payment scenario will be coming. I think cross-border will be coming. Small businesses have these same cash flow issues. They operate 24×7, and they’ve been largely underserved. Giving them the ability to pay and get paid instantly more often is going to be a big focus area of our industry in the next year.”
Murphy of Mercator sees a strong use case in cross-border payments, “One of the things I’m hearing about is the potential for use for real time cross-border. There’s a lot of activity going on with the RTP Network, EBA clearing, and SWIFT. You might start seeing some of that during the latter portion of this year.”
The Clearing House’s Gray outlines the broad benefits of real-time payments data, “Another thing we’re seeing is applications being developed that leverage the data capabilities of a real RTP Network payment, the ability to send information across the network as well as the actual payment. A corporate biller can send a request for payment that includes not only the request but the data associated with it (the invoice and the bill and where I want you to pay me). And that gets delivered to a small business or a consumer who can then make the decision to pay it now or pay it later.”
What Fiserv Is Doing to Get FIs and Their Customers Connected to These Networks FIs do not have to worry about the complexities of processing real-time payments. With Fiserv solutions, they can easily get connected to real-time networks.
“We’re creating solutions that are very much turnkey solutions,” Ruhe said. “Solutions that you can consume as a service or as an infrastructure. It makes it easy to implement and turn on so that you can start processing real-time transactions. That’s certainly true for stage one of getting connected to these networks.
“The next thing is we’re baking real-time capabilities into every other kind of processing service we have. You may have a business that wants to do digital disbursements, and we have a digital disbursement service that we sell through financial institutions and to large businesses. So we’re enabling real-time as a feature out of the gate so our clients don’t have to do a lot of heavy lifting. It’s a feature they can just turn on.
“We’re baking support for real-time into solutions across the board, whether they’re consumer solutions, small-business solutions, FI connectivity solutions, or business payment solutions. Bake it in, make it easy, let’s make customers happy.”
In the end, Fiserv is playing a key role in enabling consumers, FIs, and small businesses to fully benefit from all that real-time payments have to offer.
The post Everyone Benefits from the Real-Time Payment Networks appeared first on PaymentsJournal.
In April 2023, Visa is set to update its requirements around reporting fraud, with the goal of reducing friendly fraud chargebacks and helping merchants retain more of their revenue. These new requirements, known as Compelling Evidence (CE) 3.0, let merchants bring evidence that contradicts cardholder fraud claims before chargebacks are filed. By sending in compelling evidence via Visa’s Order Insight platform, merchants can effectively block chargebacks from being initiated and prevent the advance of fraud claims.
CE 3.0 is based on the idea that if a cardholder previously made purchases that weren’t disputed from the same business, the current transaction that is being claimed as fraud really isn’t fraud. Under the new protocol, if a merchant can prove that the same customer data (such as device fingerprint and internet protocol, or IP, address) that are involved in a chargeback case are also associated with two previous transactions that were undisputed (with the same card and merchant), Visa will automatically deny the fraud claim.
PaymentsJournalNew Visa Chargeback Guidelines Will Be a Game ChangerPaymentsJournal New Visa Chargeback Guidelines Will Be a Game ChangerPaymentsJournalFurthermore, under the new guidelines, merchants can also submit this type of evidence after a chargeback has been initiated. If a merchant responds to a chargeback in full compliance with the initiative guidelines, Visa guarantees the chargeback will be overturned. A ruling in the merchant’s favor will return revenue and reverse the original fraud claim.
A recent podcast hosted by PaymentsJournal sheds light on what the implementation of Visa CE 3.0 will mean for merchants, acquirers, and customers. Featured speakers in the podcast are Robert Painter, Sales Manager in the Dispute and Chargeback Management department at Kount, Domenic Cirone, VP of Acquirer Solutions at Midigator, and Brian Riley, Director of the Credit Advisory Service at Javelin Strategy & Research.
Before the update, merchants combatting fraud claims only had to provide one previous undisputed transaction, and it could come from any time. The new standards require providing two transactions, both being at least 120 days old. Companies that want to hit the ground running in April need to ensure they are collecting the customer information they need. The podcast, which was released on [ TBD ], comes at a good time because it helps all parties understand how fraud claims will be resolved differently, and prepare accordingly.
Friendly Fraud and Visa’s SolutionCustomers sometimes claim a transaction is fraudulent due to opaque billing information, general confusion, and lack of information. Sometimes they do so when there is a miscommunication about canceling a recurring payment. When a customer tries to cancel a subscription unsuccessfully and is billed for an additional few months, they can be tempting to call it fraud and have the issuing bank deal with it.
Such “friendly” fraud has become more common, partly because it has become much easier to file a fraud claim. “Back in the day, customers had to physically write to a billing dispute address, within 60 days on a credit card, and within 30 days for a debit card,” Cirone said. “Now, reporting fraud is easier to initiate. Customers are using the path of least resistance [to addressing unclear charges]. All they have to do is click on a checkbox that says this [payment] is unauthorized.”
Part of Visa’s new system is trying to differentiate between customer behaviors that have previously been treated the same way. The new Visa CE 3.0 initiative will enhance the taxonomy of fraud chargebacks, characterizing consumer disputes more exactly with a code for “I didn’t receive this” or “I canceled this three months ago, and they’re still billing me.”
“Visa has 28 different reason codes. A risk department can accurately analyze what the issue is with their merchant by seeing the individual reason code,” Cirone explained. “It’s a lot tougher with Mastercard because they only use four main codes. For example, Mastercard has a code which indicates a ‘consumer dispute.’ Well, what is it exactly? With Visa CE 3.0, the data will be more accurate.”
Improving the chargeback system will be helpful to acquirers, not just merchants. “Cleaning up that ecosystem of chargeback reason code so that we can start to define really what’s going on will be helpful,” Painter explained. “At the end of the day, the acquirer is really trying to keep their merchants in a position that they can grow their business and keep processing.” Having a more clear-cut fraud information system will help acquirers toward that. And, seeing as acquirers make money off every transaction they handle, the better the fraud transaction system, the more money they make.
These fraud developments will impact another group as well: fraud investigators. “The classification codes determine the workflow for [fraud investigators],” Riley noted. Having an improved fraud claim classification system, as well as weeding out claims in advance, will help banks focus their resources on the most egregious fraud claims.
“In the past, there used to be an adversarial relationship between merchants and financial institutions,” Riley said. “A lot of that’s changed. The financial institution wants the transaction because they’re going to make money from interest in the transaction. And the merchant certainly wants a sale. The realigning of interests is one of the reasons behind Visa enhancing its dispute process.”
As Visa CE 3.0 comes into play in April 2023, the future is bright. Merchants and acquiring banks should be thrilled and start planning their information collection systems so that they are ready to take advantage of the benefits of the program. Customers should be aware that less funny business is going to slip through when it comes to friendly fraud. But they may also be pleasantly surprised. Issuing banks will have more specific information about purchases to help confused customers make sense of their billing statements. It will all be interesting to watch next spring!
The post New Visa Chargeback Guidelines Will Be a Game Changer appeared first on PaymentsJournal.
Many factors drive the need for more accurate, timely, and proactive liquidity management, including increased regulation and as the continued shift to faster payments.
During a recent PaymentsJournal webinar, Jo Wright, Director of Solution Enablement at Fiserv, and Steve Murphy, Director of Commercial Payments at Javelin Strategy & Research, spoke about the key ways banks can better manage their liquidity in 2023.
PaymentsJournalLiquidity Management Takes on Increasing Importance in Uncertain Economic TimesPaymentsJournal Liquidity Management Takes on Increasing Importance in Uncertain Economic TimesPaymentsJournalBasel IV and Continued RegulationBanks are required to maintain a certain level of liquidity, which ensures that they can meet the demands of depositors, creditors, and regulators in times of financial stress. Amid moves to introduce further regulation, one key focus has been the development of Basel IV.
Basel IV has been developed by the Basel Committee on Banking Supervision, an international forum of central banks and regulators from around the world. It aims to improve the resilience of the banking sector by reducing the risk of financial crises.
According to Wright, implementation of Basel IV has been moved to Jan. 1, 2023[JE1] , with implementation taking place over a five-year period.
“That’s the timeline at the moment,” Wright said. “As we know, these timelines sometimes have delays. [But Basil IV] is meant to strengthen the international banking system and standardize the rules from country to country.”
The Move to Faster PaymentsIn today’s volatile and interconnected financial markets, banks need to be able to manage their liquidity in real time to minimize the risk of losses as well as adapt to a financial system that is increasingly dominated by real-time payments.
“Everything today is moving faster, including payments,” Wright said. “With the changes to the payments rails and movement towards immediate payments, banks aren’t working anymore with the restrictive cutoff times and waiting for next-day confirmation of settlements. They don’t have to wait for their statements, their closing statements, or their balances.
“The faster payments can be made, the faster liquidity and cash-balancing changes need to be visualized and monitored by the banks. This can allow interest debts to be settled and interests to be accumulated. This move to immediate payments requires 24/7 monitoring and the ability to know what is happening right now.”
Faster payments in domestic markets and, more recently, cross-border payments are driving the focus on liquidity. “All of the [real-time] systems that have been implemented so far have been domestic,” Murphy said. “But now we’re starting to see movement cross-border. So cross-border liquidity, which is where a lot of the high-value transfers happen, is also important.”
According to Wright, new initiatives in cross-border payments are being driven by SWIFT gpi and instant, cross-scheme integrations between Europe and the United States. SWIFT gpi (Global Payment Innovation) is a cross-border payment service offered by the Society for Worldwide Interbank Financial Telecommunication (SWIFT). The service uses such advanced technologies as distributed ledger technology and end-to-end tracking to enable faster and more efficient payments.
For banks, the upshot is a need to document liquidity in nostro accounts—those with foreign currency held by a bank in another country—more frequently than they used to. When a bank receives a payment in a foreign currency, it can credit the funds to its nostro account in that currency and use the funds to make payments to its customers or to other banks. In other words, it allows banks to do a cross-border payment without actually converting the currency.
“Traditionally, managing nostro account balances has been done overnight into day,” Wright said. “But with real-time schemes such as the SWIFT gpi, the ability to be able to move money and track money in real-time has made managing your liquidity that much more important.”
How Banks Can Directly Benefit from Liquidity ManagementWhen banks know exactly how much money they have in their accounts in real time, they can better monetize that liquidity. “There’s the possibility, which banks have always done, to reduce idle cash and maximize positions,” Wright said. Essentially, banks can withdraw funds that are not needed for liquidity concerns and pay them out as dividends.
Another positive is the consolidation of transaction data from various systems within a bank and the visibility of all financials in one place. This data can be harnessed to help drive growth and profit for banks. “Real-time data can be used for trending analysis, to see where the peaks are,” Wright said. “There’s a competitive edge for banks to monitor their clients’ liquidity and trends and provide this information [and] solutions to clients.”
Better monitoring of liquidity also allows companies to forecast payments. “By tracking positions and trading information, banks can produce accurate real-time predictions of balances throughout the day,” Wright said. “That opens up a host of opportunities to the bank to then use that data to augment that payment processing. For example, a bank might manage liquidity during the day to optimize interest rates, making payment at the correct time to make the best use of fluctuating interest rates during the day.”
Wright recommends some concrete initial steps for banks looking to move toward real-time liquidity management. “The first step is to consolidate the movement of the funds in one in one place,” she said. “That doesn’t necessarily mean changing a payments engine or changing a liquidity system. It can be by augmenting the existing infrastructure with a funnel that puts all the information in and delivers it out in one coherent picture.
“The idea is to put all the transaction data on a single platform, thus enabling decision-making and actions that not only mitigate risk but optimize liquidity positions.”
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The number of payment methods keeps expanding, driving a higher volume of payments and further complicating data management processes for businesses. The strength of any organization lies in its ability to efficiently manage data, and this is where automation would make the most significant impact.
An AutoRek report, “Payments Industry Outlook 2023,” highlights the findings of an organizational survey, identifying key challenges, priorities, and readiness for real-time payments in the ever-changing payments sector.
PaymentsJournalKey Challenges from Growing Payment Methods and VolumePaymentsJournal Key Challenges from Growing Payment Methods and VolumePaymentsJournalKey Findings in the Payments Industry Outlook 2023 ReportOne of the top findings of the survey is the need for businesses to accommodate real-time payments. Aside from speed, the key benefits of real-time payments are that they are accompanied by critical data as well as reasons for exceptions.
“Modern consumers expect instant digital payments,” said Nicholas Botha, Global Payments Lead at AutoRek. “As such, real-time payments are set to become ubiquitous for both national and regional payments networks as authorities and central banks alike continue developing real-time infrastructure to accommodate consumer demand.” (Page 25 of the report)
Currently, real-time payment infrastructures can be found live in more than fifty markets, with more than twenty more to come.
“The focus on real-time payments in the U.S. is obviously becoming something that has not been previously looked at,” Botha said. “Whereas in regions like the UK and the EU, this has been a focus for some time. There has been a transition in focus for the next few years into that sort of real-time payments market, shifting attention from customer acquisition to more middle- and back-office focus.”
Botha continued: “What we try to understand through the reports is in terms of payment: where these organizations are depending on the size of their company, how they are managing certain core functions of their business to be effective in the payments market.”
Although many companies recognize the need for real-time payments, with over 85% of them being ready for the technology in less than 12 months, it is no easy task. The biggest bottleneck can be seen in most back-offices, which can be attributed to legacy infrastructures.
A significant imbalance can be seen in the way back-offices now work. Usually, they create batches of fund transfers that will be processed at pre-determined periods instead of in real-time. Therefore, reconciliations and settlements can take place only at the end of one or more intervals of processing.
Growing Data and Payment VolumeAs previously mentioned, the range of payments and volumes are expected to escalate, and the AutoRek survey shows that close to 48% of companies have not reached back-office scalability to accommodate this growth. This will certainly lead to a deflation of profit margins.
“There has been a large amount of scale that’s been happening in payments,” Botha said. “I don’t know if COVID was the reason for the scale in these payments and volumes or if it was just a catalyst to speed up to where we saw the market going. I think the latter.
“COVID expedited the process, all the technology, all the platforms have been there, there’s been new developments in payments infrastructure that’s happened relatively quickly off the back of COVID and the pandemic. There has been a dramatic increase since 2020 in payments organizations around the globe, and that’s a common trend across all the different participants in the survey.”
Of those surveyed, 58% agreed or strongly agreed that there will be an increase in payment methods. Among the U.S. segment, 69% expect an increase in payment methods, while only 48% in the UK expected the same. This high level of expectation in the United States makes the fintech companies worth watching to see what new and innovative payment methods may be coming.
The Role of AutomationAutomation will be a key factor in significantly reducing the back-office costs incurred in managing the onslaught of payment volume.
It turns out that 25% of respondents had back-office systems with the capacity to scale. For these organizations, regardless of the increase in volume, back-office costs will remain the same.
Conversely, it was found that 22% of respondents experienced rising costs with the increase in volume. These organizations experience a drop in profit margins as payment volumes grow. Investing in back-office automation would be the answer for these situations.
“Automation helps with a number of different things for payments organizations,” Botha said. “What we do within automation of the internal processes in the middle and back-office helps shift a lot of FTE focus within a payments organization from your mundane preparation and data-handling tasks, like reconciliation and time-consuming activities.
“Automation helps shift that focus to more value-adding tasks in terms of analysis: how your product lines are performing, analysis of potential new product lines, how they could benefit them going forward. It’s about moving away from spending many hours a day, a week, a month on preparing cumbersome data that must be managed rather than investigated and analyzed to ultimately add value for the upstream.”
According to the survey, the size of the organization dictated the specific strategy that was prioritized and pursued.
“What we’ve found is that larger organizations typically have had a focus in the last two years on improving their middle and back-office, probably since they already have the market share, their revenue-generating product lines are performing well, and to remain on top, they’ve shifted their attention more to core middle and back-office functions. Automating their processes and creating more robust financial controls platforms will allow them to be more effective in maintaining and growing their market share,” Botha said.
“However, what we saw from respondents from smaller organizations is that, in the previous two years, they’ve remained focused on that custom acquisition, that revenue growth. In a different survey, post-COVID or during the pandemic, there were a lot of layoffs. Most were from the internal middle and back-office function, not in the front-office sales, revenue-generating roles being let off. That says the focus was primarily on customer acquisition, growth, and revenue growth to remain viable and operational.”
Botha offered more insight into how the responses were prompted and where the answers led.
“We asked these organizations the question: What will their outlook be for the next two years?” he said. “These organizations said they will split their focus strategically between revenue-generating activities, more product lines, and internally focusing on regulation, focusing on middle and back-office.
“But the smaller organizations who were predominantly focused on customer acquisition in the previous two years are actually looking at their internal platforms, specifically automation, focusing on governance, risk and compliance. Improving the operational systems they work with daily is seen as a way to build a more robust middle and bac-office over the next two years.”
“The more up-and-coming tech organizations, your PSPs, your fintechs, your insured techs, they were fundamentally focused in the previous two years on customer acquisition, and still remain very focused on that. But through the survey we see a lot of respondents saying the focus for upcoming or trends in the market for the upcoming two or three years is going to be really creating a robust controls process internally.”
The Real-Time and Cross-Border Payments Impact on Back-Office OperationsAlthough customers worldwide are now inclined, more than ever, to benefit from real-time payments, there are myriad challenges to overcome.
On page 29, the report noted: “As the world becomes increasingly cashless, and e-commerce and international trade continue to expand, there has been a corresponding rise in the demand for cross-border payments. As of 2022, the value of cross-border transactions exceeds $155 trillion per year. But a borderless economy demands fast payments across territories in local currencies, which poses a sizeable challenge to payments firms with fragmented systems.”
“Whether we look at domestic or cross-border payments, we’re moving to a world where the underlying customers are expecting near-real-time settlements of their funds,” Botha said. “There’s several different players and intermediaries across different jurisdictions. They have different settlement times, and so it becomes difficult internally for organizations to offer that service effectively in a more manual world to their clients.”
Botha continued: “There are a couple of key points to consider. One of the main ones is there being trust (i.e., the customers know that this is going to be effective for them). No one really likes to move away from what they know works. However, in this transition, what real-time and domestic and cross-border payments means for these organizations, and ultimately customers, is that they expect real-time responses and settlements by the organizations managing their funds.”
Steve Murphy, Director of Commercial Payments at Javelin Strategy & Research, pointed to a coming merger of capabilities.
“There’s another innovation that’s right on the doorstep now, and that’s combining real-time systems with cross-border capabilities,” Murphy said. That’s something we’re going to start seeing perhaps as soon as this year from some private companies, and certainly we’ve got central bank digital currencies and central banks that are working with each other and that kind of thing as well.”
Although the United States is certainly ready for real-time payments, the report indicated that cross-border payments are more challenging to process.
AutoRek’s Offerings in AutomationInvestment in automation might be what the doctor ordered when it comes to easing the strain of manual processes and other outdated, legacy systems. Botha said AutoRek has what companies need to free up more time to dedicate to the things that add value in running an organization.
“We are a financial data control platform, and we manage the end-to-end process in organizations,” he said. “Middle and back-office, whether it be in finance, treasury departments, payment operations, is a key element of where our platform is very successful.
“We automate three elements of the process, which add a huge value to these businesses. The first one being all your data management processes. With many different payment providers and partners working with many different banks, it creates a lot of complexity around your data management. We look after that and automate that process by giving all our clients back a lot of time in their day to shift that attention to more value-adding tasks instead of preparing data ultimately for reconciliations – the second and central part of our automation offering.
“AutoRek is a very flexible platform to meet a lot of their requirements around reconciliation. You can be as flexible and as deliberate as you need in the platform, which is beneficial to payment organizations. Payments organizations shouldn’t be told how they need to do things. They need to have something that adapts to their business models.”
Finally, Botha touted the centralization of reporting to satisfy regulatory requirements.
“The third element is having your audits all in one place and ultimately any type of reporting that you need from your management reporting, audit reporting, and even regulatory reporting,” he said. “We help reduce the potential of regulatory pressure and in some cases, fines as well.”
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ISO 20022, a new global standard for electronic messaging between financial institutions, was initially created to give the financial industry a common platform for sending and receiving data about payments.
However, financial institutions should not look at ISO 20022 as merely a compliance burden to be met, but an opportunity to serve clients better and gain a competitive edge. The amount of data related to payments that will be transmitted under ISO 20022 standards is so robust that it gives banks the ability to know their clients better and create new products and services tailored to their needs.
The robust and granular data will also aid financial institutions in fighting fraud, allowing them to detect potentially fraudulent patterns in payments and stop them before they are completed.
To learn about the importance of ISO 20022 for financial institutions, what benefits it offers, and what it means for the future of payments going forward, PaymentsJournal sat with Andrew Foulds, Director of Global Clearing Solutions, Product Management, EMEA at Fiserv, and Steve Murphy, Director of Commercial and Enterprise Payments Service at Javelin Strategy & Research, for a podcast discussion on this topic.
PaymentsJournalHow Banks Can Realize Business Benefits and Reduce Payments Fraud With ISO 20022PaymentsJournal How Banks Can Realize Business Benefits and Reduce Payments Fraud With ISO 20022PaymentsJournalThis blog is the second of a two-part series covering that podcast. Part 1, which covered why the ISO 20022 standards were delayed and what financial institutions can expect around their implementation, can be found here.
The Many Benefits of ISO 20022 ComplianceFoulds observed that when it comes to ISO 20022, “The focus on compliance with these regulatory changes can make institutions lose sight of what the business benefits are. These messages contain a lot more data and richer data. That allows us to look at and examine this data and turn it into information, which can then be used to create new services for clients.”
Foulds added that banks can take the new data and “turn it into something useful and add to the services you are already providing now.”
For example, ISO 20022 data can be used to help business clients better manage liquidity and cash flow. ISO 20022 data can also be applied to supply chains to help solve supply chain network problems.
Murphy noted the vast potential for improving and streamlining B2B payments using ISO 20022. Nacha, the electronics payments association, reported that fewer than 20% of B2B payments are processed automatically. The group further noted that ISO 20022 data can greatly improve automation of B2B payments by automatically extracting and providing typical information found on invoices. Thus, businesses can issue a “request for payment” to a payor and receive the money automatically without the need for any human intervention.
“There is a big opportunity for revolutionizing B2B payments down the line [with ISO 20022 data] when banks learn how to use all that data,” said Murphy.
Benefits from ISO 20022 will likely be seen in consumer-related payments first said Foulds, though he agreed there are massive opportunities in the B2B space.
“A lot of the banks I talk to really understand the benefits and advantages [of using ISO 20022 data in B2B payments] but they say, ‘we’ve got to really get our house in order and understand it fully before rolling it out to our corporate clients,’” said Foulds.
ISO 20022 and the Fight Against FraudAs payments continue to become faster and more digital, the risk of fraud related to payments continues to increase, making detection crucial.
“Fraud is a big issue for our industry globally,” Foulds said. “Fraudsters are constantly evolving their methods and attacks to try and stay one step ahead.”
ISO 20022 does not have anything to do with fraud per se, but it will enable banks and payment providers to more easily detect and stop fraud due to the greater amount of information and detail around payments that it provides.
For example, Foulds noted that simply checking the name associated with a payment against the name that is on an invoice can reduce fake invoice fraud by 30%. ISO 20022 data will provide many more data points to use to check against potentially fraudulent payments.
“The more data we have, the more we can investigate transactions and make sure every payment is going where it is supposed to go,” he added. “There are plenty of opportunities for ISO 20022 there.”
Murphy noted that the increase in real-time payments makes it easier for fraudsters to get away with payments fraud before it can be detected. He added that digital payments fraud is also up since the pandemic, when many more people started making payments digitally.
“As payments become more electronic, there are more schemes being developed by fraudsters to take advantage of this,” Murphy said. “Banks need to be able to look at behavioral patterns and data and track this 24/7 and 365 days a year to detect and stop fraudulent payments.”
Read part 1 of this article here.The post How Banks Can Realize Business Benefits and Reduce Payments Fraud With ISO 20022 appeared first on PaymentsJournal.
A Look into E-Commerce for 2023E-commerce merchants have had to deal with an onslaught of change recently — an acceleration of online shopping, disruptions due to COVID-19, inflation, and a possible recession — which has significantly impacted how online businesses should be operating to remain viable now.
The aforementioned events have given way to a few trends that online sellers must be ready to adopt. “Because of inflation, I see consumers looking for more bargains when they shop online,” said Ya Wen, SVP of Americas at Payoneer. “Since COVID conditions have improved, more shoppers are shopping … however, people are more cautious about their wallet. I predict that market players will do more and launch more tools and resources to provide better deals for consumers.”
PaymentsJournalOptimizing Operations to Recession and Inflation-Proof Your E-Commerce BusinessPaymentsJournal Optimizing Operations to Recession and Inflation-Proof Your E-Commerce BusinessPaymentsJournalApart from focusing on budget-friendly offerings, merchants must be ready to optimize current strategies to draw in more customers. For merchants that have significant resources, the trends point to building an omnichannel strategy. Small and medium-sized businesses (SMBs), on the other hand, need to take a careful look at the cost of acquiring customers across different channels. These costs seem to be increasing and, therefore, merchants must rework their e-commerce tactics, focusing on their marketplace power, their traffic, and their economies of scale.
If the rising cost of customer acquisition isn’t enough, merchants must also contend with another possibility of supply chain disruption and take appropriate actions to minimize impact. Merchants can begin by looking at their supplier base and determining where they want to take action to offset this risk. China is a prime supplier for many businesses and recent news only emphasizes this need.
“We already know the latest news from Apple, as they are looking to move manufacturing from China for iPad and iPhone products,” said Wen. “What that means to the e-commerce seller is that they will start thinking about their supplier and their supply chain strategy overall and try to diversify their supply chain, looking more toward Southeast Asia, Latin America, even parts of Europe. This trend will continue and accelerate in 2023 and beyond.”
That said, Wen noted that as the Chinese government continues to ease its COVID-19 restrictions and reopens its borders, Chinese merchants are eager to expand their businesses on a global level. This expansion means more bargains, more selection, and more competition.
Another trend merchants should watch closely is the rise of the creator economy, which is also expected to accelerate this year. Creator platforms such as Instagram, TikTok, and Twitter are social commerce platforms where creators have amassed a significant following and are looking to monetize the traffic they have.
One event that cannot be ignored by merchants is the potential recession and its impact on e-commerce throughout this year. “One big trend I’m looking at is what the potential for recession means for e-commerce ,” said Daniel Keyes, Senior Research Analyst of Merchant Services at Javelin Strategy & Research . “I’m interested to see how the industry responds. The reflexes will be negative: demand goes down, online shopping goes down. We don’t really know how the modern e-commerce market will respond to a recession. When you add the supply chain issues, then you get into shipping problems, making e-commerce more complicated. If there is a recession, there are a lot of areas in e-commerce that will change.”
“I think it will definitely change the economics both on the consumer side and on the seller side, and frankly, the marketplace side,” said Wen. “The prospect of having a real recession will have a bigger impact on the e-commerce trend overall.”
How Fintechs Are Equipping E-Commerce Merchants to Navigate the ChangesIn answer to the extreme challenges e-commerce merchants continue to face, some fintech players have stepped in to help.
“Payoneer really adds value and helps e-commerce sellers in a tough macro situation. Payoneer moves faster than traditional banks, something that SMBs have really been relying on. Payoneer offers products like working capital, [which is] sometimes a lifeline for small and medium-sized sellers in a tough environment. We help them to build their selection by buying the important inventory and being competitive in spending on some of the online advertisements. We provide an end-to-end, money-in, money-out service. This is much nimbler and cheaper and faster in a time of real-time changes in the economy.”
These financial and payments-related products will continue to grow, fueling more innovation. As Wen explained, now Payoneer can help relieve their clients of tax issues and accounts receivable issues, just to name a few.
“There are plenty of problems that businesses could use help with,” agreed Keyes. “There’s always an opportunity to step in, especially during a recession.”
What’s Ahead in 2023Despite many news outlets and thought leaders warning of a potential recession, there are important reasons to be positive this year. “I think the competition in the e-commerce space will continue to heat up,” said Wen. “We’ll see more players coming into the space —spending billions of dollars trying to build that fulfillment capacity, build[ing] their local regional sales and marketing capacity to really drive seller recruitment, [and] offering a deeper selection and better pricing globally — so that competition will heat up further as China opens up. That’s great news for consumers.”
Wen emphasized the importance for small and medium-sized businesses to look beyond their own backyard and think globally, not just in terms of new customers, but also suppliers and partners. Demand is strong, both domestically and beyond our borders, and companies should consider partnering up with Payoneer to leverage their account receivables and supplier payment solutions to facilitate global growth.
The post Optimizing Operations to Recession and Inflation-Proof Your E-Commerce Business appeared first on PaymentsJournal.
ISO 20022 may be delayed in its global rollout, but that doesn’t mean banks can afford to put off or ignore upgrading their payments systems to meet this new messaging standard.
Broadly speaking, ISO 20022 is a global standard for electronic messaging between financial institutions and was initially created to give the financial industry a common platform for sending and receiving data about payments.
This new standard will provide much more granular and robust data about payments, which financial institutions can use to ultimately serve their clients better. Around 21 domains of business processes are specified in the ISO 20022 standard, along with the messaging and data necessary to support the different processes.
PaymentsJournal sat with Andrew Foulds, Director of Global Clearing Solutions, Product Management, EMEA at Fiserv, and Steve Murphy, Director of Commercial and Enterprise Payments Service at Javelin Strategy & Research to discuss the current state of ISO 20022 and what to expect. In Part 1, they chat about the importance of ISO 20022 for financial institutions, why it was delayed, and what banks can anticipate around this standard going forward.
PaymentsJournalISO 20022: What Banks Need to Know About Delays and OpportunitiesPaymentsJournal ISO 20022: What Banks Need to Know About Delays and OpportunitiesPaymentsJournalDelays Should Not Create ComplacencyISO 20022 was meant to go live globally in November 2022 but got pushed back to March 2023. A big reason was the need for some market infrastructure platforms to iron out technical kinks. Notably, the European Central Bank (ECB) delayed the migration to its Target2 real-time gross settlement system, which would incorporate ISO 20022 standards, which in turn had a “domino effect,” explained Foulds.
“It caused other market infrastructure systems to delay their go-live dates,” added Foulds.
Swift, the global financial messaging network, also announced it will go live with ISO 20022 in March of 2023, but said that institutions will have until 2025 to adopt the new standard.
This may have lulled some financial institutions “into a false sense of security,” said Foulds, but it doesn’t mean that banks should be complacent in migrating to ISO 20022 standards.
“It’s something we are going to have to deal with as an industry,” he said.
Murphy added that U.S. institutions are not impervious to ISO 20022 standards, since the Federal Reserve will be adopting ISO 20022 standards for messages in its Fedwire Funds service, as well as The Clearing House for its CHIPS network.
The Clearing House noted that it “remains committed to the ISO 20022 message format to enhance the efficiency of payments processing, to allow participants and end user customers to glean value from enriched data content and structured message formats,” and added that approximately 95% of CHIPS payments have a cross-border component to them.
“There are global implications to this any way you look at it,” Murphy observed.
Opportunity Cost for BanksMurphy asked Foulds how banks should be preparing for this massive change and if they should rely on their payments service providers to help with the transition or use in-house resources.
Foulds responded that larger banks likely have the in-house resources to begin working on migrating to ISO 20022 standards, and they are generally being more proactive in getting it done as quickly and as comprehensively as possible since much of their business is done globally.
Smaller banks will likely have to rely more heavily on help from their payments providers and vendors, but no matter the size of the institution, Foulds warned that none should put off the work to move to the new messaging standard.
“Since Swift gave until 2025 [for its institutions to adopt the new standards], some smaller institutions may put this off,” he added. “Our recommendation is that you should engage with your service providers and have a strategy to deal with this.”
That’s because there is an “opportunity cost” associated with delaying migration to ISO 20022 messaging standards, Foulds said.
“The earlier you go about this, the better it is, we think,” he added. “Don’t think about this as a mandated, regulatory issue, but view it as a business opportunity. There are more robust, rich data points transported via ISO 20022 messages, and institutions can use that new data and turn that information into new services for their clients.”
By way of metaphor, Foulds compared previous data sent through payments messaging as “about the size of a baseball, or a cricket ball” while data sent via ISO 20022 messages would be akin to the size of a basketball.
“There is a vast difference in the amount of data,” he added.
Foulds said this means that institutions that do not incorporate ISO 20022 standards will be at a massive competitive disadvantage. For example, when the European Central Bank’s aforementioned Target2 system goes live in March, it will be a “big bang” approach rather than a phased approach.
“That means on Friday at the end of day they’ll retire the old system, and Monday morning the new will be in place. So if you’re not ready, you won’t be able to do business. It’s really more of an existential business issue than just a regulatory issue.”
The post ISO 20022: What Banks Need to Know About Delays and Opportunities appeared first on PaymentsJournal.
The year 2023 is poised to see significant evolutions within the payments landscape. From the rapid rise of contactless payments in the past couple of years to the widespread adoption of embedded payments, consumers and merchants can agree that they want their payments to be seamless, frictionless, and fast.
PaymentsJournalThe Future of Payments is Fast, Secure, and ConvenientPaymentsJournal The Future of Payments is Fast, Secure, and ConvenientPaymentsJournalThe Current Payments LandscapeConsumers have always taken part in payments in some shape, but the channels in which payments are taking place have changed. In the wake of COVID-19 lockdowns, the need for contactless payments arose, bringing security to top of mind for consumers and merchants alike.
With these changes come new demands, shifting the landscape of payments. Here is what those in the industry must look out for.
“From the payments landscape forward, I look at it from three different perspectives,” said Sukanya Madhavan, Vice President of Product Management and Engineering at CSG Forte. “From the consumer side, the end consumers want additional methods of payments, such as alternate methods of payment and embedded payments. The goal is making it seamless and simple for consumers to make a payment.
“From the merchant side, adding this to their regular business activities and making payments seamless to their consumers is something to consider, while keeping costs at bay and optimizing payment operations. As a payment solution provider, we need to keep tabs on the market to determine consumers’ needs and ensure we add all these capabilities, such as a QR code or open-banking BNPL (buy now, pay later).“
Merchants must learn to thrive in this increasingly demanding environment to stay competitive. Balancing in-demand offerings while keeping costs low and providing a seamless checkout experience is no small feat.
“Alternative payments are important in meeting consumer needs,” said Daniel Keyes, Senior Research Analyst of Merchant Services at Javelin Strategy & Research. “But they also introduce new complications such as crowding the checkout page. You can potentially overwhelm consumers with options, but you also want to provide them with the ability to pay the way they want to. Offering consumers with the payment options they want while avoiding a fragmented and frustrating checkout experience is a challenge that merchants and their providers will need to meet.”
“We need to have a balance,” Madhavan added. “‘Do you want too many payment methods appearing in your checkout?’ As a payment provider and as a merchant, [having] that flexibility in the offering so you can change it as needed, depending on the market or the specific customer that you’re looking for is critical.”
Luckily, merchants can easily pick and choose the payment options that best suit their business, saving time and money.
“It’s not a one-size-fits-all,” Keyes said. “A restaurant doesn’t need all the payment options that an apparel retailer needs and so on. The ability to choose and understand what is the right match for a merchant is important going forward.”
Additional Ways Consumers Will Engage with Cashless TransactionsIn the payments world, we have seen alternative payments options that have sprouted with abandon.
“The alternate-payment methods landscape has expanded in the past few years,” said Madhavan. “Although we’ve had digital wallets for a long time, Apple Pay and GPay adoption is accelerating. We have buy now, pay later, where customers can purchase items they wouldn’t have otherwise had they not had the option of paying for it in three or four or five installments.”
“From the merchant side, that’s a business or a sale that they wouldn’t have. There’s the concern of moving consumers toward additional debt. But it’s more of a calculated risk. We must ensure consumers are financially capable.
“We are also seeing an increased adoption in recurring payments, where people can set and forget it. People want seamless payments, and therefore we are seeing recurring payments grow.”
Younger consumers are more prone to be early adopters of such alternative payment methods as peer-to-peer (P2P) apps like Venmo and paying with a mobile wallet.
“Digital wallets really stand out to me as a cashless payment that is going to take off,” Keyes said. “Adoption has been on the way up. We’re seeing younger consumers rely on them more heavily. They’re making more purchases a week with a digital wallet than older generations, Gen Z in particular.
“I think digital wallets are really poised to become more of consumers’ go-to payment method, which is a big shift from what it’s been in the past years.”
