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 Card

As 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 Talent

Beyond 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 Access

Just 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 Perspective

While 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 Experience

Taken 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 Scalability

Historically, 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 Automation

Given 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 Event

To 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 Organization

The 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 Inefficiency

Wires 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 B2B

Alongside 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 Experience

For 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 Workflows

Accounts 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 Better

For 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 Closing

As 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 Gap

Implementing 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 System

AI 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 Trust

The 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 Authentication

Given 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 Data

Although 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 Parties

These 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 Compliantly

Developing 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 Everywhere

It’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 Generations

Because 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 Gap

The 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 Experience

Financial 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 Offense

With 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 Crypto

The 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 Deposits

Stablecoins 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 Impact

Rules 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 Change

Many 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-Commerce

This 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 Standard

A 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 Decision

More 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 Authorization

As 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 Ownership

For 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 Mandate

Payment 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 Trust

A 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 Changing

The 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 Spreadsheets

While 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 Basket

These 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 Advisor

Data 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 Hub

While 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 Upstream

For 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 Identity

In 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 Together

Many 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 Data

In 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 Again

When 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 Engine

Looking 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: Cost

The 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: Revenue

On 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 Partner

Financial 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 Standard

Several 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 Crisis

To 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 Opportunities

As 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 Along

These 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 Turn

One 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 Answer

In 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 Problem

The 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 Right

Due 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 Typologies

The 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 Friction

Today’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 Payments

Embedded 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 Makers

Over 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 Commerce

That 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 Promotions

One 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 Shoppers

Even 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 AI

In 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 Channels

Another 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 Consumer

In 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 Story

The 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 Growth

One 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 Zelle

Zelle 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 Zelle

Zelle’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 West

One 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 Cycle

As 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 Value

This 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 Adoption

Although 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 Default

The 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 Results

Merchants 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 Strategies

Several 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 Orchestration

Payments 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 Mind

The 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 Economy

A 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 Checks

Despite 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 ACH

As 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 ACH

The 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 Year

Even 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 Retailers

Without 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 Rise

It’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 Password

Many 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 Right

Passkeys 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 AI

Across 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 Time

For 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 Success

The 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 Trust

Achieving 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 Future

One 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 Growth

Although 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 Payments

A 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 Economy

In 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 Banks

Financial 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 Behind

So, 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 Concern

OpenAI 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 Fraud

The 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 Paramount

Organizations 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 AI

More 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) Friction

This 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 Collaboration

True 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 Process

One 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 Departments

Along 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 Lifetime

As 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 Side

Shifting 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 Bridge

Altering 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 Language

Two 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 Complexity

For 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 Growth

When 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 Go

Although 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 Effect

Bad 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 Defenses

In 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 Strategy

Technology 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 Ecosystem

Unfortunately, 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.”

The post The Rise of Smarter Cybercriminals Demands Stronger Fraud Defenses appeared first on PaymentsJournal.

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 Asset

Forward-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 Needs

Credit 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 Organization

Data 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 Emergency

Artificial 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 post The Information Age: How Credit Unions Can Maximize the Impact of Their Data appeared first on PaymentsJournal.

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 Waters

Traditionally, 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 Process

To 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 Fire

To 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 Matters

As 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.”

The post How FIs Can Prepare for the Surge in Agentic Commerce-Driven Disputes appeared first on PaymentsJournal.

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 Opportunity

For 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 Experiences

One 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 Perception

Although 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 Building

As 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.”

The post Driving Hyper-Personalization in Digital Banking using AI appeared first on PaymentsJournal.

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 APMs

Despite 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 Partner

Once 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 Phenomenon

One 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 Mile

Consumers 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.”

The post Why Alternative Payment Methods Are No Longer “Alternative” appeared first on PaymentsJournal.

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 Kingdom

Malware 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 Convenience

Many 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 Web

In 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 Friction

Through 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.”

The post How Dark Web Intelligence Is Key to the Fight Against Infostealers appeared first on PaymentsJournal.

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 Pillars

Nacha’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 Audience

The 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 Audiences

Along 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 Criteria

Although 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.”

The post What’s New at Nacha’s Smarter Faster Payments Conference appeared first on PaymentsJournal.

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 Market

According 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 Objectives

A 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 Incentives

One 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 Cards

As 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 Balances

One 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.

The post From Gift to Growth Engine: Exploring the Gift Card Evolution appeared first on PaymentsJournal.

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 Banks

What 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 Employees

Millions 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 3^rd 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 Competition

While 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.

The post Making Cross-Border Payments Work at Smaller FIs—as Originating Institutions or Correspondent Banks appeared first on PaymentsJournal.

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 Branch

The 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 Automation

One 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 Gap

An 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 Ready

Staffing 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 Touch

ITMs 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.”

The post Banking, Reimagined: The Role of ITMs appeared first on PaymentsJournal.

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 Spot

While 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 Verticals

The 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 AI

Artificial 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 Onboarding

Onboarding 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 Processes

The 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 Organization

The 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 Mix

This 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 Utility

Bill 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 Engagement

An 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 Reminders

Because 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 Payments

Several 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 Touchpoints

Along 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 Cylinders

According 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 Trends

This 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 Board

Within 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 Factor

Amid 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 Making

The 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 Trends

In 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 Lenses

While 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 Complexity

Though 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 Spectrum

This 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 Silos

The 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 Organization

Cyber 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 Key

Most 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 Alone

Sometimes 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 Trust

Transactional 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 Baseline

Research 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 Hours

One 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 Ticket

As 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 Grail

Despite 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 Process

With $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 Financials

To 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 Experience

Texans 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 Investment

Don’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 Revenue

Most 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 Equation

Of 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 Case

More 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 Legacy

The 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 Divisions

As 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 Persuaded

Under 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 Avenues

In 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 Engagement

Because 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 Step

As 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 among the most trusted entities in the world. Consumers believe their banks act in their best interests—especially when it comes to protecting them from fraud. They expect strong, effective solutions that support their everyday financial activities, safeguard their accounts, and secure their identities.

But trust isn’t automatic—it must be earned. Nowhere is this more true than in the fraud dispute process. In a PaymentsJournal Podcast, Ryan Sorrels, CRO at Quavo, and Suzanne Sando, Lead Analyst of Fraud Management at Javelin Strategy & Research, discussed how, instead of letting disputes drive customers away, banks can use these moments to build deeper trust and strengthen relationships.

Restoring Confidence After Fraud

There is a lot of room for improvement within the fraud dispute process. According to Javelin, nearly half of fraud victims wished their financial institution had treated them like a victim—not a burden.