On a personal note, Madhavan related a story about her teenage son’s inclination toward using Apple Pay on his phone instead of opening a bank account of his own.
Keyes added, “If you get a phone in your teenage years and you can get a debit card or a credit card loaded up onto Apple Pay, if that’s the first way you pay for something, why would you suddenly start using cards or other methods later? Those wallets are reaching consumers early and building up a relationship that could last for the rest of their lives.”
Embedded Payments’ Role in the LandscapeOne of the biggest draws for embedded payments is just how easy they are to execute. The consumer does not have to search for a card or for cash. With just the push of a button, a purchase can take place, all on the same platform. What’s not to like about that? It’s a massive win for merchants and customers alike.
“We talked about how consumer behaviors have changed, how they demand instant payments,” Madhavan said. “Merchants must now offer all these capabilities in addition to their core business. Embedded payments will make it easier for merchants and a seamless payment experience for the end consumer.
“Another benefit of embedded payments is additional reporting. We know companies spend a ton of time trying to go back and reconcile and make sure the books are right.”
“For merchants, embedded payments open so many doors and make things so much easier,” Keyes added. “For consumers, embedded payments make payments invisible. The average consumer does not want to think about payments and embedded payments. Consumers want a frictionless experience where they don’t even really know they’re paying. There’s not a lot of effort. That’s important for creating seamless, appealing checkout experiences and other shopping experiences. So, you know, I think embedded payments are certainly here to stay, and their importance is only going to grow.”
What’s Next for the Payments Landscape?Payments providers will need to step up their offerings to serve the growing needs of their merchant customers, who are seeing growth not just in payments but also in alternative forms.
“I believe there is going to be a value sphere expansion,” Madhavan said. “At the core; capabilities and alternate methods of payment are expanding the value sphere. In terms of risk monitoring, fraud management, reporting and reconciliation, they will enhance consumer experience, ensuring merchants can continue to run their business while providing that better experience for the customer. That will be the focus, and we can expect several businesses to invest a lot of money in that area.”
Payments companies must also focus on the quality of their offerings, not just the quantity.
“Payments can be very fragmented,” Keyes said. “We’ve named a million different services that a company can offer: BNPL processing, acquiring digital wallets, [and more]. Payments companies that are trying to offer all these services in one have a real advantage if they can offer quality services. A merchant can get everything they need in one place. An SMB does not have the time to source out different vendors for all their payment needs. It would be much easier for them if it’s an all-in-one platform. Maybe it’s in a very-easy-to-use dashboard.”
Keyes continues, “I think we’re going to see a lot of companies continue to push to meet more if not all of merchants’ needs in order to deepen their relationship and to get more revenue out of the relationship as well. But I think the ability to make payments less fragmented for merchants will be key going forward.”
One thing is certain: More payment methods will mean that more must be done to ensure merchants and customers can enjoy quick, safe, and convenient payments. That is the future.
The post The Future of Payments is Fast, Secure, and Convenient appeared first on PaymentsJournal.
In a payments world that often is often focused on the new thing, reliable ACH payments—the province of the National Automated Clearing House Association (Nacha)—keep steadily growing, with billions of payments processed annually to the tune of trillions of dollars.
PaymentsJournalACH Network Processed 30 Billion Payments—a Total of $76.7 Trillion—in 2022PaymentsJournal ACH Network Processed 30 Billion Payments—a Total of $76.7 Trillion—in 2022PaymentsJournalThat doesn’t mean, however, that nothing is new in the ACH lane. On a recent PaymentsJournal podcast, Michael Herd, the Senior Vice President of ACH Network Administration at Nacha chatted with Brian Riley, Co-Director of Payments at Javelin Strategy & Research, about the highlights of the past year, what has been driving business for Nacha, developments to look forward to in 2023, and why Herd sees reason for optimism.
“It really is a far-reaching, industrial-strength payment system here in the U.S.,” said Herd.
2022 by the NumbersThe volume attests to Herd’s contention.
The ACH Network processed 30 billion payments in 2022, encompassing $76.7 trillion. Those numbers were up by 3% and 5.6% over what the network handled in 2021.
Herd said that volume was achieved despite “some headwinds.” He noted the absence of pandemic assistance payments, which flooded into taxpayers’ bank accounts in 2020 and 2021. There was also a slowdown in economic growth and in jobs.
Nonetheless, the numbers grew across the board for the ACH Network, with dollar growth of about 6% year over year. It all amounts to more than 120 million payments per business day, and over the course of the year, it’s approximately 89 payments per U.S. citizen.
But perhaps the best measurement of ACH payments’ enduring appeal and easy reliability is that the value of the payments processed by the ACH Network has increased by more than one trillion dollars every year for 10 consecutive years.
It’s an enviable steadiness, Riley noted.
“The volume continues to grow,” he said. “I don’t want to know about events that blow up. It’s nice and steady. It’s there, reliable.”
The Continuing Growth of Same Day ACHIn March 2022, the per-payment limit on Same Day ACH transactions increased from $100,000 to $1 million. That boost brought new players into the fold and fueled remarkable year-over-year growth for the payment method.
“There was an immediate impact to that increase,” said Herd. “We were able to see a doubling of the dollars flowing through same-day ACH (from February, the month before the increase, to April).”
Again, the numbers tell the story of the growth: 697.5 million payments using same-day ACH that added up to $1.7 trillion in value, a more than 86% increase year over year.
What’s more, the boost in the per-payment limit expanded the use cases for Same Day ACH, drawing in such things as vendor payments, tax withholdings, merchant funding and settlements, and concentrations of cash. Further, business-to-business (B2B) payments across Same Day ACH are up 44% year over year, according to Herd.
The cap increase, Riley said, “was significant for the long-term reliability of that relationship.”
Herd backed that up with anecdotes from his dealings with users and would-be users of same-day ACH.
“It is the corporate user community that has been driving those increases over time,” he said. “They’re the ones that have really told us that this is something that they wanted and that it makes a difference to them. It enables them to use the capability that has been created.”
The ACH Network has continued to see shifts from the pre-pandemic business payments models, which in many cases clung to older forms like paper checks, to what became a necessity during the pandemic: paying employees, vendors, suppliers, and the like without putting a piece of paper in their hands.
That ended what Herd described as “inertia” among some businesses.
“When you don’t really have ways to send and receive checks with actual people doing the physical processing of those, that changes behavior very quickly,” he said. “So we saw some significant increases in business payments and especially B2B volume, and that continued in 2022 even though many businesses have either gone back or portions of the workforce have gone back.”
“Once you make that shift away from paper,” Riley quipped, “you’re not really going to go back.”
Looking to the Year AheadHerd pointed to three fronts where Nacha will be looking to refine how it does business:
- Extended hours for Same Day ACH: Right now, the settlement times for Same Day ACH correspond with standard East Coast working hours. As a result, the West Coast currently has a truncated window for Same Day ACH payments. Herd said the idea is to work with industry partners to expand Same Day availability to align with West Coast close-of-business hours.
- International ACH transactions: Improvements, Herd said, can make the user experience better and easier to understand.
- Risk management: Implementation has begun on a new Risk Management Framework, issued in 2022. Herd pointed to a focus on fraud like “credit push payments, things such as business email compromise and vendor impersonations and other types of fraud.”
An Optimistic ViewHerd ended on a hopeful note, citing some of the reasons for optimism he has seen in the young year. Recession fears, swirling since last year, are easing a bit. Job gains for January (517,000 new jobs) were strong, and fortified statistics from November and December that were also encouraging.
“It’s good for payment systems,” he said. “It’s certainly good for the ACH direct deposit of payroll payments.”
And while acknowledging what Riley called “unpredictable things” such as inflation, Herd cast the steady reliability of ACH transactions in the wider light of Nacha’s ongoing mission to refine its processes and protect its customers.
“The world wants to move faster and faster and faster, and the ACH [Network] has been central to that conversation,” he said. “And we also have to be safer, safer, safer, and so we need to do that, too. So that’s kind of all in the mix of how to keep something running efficiently.”
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In today’s digital age—when convenience, ease, and personalization are highly valued—consumers expect a variety of payment options, whether it’s buy-now, pay-later installment plans, cryptocurrency, or contactless payments. And they want those options not just in e-commerce but also within physical stores.
As a result, many companies are adopting an omnichannel payments strategy that gives consumers the option of paying the way they want.
In a recent PaymentsJournal podcast, Nitin Prabhu, Vice President of Merchant Experiences & Payment Solutions at PayPal, and Daniel Keyes, Senior Research Analyst of Merchant Services at Javelin Strategy & Research, discussed how retailers can bring their omnichannel strategy to life in order to reduce friction in the customer journey.
PaymentsJournalPractical Advice for Retailers to Bolster Omnichannel StrategiesPaymentsJournal Practical Advice for Retailers to Bolster Omnichannel StrategiesPaymentsJournalAdjusting Retail to an E-Commerce-First MarketAlthough an omnichannel experience isn’t something new—retailers have long looked at being able to reach consumers on their own terms, regardless of the device they use—an omnichannel payments experience is a whole new territory for most.
“There are a lot of basic things retailers can do to improve this, such as reducing friction during the checkout process, as well as offering the right payment options,” Prabhu said.
Keyes noted that shopping at retail stores can be more taxing than online shopping, presenting more friction than is necessary. “Any process that can remove friction, and is very consistent and familiar, is ideal,” he said. “That way the customer is just getting what they want, without having to give payment much thought.”
Post-Pandemic AdaptationBefore the pandemic, small and medium-sized retailers worked with multiple vendors on dealing with fraud risks and catalog management. But they found that interoperability of vendor software was an issue and managing the vendor relationships was challenging. Today, many merchants are switching to a single vendor that can meet all their payments-related needs in an end-to-end experience.
For example, PayPal has developed a vertically integrated platform that includes services typically outside of its purview, including a service to return products. “PayPal recently acquired a company called Happy Returns,” Prabhu said. “They’ve done a fantastic job at creating a seamless returns process for merchants, especially in the small and mid-market segment who may not have the logistics or footprint across the U.S. to return products.”
Integrated platforms can also reduce headaches for consumers and even drive demand. A seamless returns process can drive business development.
“It is shown that for most customers, if they’re able to return a product after trying it, the propensity to go and try that product or service is much higher,” Prabhu said.
Merchants need to find a custom solution to IT for their businesses, but this doesn’t mean they need to go after multiple vendors and maintain all those relationships. Increasingly, merchants are seeking a company that provides all of their payment functions in one place.
Once merchants commit to a single payments ecosystem, they want it to handle everything. For example, in the hospitality sector, “a restaurant might expect the processor to have a shift management software, the ability to handle tips, but also delivery and other things,” Keyes said. “Providers are doing their best to meet that meet that challenge to maximize their relationships and maximize the revenue in the process.”
Earning Customer TrustAccording to PayPal, having payment options that customers trust can increase sales. Its data indicates that 44% of consumers are more likely to trust merchants if they see their preferred payment option at checkout.
In fact, many consumers won’t make a purchase at all if their preferred method is not present. “Roughly 59% of PayPal consumers have actually told us that during checkout, if they don’t see PayPal as a payment option, they have decided not to purchase something,” Prabhu said. “People are very worried that if the purchase goes wrong, will their financial institution or payment provider have their back? How easy is it to get refund policies to fight chargebacks or disputes? Preference of payment options definitely drives trust with merchants.”
Reducing Friction Is Crucial to Driving SalesWhen consumers have to make complex payments, they often drop off. Thus, reducing friction becomes the first barrier to clear in driving sales.
“In a survey, we found that one in four customers drops off from a purchasing funnel if the process is too complex or there are too many steps,” Prabhu said. “That translates to approximately $236 billion in lost sales.”
Retailers should start by focusing on the basics. For example, smartphones aren’t the easiest devices to type on, so it’s important to have minimal forms. Providing one-click payment options is also helpful, as is storing customer information for future checkouts. And merchants still need to let customers check out as guests if they prefer.
Finally, retailers should avoid redirecting to different URLs within the payment process. Should consumers lose signal service, they would have to go back to the beginning of a long checkout flow. And that inconvenience is enough to drive them away.
What to Expect in 2023One big change over the past few years has been the acceleration of e-commerce, particularly among older generations. There are no signs this will slow down in 2023.
What’s more, expect to see a greater diversity of payment options. “Credit and debit have historically dominated the payments in general,” Keyes said. “But other options—whether it’s a buy-now, pay-later solution or other types of digital wallets such as Venmo or Cash App—will gain increasing traction in 2023.”
The biggest change, however, will be the convergence of online and in-store shopping. “Customers don’t think about online or in-store separately,” Prabhu said. “They say, ‘Let me purchase this product online. I don’t want to wait for two-day shipping, so maybe I go to the nearest store and quickly pick it up, and try it on. And if I end up not liking it, I can return it in store or by mail.’ All these channels are merging. That is what is most exciting to me.”
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Ransomware attacks are hitting financial institutions big and small, and show no signs of abating. When companies suffer ransomware attacks, they typically turn to their legal counsel or insurer for advice about how to choose a good ransomware negotiator. When small business, in particular, is hit, they often turn to their primary financial institution for ransomware-response guidance. That’s because they’re unsure of which negotiation service is the right fit. Ransomware negotiation is a niche industry, as it involves direct interaction with the criminals who wage ransomware attacks.
PaymentsJournalWhen It Comes to Ransomware Mitigation, Selecting the Right Negotiator is EssentialPaymentsJournal When It Comes to Ransomware Mitigation, Selecting the Right Negotiator is EssentialPaymentsJournalIn recent months, Javelin Strategy & Research’s Tracy Kitten, Director of Fraud and Security, and Alexander Franks, Fraud and Security analyst, conducted research into the industry around ransomware negotiation. They found that many financial institutions didn’t know much—or, in some cases, anything—about the ransomware negotiation companies they refer to their clients. Oftentimes, FIs just know negotiators by word of mouth from outside lawyers and insurance providers.
In a recent podcast, PaymentsJournal sat down with Kitten and Franks to discuss the main findings of their report. They provided an overview of what companies should look for when choosing a ransomware negotiation company and how companies in that specialty differ in the resources they offer.
What to Do When Ransomware HitsKitten explained that Javelin’s research is really focused on the basics: Who are the players and what should customers ask of them? “So, it’s a very niche part of the ransomware mitigation landscape,” Kitten said. “But a very important one and one that we found really is kind of at the crux of ransomware mitigation.”
Financial institutions are indirectly impacted when ransomware attacks strike their commercial customers. Franks noted that when a company looks for a ransomware mitigation specialist, it needs to ask about three main things: capacity, culture, and collaboration. Ransomware negotiation providers differ in those aspects, so asking about them can mean the difference between paying a ransom and avoiding a loss.
Ransomware negotiators also differ in what they are capable of doing—or willing to do—for clients. Franks suggested that prospective clients ask negotiators about helping with payments, helping with the handling of cryptocurrency, explaining how payments will work, providing legal support, and outlining the languages negotiators on staff are fluent in.
The language factor is essential. To get the best settlement, a negotiator needs to speak the language of the criminal. “Not only does it help the negotiators quickly determine the sophistication of the attackers, but it also helps the negotiators build a rapport with the attackers,” Kitten said. “They develop mutual respect. If you have negotiators that have native language speakers on staff, the likelihood that you’re going to lower your ransom is greater, and the likelihood that you’re going to be hit by the same ransomware gang in the future drops dramatically. And again, a lot of that is just because of the relationship building.”
It’s also important to inquire about how the ransomware negotiator collaborates with its clients. “This is essentially just the set of practices that describe how a victim organization is going to hear from their ransomware negotiator,” Franks said. “Are you bringing in the data protection officer or chief risk officer? Are you getting updates in real-time? Are you getting them daily? Who is providing public relations services? Who is handling all adherence to cyber insurance or legal requirements?”
If a company chooses a good ransomware negotiator, it may be able to avoid paying a ransom altogether.
“But we know that oftentimes, that’s not the case,” Kitten said. “You want to make sure the incentives are right for the negotiator. It is possible that, because it is such an opaque business, the negotiator could get a cut of the ransom. You at least want to make sure to get a ransomware negotiation provider that does not have an incentive to either get paid a high ransom or any ransom at all.”
Fool Me Once, Fool Me a Hundred TimesIf you’re hit with a ransomware attack once and end up paying a ransom, “you’re more likely to be hit by a ransomware attack again,” Kitten said. “And so having a really good negotiator is going to help reduce the chances or the likelihood that you’re hit again.”
Many companies that have been hit with a ransomware attack were already targeted by multiple attacks in the previous year.
“In 2021, 50% of the ransomware victims were attacked between two to five times, and nearly 75% of the victims were hit two to 10-plus times,” Kitten said. “Oftentimes, they’re getting in because an employee falls for some kind of phishing attack. It’s a network vulnerability that they exploit. So even if you have backups of data, you still need to address the network intrusion.”
The Future of Ransomware NegotiationThe market for ransomware negotiation has long been a black box, with most parties seeking such services not knowing even the basics; so there’s lots of room for improvement. “There needs to be information sharing,” Kitten said. “All parties would benefit from sharing of techniques, standards, and the expectations of different ransomware gangs. It just doesn’t exist yet.”
Ethical standards will be increasingly important, too. “Sharing of ethical standards can really go a long way in handling this epidemic of ransomware and preventing the damage that it’s causing from spiraling out of control,” Kitten said. “Beyond that, I think that there are certain approaches, for example, pricing-model approaches, that would give us a lot of space to grow.”
Other innovations can involve the payment of negotiators. One classic model of compensation has been to give negotiators a cut of the difference between the ransom sought and what was ultimately paid. Kitten would like to see that revised. “There’s an incentive for both the ransomware negotiators and the ransomers to give absurdly high ransoms at the outset, with the expectation they will be negotiated far down. And that puts the ransomers in an advantageous position,” she said.
To learn more about the negotiations market and how to select a good ransomware negotiator, click here to view the full report.
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With cybercrimes reaching unprecedented levels and impacting businesses in every industry, consumers are naturally wary of providing personal information online. Financial institutions continually rank among the most trusted organizations with which consumers do business, but FIs can quickly lose their coveted ground if their customers or members lose cyber-trust due to lack of privacy protections and transparency.
Javelin Strategy & Research’s “Cyber-Trust in Banking Scorecard,” which ranked 21 U.S. FIs on consumer privacy, cybersecurity empowerment, and cybersecurity education, finds that FIs that focus on focusing on privacy, empowerment and education for customers and members are the best situated to cultivate trustworthiness and long-term relationships.
PaymentsJournalFIs That Prioritize Cyber-Trust Have Much to GainPaymentsJournal FIs That Prioritize Cyber-Trust Have Much to GainPaymentsJournalCyber-Trust DefinedWhat is cyber-trust and why is it important that financial institutions nurture this among their members and customers?
“The relationship between a consumer and the organization that they are doing repeated business with is contingent on trust,” said Suzanne Sando, senior analyst of Fraud & Security at Javelin. “You’re not going to go back and continue to do business with a company that you don’t feel takes you seriously or takes your privacy and your general livelihood seriously. Looking through the lens of financial institutions, they are arguably one of the most trusted organizations, which I think is why building and maintaining what we call cyber-trust is so important for FIs.”
“The impetus for this Cyber-Trust in Banking Scorecard was for us to get a feel for how much our financial institutions in the U.S. are focusing on empowering consumers from a cybersecurity perspective,” said Tracy Kitten, director of Fraud & Security at Javelin. “What’s interesting and ironic about it is that right after our report published, we saw so many institutions putting into motion some of the recommendations that we listed in the report.”
This comes as Congress continues to come down on FIs have responded positively, as they have made changes in the right direction.
How Consumers Define Cyber-TrustThe scorecard revealed how consumers’ trust in their FIs determines consumers’ willingness to surrender personal data. However, the FI must still handle consumers’ personal data responsibly.
“Consumers who trust their primary financial institution are more comfortable than those who don’t trust their FI with cybersecurity-relevant data being collected by their FI,” said Sando. “So, for a further example, of consumers who trust their FI, 62% are comfortable with their financial institution collecting PII (personally identifiable information) versus just 30% of consumers who don’t trust their FI. When that relevant data is being collected, if a consumer trusts their FI and they know what’s happening with that data, they’re OK with it.”
“The important takeaway here is that FIs can interpret this as a level of cyber-trust, but that doesn’t mean that they can just go crazy with collecting customer data,” Sando added. “Only things that are absolutely necessary for business should be collected. You don’t want to abuse that trust because consumers are going to react if they feel like their FI is overstepping their bounds. And that trust is destroyed in an instant when privacy expectations aren’t met. The main point here is that transparency matters.”
Cybersecurity has taken on many forms, including biometrics authentication, and consumers are willing to share physical and behavioral biometrics data to ensure stronger cybersecurity. They are not as closed-minded or fearful as FIs tend to think.
“If a consumer knows that tracking their behaviors and using biometric authentication is going to enhance security, they’re more than willing to share that information and have that information be used about themselves or about their physical being,” said Kitten. “And that’s just something that financial institutions historically have not been super transparent about.”
In fact, consumers are much more cyber-aware these days and are not scared off if FIs use the word “cybersecurity,” Kitten added.
“They want to be educated, they want to be talked to,” said Kitten. “We shouldn’t treat them like children who don’t understand anything about cybersecurity. I think it is one of the bigger takeaways.”
Knowledge about cybersecurity empowers consumers to make more informed decisions about protecting their security, forming a powerful alliance with their Fis against fraud.
“The more a consumer knows, the more they’re going to trust their FI because they have a better understanding of what is out there that’s threatening their privacy, it’s threatening their accounts, their own security,” said Sando. “And that’s why I think when we did the scorecard, that’s the strong foundation of having that protection for your accounts, for your identity, for the fact that you need to have the knowledge to better detect and report scams.”
The bottom line is that the education of consumers eradicates any fear involved in taking the necessary cybersecurity measures.
How FIs Can Bridge the Gap between Service and Cyber-TrustFIs have an enormous wealth of resources and educational materials at their disposal that are not being leveraged to their fullest potential; consequently, consumers remain in the dark about cybersecurity protection. This can potentially place the cybersecurity of both the FI and the consumer in jeopardy.
“It’s in a financial institution’s best interest to provide comprehensive educational materials from cybersecurity to fraud, scams,” Sando said. “When educational material is actually used by consumers, the vast majority say it’s useful, which is great. But the problem is, many FIs don’t have it organized in a way that is convenient for the consumer. If you look at FIs that use external search functions within their online website search, you’re pulling in a lot of results that maybe aren’t necessary. Relevancy and usefulness are incredibly important for a consumer to find real use from these educational materials.”
Presentation of materials in all formats is important in order to engage with all consumers. Audio and video content will be highly useful, as it is an easily consumable content. It takes more time and effort to sit down and read educational materials.
Kitten added that educational materials should be, “easy to find.”
“If you have all of the educational materials buried deep into the website where no one can find them, they’re not doing anyone any good,” she said. “And we don’t want to have to download a lot of white papers and read them. When I’m working, I find it very easy just to put on a podcast in the background. I like to do the same thing with webinars. I can still check my email, but I’m also able to multitask and it’s just a more engaging way to interact and educate.”
Another highly engaging way to interact with consumers is by using gamification techniques.
“One of the other things that we looked at in the scorecard were interactive fraud and cyber assessments,” said Sando. “And only 14% of FIs were actually making use of gamification through an interactive assessment. They’re arguably one of the best ways to engage consumers because we are naturally curious about our own aptitude. Gamifying this education gives consumers a chance to benchmark their own fraud and security proficiencies. They can get a better sense of ‘where am I at? what do I need to do better?’ It’s not that cybersecurity is scary. It doesn’t have to be.”
Gamification uses both competition and rewards to enhance both learning and engagement.
Kitten added, “And also, it’s a little bit more fun, right? When you make it a game, if you make it a self-assessment, you’re posing questions that consumers might not even think about. They may not think about social media use or how often they’re changing their passwords. If they’re reusing passwords, do they use a password manager? All these things are questions that the FI could be posing in a self-assessment that would help.”
This will ensure that both the FI and the consumer can benefit from having extra layers of security.
FIs should also remember to speak to their consumers in a language that consumers comprehend. Industry jargon should not be used to communicate critical information to customers.
“When an FI has a privacy policy that’s comprehensive, it’s easy to understand, easy to read, in language that we can all take in and understand what’s going on, that is fostering a sense of trust because the consumer understands what is happening with their data, their privacy, and anything that goes along with it,” Sando said. “I think that transparency when it comes to data collection and marketing is also really important to establishing trust. When you disclose the data collection or your tracking practices, it leads to that sense of cyber-trust and -security among consumers because they feel like they have more of a sense of control over what’s going on with their data and that sense of autonomy right there, which leads to independence and a greater sense of satisfaction, which of course leads to cyber-trust.”
“Legalese has to go away, Kitten added. “These privacy policies have to be written in ways that the layperson will understand,” she said. “That’s one of the big things that some institutions are doing a better job than others, but all of them have room for improvement.”
So, what are the implications or consequences for FIs that fail to maintain cyber-trust among their customers?
“I think one last point here in terms of consumer privacy is just the implications of a breach of trust,” said Sando. “If a business is considered untrustworthy and betrays the trust of a consumer, the impact is not that substantial because the consumer probably didn’t have a lot of faith with them to begin with. They weren’t doing a ton of business with this, with this company anyway. But if an FI violates that cyber-trust, that impact of a breach of trust is so much more significant because the consumer had a greater level of trust to begin with. If you want to reduce the risk of attrition, reduce the risk of even just a consumer, maybe taking some of their services away from their FI and finding other sources for this business, you really have to focus on consumer privacy and fostering that sense of trust just within their own data and their own security.”
Cultivating Cyber-TrustThe key takeaway from this report is that FIs must do all they can to reveal to their customers their intentions for collecting their personal information. They must also continue to make cybersecurity education a priority by making it both relevant and accessible to all.
“Be transparent,” Sando said. “Transparency about everything from your privacy policy rights, to the data collection, to how you know you’re using targeted marketing, educational materials, security features that are accessible and easily found for all consumers. Everything has to be made aware to a consumer if you want to foster cyber-trust.”
“Institutions really need to lean into this role of being an educator,” said Kitten. “They’re trusted. They’re deemed to be much more secure than many other industries and businesses. So take advantage of that. Consumers are going to look to institutions for education, for support — take advantage of it and use it to just continually build on the trust that’s already there.”
“Prioritizing education, expanding your topic coverage, making use of all content formats. You want to maximize consumer engagement because anything that gives a consumer a better sense of independence and a better sense of control over their financial wellness as a whole is just going to lead to a greater long-lasting partnership.”
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Direct Deposit has been a part of our banking system for more than two decades, and employers commonly use it to issue employees their wages directly into their bank accounts. Today, Direct Deposits can be used to pay taxes, bills, and other charges.
PaymentsJournalNacha Launches Campaign to Reach Millennials on the Benefits of Direct DepositPaymentsJournal Nacha Launches Campaign to Reach Millennials on the Benefits of Direct DepositPaymentsJournal“Direct Deposit has been around for quite some time and it’s very well received throughout the United States,” said Debbie Barr, Senior Director of ACH Network Rules Process & Communication at Nacha. “Over 93% of American workers use Direct Deposit. We know the federal government uses Direct Deposit for tax refunds and EIP [economic impact payment] payments. But what we really wanted to know was to dig down deeper into one segment of the population: We decided to look at the millennials.”
Nacha, the payment system organization that manages the ACH (Automated Clearing House) Network, recently launched a campaign to encourage millennial workers to use Direct Deposit to receive their wages directly into their bank accounts. The survey consisted of 700 U.S. consumers ages 22–34. Half of the millennials surveyed were W-2 workers and the other half were gig workers. Here are the findings.
“What we found was that 97% of those surveyed have a bank or credit union account,” said Barr. “This means that they already have the tools they need to receive Direct Deposit. Eighty-three percent are already receiving their pay by Direct Deposit. Seventy-one percent said they primarily keep their money in their bank or credit union account. Almost all of them have deposit accounts. The vast majority have savings accounts. That’s a great thing as we think about Split Deposits. The top uses for Direct Deposits are salary, wages, receiving those tax refunds, and EIP payments.”
Barr believed receiving Direct Deposit creates a gateway to the many other benefits of using the ACH Network. “Receiving Direct Deposit creates this great foundation for using ACH for other things, like your bill payment,” she said. “The more you use ACH, you get this level of trust because you see the benefits of ACH, the reliability, the convenience.”
Barr continued, “With the trust level, we found that 80% of those who received their salary with Direct Deposit consider it highly trustworthy, giving it an 8, 9, or 10 out of a scale of 10. So that is exciting for us. It builds that foundation that moves them into using ACH for other things like Direct Payments. Seven out of 10 said they use Direct Payment for at least one bill each month. We were very happy to see those results.”
“I don’t think I’ve seen a paycheck in 25 years,” said Brian Riley, Co-head of Payments at Mercator Advisory Group. “It goes in, everything works, and it’s flawless. I had an issue with one of my kids — my daughter was filing her taxes [and] she checked off that she did not want to get an ACH on her tax refund but wanted a check. I said, ‘Do you realize that will add about five weeks until you actually get the funds?’”
Who Are the Millennials and How Do They Get Paid?Nacha’s reasons for targeting millennials as a group to potentially benefit from Direct Deposit are well-founded. These college graduates are entering the workforce, are earning salaries, and have a car payment.
“These are college graduates; they have annual salaries of at least $35,000 a year,” said Barr. “They all had either a student loan or a car payment. That really tightened up the group for us. With our W-2 employees, 88% are already using Direct Deposit. But less than half [47%] of gig workers are getting paid that way. We see a great opportunity there to educate that audience on the benefits of Direct Deposit. Some in our survey do both — they have their W-2 job and they also do some side work. With that group, we found that 92% of those were using Direct Deposit at least once a month to receive their pay.”
Barr continued, “With our gig employees, just over half [56%] are primarily storing their money in bank accounts. The rest are storing them in nonbank payment apps. So that’s a great opportunity to talk to them about the benefits of using Direct Deposit and having that bank account available for that.”
“This is basically a no-lose strategy,” said Riley. “It’s cheaper for the employer to do a DDA (daily demand deposit account or checking account) drop than it is to cut a check. That’s a significant channel. For the employee, it loads up that account quicker and [they do] not have to wait for funds to clear through a check deposit.”
A Look into Nacha’s CampaignMany benefits are tied to Direct Deposit payments. They are a fast, reliable, convenient, and environmentally friendly way to get paid. Nacha understands that as workers age, there will be a natural increase in ACH use as they begin to add utility payments, mortgage payments, and additional car payments. The time to educate millennials on the value of using Direct Deposit is now.
“We started our campaign looking at three different channels,” said Barr. “We have display ads that follow our targeted market audience throughout their internet [use]. We also have some native ads that, if they [millennials] are online and looking at articles, the native ads will be there, too. We also have 15-second videos where we picked three different types of gig workers. These are real gig workers that are doing their job, working hard, trying to get their pay. We have one that is in food delivery. We have one that is in rideshare, and one that is a dog walker. They are in our static ads and in our videos. Using Direct Deposit, their pay arrives when they expect it, and it’s there for them to use.”
“We really wanted to push this campaign out to help them understand like, ‘we know you guys are working hard and you deserve to get every dollar that you’re paid,’” Barr added. “And getting [paid] on the day you expect it. Making sure they understand all the benefits [that] go along with having Direct Deposit as your payment choice.”
Did Nacha receive any pushback from respondents about Direct Deposit? The study found that pushback stems more from a lack of education and awareness for this option than from an opposition to using this system.
“It’s really an education piece more than there being a holdback, so it’s helping people to make sure they understand the ease of signing up for Direct Deposit and the reliability that your pay will be there when you expect it to be,” said Barr. “And the security. There’s always a little concern when we do anything online that there might be some issues, but the ACH Network is a very secure way to make your payments.”
“It doesn’t cost anything,” said Riley.
Helping Millennials to Adopt Direct DepositTo learn more about all the benefits that Direct Deposit has to offer, millennials can easily get more information on Nacha’s dedicated website.
“Visit our website, directdeposit.org/gigworkers,” said Barr. “There you will see a lot of great tools.”
Barr also invited financial institutions to get onboard, spreading the news about how Direct Deposits benefit both employers and employees.
“We want our financial institutions [involved] because they touch both sides of the transactions,” said Barr. “They have the employers as their corporate customers and making sure the employers understand that Direct Deposit is a great benefit to them to offer besides being a benefit to their employees. It’s more economical. It’s easy once it is set up. Making sure that the employers have the tools they need to get the Direct Deposit set up but also to educate their employers or their employees on the benefits of ACH.”
“Our financial institutions also have the employees as their customers,” Barr added. “We have the millennials with their bank accounts, and so making sure they understand the benefits of Direct Deposit. With that age group, they have the phone in their hand all the time. They have the bank app on their phone. Making sure they understand where in their bank app they can grab that routing number, the account number, the information they need to sign up for Direct Deposit, and know what it is. It’s probably on the app, but can they find it? Make it easy, clear, and call it out. The beauty of ACH is once you’re signed up, it’s set it and forget it.”
Direct Deposit is more ubiquitous than ever, as more providers are offering it as part of a payroll provider’s offering.“Direct Deposit is something that is offered across the board. Any of your major payroll providers and the majority of the smaller, independent payroll providers know ACH, know Direct Deposit — it’s something they are able to offer,” said Barr. “It shouldn’t be something that you have to educate your payroll provider on.”
“As you start receiving ACH credits, you get that comfort level with ACH. You start doing some Direct Payments for this group [millennials] — it may be their student loans, their car payment that they set up as auto pay. As we age, we add more lifestyle payments such as utilities, mortgages, subscription services, donations — there’s so many opportunities for Direct Payment. As consumers age, they add more lifestyle payments and the more they add as Direct Payment, the easier it is. It’s such an easy way to handle your finances and manage your money.”
Check out directdeposit.org/gigworkers for tools and more information on the benefits of Direct Deposit.
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It’s been about five years since real-time payments (RTP) became a reality in the U.S., and their popularity and adoption continue to skyrocket. According to a survey U.S. Bank conducted among 1,000 financial executives across various industries in May and June of 2022, 56% said they will adopt real-time payments by 2024.
Furthermore, 41% of companies described as “RTP leaders” saw an increase in revenue compared with the previous year, while only 33% of “RTP laggards” reported the same. A further 39% of RTP leaders saw an increase in profits in the past year, while 44% said they saw their brand value increase.
To learn more about the importance of businesses adopting real-time payments and integrating them into their overall digital strategy, PaymentsJournal sat with Mike Jorgensen, Head of Emerging Solutions at U.S. Bank, Anuradha Somani, Head of Payments, Global Treasury Management at U.S. Bank, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.
PaymentsJournalWhy Businesses Need to Adopt Real-Time Payments as a Competitive DifferentiatorPaymentsJournal Why Businesses Need to Adopt Real-Time Payments as a Competitive DifferentiatorPaymentsJournalReal-time Payments as a Competitive DifferentiatorThe growth of real-time payments continues to rise: In the second quarter of 2022, companies made more than 41 million real-time payments, totaling $18 billion — a 12% growth in volume from Q1, according to The Clearing House.
According to The Clearing House, roughly 62%of accounts in the U.S. can receive real-time payments “and if all the payments providers and banks had everything turned on, that figure could reach about 90%,” noted Murphy.
But real-time payments aren’t just about instant payments; they also mean that payments can be reconciled 24/7 and give businesses access to more and larger amounts of data related to payments, said Somani. She added that businesses shouldn’t just think of real-time payments as something to tack on as an afterthought, but rather using them to create “a fundamental change to your business model.”
“It gives you the ability to create a friction-free and seamless experience, so the payment moves to the back of the mind for the consumer,” she added.
Jorgensen noted some industry-specific examples, including broker-dealers enabling clients to fund their accounts instantly so they can immediately begin trading rather than having to wait the typical two to three days for an automated clearing house (ACH) transaction to clear. Or a car dealership buying a vehicle from a consumer being able to instantly transfer the funds. Jorgensen also referenced the gig economy, and workers being able to immediately get their pay at the end of their shift.
“Real-time payments offer companies the possibility of creating a differentiated experience,” Jorgensen added.
He cited the experiences of rideshare companies such as Uber and Lyft as examples of this seamless payments experience.
“In the old days, you would take a taxi and then pay them at the end of the ride,” Jorgensen said. With ride share companies, “the payment is invisible, real-time, and embedded in the experience.”