Banks need to refocus on ensuring that this difficult experience doesn’t lead to further negativity. In fact, many customers say the way a bank handles the resolution process has a greater impact on their trust in the institution than the fraud itself.

“They’re already having a negative experience of fraud,” said Sorrels. “We don’t want to compound that with another negative experience. Let’s take that negative experience and show up to give a great experience. You’re doing a tremendous amount to reinforce loyalty as opposed to compounding the problem and eroding loyalty even further.”

Many fraud victims want better tracking throughout the claims and dispute process. A small subset of bank consumers file fraud disputes and then never receive any follow-up. This could be due to a lack of standardized and automated procedures to make the dispute process more efficient. Some of these cases might be falling through the cracks, leaving customers feeling like they’re not a priority. Ultimately, that would make anyone feel unhappy with an organization they do business with.

The Customer Cost

Historically, the dispute resolution process has been viewed as a back-office function—primarily focused on cost, efficiency, and staffing requirements. What’s been less examined is the economic impact on the customer experience.

When banks deliver a strong dispute experience, they build trust and enhance loyalty. But a poor experience can have the opposite effect, driving customers away. In fact, many customers say the way their bank handles fraud disputes influences their loyalty—and some are even willing to switch banks after a negative experience.

“We’re so interconnected with our accounts, so it’s a lot of work to go through the process of closing an account, opening a new one and getting everything set back up,” said Sando. “There’s a lot of rigamarole around closing those accounts, reopening somewhere else, reestablishing all those connections, making sure your information is correct. If fraud victims are willing to go that extra mile, that speaks volumes to the importance of making sure that the customer experience is prioritized, and that you’re focusing on reducing that unnecessary friction and maintaining that loyalty and trust.”

Banks invest millions of dollars in customer acquisition, with the average cost exceeding $700 per customer. Maybe only 10% of people presenting disputes have a negative experience, but two-thirds of those are at risk of leaving. The cost to reacquire those customers can add up quickly. Even if just 200 customers ultimately leave due to a negative experience, that’s nearly $150,000 just in customer acquisition costs alone.

Customers who don’t leave risk moving the bank to the back of their wallet. They may stay, but they might adopting fewer products or use existing ones less frequently.

Eliminating Friction with AI

Much of the friction in today’s dispute process stems from outdated, inefficient systems. But with the right tools and automation in place, that can change drastically, and that’s exactly where Quavo is leading the charge.

Take the intake process, for example: on average, it takes a customer around 10 minutes to file a dispute. With Quavo’s AI-driven platform, that time drops to just two minutes.

But it’s not just about streamlining intake, it’s also about accelerating resolution. Accountholders don’t want to wait days or weeks for answers. These are emotionally charged moments, and every delay compounds the stress. Customers expect responsiveness and swift, fair outcomes.

Speed alone, however, isn’t enough. Transparency is equally critical. When accountholders are at their most vulnerable, they need to know their claim is being investigated, and that their financial institution is keeping them informed every step of the way.

With Quavo, issuers can deliver a faster, more transparent, and empathetic experience, end-to-end, through the digital channels customers already rely on, such as mobile and online banking.

Managing Expectations  

Fraud victims want a realistic timeline for resolution that aligns with the nature of their dispute. It’s entirely reasonable for them to want to know what to expect. By setting clear expectations, banks can turn a negative, stressful situation into a more manageable—and even positive—experience for the customer.

Customers are more cooperative when they know what to expect and when to expect it, whether the situation is stressful or routine. Financial institutions need to keep customers informed throughout the dispute process: when their participation is needed, what updates they can expect, and how the process works.

“I don’t think that’s a lot to ask for when you’re working through a process that isn’t standardized or is very much dependent on the employee that you as a customer happen to be working with,” said Sando. “Things tend to be dealt with on a case-by-case basis, and that introduces inconsistency, uncertainty, unnecessary friction into an already stressful situation.”

Certain cases, like first-party fraud, require more manual review and a personalized approach. However, in general, an unstandardized process accountholders valuable time—time that could be better spent on higher-priority, customer-facing matters.

The Advantages of Automation

There are solutions that can automate much of this process behind the scenes. When employees trust that these tasks are being handled efficiently, they can spend more time on special cases. This allows employees to devote more attention to customers who need it, making them feel like a priority.

Maintaining and growing brand loyalty and trust with the bank also involves improving these high-stress situations. It ultimately comes down to customer sentiment. At the end of the day, do they feel like they were treated as a priority? Do they have a satisfactory experience where they can say their bank handled the situation well and feel even better about the relationship going forward?

“Trust is the center of the customer bank relationship,” said Sorrels. “When there’s fraud on a customer’s account and a dispute process, it’s the banks opportunity to show up and create a great experience. On the flip side, if it’s a negative experience, it can really break that trust. The most important aspect to customer loyalty is: what are you doing with that customer’s trust?”

The post Turning Fraud Disputes Into a Win for Banks appeared first on PaymentsJournal.

One of the most important resources for any card portfolio manager is understanding cardholders’ spending patterns. This requires not just full access to data, but also the ability to interpret what the data reveals.

Growing business intelligence tools like Card Expert^SM from Fiserv are helping issuers gain deeper insight into their customer base, allowing them to serve cardholders more effectively.

In a PaymentsJournal Podcast, Janine Wilson, Director of Data Solutions at Fiserv, discussed innovative ways financial institutions are now leveraging cardholder data. She was joined by Deana Bartel, Vice President of Payment Services at Randolph-Brooks Federal Credit Union, and Derek Hayes, Senior Products Manager of Cards and Payments at 1st Source Bank—both of whom are using Card Expert to inform strategy and deliver stronger results.

Decisions Driven by Data

At the strategic level, cardholder data is essential for understanding not just where clients are transacting, but how they’re transacting—whether through digital wallets, e-commerce, or traditional card-present channels. Insights into spending behaviors and peer benchmarking are critical for assessing issuer performance, Hayes noted.

“At a more granular level, the data allows issuers to build detailed client personas by analyzing variables such as age, available balance, transaction frequency, and preferred shopping channels,” Hayes said. “Questions like whether a client uses a digital wallet or shops online are easily answered.”

“It’s absolutely critical that our clients have access to data and use data to drive their decision making,” said Wilson. “We created Card Expert a number of years ago to address this challenge. This tool takes the mountain of transaction and card usage details that exists and distills it into actionable insights. It’s a single platform containing lots of data around card portfolio performance for our clients, as well as showcasing how their customers interact with and utilize the various card surrounds that support their portfolio.“

Card Expert highlights where banks and credit unions are performing well—and where they have opportunities to improve. This might include reducing time and expenses related to reporting tasks, identifying areas of decline within their portfolios, and engaging specific groups of cardholders to drive actions like activation and usage. Without clear insights into portfolio performance, it’s impossible to make informed decisions or target the right customers with the right offers.