It’s not just business-to-consumer (B2C) businesses that benefit from RTP, but business-to-business (B2B) as well. Murphy noted that “there is an increasing demand from people in offices to get the same experiences [at work] that they get on their personal apps.”
Some B2B use cases include paying invoices instantly and funding payroll instantaneously, especially so that employees can receive instant earned wage access, Murphy added.
RTP and Digital TransformationBusinesses need to think about how real-time payments will be integrated into their overall digital transformation agenda, said Somani.
“It’s not just about changing a single ACH into RTP, but how does this integrate into my larger payments ecosystem, and how does it integrate with different business cases and use cases?” she added.
For example, there are a lot of back-office considerations when it comes to RTP, noted Jorgensen.
“You have to think about how RTP will affect your normal accounts receivable and accounts payable functions,” he said. What do you do if a payment comes in at 1 a.m.? Most businesses aren’t staffed to have accounts funded 24/7.”
Embracing real-time payments means “changing your entire payments system as part of a larger transformation agenda,” added Somani.
That is why it is critical for businesses to identify the right partners to work with as they embark on their digital transformation journey, including financial and technology partners.
“You are not trying to retrofit anything, but innovating and integrating into your existing systems,” she added. “This requires the right partners to help identify what pain points exist today, what is the ideal end state when it comes to payments, and how do we get there.”
A “Netflix Moment” for PaymentsJorgensen observed that business that adopt and implement real-time payments will have a significant competitive advantage over those that don’t. He cited the U.S. Bank survey that showed that nearly 60% of those polled will implement real-time payments by 2024, meaning that “the other 40% are at risk.”
“If a company doesn’t adopt RTP and they can’t figure out how to integrate it into their front-end and back-end operations, they will lose competitive advantage, speed to market, and even the ability to scale quickly,” he added.
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Faster payments and the user experience are the differentiators that will enable banks and credit unions to remain relevant and competitive.
We’ve seen this gradual shift during the past decade as modern payments have undergone a significant transformation based on consumer expectations. And in the past few years, in particular, the shift has accelerated as the pandemic changed the way many are paying for goods and services.
PaymentsJournalFaster Payments Are Set to Revolutionize Modern Digital PaymentsPaymentsJournal Faster Payments Are Set to Revolutionize Modern Digital PaymentsPaymentsJournalTo put it simply, consumers want convenience — and that’s what’s driving this surge in digital payments. “Most people are looking for the iPhone experience,” said Jeff Bucher, Senior Product Manager at Alkami. “On your iPhone, you can click on the app and you can get things right away. You can order food immediately and have it delivered quickly.”
“Banking is important and using banking in the same manner that you use other apps and other interfaces is what people expect,” he added. “At this point, people want digital banking at their fingertips. They want to be able to have a streamlined interface, and they expect robust capabilities — to pay their bills online, pay their friends and family, and pay their loans online as well.”
The growth of faster payments is starting to be reflected in new use cases, according to Mark Majeske, SVP of Faster Payments at Alacriti, especially when looking at real-time payments, which has been available in the U.S. for five years.
“2023 is going to be the year of use cases,” said Majeske. “How do you drive usage of these systems, at the end of the day, adoption of these RTP [real-time payment] rails and FedNow — that’s coming up — really depends on us, with consumers and businesses using it. In the next couple of years, we’re going to see a huge emphasis on user expectations.
Key Differences Between the RTP® Network and the FedNowSM ServiceThe FedNow Service is poised to go live next year, and it shares considerable similarities with The Clearing House’s RTP network, which launched in the U.S. five years ago.
“Both the RTP network and the FedNow Service are instant, real-time payments, and they’re final,” said Bucher. “This is key to understand — that once you send the payment, it’s done. The only way to get the money back is to request that the money is sent back.”
“It’s a push-only method,” he said. “They’re not batches like ACH [Automated Clearing House] — both use ISO 20022 messaging to communicate, and this is key because ISO 20022 is a messaging method that’s being adopted around the world [and] is becoming more of a standard ever year.”
According to Bucher, both the RTP network and the FedNow Service are similar to wires, but they can replace wires in a lot of different ways because they’re faster, cheaper, and easier. “Some differences between the two are that you have to be on one network or the other,” he said. “They’re not ubiquitous, they don’t crossover, so you can’t send something on the FedNow Service and it will show up on the RTP network. You’re either on the RTP network or you’re on the FedNow Service.”
Another significant difference is that the maximum transaction limits are different. The RTP network has a maximum transaction limit of $1 million, and the FedNow Service $500,000.
Significant Use Cases for Faster PaymentsOne important use case around faster payments is account-to-account (A2A) money transfers. “We are partnering with Alacriti to offer A2A within our native environment,” said Bucher. “I think it’s something that makes a whole lot of sense. If you want to send money to an external account, say you’re at one credit union and you want to send it to a bank…you want to be able to send it immediately where you [can] press the button and it shows up in your account.”
“It’s a great use case, and it’s very needed and very desired among financial institutions and their users,” he added.
There are also many use cases within the business-to-business (B2B) space that are leveraging real-time payments—to pay for invoices, request payments, and even request payments back on invoices.
For business to personal transactions, a growing number of companies have gig workers who need to be paid daily, so it makes sense to use the FedNow Service and the RTP network for payroll. In addition, insurance payments can also be paid out quickly after a disaster to help people receive funds for housing, food, and clothing.
“Payroll’s another use case,” said Bucher. “There’s a lot of companies that have gig workers or temp workers and you need to pay them on a daily basis—and it makes a whole lot of sense to use real-time payments for that. It could be cheaper and easier than ACH in some instances.”
According to Majeske, real estate and automotive are other industries benefiting from RTP. “Some of the high-level transactions I’m starting to see is basically a car purchase. Let’s say you’re at the car dealership and you go to your mobile phone and sign up or apply for a loan,” he said. “The loan is turned around very quickly and at the end of the day, you’ve got the funds going to the dealership and you’re walking out with a set of keys.”
A Partnership That WorksIn order for faster payments to work and for the consumer to take advantage of their offerings, they must be simple to use and fast. Ensuring that the front end of operations also has a user-friendly interface is crucial.
“Alkami takes care of all the back end,” said Bucher. “Alacriti has an engine that chooses the rail on the backside, whether the FedNow Service or RTP network, and we handle the interface to ensure they know we are executing their transactions and they can input what they need.”
“We picked Alacriti to partner with based on the fact that they were further along than a lot of the other potential partners that we talked to,” he added. “They really had an inside track on RTP and they were also in the pilot for the FedNow Service. Now they have strengths where we need them in payments, in particular, and they have a great track record of working with credit unions and banks.”
“It’s a win because at the end of the day, to be successful in faster payments you need the expertise on the payments side,” said Majeske. “Oftentimes, even more importantly, is that you [get] the user experience right, because without that, customers won’t easily use it or adopt it.”
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The year 2022 was one of global financial uncertainty and risk, and 2023 may bring more of the same. For executives in payments risk management, planning for the year ahead should involve taking this geopolitical and financial uncertainty into account and planning accordingly.
In a recent PaymentsJournal podcast, Sudhir Jha, senior vice president and head of Brighterion, a Mastercard company, and Brian Riley, head of credit and co-head of Payments at Mercator Advisory Group, discussed how artificial intelligence (AI) is growing as a tool in payments risk management, and they also delved into the key trends they expect to see this year.
PaymentsJournalHow AI can Help Manage Payments Risk in 2023PaymentsJournal How AI can Help Manage Payments Risk in 2023PaymentsJournalSecurity Challenges Facing Financial Institutions in 2023There is likely to be a heightened risk of geopolitical conflict, inflation, and resulting credit issues in 2023. “Unemployment has been low, but household budgets are not keeping up with the cost of living,” Riley said. “Interest rates are off the charts.”
In the past year, there has been an increase in scams associated with peer-to-peer (P2P) payment apps, such as Zelle, a trend that’s likely to continue.
As a result, many are looking to AI to help prevent such scams. “The developments in AI are not accessible to everybody,” Jha said. “The government hasn’t done the equal investment to make it available to everybody. In the ‘70s, ‘80s, and ‘90s, there was a lot of funding of fundamental research that could be made available to everybody to use. From a government perspective, the U.S. is not investing enough in AI to make sure that the research trickles down to everyone.”
Smaller players don’t necessarily have the capacity to develop their own AI solutions. As a result, they often form partnerships with larger companies, such as Mastercard, to make use of the larger firms’ increased computing power.
Brighterion is using AI to address P2P fraud across its network. “We are building solutions very similar to what we have done for the card side, on the account-to-account side, to provide solutions that work at the network level,” Jha said. “We can give you a solution that works across card payments, ATM transactions, and even crypto transactions. Fraudsters are aware that many financial institutions have silo applications for finding fraud in one channel, so they will have one card for account-to-account and one for crypto.
“We are trying to provide a multichannel solution for both fraud and money laundering to provide full visibility for all transactions, and helping to capture fraud across the network.”
Fraud Scenarios We Expect to SeeAs AI-powered fraud detection software has gotten more sophisticated, fraudsters have become less successful at creating synthetic identities that pass detection and have moved more toward scams. “They’re trying to make the person who actually owns the instrument—whether that’s a cellphone or credit card—do something that is not in their best interest,” Jha said. “For example, if I were a fraudster, I could call you and tell you that you won $10,000, but for me to give you that prize money, you have to send me $200 for shipping.”
New machine-learning algorithms are being developed to give people warnings when they attempt to make a transaction that appears suspicious. “We have to figure out a way to flag it for them, and change their mind,” Jha said.
According to Riley, faster payments and P2P payments can make scams even trickier to combat, because payments can go directly between bank accounts instantaneously. “The payment transaction, unlike a credit card, is irrevocable,” he said. “To undo that whole mess takes a lot of work.”
In the coming year, scams on P2P platforms will accelerate because they are still very hard to catch. “There will continue to be payments risk in the entire market, whether it’s at the merchant level or the consumer level, and there will be a range of issues due to the impending economic slowdown,” Jha said. “And people already have spent some of the savings that they had. That creates a credit delinquency issue, which leads to even more fraudulent claims by the merchant or by the consumer, and more openings for scams. The only thing we can really do is suspect that this is not a transaction that you normally do and warn you that it could be a fraudulent transaction.”
As AI develops, it will get better at detecting scams, but that development remains in a nascent stage. Financial institutions can look forward to better tools in the future, as AI solutions spread throughout the economy and use cases multiply.
The post How AI can Help Manage Payments Risk in 2023 appeared first on PaymentsJournal.
Cryptocurrencies have moved from a speculative asset to a practical one. One area in which crypto can serve and improve is the current business-to-business (B2B) payments space.
In a recent PaymentsJournal podcast, Daniel Artin, Vice President of Strategic Partnerships at Boost, and Elly Aiala, Chief Compliance Officer at Boost, joined Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator, to discuss how businesses should consider adopting blockchain technology, and specifically, stablecoins, to ensure transparency, traceability, and security in their B2B payments.
PaymentsJournalCrypto as a Practical Solution to B2B PaymentsPaymentsJournal Crypto as a Practical Solution to B2B PaymentsPaymentsJournalCurrent State of B2B PaymentsFirst, let’s set the current state of B2B payments. Even with all the innovation that the payments space has witnessed in the last few years, B2B payments are still fraught with problems.
“This niche of payments in the market is littered with pain points,” said Artin, “primarily due to costly fees, late payments, poor management of data, inaccurate data entries, and oftentimes lack of education in the marketplace around innovations to solve these problems. Buyers and suppliers are used to delayed payments [and] frequent disputes amongst one another, and there is a status quo of distrust that occurs amongst commercial trading partners. Since the B2B payments space is a trillion-dollar addressable market, we believe this a large ramp for digitization.”
Artin blamed inertia for the lag in adopting new ways of accepting B2B payments. Many businesses continue to use legacy systems implemented decades ago despite their inefficiencies.
And organization leaders are not keen on taking a leap into the unknown. “A lot of CFOs and treasurers looking to optimize payments are risk-averse and naturally so,” added Artin. “You’re taking systems, processes, and workflows that have worked for 60 to 70 years and now asking [business leaders] to migrate that to a new digital form that you may not fully understand or know.”
Cryptocurrencies are still shrouded in mystery, which is why they need to be unpacked to reveal how they actually work and to discuss successful use-cases.
But before diving in, let’s tackle the challenges surrounding cryptocurrencies today.
U.S. Regulation: A Stumbling Block to AdoptionYou cannot begin a conversation about cryptocurrency without mentioning regulation. Regulation has been ever-present since the popularization and growing adoption of cryptocurrency began.
“Our [U.S.] approach to cryptocurrencies and other technologies in this space has been picking up speed,” said Aiala. “But it is very much in development and exists primarily as a combination of both enforcement and draft legislation and frameworks. This impacts institutional adoption. In order to know why the U.S. regulation is where it is today, you need to know what cryptocurrency and blockchain technology is doing to the existing financial infrastructure.”
Aiala used the analogy of gathering the world’s best soccer players to play a game without rules or compliance. The result is that the game will not function safely or efficiently. The current referees, or two regulatory parties, competing to earn the position of top regulator for cryptocurrencies are the Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC).
Aiala asserted that without historical knowledge and experience using crypto and blockchain technologies, it is difficult for policy makers to create regulations that will endure the test of time. Technology, as well as its use cases, is never static but always changing.
The way around all the fear, mistrust, and misinformation is for leaders in the crypto space to stay diligent in educating policy makers, informing them so that the appropriate regulatory frameworks can be developed. It’s not only about growth and innovation in the crypto space, it is also about ensuring that end users are safe in using this technology.
Although change is coming and more policy makers and consumers are being introduced to this new financial technology, the current lack of official rules keeps many institutions from adopting crypto.
Why Replace Legacy Systems with Blockchain TechnologyThere are many benefits for companies to incorporate and replace their current infrastructures with blockchain technology. These include transparency and traceability, consensus mechanisms, security and audit, and smart contracts.
With transparency and traceability, businesses would have the advantage of having all participants within the network see the data as they are updated in real time.
Also known as consensus protocols, consensus mechanisms would allow businesses to verify transactions and ensure the security of the blockchain or protocol.
Blockchain is incredibly secure, making accounting and auditing a breeze and eliminating human error. Blockchain also ensures the integrity of its records. Another important factor is that the ledger is immutable. No one can change a transaction after it has been submitted. This includes record owners.
Smart contracts are programmatic rules that can be carried out automatically within the blockchain after certain rules are met.
“We live in a world where buyers and suppliers have established pre-negotiated commercial trading terms,” added Artin. “Aside from contract penalties, early-pay discounts, [or] trade financing, there’s no way to enforce these rules blindly by buyers and suppliers. Hence the disputes. But with smart contracts, these conditions and terms can be programmed, and automatically fulfill those obligations across both parties on their behalf automatically. It’s touchless, it’s automatic, and it instills a newfound level of trust among parties that otherwise [was] not there.”
One significant use case concerns Walmart Canada, whose shipping fleet of 2,500 produces a whopping seven billion invoice permutations annually, and of which 70% of freight contracts resulted in disputes. When Walmart Canada implemented blockchain, invoice disputes dropped to below 2%.
“Our research goes back five to six years, and one of the earliest use-cases we identified for blockchain was international and domestic trade,” Murphy said. “It’s [blockchains] really getting rolled out quickly. International trade and the use of smart contracts is a bright use-case.”
Looking Ahead for B2B PaymentsThe use and adoption of cryptocurrency are still at an early stage. And businesses are certainly not clamoring for adoption either. What we do know is that blockchain has the mechanics and infrastructure necessary for businesses to vastly improve the current state of B2B payments.
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To sustain their operations, businesses have more than their fair share of challenges to confront. With a recession imminent, climbing interest rates, supply chain disruptions, and a turbulent global climate, business executives have many AR issues to address, along with just keeping enough cash on hand.
PaymentsJournalDigitizing AR Would Address One of Executives’ Biggest Concerns About Economic InstabilityPaymentsJournal Digitizing AR Would Address One of Executives’ Biggest Concerns About Economic InstabilityPaymentsJournalTo get an in-depth look at what executives are struggling with, Versapay surveyed 1,000 C-level executives to uncover their biggest concerns on the current economic climate as well as how the customer experience directly affects the bottom line. Here are the findings.
“We did a survey of a thousand C-suite executives from medium to large-sized companies,” said Nancy Sansom, Chief Commercial Officer at Versapay. “The number one concern across the board was supply chain disruption. The top concern for CFOs is inflation. Second to that is rising interest rates, and then labor shortages.”
Sansom added, “We put out two reports, one is the state of digitization in B2B [business-to-business] finance, and the other is the impact of customer experience on B2B payments. For inflation, finance teams are under pressure to increase cash flow and speed up the invoice-to-cash cycle. AR [accounts receivable] teams haven’t been prioritized from a technological perspective. So the digitization of finance and AR teams are the last priority in the organization, yet they have an impact on customer experience.”
Without the proper tools, such as the latest technology that can automate these processes, outdated systems are sure to cause an interruption in cash flow, thereby impacting the customer experience.
“The other theme of these reports is that customer experience is top of mind,” said Sansom, “because we all know that it is easier and cheaper to keep a customer than to acquire a new one. In a downturn, you really want to be keeping your customers happy so that you can retain them.”
Poor Processes Can Lead to Poor Customer ExperiencesAccounts receivable seem to have fallen into an obscure, back-office category, with not much in the way of optimizing its processes, an out-of-sight, out-of-mind, hidden operation.
“Companies think of accounts receivable as back office,” Sansom said. “But every customer interaction is important and AR teams really do touch the customer, especially when something goes wrong, and that’s when tensions can be heightened.”
She continued, “A couple of interesting stats … 73% of all C-suite executives that we surveyed said that the invoice-to-cash process can negatively impact customer experience. Nearly nine in ten CEOs said the organization lost revenue due to confusion or conflicts, and 85% said their company got paid less than owed due to a miscommunication in the invoice-to-cash process. There’s a loss of money, opportunity cost, time spent, and it frustrates customers. It’s important that we don’t just think of it [accounts receivable] as back office and think about how we can improve that experience so that customers will be happy and pay faster.”
B2B customers are not much different from business-to-consumer (B2C) customers, as they also desire a fast, safe, and seamless payments experience.
“What we find in our research is that happy customers are kept happy by reducing friction in these processes,” said Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.
The solution is not only to implement the latest technological tools, but to also incorporate the human element of collaboration.
“Some [companies] think about the customer experience side but most don’t,” said Sansom. “Most come to us and are just thinking about automation. They end up shooting themselves in the foot, because as they automate the process, they remove the human element. What we show our prospects is that there is a better way. You can automate, but you can also improve the customer experience by collaborating. Why wouldn’t we collaborate on an invoice issue, or goods that are damaged? They haven’t connected the dots on what’s possible with technology to automate while improving the customer experience.”
“Most people don’t want to think of one or two days of DSO [days sales outstanding] as being a positive experience,” said Murphy. “Given the competitive nature of and the importance of cash flow these days, the ability to reduce DSO by one day, two days, three days is important.”
“A lot of times the customer or the buyer needs to trust you,” said Sansom. “If you provide full visibility into all of your statements versus statements that are outdated, you have no visibility real-time. That doesn’t create trust with your customer, but if you create trust by having full visibility and giving them great tools to pay the way they want to pay, they might be more willing to set it up on autopay. Think about what that does to your DSO if you get some nice percentage of your customers just auto-paying and then it’s predictable and can really speed up that payment process. But first you need the trust, the transparency, and visibility into their account.”
How Executives Are Improving Customer Experience Amid Inflation and Other Economic ConcernsExecutives should seek out holistic solutions to enhance and optimize their current payment processes.
“They come to us looking for efficiency,” said Sansom. “One of the terms we use at Versapay is something called the AR disconnect. That’s the gap between buyers and suppliers or AR teams and AP [accounts payable] teams. We try to solve that gap. If they’re just thinking about themselves and their own processes, they’re going to do the opposite of what they’re trying to do. It’s about adopting collaboration tools.”
“As you digitize these processes and receivables, you’ve got a lot more data to play with,” said Murphy. “You can utilize machine learning to improve the algorithms and improve processes and further reduce DSL, or at least have flexibility to make better decisions. It’s an important part that people tend to discount.”
“Our cash application solution can take all these checks from lockboxes and the machine learning can figure out where to apply it to,” said Sansom. “When it can’t, it can let a human come in and give it some guidance. Then it can remember it from that point forward. With that kind of automation, you can get to 95% automated. For the 5% that you can’t figure out, that’s where you have the collaboration. If you don’t have the collaboration, then that 5% can really take up your whole team’s time. The combination of the two is where the magic happens.”
“Customers are not only happier, but they can take some resources and apply them to more profitable ends of the business,” said Murphy.
“Either our customers say, ‘I was able to eliminate contractors, I was able to let my call center focus on other customer service issues and not invoice issues,’ that’s been a really great experience that our customers have had,” said Sansom.
Filling in the Gaps in Accounts Receivable DigitizationCollaboration, along with automation, is the best solution to ensure that your business can deliver the best customer experience.
“At Versapay, we have AR automation, which is a relatively new category so we can talk about initial efforts,” said Sansom. “We have AR automation, collaboration tools like Slack and Salesforce, plus a B2B-optimized payment network. You put those three together and now you can deliver a great customer experience while getting those automation benefits. Companies are ready to digitize in their finance area. They’re now realizing how important that is, especially with cash being so critical right now. Also speeding up payments and improving DSL.”
Sansom added, “Our software is called Versapay Collaborative AR. It’s a platform that brings together the buyers and sellers. It has great tools for the actual customer. You can let one buyer manage multiple supplier relationships with that one tool. It’s a network that brings more value to them, the more suppliers they use it for.”
“Fifty percent of invoice disputes are actually caused by human errors in the payment process,” said Sansom. “Forty-one percent of the execs that we surveyed said human communication breakdowns and relationship issues are top causes for disputes. This is where people need to collaborate. Sometimes you need to pull in [the] salesperson who sold the product. Maybe there was a misunderstanding or an expectation about what was sold. In a collaborative environment, you can pull in whoever you need, keep a record of all that. That’s where that disconnect can get resolved by communicating and fixing those issues.”
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Most of the narrative within the fintech and crypto space revolves around the decline of cash. But is cash really declining? Countries that have attempted to go cashless, such as Sweden, have backtracked these efforts to ensure that consumers still have access to cash when the occasion calls for it.
“Cash is on the increase,” said Joe Myers, Executive Vice President of Global Banking at Diebold Nixdorf. “If you look at global cash in the economy since 2012, there’s a compound annual growth rate of about 7.5%. So cash is growing. That was one of the things that struck me as an ‘aha’ moment. Consumers need access to cash. And that has a direct correlation on how that all plays through in the ecosystem, including access to technology like ATMs.”
PaymentsJournalAccessibility to Cash Is Still KingPaymentsJournal Accessibility to Cash Is Still KingPaymentsJournalDiebold Nixdorf, a multinational company that specializes in self-service transaction systems such as automated teller machines (ATMs), has supported this need for cash for consumers. There is a need for more ATMs now more than ever as more bank branch networks are beginning to shrink.
Myers added, “Diebold Nixdorf sits in a very interesting place, connecting the physical to the digital and still allowing access to cash for those that need it. The ATM market is in good shape. We have tremendously strong products and global market share.”
“You can’t argue with cash, that’s for sure,” said Brian Riley, Director of Credit Advisory Service at Mercator Advisory Group. “The ATM has become more than a money machine. There are other functionalities to it. Even as electronic payments start growing, there’s definitely a use case for these machines to displace the operational expenses associated with the branch.
Although it is not a worrisome rate, banks are beginning to close more branches, something that should remain top of mind. As banks aim to reduce costs, the increased use of technology will be critical to continue to deliver a top customer experience.
“Functionality and technology are playing a bigger role,” said Myers. “The rate of decline is there for banks, at about 1% per annum. It’s not huge but certainly happening. The functionality that technology is putting forward so that people still have access to services is critical.”
Addressing Customer Pain PointsEvery industry struggles to remain competitive and solvent, and the banking industry is no different. Myers has taken the time to get on the ground to hear firsthand what banks are struggling with.
“The one thing that is common across all is there isn’t a CEO at any of these banks that isn’t looking to improve their efficiency ratio,” said Myers. “Improving their efficiency ratio means attracting new customers and generating new income and new fees from those customers. Number two is retaining those customers that they have and enabling cross-sell and upsell into those customers — again, driving additional revenue sources from those customers. Thirdly, reducing the cost at which they do it. Reducing the amount of staff in branch and relying more heavily on technology.”
Fintechs are winning over consumers with fast, secure, and affordable ways to get access to financial services. The winning edge these fintechs have is that they don’t have the operational costs of branches, allowing these companies to be nimbler with their solutions.
Consumers are also looking for a streamlined, seamless customer journey. “When we think about the journeys that are being created and how the app and the web, and the physical assets like the ATM, branch, and advisory services are all having to work very closely together to create a seamless experience,” said Myers, “that’s how banks are differentiating themselves from each other, and how they’re looking to win market share in what is a very competitive marketplace. That is what we are picking up from our markets and where we currently stand in terms of how we are positioned to help support them and create those journeys that best enable them to attract and retain new customers in a cost-effective way.”
“This kind of symbiotic relationship between ATMs and branches and payments, it creates an ecosystem where you know that the card must have wide acceptance,” said Riley. “The financial institution has their own branding that can be done with that. They can tie it into the branch, they can tie it into the card. There’s a whole continuous loop that I see.”
On another note, despite the push toward digital currency and transactions, banks need to remember that in parts of the world, cash is still king. “Sweden declared that they would be a cashless society 15 years ago,” said Myers. “They’ve had to reverse that and reposition [to] what is a cash-light society. There’s regulation that’s coming to place that every single member of the Swedish population has to be within 25 kilometers of an access point to cash. That’s a great proof point for the rest of the world to start to think about as they think about this migration to a cash-light society. It’s critical that availability to cash is maintained across the entire ecosystem to allow that resiliency, should disaster occur.”
Positioned to Deliver SolutionsThere is no doubt that in order for banks to continually deliver a seamless customer journey, their current systems must be modernized. Legacy systems can be cumbersome to deal with when it comes to making quick changes or to develop on. It is also much more costly.
“At Diebold, we’ve created a set of micro services that we have deployed across a number of key banks that enable them to quickly make the changes required to comply with whatever regulatory changes take place,” said Myers. “To capture the data they need, store it, and create a customer journey to attract and retain more customers. This is all in a cost-effective way. We have a consulting team ready to talk to bankers to showcase what Diebold Nixdorf can do.”
Banks can be sure that a partnership with Diebold Nixdorf can put them on the right path to delivering a top-notch customer experience.
“We have service techs across the world ensuring that those systems are up and running as close to 100% of the time as possible, “said Myers. “With our software, we are making sure that we are validating transactions along with security. With marketing, banks can present offers via technology as opposed to in-person. We’re moving customers into a more personalized area, where bankers can advise and create additional value for their customers, leading to additional fee income as banks are able to sell more complex solutions.
“When I think of Diebold Nixdorf, I think of ATMs, but an ATM is a commodity piece for a financial institution,” said Riley. “The special sauce is being able to customize it to that financial institution.”
Another technology that’s generating a lot of interest, especially in the U.S., is the interactive video teller (IVT), or having a video teller at an ATM or a remote branch.
“There’s a massive runway to get into video,” said Myers. “Video via teller at the ATM, via a remote-type branch. Video is a big thing and something we have the capability to share.”
“I’ve seen it with two big money center banks,” said Riley. “And I recently had to open a credit union account for a client and it was actually a good experience because I’m used to top banks. I was surprised how they had integrated the IVT into the whole transaction. With the push of a button, I can be dealing with a rep, I choose the denomination of funds, I’ve also seen it with a couple of big banks using it to displace closed branches.”
“That technology is being deployed to maintain the personal touch and ensure that the customer journey and the support required by that customer is available at the push of a button,” said Myers. “That results in major efficiency for the bank because they are not having to staff multiple banks, especially those that seldom get foot traffic.”
Finally, all banks must make it a priority to stay solvent and competitive by ensuring the safety and accessibility of cash for their customers.
“Security is a major part,” added Myers. “Securing the ATM, securing the cash within the ATM. The other key bit here is availability. Making sure their solution is available to customers. Our services and our services techs ensure that our fleet of ATMs are continuously up, striving to get to 100%. This technology is really forward-thinking and AI-driven. What it tells us and tells our techs is that when one of the systems are about to go down, so we can perform preventative maintenance to ensure the uptime remains.”
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For financial institutions, focusing on digital transformation has become extremely important. The shift to digitization accelerated during the pandemic when many people weren’t stepping foot into physical bank locations, keeping most of their interactions with banks virtual.
PaymentsJournal recently sat with Whitney Stewart Russell, President of Digital Solutions at Fiserv, and Steve Murphy, Director of Commercial Payments at Mercator Advisory Group to discuss Fiserv’s recent study and the key findings from it, as well as the advantages that financial institutions may have, and why trust is crucial to their success.
PaymentsJournalThe Importance of Digital Transformation for Financial InstitutionsPaymentsJournal The Importance of Digital Transformation for Financial InstitutionsPaymentsJournalDigital Behavior ShiftsFinancial Institutions have historically enjoyed a high degree of consumer trust, but during the pandemic more consumers were drawn to the convenience that fintechs provided when it came to digital banking.
“It’s interesting,” said Russell. “One stat that I often share with customers as we’re talking about this change is from a study. Millennials were asked who they would feel most comfortable banking with, and it actually swung to fintechs and big tech because of the convenience those organizations can provide.”
“Maybe I don’t trust them as much, but I’m willing to migrate to them because of the convenience factor,” she said.
Now the pendulum is swinging back, largely because banks are following the lead of fintechs and upping their digital capabilities. “We’ve actually seen that swing back in our most recent research, where the trust factor associated with banks and credit unions is outweighing what was perceived as a competitive advantage from a convenience factor,” said Russell. “And we’ve also seen banks and credit unions make digital investment a top priority. So they’re starting to even the playing field. When you have an even playing field, you’ve got the advantage of trust.”
Financial Institutions are also adding new features to help extend the banking experience, with real-time payments and financial planning tools. By having all those tools in-house, integrated in a smooth digital banking experience, there is no need for customers to go elsewhere.
Financial planning tools offered by financial institutions can help customers “develop good habits around money management and card management,” Russell said. “They can also help them track how much they’re spending, where they’re spending, and what controls they have in place to keep track of their budgets with this challenging economy.” Having a digital banking suite for customers to actively manage their spending can help banks keep their customers.
As real-time payments become more mainstream, financial institutions will need to include them in their digital banking offerings. Having that service can help drive engagement elsewhere. “You have to have real-time payments, regardless if it’s a money-maker,” Murphy said. “If you don’t, you might not have the opportunity to get all that additional revenue through all this engagement. It’s one of those services that consumers are expecting for free, but it’s driving other businesses [as well]. And you might lose customers if you don’t have it.” Overall, the more digital engagement, the more likely customers are to stay, and the more valuable those relationships become.
Value of Digital Engagement To better understand the correlation between a consumer’s digital and payments usage and the value to the financial institution in terms of net profit, product holding, and relationship primacy, Fiserv conducted a recent study leveraging a combination of Fiserv payments data and internal financial data from a large regional financial institution. Fiserv examined how the level of digital engagement among customers correlated with other behaviors.
“The consumers that we consider highly digitally engaged were 29% more profitable than those that were not, which is a huge number. That same group had 48% higher balances,” said Russell.
Part of the increased profitability is that those customers didn’t go to bank branches often, which minimizes costs for the banks. Digitally engaged customers also differed in regard to the amount of loans they took on. This is important because loans are very lucrative for banks.
According to Russell, “the highly digitally engaged customers were aggregating more deposits with those financial institutions and were 11% more likely to have a loan. Their loan balances were almost 40% higher than those that were not digitally engaged.”
According to Murphy, one of the early drivers for moving to online and mobile was the need for cost reduction including reducing the number of branches. But he notes that there has been a shift from conserving cash to generating new revenue. “If banks can get a bit more nifty in the way they can engage with customers, they’ll see increased profits,” he said.
Russell agreed. “We’ve been talking a lot to banks and credit unions just about this pivot in the industry, and really using the digital channel to grow relationships.”
In summary, to succeed in a digital world, banks need to focus on developing world class digital solutions, which match the features and convenience provided by the fintech competition. The most digitally engaged customers are some of the most valuable. To retain those customers, banks need to focus on making payments as seamless as possible on their apps, and include solutions such as real-time payments and financial planning tools. Fiserv has taken a leadership role in helping banks make these digital transitions.
Part of the transition is strategic. Transacting payments isn’t enough anymore as a business model. Financial Institutions have to provide value-added solutions for customers to retain them. These solutions, combined with the trust that people traditionally have banks, will help financial institutions thrive in the years to come.
The post In a Digital World, Trust Tips the Scale for Financial Institutions appeared first on PaymentsJournal.
As the holiday season approaches, merchants should be aware that as overall sales increase, so will fraud. In fact, the holiday season is an opportune time for fraudsters to strike, and merchants need to plan accordingly so that they are not overwhelmed. Fortunately, certain strategies and tools can help merchants adjust their fraud procedures in ways that avoid the need to hire additional staff to process holiday season fraud claims.
This fall Kount conducted a survey about anticipated consumer behavior this holiday season to better understand how merchants should focus their fraud strategy. To learn more about the survey and how merchants and acquirers can optimize their fraud management this holiday season, PaymentsJournal sat with Casey Zenner, Vice President of Global Sales at Kount, Brady Harrison, Director of Customer Analytics Solution Delivery at Kount, and Daniel Keyes, Senior Research Analyst at Mercator Advisory Group.
PaymentsJournalCapturing Fraud During the Holiday SeasonPaymentsJournal Capturing Fraud During the Holiday SeasonPaymentsJournalEquipping Merchants to Combat Holiday FraudAccording to Kount, holiday fraud tends to peak during the year-end consumer buying season — and it continues to persist after the big holiday rush with returns, refunds, and charge-backs. Many fraudsters tend to target this period in the hopes that a merchant’s fraud defenses are overwhelmed. And it’s critical that merchants are prepared and fully equipped to respond to any potential attacks.
“It’s such a double-edged sword for many businesses working to try and capture revenue during their busiest time of the year — because the holiday season, for many merchants, can really make or break their business,” said Zenner.
“During the holiday season, levels of fraud do peak, just because we have more transaction volume in terms of dollars lost,” added Harrison. “But you really need to sift through those events where it makes sense and not overwhelm your existing operational footprint — that’s what we hear a lot from the fraud space.”
“The other option is to dial down your fraud strategy and just say, ‘Hey, we’re just going to take this on the chin, minimize the level of friction for all customers, and then deal with the holiday hangover in January of charge-backs,” he added.
With a reactive approach to fraud, businesses gather information about customers after they make a purchase. But merchants that prepare well will move some of that identification process further upstream. “This creates a better customer experience for 99% of your good customers,” Zenner said. “The idea is to leverage data to put up adaptive friction where necessary.”
“Adaptive friction is the idea of not really setting a line in the sand for all customers, but rather setting that line in the sand for approve or decline or approve based on a variety of data, such as customer information, physical location, and season of the year,” added Harrison.
But adaptive friction can’t come at the expense of customer service. “There’s a huge loyalty opportunity with each customer,” Keyes said. “It’s important that their experience with returns, refunds, and chargebacks is positive because it could lead to a continuing relationship and more sales beyond the holidays.”
Survey of Customer Holiday PredictionsIn a recent survey, Kount polled 2,000 people living in the U.S., the UK, Canada, Australia, and Mexico about their online shopping plans for the upcoming holiday season. By and large, Kount anticipates strong holiday sales and consumers starting their shopping earlier than usual. “Some of this is a reaction to what they’re hearing about supply chain issues. Some of it is just the extreme attention to the holiday season as a whole,” said Harrison.
Traditionally, Christmas shopping took place in December, but with the proliferation of big shopping days including Black Friday and Cyber Monday, consumers haven’t been waiting till the last minute to get their holiday shopping done. “Some people are early shoppers and they want to get it done and deal with some of these shipping, logistics, and supply chain issues,” said Harrison. “What this really means for your business is the peak planning season is well underway in September.”
For fraud management, the upshot of these findings is that policy changes for the holiday season should be implemented earlier in the year.