“Card Expert has been an easy and effective way for my team to access that data,” said Bartel. “We’re using that data to improve things like the rate of cardholder declines, driving digital wallet engagement and taking a more proactive approach to personalization versus segmentation when engaging with our cardholders.”

The solution provides an executive-level overview of an issuer’s portfolio while making it easy to drill down into the data. RBFCU uses Card Expert to review declines and identify ways to improve the member experience. It plans to use these insights to send near real-time notifications, allowing members to self-correct without needing to call or switch to another card.

Increasing Card Usage

1st Source Bank used Card Expert segmentation tools to analyze clients at different levels, pinpointing those with no or minimal card activity. The data allowed them to design campaigns encouraging these customers to use their card for the first time or increase their usage.

Another campaign focused on expanding digital wallet usage. Card Expert provides visibility into which clients were actively using digital wallets, in turn allowing 1st Source Bank to design campaigns that encouraged clients either to add their card to digital wallets or to increase their usage, ultimately driving both engagement and transaction volume.

“We want to make sure we’re making data-driven decisions,” said Hayes. “We’ve added data from Card Expert’s benchmarking capabilities into data from our core systems and from Mastercard to ensure they get a holistic picture of the customer. The multi-source approach allows us to develop a more comprehensive and targeted strategy.”

Bartel added: “Before moving to Fiserv for our card portfolios and leveraging Card Expert, we rarely used our data in a proactive way because we didn’t have easy access to it. With those limitations, we took a very generic approach to optimizing the portfolio, with lots of generalized campaigns and marketing going out to our cardholders. But we’ve been able to see a shift in how we communicate with our cardholders by leveraging Card Expert, because the data is truly at your fingertips. And one of the things that I love is that it’s continually getting enhancements to make it even more beneficial to my financial institution.”

Keeping the Conversation Going

Fiserv holds monthly sessions to keep its client banks and credit unions connected to ongoing product enhancements. The company answers user-submitted questions live and demonstrates best practices, highlighting tips and tricks for getting the most out of this content. Participants can discuss strategy, how best to use the data, ways to engage members and cardholders, analyze portfolio trends, and benchmark against peers.

“RBFCU is still navigating our data journey, but Card Expert makes it feel like it’s not as daunting of a task for us,” said Bartel. “One key is to define and prioritize your data use cases. Creating those use cases will help you focus on what’s most important to you, and the organizational goals.”

On the horizon for Card Expert is enhanced interchange trends and continued innovation to expand benchmarking beyond today’s debit and credit portfolio metrics. This data will help banks and credit unions see how they stack up against various peer groups, and where they can focus their efforts for growth and improvement.

“We continue to engage with our clients to understand their requirements for expanded capabilities like data sharing or data as a service,” said Wilson, “To ensure that we deliver on the goal of being a partner in data.”

The post Unlocking Profit: How Data Mining Transforms Card Portfolio Strategies appeared first on PaymentsJournal.

At best, an inefficient accounts payable process can result in delayed payments or limited visibility into spending. At worst, it could lead to misrouted payments and an increased probability of fraud. Yet many organizations still rely on outdated AP processes—jeopardizing relationships with the suppliers that keep their business moving.

In a recent PaymentsJournal podcast, Marchelle Becher, Business Development Executive at B4B Payments, and Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, discussed the obstacles businesses face in the AP process, the role of prepaid and virtual cards in payouts, and how a unified payments platform can streamline accounts payable.

Holding on to Outdated Systems

One of the main challenges with many AP processes is that they still depend on manual invoices, requiring a high degree of administrative involvement. They also often rely on siloed systems.

“There are so many companies that have multiple banking accounts or solutions,” Becher said. “It’s very fragmented. We see that there’s an increase in reconciliation errors in general, and they’re still using older payout methods like wires and writing checks and ACH. Today we’ve got so many other solutions that streamline the whole process.”

Many companies continue to use outdated procedures because, despite their flaws, they have mostly been sufficient. As a result, businesses have chosen to invest their time and resources in other areas, such as improving the customer experience.

Additionally, there is often a reluctance to innovate in a process that could impact both an organization’s finances and its partnerships. These concerns have been amplified by an increasingly stringent regulatory environment.

However, both businesses and suppliers have become more aware of new payments technologies through their experiences as consumers. The rise of digital payments—easily initiated through an app and settled in near real-time—has many users wondering why this functionality isn’t available in B2B payments.

“Consumer payments experiences are driving what’s expected in commercial payments experiences,” Thomas said. “This is definitely one area where getting outdated is a concern, because you’re falling behind where people’s expectations are for the technology.”

Standing In Sharp Contrast

These technologies can bring dramatic benefits to the AP process. For example, the flexibility of prepaid and virtual cards stands in sharp contrast to traditional payment methods such as wire transfers and paper checks.

“It definitely reduces the lag time in processing payments, transactions settle immediately and finance teams have real-time visibility into cash flow,” Becher said. “Prepaid and virtual cards are going to reduce the time it takes to write checks, and there’s also more controls around them—you can send a virtual card out that can only be used online, or it could be just a one-time use card as well.”

A virtual card can be configured with restrictions—such as use at a specific merchant or for a set amount—enhancing control and reducing risk.

Similarly, a key feature of a prepaid card is its ability to limit the funds disbursed. With a digital prepaid card, the payout is available for immediate use and can even be loaded into a digital wallet.

With both virtual and prepaid cards, organizations retain recourse if a payment is made in error or in the event of fraud. For instance, if a supplier short-shipped an order or a contractor failed to complete the expected work, the company could retract or adjust the payment.

Fraud risk is further reduced, as no bank account information is exchanged when using virtual or prepaid cards.

“The card can come completely hashed, so nobody is disclosing any financial information on either side of the two counterparties, and you’ve got the value added of potentially mitigating cash management goals on buyer and seller side,” Thomas said. “The buyer probably wants to get paid earlier; seller wants to hold onto cash until later. In most cases, you can have an intermediary who can balance those cash management needs when you’re using virtual cards.”

Adding More Guardrails

Although prepaid and virtual cards are powerful additions to payouts, they don’t solve the fragmentation in the AP process on their own. This is why it is important for businesses to consider unified B2B payments platforms.

An all-in-one payment platform eliminates the need for multiple systems and logins. It can also save organizations a significant amount of time currently spent on manual tracking and paper processes.

“One of the benefits of B4B Payments is that our app can capture receipts,” Becher said. “We look at reconciliation, we look at people having to gather receipts, make copies, and send them in. What it amounts to is that there’s a lag to get reimbursed.”

“The great of today’s platforms is that you can prefund an expense card and as a transaction is being done at the point of sale, that individual can take a photocopy of their receipt,” she said. “It can be uploaded and immediately go to accounting, so that on both sides we have accountability.”

This real-time visibility extends across all of an organization’s operations, and a single portal can be used for auditing and reporting.

In many businesses, multiple bank accounts and systems often come with multiple users. Managing access for these users is another pain point—one that can be alleviated by moving to a unified platform.

“Overall, it’s putting more guardrails in there, and those can be as wide or narrow as a business needs,” Becher said. “Also, you can access multiple payout options from one portal. If you wanted to do ACH, prepaid or virtual cards, real-time payments, that is all dependent on your business and what best suits your vendors or customers. That’s key here—everything is accessible from one central point.”

The more of the AP process that is captured in a single system, the less burdensome it becomes for an organization’s accounting staff. The finance office can use this additional time to evaluate operations more effectively and, in turn, make more strategic decisions.

“You’re talking about a bunch of different moving payment instruments,” Thomas said. “If they’re in one platform, you can start getting recommendations, like: you should be thinking about a virtual card here because you could keep 10 extra days payable outstanding on your books, as opposed to just cutting checks on the agreed terms of payment timing or whatever the case might be.’”

The Compliance Straight and Narrow

These added insights into an organization can improve efficiency, but they can also keep a company on the compliance straight and narrow. This is increasingly difficult as businesses wade through Know Your Business and Know Your Customer checks and strive to remain compliant with anti-money laundering regulations.

As organizations search for platforms that can unify their AP process, they must ensure they select a partner that adheres to the most current regulatory standards across different regions. Once they have a platform in place that keeps their transactions compliant and secure, they can begin focusing on what matters most.

“It is extremely important for businesses to be able to have all the data available to them,” Becher said. “They see trends, are able to better manage their cashflow and strengthen their business partnerships.”

The post A Fragmented Accounts Payable Process Is a Liability in More Ways Than One appeared first on PaymentsJournal.

Digital cards saw a significant boost in adoption during the pandemic, initially driven by necessity. However, it quickly became clear that hygiene was just one of many benefits—and not even the most compelling one. Both consumers and retailers have found digital to be faster, more cost-effective, and more efficient than traditional physical options.

In a PaymentsJournal podcast, Fiserv’s Wesley Suter, Senior Director of Product, and Kush Patel, Senior Product Advisor, as well as Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed the advantages digital cards offer over their physical counterparts, and how banks can tap into those strengths.

The Card-Not-Present World

Post-pandemic, the world has shifted from predominantly card-present to card-not-present transactions. Consumers can now order groceries from the comfort of their couch, then drive to the store where someone loads them into the car. There’s also been growth in digital acceptance at the point of sale, as merchants adopt tap-to-pay systems.

“Roughly 30% of in-person transactions are click-to-pay or digital wallet transactions, and that’s going to grow to over 50% in the next couple of years,” said Patel. “Anecdotally speaking, I live in a neighborhood where our restaurant association has gone completely cashless. Tap-to-pay and digital wallet transactions are very important to cardholders, not just at home but when they’re shopping in stores and at restaurants.”

Beyond shopping, businesses are working to make it easier for cardholders to digitally complete tasks that were traditionally done through human interaction. That can include something as simple as activating a card or more complex and curated experiences like disputing a transaction.

Ultimately, it’s not just about making cardholders’ lives easier, but making it easier for them to do business with issuers. Engaging customers to the point where incorporating digital tools becomes a part of their routine sets the stage for stickier relationships, cross-selling opportunities, and deeper engagement.

“When you see the throughput that the integrated experience has with the debit and credit card portfolios, you start to think about the foundational aspects of card management,” said Suter. “How do we get those cards not only in their hands, but active and used. With the integrated model, we have seen digital banking platforms increase 5% to 7% month over month in activation and usage.”

Integrating Debit and Credit

One area in which digital platforms have made a difference is in integrating credit and debit accounts. Issuers used to treat debit card holders differently from credit card holders. They might ask a debit card holder to download an app to manage their card, but if that same user had a credit card from the issuer, they could be directed to a third-party website to make a payment or view statements.

“It’s not the consumer’s problem how the silos might exist in different companies,” said Riley. “To them, it’s a card that they want to use to conduct a transaction. Whether they want the money to come out of a bank account with a debit card or to use a credit line, making that whole process seamless is important.”  

By unifying debit and credit accounts, digital platforms make it easier for cardholders to do business with their issuer. It also better positions the bank to cross-sell between the two accounts.

Creating More Engaged Customers

Another advantage for issuers is that cardholders who can quickly access their funds tend to transact more frequently than those who are less digitally engaged. Credit card transactions were once primarily for big-ticket items, but thanks to digital cards, we’re now seeing an increase in smaller transactions across debit and credit. This results in greater engagement in terms of transaction volume and overall portfolio spend.

They also give cardholders more uninterrupted access to their funds. When a card is lost or stolen and not promptly replaced, 40% of affected cardholders are likely to switch to another issuer or card, leaving the original one behind.

Similar to merchant-specific cards hosted on their own portals, issuers are now beginning to offer digital-only solutions as well, like the Apple Card. Additionally, virtual cards are being rapidly adopted by commercial and small businesses to enable better expense management, faster transaction settlement, and greater control over overall spend.

This trend may also carry into the consumer space as online transactions become more common. Increased online activity exposes cardholders to higher risk and privacy concerns, prompting consumers to adopt virtual cards—whether one-time or merchant-specific—as a way to protect themselves.

Fighting Fraud

Digital transaction also makes it easier to fight fraud. Fiserv’s technology, for instance, can provide contextual evidence around the purchase transaction. Issuers that have adopted this technology at a rate of 75% or higher have seen a reduction in fraud of over 20%. Those with lower levels of engagement are seeing a more modest 5% to 6% reduction in fraud.

“I can tell a layman cardholder right off the street that this is where your transaction was conducted, how much it was for, and where the message came from,” said Suter. “They immediately understand whether it is a legitimate transaction or potentially illegitimate. That deputizes the cardholder, allowing them to understand with pure context whether they performed that transaction or not.”