“If you’re having a policy change that you think will start the week of Black Friday, that policy or risk adjustment of adaptive friction for peak period might need to start November 1 rather than Thanksgiving,” said Harrison. “It’s a bit of a paradigm shift in fraud strategy that the season is moving earlier.”
According to Kount, gift cards will be a big purchase this year. In fact, 83% of consumers are preparing to buy gift cards for the 2022 holiday season. As a result, during those months, fraud strategies need to relax their scrutiny of such purchases because they’re so common during this time of year.
“Another big insight we’re seeing is in the alternative payments space,” said Harrison. “While we’re seeing growth in buy now, pay later [BNPL], it still [makes up] a minority of transactions. Many consumers said they would engage with some purchases using BNPL, and that said, around 80% of transactions will still be through credit and debit cards.”
For merchants looking at their fraud strategy this holiday season, there are a few key takeaways. Fraud will be rampant this holiday season, and merchants should consider adaptive friction that is customized, based on a variety of customer information. Merchants should also consider focusing on riskier cases of fraud, so with the increase in transactions they don’t have to hire additional fraud investigators. In any case, the policies that they adopt should be put into place in early November, as the Kount survey shows customers are starting their holiday shopping earlier and earlier.
The post Capturing Fraud During the Holiday Season appeared first on PaymentsJournal.
Fraud continues to pound embattled financial institutions, which are aiming to stay ahead of increasingly sophisticated attacks. More organizations are realizing that fraud prevention tools and strategies must remain top of mind, which means investing heavily on the most effective tools on the market today. Great strides have been made thanks to powerful tools such as analytics, artificial intelligence (AI), and machine learning, yet financial institutions are failing to capitalize on another vital tool they have in combatting fraud in the payments space: data sharing.
Bruce Diesel, Global Head of Product and Payments at Diebold Nixdorf, David Excell, Founder of Featurespace, and Marco Salazar, Director of Technology and Infrastructure at Mercator Advisory Group, discussed the delicate balance and challenges between enhancing the customer experience and delivering robust customer protection against fraud.
PaymentsJournalData Sharing as a Means to Combat FraudPaymentsJournal Data Sharing as a Means to Combat FraudPaymentsJournalGreater Data Sharing and Its Implications for the Payments SpaceData sharing provides vital insights about customers and can also inform FIs on what solutions their customers are demanding. But it also plays a vital role in protecting customers from fraud.
“Data sharing enables the banks to protect the customer and create new experiences for that customer instead of [offering] new products and services to meet those real-time needs and requirements,” said Excell.
With the surge of customer information in circulation comes bad actors ready to swipe from the massive sea of data.
“Increased data sharing is increased opportunities for fraud,” added Diesel. “An increased volume of transactions means a bigger attack surface area for fraud.”
“Data sharing, if done correctly across business units and third parties, allows for broader detection of fraud before it even begins across a wider array of products,” said Salazar. “There’s this delicate fine balance that needs to be played when thinking about data sharing.”
Another reality that Excell pointed out is the proliferation of data sharing among fraudsters. It is through compromises that they get access to data in order to both share and sell data between themselves. He continued with proposing current solutions such as artificial intelligence (AI) and machine learning to use these data in order to protect customers in real-time environments.
Diesel also mentioned that the systems fraudsters use are far more agile than the systems used to mitigate them. He emphasized the importance of using the latest fraud technology to outpace fraudsters.
According to Salazar, a critical element is needed to use AI and machine learning systems effectively: “Those models just need large amounts of data to work properly. But this only happens if the data is standardized, is normalized.”
“You can’t build machine learning and AI on poor-quality data,” Diesel added. “It’s not a tool for improving the quality of data.”
Salazar continued, “In this case, you’re trying to improve the quality of the data from the onset and that’s going to help scale, not just scale these solutions, but increase their robustness.”
Customer Experience and Customer Protection: Striking a BalanceThe latest innovation on fraud technology has kept up to pace to minimize the potential for fraud.
“The industry’s done well applying technology that has increased the level of authentication, which has meant things like account takeover and phishing type tactics are harder for the fraudsters to do,” said Excell.
However, when it comes to the end game of battling fraud, technology cannot do all the heavy lifting. The customer must play a central role.
“You can’t just rely on technology,” said Diesel. “I always advise to go back to consumer education and awareness.”
Although the newest fraud tools such as AI and machine learning have been an effective means of fraud protection, certain consumer expectations do need to be curbed.
Friction within the digital payment experience is not popular with consumers, yet some friction must be tolerated to ensure fraud protection.
“There’s a balance point where consumers are prepared to accept an amount of friction to get the protection that they want and make them feel safe.” said Diesel. “The friction needs to be at a tolerable level to the consumer.”
“Data needs to be well shared, and it needs to be real-time shared between channels,” said Diesel. “Most banks are still operating in a very siloed manner in these channels. This creates a significant challenge.”
Another piece of the puzzle to mitigating fraud is consumer data and their use. Ultimately, consumers should have the final say as to whether their data can be accessed and for what purpose. When organizations are transparent about the gathering and use of consumer data, a bridge of trust and brand loyalty can be built. If organizations cannot prove the value of gathering consumers’ data, the result will be consumers revoking access.
“When a new payment method emerges, it’s going to need access to specific types of data,” said Salazar. “Once that’s established, the consumers are willing to try these new instruments. They understand that data needs to be shared in order to have these experiences. Firms have to be able to provide a permissioned access to data.”
But after these data are amassed, who’s responsible for them and who regulates them?
“Where is that data at the end of the day and under which regulatory body does it exist?” asked Diesel. “It’s very challenging.”
New Techniques and How They Impact Compliance and Regulatory MandatesAccording to Salazar, new mandates take considerable time to reach the market. The example used is cryptocurrency companies and exchanges. Many of the companies within this market want to expand their reach but are hesitant to do so because a regulatory framework is absent from the market. These companies know that, in order to see mass adoption of crypto, consumers need to know that their experience will be a safe one.
Since there are no foreseeable mandates, financial institutions continue to sit out of the crypto game, as they do not want to incur any risk. Most organizations that want to operate within the crypto market desire to do so in a legal matter.
Also, by its very nature, technology tends to advance lightspeeds faster than any regulatory body can contend with.
Fraud Strategy as a USPConsumers want to know that their payments are protected, with as little friction as possible. This will be the ongoing challenge that most organizations will continue to face. Diesel noted that financial institutions can communicate their fraud strategies in order to build trust with their customers.
“We’ve seen a number of financial institutions advertise what they do with fraud controls and educate consumers around scams that are taking place,” said Excell. “It’s the reputation of the financial institution and that brand loyalty that’s at risk. So I think it’s a huge differentiator for FIs to be able to protect their customers and keep their money safe, which is one of the main reasons why we want to use a bank rather than keep the cash under the mattress.”
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In the event of a possible recession, it’s important for acquirers to make their businesses as efficient as possible. Increasing sales is one important part of that, but so is reducing transaction fraud. Yet, being overzealous with transaction fraud detection has its risks. If false declines on transactions are too high, customers become frustrated and stop shopping with certain merchants. This can lead some merchants to switch acquirers, which in turn ends up costing acquirers billions of dollars.
In a recent podcast, PaymentsJournal sat with Amyn Dhala, Chief Product Officer at Brighterion, a Mastercard Company, and Brian Riley, Co-Head of Payments Research at Mercator Advisory Group, to discuss why optimizing transaction fraud detection is important in the face of increased volatility.
PaymentsJournalOptimizing Transaction Fraud DetectionPaymentsJournal Optimizing Transaction Fraud DetectionPaymentsJournalOverview of the Transaction Fraud SpaceBanks and acquiring banks are making use of machine learning (ML) models, leveraging internal data to predict which transactions are most likely to be fraudulent and stopping them pre-authorization.
“The key objective for acquirers is the same as it has always been — increasing revenue for merchants, increasing approval rates, and reducing fraud,” said Dhala.
What’s different now, according to Dhala, are the new tools and developments during the pandemic that have changed the way fraud may be tackled in an economic downturn.
Brighterion uses artificial intelligence (AI) models to leverage Mastercard network data, and these models are trained on billions of transactions, and the latest payment trends.
During the last few years, customers have changed. “Over the last couple of years, we’ve seen an increased use of [digital] wallet payments. For example, making payments using messaging apps. There’s also the use of newer credit products such as buy now, pay later (BNPL),” said Dhala.
Optimizing Transaction Fraud DetectionCombatting fraud is part art and part science, according to Riley. “You could stop fraud by not approving any transactions,” he said. “Or you could increase sales by approving every transaction. It’s finding the balance between the two that’s important. If you think about the number of false positives that you can control, it’s crucial to set the dial for false negatives right. Learning from the customer’s experience with the fraud system, and recalibrating accordingly, shifts it from a science to kind of an art.”
Modern transaction fraud detection systems are characterized by cloud compatibility, rich data models, and success in real-life application. Cloud-based solutions also allow acquirers to detect transaction fraud without having their own servers, and help acquirers more easily scale up or down depending on the needs of particular companies. For example, during the holiday season, a company may require more fraud detection capacity than the rest of the year. With a cloud-based model, the company doesn’t need to permanently acquire extra server space for those months, but can ramp up or down according to its needs on a moment’s notice.
At Mastercard, much of the data crunching is done by using machine learning. Implementation of these systems are typically a big lift that can take months or years, but have the potential to really pay off. “What we’ve seen with our Mastercard models is that you can detect 30% more fraud by reviewing less than 1% of transactions,” said Dhala. Brighterion has access to data from a wide variety of merchants. As a result, it’s able to offer analytics based on what is happening in the broader business community and not just the data of individual clients.
One issue with machine learning is that machines create models that are effective at predicting which transactions are likely to be fraudulent, but are completely opaque about how they work. Machine learning systems can function as black boxes, and one current area of research is how to make this less the case.
Market-Ready ModelsBrighterion’s market-ready models bring together AI technology and foreign intelligence database of hundreds of billions of transactions. “This juxtaposition combination helps us provide a solution, which delivers exceptional accuracy in reducing false positives,” said Dhala. “We now have market models delivering real-time intelligence in the Americas, Europe, the Middle East, and Asia.”
Market-ready models have a few key features that make them desirable. First, they enable an acquirer to assess payments for likelihood of fraud before the payments are authorized. Second, the models can be easily integrated into case management user interfaces that implement fraud solutions, as well as business intelligence applications.
“It comes down to the core basics,” said Dhala. “Acquirers and merchants are focused on improving customer experience, increasing revenue, and reducing fraud. Minimizing false positives is key. This is especially crucial in the holiday season, when customers are going after Black Friday deals.”
As previously mentioned, acquirers are focused on increasing revenue and conversion and reducing fraud. “Market-ready models help do that from day one,” said Dhala. “Because it’s already been pre-trained on billions of transactions from which you can derive insights to inform and improve your customer experience.”
The post Optimizing Transaction Fraud Detection appeared first on PaymentsJournal.
The regulatory compliance world can be very complex, and with the rapid expansion of digital payments, it’s increasingly difficult to identify and stop fraudulent transactions from occurring.
Although technological solutions continue to evolve at an equally breakneck speed, they have failed to keep up with the rapid-fire payments made by bad actors, forcing compliance analysts to manage the barrage with outdated and inefficient tools.
Euronet’s Skylight is a financial transaction monitoring solution that identifies fraudulent and suspicious activity behavior and aims to facilitate financial services compliance investigations by automating the entire process — mitigating both regulatory and reputational risk for businesses.
“Businesses have a lake of data they need to analyze,” said Bryan Zingg, President of epay North America at Euronet. “The system uses powerful algorithms to apply rules to that data and then it creates alerts. All that is done in an automated way so that when a compliance agent logs onto Skylight, they’re able to see different alerts that have been created based on the rules businesses set.”
In a recent PaymentsJournal podcast, Zingg and Brian Riley, Director of Credit at Mercator Advisory Group, discussed how solutions like Skylight can greatly benefit businesses and help them streamline an otherwise difficult process.
PaymentsJournalRegulatory Compliance Requires More Robust Fraud and Transaction Monitoring SolutionsPaymentsJournal Regulatory Compliance Requires More Robust Fraud and Transaction Monitoring SolutionsPaymentsJournalBringing Clarity to Regulatory Compliance CasesEfficiency is key for an effective regulatory compliance solution, and it helps liberate time for AML/Compliance analysts to focus their efforts on spotting illicit consumer behaviors. Skylight creates a case management workflow for compliance analysts. How this plays out is that companies can modify their specific workflows, which can be based on the stringency of their compliance obligations. Workflows can be straightforward or more complex depending on the needs of the business.
“Once the analyst has gone through the case and determined that it generated a meaningful alert that needs to be flagged as a compliance risk, the system can automate and populate the SAR [suspicious activity report] and CTR [currency transaction report], which are two different types of forms that a business will have to file with their regulator,” said Zingg. “Through an integration that we have with FinCEN — Financial Crimes Enforcement Network — an automated process sends these to the regulator.”
On another note, it’s through a dashboard on the platform that the organization’s managerial team can peer into key performance metrics, trends, alerts, and case aging.
“As a Compliance Officer, if I have cases that are more than 90 days old, I can take action and assign them to the agent or dig into why an agent might not be working through those aged cases,” said Zingg. “There’s a dashboard tool that shows all these key metrics that can be used to gain visibility in to the business’ compliance program.”
No-Code Rule CreationWhen it comes to standard regulatory compliance software tools, the Compliance Officer typically needs technical support – either internal resources or contractors – to create rules. If there is a fraud risk that hits their radar, the setting up of a rule to address that requires coding. With Skylight, there’s no code rule creation. This option exists for the Compliance Officer so that they’re free to create their own rules. These rules can then be run against actual production data in test mode before they’re run in production.
If the rule is not set up correctly, businesses can tune these rules without having to restart the process and engaging technical resources.
“The benefit of no code rule creation is that if you don’t get a rule exactly correct, maybe you intend to flag 100 different transactions that might be fraudulent or risky – and you end up flagging 100,000 risky transactions and create 100,000 alerts, it’ll be overwhelming,” said Zingg. “Typically this results in the compliance analyst needing to work through all those alerts, and that would cause a massive backlog in the compliance management process.”
“With a global crisis in hand, financial institutions are focused on capital adequacy, the blood and guts of running their business,” added Riley. “Suppliers and the supply chains are disrupted. Focusing on the compliance aspect is more important than ever, as is bringing in tools that automate it.”
Regulatory Compliance as an AfterthoughtIn conversations with clients, Zingg noted that businesses place a lot of emphasis on building a successful user interface without giving much thought to regulatory compliance. This typically happens when businesses start out with a small customer base. When the numbers reach the thousands or millions, that’s when businesses start thinking about implementing a regulatory compliance solution.
“This is providing a powerful tool in the compliance world for companies that didn’t have it,” said Zingg. “And then in other instances, some companies have had a compliance solution that covers their case management, one covers their transaction monitoring, another compliance tool handles their fraud management, and yet another one that they might use for analytics. Skylight bundles all that into one cohesive, homogeneous platform that covers all their compliance needs.”
Regardless of the type of fintech, banking or payments market a company makes its foray into, the reality is that there will be an obligation for businesses for compliance. The automation solutions Skylight offers takes the manual steps out of the process of regulatory transaction monitoring investigations.
The Middle East, specifically, has specific regulatory compliance requirements that Skylight can address. This can also be transferable to any market worldwide as more countries begin implementing their own compliance regulations.
“There’s a lot of obligations that need to be fulfilled,” said Riley. “You start thinking about inflation, even the thresholds that trigger that will start to compress.”
The Benefits of Self-Service CreationMost regulatory compliance businesses follow a predetermined set of rules. There are also rule templates available in which businesses can create their own rules, and there are attributes that can be designated to those rules.
“You can set a rule that says, ‘I want to know if customer A is in Mexico and customer B is in the United States,’” said Zingg. “You can even get down to a city in a country or to a zip code. It allows you to have a vast array of parameters that you can build into a rule, then you can click it and run it in trial mode so that you can run it against your own data to see what happens when that rule is applied.”
“If you’re successful, you’ll get a meaningful and reasonable amount of responses from that rule, and the alerts will show you the nefarious behavior you can detect, seek to eliminate, and potentially block through fraud mitigation,” he said.
As digital payments continue to grow, more compliance regulations will be implemented to protect both consumers and businesses from data breaches and other fraud risks. Businesses must do all they can to protect themselves and their customers from bad actors.
The post Regulatory Compliance Requires More Robust Fraud and Transaction Monitoring Solutions appeared first on PaymentsJournal.
Within the banking industry, it’s important to secure hardware as soon as you need it to ensure your operations continue to run at peak performance and to meet compliance requirements. Unfortunately, the procurement process has become slow and cumbersome for many financial institutions because of supply chain snags, disparate systems and lack of resources to manage this necessary function.
Automating the procurement process can help banks save time and resources and ordering all hardware through a single vendor can further simplify the acquiring process.
In a recent podcast, PaymentsJournal sat with Alex Kennedy, Director of Hardware Advantage at Fiserv, to better understand the importance of automating the procurement process.
PaymentsJournalExpediting the Hardware Procurement Process at Financial InstitutionsPaymentsJournal Expediting the Hardware Procurement Process at Financial InstitutionsPaymentsJournalProcuring Hardware for Retail BranchesFinancial institutions require a lot of business hardware and supplies — PCs, check scanners, printers and ink cartridges — to ensure their business is functioning. Increased maintenance costs, decreased security, non-compliance and compatibility issues are just a few reasons to regularly update or upgrade hardware.
“Today the rising demand for hardware is due to changes in regulations, cybersecurity, as well as mergers and acquisitions,” said Kennedy. “In addition, the impact of the pandemic has given rise to supply chain delays from equipment manufacturers.”
Despite automation availability, many banks still procure their equipment through manual systems. According to a recent survey by Oxford Economics, 47% of banking executives reported that most, if not all, of their procurement processes are manual. Kennedy explained that this can be a problem for banks, because not all equipment is compatible and working with different vendors can result in varied delivery schedules, especially when supply chains are already strained.
Benefits to Automating Hardware ProcurementWorking with a single vendor such as Hardware Advantage from Fiserv streamlines and simplifies the procurement process dramatically, requiring fewer workers at the banks. Dealing with just one vendor also means that the equipment procurement process goes quickly, and new institutions can be up and running quickly as well.
“Banks can increase efficiency and agility and reduce expense and risk to their institution while improving transparency,” Kennedy said. “It can also free up employees involved in procurement for other tasks, allowing a bank to do more with less.”
Simplifying Hardware Procurement During Unsure Economic TimesDuring the pandemic, sourcing hardware became more difficult for businesses, and financial institutions were no exception. But, for companies that partnered with a single large vendor like Fiserv, the challenges were lessened.
“During the pandemic, a large client of ours needed 700 laptops to accommodate its large workforce that was forced to go remote. Normally, an initiative like this takes months of planning, but we did it in under a week,” said Kennedy. “The alternative to using Hardware Advantage was buying out all the inventory of smaller regional resellers and trying to piece together a solution — which even if it was able to be done would have caused an administrative nightmare with multiple vendors shipping multiple products. In the end, we were able to work with the client and minimize the challenge of getting the equipment they needed in a timely fashion.”
Supply chains have improved somewhat, though they’re not back to pre-pandemic levels. One commodity that is still lagging in supply is computer chips. “The ongoing computer chip shortage is making equipment that is critical to day-to-day operations difficult to get in a timely manner,” said Kennedy. “Having a partner you can trust to help you maneuver through these delays and backlogs, and help you plan ahead to ensure your deadlines are met, can help alleviate potential impacts to your business.”
ConclusionSupply chain disruptions, inflation and the pandemic have increased pressures to reduce costs and to overcome obstacles in procuring hardware. Letting a single vendor take care of all of this is a good solution. It frees up bank staff for other purposes and also removes a lot of distress for senior management. Financial institutions should consider going that route for peace of mind and cost savings as well.
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For most financial institutions, modernization and digital transformation are top priorities, yet many still struggle in these efforts. Many are unsure where to start and also wary of the potential risks with modernizing legacy systems. Therefore, a large number of banks and credit unions are still in the beginning or exploratory phase of digital transformation.
Yet these projects are more important than ever, as financial institutions face more competition than ever, not only from other financial institutions but fintechs and digital-only neobanks, too, as well as consumer expectations derived from nonfinancial firms such as Amazon and Uber.
Digital transformation and modernization may seem a monumental task, but by using open architecture and taking advantage of partnerships, financial institutions can make great strides. To learn more, PaymentsJournal sat with Lance Homer, Global Head of Digital Payments and Banking Ecosystems for digital infrastructure company Equinix, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service for Mercator Advisory Group.
PaymentsJournalHow Banks Can Achieve Modernization Through PartnershipsPaymentsJournal How Banks Can Achieve Modernization Through PartnershipsPaymentsJournalWhat Makes a Better Bank?Ultimately, modernization projects are embarked upon to create a better bank. There are several aspects of what constitutes a “better bank,” noted Homer.
“It’s about being greener, connected, smarter, modular, distributed, and automated,” he said. “These are the things driving digital transformation across the landscape.”
All of the above are byproducts of moving out of legacy data centers and into the cloud, using open application programming interfaces (APIs), breaking up the legacy tech stack, and moving toward a platform model. As one example, Homer noted that moving to the cloud and operating fewer data centers mean banks can reduce their carbon footprint and reach ESG goals quicker.
Furthermore, by adopting a platform model using open APIs to connect with best-of-breed partners, banks can offer more innovative products and services to their customers and bring them to market quickly.
“It’s difficult for banks to differentiate on the thing they used to, like interest rates,” said Homer. “It’s about operating smarter and creating a better end-user experience.”
Grotta added that modernization is a “hot topic” in banking at the moment and that “I get at least two calls per week from financial institutions thinking about embarking on some level of modernization.”
She observed that in the past few years — especially spurred on by the pace of digital adoption during the COVID-19 pandemic — many bank and credit union executives are more sensitive to how their institution is lagging when it comes to digital capabilities.
“A lot of them are not happy in the way their institution has reacted when new digital products are launched into the marketplace, and they have a tough time delivering the digital customer experience they want to be known for,” Grotta said. “They need to keep up not only with the competitor down the street, but deliver on experiences that consumers and business are finding in other places as well.”
Homer said it is hard for many institutions to know where to start when it comes to modernization projects, but the ideal place to begin is replacing the “plumbing.”
“For banks, this means positioning to move to the cloud,” he said. “Figure out which applications can move to the cloud and which can’t. Determine where your cloud on-ramps sit and where your partners connect. Then it’s easy to move workloads one at a time.”
Financial institutions should also work to separate their technology stack into its component parts; this can be difficult due to having to work through years of “spaghetti code,” but being modular will enable institutions to be more agile, Homer said.
Banking-as-a-ServiceThese modernization efforts ultimately help institutions work toward a “banking-as-a-service” (BaaS) model and embrace embedded finance, Homer added.
“We are seeing this as-a-service model being adopted everywhere, across industries,” he said. BaaS “is about rethinking the digital supply chain and rethinking how a bank builds its infrastructure.”
Source: Lipis AdvisorsBaaS enables a quicker time to market and the ability to identify new revenue opportunities and to distribute services at the edge. The latter point is critical especially in helping banks move into new geographies by enabling them to manage and store data in the different geographies they operate in.
A platform model is also helpful in facilitating real-time payments, which consumers and businesses are increasingly asking for.
“In the old-batch processing model, you just need to get the file sent by the cutoff time,” said Homer. “But with real-time payments, you need always-on connectivity.”
Finding a Trusted PartnerWhen it comes to modernization, financial institutions can’t do everything at once so finding a partner to help guide the process is critical. For example, Equinix does not operate its own public cloud, so it can be an effective neutral party in helping banks and credit unions evaluate the different cloud providers, said Homer, as well as to advise how banks and credit unions should build their new tech infrastructure.
“You need to consider the relative strengths of the various cloud providers,” he added. “Also, where do you put non-cloud apps? Not everything can go on the cloud. Some banks can have up to 3,000 apps that are not cloud-ready. They still need to talk to each other. So how do you build an infrastructure so those cloud and non-cloud apps still talk to each other as they did when they were sitting side by side on computers in your data center?”
Grotta noted that banks that are not thinking about these issues need to start doing so now or risk falling behind the curve.
“Open banking is here whether we have mandates about it or not,” she said. “If you don’t have a plan for it now, you are putting your business at risk.”
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Data is the driving force behind key strategic decisions for any business, but more often than not, businesses have a tough time turning the wealth of data and insights they have into something actionable and tangible. How can cloud data help?
Through their partnership, Mastercard and Amazon Web Services (AWS) are looking to equip organizations with the most up-to-date location and spending insights to make informed and strategic business decisions.
“Mastercard has a wide reach across geographies that can provide powerful insights for businesses across industries and regions,” said Paul Chang, Principal of Payments at Amazon Web Services (AWS). “Through the Mastercard and AWS Data Exchange partnership, we can collaboratively provide meaningful insights and solutions to businesses across markets and industries to help them tackle their own unique challenges.”
“When we think about our Data & Services business at Mastercard, we focus on helping our customers make smarter decisions that result in better outcomes for everyone,” added Stuart Finkelstein, Executive Vice President at Mastercard Data & Services. “Our collaboration allows us to improve our reach with the simplicity of access and helps us drive scale by getting these powerful tools into the hands of more customers.”
Both companies delved into their partnership and why it’s so important in a recent PaymentsJournal podcast. Finkelstein, Chang, and Marco Salazar, Director of Technology and Infrastructure at Mercator Advisory Group, also spoke about how two offerings — Mastercard SpendingPulse and Mastercard Places — are critical solutions for organizations looking to stay ahead of competitors.
PaymentsJournalPaymentsJournalPaymentsJournalThe Benefits of AWS Data ExchangeThrough AWS Data Exchange, customers can locate, subscribe, and use third-party data to supplement their own internal data, thereby enhancing their decision-making.
According to Chang, data subscribers expressed the need to locate and use data within the cloud, as more are being generated and stored. “They wanted it to be as easy as it is to shop online today so that their team can focus on producing differentiated products and spend time on value-added activities rather than discovering data, maintaining infrastructure, or managing revisions,” he said.
“As a subscriber, you can reduce time to find and source data from months to hours with minimal changes to existing operations,” Chang added. “AWS Data Exchange makes managing data subscriptions easier by consolidating contracts, billing, and payments in one place.”
Meanwhile, data providers are also seeing the benefits, particularly in reaching a broader set of customers. “A data provider can publish data simultaneously to all its customers and spend more time growing their business rather than managing the logistics,” said Chang.
Harnessing the Power of Data-Driven InsightsBoth Mastercard and AWS saw the challenges organizations face in regard to data — particularly that many weren’t sure what to do with the trove of information they have or if it’s accurate.
“Mastercard SpendingPulse is a macroeconomic indicator of retail sales, which measures in-store and online retail sales and includes all forms of payment,” said Finkelstein. “It utilizes anonymized aggregated sales activity taken directly from the Mastercard Payments Network and is combined with survey-based estimates for other types of payments such as cash and check in order to answer key business questions for our customers.”
“For instance, customers may use this to gain a competitive perspective that allows them to understand their market share and their competitive positioning,” Finkelstein continued. “It gives them timely information that allows them to adapt and react quickly to changing sales trends. This understanding of trends opens up data-driven opportunities as they examine consumer purchasing habits and perform forecasts that help them identify and capitalize on untapped potential.”
Mastercard Places offers a comprehensive view of all merchant locations that accept Mastercard as payment both online and in-store. “Places is captured from aggregated anonymized transaction data that matches to third-party location data listings,” said Finkelstein. “Using Places, our customers can understand changes to merchants over time and what payment activities each location supports — and how the merchant landscape continues to evolve.”
A Focus on Ethical PracticesWith Mastercard’s immense reach worldwide — amassing a staggering amount of data — it’s sitting on a gold mine of information, prompting the need for ethical policies for its use.
“Payments networks have multiple touch points from both a consumer and merchant standpoint,” said Salazar. “This provides access to a rich set of data that powers and streamlines a plethora of products and experiences.”
“This has to be done with a fine balance,” he continued. “It has to be focused on ethical access and use of the data that accounts for privacy from both sides.”
“The network itself and the data that we have is tremendously important,” added Finkelstein. “Last year, Mastercard processed $7.7 trillion in gross dollar volume and processed 112 billion transactions from about 3 billion cards across 200 countries and territories. The use of all that data and the power that it brings has to be combined with our ethical practices.”
When it comes to ethical practices, the focus is on security and privacy, transparency, and control. With accountability, the solutions ensure that the individual’s interest is front and center. The result is for the data analytics to promote inclusive, comprehensive, and equitable behaviors.
“We always have integrity as we look to innovate consistently to ensure the individual benefits from the use of their data through better experiences,” said Finkelstein. “The combination of our powerful data and ethical use practices, we believe, is what makes our data so powerful in our solutions.”
How Customers Are Using SpendingPulse and PlacesLeading organizations use Mastercard SpendingPulse and Places to enhance their day-to-day decision-making. For example, a drugstore chain wanted to measure performance in markets by taking account of the effects of macroeconomic trends. “Using SpendingPulse insights, they were able to benchmark how they performed in those particular markets compared to the industry as a whole,” said Finkelstein. “They also understood the channel spending trends.”
“They found that they underperformed in higher density areas, where the shift to online was more pronounced and in-store shopping was declining,” he added. “Taking all of this into account, they developed a deep understanding of how they performed, and completely changed their future investment strategy as a result.”
In another example, a grocer wanted to expand and open new locations. It needed to know where its competitors were located, as well as the shopping behaviors of consumers in that area. Using the Mastercard Places solution, the grocer gained an understanding of potential competitor merchants as well as their locations, along with an indicator of their popularity among consumers.
“The grocer was able to leverage this information to pinpoint the ideal location for a new store,” said Finkelstein. “And they were able to create a road map for future growth without cannibalizing their own footprint or entering over-saturated markets.”
Looking Ahead: Key Trends This Holiday SeasonAccording to Mastercard SpendingPulse, there are three key trends to expect this holiday season. The first is that many consumers will begin their holiday shopping earlier this year, seeking out bargains as the cost of everyday essentials continues to grow.
Key promotional days, including Black Friday, will make a strong return this year, as will Christmas Eve, which falls on a Saturday and is slated to be one of the biggest days for retailers.
Finally, in-store experiences will be in full force. More brick-and-mortar stores are offering in-store experiences to get shoppers in the door.
For more information on the Mastercard SpendingPulse and Places solutions, follow this link.
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In traditional government disbursements and emergency payments, prepaid cards played a significant role in accelerating federal economic impact payments (EIP). This was particularly seen during the COVID-19 relief aid.
Prepaid cards are faster, more secure, and more cost-effective than paper checks. And they offer benefits to the recipient as well as the agency. They’re also especially useful for the unbanked and underbanked, which represent roughly 19% of U.S. households. According to the Report on the Economic Well-Being of U.S. Households, 40% of unbanked adults used an alternative financial service such as a check cashing service, a money order, or a payday loan in 2018. This is an important factor to consider when distributing funds.
In a recent podcast, Helen Brune, Senior Business Development Manager at Blackhawk Network, Tyler Gentry, Director of Payments for Good and Public Sector Partnership Development Director at Blackhawk Network, and Jordan Hirschfield, Director of Prepaid Advisory Service at Mercator Advisory Group, discussed how prepaid cards facilitate the disbursement of funds for agencies and give recipients the flexibility and security to receive these funds quickly.
PaymentsJournalHow Payments for Good Is Modernizing Government Disbursements Through Prepaid CardsPaymentsJournal How Payments for Good Is Modernizing Government Disbursements Through Prepaid CardsPaymentsJournalThe Key Benefits Driving Prepaid Card AdoptionThe role of Payments for Good is to assist state and local government agencies and nonprofit organizations. It will assist them in updating their disbursement capabilities by replacing paper checks with prepaid cards. Prepaid cards are cost-efficient, faster, and safer than traditional paper checks.
“The pandemic really accelerated the adoption of cards by government agencies because they had an unprecedented number of COVID-related payments to send out,” said Brune. “They lacked the administrative staff and technology to do it in an efficient manner with checks.”
The advantage of using prepaid cards over checks is the ability to pay bills and purchase essentials. Consumers can also pay online or in person, giving them more flexibility. Prepaid cards also offer cardholder protections in a way that checks don’t.
“One of the biggest takeaways we got from getting though the pandemic was the ability of businesses, government, and consumers to quickly adapt and accept cards as a secure and desired payment mechanism because they have wide acceptance,” said Hirschfield. “They are instantly available and there is back-end security.”
Agencies can cut administrative spending when using prepaid cards, as they typically cost 10% to 20% less than issuing checks. Prepaid cards are also faster than checks. If an organization chooses to distribute virtual cards, they can be delivered instantly, Cards can also be programmed to only be used in certain businesses and industries.
Prepaid cards are a more cost-efficient way to deliver funds and savings. This maximizes program funds and the financial benefit being awarded to recipients.
How Prepaid Card Use Is Combating FraudPrepaid cards offer security benefits for both recipients and government agencies. Recipients don’t have to worry about receiving their prepaid cards via mail in order to support multiple or recurring payments. Funds are delivered digitally, ensuring that funds get delivered quickly and securely. Cardholders also benefit from protection against lost or stolen cards. With Cardholder Support, recipients can receive assistance when issues arise. The Federal Deposit Insurance Corporation (FDIC) also provides coverage.
Government agencies can analyze the program’s influence using spend information. It also offers transparency as well as accountability.
“Security continues to be an issue with consumers,” said Hirschfield, “Mercator has research that highlights that fraud and theft is a large concern across all payment mechanisms, especially within prepaid mechanisms. 55% of consumers were satisfied with a resolution with prepaid fraud or theft incident. People in a compromised position need to know they have the protections as well as a greater opportunity for a positive resolution.”
Payments For Good and Mobilization of AidPayments for Good assisted in the disbursement of $3 billion in state government and local nonprofit payments to individuals. One of its partnerships was in March of 2021 when it joined forces with CORE (Children of Restaurant Employees). CORE is a nonprofit organization that supports families in the restaurant industry who face financial hardship due to injury or death. They also provided prepaid cards during job loss in the middle of the pandemic. There was also Blackhawk’s partnership with the government of California in June of 2021 to provide prepaid cards as incentives to receive the COVID-19 shot before the state reopened.
“Our largest and most prominent clients were government agencies and departments of social and health services,” said Gentry. “Those funds have benefitted vulnerable populations, from foster youth and family welfare, assisted care facilities to immigrant workers excluded from federal emergency aid. During the pandemic, the state of California asked us to fill vaccine incentives to encourage health and human safety. It was in the form of $50 digitally delivered Mastercard to those residents who received the shot.”
Payments for Good takes on the operational challenges that many organizations face.
“What we do is take on all the administrative burden and all the servicing of disbursing the payments on behalf of the organization,” said Brune.
To learn more about Payments for Good, please visit Blackhawk’s website, contact us directly on LinkedIn, or reach out to us at helen.brune@bhnetwork.com or Tyler.gentry@bhnetwork.com
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Fintech applications are taking the lead in digitization of the bill pay space. They now offer improvements in digital bill viewing and bill payment over what banks have traditionally offered. For these reasons, many customers are paying billers directly through fintech applications.
In a recent PaymentsJournal podcast, Marcell King, Chief Innovation Officer at Paymentus, and Brian Riley, Director of Credit at Mercator Advisory Group, discuss how electronic bill payment and presentment (EBPP) technology is filling market gaps and creating new opportunities for banks, credit unions, and fintechs. To retain their customers, banks need to compete with fintechs directly on EBPP technology. Or they need to partner with them to stay competitive.
PaymentsJournalHow Bill Payment Creates New Opportunities for Financial InstitutionPaymentsJournal How Bill Payment Creates New Opportunities for Financial InstitutionPaymentsJournalElectronic Bill Payment and PresentmentEBPP systems are used by companies and service providers to move their paper billing systems online. Presentment is the action of presenting bills electronically to customers instead of a paper copy. And once customers are presented with their bills online, they can pay them electronically.
Using EBPP systems helps increase efficiency and convenience in customer service. The systems allow for sending digital notifications to customers and enables customers to pay through a variety of means, including credit cards, debit cards, or wires. Some systems also enable payment plans, and micro-loans via buy now, pay later options. Many industries have integrated EBPP systems, including healthcare and governmental agencies.
Traditionally, payment presentation and processing involved separate platforms. “Paymentus is the first and only integrated real-time digital bill pay presentment and money movement platform on the market,” said King. “When we bring those two technologies together, it’s a complete solution that allows institutions to take advantage of not only bill pay and presentment, but also peer-to-peer capabilities, external transfers, loan payments, and new account funding.”