Behind the scenes, Fiserv leverages neural networks, insights and machine learning not only to fight fraud but also accelerate customization—such as personalized offers based on geolocation. These elements can drive increased spend on those cards.

Steering Them to Digital

We live in a digital-first ecosystem. We can manage our thermostats, do our grocery shopping, and call a rideshare—all from our phones. Our digital banking and finance experiences are a natural extension of that. It’s important to have digitally integrated engagements that accommodate the shift in how consumers interact with their financial institutions.

“Over half of consumers would like to engage with their banking institutions via digital channels rather than going into a branch,” said Patel. “Younger generations expect this at a much higher rate, but more than half of baby boomers and Gen Xers also expect to engage via their mobile channels.”

Every consumer is at a different stage in their lifecycle. Fiserv continues to iterate on its platform to help guide both consumers and businesses in tokenizing their cards into digital wallets.

“Anything that I can do on the phone or in branch now needs to be steered towards that digital component, from disputing a transaction to more engaged relationships around rewards and fulfillment,” said Suter. “At some point the card has to be reissued or replaced. True digital card management is the ability to manage the entire lifecycle relationship of that card and that consumer.”

The post Beyond Plastic: Why Digital Cards Are the Future appeared first on PaymentsJournal.

When a financial institution’s customer is tricked into sending a payment, there has often been little recourse for the victim. As credit push fraud becomes increasingly prevalent—amplified by sophisticated technologies—the financial services industry must strengthen its protections.

This is why Nacha has developed a framework of fraud management rules that will go into effect next year. In a recent PaymentsJournal podcast, Devon Marsh, Managing Director, ACH Network Rules & Risk Management at Nacha, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, examined the requirements of the new rules and the steps financial institutions can take to comply and better protect their customers.

Attacking an Emerging Fraud Trend

Many bad actors have shifted away from attacks like account takeovers because financial institutions have implemented more robust fraud defenses.

As a result, the path of least resistance now runs through the end user, as evidenced by the rise of automated push payment (APP) fraud. These social engineering attacks have become increasingly convincing, with cybercriminals leveraging artificial intelligence and cybercrime-as-a-service tools.

The sophistication of these attempts makes it difficult even for well-informed users to distinguish scams from legitimate communications.

“Recently, from personal experience, I’ve been getting more communications from the financial institutions that I do business with, alerting me of the various types of new scams to be aware of—many of which seem to involve credit push payments or authorized payments,” Tavilla said.

“These include impersonation of a bank or sending SMSs with links that often express an urgency,” she said. “Last week I got a number of them saying I owed toll payments for states that I never even visited.”

As one of the most predominant payment methods in the U.S., ACH transactions are a common target for criminals. Nacha recognized this threat and began developing its fraud monitoring and risk management rules in 2022.

“We took an approach to develop a risk management framework to attack a developing, emerging fraud trend in credit push payment fraud,” Marsh said. “The risk management framework was well-received; we proposed some rules, the industry approved them, and that’s where we are today. We have some rules that have been implemented and then some that are pending implementation in 2026 to address credit push fraud.”

Risk-Based Processes and Procedures

The rules going into effect next year pertain to transaction monitoring, instituting a requirement for originators, third-party senders, and originating depository financial institutions (ODFIs).

The framework requires fraud monitoring for all transactions, including traditional and Same Day ACH. Under the framework, all ACH Standard Entry Class codes for both debits and credits must be monitored. This monitoring need not be completed prior to processing payments. While monitoring prior to processing is ideal, it is not required by the rule.

“It’s ideal if it’s done prior, but what the rule calls for are risk-based processes and procedures to detect fraudulently initiated payments,” Marsh said. “There’s a separate rule—it’s very similar—but it requires receiving depository financial institutions to monitor incoming credits that they receive.”

One of the most important aspects of the new regulations is that they require all financial institutions to institute processes and procedures—not technical solutions.

“That’s great if an organization wants to implement technology, but the rule would certainly allow for manual processes and existing processes—as long as they take that risk-based approach, they are documented processes, and they are effective within the organization’s risk tolerance,” Marsh said.

Assessment and Analysis

The first step for many financial services companies is to conduct a risk assessment and establish their risk appetite.

“Probably every organization today has something—even if it’s in the back of their mind or intuitive—that says this just doesn’t seem right,” Marsh said. “What are those things that make it not seem right today? Formalize the recognition of those things that aren’t quite right and make that part of your processes and procedures.”

A red flag could be an ACH Standard Entry Class code that is not appropriate for the receiving account, or an unusually high dollar volume going into an account that typically has a low threshold. For example, if a consumer account that normally only receives a paycheck as its largest deposit suddenly receives a $50,000 corporate transaction, this should be flagged as suspicious activity.

Many organizations already have solutions in place that can identify these red flags to some degree. However, after reviewing the requirements of Nacha’s new rules, they will have to perform a gap analysis to determine where their existing processes stand compared to the new paradigm. From there, they can begin to close these gaps.

To do so, many organizations will turn to third-party providers. While this can be an effective model, financial institutions must ensure that all parties have a clear understanding of their roles and responsibilities under the new framework.

This vendor vetting and implementation process is likely to be intensive, especially as the rules’ effective date draws near.

“There are technology providers out there who provide automated solutions or other tools that require more resources and implementation,” Tavilla said. “This would be a good time to start exploring appropriate partners and solutions in preparation for when the new rules go into effect next year.”

When a Fraudulent Transaction Occurs

Although these rules strengthen fraud monitoring procedures, their scope doesn’t end with fraud detection.

If a receiving depository financial institution (RDFI) detects a fraudulent transaction, the regulations dictate specific actions which institutions should incorporate into their procedures.

For example, after the RDFI has resolved the transaction—either by returning the payment to the originator or freezing the funds in the receiver’s account—it should conduct a thorough evaluation of the receiver.

“Is this an unwitting money mule?” Marsh said. “Is this a good customer who got maybe scammed into receiving the payment and is coached to send it on to the fraudster somewhere else? Or is the RDFI actually banking the fraudster? The response would be very different in those cases. They may need to talk to their AML team, because a money mule is literally involved in money laundering.”

In addition to assessing the involved accounts, Nacha provides a checklist of actions that a fraud victim can utilize in their recovery efforts.

For instance, the guide can walk an originator who has been scammed into sending a fraudulent payment through the process of contacting the financial institution and notifying them of the transaction details. The checklist can also guide them on how to contact the RDFI and request that it either freeze or return the funds.

There is also a post-mortem aspect of the checklist, which coaches the fraud victim through evaluating how they were scammed and what they may have missed, to help prevent future attacks.