The Advantage of EBPP for Consumers“When you think about it from a consumer perspective, consumers are looking for simplicity, convenience, speed, and transparency in a traditional digital bill pay market within the banking space,” said King. “[If you’re] paying via a bank checking account, a bill is sent in the mail, and it’s going to take two to ten days to get received by the biller. With an EBPP, payments are almost instantaneous.”
Another key advantage is the flexibility it provides. “You get the convenience and control of getting to choose your preferred payment method,” said King. “If a credit card offers three points for every dollar spent, you’re going to pay your bills with that card.”
EBPP also helps consumers stay organized. Consumers have many bills and many cards to keep track of, all with different due dates. “An EBPP allows consumers to aggregate all of their financial obligations and also pay them in real time with their favorite credit card or debit card, which obviously drives more engagement for the consumer,” said King.
The Benefits of Collaborating With FintechsTeaming up with fintechs that offer EBPP solutions can be helpful to many financial institutions.
An EBPP service can help drive more consumer engagement at banks and credit unions. “If your consumers are engaging with your services, there is a stickiness to that. By bringing this convenience factor, by bringing them choice, by giving them the ability to make those payments in real time, it’s going to help drive engagement,” said King.
“[What’s more], by giving consumers the ability for bill payment with their credit card or their debit card, that helps the financial institution actually drive interchange revenue and provide top-of-wallet control that institutions are looking for,” he added.
Financial institutions can also leverage data from the EBPP to personalize customer service and generate more profits. For instance, Bill Center(SM) from Paymentus centralizes customers’ financial obligations in a single bill management hub. It delivers through the financial institution’s app, creating a unique window into their financial lives.
“Bill Center allows the consumer to aggregate not just their traditional bills, but also what we call their offline bills — like certain subscriptions,” said King. “With that comes a plethora of data that the financial institution can leverage for cross-selling. They can use customers’ payment history to understand the overall consumer financial health. That gives them the opportunity to potentially underwrite credit for short-term loans.”
According to Riley, stickiness and engagement is really important for financial institutions to focus on. “As a financial institution, you’ve got to be more than a one-trick pony just focused on taking deposits and giving out credit cards,” he said. “It’s about being involved in the whole life cycle of a customer. The most important thing for the consumer and the financial institution is being able to integrate the EBPP process. Also, they make sure it’s not a cluttery mess.”
To learn more about Paymentus Banking & Fintech Solutions, please visit Paymentus.com/banking-fintech.
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For the fifth year in a row, PSCU sought to better understand payment method preferences among consumers, and what factors — whether it’s different life stages or economic events — are driving adoption. For its 2022 Eye on Payments study, PSCU surveyed 1,750 credit union members and nonmembers within the U.S. and found that choice […]
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Instantaneous movement is technically impossible, but real-time payments get pretty close. Real-time payments (RTP) are financial transactions that are settled almost instantaneously. They use separate digital network “rails” to process payments 24/7 every day of the year. Real-time payments are fast, which is helpful to companies and individuals that either want to pay or receive […]
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This article is part 2 on the topic of Holiday Spending Insights 2022. Click HERE for part 1. The holiday shopping season is already upon us, and it is poised to be the biggest one yet. Consumers are planning to spend 8% more this year on holiday gifts than last year. This is despite factors […]
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The world continues to move further away from COVID-19 pandemic-induced restrictions. It is moving back into a state of somewhat normalcy. The 2022 holiday season will take on interesting new trends in gifting and how those holiday gifts are paid for. In fact, 58% of consumers are planning to change their shopping behavior. They are […]
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Frauds that use credit-push are on the rise. Every participant in the payments ecosystem needs to be aware of how to identify and help stop this crime. Credit-push fraud differs from traditional debit fraud, wherein a bank account makes unauthorized payments. In credit-push fraud, the criminal uses social engineering or phishing attacks. They use these […]
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Enabling real-time payments is vital for any bank or credit union to remain competitive. Consumers have grown accustomed to sending and receiving real-time payments through a variety of fintechs, such as peer-to-peer (P2P) payment apps. Demand for real-time payments has become even greater lately, as inflation makes the need to receive cash quickly more vital, […]
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The U.S. — and much of the world — is facing an inflationary environment not seen in more than 40 years. Persistent, high inflation is proving to be stubborn and shows no sign of slowing down. This greatly affects businesses buying goods and services because it increases their prices and makes running their business more […]
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Although card payments have been around for 80 years, little has changed within the industry to keep up with ever-changing customer demands for digital payments and the explosive growth of innovation within the fintech industry. Many financial institutions that rely heavily on their legacy systems to offer their financial services are finding it more difficult […]
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Today’s technical decision-makers face pressure to increase the company’s revenue while keeping risk low in the consumer checkout process. If a customer’s legitimate payment transaction gets declined because a merchant’s tech isn’t advanced enough, this has the potential to result in a lost customer. One of the most important parts of streamlining your payment process and […]
The post Efficient Payment Authorization Can Improve a Merchant’s Bottom Line appeared first on PaymentsJournal.
Blackhawk Network, a California-based company in the prepaid, gift card, and payments industry, joined forces with NAPCO Research, the “research arm” of NAPCO Media, a B2B digital media company, for the fifth year. Their aim? To assess the in-store, online, and mobile gift card program experiences across more than 225 merchants. This time, their annual […]
The post Assessing Merchant Gift Card Programs and Actionable Best Practices appeared first on PaymentsJournal.
Many financial institutions are in a time of transition. With the continuous decline in check volume, it’s important for banks and credit unions to find efficiencies where they can. One area where financial institutions can realize immediate benefits is by outsourcing their item processing function. To learn more, PaymentsJournal sat with Joe Pachunka, CIO of […]
The post The Benefits of Outsourcing Item Processing Functions appeared first on PaymentsJournal.
Times of rampant high inflation, such as that we are living in now, affect consumers and businesses in various ways. But one segment that is typically most adversely affected by inflation are workers who are paid an hourly wage. How can earned wage access make an impact? As inflation forces difficult spending and budgeting decisions […]
The post Why Earned Wage Access Is Critical for Employees and Businesses appeared first on PaymentsJournal.
There is a common misconception that business credit cards are only for midsize to large businesses, as small business owners commonly use personal credit cards for their businesses. Furthermore, marketing for business cards has not traditionally been targeted at small business owners. However, banks are starting to rethink that strategy. They see small businesses as […]
The post Nimble and Intuitive Card and Expense Management Tools Are Essential for Business Card Portfolio Growth appeared first on PaymentsJournal.
For debit and credit card issuers, marketing has always been a pillar to growing the business: attracting new customers, activating those who have gone dormant, and finding incentives that increase business from active customers. As happened with so many elements of consumers’ lives, the fundamentals of their engagement with card accounts shifted after the onset […]
The post Credit and Debit Card Marketing Through—and Beyond—the Pandemic appeared first on PaymentsJournal.
For debit and credit card issuers, marketing has always been a pillar to growing the business: attracting new customers, activating those who have gone dormant, and finding incentives that increase business from active customers. As happened with so many elements of consumers’ lives, the fundamentals of their engagement with card accounts shifted after the onset […]
The post Credit and Debit Card Marketing Through—and Beyond—the Pandemic appeared first on PaymentsJournal.
The ACH (Automated Clearing House) Network affects most Americans daily, having moved nearly $73 trillion in payments in 2021, according to Nacha, the organization that governs it. As payments constantly evolve and become more digital and faster, the ACH Network is also evolving in order to meet the needs of both businesses and consumers. To […]
The post How the ACH Network Is Evolving to Meet the Needs of Businesses and Consumers appeared first on PaymentsJournal.
The ACH (Automated Clearing House) Network affects most Americans daily, having moved nearly $73 trillion in payments in 2021, according to Nacha, the organization that governs it. As payments constantly evolve and become more digital and faster, the ACH Network is also evolving in order to meet the needs of both businesses and consumers. To […]
The post How the ACH Network Is Evolving to Meet the Needs of Businesses and Consumers appeared first on PaymentsJournal.
Halfway through 2022, it’s not that the fight against payments fraud has shifted to a whole new ball game. While criminals’ tactics are ever-evolving, the real challenge lies in the breadth and complexity of the fraud. It’s many ball games on many fields, all at once, and that’s the environment confronted by card issuers, merchants, […]
The post What Debit and Credit Card Issuers Need to Know About Current Trends in Payments Fraud appeared first on PaymentsJournal.
Halfway through 2022, it’s not that the fight against payments fraud has shifted to a whole new ball game. While criminals’ tactics are ever-evolving, the real challenge lies in the breadth and complexity of the fraud. It’s many ball games on many fields, all at once, and that’s the environment confronted by card issuers, merchants, […]
The post What Debit and Credit Card Issuers Need to Know About Current Trends in Payments Fraud appeared first on PaymentsJournal.
Digital transformation is top of mind for financial institutions of all stripes, yet many are cautious when initiating such projects and unsure where to begin due to the inherent risk associated with modernizing legacy systems. This is especially true when it comes to modernizing payments systems. Today’s consumer wants to not only pay using traditional […]
The post What to Expect from Diebold Nixdorf’s Upcoming Intersect Conference in Las Vegas appeared first on PaymentsJournal.
Digital transformation is top of mind for financial institutions of all stripes, yet many are cautious when initiating such projects and unsure where to begin due to the inherent risk associated with modernizing legacy systems. This is especially true when it comes to modernizing payments systems. Today’s consumer wants to not only pay using traditional […]
The post What to Expect from Diebold Nixdorf’s Upcoming Intersect Conference in Las Vegas appeared first on PaymentsJournal.
There is a common misconception that today’s bank and credit union customers want to do everything in a digital channel. The fact is that when it comes to financial services, consumers often have high expectations: in-person assistance when help is needed, plus the convenience of on-demand, self-service digital and mobile channels. How can retail banks […]
The post Next-Gen ATMs Are a Key Part of Banks’ Digital Strategy appeared first on PaymentsJournal.
There is a common misconception that today’s bank and credit union customers want to do everything in a digital channel. The fact is that when it comes to financial services, consumers often have high expectations: in-person assistance when help is needed, plus the convenience of on-demand, self-service digital and mobile channels. How can retail banks […]
The post Next-Gen ATMs Are a Key Part of Banks’ Digital Strategy appeared first on PaymentsJournal.
Digital innovation has transformed payments for businesses and consumers in recent years. One area that has lagged, however, is accounts receivable (AR). Many businesses still rely on manual, time-consuming, and costly processes when it comes to AR. But that’s beginning to change. Advanced technologies such as cloud computing, artificial intelligence, and machine learning are starting […]
The post How Payments Integration Can Revolutionize Accounts Receivable appeared first on PaymentsJournal.
Digital innovation has transformed payments for businesses and consumers in recent years. One area that has lagged, however, is accounts receivable (AR). Many businesses still rely on manual, time-consuming, and costly processes when it comes to AR. But that’s beginning to change. Advanced technologies such as cloud computing, artificial intelligence, and machine learning are starting […]
The post How Payments Integration Can Revolutionize Accounts Receivable appeared first on PaymentsJournal.
The technology and payment rails to enable real-time payments in the U.S. already exist, though real-time and faster payments still have not entirely permeated the U.S. financial system. That’s because many of the more than 10,000 banks and credit unions in the U.S. today have been slow to adopt real-time payments. The reasons for this […]
The post Why Banks and Credit Unions Need to Adopt Real-Time Payments Now appeared first on PaymentsJournal.
The technology and payment rails to enable real-time payments in the U.S. already exist, though real-time and faster payments still have not entirely permeated the U.S. financial system. That’s because many of the more than 10,000 banks and credit unions in the U.S. today have been slow to adopt real-time payments. The reasons for this […]
The post Why Banks and Credit Unions Need to Adopt Real-Time Payments Now appeared first on PaymentsJournal.
Merchants, their acquiring banks, and payment service providers (PSPs) all face a daunting challenge: They’re under pressure to reduce ever-increasing transaction fraud while at the same time increasing revenue by taking on more volume with less friction for customers and merchants where sales are made. According to Amyn Dhala, Chief Product Officer at Brighterion, a […]
The post Putting AI and Machine Learning to Work Against Fraud for Banks, PSPs, and Merchants appeared first on PaymentsJournal.
It’s 2022 and many consumers are splitting restaurant bills with peer-to-peer (P2P) apps and initiating a wide range of payments without having ever written a check, or in some cases, even having a checkbook. On the flip side, according to Payveris Chief Innovation Officer Marcell King, some consumers are making big-ticket monthly payments for items […]
The post Expanding the Methods and Speed of Loan Payments for Banks and Other Lenders appeared first on PaymentsJournal.
Buy Now, Pay Later (also known as BNPL) as a consumer financing option — and, importantly, a merchant marketing tool — is a relatively recent arrival to the scene, if also a fresh branding of a not-so-new idea. PayPal’s June 15 announcement of its Pay Monthly product, allowing customers to make a purchase and break […]
The post Reexamining Buy Now, Pay Later as PayPal Makes a Bigger Move appeared first on PaymentsJournal.
Buy Now, Pay Later (also known as BNPL) as a consumer financing option — and, importantly, a merchant marketing tool — is a relatively recent arrival to the scene, if also a fresh branding of a not-so-new idea. PayPal’s June 15 announcement of its Pay Monthly product, allowing customers to make a purchase and break […]
The post Reexamining Buy Now, Pay Later as PayPal Makes a Bigger Move appeared first on PaymentsJournal.
Like companies in other realms of financial services, credit unions must grapple with how to build the experiences their members want in a world that is increasingly digital, particularly since the onset of the COVID-19 pandemic. As more and more of their members adopt digital tools to access their accounts and engage with their financial […]
The post How Credit Unions Can Create Better Customer Journeys in a Digital-First World appeared first on PaymentsJournal.
Payment facilitation, or PayFac, is quickly becoming table stakes for many merchants. With new technology diversifying payment methods across all industries, merchants are clamoring for streamlined payment acceptance functionality. Businesses are increasingly looking toward independent software vendors (ISVs) to provide those services, and those ISVs want to deliver fast and easy payment acceptance activation to […]
The post Transforming Software Vendor Businesses by Including Payment Facilitator Capabilities appeared first on PaymentsJournal.
One needn’t look far to see that neobanks and other types of digital-only banks — the upstarts in financial services — have altered retail banking. These numbers tell part of the story: Chime: 13.1 million U.S. accountholders Current: 4.0 million Aspiration: 3.0 million Varo: 2.7 million But there’s more: The five-year projection from 2021 to […]
The post How Traditional FIs Can Meet the Rising Challenge of Digital-Only Banks appeared first on PaymentsJournal.
For any leader of an organization steeped in payments — banks, fintechs, and technology providers — it’s a time of great opportunity and great complexity. Customer demand for instant payments, instant credit decisioning, and more-frictionless payments is increasing. Borders are coming down, at least in the realm of transactions, creating a need for solutions that […]
The post Cloud Computing and Payments Connectivity: Where We Are and Where They’re Going appeared first on PaymentsJournal.
The many digital touchpoints today’s consumers use to connect with merchants and buy products have been a boon for businesses. Merchants have many different digital avenues to meet customers where they are and enable quick and seamless payments options for products and services. While this digital world has created convenience, it has also created ample opportunities […]
The post How Merchants Can Strike the Delicate Balance Between Fraud Prevention and Customer Experience appeared first on PaymentsJournal.
In the current environment of high inflation, soaring gas prices, and threat of recession, consumers are looking to get the most out of their purchases and being judicious about where they spend their money. That is why rewards programs are more critical today than ever; merchants and businesses need the right rewards program in place […]
The post How Gift Cards Are Reshaping the Loyalty Program Landscape appeared first on PaymentsJournal.
Real-time payments occupy a unique niche in the payments industry, both for its diversity and its rapid growth. The Clearing House RTP® network processes more than $16 billion each quarter, and Zelle processes more than $120 billion. Direct push payments such as Mastercard Send and Visa Direct settle payments in less than thirty minutes and […]
The post Why Banks and Credit Unions Need Multiple Real-Time Payments Options appeared first on PaymentsJournal.
The payments infrastructure at many traditional financial institutions — banks and credit unions — is showing its age at a time when new, nimble players are entering the space. These lumbering systems, many of which were constructed 50 years ago for electronic funds transfers and card services, are being left behind entirely by fintechs, or […]
The post Unburdening Financial Institutions from Legacy Payments Systems appeared first on PaymentsJournal.
Last January, Equifax announced a definitive agreement to acquire Kount, a digital identity trust and fraud prevention solution provider. On February 11, 2021, another Equifax announcement declared that the acquisition was complete. One year after the acquisition, Equifax has made noteworthy progress in combining the strengths of the two organizations to help businesses better engage […]
The post Digital Enablement Capabilities Enhance the Online Customer Journey appeared first on PaymentsJournal.
The digital, on-demand nature of today’s world is changing the way consumers engage with brands and businesses – and what they expect in return – especially when it comes to payments. The pandemic has only fueled these changes. Simply put, when it comes to receiving payments of any type – rebates, refunds, compensation, etc. – […]
The post Faster, Easier, & More Control: Where Payments Are Headed in the Future appeared first on PaymentsJournal.
The fight for consumer mindshare is more competitive than ever. Customers are bombarded with messages in a number of different channels, and standing out among the noise can be difficult for merchants. The key to doing so is to deliver targeted, relevant promotions and offers in the mobile channel at the right time. To learn […]
The post How Merchants Can Use Mobile to Stay Vital to the Customer Relationship appeared first on PaymentsJournal.
Consumer expectations are changing across the board. The world has become faster and more digitized. Payments in particular have been moving towards real-time operations for years, further expedited by the COVID-19 pandemic. Yet, physical credit and debit card issuance can still move at a snail’s pace. The solution? Digital issuance. To learn more about whether […]
The post Digital Issuance for a Digital World appeared first on PaymentsJournal.
With the unprecedented rise in fraudulent activity financial institutions and their customers experience, the pressure to mitigate risk to reduce losses and protect FI brands is extreme across all payment channels. Fraudsters are more sophisticated and determined than ever, with new tools and technologies that challenge the banking system every day. One type of payments […]
The post Check Deposit Risk Mitigation for Financial Institutions appeared first on PaymentsJournal.
Bill collections still uses many manual, paper-based, and inefficient processes. However, that is beginning to change as fintech digital innovations are transforming the collections space and making it easier for consumers to pay off debt quickly and seamlessly. To find out how, PaymentsJournal sat with Don Apgar, Director of Merchant Services Advisory Practice at Mercator […]
The post How Digital Innovation Makes Bill Collections Kinder (& More Effective) appeared first on PaymentsJournal.
The market for financial services has never been more competitive. Digital banks, neobanks, challenger banks—even merchants like Walmart, groceries, and drugstores—and other fintechs are all offering financial services in a less regulated setting than that of financial institutions (FIs). Offering digital services is of paramount importance to financial institutions, but it can be very hard […]
The post Leading the FI Pack with Earned Wage Access appeared first on PaymentsJournal.
Merchant services are riding a wave of innovation. For many years, the broadest distribution channel for merchant services was the independent sales agent. Merchants relied on their personal relationship with agents for competitive pricing and local customer service. Now there is a new trend where merchants are starting to value technology over the traditional merchant-vendor […]
The post Pivoting the Payments Industry with Disruptive Omni-Channel Solutions appeared first on PaymentsJournal.
Payment processing is an essential part of any business. Forward-thinking merchants are pursuing omnichannel experiences that will yield the highest number of conversions in the most efficient way. However, many merchants still rely on legacy payment processors. Software developers need to create the next generation of modern and agile payments processing technology to help merchants […]
The post Why Partnering with an Agile Payment Processor Is the Smart Move appeared first on PaymentsJournal.
Over the last two years, the world has seen a massive wave of digitalization. Data sharing and data privacy have taken on greater importance, and data portability has become paramount to managing personal finances. While various data aggregators have been accessing consumer data for some time now, common data-aggregation practices like sharing of account credentials can […]
The post Secure and Transparent Data Portability with Open Finance appeared first on PaymentsJournal.
To build an e-commerce experience that will attract and retain B2B buyers, it is imperative that merchants make sure the experience dovetails with all sales channels and that they provide their customers with as much choice as possible at checkout. B2B sellers who offer more payment flexibility increase the probability of receiving a larger share […]
The post BNPL for B2B: Exploring Business Financing Options appeared first on PaymentsJournal.
Fraud is always evolving. As the payments industry grows and changes, so also do the tactics used by fraudsters to steal money. Whether in person or online, merchants must take a firm stance on fraud prevention. At the end of the day, stopping fraud in its tracks does not just help the targeted business, it […]
The post Multi-Layered Fraud Protection for All Merchants appeared first on PaymentsJournal.
One of the most important elements of a business is not always talked about consistently and directly: cash flow management. Historically, it has been very complicated for smaller companies to forecast cash flow accurately, but true cash flow control goes beyond even forecasting – businesses need simple ways to adjust the levers that impact cash […]
The post Strategic Cash Flow Forecasting for SMBs appeared first on PaymentsJournal.
Over the last few years, mobile banking with financial institutions across the country has soared as consumers happily embrace the shift to digital. It is important for both banks and credits unions to continue to grow their accountholders’ adoption of digital payment methods – specifically mobile check deposits – to not only drive greater end-user […]
The post Driving Accountholder Adoption of Mobile Check Deposits appeared first on PaymentsJournal.
Omnichannel payments and customer experience go hand in hand. If developing great customer experiences is the goal, omnichannel payments are the solution. Customers want to transact with whatever method they choose, and with the help of companies like NCR, merchants can deliver top-notch service through flexible payment options. To learn more about omnichannel payments and […]
The post Omnichannel Payments Lead to Improved CX appeared first on PaymentsJournal.
The bill pay industry is often overlooked, which is surprising given that bills are omnipresent for all adult consumers. Thankfully, organizations like BillGO are paying close attention to how consumers pay their bills and what consumers are looking for in technology to help them better manage their financial obligations. PaymentsJournal sat down with Daniel Hawtof, […]
The post Bills, Bills, Bills: Consumers Want Flexibility and Speed appeared first on PaymentsJournal.
Enterprise resource planning (ERP) is crucial for the success of any business. The software and technology used to integrate the different management components of a business provides a bird’s eye view of enterprise processes and facilitates the most minute technical nuances. Software-as-a-Service (SaaS) and cloud-based solutions for ERP and treasury management systems (TMS) are the […]
The post SaaS Cloud-Based Solutions for Enterprise Resource Planning appeared first on PaymentsJournal.
As social distancing became a necessary way of life in 2020, so did the need for new and alternative payment solutions. While the COVID-19 crisis accelerated consumer adoption of various contactless payment methods, retail will continue to face disruptions as new payments solutions emerge and evolve in the months and years ahead. As consumers adopt […]
The post Preparing to Embrace New Retail Payments Technology appeared first on PaymentsJournal.
It is safe to say that everybody has experienced a frictional checkout process at some point in their life. Whether in-person or online, anything interrupting or slowing the checkout process can feel incomprehensibly frustrating. Fortunately, new technology such as GoCart (powered by FIS) can deliver an easy and simple checkout experience without compromising security. To […]
The post Forging a Path to a Frictionless Checkout Process appeared first on PaymentsJournal.
No other area of payments has seen more technology focus over the past several years than the cross-border space. Global economies are becoming increasingly interdependent, creating a growing need for consumers and businesses to send cross-border payments in real time. The annual volume of cross-border payments exceeds $150 trillion. Innovation has been fueled by the […]
The post Real-Time Success with Polyfunctional Cross-Border Payment Rails appeared first on PaymentsJournal.
Consumer behaviors within the payments ecosystem seem to be in a constant state of flux. Technological advancements, geopolitical and epidemiological pressures, and evolving payments preferences create an atmosphere of progress and uncertainty. Thankfully, there are experts with an informed view of what the future holds. One thing that remains clear is that wherever the payments […]
The post Staying Ahead of the Curve on Payments and Fraud appeared first on PaymentsJournal.
Payments orchestration platforms are vital for any successful merchant. By integrating and managing various payment service providers (PSPs), merchants increase efficiency, authorization rates, and customer satisfaction. Payments orchestration is perhaps even more crucial for merchant aggregators whose offerings support any number of merchant customers. To learn more about payments orchestration and the value of a […]
The post Payments Orchestration for Merchant Aggregators appeared first on PaymentsJournal.
Real-time payments are here to stay. However, connecting to a real-time payment network can be difficult. Financial institutions need flexible architecture that allows ease of integration through a low-code, drag-and-drop interface. To learn more about the state of real-time payments and how financial institutions can prepare, PaymentsJournal sat down with Matt Nilles, Senior Director of […]
The post Getting Ready for Real-Time Payments appeared first on PaymentsJournal.
Credit is an absolutely massive industry. In 2020, over one-third of all point-of-sale payments in the U.S. were conducted using a credit card. An average U.S. household has at least two credit cards, amounting to over 500 million total cards outstanding in the U.S. Credit cards generate about $4T in spend each year. Most significantly, 85% of that spending is managed exclusively by the top ten credit card issuing banks in the U.S.
Both as a means to diversify the marketplace and respond to consumer demands, fintechs around the country have begun introducing Credit/Card-as-a-Service (CaaS, or CCaaS), which expands credit offerings and allows credit to be integrated directly into specific businesses. In particular, Railsbank is embedding credit cards directly into the customer experience, bolstered by technology solutions from Zoot.
To learn more about how Railsbank enables any company to become a fintech, and how Zoot ensures responsible lending with rapid technology design and implementation, PaymentsJournal sat down with Dov Marmor, COO, N. America at Railsbank; Ben Duran, Global Head of Credit Risk and Operations, N. America at Railsbank; Bob Lonergan, Vice President of Sales at Zoot Enterprises; and Brian Riley, Director of Credit Advisory Service at Mercator Advisory Group.
PaymentsJournalThe Power of Credit-as-a-ServicePaymentsJournal The Power of Credit-as-a-ServicePaymentsJournal Helping companies build their own credit cards In Marmor’s own words, “Railsbank is a global platform that allows companies to build their own financial products.” These could include payments, debit cards, credit cards, or bank accounts, all of which are built as embedded experiences within the company’s digital app or ecosystem.
“Our platform allows new entrants to come into the market and build their own, what we call, embedded credit card experiences,” explained Marmor. This is distinct from co-brands, which partner with a bank or financial institution – these would be company-specific credit cards, hosted on their digital ecosystem, that allow end users to engage with the brand every day.
This service couldn’t come at a more vital time, as until recently the credit industry has been monopolized by a handful of behemoths. “Any time ten companies own the entire market, there’s a serious lack of innovation within this space,” Marmor pointed out.
Opening up the market to competition allows for a whole new breed of credit cards. For example, a cardholder might be interested in crypto, so their card would allow them to tie every spend to a crypto portfolio investment; similarly, a credit card created by a health and wellness app could set up a cashback rewards system that is activated when the cardholder hits weekly fitness goals on their wearable device. The options are virtually limitless.
How tech partnerships enable rapid deployment of solutions at scale No single company can achieve the efficiency and effectiveness it needs to succeed without strategic partnerships. For big businesses, shipping, inventory management, payments, and other operations are often conducted through integrations with expert partners. Railsbank is no exception when it comes to bringing their CaaS products to life.
“[Railsbank’s] platform doesn’t need to own every single piece of the ecosystem,” clarified Marmor. “What it needs to do is bring together best-in-breed products from around the ecosystem to create an end-to-end platform, and then operationalize all the processes that make those different systems run in harmony between one another.” This is why Railsbank partnered with Zoot and their Platform-as-a-Service (PaaS) model, according to Duran. “Zoot stands out has having been in this space and had this type of buildout with large and small customers in the past,” said Duran, “and helped us think through what this solution would look like not just in the short term, but also the long term.” Lonergan expanded: “[Zoot’s] been in business for over thirty years… our portfolio of clients run the gamut from Fortune 100 down to innovative disruptors like Railsbank.”
Zoot provides Railsbank with the tools to handle the decision engine themselves. “We control it, we manage it, we build within it, the base structure is there,” Duran continued, also citing Zoot’s private cloud as a key factor in choosing them as a decisioning vendor. “And if at any point we need support or help, it’s just a matter of getting on the phone for thirty minutes.” Zoot and other key partnerships offer Railsbank intuitive programming, reliable API connections, robust data provider networks, and scalability and reusability around the globe.
What comes next for Credit-as-a-Service The next stages for CaaS are in line with the origins of the service itself – meeting the needs of the market. “We really follow the cues of our customers,” said Marmor. Coming out of a COVID-induced economic slump, and in tandem with soaring housing costs, inflation, and the rise of Buy Now, Pay Later (BNPL), the world clearly is in desperate need of alternative lending methods.
Railsbank is in a unique position to provide those methods – moving from an unsecured consumer credit card to different iterations of credit, and creating easy to launch financial solutions that help companies get off the ground faster. “All of the APIs that face our customers are country agnostic,” Marmor added, “meaning that the same product that you build in the U.S. is built to be transferable to Europe, to Singapore, to Australia, to all the other markets that we open up.”
Ultimately, the proliferation of CaaS and the partnership between Railsbank and Zoot will allow businesses unprecedented customization. “It might be the simple integration with your application that makes things smoother,” said Riley, “or it might be adding features that are really not able to be done in the current environment today.” Either way, the playing field has typically been laid out by the top issuers in the card business, and this sort of disruption by CaaS providers means businesses won’t have to “color within the lines” as much.
“Being able to take that model that Railsbank has and integrate it with expert skills is something that creates a very interesting offer,” Riley concluded.
The post The Power of Credit-as-a-Service appeared first on PaymentsJournal.
Payment fraud is a chronic issue. The current wave of digitization has opened up even more avenues for fraudsters: business email compromise (BEC), malware, phishing, data breaches, ACH debit fraud, and more, all on top of the still-rampant old-fashioned methods of check and wire fraud. (Author’s note: I faced this particular phishing scam just last weekend.)
IBM’s 2021 Cost of a Data Breach Report put the average total cost of a cyber breach at $4.2M across all surveyed industries, and at $5.72M for financial services in particular. And that doesn’t count the value of any stolen money, just the cost of internal processes such as detection, escalation, lost business notification, and post-breach follow up. The 2021 AFP Payments Fraud and Control Survey found that 74% of firms experienced actual or attempted payments fraud, and that companies above a billion dollars in revenue are more likely to be targeted than those with less revenue.
To learn more about how enterprises can protect their operations against payment fraud in 2022, PaymentsJournal sat down with Jon Paquette, VP of Solutions at TIS, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.
PaymentsJournalHow Enterprises Can Protect Their Operations Against Payment Fraud in 2022PaymentsJournal How Enterprises Can Protect Their Operations Against Payment Fraud in 2022PaymentsJournal Common cybercrime tactics Although each new advance in technology brings a corresponding opportunity for fraudulent exploitation, the truth is that most types of fraud are the same as they have ever been. “The tactics haven’t changed,” said Paquette, “but the sophistication has changed a lot.”
For example, traditional BEC attacks are email-based – after all, it is right there in the name business email compromise. Now, cybercriminals are reinforcing that attack with phony confirmations from other sources. “We heard an organization tell us about deepfake phone calls they receive where the attackers actually spoof the CEO’s voice through recordings to say, “Hey, a wire request is coming in, keep an eye out,” before they send the BEC attack,” Paquette explained.
Fake invoice and fake wire instruction change requests are two of the newer fraud attempts currently circulating, wherein attackers send an accounts payable department a doctored-up invoice which routes to a fraudulent account. The AFP survey cited above reported that 60% of respondents believe accounts payable (AP) is the most vulnerable department to fraud within their organization. Another survey by Strategic Treasurer indicated success rates for BEC attempts had doubled between 2018 -2020. “It’s almost like you know these attacks are coming, and they still can’t be stopped,” Paquette elaborated.
Best practices for defending against digital payments fraud Even if attackers remain persistent, institutional vigilance can go a long way towards mitigating damage. There are three key components of fraud mitigation:
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Training programs – To quote G.I. Joe, “Knowing is half the battle.” Training staff on what to look for in fraud attempts is a low-investment undertaking that can have high impact.
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Internal financial controls – Ensure there are robust mechanisms, rules, and procedures in place to maintain financial integrity and prevent fraud. This includes separation of duties, replacing manual processes with straight-through processing, and day-to-day reconciliation. These controls are split into three subsections:
a. Vendor master controls
b. Payment controls
c. Accounting controls
- Detection – Account validation services can be used to confirm if account information is legitimate or if there is a hidden beneficial owner. AI and pattern recognition are also very useful for determining if anything abnormal occurs.
Of course, not every enterprise will be able to enact sweeping end-to-end fraud prevention protocols. If the effort is more piecemeal, the priority is education, followed swiftly by controls. “You need to identify what the risk is, and then configure the tool to protect against specifically what that risk is,” Paquette clarified. “Otherwise, you’re going to put a tool in place that touches nearly everything, and all you’re going to create for yourself is a giant work queue of false positives to approve on a day-to-day basis, which is the opposite of having a well-thought-out fraud detection program in place.”
“It takes a village” Just as the old adage says, “It takes a village to raise a child,” so too does it take a community to send a payment. The payments ecosystem is intimately connected, and a network of trusted beneficiaries, vendors, and information providers can help verify the legitimacy of an outbound payment to prevent fraud.
“From an attacker standpoint, that’s exactly what they’re doing,” Paquette pointed out. “They’re using automation and data to attack corporates, through publicly available sources like Zoom and LinkedIn. They know organizational structures within companies, who might be the ones releasing payments… and then they share that information extremely well within criminal networks. From a corporate standpoint, it only makes sense to then defend the same way with automation and data.”
Utilizing multiple data sources is critical for protection against fraud. Community sharing of data on account validation, historical customer behavior, normal payment routines, vendor changes, and corporate information all combine to make a powerful data set on which to run technology. Third-party vendors can provide this sort of agglomeration service.
Preventative networking is particularly effective against account takeover, which would otherwise look legitimate to account validation services unless the routing information is checked against other payees. For example, if two dozen other community members are paying a vendor through a different account than the one you have, that may be the only clue indicating that there is a problem.
Working from the top down Overall, the best way to tackle fraud is to get organizational buy-in starting with a top-down commitment that fraud mitigation is a priority. “You need to have that mindset going into it for even a basic education program to really take off,” said Paquette. “Fraud mitigation is never a one-and-done type solution. It’s always an ongoing, constant change, management-type process.”
Each industry and each company will have different methods that are most effective for their specific internal gaps. The insurance industry, for example, processes a great deal of first-time payees for claims payments, so tracking changes from a vendor master standpoint won’t do much good with an evolving supplier base. In that situation, account validation services will be more critical so that bank account details can be verified.
Either way, enterprises should not rush into the implementation of a sophisticated detection tool if they don’t yet know how to use it or know what they are looking for. The best immediate action to take is educating employees about what threats there are in the market. “It’s informing your employees about what a fraudulent threat looks like,” Paquette concluded. Once that is done, reviewing financial controls and working towards a reduction in manual payments are great next steps.
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A beautifully designed payout experience can increase customer satisfaction, translating to cost savings and/or retained revenue. Choice and speed are important, but ease/simplicity is paramount, yet more an evolving challenge. This can be even more difficult to achieve where an arm’s length relationship exists with the customer at the time of payment.
To learn more about the current payout market, including processes, customer experience, and future solutions, PaymentsJournal sat down with Mike Magennis, Product Director at EML Payments, and Don Apgar, Director of Merchant Services Advisory Practice at Mercator Advisory Group.
PaymentsJournalThe Problem with (and Solution for) Payouts PaymentsJournal The Problem with (and Solution for) Payouts PaymentsJournal Payouts: imprudently archaic and low-priority Payouts in this context are defined as payments that businesses make to their customers, as opposed to pay-ins, which are sent from customer to business. Across all industries, business payouts are significantly more outdated than pay-ins. No business operates on one-way transactions; money moves back and forth, so why would one direction work differently or more efficiently than another? “The reason is simple,” Magennis explained. “Businesses prioritize making it easy to collect. It’s less obvious why it should be important to dispense money as easily as you bring it in.”
“A lot of companies default in many instances to the lowest common denominator [regarding payouts],” Magennis continued. “Sometimes that’s checks, sometimes that’s cash, and sometimes it’s both… I think it completely misaligns with the expectations across most demographics.”
Issues with checks include:
- Back office headaches and expense
- Concerns with positive pay, reissues, and escheatment
- Extra service costs
- Merchants dealing with payee complaints
- Slow speed of delivery and processing
- Unnecessary time and effort for the consumer
Dealing predominantly in cash may also cause issues with safety and security, delivery insurance, and theft for merchandise exchange, gaming and slot machines, and other types of payout kiosks. “It’s really just not ideal, this kind of antiquated view,” said Magennis. “We’re living in a digital age, but companies continue to struggle to get there with payouts.”
Unnecessary complexity can be a thing of the past Given the pace of current digital payment automation technology, it hardly makes sense that outmoded payment types would still be a concern, but as Apgar noted: “I think it’s a question of bandwidth. Merchants haven’t gotten around to looking at this yet, but it’s time.” Unfortunately, the combination of inertia and prioritizing more overtly profitable upgrades is a difficult mindset to overcome. “The biggest thing we’re fighting is the status quo,” Magennis clarified. “And [businesses] don’t necessarily think as much [about payouts] because it’s not as immediate in terms of gratification.”
Insurance is a perfect example of an industry that has been doing things the same way for decades and is due for a change. Although plenty of progress has been made with initial payments for claims – such as by utilizing Mastercard Send or Visa Direct payment rails – the refund process is still conducted using checks. “I don’t know why it’s still done that way,” Magennis admitted. “Business [payouts] should be as easy as it is for me to pay you with Venmo.” Once upon a time, this check use could be explained because insurance companies might have been able to earn 20% in the money market by holding onto funds on deposit for an extra week, but the prime rate is currently so low that the benefits are practically nonexistent. The older and slower payout methods seem to serve nobody.
Moreover, the pandemic demonstrated that customer experience is job one. “A lot of companies didn’t realize the impact that these types of transactions have on the overall customer experience,” Apgar pointed out. “You want to delight customers when you onboard them… but there are opportunities to continue to improve that customer experience.” Modern wisdom says that every touchpoint is an opportunity to either delight or aggravate customers, and payouts are no exception.
Why merchants should care about (and invest in) payouts To mix metaphors for a moment, the tide is changing, and the writing is on the wall: ease and immediacy are the new expectations. “Older generations have come to expect [payouts] not to be easy,” said Magennis. “Younger generations, they’re the Venmo generation, P2P, social media – everything’s immediate. So, if they’re interacting with a business and something is not immediate, they are going to think more negatively about that business or just find another business to go to that makes it easier for them.”
Apgar expanded: “The rule of thumb is that if a customer has a good experience with a business, they may tell one person. If they have a bad experience with the business, they’ll tell at least ten people, because people like to complain.” The repercussions of a negative experience are much more far-reaching than those of a positive experience, and payouts mark as a consistent pain point for customers of all stripes.
To illustrate the point, Magennis described both a bad and a good experience he had with payouts. The bad experience involved cancelling his insurance when he moved. The insurance company insisted on mailing a check, but they had the wrong address on file, and it took a series of several phone calls to make sure that the information was up to date. “If I didn’t think about that,” Magennis remarked, “then it was going to go to the wrong address because I don’t live there anymore, and that was their default.” Conversely, Magennis relayed a very pleasant experience dealing with a sudden Airbnb cancellation: “Airbnb went absolutely above and beyond to see what they could do, not only to refund me right away, but figure out what other incentives and offers they could make to make my experience even more delightful in the future.” These types of payout experiences impact whether a one-time customer will become a repeat customer.
Questions merchants should ask themselves about the future of payouts Magennis hypothesized that most businesses likely haven’t considered the state of their payout system in quite some time, and emphasized that introspection is warranted, suggesting some questions businesses should ask themselves:
-
When is the last time we looked at the payout experience?
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When did we think about our demographic and the perception they have?
- Are we able to reach all potential customers, or could we be unknowingly excluding new ones, or losing the possibility of returning customers?
- Are those customers in control and speaking highly of their experience with us?
- How can I move into the digital era without completely overhauling my front end customer-facing business and my back office?
Customers are always looking for the next, best, easiest thing. “Adaptation is paramount,” summarized Magennis. Instantaneous delivery options are crucial because of something Magennis describes as “one-call resolution mentality,” namely that the closer a positive experience occurs to the source of that experience, the easier it is for the consumer to tie the positive experience to the interaction with the business. “We’re all very scattered in this day and age,” Magennis pointed out. If the problem takes more than one call to resolve, that may lead to a mental disconnect. “We forget that there’s a connection point, and we may forget that it was a delightful experience.”
In the wake of the pandemic and the Great Resignation, many people are pausing to think about what is really important in their lives. “Just like people who say, I’m not going to work at this crappy job anymore, they say, I’m not going to tolerate this substandard service,” said Apgar. If people don’t have a good experience, they will take their business elsewhere, so merchants should step up their payout game. “The time is right now,” Apgar concluded.
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Compliance and regulation can simultaneously be the most important and the most onerous aspects of business to manage. Our economy functions more efficiently and lawfully when everybody adheres to the same rules, but impacted financial institutions may find regulations stifling and difficult to effectively follow.
One government bureau instituting financial regulations is the Financial Crimes Enforcement Network (FinCEN), which recently implemented new beneficial ownership requirements as part of the Corporate Transparency Act included in the Anti-Money Laundering Act of 2020. Various RegTechs are currently arguing for access to FinCEN’s beneficial ownership register, in large part because making the register available to RegTechs would help them more effectively address compliance requirements.
To learn more about FinCEN’s new corporate transparency act, why RegTechs want access to the beneficial ownership register, and how RegTechs support financial institutions (FIs) in completing their regulatory obligations, PaymentsJournal sat down with Dr. Henry Balani, Global Head of Industry and Regulatory Affairs at Encompass Corporation.
PaymentsJournalHow RegTechs Use Beneficial Ownership Information to Maximize Compliance and Prevent Financial Crime PaymentsJournal How RegTechs Use Beneficial Ownership Information to Maximize Compliance and Prevent Financial Crime PaymentsJournal FinCEN, the Corporate Transparency Act, and beneficial ownership Anti-money laundering (AML) and financial crime prevention efforts have been undergoing drastic changes in recent years. The Corporate Transparency Act (CTA), which was established in late 2020 and came into force in 2021, mandates FinCEN to ensure that legal entities such as financial institutions are following the Anti-Money Laundering Act by, among other things, submitting reports containing beneficial ownership information.
“What’s interesting is that this particular mandate is an expanded role of FinCEN,” explained Balani. FinCEN typically only has been involved in the collection of suspicious activity reports (SARs), which would then be passed on to the appropriate law enforcement agencies. But now, the scope of FinCEN’s reach includes maintaining the beneficial ownership registry, which catalogues lists of individuals, groups, and businesses that reap the benefits of ownership without officially having the title of owner.
Identifying ultimate beneficial owners (UBOs) is important because it can be challenging to determine, among all those who have power and influence across large organizations, who might be engaged in money laundering, terrorist financing, or otherwise illicit, sanctioned, or high-risk activities. Providing a broader set of data to governmental regulatory oversight helps people “follow the money” and keep all financial activities above board.
Why it is important for RegTechs to have access to the UBO database The original intent behind FinCEN’s beneficial ownership registry was to keep tabs on suspicious activity related to financial crime, and to therefore limit registry access to relevant law enforcement agencies and the FIs submitting information. However, RegTechs (regulation technology companies), like Encompass, have been taking advantage the Notice of Proposed Rulemaking, a period of time during which federal agencies invite input from the general public after announcing new rules.
The problem is that the different corporations about which suspicious activity reports may be filed tend to be fairly complex. “They’re complex in the sense that they may have multiple subsidiaries within the organization,” said Balani, “and the subsidiaries may be offshore, and they may be in different countries, and they may even be in sanctioned countries.” Regarding sanctions specifically, large corporate entities with multiple levels of ownership may fall through the cracks of the Office of Foreign Asset Control (OFAC) since they only specify that the parent company will be sanctioned (or in the case of an exact 50/50 ownership split, both parties). Yet another challenge is that shell companies may be hidden away somewhere difficult to find.
RegTechs have the expertise and technology to help banks manage this kind of corporate structure identification in ways that banks cannot manage on their own. Encompass, in particular, can offer data pulled from multiple sources and compiled into an easy-to-understand corporate tree structure. This goal of ensuring comprehensive, diligent, top-tier KYC (Know Your Customer) would be made much easier and more effective with access to the beneficial ownership registries. Business structures can quickly shift or become quite convoluted, and expanding FinCEN’s intel to include RegTechs can help fight financial crime.
What the U.S. can learn from European precedents Opening up banking and business ownership data for the purposes of AML and compliance is hardly unprecedented. “Austria, Denmark, Germany, Ireland, Poland, and the United Kingdom all have beneficial ownership registries that the public can access,” Balani pointed out. “It’s not only just firms like [Encompass]; the public can access them.”
The U.K.’s Companies House, established in 1844, is considered the gold standard – you do not even need to provide your information or a reason to see business ownership data such as names of directors or owners, shareholders and percentages of shares owned, citizenship, dates of birth and addresses of any persons of interest. “We have to recognize that what we are trying to do is move beyond simply commercial activities, and moving towards now fighting financial crime,” Balani elaborated.
Despite the advanced level of transparency with Companies House in the U.K., there is still reform underway. “You’ve got multiple actors that can fight financial crime,” noted Balani, “or at least provide intelligence and input towards doing that. It’s not just enforcement agencies – enforcement agencies rely on the public, and rely on the banks… There’s no reason why we can’t continue to extend that.” The U.S. currently only has a state register of corporate structures, but as noted above, it has been pursuing a federal register, and Regtech Firms like Encompass can help add to that fight against financial crime.
How Encompass automates corporate KYC due diligence Validating the risk profile of an organization or individual is of vital importance, so identifying the underlying corporate structure is the essential focus for Encompass. “Banks and other regulated entities are required to conduct due diligence as part of the Know Your Customer onboarding process, or KYC for short,” Balani clarified. “It’s a fairly common activity.”
Encompass provides Software-as-a-Service (SaaS) using either onscreen lookups or APIs to let banks integrate with Encompass’ back-end platforms, where data has been assembled from various sources such as Companies House or the New York Stock Exchange. Encompass provides a centralized source and a rules mechanism based on certain parameters (e.g., jurisdiction or risk profile), so instead of the analysts having to spend hours or days scraping for information across the web, top-notch KYC can be accomplished in a matter of minutes.
“In a nutshell, what we’re doing is automating the uncovering of the corporate structure,” summarized Balani. Providing an automated picture of the hierarchy pyramid including less obvious ownership information increases efficiency and consistency for onboarding. The idea is that businesses should have the same frictionless onboarding experience as customers when dealing with banks. “We’ve been working with U.S.-based banks for quite some time,” noted Balani, “especially the large tier-one banks that recognize the value of these types of solutions.”
Finally, all of these processes happen in real time, which in today’s fast-paced climate is a huge boon. “The geopolitical landscape is dynamically changing,” said Balani. When new sanctions are announced on a daily basis, up-to-the-second information is critical to avoid financing a sanctioned entity, which would be disastrous from a policy enforcement perspective. Encompass helps mitigate risk even as financial crime rises and the world continues to evolve. “We need to make sure that we understand who the beneficial ownership owners are,” Balani concluded. “If you don’t, you’re in trouble.”
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It is an exciting time to be in business. The emergence of web3 technologies such such as non-fungible tokens (NFTs) and stablecoins are presenting new opportunities for businesses to streamline money movement and other use cases.
Stablecoins specifically have a slew of practical applications that make evaluating their suitability within a business environment crucial. And, according toBradley Riss, CCO at Checkout.com, “If NFTs are the gateway for consumers to enter Web3, stablecoins should serve the same purpose for businesses.”
To unpack this statement and explore what value stablecoins can provide in the business world, PaymentsJournal sat down with both Riss and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group.
PaymentsJournalStablecoins: Practical Applications for Improving Money MovementPaymentsJournal Stablecoins: Practical Applications for Improving Money MovementPaymentsJournal
CBDCs, stablecoins, and Web3: defining important terms Central bank digital currencies
While not the focus of Riss’s and Sloane’s conversation, central bank digital currencies (CBDC) are often discussed in the same realm as stablecoins. “A central bank digital currency is effectively a digital form of fiat. Traditionally, central banks will print money. A CBDC is basically the digital version of that,” Riss said.
Whether dealing with fiat currency (government-issued and not backed by a physical commodity) or digital currency, people need to trust that their money will hold value. “It’s not actually asset based. You’re putting your faith in the regulator, and effectively the country, to ensure that dollar or peso or euro or pound [retains value],” added Riss.
Stablecoins
Stablecoins are digital assets pegged at a 1:1 ratio to another asset. Typically, this will be a fiat currency. However, there are also stablecoins pegged to gold and even algorithmically backed. Stablecoins enable the benefits of technology to be realized without the risk of volatility that is associated with cryptocurrencies like Bitcoin.
While U.S. denominated stablecoins likeUSD Coin (USDC) andTether (USDT) are minted, there is no central authority issuing them. “So, for example, someone like Circle will take a U.S. dollar and mint a UDSC for that. Once it’s in this digital form, it will then normally run that UDSC on a chain, and this could be on a variety of chains–there is not one blockchain that operates USDC,” continued Riss.
Web3
At its most basic level,Web3 is a concept for a new iteration of the World Wide Web based on decentralized blockchain technology. Describing Web3 as a transitionary period, Riss explained that the one constant in the definition of Web3 is blockchain. “From a standards perspective, we are starting to move components of the internet into the blockchain, which hopefully creates a foundation for other functions and apps to operate on top of that,” he said.
Stablecoin business use cases around money movement Stablecoins can deliver on the promise of improving the movement of value between any two parties, whether that be a business sending money to a business, a business sending money to customers, customers sending money to a business, or consumers exchanging money among themselves. To underscore this value, Riss offered three stablecoin business models that show how they can improve money movement:
Business model #1: Money remittance Moving small amounts of money across borders is often inefficient and expensive. It also involves complying with assorted global – but locally regulated – banking facilities. With stablecoins, “the transaction could be run on a chain instantly for nothing–maybe not free, but a fraction of [a] cent. In that sort of business, the alternative would be [to] take money in via a bank transfer or even a debit card, for example,” Riss said.
While debit and bank transfers have made enormous strides over the years, they are not perfect. Settlement cycles mean that businesses still need to front that liquidity, taking on a line of credit and adding to their business inefficiencies. That’s where stablecoins moving on a blockchain come in. “If, in theory, that money could be transferred to them on demand or hourly or instantly, then that liquidity gap disappears and you’re making the system much more efficient,” he added.
Business model #2: The gig economy Freelance networks often consist of small and medium enterprises (SMEs) in affluent countries contracting cost-effective developers in another nation. For example, a business in the United States may want to work with a contractor based in Kenya.
“The actual movement of money from, for example, the U.S. to Kenya [can be] done on a chain using the right chains for free and arrives in near-real time. The alternative would be using that SWIFT-esque example [where] that $100 that needs to get there may have $35 cut out of it, another 5% taken on FX when they convert Dollars to Shillings, and could take five days to get there,” explained Riss.
Business model #3: Peer-to-peer payments Domestic peer-to-peer (P2P) payments can be easily accomplished through apps such as PayPal, Cash App, and Venmo, but they become more complicated when payments are international. Consider the hypothetical scenario of a daughter in the United States who wants to send money to her father who lives in France. “Using the underlying blockchain technology [of stablecoins] would be a way for [her] in real-time to send value, money, in a stablecoin form to him. Maybe it arrives in USDC, maybe it arrives in a Euro denominated stable coin,” Riss said.
Commenting on these use cases, Sloane noted that “almost all of those examples are, in essence, cross-border examples of the challenges associated with moving value. And that has been an age-old problem.”
Stablecoin usage could mimic NFT consumer interest Non-fungible tokens, or NFTs, are a cryptographic token stored on a blockchain that can be sold and traded. NFTs come with unique identification codes and metadata that distinguish them from one another. They can be used to represent real-world items, such as artwork and real estate, as well as digital goods. Tokenizing real-world assets makes it possible for them to be bought and sold more efficiently.
Much of growing consumer awareness around NFTs involves industry buzz and public figure involvement. For example, celebrities including Eminem, Paris Hilton, Jimmy Fallon, and Steph Curry have been in the news for purchasingBored Ape Yacht Club NFTs, a collection of 10,000 images of apes with unique traits and outfits.
Riss believes that like NFTs, consumers’ initial touchpoints with cryptocurrency will come from recognizable products or public figures engaging in the space. “There’s obviously a lot of [NFT] buzz in the industry, and I think that has brought a lot of people in. So, I think a lot of consumers’ first touchpoint with crypto won’t be yield farming an alt coin for an attractive APY [annual percentage yield]. It will be a product that they recognize, something which they like the design of [or] something that maybe has a celebrity tie-in and brings them closer as a fan,” he said.
The takeaway There are many buzzwords being discussed in the crypto space. Knowing where to start in terms of implementing them begins with embarking on an educational journey. This means gaining a deep understanding of terms such as NFT, blockchain, distributed ledger, cryptocurrency, stablecoins, Web3, and more.
“Get an understanding of what the blockchain technology can do,” Riss advised. “If, for example, you’re a fintech and cash flow is important to you, then very potentially the application of stablecoins would have value within your business. If you’re a content producer, very possibly an NFT will be something that your user base or fan base will find appealing,” he added.
Businesses that fail to take these technologies into consideration risk putting themselves–and their customers–at a disadvantage. “Our role in the industry is to help our customers and their customers move value seamlessly. But, of course, as new technologies emerge that improve upon that, I think it would be foolish for any organization who is involved… [to] not look into this and see if it can improve operations for their business inefficiencies,” concluded Riss.
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Today, most insurance, utility, and healthcare companies are not PCI compliant. In fact, just 27% of them are, despite the existence of regulations and organizations that can help businesses achieve and maintain compliance.
To learn more about how insurance companies, utilities, and healthcare networks can navigate the constantly evolving security and compliance landscape, PaymentsJournal sat down with Nirmal Kumar, CTO and Head of Product at Aliaswire, and Don Apgar, Director of the Merchant Services Advisory Practice at Mercator Advisory Group.
PaymentsJournalNavigating the Ever-Changing Landscape of PCI Compliance PaymentsJournal Navigating the Ever-Changing Landscape of PCI Compliance PaymentsJournal
What is PCI compliance?
PCI compliance refers to complying with the Payment Card Industry Data Security Standard (PCI DSS). PCI DSS is a set of security standards that has existed since 2004. It was created by the major card brands Visa, Mastercard, American Express, Discover, and JCB to ensure that businesses storing, processing, or transmitting payment card data do so within a secure environment and meet the minimum baseline of security control requirements.
Securing payment card data must be a top priority for any business processing card payments. “The card brands instituted [PCI] because it builds trust between the business and the customer. If I am paying my bill, I want to be sure that my card information is secure in your environment and in your technology,” explained Kumar. If merchants fail to protect their customers’ payment card information, those customers are unlikely to trust them for a future purchase.
Businesses struggle to comply with PCI DSS Despite its undeniable importance, many businesses struggle to fully comply with PCI DSS. Simply put, compliance is often easier said than done. Rather than just a one-time technology investment, PCI compliance requires the participation of multiple areas throughout an organization. It involves process, personnel, technology, encryption and security.
“A company might make large technology investments to become compliant, but because of the ever-changing security threats and upgrades to the standards, it’s hard to keep up. It requires a constant upkeep of systems, personnel and processes,” said Kumar.
Despite the potential for severe repercussions, compliance sustainability continues to decline as a decreasing percentage of organizations demonstrate the ability to keep a minimum baseline of security controls in place. According to Verizon, fewer than one-third (27.9%) of organizations maintained their required set of PCI data security controls during their 12-month compliance cycle in 2019.
The pandemic played a role in this decline. The socially distant nature of the COVID environment forced many businesses to pivot quickly to online and mobile commerce channels to interact with customers. In the rush to do so, security was easy to overlook. Ongoing updates to PCI DSS also contribute to the difficulty in becoming and remaining compliant.
“You’ve got the double whammy of increasingly complex PCI standards… and also merchants being pressured to use payment data in more ways and accept it in more places, and that just compounds the problems of how to keep it secure,” said Apgar.
How can organizations manage compliance?
An effective way for organizations to achieve PCI compliance is to outsource it to an experienced partner. “One of the things they can do is outsource… their billing and payment-related needs to fully integrated partners. And the reason I bring up fully integrated partners is because you do not want to compromise on your user experience,” said Kumar.
Prioritizing compliance does not mean that organizations should risk adding friction to the customer experience. “You do not want to create that extra step for your users to go to some other website or have a very clumsy way of entering the card data,” he added.
Aliaswire’s DirectBiller solution is level one PCI-DSS compliant. Billers who partner with Aliaswire only have to fill out a shortened form, the PCI self-assessment questionnaire (SAQ)-A form, where they attest that no credit card data traverses the biller’s environment.
“This can be a great, cost-effective way of accepting payments – having a platform that gives you capabilities like single sign-on and all the integration points so that your user experience is not degraded, while maintaining security and compliance around the PCI data,” explained Kumar.
Apgar agreed, adding that “it’s pretty clear that best practice for a lot of vertical markets is exactly that: keep the data out of my system and then I don’t have to worry about PCI compliance. And the attestation becomes a rubber stamp because when [regulators] ask me how I am safeguarding data, the answer is easy. I don’t have any data. I have a partner that specializes in that business that’s doing it for me,” said Apgar.
What outsourced PCI compliance looks like To Kumar, outsourced PCI compliance starts with the right partner. “Find a partner that has the capabilities to provide you with all the integrations you need, so that you do not have to compromise on the user experience. You may already have a portal, or if you want to add payment acceptance capability, your user should be able to single sign-on and make a payment.”
“If you have complex workflows and accept payment or card data, you’ll want to have options for tokenization of the card data. Your partner takes the card data from the customer’s browser to their servers. It doesn’t even go to your server during transition. This allows you to avoid storing or transitioning the card data.”
It’s important to find a partner that can provide all options – whether it’s a quick button that takes your customer to a different website, a single sign-on experience, or a secure tokenization widget that can be embedded into your complex workflow.
PCI compliance partners should also be able to provide compliance reports and conduct independent screenings to give businesses the comfort they need to know they are well taken care of.
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September 2021 marked the five-year anniversary of the Same Day ACH (SDA) debut. When SDA went live, the ACH Network only allowed up to $25,000 per same day payment. Now, on March 18, 2022, the Same Day ACH limit will increase to $1 million per transaction, a ten-fold increase from the current $100,000 per transaction limit. Since its introduction, the market has only grown more accustomed to SDA as a payment method, and if SDA expansion continues at the current rate, the sky is the limit.
To learn more about Same Day ACH, its meteoric rise, and what that rise means for the payments industry, PaymentsJournal sat down with Mike Herd, Senior Vice President of ACH Network Administration at Nacha, and Sarah Grotta, Director of Debit and Alternative Products at Mercator Advisory Group.
PaymentsJournalSame Day ACH and So Much More PaymentsJournal Same Day ACH and So Much More PaymentsJournal Growth leads to opportunity – and vice versa The higher ceiling in allowed dollar value per SDA transaction means one thing: opportunity. A wide spectrum of industries, government entities, and consumers will be able to utilize and benefit from the ACH Network while ensuring that their payments continue to be safe and secure.
B2B payments will likely see a particular boon, including vendor or supplier payments, tax payments, and payroll funding. Other uses like insurance claims and other A2A transfers are also expected to increase.
“The last time there was a dollar limit increase was about two years ago, to the current level of $100,000 per payment,” Herd noted. “That generated larger dollar flows using Same Day ACH almost immediately. We’re going to be watching closely as that goes into effect, but that’s our anticipation.”
According to Grotta, this planned increase demonstrates three things:
- The market is finding utility for Same Day ACH with expanded use cases.
- Financial institutions have confidence in the ACH Network and confidence that they can successfully manage any accompanying fraud.
- There is a growing expectation that money should move more quickly.
“Hockey stick” inflection point The numbers being recorded surrounding Same Day ACH are frankly staggering. In 2021, SDA volume increased by 74%, and dollar volume increased by 105%. A combination of factors in the last two years – the prior dollar limit increase to $100K, the expanded hours of availability for Same Day ACH settlement, and the general economic conditions of the country moving towards electronic and faster payments – all ignited steep growth after a steadier period. If you were to track SDA use on a graph, it would resemble a hockey stick – mostly flat and then a sharp turn upward.
On a more granular level, Herd pointed out two specific growth areas for Same Day ACH in 2021. The first is consumer debits initiated online, which increased by 127%. The second area is B2B payments, which saw a doubling in the number of transactions and a 142% increase in dollar volume. Whereas prior growth was driven primarily by consumer direct deposit and other disbursements, these new use cases have spurred tremendous gains.
ACH currently clocks in at 29.1 billion payments valued at $72.6 trillion – with a T. Compared with 2020, that represents an increase in ACH Network payment volume by 8.7%, or 2.3 billion, and dollar volume by 17.4%, or $10.8 trillion. “ACH is really in record-setting territory at the moment,” Herd summarized.
Three primary factors The remarkable growth in ACH can be attributed to three main factors, according to Herd:
- ACH payments initiated online by consumers
- Consumer online payments are the largest growth area, with more than 1 billion new payments in 2021. These payments include bills, recurring donations and subscriptions, A2A transfers, and links between fintechs and bank accounts. “Using online abilities to initiate payments has become more important than ever over the last couple of years,” Herd pointed out.
- B2B payments
- The 5.3 billion B2B payments, valued at $50 trillion, reflect a 20.4% increase from 2020, and over the past two years, ACH B2B payments have jumped 33.2%. A big part of that is the transition from check usage, which has declined to the remote work conditions of the pandemic. “Close to 40% of business-to-business transactions are still done via check,” Grotta elaborated, “so I think there’s even more to be had there.”
- Government payments
- The federal government continued economic assistance in 2021 using payments largely distributed by ACH. These payments included direct deposit of Economic Impact Payments, child tax credits, unemployment benefits, as well as disbursements to states, businesses, agencies, and medical providers and facilities.
The future of the ACH Network With all the positive movement in the ACH space, one might assume it would be easy for the ACH Network to rest on its laurels. But this is not the case.
“One thing we’re interested in is expanding the ACH Network’s availability and settlement capabilities into additional days and times,” explained Herd. “For example, to shorten the time over a weekend or a holiday weekend when ACH payments currently cannot be settled.” Nacha has reached out to the Federal Reserve to advocate for the expansion of the Fed’s interbank settlement service, positing that it would benefit both banks and customers by increasing the availability of funds.
Another opportunity is simply to lock in the gains made in the last several years with B2B and government payments. The IRS looks to be on a record pace to issue tax refunds by direct deposit during this filing season, which is a good sign for ACH. “One thing I hear people wonder about is, if we are returning to a state of more normalcy, is there going to be some backsliding with payments going back to paper?” Herd said. “So far, it appears that type of backsliding is not happening.”
Expanding ACH adoption into new business models akin to bill payments is also a top priority. From a payments perspective, repeat donations and subscriptions have much in common with monthly utility bills, and the ACH Network is well-equipped to handle it. Even BNPL solutions and the predicted onset of open banking in the U.S. could utilize ACH. “There’s a lot of opportunity for ACH to expand into the payments for those types of services,” Herd concluded.
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There are several differences in the payment preferences of consumers across European nations. In Germany, merchants offer invoice payments. In the Netherlands, instant bank transfers dominate the retail space. In Sweden, the mobile wallet Swish has millions of regular users.
Cultural differences aside, a universal theme is emerging: alternative payment methods, or payment methods other than cash or major debit and credit cards, are gaining traction. For merchants serving European customers, these payment methods represent a great opportunity to improve the customer experience, bolster security, reduce card disputes, and more.
To learn more about the rise of alternative payments in Europe and how they benefit merchants and consumers alike, PaymentsJournal sat down with Jack Wilson, Head of Public Policy at TrueLayer and Samee Zafar, Director at Edgar, Dunn & Company.
PaymentsJournalWhy Merchants Should Embrace the Rise of Alternative Payment Methods in the UK and Europe PaymentsJournal Why Merchants Should Embrace the Rise of Alternative Payment Methods in the UK and Europe PaymentsJournal The rise of alternative payments
In 2021, credit and debit cards made up 41% of all e-commerce payments in Europe, however, this number is falling. By 2026, two-thirds of e-commerce purchases will be made using alternative payment methods instead.
This projection does not mean that the number of card transactions is decreasing. Rather, card payments will encompass a smaller percentage of total e-commerce payments by 2026. “While the total pie of payments will increase, the market share of alternatives to cards will grow and, accordingly, card market share will decline. So you will see that by 2026, we think that about two-thirds of total e-commerce transactions will be made with alternative payment instruments,” said Zafar.
This includes payment methods such as Buy Now, Pay Later (BNPL), digital wallets, and bank payments. Each of these categories is expected to gain in market share at the expense of both credit and debit cards.
The “why” behind alternative payment growth
Simply put, alternative payments are convenient, cheap, and effective. The two major advantages of card payments are authorization–guaranteed funds to the merchant–and payment speed. But with modern banking payments, instant payments, and other alternative payment methods, those advantages are no longer exclusive to cards.
The increasing accessibility of alternative payment methods is also a factor. “Non-card payments are becoming much more accessible to merchants as technology improves. Open banking is a good example of that, where developer-first companies like TrueLayer… make it as easy as possible to integrate with a non-card payment method. So that’s why merchants have the opportunity to switch away from cards,” added Wilson.
How new payment methods benefit merchants There are several compelling reasons why merchants should integrate alternative payment methods into their offerings. For starters, merchants with a wider selection of payment methods have higher conversion rates (the percentage of customers who complete the transaction). This means fewer checkout abandonments and a higher probability of a successful sale. “That’s the first reason why merchants love alternative payment methods alongside cards, because they reduce their shopping cart abandonment rates,” said Zafar.
A second benefit for merchants is that alternative payment methods are often less expensive than card acceptance. While interchange fees in Europe have decreased in recent years, that decrease has not been passed onto all merchants by acquiring banks. “In fact, there has been a significant reduction in interchange, but the small merchants continue to pay high rates,” continued Zafar.
According to Wilson, cost savings is the biggest determiner for merchants. “If you look at cards, that is [fees of] up to 3% of transactions for processing card payments, whereas open-banking payments… can be around [or] lower than 1%—and that’s not even counting contingent charges, for example, the cost of processing a chargeback,” he explained.
The role of open banking Open banking plays an important role in alternative payment methods. According to TrueLayer, open banking is a disruptive technology that seeks to bypass the dominance of card networks and other traditional financial rails by letting banks open their systems directly to developers and services by way of APIs. Open banking can be pivotal in helping merchants integrate new payment methods into their offerings.
“What open banking does is it enables the infrastructure of instant or faster payments to be leveraged by merchants, and that’s because it gives them the ability to [work with] third-party providers like TrueLayer to initiate these instant payments on behalf of customers,” said Wilson. Thanks to the open-banking ecosystem, funds can now move directly from a consumer account to a merchant account. “What you have is third-party providers making agreements with merchants to integrate the payment method into the checkout, then you have the third-party provider providing that payment service to the consumer at checkout,” he added.
This reduces the time it takes for funds to arrive in a merchant’s account. With card payments, “a merchant can be waiting for a number of days for those funds to arrive. But that is not the case with open banking, and it can really help from a liquidity perspective and a cash-management perspective for merchants,” explained Wilson.
The takeaway The future of payments is bright. European consumers are increasingly recognizing the value of alternative payment methods, which is apparent given the anticipated decline in debit and credit card market share for e-commerce payments.
Meanwhile, open banking has made it easier for merchants to partner with experienced third-party providers that can enable new payment methods. Merchants that fail to incorporate alternative payment methods into their offerings will miss out on all the benefits that can result from doing so.
“It is now possible to make a payment within Europe from one person to another or from one person to an entity or merchant as efficiently, more cheaply, and with a better or an equally good customer experience as cards. For the first time, we now have a credible alternative to cards, which we never had before,” concluded Zafar.
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As consumers flock to digital and P2P payment methods, the need for more robust messaging has come to the forefront. The top-line messaging standard for electronic data interchange (EDI), ISO 20022, describes and transmits information about financial services and includes both a metadata repository and a maintenance process for the repository content. If the previous sentence dried your eyes up just a little, you might wonder: What is all the fuss around a messaging standard?
To learn more about what ISO 20022 actually is, what it does, why companies are implementing it, and how it is being used, PaymentsJournal sat down with Jack Baldwin, Chairman of BHMI, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.
PaymentsJournalWhat’s All the Excitement around ISO 20022? PaymentsJournal What’s All the Excitement around ISO 20022? PaymentsJournal Powerful design: the exacting detail of data enrichment “The primary power of the specification is attributable, at least in part, to how it was designed,” Baldwin began. There are around 21 different domains of business processes specified in the ISO 20022 standard, along with the messaging and data necessary to support the different processes. Not all financial business services have the same profiles, however. Fee collection has a different profile than foreign exchange trade, which has a different profile than securities clearing, or card administration, or ATM management. Moreover, within each of those categories are subsections and each require the transmission of different information.
The messaging standard manages all aspects of payments messaging at a granular level. “ISO 20022 messaging includes additional detail to help remove ambiguity from the interpretation and processing of these messages,” Baldwin explained. “This is basically referred to as data enrichment.” Whether you are dealing with reconciliation, settlement, money laundering, or fraud detection, the extra attributes included in the ISO 20022 messaging standard improve processing transparency and help to dramatically reduce potential issues with the payment experience.
This sharply contrasts with the experience of using an older standard such as ISO 8583, a popular transaction protocol that has been used for decades. The operative difference lies in how much information the data field can support. “Because of the [ISO 8583] standard, there will be data that [transaction partners] want to transmit, but there’s not really a data field to support it,” clarified Baldwin. Instead, two parties might work out an arrangement between them and use a different unused data field that can support the amount of information. Skirting the protocol to accommodate extra data leads to a cascading set of problems, such as needing to adjust for every new communication and constantly swapping out data fields as needed. “[ISO 20022] obviates the necessity of trying to override or misuse the protocol,” said Baldwin.
ISO 20022 – past, present, and future The first iteration of ISO 20022 was published in 2004, and the second edition in 2013, which is the version now seeing widespread use. “The initiatives around ISO 20022 sort of coincide with real-time payment systems,” explained Murphy. “That’s really taken off in the last 6-7 years.” There are approximately 60 real-time payment systems across the globe, including recent implementations in Canada, Peru, Indonesia, Colombia, New Zealand, Singapore, Thailand, and more. ISO 20022 is the de facto standard for all of them.
Other high-profile use cases include:
- SWIFT – Conversion to ISO 20022 is expected by 2024 for all cross-border and B2B payment messaging, including partnerships with EBA CLEARING and The Clearing House (TCH).
- EBA CLEARING – Migration to ISO 20022 is underway with a current deadline of November 2022.
- The Clearing House (TCH) – Real-Time Payments (RTP) network and CHIPS clearing system are both en route to use ISO 20022 by mid-2022.
- U.K. Faster Payments Service (FPS) – Moving to ISO 20022 by April 2023.
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P27 Nordic – Cross-border payments for the Nordic regions already operate on ISO 20022.
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Bank of International Settlements (BIS) – Project Nexus cross-border payments will operate on ISO 20022 standard.
- Fedwire – One of two real-time gross settlement (RTGS) or wire systems, along with CHIPS, that plan to convert to ISO 20022 in the next several years.
- FedNow – Proposed to be operational in 2023, and will also use ISO 20022 specifications.
- Cuscal – Australian payments solution company uses The New Payments Platform (NPP), which has run on ISO 20022 since 2018, with support from BHMI.
- PayShop – Portugal-based payments institution has used ISO 20022 since last July with support from BHMI.
There are obvious benefits for this kind of harmonization in B2B, B2C, and P2P payments. “There really isn’t any recently developed financial services network that is not based on ISO 20022,” Baldwin summarized. The BHMI Concourse financial software suite acts as a comprehensive back-office module that, among other offerings that modernize electronic payment transactions, aligns companies with the ISO 20022 standard.
Begin the adoption process now! The writing is on the wall: everyone is moving towards ISO 20022. This is easier said than done, however. In a perfect world, older financial service networks would have legacy carryover, but this does not necessarily happen. Old protocols have what Baldwin refers to as “logical tentacles” that stretch into other areas of the application set. “There is really no clear separation or delineation between internal and external data,” Baldwin pointed out. “This complicates adopting something like ISO 20022 as a standard.”