“On the more technical side, the best tool we’ve got for bank-to-bank communication is through Nacha’s risk management portal,” Marsh said. “The originating institution can receive a call from their originator, recognize that they have to contact the RDFI, and they can use our contact registry to look up who they need to speak to in the ACH fraud department at the other financial institution.”

Along with the checklist, Nacha also provides tools for exchanging documents. An RDFI may respond that they have frozen funds and can return them, but first require a letter of indemnity (LOI). The ODFI can then send the LOI to the receiving institution using the Secure Exchange feature in Nacha’s Risk Management Portal.

Doing Nothing is Not an Option

Increased communication between financial institutions is a critical component of the cooperative effort needed to combat the rising threat of fraud.

This concerted collaboration is not only integral to accelerating industry-wide adoption of Nacha’s new rules, but also essential for their effective enforcement.

“The way Nacha is ultimately going to enforce this is indirectly, we have a requirement for a Nacha rules compliance audit, so we query the industry and we challenge to see who has completed their audits and if they’re compliant with the rules,” Marsh said.

“Beyond that, a more targeted approach is any stakeholder in the industry can file an allegation of a rule violation through Nacha’s National System of Fines,” he said. “If they see a shortcoming in an organization based on the transaction they’ve dealt with, they could possibly file a rule violation if they think someone’s not following these rules.”

Additionally, Nacha has established a Credit-Push Fraud Monitoring Resource Center, offering guidance and tools tailored to assist in complying with the new rules.

Although many financial institutions have been proactive in the fight against fraud, they should still use this opportunity to ensure their systems are fully optimized.

“With regard to transactions, we have made the point many times in training and speaking events that doing nothing is not an option,” Marsh said. “It’s not satisfactory for an organization to say we conducted a risk assessment, we don’t consider any of our transactional activity risky, so we’re not going to do monitoring. That’s not acceptable.”

The post What to Expect When Nacha’s Fraud Monitoring Rules Take Effect appeared first on PaymentsJournal.

For years, many businesses proclaimed they would never transition their payments to SaaS. Even as everything else moved to the cloud, financial professionals remained adamant that payment services and data would stay in-house. The data was considered highly sensitive, and few were willing to risk storing it outside their walls.

But the benefits of Payments-as-a-Service (PaaS) have upended that thinking. More organizations are now realizing that leveraging external providers is transforming their payment structures—both for today and the future. In a Payments Journal Podcast, Mike Vigue, Head of Product at Finastra, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed how Payments-as-a-Service can give organizations of all sizes access to the latest technology, enhancing resilience and agility while enabling mid-market clients to compete with much larger institutions.

Staying Ahead of the Curve

Payment modernization is often viewed as a destination—a point at which payment operations will eventually arrive. In reality, there is no endpoint. Technology, regulations, and customer expectations will continue to evolve. Future changes will require systems that are not monolithic, but agile—enabling developers to build solutions that have yet to be conceived.

While the exact direction of change is uncertain, it’s clear that tomorrow’s requirements will call for systems that are more modern. That means being cloud-native, API-first, and event-driven.

According to Vigue, organizations that aren’t allocating 20% to 25% of their roadmap to maintaining modern infrastructure and technology risk falling behind. And the further they fall, the harder it becomes to develop new features. Staying modern enables technology to do more—and to do it faster.

Changing on the Fly

Nobody has the luxury of stopping time for a year and a half to develop a new platform. PaaS offers modular solutions like microservices that allow teams to modernize one piece of the application at a time and isolate service failures from bringing the entire application down. The process involves extracting a particular payment rail out of the platform, developing it in a new modernized way, and then integrating it back into the existing infrastructure—until the team has time to update the rest.

“When I talk to certain customers, particularly about ACH for example, they’re nervous,” Vigue said. “How can you take a bank that’s doing like 300 million ACH transactions a year off of an application that’s been in their business for 15 years, runs off a mainframe and put it on some modern system without bringing the bank to its knees?”

“ACH is 50 years old and it’s kind of been neglected, because banks all have the same technology,” he said. “There’s not a lot of difference in what you get from functionality there. But you can differentiate your services by modernizing them. We’re going to see some changes coming, particularly in 2026. For example, there’s an upcoming mandate from Nacha to do fraud scans against ACH payments. I heard a quote recently that 44% of banks are thinking about looking at their ACH infrastructure over the next 18 months.” ¹

According to Wester, the goal is to reach a point where you can start anticipating some of the changes. “Some of those changes are going to be things that you think that you already do well now,” Wester said. “It’s not just about being prepared to do whatever is coming down the pike, it’s also about how you can improve things you’ve been doing for a very long time.”

These newer tools can result in a more modernized and responsive infrastructure, as the systems are built on today’s architecture rather than that of 15 to 20 years ago. While legacy applications currently offer more functionality, AI can help them catch up and modernize their technology faster.

Resilience and Agility

One key benefit of PaaS is resilience—keeping the payment system operational no matter what happens. Even the best payments application is useless if no one can log into it. Requirements have become so stringent that some clearing systems are now expected to be down for a maximum of two minutes per month. Meeting this standard requires a comprehensive business continuity and disaster recovery plan.

“I previously worked at a different organization that had a third party doing our payment processing for us, and their bank went under,” said Vigue. “That was one thing I’d never really thought about from a disaster recovery plan. Because we were in the accounts payable automation space, we couldn’t send the payments that our customers needed to pay their vendors.”

Another critical element of Payments-as-a-Service is agility. The payments industry is undergoing rapid transformation, from the ISO 20022 changeover to new real-time payment schemes. Banks that want to compete effectively must be agile in this environment. Monolithic applications within legacy infrastructure that take a year to deliver a few enhancements simply won’t be good enough. PaaS enables banks to isolate and modernize specific payment rails—such as real-time or cross-border systems—without overhauling the entire platform. This approach not only accelerates time to market but also allows institutions to position those capabilities alongside offerings from major players, creating a competitive edge.

Building Toward the Future

It’s critical to work with a vendor that has a well thought-out roadmap—one that clearly outlines where the process is headed and how it will evolve over time. A strong partner provides support as new technologies emerge and the payments landscape continues to change.

Roadmaps are essential. Many consist of ideas under consideration, but forward-thinking vendors go further. They’re willing to say, “This is where we’re going, this is what will be happening, and this is what we’re building toward.” That level of clarity allows customers to confidently invest in the process, knowing both what the vendor will be supporting and how they will be supported. The result is that even mid-market organizations gain cost effective access to the sort of technology they would struggle to deliver themselves, positiong them strongly alongside the major players.