The good news is that ISO 20022 is designed to functionally support old data messaging standards, while still adding the extra attributes that resolve any potential ambiguity lurking in the contents of the data. The only drawback is that while integrating ISO 20022, any older messaging standard in use may not maintain the enriched data offered by the new standard, so until the switch is complete, there may be an interim period with some limitations. “The advice I would give is to implement ISO 20022 from the get-go,” Baldwin concluded.
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Every corner of the payments industry is undergoing significant technological advancement. Ironically, one key back-office area that is often overlooked is the role of treasury management. With just over a month left in Q1 2022, now is the ideal time to assess treasury and payment technology trends and plan for the future.
To learn more about the strategic role of treasury, top treasury priorities and challenges, and the role that technology will play in delivering treasury success in 2022, PaymentsJournal sat down with Jon Paquette, VP of Solutions at TIS, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.
PaymentsJournalTreasury and Payment Technology Trends in 2022 PaymentsJournal Treasury and Payment Technology Trends in 2022 PaymentsJournal Where treasury has been and where it is going “Treasury has traditionally been a specialized and lightly resourced area of the Chief Financial Office within corporate structures,” Murphy explained. However, after the Great Recession of 2008-2009 – and catalyzed further by the COVID-19 pandemic – financial processes have been moving towards digitalization, with new technology evolving specifically on the workstation side. To that end, TIS recently conducted a survey to gain insight into current treasury management trends.
First and foremost, Paquette noted that 80% of survey respondents indicated an expectation of increased responsibilities. “The survey results were across multiple departments,” Paquette mentioned. “Treasury, FP&A [financial planning and analysis] accounting, and accounts payable all responded, but actually it was treasury who responded the most favorably to having increased responsibilities next year.” Moreover, about 50% expected professional development opportunities to increase, and 75% planned to upgrade technology in their department.
Putting technology in the right places The specifics of what technology upgrades were desired, and how and why the tech would be used, varied between small and midsize vs. enterprise organizations. “For small companies, we saw a big focus on the desired impact of their technology investments around process automation within treasury and also cash forecasting,” Paquette pointed out, emphasizing how most respondents were also bullish on the role of AI. “If you flip that and look at enterprise organizations,” Paquette continued, “the main trend was that most companies have a big focus on data.” Bigger organizations are looking to extract more insight from their data, avoid data lakes, and use their data for machine learning and pattern recognition to bolster fraud detection.
While many of the survey results made perfect sense, such as 75% of respondents planning to use bank APIs in 2022, other findings were more surprising. “About 50% indicated they wanted to take advantage of real-time payments,” said Paquette, “which I thought was on the higher side. And even 15% of respondents indicated some interest in cryptocurrencies.” Conversely, only about 5% of survey respondents showed interest in improving account validation services, which seemed very low to Paquette given the potential benefits, and which did not align with the day-to-day conversations TIS had been having with treasurers.
Strong concerns: risk mitigation and cash management Behind data management, the TIS survey showed the top desired impact of technology was in the realm of risk mitigation. In particular, the biggest efforts organizations were looking to put in place were 1) eliminating manual payments, and 2) revamping training programs. “AI will play a big role in driving those solutions in 2022,” Paquette clarified. “Although eliminating manual payments seems like an at least conceptually simple idea, the reality behind it means basically broad adoption of straight through processing, right across your entire organization.” That includes managing back connectivity, file formats, global payments, ERP connectivity, and more.
Cash management appeared as the number one most important skills upgrade for small and mid-sized companies, with 41% of respondents indicating as much. “It seems to be very market-driven,” noted Paquette. “It’s not the fintechs. It’s not the banks telling corporates they have to do this. It’s the corporates telling us that they want to manage things more real-time.” One potential explanation for this trend is that the unpredictability introduced during the pandemic accelerated the desire for real-time cash management, especially due to supply chain issues and other COVID-related slowdowns.
Other trends – eBAM, crypto, and APIs An interesting result from the TIS survey involved electronic bank account management, or eBAM: it was the bottom priority for most organizations. “[eBAM] came in dead last amongst emerging technology adoptions for 2022,” said Paquette. “It even came behind cryptocurrency.”
Widespread adoption of eBAM technology seems to be hindered by the market expectation that automated workflows around opening and closing bank accounts won’t catch on. “There’s been various iterations of [eBAM] that have been introduced over time,” Paquette explained, “and nothing has ever gained full adoption amongst all the players that would need to adopt it within the industry.” APIs, on the other hand, are on the rise, and while API technology could be used to solve some of the eBAM challenges, Paquette suspects it won’t happen this year. “I wouldn’t rule out eBAM permanently,” he clarified.
Corporates who want to adopt APIs for other uses will have to make several key decisions. “With functionality vs. standardization vs. institutional costs of adopting APIs, there’s still quite a bit of variability between the API capabilities between most banks,” noted Paquette. Still, banks are clearly moving towards an American-style open banking. “A lot of banks are offering [APIs] for free right now,” Paquette pointed out. “What does that tell you? Banks never offer anything for free… the market is pushing everything in this direction very fast.”
Regarding cryptocurrency, Paquette views it as a win that treasurers are even marginally open to its adoption. “Crypto probably doesn’t make sense in most organizations,” Paquette said, “but it seems like for some of the use cases around global payments, crypto is a settlement currency.” Using cryptocurrency can potentially accelerate the settlement of foreign exchange transactions, though those use cases have not been made concrete as of yet. Overall, there has been so much volatility due to the pandemic that it can be hard to gauge which technologies are practical or desirable in the long-term. “That’s a good question,” concluded Paquette. “Are organizations really in a good place to take advantage of this technology?”
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In an age when consumers have limitless options for what to buy and how to buy it, the concept of customer loyalty would seem at risk of taking the back seat to convenience and caprice. However, cardholder loyalty still means a great deal to financial institutions, and there are effective ways to adapt to the modern marketplace and entice consumers to prioritize some cards over others.
To learn more about how financial institutions can maintain and enhance cardholder loyalty, PaymentsJournal sat down with Mandar Mangalvedhekar, VP of Digital Product Management at Fiserv, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.
PaymentsJournalThe Importance of Cardholder Loyalty PaymentsJournal The Importance of Cardholder Loyalty PaymentsJournal Cardholder loyalty means more than just rewards When people think of cardholder loyalty, they tend to think about what sort of rewards a card might offer, such as points, cash back, airline miles, or other perks. However, the idea of building customer loyalty runs much deeper and broader than that. “It’s all about driving engagement between the issuers and their consumers,” said Mangalvedhekar. “And it starts, actually, from the moment the consumers sign up for an account.”
As soon as a cardholder begins their relationship with an issuer, the financial institution (FI) has an opportunity to gather information about consumer behavior. Online, mobile, and digital channels have all increased, in part because of the COVID-19 pandemic. Those channels lead to more options for consumers and more data that is accessible for FIs. “There are more products, more ways of utilizing those products, and more ways of accessing those products than ever before,” noted Grotta.
Financial institutions will find that there are significant generational differences in consumer patterns. Different consumer segments have different relationships with their issuers, and Gen Z in particular tends to develop relationships with multiple issuers and fintechs. “To Gen X, debit rewards are not particularly motivating, but they may be very motivating to somebody in the Gen Z category,” Grotta pointed out. The use of digital currency is also concentrated heavily among younger populations.
“When issuers think about loyalty,” Mangalvedhekar said, “the key question in my mind is: Are they able to offer personalized experiences across all the channels to drive engagement and growth?”
What this means for primary financial institutions “Issuers need to invest time and money for continuous learning of consumer preferences,” said Mangalvedhekar. Starting from the initial interaction, FIs should be tailoring experiences to offer the best-in-class personalized services for their cardholders. This can start with integrating digital experiences during card activation, and continuously providing visibility and tools through online and mobile channels to keep issuer products at top of mind. Digital issuance, for example, has tremendous potential to tap into myriad digital experiences, including card-on-file, which benefits both consumers and FIs.
Rewards are not to be dismissed and are best implemented using a targeted approach, not just throwing deals and prizes at the wall and seeing what sticks. “Financial institutions need to understand consumer preferences,” Mangalvedhekar explained. “What actions I do, and how I, as a consumer, can be engaged.” This will provide the best opportunity to incentivize consumers to take different actions by rewarding certain behaviors.
Building on that, Mangalvedhekar added: “I think issuers must use analytics to discover trends and anomalies, segment the consumers, and do benchmarking vs. competitors.” Analytics are a great way for issuers to identify opportunities to drive engagement and growth.
How issuers can tell if their consumer relationships are at risk According to Mangalvedhekar, the most important strategy for FIs is monthly spend tracking – and not just total dollars spent, but in which specific merchant categories the cardholder used the card. He gave an example: “If the consumer had an issuer’s card on file with Netflix for the last few months, and the issuer is seeing a recurring transaction from Netflix, and then they don’t see that recurring transaction, does this mean that the consumer has stopped using Netflix? I would say most likely not. It is likely that the consumer is now using some other card.” Monthly spend tracking of this sort provides insight into what is happening in terms of consumer engagement with the portfolio.
It is also crucial to ensure that issuers are leveraging online and mobile channels. If FIs do not invest in digital interactions such as P2P, bill pay, credit score tracking, and others, consumers will look to fintechs to meet those needs elsewhere. “As the mindshare shifts to other issuers, I think it’s hard to re-engage those consumers,” noted Mangalvedhekar. Similarly, if cardholders are not activating their rewards, there is a good chance they are using other cards instead.
Keeping track of all of these metrics is vital for maintaining customer loyalty. Card ExpertSM is an on-demand business intelligence solution from Fiserv that provides card issuers with the opportunities they need to deepen consumer relationships and grow their business. “[Card Expert] actually compiles your debit and credit data from multiple sources,” Mangalvedhekar clarified. “This provides the insights to understand cardholder behavior so that issuers can actually execute targeted marketing campaigns and drive engagement.”
Capturing the majority share of spend The bottom line for FIs is to put consumer needs at the center of their strategy. “The next generation of consumers are digital natives,” Mangalvedhekar explained. “And everyone now across generations expects personalized experiences. So, issuers need to offer meaningful interactions and every consumer journey must be digitized.”
Another Fiserv product called CardHub offers a single place for cardholders to get, use, and manage credit and debit cards. This solution empowers cardholders to control their cards, clearly see spending, and use cards more easily. “The CardHub solution encompasses the entire life cycle of the consumer,” summarized Mangalvedhekar. One other action issuers can take is to support all digital channels and offer a variety of products to support all different wallets, consumer segments, and preferences. “Engaging the consumers at the right time via the right channel is extremely critical to drive engagement and loyalty.”
Emphasis on the word right. “Providing a reward that doesn’t make sense for my spending habits really falls flat and has the potential to do more damage than create the good will that it’s intended to do,” said Grotta. In order to really push that personalization and flexibility, Fiserv also offers its uChoose Rewards loyalty program, available for both debit and credit cards. “When you choose rewards, you can select the type of program that matches your objectives and preferences,” said Mangalvedhekar. “You can have merchant-funded offers, issuer-funded offers, or a blend of the two.”
He concluded: “In summary, issuers must understand cardholder behavior, offer best-in-class experiences, and drive engagement and loyalty to get the share of spend.”
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The beginning of a new year is often a time to reflect on past accomplishments and set goals for what’s to come. This is true in people’s personal lives and within the world of business. Recognizing this, DadeSystems took time in 2021 to speak with hundreds of leaders in accounts receivable, credit, and finance about the challenges they have faced and how they plan to address them. A clear theme emerged from these conversations: technology and digitization are more imperative than ever before.
To learn more about why accounts receivable automation is poised to thrive in 2022, PaymentsJournal sat down with Brian Greehan, Chief Revenue Officer of DadeSystems, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.
PaymentsJournalAccounts Receivable Automation: A Resolution Businesses Can Keep in 2022 PaymentsJournal Accounts Receivable Automation: A Resolution Businesses Can Keep in 2022 PaymentsJournal
Cash flow is a top concern for business leaders
Access to capital is not a “nice-to-have” for businesses: it is essential. The PwC U.S. CFO Pulse Survey conducted in June 2020 found that 66% of senior financial executives reported that cash flow is among their top three business concerns.
Through his work at DadeSystems, which offers a suite of integrated AR automation solutions, Greehan has seen firsthand how seriously organizations are taking cash flow. “We recently contracted with a new customer, a multi-billion dollar food distributor. We’d been selected as the vendor of choice and then waited weeks–months–for the CIO to sign the contract. I asked procurement why the CIO had to be the signer [as] he seemed pretty high up and he told me that cash flow efficiency is absolutely mission critical to the entire organization,” he explained.
This cash flow emphasis is apparent among DadeSystems’ food distribution, lumber distribution, law firm, and other types of clients. The prioritization of cash flow “is really kind of universal, both in terms of vertical [and] industry as well as organization size,” he added.
Late payments contribute to cash flow concerns One of the driving factors behind businesses’ cash flow concerns is the rising prevalence of suppliers not paying them on time. In fact, the same PwC study referenced above found that 59% of business executives reported an increase in average days late for payments.
“Some companies are paying late because they need to, some because they can, and others because they haven’t automated their payables effectively. But mostly, I think it’s the uncertainty and disruption of overall commerce. While the job market is extremely tight and the stock market is up, it is still safe to say we’re not in a normal economy,” said Greehan.
It is common for small businesses to rely on manual accounts payable processes such as physically writing and addressing checks to their distributors. But some businesses lack the personnel necessary to do so efficiently. For example, businesses depending on a small team of accounts payable employees may fall behind on making payments if members of that team call out sick or go on vacation. Automating accounts receivable wherever possible allows suppliers to mitigate the impact of these delays by enabling them to apply cash as quickly as it comes in.
Managing cash flow and B2B payments in 2022 In the past few years, there has been an enormous amount of investment and innovation around business-to-business (B2B) payments. “You have real-time payments, you have virtual cards, checks, wires, ACH, direct debit, and now there’s crypto. You see portals popping up all over the place in businesses that are smart and want to be flexible for their customers to make payments,” said Greehan.
At the same time, suppliers need to be vigilant to control the cost associated with offering additional payment types. For starters, each payment type has its own remittance. “The matching exercise with these different payment types and these different remittance types is really complex and tedious,” he added.
To illustrate his point, Greehan gave real-life examples. He highlighted the manual accounts receivable processes seen at a global shipping company that relies on a team of around twenty employees in Central America to match payments with remittances daily. Due to of employee turnover, ongoing training is needed to keep the team operating smoothly.
Another company, this time a logistics company in the United States, relies on thirteen full-time employees managing cash applications and is struggling to fill the remaining two openings on the team. “They’re spending more than a million dollars a year on personnel costs for manual exercise, of which 90% could be automated at a much lower cost,” he explained.
Digitizing AR has other efficiency benefits as well. “As companies digitize their payables and receivables process and series of processes, they have all sorts of data flowing through these systems. Now that data can be used for greater effectiveness throughout the cash cycle process,” noted Murphy.
Accounts receivable automation is within reach Inefficiencies in accounts receivable processes have been apparent for some time. COVID-19 increased the urgency to address them. But many businesses still have not made the move to automation, with 75% of businesses still applying cash manually.
“Over the last couple of years, there has probably been more focus and investment on the payables side of the coin driven by banks and overall economics. But as we sit in 2022, I think it is receivables’ time to shine,” said Greehan. “We’re talking to hundreds of businesses that are ready, and not just ready, but budgeting to tackle receivables automation this year.”
The adoption of new receivables technology faces two major obstacles: the lack of resources and knowledge to implement it, and the difficulty in creating a return on investment (ROI) model. DadeSystems helps companies overcome these obstacles with its suite of integrated AR automation solutions.
“The good news is if you look at receivables automation relative to other IT or finance projects, this is an easy one. This is not a complex, multi-year ERP migration where your IT team needs to stop everything else and dive in. This is a relatively quick contract, six-week implementation, [and] in-quarter ROI,” concluded Greehan.
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Fraud has been a persistent issue in the payments industry and has increased even more dramatically in recent years as it has shifted to predominantly digital channels. The total eradication of fraud is as unreachable a goal as the eradication of lying itself, but as fraudsters employ increasingly sophisticated measures to perpetrate their schemes, the payments industry must use its full arsenal of tools and strategies to mitigate risk, and prioritize strengthening authentication.
To learn more about the status and direction of fraud and its prevention, PaymentsJournal sat down with Matt Herren, Director of Payments Strategy at CSI, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.
PaymentsJournalFocusing on Robust Authentication to Fight Fraud PaymentsJournal Focusing on Robust Authentication to Fight Fraud PaymentsJournal Fraud: a growing industry A 2020 Mercator consumer survey found fraud of all kinds, including bank, credit card, and lease/loan, increased by 10% from 2019, and this trend was corroborated by similar data from the FTC. The rapid shift to contactless and remote payments spurred by the COVID-19 pandemic is partially to blame, but the fact is that fraud has been rising steadily for years. “The sophistication of perpetrators outpacing institutional procedures, in my mind, is really the primary culprit,” said Herren.
Even more troubling is that “fraud as a service” has become an industry unto itself. Individual actors develop specialized skills such as data aggregation, social engineering, or security breaching, and offer those skills in the open market – almost like the various experts involved in a bank heist, but with better customer service. “We’re seeing the full-featured marketplaces take off,” warned Herren. “24/7 chat support, full warranty services with money bank guarantees, index search options by channels, geographic location, even specific institutions.” The organizational efficiency might almost be impressive if it wasn’t illegal, immoral, and robbing innocent people of their livelihoods.
Spear phishing, synthetic identity, and account takeover Spear phishing, a form of phishing that focuses on high-value fraud targets rather than casting a wide net, has seen a particularly significant uptick. According to Herren, fraudsters are “using ancillary data from other breaches” to flesh out their strategies – i.e. incorporating insurance data, medical data, and other third-party vendor information to craft highly personalized phishing attacks. The victims of spear phishing are often those working in corporate upper management who conduct large-scale B2B transactions.
Fraudsters are also creating “synthetic identities” which are fake profiles cobbled together from real data. For example, a synthetic identity might use a real social security number but with the wrong name. “Social security number[s were] never really intended to be used as a piece of identity identification,” noted Herren, even though many companies request SSNs as a prerequisite for creating or verifying an account. Often the primary targets are young children whose credit reports, if they exist, are not usually closely monitored. “You steal Warren Buffet’s credit information, he’s probably going to be notified almost immediately,” said Herren. “But you steal [a] six-year-old’s information, the chances of successfully using personal information for fraudulent ends is much higher.”
Increasingly, spear phishing and synthetic identity fraud have been used not just to access one facet of personal information, but to control all parts of the fraud victim’s account from the inside out. “We’re really seeing a distinct shift from the lower-hanging fruit of stolen static card information toward more full account takeover,” Herren explained.
Preventative measures and best practices Thankfully, there is technology is available that can make it much harder for cybercriminals to take advantage of private information. Armed with practical information, by following several simple steps coupled with the consultation of trusted partners such as CSI, you can establish serious roadblocks to fraudulent activity:
- Use EMV and Tokenization – This is one of the strongest methods for keeping card data protected. By moving away from static card information towards tokenization and cryptography, potential breaches will be less impactful and private information will be more secure.
- Test for Penetration – Testing security measures in a controlled environment is always preferable to waiting for a real attack to see if they work.
- Implement Fraud Recognition Training – People can be trained to be more mindful and cautious when sharing online information, not to click on third-party links in emails, and to recognize that most legitimate institutions will not request sensitive data by email in the way fraudsters do. Always call the real phone number of the institution to check.
- Vary Passwords – Make it a consistent practice to use different passwords for every account and change them regularly.
- Don’t Advertise Defenses – When banks post on their web sites about what kind of fraud defenses they use (such as blocking certain transaction types or regions), that information will be “scraped,” added to fraudsters’ profiles of potential targets, and used against them. Think of this as “Inverse Marketing.”
- Know That Criminals Are Persistent – If one channel for fraud is closed, fraudsters won’t suddenly decide to go straight and narrow; they just shift their energy elsewhere. Stay vigilant.
An ongoing project There are no two ways about it: fraud is rampant, and our account information is vulnerable. “We have to embrace the reality that says if we give information out that can be stolen and subsequently used for fraud, it will be,” emphasized Herren. “Accept that, because the trends have perpetually shown that that’s the case.” The problem won’t disappear overnight, but the good news is that there are experts who can help level the playing field.
CSI has been exploring additional preventative measures including enhancing device biometrics, consortium data, and botnet screening. If banks stay ahead of the curve by working with CSI to adopt the latest fraud prevention strategies, they could become the trusted source for account validation, and could be compensated for doing so. “A few years ago, Ross Anderson, a professor of security engineering at Cambridge, said something that really stuck with me,” Herren concluded. “‘If you solve for authentication, everything else is just accounting.’ I think that’s a phenomenal way of thinking about it.”
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As we move into the new year, payments experts and lay people alike are wondering, What developments deserve our attention, and which ones are simply fads? With a flurry of new technology, diverse payment options and services, and an ever-shifting market, zeroing in on the most crucial moves in the payments industry can be a daunting task.
To learn more about three key payment trends to watch in 2022, PaymentsJournal sat down with Vanni Parmeggiani, Director of Open Banking and Real-Time Payments at GoCardless, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.
Three Payment Trends to Watch in 2022Three Payment Trends to Watch in 2022Three Payment Trends to Watch in 2022 Three Payment Trends to Watch in 2022Three Payment Trends to Watch in 2022 Wallets become the “magnetic pole” for the consumer relationship Digital wallets are fast becoming the primary payment method and are on their way to surpass credit cards. Two major factors account for this shift: consumer preference and mobile commerce.
Super apps, including PayPal, Venmo, Apple, Google, Klarna, and Afterpay, offer rich shopping and marketing experiences that go beyond the traditional “pay now” model with basic rewards. “They allow you to trade crypto, they have a social element to them, and that’s all on top of payments where consumers can get all of these benefits and experiences directly on their apps,” said Parmeggiani. “Super appealing.”
Additionally, mobile commerce is becoming the preeminent channel for digital commerce, on track to overtake at-home web commerce in the U.S. and elsewhere. “Eight in ten consumers globally have already used contactless payments at the point of sale,” noted Parmeggiani.
BNPL credit steals the show from revolving credit These changes are indicative of a larger phenomenon around payments evolution, including the groundswell of Buy Now, Pay Later. “Buy Now, Pay Later innovators have really cracked the code on how to deliver credit in a digital retail world,” said Parmeggiani. The reasons are threefold: accessibility, control, and fees.
With a soft credit check or no check at all – even with more regulatory scrutiny on the way – BNPL paves the way for a wide swath of customers to access flexible payment options. For many of these BNPL converts, the payment method allows them to keep a handle on smaller transactions, enabling greater control of their finances. Not to mention, BNPL only comes with late payment fees, but no interest rates, and the majority of the cost is borne by the merchant.
“Now, one might ask, Does it make sense for merchants?” Parmeggiani questioned. “I think the answer so far has been a resounding yes.” Compared to cards, recent research shows a 20-30% increase in conversion rates, and a 30-50% increase in average transaction size.
And this is not just popular among younger buyers or those with low credit scores. “We are seeing reports of greater than 50% of the [U.S.] adult population having used [BNPL] at least once,” Grotta added. Moreover, although 87% of Gen Z and Millennial respondents would prefer a BNPL solution to credit cards, up to 70% of all Americans indicated a preference for BNPL.
‘Next-gen’ bank payments critical for wallets and merchants The tremendous growth of new payment methods such as digital wallets and BNPL dovetails with two major trends in payment efficiency and diversification: open banking and real-time push payments.
“Open banking is essentially the ability for permissioned third parties to access account data related to a bank account,” explained Parmeggiani. “Through open-banking APIs, third parties who are providing payment or risk services can make those services a lot more secure, less open to fraud, and increase the success rate of those payments by looking at the availability of funds.”
Real-time push payments are becoming key alternatives that operate alongside traditional payment rails like ACH (which is already made more robust and transparent through open banking). In addition to the benefits of real-time settlement and confirmation, real-time payments offer merchants payment irrevocability with limited chargeback risk because the merchants’ own refund and dispute policies govern the relationship.
Open banking and real-time push payments bring both convenience for consumers and incredible cost-effectiveness for merchants when compared to traditional card transactions. “The cost is on a fixed basis rather than ad valorem, [i.e. proportional to the value],” Parmeggiani clarified. “But other than the cost, we’re now able to offer bank payments in a way that is secure, instantaneous, and very, very user friendly.”
The takeaway With the rising stars of digital wallets, BNPL, and ‘next-gen’ bank payments, the future of payments might seem bright and clear. However, as Grotta noted, “We here in the U.S. are still a little bit attached to our cards.” One might ask, Are the promised benefits of new payment methods enough to draw in U.S. consumers?
“The entire ecosystem evolves to cater to consumer needs,” answered Parmeggiani. And in this case, when merchants offer improved experiences to their customers, they are also saving money by reinvesting former credit card interchange fees into their own personalized loyalty and reward programs.
Parmeggiani concluded: “We at GoCardless always work with our merchants to reinvest that pot of gold into experiences that are tailored to their success and the success of consumers on their websites and retail stores. That, for us, is really the key point to drive home.”
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Merchants today have never had more choices when it comes to routing their transactions. There is significant opportunity to optimize routing payments with options like Network Payment Tokens, PINless routing, and Real-time Account Updater – but how does a merchant know when to use which option? .
To learn more about how merchants can understand the trade-offs between transaction routing options and how that impacts their goals, PaymentsJournal sat down with Jason Harding, Principal Product Manager at Worldpay by FIS, and Don Apgar, Director of Merchant Services Advisory Practice at Mercator Advisory Group.
PaymentsJournalUnderstanding the Trade-Offs Between Transaction Routing OptionsPaymentsJournal Understanding the Trade-Offs Between Transaction Routing OptionsPaymentsJournal The many paths to payments optimization Before merchants can optimize payments, they need to establish their end goals. Much like when going on a road trip, knowing the destination is necessary to figure out the best route to get there. While the “destination” or end goal for Merchant A may be to increase conversion and achieve the highest approval rate, the destination for Merchant B could be to decrease fraud risk. Meanwhile, Merchant C might be aiming to lower costs.
Achieving optimization can look vastly different depending on a merchant’s specific goals. “Optimization is a funny word because it doesn’t mean anything by itself. You can optimize for risk. You can optimize for cost or conversion. But just optimizing doesn’t tell you what your end goal actually is, and the same is true for the term orchestration,” said Harding.
The trade-offs of transaction routing options There are also trade-offs to consider when prioritizing optimization goals. For example, a merchant focusing its efforts on preventing fraudulent transactions could simply stop taking payments. Without any transactions, no fraud could occur. “But [the] conversion rate is going to be 0%. So, the goal is, how do you find the balance of what’s most important to you?” Harding continued.
The answer to this question varies from merchant to merchant. Different merchants have their own comfort levels when it comes to acceptable risk level and conversion. Additionally, merchant goals are affected by external factors and may change over time.
“When you look at optimization and orchestration, part of the challenge is maintaining that balance. You may put an algorithm in place to start, but as you go into the holiday shopping season you may want to tweak that algorithm. Maybe you want to put a little more emphasis on conversion and a little less emphasis on cost as a sales driver,” noted Apgar.
Different approaches to routing transactions Once a merchant defines its business goals, it can plot its moves to optimize transaction routing. Of course, that is easier said than done. After all, explained Harding, “there have really never been more choices for [merchants] in terms of what they could be using, how they could be improving their transactions, [and] what different variables they can pull into their transactions.” Three choices that merchants can make when it comes to routing transactions are PINless Debit, Network Tokens, and Account Updater.
Merchants have historically leveraged PINless routing for cost optimization. Evidence suggests that there is potential for approval optimization when routing PINless over signature. Flexibility with multiple routing choices for a single transaction is not dependent on any one network.
“I can also make the decision of how do I format the transaction? Am I using a network payment token, also often referred to as an EMV token or a Visa or Mastercard token?” asked Harding. For companies looking to bolster the security of their transactions, the answer may be yes. Tokenization involves replacing cardholder data with surrogates of lower value. Merchants can route non-sensitive tokens as a representation of the card number, reducing the chances of data theft while still enabling payments to occur.
Another option is Account Updater, a card updater service that increases authorizations and customer retention. By automating card updates, merchants can boost their customer retention and acceptance rates while reducing friction in the customer experience.
Merchants do not need to face change alone While some merchants are eager to take a do-it-yourself attitude to payments optimization and data management, others do not have the capacity to do so. Fortunately, FIS offers a managed service with two approaches that can meet the needs of both types of merchants.
Merchants that want to be in control of their optimization journey still benefit from working with FIS. While FIS processes billions of transactions , individual merchants are limited to the smaller data set they have from their processed transactions. With enhanced visibility into a larger pool of data, merchants can make more informed decisions to optimize payments.
“If you want to DIY your approach and manage optimization yourself, that’s great. [FIS] can provide that bin level data to you. We can make that available so you can internalize that and make your own decisions,” advised Harding.
For merchants that are not ready to do the heavy lifting on their own, FIS offers additional support. “For the merchant that doesn’t have that capacity or doesn’t have that capacity right now and wants to get to it, it’s taking the managed solution approach of what are the best opportunities for a given transaction and what is the best routing option,” Harding added.
Addressing transaction failures head-on When the first transaction fails, what is your plan B? A transaction that declines for insufficient funds you may want to try again – but a declined card for “closed account” may require a different approach. How do you manage these scenarios, and decide what to retry, how many times to retry, and which tools to leverage on each attempt? Optimizing retry rules based on merchant data is an improvement. “Having a retry strategy and sticking to that can help you increase conversion, whereas it’s about the ultimate end sale and not necessarily your top-line approval rate,” said Harding. But to maximize the benefit you factor in the BIN (Issuer) and decline reason code.
“You can implement solutions like Account Updater to keep your credentials fresh. You can start using PINless debit. You can start using network payment tokens in aggregate, and you’ll see some value and benefit there. And then those who have the resources to dive into that bin level data–the issuer level data–can really look to maximize their benefits,” Harding concluded. The biggest question to solve for is when to use which – and how will that change over time? You can manage all of this yourself, or leverage partners like FIS who can help.
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Real-time payments have been the subject of extensive research over the past several years. New real-time payment options have emerged as consumer expectations and demand are driving real-time payment growth across multiple channels.
To learn more about the paradigm shift towards real-time payments and unpack how the NOW® Gateway from Fiserv can provide connections to a range of real-time payment capabilities, PaymentsJournal sat down with Tim Ruhe, Vice President of Real-Time Payments at Fiserv, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.
PaymentsJournalThe World Wants Real-Time Payments, And They Want Them NOWPaymentsJournal The World Wants Real-Time Payments, And They Want Them NOWPaymentsJournal Top priorities for financial institutions Financial institutions have been investing time, energy, and money into real-time payments for one all-encompassing reason: to meet customer expectations. Fiserv recently commissioned Javelin Strategy & Research to look at today’s real-time payments landscape. The research shows 75% of polled consumers feel it is important to receive payments and have access to funds instantly. This expectation is particularly strong among the youngest generations, with 90% of Gen Z respondents and 93% of Gen Y (Millennial) respondents highlighting real-time activity as essential.
There are plenty of reasons why consumers want faster payments, according to Ruhe. “It’s a social obligation, or it’s an urgent payment, or they don’t want to be late,” he said. “There are many, many ways that consumers want to be able to take advantage of this.” Moreover, according to Grotta, Mercator research forecasts that the rate of real-time payments growth is only going to speed up.
Beyond that, real-time payments have the potential to impact every type of payment interaction that financial institutions support today. “It’s going to touch how we transfer money between accounts, how we get paid, how we pay bills, how businesses pay each other, and might even affect how you buy goods and services from a merchant,” Ruhe explained. “Financial institutions are starting to think about that journey.”
What is driving real-time transformation As previously mentioned, customer expectations play a significant role in determining where FIs choose to make investments in their business offerings. Currently, consumers don’t want to put their lives on hold when payments aren’t processed over the weekend – they expect 24/7 service. For FIs, this is an opportunity to stand out from the pack. “You want to be able to differentiate yourself now, because over time, this will become table stakes,” said Ruhe, meaning real-time will soon be viewed as a baseline offering. “Then you will need to be at competitive parity.”
Additionally, real-time payments lead to deeper digital engagement. For example, early data has demonstrated that users of the Zelle® person-to-person payment service are more heavily engaged with their financial institution and exhibit greater loyalty than non-users. “Customers who use Zelle have higher balances, they have more product holdings, they are more profitable, and they don’t leave the financial institution as frequently,” Ruhe explained. And that is just in the P2P payments space. “What’s going to be that next application that really drives the adoption and use of faster and real-time payments?” Grotta wondered.
The network perspective and what comes next Both the RTP® Network from The Clearing House and the Zelle Network® are being adopted at a rapid clip. $34B was processed through RTP in Q3, which represents an 18% growth from Q2. Meanwhile, the Zelle Network processed 828M transactions totaling $226B over the first six months of 2021. “We’re seeing a lot of uses of Zelle, and RTP works on all bank accounts for any financial institution that support RTP, so that opens up a whole other set of capabilities and use cases,” Ruhe noted. “And we are starting to see them interoperate, so that’s creating a lot of innovation as well.”
One of the next big steps in the real-time payments industry will be the addition of the Federal Reserve’s FedNow network, which should launch late next year. However, there is still an open question of whether or not FedNow and RTP will have interoperability issues. “It’s not a new thing for us to have more than one payment network,” Ruhe clarified. “There’s a couple different ACH networks and multiple card networks. This is kind of how we roll here in the U.S.” The intention behind this diversity is not to cause complications, but rather to drive ubiquity. Competition spurs continuous innovation, and with cross-border payments enablement as one of the next big hurdles to cross, who knows if that will be on an existing or future network?
Bringing everything together with the NOW Gateway The NOW Network from Fiserv, which was introduced in 2014, enables financial institutions to deploy multiple payments use cases across multiple networks with one single connection. NOW is an acronym for “Network for Our World,” and Fiserv recently introduced the NOW Gateway: RTP Network, which can receive credit transfers from RTP. “NOW Gateway simplifies the task of implementing real-time payments,” explained Ruhe.
Support of RTP is applicable to plenty of use cases, including paying gig economy and temp workers, plus any emergency payroll situations. If one of the nearly 1,300 financial institutions that have implemented Zelle decides they want to support RTP, Fiserv can add that capability simply through the NOW Gateway. Furthermore, Fiserv can bring real-time capability to electronic transactions that currently take two or three days. “In summary, NOW future proofs the implementation of real-time payments at financial institutions,” Ruhe concluded.
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Over the past decade, financial institutions have undertaken various efforts to modernize their payments systems. Now with the emergence of COVID-19, the world is witnessing an accelerated journey toward digital transformation in the payments ecosystem.
In an interview with PaymentsJournal at the 2021 Money20/20 event, Soumya Johar, Director of Strategic Alliances & Partnerships at Opus Consulting Solutions, spoke about the need for financial institutions to accelerate payments digital transformation to drive success in the modern world.
PaymentsJournalBanking on Modernization: Why Payments Digital Transformation is the Key to SuccessPaymentsJournal Banking on Modernization: Why Payments Digital Transformation is the Key to SuccessPaymentsJournal The key drivers behind legacy payment system modernization While many organizations began their modernization efforts prior to 2020, the pandemic made digital transformation an instant priority for all financial institutions. “They had to accelerate their digital transformation journey of legacy applications–and work towards making it more nimble, data-centric, customer-focused, and all of those good things,” said Johar.
Along with COVID-19, the limitations of legacy infrastructure, complex regulatory requirements, highly competitive marketplaces, and shifting consumer expectations are among the driving forces behind these efforts. Monolithic legacy cores do not provide the level of functionality needed to give customers the frictionless omnichannel digital experiences they have come to expect. These systems also struggle to keep up with emerging trends such as real-time payments. In other words, dated legacy applications simply cannot keep up with the needs of the modern world.
“Coming out of the pandemic, one of the lessons that most people learned was that legacy applications need to be transformed so that they can move quickly and nimbly to adapt to all of those changing trends,” said Johar.
To achieve scalability and drive innovation, financial institutions should take a holistic approach to payments modernization that covers the end-to-end payments value chain. Vendor integration via cloud-based architecture will enable financial institutions to build orchestrated payment capabilities that will further strengthen their modernization efforts.
Modernization is about the journey, not the destination Organizations that once dragged their feet when it came to prioritizing digital transformation quickly realized the error of their ways when the pandemic emerged. “To keep up with the times, there is a pressing need for organizations to modernize legacy applications and architecture to deliver what the clients are looking for,” said Johar.
While payments used to be a discrete activity that happened in the background of a transaction, that is no longer the case. Now, payments are integrated into the entire end-to-end customer journey. As a result, they should be contextual and seamlessly embedded into the consumer lifecycle.
Modernization efforts can also address the negative elements of a digital world by keeping customer data secure and preventing fraud. “That is also one of the reasons companies have to embark on that modernization journey–to stay ahead of all those negative elements,” explained Johar.
Johar’s use of the word ‘journey’ is deliberate. Organizations that approach modernization as a customer-centric journey rather than a rigid end destination will likely be successful in adding value to customers and driving revenue. “I think what one needs to stay cognizant of is how to keep their applications and architecture nimble, innovative, and evolving to meet those needs. It’s not a destination that anyone is working toward, but rather a journey,” said Johar.
The challenges of digital transformation Of course, modernization is easier said than done. According to Johar, there are two top challenges related to digital transformation: legacy applications and change management.
While internal teams typically have a deep understanding of the legacy systems already in place at their specific organization, they tend to lack hands-on knowledge of the modern technology and best practices needed to successfully digitize. On the other hand, a new team brought in from the outside with working knowledge of modern technology may lack the institutional knowledge of the organization’s specific legacy architecture, business problems, and areas for improvement. As a result, they fail to deliver, and the momentum of digital transformation is lost before it is even built.
The second challenge is change management. Technology modernization requires training during and after the process to ensure full adoption. If not, organizations continue to make investments without seeing any returns.
“This change management also has to be robust, and I think those are the areas where companies like Opus come in. Being in the payment space, we do understand legacy applications and infrastructure very well. We also understand modern applications and infrastructure and, having helped many clients, we have developed best practices. We understand where those pitfalls are, where those risks are, [and] how to mitigate those risks,” explained Johar.
Are you prepared for the future of payments? Given the rapid pace at which organizations are implementing payments modernization efforts, it is safe to say that the payments ecosystem is undergoing an existential shift. This is only the beginning of what promises to be a massive technological disruption.
Knowing this, it is imperative for organizations to push forward with legacy modernization and future-proofed payments systems. Building scalable solutions in the cloud and integrating futuristic technologies will pave the path to make continuous enhancements and meet increasing customer expectations.
Ultimately, a secure, reliable, and interoperable real-time payments system powered by the cloud, mobile technologies, and AI, will take center stage in the digital payments landscape of the future. Organizations need to keep “in mind how to be lightweight and nimble and stay relevant to the customer needs so that as it shifts, they can easily make changes and stay aligned with the customers,” concluded Johar.
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Buy Now, Pay Later is making headlines as a great option for consumers looking to make purchases without breaking the bank. For financial institutions and others in the payments industry, not entering the competitive BNPL space is no longer an option.
To learn more about how financial services organizations can become more involved in Buy Now, Pay Later lending, PaymentsJournal sat down with Ratish Gopal, VP of Strategy and Business Development at Fiserv, and Brian Riley, Director of Credit Advisory Service at Mercator Advisory Group.
PaymentsJournalThe Juggernaut Continues: Why Banks Should Make Moves into BNPLPaymentsJournal The Juggernaut Continues: Why Banks Should Make Moves into BNPLPaymentsJournal Now trending: Buy Now, Pay Later Buy Now, Pay Later (BNPL) is a short-term installment lending option that allows customers to buy items at retailers without paying the entire amount up front. Instead, they pay it off in a set number of installment payments over time. Retail installment lending is not a new concept. In fact, installment lending was pioneered by companies in the 1970s and 1980s. However, it is now experiencing a resurgence in the form of Buy Now, Pay Later.
“Instead of empowering a customer with a credit card, we are empowering merchants with the ability to do financing at the point of sale. Now, we expect rapid growth in the United States as this starts to form and mature,” said Riley. While fintech startups once dominated BNPL, that is no longer the case. There are many players today, such as banks and card issuers, that offer options appealing to merchants and consumers alike.
According to Gopal, the trend toward BNPL “reflects the fundamental way consumers view things and their willingness to pay at a transactional level.” He used the example of cable television to underscore his point. “Once upon a time, consumers paid $200 per month for cable TV to have access to as many channels as they want. But with the advent of streamers, consumers became accustomed to only paying for what they watch,” he said.
Consumers are experiencing a similar natural shift to BNPL because, like cable television, it is at the case-by-case, transactional level. Instead of being able to make as many transactions as possible within a set credit limit, consumers can pick and choose which transactions they want to obtain financing for.
It is not only the consumers who are benefiting. BNPL also allows merchants to offer a lending product without relying on bank-grade lending where banks have strict regulatory requirements. “One of the reasons merchants have really loved Buy Now, Pay Later lending is that it’s pretty easy to get your customer through the authorization process and get them approved for a loan,” added Riley.
Tech-savvy partners help banks optimize BNPL Although fintechs blazed the path to BNPL, financial institutions and their card issuers and enablers have shown that banking technology can quickly get them up to speed. “For example, Fiserv, one of the largest fintech players, offers issuers a product in the BNPL space called ILLOC–installment loan on credit,” said Gopal. “From a feature perspective, they are getting that same transactional-level paying installment feature with all the heavy lifting done by someone like Fiserv.”
Financial organizations offering BNPL can work with their processing partners to optimize their offerings. This makes it possible for consumers to utilize the BNPL option offered by their existing FI instead of having to build a new relationship with another provider.
“What makes this product even more compelling to the issuers is that this BNPL product from Fiserv comes fully packaged with the Fiserv digital product called CardHub. So your user interface, user experience, and [all] of those good aspects are fully taken care of. If you’re an issuer, you know you need to be in this space. You [can] leverage your partners and someone like Fiserv is ready to serve you as we speak,” Gopal added.
What could slow down this juggernaut? With rapid expansion since 2019, BNPL is without a doubt a lending juggernaut. However, there are factors that could impede or slow down some of its growth. “There are some external factors to consider. Specifically, you have the consumer confidence, inflation, unemployment, and, of course, the big one: regulation,” noted Gopal.
While BNPL has gone largely unregulated in the United States, regulators have begun to take notice of the area. Most recently, the Consumer Financial Protection Bureau (CFPB) issued a series of orders to five BNPL providers: Affirm, Afterpay, Klarna, PayPal, and Zip. It intends to collect information on the risks and benefits of this fast-growing financing option. In November 2021, The Federal Reserve bank of Kansas City published an article covering how regulations are creeping into BNPL. And in early 2020, the California Department of Financial Protection settled lawsuits with traditional BNPL players that resulted in $2 million in fee refunds to California consumers.
“The fact remains that as the industry increases by leaps and bounds, the regulators are going to start taking notice. And from an issuer perspective or from a traditional financial institution perspective, the way I would look at this is regulations [are] something that these financial institutions play with on a daily basis,” said Gopal.
Of course, banking is already an incredibly regulated space. As a result, banks and financial institutions are very accustomed to regulatory scrutiny and compliance requirements. If BNPL becomes more regulated, it will become a matter of pivoting to meet those new requirements.
Additionally, the demand for BNPL still presents a great opportunity for banks. “There is a lot to consider as the economy starts to shift, so there could be a softening in that,” warned Riley. “But one thing we have seen is that there is a preference for consumer loans, and that opens up a wide range of opportunities for lenders to get into. And maybe they haven’t focused on that, but integrating [BNPL] directly into their card platform creates a long-term opportunity.”
The takeaway Buy Now, Pay Later has seen tremendous growth in recent years. While it was once dominated by fintech players, banks and other traditional financial services organizations now have the opportunity to get involved in the space–and it is an opportunity they cannot ignore.
But that does not mean they have to create their own in-house BNPL lending product. Rather, they can collaborate with an experienced partner that already has the tools needed to thrive in an increasingly competitive space. “Partner now with your processor or issuer partner, like Fiserv, and start using some of their products,” Gopal advised.
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When it comes to the modern payments ecosystem, speed and security are topmost priorities. The automated clearing house (ACH), proven to be a reliable provider of fast and secure payments, has seen steady growth over the last several years, with a 10% compound annual growth rate (CAGR) between 2017-2020 and even larger gains projected through the end of 2021.
However, increases in transaction volume bring commensurate increases in fraud and the mitigation of fraud risks, undermining the benefits of ACH with lengthy remediation processes. One way to nip fraud risk in the bud is with a strong account validation system, but it must continue to allow for seamless and fast payments.
To learn more about how to optimize account validation to mitigate fraud and drive faster payments, PaymentsJournal sat down with Nirmal Kumar, CTO and Head of Product at Aliaswire, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.
PaymentsJournalHow ACH Account Validation Reduces Fraud and Facilitates Faster PaymentsPaymentsJournal How ACH Account Validation Reduces Fraud and Facilitates Faster PaymentsPaymentsJournal ACH spiked with COVID-19 ACH is not a new system – its roots trace back to the late 1960s and early 1970s – but Same Day ACH was only introduced in 2016. When the COVID-19 pandemic drove payments into the digital space, the ACH Network was already in place and ready to accommodate widespread changes in the payments ecosystem.
“There was a tremendous amount of volume pumped through the ACH as a result of the CARES Act and unemployment benefits,” Grotta pointed out. “The pandemic also put a lot of pressure on businesses to stop processing checks, just because it became such a burden, particularly in the B2B and B2C channels.”
Everybody from financial institutions to individual consumers desired greater efficiencies through electronic transactions. “It’s a behavior shift,” said Kumar. “It’s not going to go away.” Some of the growth has come from new digital tools for P2P payments such as Venmo and Zelle, which appear to be different payment mechanisms but which in fact use ACH under the hood.
Kumar highlighted how the ACH network handled a record high of over 26 billion payments in 2020, which translates to about 81 payments per person in the U.S. “That’s how efficient the system needs to be,” said Kumar. “If there’s any friction in the system, that’s how impactful it’ll be across the board.”
The vital role of account validation As ACH volume grows, it is only logical that fraud, errors, and return rates would grow as well. Anybody with the right credentials can enter an account number, and something as banal as a “fat finger error” can disrupt the flow of payments and introduce friction.
“The entire onus of entering accurate account information is on the payer,” Kumar explained. “Inaccurate information causes what I call the ‘pipe freeze,’ and eventually the [pipes] thaw, the payment is kicked back, and the fraud is realized, but that almost takes four or five days to happen. That slows down the entire system.”
NACHA introduced a new countermeasure rule that went into effect on March 21, 2021, requiring account validation for the first use of any bank account that goes into the ACH network. Still, the U.S. banking system is fragmented across many different banks and accounts, and there is not yet a single unified account validation scheme for everyone to follow. “If account validation is done the right way, it can increase both volume and user experience,” said Kumar.
For years, people have used prenotes and microdeposits (negligibly small transactions to verify account information) as an account validation method, but that process takes time and runs counter to the whole concept of fast payments. “In this day and age of faster payments, that is just not viable,” suggested Kumar. Some sort of account validation is necessary to give users the confidence to use ACH, because if the system is bogged down in errors, people will turn to payment cards instead, which will increase costs for FIs and other account originators.
What strong & modern account validation looks like Any strong account validation process will provide cost efficiency, reduce drop-offs, and lower risk of fraud. However, historical account validation tools such as prenotes and microdeposits can take 5-7 business days to process, and account aggregators add risk to the equation by sending customer information to a third party. How does one modernize this essential process?
According to Kumar, account validation in the U.S. requires a multi-pronged approach to meet the needs of a fragmented system. “It really has to have a platform approach where you can mix and match different tools to provide the best experience as far as account validation is concerned,” he said. Most importantly, money needs to be able to move at high speed, particularly as open banking finds its footing in the U.S. “As banking becomes more democratized, I think these tools are very important and essential,” Kumar continued.
Account validation must confirm four main things:
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Account status
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Payment history, particularly NSF or chargeback history
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Ownership, and matching ownership to the payment originator
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Consistency of Personally Identifiable Information (PII) including name, address, phone number, email, etc.
Overall, account validation must be built for real-time payments with a sophisticated understanding of how fraud is conducted, and it must be done cost-effectively. “ACH is the most cost-effective way of moving money,” Kumar explained. “But as soon as you add account validation and start using third parties, that cost jumps almost 5-6 times.” A platform approach can minimize that financial burden by proactively using existing data, multiple providers, and relevant payment history. “That kind of cost optimization can only be brought in by a platform approach and not by a single source,” Kumar concluded.
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The cryptocurrency market has grown tremendously over the past eighteen months, and mainstream use cases associated with digital currencies continue to emerge. With the surging interest in crypto comes pertinent questions about what specifically is driving the growth, who is using the technology and for what purposes, how regulatory efforts will affect the market, and more.
To learn more about the future of payments and how traditional and digital payment ecosystems will co-exist in the future, PaymentsJournal sat down with Nabil Manji, Senior Vice President, Head of Crypto and Emerging Business at Worldpay from FIS, and Tim Sloane, VP of Payments of Innovation at Mercator Advisory Group.
PaymentsJournalCrypto: Past, Present, and FuturePaymentsJournal Crypto: Past, Present, and FuturePaymentsJournal Crypto users and reasons for expansion According to Mercator research, just under 20% of American adults hold cryptocurrency. There is a stark division by age bracket: 34% of respondents ages 18-44 own crypto, compared to only 10% of those ages 44-65 and 1% of those ages 65+. And the market is only growing. The current market capitalization of cryptocurrency is nearly $3T, up from a few hundred billion dollars just 12-18 months ago. Understanding who finds crypto appealing will be crucial for financial institutions, companies, and merchants looking to enter the crypto space.
Much has changed in the crypto space over the past few years. According to Manji, there are three broad drivers of crypto growth:
- Continued technological innovation – Whereas crypto was primarily a speculative investment even just a few years ago, use cases of blockchain-based technology are broadening to include examples such as P2P transactions and non-fungible tokens (NFTs).
- Increased legitimacy through regulation – People are becoming more comfortable using crypto for payment or exchanges due to regulations that didn’t exist a few years ago, particularly in Europe, with some additional cases in the U.S. and Asia-Pacific region.
- Governments exploring CBDCs – Central Bank Digital Currencies and other alternative payments and rails have recently been a significant investment target for governments from the UK, France, Nigeria, Singapore, China, and the UAE, affecting the business and consumer market.
Merchants and cryptocurrencies As of November 2021, there are 79 million blockchain wallets in use globally. Merchants are accordingly beginning to accept more crypto at point-of-sale. Just as with the larger ecosystem, Manji noted three factors contributing to merchant interest:
- Enormous market capitalization – Merchants want to tap into the value of crypto and to sell their goods and services, particularly high-ticket items like air travel and luxury goods, which consumers might be willing to explore new payment methods to access.
- Payment agnosticism – Merchants already support all kinds of payment methods, and as a general rule, do not want payment method to be the reason a customer can’t complete a purchase.
- Expensive credit card fees – Moving business strategy away from the hands of card suppliers will be cheaper for merchants and potentially free them from the hassles of disputes and chargebacks, plus prepare businesses for wider supply chain finance options.
Conversely, merchants may feel some trepidation about integrating cryptocurrency into their business. There are still many unanswered questions. “If I have crypto on my balance sheet, how do I account for that?” Manji asked by way of example. “What are the tax implications of holding and transacting cryptocurrency? Are there any regulatory considerations that I need to be aware of?”
Adding another layer, the adoption of CBDCs are a “when, not if” question, and when governments introduce central digital bank currency, it will be legal tender by definition and its acceptance will be mandated. Merchants risk falling behind if they are unprepared to make these changes in advance. As the details are clarified at both a governmental and industry level, Manji emphasized that both merchants and payments companies like FIS must lean in and bolster their understanding of the challenges and opportunities involved with crypto.
Crypto growing pains The world is going through growing pains when it comes to embracing crypto. In many ways, the landscape is quite fragmented at the moment. Besides the fact that even blockchains with the same basic function can look different, blockchain-based crypto can also be directed either towards the account/payment infrastructure or towards investment-side NFTs, which are very different animals from one another. “Regulators are broken up into these very narrow silos,” said Sloane. “I think they’re really having trouble getting their heads around this broad spectrum of capabilities.”
At least in the U.S., there seems to be an aimlessness when it comes to classifying crypto; “It’s neither fish nor fowl,” Sloane quipped. To understand the problem, you might invoke the old cliché of not “thinking outside the box” or “trying to teach an old dog new tricks.” Manji explained: “The feeling is that we’re trying to take a set of regulatory institutions and laws that were designed in a different time and with a different set of aims and goals applied to different technologies.” Trying to apply those protocols to new use cases of this sort doesn’t make sense. “It’ll be interesting to see how different governments seek to harmonize existing frameworks and laws,” Manji continued, “or whether they will start from a clean sheet of paper and do something completely new. I think that’ll drive a lot of what the innovation, use cases, and products and services will look like.”
Regulation for crypto and blockchain At the moment, blockchain as a technology is largely unregulated, much like the internet. “It’s more about what applications are being built,” Manji clarified. “Which of those should we regulate, and why or why not?” The key is to manage decentralized blockchain-based applications without stifling innovation. Some of the core blockchain-based cryptocurrency services that used to be unregulated, such as crypto exchanges, wallets, and qualified custodians, are all now regulated in most jurisdictions. The expectations around regulation and security for these services – including consumer requirements, anti-money laundering, sanctions screening, and suspicious activity reporting – may soon look the same as they do for similar pre-existing financial offerings.
Regulatory requirements may help ease skepticism and represent a significant next step in the development of a legitimate crypto ecosystem. According to Manji, the narrative around crypto was quite different even just two years ago, with many viewing crypto merely as a convenient vehicle for criminal activity. However, jurisdictional entities like the Financial Action Task Force (FATF) and Interpol have leaned into the technology and realized that with the correct regulation, it can greatly benefit institutions and governments in actually preventing those same kinds of crimes. “Chainalysis, Elliptic, CipherTrace, and others have helped governments bust longstanding crime and trafficking rings, and that wouldn’t have been possible in the traditional kind of fiat and financial services ecosystem,” explained Manji.
The future of cryptocurrency Given the rapid clip at which crypto and blockchain have exploded over the last five years, who knows what the next five years will bring? Three prominent trends are expected from an FIS perspective:
- Continued blockchain expansion – NFTs, decentralized finance, CBDCs, stablecoins, and more applications will likely continue to grow, and within 3-5 years will see widespread consumer and business adoption.
- Interoperability – Significant value in blockchain will drive innovation on both the application and protocol layer front, allowing different parties to move between different chains and assets, particularly for G20 economies to enable cross-border CBDC transactions.
- Continued digitization of life – Concepts like the metaverse and digital identity, accelerated by COVID, are inspiring the world to transcend using existing technologies and financial services, and instead asking whether blockchain can create new industries in and of themselves.
Although the world of payments – and the world in general – seems to always be advancing, one critical and under-asked question is about progress for progress’ sake: Some might maintain that traditional currency works perfectly fine, and while blockchain technology is cool, it is a solution in search of a problem. Both Manji and Sloane disagree with that contention.
Sloane pointed out a couple of practical use cases. “Crypto is a great opportunity to apply digital identity,” he said. “My hope is that we see a major shift in how we execute all of those standard regulations around KYC to embrace the new role of identity on the internet.” Sloane continued to discuss the benefits to efficient account validation: “Payments today have been bolted onto accounts. You can’t make a payment without knowing the balance of the account… blockchain and crypto eliminates that because the account and the crypto are one and the same.”
Additionally, U.S. payment rails are not as efficient as they might be, according to Manji. Conversion rates and consumer satisfaction with their banking providers are both lower than expected. Legacy infrastructure, antiquated or clunky regulations, and slow manual processes can all interrupt efficient, timely, cost-effective payments. There is clearly room for improvement. “Is blockchain going to solve all those problems?” concluded Manji. “Absolutely not. But is there an opportunity for blockchain to come in and be a new set of infrastructure or technology layer to improve some of those things and benefit everybody in the ecosystem? Absolutely.”
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Faster payments are the future of payments, full stop. The world operates at light-speed these days, and convenience and efficiency always win the day. Real-time payments (RTP) have seen steady growth since the technology was first introduced, and while RTP has seemed poised to explode for several years, it has not yet seen widespread adoption. Is the promise of faster payments finally coming to fruition?
To learn more about how collaboration across all industry stakeholders will be key to the success and implementation of real-time payments, PaymentsJournal sat down with Will Graylin, Founder and CEO of OV Loop; Peter Davey, Senior Vice President and Head of Product Innovation at The Clearing House (TCH); and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group.
PaymentsJournalHow Innovation and Collaboration Support Real-Time PaymentsPaymentsJournal How Innovation and Collaboration Support Real-Time PaymentsPaymentsJournal Real-time payments for a real-time economy According to a recent PaymentsJournal article, people have very high expectations for real-time payments:
- 80% of merchants, retail banks, and billing organizations favor real-time payments and open banking.
- 84% of regional merchants, retail banks, and billing organizations anticipate customer service improvements from real-time payments.
- 92% of merchants and 82% of billing organizations with revenues of at least $5 billion expect to see customer service improvements as a result of real-time payments.
“The stats really highlight that we’ve already moved into a real-time economy,” said Davey. “The reality around all of this is that folks desire real time-attributes… to know where everything stands at any one point in time.”
When real-time systems are built on top of legacy rails like Zelle, users benefit from a response mechanism that gives people transaction status. According to Davey, many people call their banks simply to ensure that somebody received their payments. RTP takes the pressure off of call centers and alleviates “pay and pray,” where users cross their fingers and hope their money went to the right place. “The assured delivery and response capabilities that have been built into a lot of the real-time payment networks really do allow for you to do customer self-service,” Davey continued. “This creates a much more delightful end-user experience.”
Open banking has already started to drive faster payments in Europe, according to Sloane. “As the use cases were defined, adoption followed in a really big way,” he said, adding that between PayIt, TrueLayer, and a new solution called Kevin., “there’s a lot of innovation going on.” Foundationally, payment rails are required to bring RTP to life, and TCH has provided the first rail capabilities of this kind in the U.S. Simultaneously, OV Loop can run the user interface and develop APIs to connect payments to people and businesses all over. “The possibilities are tremendous for RTP to take off,” said Graylin.
Why the U.S. is behind the curve… Considering the success real-time payments have found in Europe, it begs the question, Why has the U.S. – an innovator in so many other spaces – lagged in incorporating RTP? One reason is simply that change takes time. “The reality of any situation when you have new technology coming into play,” explained Davey, “is that it takes a while for people to actually build out their capabilities to leverage the new technology.” The majority of the five to six thousand financial institutions in the U.S. are over a hundred years old, which means a lot of legacy investments have been made, and many of those FIs are also reliant on their core providers to provide new technological capabilities.
Another reason is that Europe operates under PSD2 mandates, which codify open-banking regulations in the EU, whereas U.S. RTP solutions are commercially driven. “Financial institutions, merchants, the networks—everybody has some solution that has some commercial implications to them relative to where they make revenue and where they have to expend costs,” Sloane pointed out.
However, bill pay represents a great opportunity for the U.S. to apply real-time payments in a way that is beneficial to everyone. “Despite the lack of a mandate, it will make commercial sense,” Sloane explained. “How you then expand that into more traditional user payments becomes a bit of a challenge.”
…and how the U.S. can catch up That is where The Clearing House and OV Loop come into play. The TCH real-time payments network is just over four years old, and Davey summarized: “We’ve got over 62% of the entire U.S. deposit base now eligible to receive an RTP transaction… we’ve got at least eight of the top ten banks that are originating payments every single day on the network… and we’re growing by at least 10% per month in terms of volume.”
Meanwhile, OV Loop focuses on creating the best possible user experience by creating applications that enhance the bill pay experience with interactive bills and offers that merchants/billers can easily send out and field questions as they arise. “That kind of messaging could be sent across many different kinds of channels,” said Graylin, perhaps by enabling a “super wallet” that sends tokenized payments through RTP rails, or even by email or text.
“It’s really about creating an omnipresent experience,” Davey clarified. “I don’t want to necessarily be strangleheld by a traditional online banking experience—I want to be able to pay bills and interact with my finances wherever I want to be,” whether from the car, browser, or mobile phone. Other fintechs, such as Jack Henry, Fiserv, and FIS, are continuing to drive the market forward. “The ones who will succeed in this industry are the ones who realize that open [banking] is actually a benefit for them,” added Davey. “I’d say 2022 will be the year of real-time payments in the U.S.”
The future of RTP innovation The U.S. has a complex ecosystem of billers, payers, and FIs in the middle, all of whom will need to experience tangible benefits in order to fully embrace real-time payments. Organizations like The Clearing House are actively working to make real-time payments look attractive. TCH is currently driving progress with Akoya, a data access network co-owned by TCH, through which they can securely access and share financial data. TCH will also offer document services, allowing digital documents to be attached to any transaction, which will help with billing, invoicing, and data remittance.
“Gone are the days of having to format things into an 80-byte file and then having them decoded by your financial institution,” said Davey. “Now, I can actually directly exchange a PDF or XML file with my partner as part of the payment record, therefore alleviating the financial institution from having to do all of that complexity and work.”
Innovators like OV Loop are more focused on the “above-the-glass” experience that can then be paired with “below-the-glass” APIs and payment rails from companies like TCH Akoya. “It’s really about building that front-end experience for consumers on one side, but also the back-end experience that makes it easier for billers to create these interactive offers,” said Graylin.
Davey paraphrased his TCH colleague Steve Ledford: “What we do at The Clearing House – we’re all plumbers, which means that we’re the ones laying all the pipes so that things can move from place to place.” Sloane added that by that same metaphor, OV Loop manufactures the faucets, sinks, and dishwashers, aka the user interface.
Above all, it is vital that everybody can leverage the infrastructure of real-time payments. The disparate payments ecosystem can benefit across the board from a unified solution to systemic issues. “Hopefully [we will] be able to drive standardization in a much faster way than having to do this one-off over and over again across multiple financial institutions,” concluded Davey. “The more that we can do as a network that enables all parties to succeed, the better off we’re going to be.”
This upcoming year, we at PaymentsJournal are excited to see the promises of real time payments come to fruition. Hopefully, we will look back at 2022 as a watershed year for the industry with respect to adoption, innovation and collaboration. Happy New Year!
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The payments industry is constantly changing, and those changes require merchants and independent software vendors (ISVs) to prepare for whatever comes next. One current trend is towards increased digitalization, which brings a number of questions about data security, legacy systems vs. the cloud, and general readiness for the next big leap in technology or the market.
To learn more about how Agile Financial Systems (AFS) continuously stays ahead of the curve with innovation and technology to keep its customers at the cutting edge of payments, PaymentsJournal sat down with Paul Huff, CTO at AFS, and Don Apgar, Director of Merchant Services Advisory Practice at Mercator Advisory Group.
PaymentsJournalAgility and Adaptability: How AFS Plans for the Future, TodayPaymentsJournal Agility and Adaptability: How AFS Plans for the Future, TodayPaymentsJournal Strong foundation of security According to Mercator Advisory Group’s 2021 Small Business PaymentsInsights, 56% of small businesses agree that keeping up with new technology is critical to company success, but 45% also worry about security issues surrounding their technology investments. With an increase in news stories about corporate data breaches, security is a foundational concern for anybody dealing with sensitive data.
“One of the keys for merchants is who they work with, who they partner with, and who is taking care of their payment data,” said Huff. Even as new technological innovations hit the market, cybercriminals continue attempting to access valuable payments data. Fortunately, AFS has security taken care of, whether for an ISV integration or for users leveraging their front-end gateway. “Hackers have gotten so elegant… that you really have to start at the beginning and say, What’s the secure framework?” said Apgar.
Early software developers may have designed the features and functionality first, and then dealt with security last, but for AFS and the APEX product suite, security is integrated from the very start. “That’s a huge paradigm shift,” Apgar noted. Companies can boast top-level of security by limiting high-risk touch points and maintaining PCI compliance, particularly by enlisting the expertise of AFS, which has already done the hard work with its APEX product suite.
Strategic partnerships and technology tools To that end, the APEX platform from AFS offers its own payment gateway, and AFS has partnered with Microsoft to make that platform cloud native. “We believe in standing on the shoulders of giants,” Huff remarked about the Microsoft partnership. “We then take that a step further by adding our own additional security controls.” These preset offerings from AFS can be a huge relief to SMBs. “Small businesses, and especially ISVs, want payment security to be turnkey,” Apgar pointed out. “Whatever solution they deploy for their business, they just want to know that the security is already built in.”
One specific feature of AFS’ payment solution is total data tokenization and no storage of Primary Account Number (PAN) data. Unlike encryption, which is protected but decodable if a criminal acquires the encryption key, tokenization is irreversible: there is no way to reverse-engineer card data out of a token. “It’s in a tight Fort Knox behind the scenes,” Huff explained. “We make it so all the customers have to do is a simple integration with us, and we take care of everything else from the security point.” AFS also uses tokenization to authenticate and secure its API and payment gateway so there is no need to store username and password information. By leveraging Microsoft to handle identity storage, AFS effectively manages a key piece of digital security.
The impact of digitalization The steady migration of business operations into the digital space has had many different effects on the payments ecosystem. Mercator research shows that 54% of small businesses see cloud computing as a useful business tool. Whereas once upon a time, only billion-dollar corporations had access to the latest technology and larger markets, the cloud now represents a democratization of those resources. The trick is to leverage the technology properly.
If companies have a glut of legacy systems that weren’t built for cloud technologies, they won’t be able to fully enjoy the latest advancements. “The cloud has a lot of great benefits, like immediate scalability and reliability and security,” noted Huff. “But your applications and technology stack have to be built in a way that is able to utilize those. You can move legacy applications to the cloud, but unfortunately those applications are simply being hosted on someone else’s server, and not really taking advantage.”
This is why the AFS APEX platform is built to be cloud native from the ground up. “Since everything is more digital, you have to have truly global reach,” said Huff. “That means you also have to have global scale. There are no physical restrictions… so you have to be ready to handle that scale, and always be online.” The more customers and time zones companies serve, the more opportunities for customer service interactions, and companies must be ready to handle those situations whenever they arise.
Putting the “agile” in Agile Financial Systems Although nobody can predict the future with complete accuracy, AFS is enabling companies to future-proof their operations by offering agile and adaptable product suites. The world five years from now will probably look quite different from today in many ways, and Mercator’s 2022 Merchant Services Outlook advises companies to be prepared to pivot. “One thing we learned from the pandemic is that the landscape changes fast,” said Apgar. “You never know what’s coming next, and you have to have an extensive architecture that’s able to adapt to new products, new services, new ways the customer wants to interact.”
The word “agile” in the name Agile Financial Systems is no coincidence: “Agile is at the core of our corporate culture,” Huff concluded. “It requires the entire organization, from operations, to business development, to products, to customer support. Everybody uses these systems; everybody interacts with the customer.” The common corporate goal of agility leads AFS to continuously monitor its software and regularly deploy software updates to address any potential security vulnerabilities.
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E-commerce was already booming before COVID-19, but the pandemic spurred an unprecedented acceleration of growth. Much has been made of the fact that over the last twelve months, e-commerce saw the equivalent of five years of sales. The shift towards online shopping has forced retailers to fight for customer loyalty by offering better and more diverse incentives for consumers.
Part of what customers expect from a seamless shopping experience is the easy facilitation of refunds and returns. Another effect of the pandemic was the mass cancellation of plans and events in the entertainment and travel industries. These cancellations revealed pinch points in business refund operations that led to negative customer experiences.
Poor payout and refund practices cost customer loyalty, but open banking may offer a solution. To learn more about how open banking improves customer experience and enables merchants to offer faster refunds, PaymentsJournal sat down with Murtaza Bootwala, Head of Product at TrueLayer, and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group.
PaymentsJournalOpen Banking: Enabling Instant Refunds and Driving Customer LoyaltyPaymentsJournal Open Banking: Enabling Instant Refunds and Driving Customer LoyaltyPaymentsJournal Customer experience transcends the initial purchase According to research with YouGov in 2020/2021, 1 in 3 merchants receive complaints about slow or lost refunds. “Shoppers have high expectations when it comes to refunds,” Bootwala said. “But those expectations are not always being met.” That same research showed 2 out of 3 shoppers said refund issuance time was an important factor in deciding whether to shop on a website, and 85% of surveyed merchants said offering instant refunds would make shoppers more likely to shop with them again.
Refunds and payouts are a commonly bottlenecked element of business operations. Loop Returns, a return portal that automates the returns and refunds of products, calculates that two hours of labor goes into processing every return. An unexpected influx of return requests can lead to significant operational load, which in turn can lead to slowed or even lost refunds. In the case of flights, concerts, or other ticketed events, there is a gap between time-of-purchase and the event itself, and sometimes payment cards have expired by the time refunds need to be issued.
For merchants, payouts to customers can involve managing multiple accounts, dealing with payment details, and manually tracking each payment. The entire process is costly, time-consuming, and error-prone, which leads to operational inefficiencies that snowball into poor customer experience and increased numbers of complaints. The worst-case scenario: a payment is never issued or is transferred to the wrong account. “This is a clear opportunity for businesses to improve customer experience and drive loyalty,” summarized Bootwala.
The problem with payouts Industries such as AI gaming and digital wealth management have their own issues with sending payments to their customers, as payments take the form of payouts rather than refunds. AI gamers and gamblers pay money to play and then cash out their winnings, and digital wealth management users have investments and dividends that they may want to withdraw. However, these systems for sending outgoing payments are siloed and slow, often due to over-complicated compliance and regulations.
“Customers might be able to pay-in or top-up their account instantaneously, but then they are left waiting for days to cash out their earnings and winnings via card transfer,” Bootwala noted. “It does not leave good loyalty or a good taste with your end customers.”
It may sound counterintuitive for merchants to expedite the process by which their customers can take money away from them, but 2020 research from YouGov found that 55% of gaming players would switch to a different site if instant payouts were offered, and a significant number would deposit even more money if given assurances that they could access their winnings at will.
“You have a battle going on between, say, the digital wallet players Apple and Google trying to implement incentives in their wallets that displace the merchant,” said Sloane. “The merchant needs to realize that getting instant rewards out – getting instant cash into the hands of their consumers in that incentives battle – is an important step for them.”
Open banking can bring speed and security Open banking is technology which enables direct connection to customer bank accounts through secure APIs, used either to fetch data about the customer or to make payments on the customer’s behalf. “This is executed with extremely safe bank-level grade security, and with the complete transparency and consent of the customer,” Bootwala clarified.
The technology of open banking has found footing in the U.K. and Europe due to PSD2 standards, regulations which were passed to increase payments innovation. Right now, though, those open- banking payment mechanisms are only available for pay-ins, not pay-outs. TrueLayer is changing all that. “What we at TrueLayer have done,” explained Bootwala, “is we have built on top of these open-banking rails that allow customers to send payments to merchants. We have added functionality to these rails to allow merchants to collect payments as well as pay out faster using the same bank payment rails.”
By using direct bank account information to verify account details, the payout process is simplified. “We have eliminated failed or lost payments, reduced the strain on the customers – and customer support – and also simplified the compliance checks for the businesses,” Bootwala continued. “In return, it has also made the customer experience a lot better.”
Additionally, open banking puts the customer front and center, and therefore makes the customer-to-merchant payments process safer. When the customer pays the merchant money through open banking, it is through a push payment, wherein the customer initiates the transaction (as opposed to a pull payment, where the merchant initiates it). “The issuing bank is involved in the identity of the individual,” said Sloane, and all with customer’s consent. “The bank is giving the merchant the information they need to be able to make the payment happen, and the consumer is directly involved.” This process can help the customer trust that the payment is secure, and that fraud will be reduced.
Where open banking can make an impact There are many industries that have either already applied open banking to their payments processes or would find great benefits from doing so. “Some of the early industries that have been leaning in to adopt these open-banking payment methods include digital banks, wealthtech, travel, gaming, and very quickly it has also gained traction in e-commerce,” said Bootwala. Open banking has also become popular in any market where card fraud rate is high – as a means of counteracting fraudulent transactions.
According to Bootwala, open banking payments has been growing 550% annually in the U.K., and TrueLayer hopes that by 2030, open banking will be the default way to pay and be paid online. “For merchants, it means a high-converting, low-fraud, and cost-effective payment solution for consumers,” Bootwala concluded. “It’s instant and provides a great user experience.”
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