“We talk about people adopting Payments-as-a-Service, but frankly, I don’t think some of them are going to have a choice in the future,” said Vigue. “The idea that this is something that you can put off or think about later—no. If you’re not already thinking about where you’re going to be from a modernization standpoint, you’re already behind.

“That’s where Finastra comes into play,” said Vigue. “First and foremost, it’s the people that we have and the credibility we bring by knowing what it’s like to be in their shoes, having done it so many different times. It’s less about the product and more about the ability to get an organization from where it is today to where they want to be in the future.”

¹Source: Celent Dimensions Corporate Banking Survey 2025 (n:227)

The post Don’t Just React to What’s Next in Payments—Anticipate It appeared first on PaymentsJournal.

Organizations routinely ask employees to take clients out to lunch or attend industry conferences. Yet the expense management process designed to support these essential functions is often manual, time-consuming, and prone to delays, errors, and misuse.

In a recent PaymentsJournal podcast, Susie Shyatt, Business Development Executive at B4B Payments, and Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, discussed the common challenges businesses face in managing expenses—and how embedded payments can help streamline this inefficient process.

Expense Reimbursement Vs. Corporate Cards

One of the most common issues in the expense management process stems from employees being required to use their own funds to cover company expenses. First, this means the employee must have sufficient funds available—something that can be a challenge for costly business trips involving airfare and hotel stays.

Another issue arises once the employee returns, as they must provide documentation for their expenses, which then needs to be manually processed. This can lead to delays or errors in reimbursement. There’s also the risk of abuse in the process—something that, in some cases, has even been inadvertently encouraged by management.

“With some companies that we’ve worked with in the past, their C-level groups are touting the ability to get points and earn rewards using personal cards as a benefit to new hires,” Shyatt said. “Whereas the HR and payroll and finance people see it as a headache, where they’re having to reimburse without knowing exactly what all of the payments are being utilized for.”

These challenges with expense reimbursement have led many companies to adopt corporate cards. However, company credit cards can present hurdles of their own.

“At the end of the month, you have to take this big bundle of receipts and photocopy them and get it back to somebody who then has to look through all that stuff and sign off on it,” Thomas said. “It creates tons of extra work for the payables department. It creates extra work for the payroll department. Frankly, it’s not anywhere as safe or compliant a way to buy on behalf of a company as when you’re having somebody submit their own personal expenses.”

Embedding for Speed and Visibility

Among all these pain points, one of the biggest barriers to streamlining the expense management process is that organizations are often unaware of just how inefficient it really is. Multiple groups within the same company may be involved, resulting in a fragmented, manual solution where items can easily get lost in the mix.

As a result, the expense management process becomes frustrating not only for finance office staff, but also for employees.

“Especially as younger generations have entered the workforce, they’re used to everything being quick in their personal lives,” Shyatt said. “You can go to a restaurant with 15 people and after one person puts it on a credit card, within seconds, everybody has paid that person back. It’s very confusing why a work payment should take so long, when I can make a transaction on a website, and everything is there in seconds.”

Payments technology is the reason these interactions are possible. Much like the innovations that allow roommates to seamlessly split a rent payment, embedded payments can be used to accurately reimburse an employee for a hotel stay. Additionally, embedded solutions can equip employees with the tools they need to manage expense activities upfront, which can help mitigate concerns about payment delays.

Embedding payments into the expense management process also brings substantial benefits to organizations. While this technology likely won’t replace staff members, it can reduce the amount of time finance personnel spend processing expense documentation—freeing them up to focus on more strategic tasks.

It also gives organizations greater control over how funds are being spent. When employees use personal funds to cover expenses, there’s often a lack of transparency into how and where those funds are sourced.

In addition, visibility into the expense management process is often increased because these solutions allow organizations to manage both employee and outbound payments from a single platform.

Many solutions also support faster or instant payment types—and real-time payments benefit not only the recipient but the organization as well.

“When you’re using these embedded solutions or expense management tools, it gives you more ability to maintain your working capital, and it gives you a better idea of where you truly stand from a cash flow perspective,” Shyatt said.

Removing the Inertia Barrier

Even though there are clear benefits to adopting embedded payments in the expense management process, many organizations worry that integration will be too costly or place too much burden on the IT team.

However, with the rise of embedded payments technologies, the biggest obstacle to streamlining the process is often resistance to change.

“Inertia is arguably the biggest barrier,” Thomas said. “If there was no inertia in the world, there still wouldn’t be check payments in the United States, after pundits like me have been talking about check payments disappearing for as long as I’ve been in this business. These things don’t change overnight. They don’t change over years necessarily, and that’s mostly a factor of how people run their businesses.”

Though many companies are focused on day-to-day operations, the benefits of modernizing expense management make it well worth the effort to step outside their comfort zone.

“At a lot of the companies that we work with, payments are not their core business, it is just part of what makes their business run,” Shyatt said. “In their mind, it can be a little daunting to look at these big, embedded solutions and think about adding all of these pieces into what they’re doing today, when it’s not the core business that they know.”

Deep Diving for Solutions

The first step for these organizations is to take a deep dive into their expense management process from end to end. They should talk to their accounts payable and payroll staff, as well as any employee who regularly participates in the expense reimbursement program. Then, the organization can identify the true pain points in their current process.

Next, the company should search for solutions that can meet these needs. This could include evaluating whether a platform can integrate with existing systems or finding a solution that offers more robust compliance reporting functions.

Organizations should also assess whether they need to leverage multiple payment types—such as payment cards, ACH, or real-time payment rails—to optimize their expense management process. Another consideration is whether they require a platform that can support payments in multiple currencies.

Once the organization has identified its needs, it can begin to address the inefficiencies in this critical function.

“A lot of times, especially at a higher C-level, we think we know what the problems are and what the headaches are, but we don’t take the time to get in the weeds and truly figure it out,” Shyatt said. “It goes back to knowing your pain points. Knowing exactly what you need not only helps with efficiencies within your company, but it also helps with your cost savings as well, because those go hand-in-hand.”

The post How Embedded Payments Is Optimizing the Expense Management Process appeared first on PaymentsJournal.

The relationship between financial institutions and small businesses has grown increasingly strained. Many small businesses are becoming dissatisfied with their payment and banking services. In fact, more than half obtain their merchant payment accounts from providers other than their primary bank.

In a PaymentsJournal podcast, Fiserv’s Tim Ruhe, Head of FI Payment Strategy, AJ Levin, Senior Director for Small Business Market Strategy, and Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research, discussed why small businesses are turning to fintechs for payment services and what banks need to do to remain competitive in this critical market.

Fragmented Relationships

Research shows that small businesses are turning to multiple providers—typically three to five fintechs—to meet at least one of their financial needs. This means they’re stepping outside their primary financial institution and relying on nonintegrated solutions—a complex and fragmented approach. To run their day-to-day business, they’re spending nearly 20 hours a week on cash flow and financial processes. Part of this burden stems from juggling so many different providers.

“They’re fragmenting their relationships, going to multiple places to serve their banking and payment needs,” said Ruhe. “They’re not getting everything in one place the way we would like them to. If you ask them how they pay and get paid, you generally hear a pretty incredible fragmented journey and to me that leads to: OK, there’s some work to be done. It’s not enough to just have a lending product and a bill pay product, we need solutions tailored to the needs of those small businesses.”

Take invoices, for instance. Many small businesses still send paper invoices but want to move to electronic invoicing and receive payments digitally. Ideally, they’d do that through their financial institution rather than a fintech, so the bank has visibility into where deposits are going.

That’s an area where banks haven’t competed as well as they could. Fintechs and banking-as-a-service providers are gaining ground by leading with specialized offerings in niche categories, then expanding into payments. Before long, they start pulling customers away. To prevent that, banks have to make sure they’re offering the right solutions to protect against that.

Small Business Is a Tweener

Historically, banks have served small businesses using a mix of consumer and commercial mid-market products. Small businesses have to choose between consumer services—which are intuitive and easy to use but lack advanced capabilities—and commercial banking services, which are typically geared toward businesses with hundreds of millions in revenue and dedicated staff to manage payables and receivables.

Small businesses are a tweener segment. They have merchant services, invoices, accounts payable, payroll cards, and loans, but they still need the simplicity of consumer banking. Often, the staff is just the owner and an accountant. They don’t have the time to learn new tools. If using their bank requires a learning curve, they’re likely to move on.

“That ultimately is the conundrum we’ve seen with financial institutions not having a dedicated small business solution,” said Ruhe. “We saw the seismic shift in real-time payments and mobile 10 or 15 years ago. Should banks offer P2P services? Now, it’s no longer a question. This is in the same category. Should we have a small business-focused integrated payment capability? Increasingly the answer is yes.”

These are revenue generating services. Small businesses expect to pay for quality solutions—whether it’s invoicing, expedited payments, real-time payments, or the ability to pay with a card to better manage cash flow. Fintechs are actively monetizing many of these revenue levers, while traditional financial institutions are not.

“For folks that have been in the merchant services space for a while, you remember the old race to zero,” said Apgar. “It was all about price, and it squeezed all the margin out. But in today’s market, it’s less about price for the small business and more about the interoperability, the convenience of being able to do everything in one spot. The verticals companies have made inroads into payments and grabbed basically half of the market share away from banks. Because of that, it’s extremely profitable for these software companies, because they’re not selling it on a low price.”

Making the Customers Aware

Banks now see the opportunity to step into that space with a completely interconnected product set that lets business owners run their operations more efficiently. But simply having the capability isn’t enough—it won’t be successful if customers aren’t aware of it. Small businesses are among the busiest customers a bank serves. They’re focused on running their business, which means they have limited time and capacity for new things.

Every bank and credit union needs to make sure their customers know what’s available to them. Banks still have staff in branches who engage with customers—and while many customers no longer visit branches, small business owners still do. That’s an opportunity to become the Genius Bar for small business at the branch.

“Today, we’re only seeing merchant services added to the bank account at opening 15% of the time,” said Levin. “To make sure that you’re beating the competitors to the punch, getting in front of the small business at the right time, that conversation has to be moved up further along in the process at account opening. Make sure that you’re able to capitalize on this buying moment with the small business.”

The Lure of the One-Stop Shop

The average small business owner wants the simplicity and digital capabilities of a consumer bank account, but also needs some of the features of a commercial demand deposit account. The opportunity for banks today lies in making it easy for small business owners to access all the functions and data they need to run their business in one place.

By bringing these products together and creating a one-stop shop—where merchants can not only access banking services but also payroll, insurance, and other essential business tools—banks can deliver a win for both the small business and the institution itself.

“Merchant services can help financial institutions deepen their small business relationships and improve their cross-selling abilities,” said Levin. “Merchant services can help financial institutions grow and protect their deposits—they result in twice the deposit growth versus accounts without merchant services. If you offer the one-stop shop, there’s less reason for the small business to go outside of those banking walls.”

The post How Banks Can Bring Small Businesses Back to the Fold appeared first on PaymentsJournal.

The traditional model of biweekly or monthly physical check payouts is rapidly becoming a thing of the past. For businesses, moving away from checks results in lower processing costs and a reduced risk of check fraud.

While direct deposit offers clear benefits for employees, it’s not always their preferred method of receiving pay. In today’s competitive labor market, an organization’s compensation model can serve as a key differentiator.

In a recent PaymentsJournal podcast, Kristin Ridgway, Vice President of Treasury and Payment Solutions at U.S. Bank, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the changing compensation landscape and the growing role prepaid solutions play in attracting and retaining talent.

“When we think of prepaid it becomes about gift cards—giving money away—and self-use,” Hirschfield said. “The payroll card opens up a window of opportunity that can expand almost exponentially in terms of all those things you can do for yourself.”

A Window of Opportunity

The need for more flexible payroll options is increasing. Businesses often have teams composed of various types of employees, not just long-term, full-time staff. In many cases, the traditional check and direct deposit model can complicate payments to a workforce with high turnover or those consisting of a mix of full-time employees, contractors, and seasonal workers. 

“Prepaid payroll cards can reduce costs and administrative work by minimizing paper checks, and offer greater flexibility in delivering payments as needed,” Ridgway said. “Providing more payment options can improve the likelihood that workers will choose to continue working with that company.”

Building strong relationships is especially important with gig workers, who are often critical to an organization’s everyday operations.

The rise of digital payments has led consumers to increasingly expect flexibility—nowhere more so than in the growing gig economy. Most gig workers don’t work traditional hours or fixed schedules, so they don’t expect their payments to follow a traditional model either.

“If you think about a rideshare driver or an Instacart shopper, many want or need to have access to their pay as soon as they’ve finished their shift or the job,” Ridgway said. “With a traditional payroll system, they might not see those earnings for a week or more. With earned wage access and real-time payments to prepaid cards, they receive their money instantly by loading it to the card and could use it to buy gas or groceries or whatever that same day.”

Since many gig workers contract with multiple companies, prepaid accounts that support payouts from multiple sources are especially valuable. Similarly, a full-time worker who picks up gigs on the side can conveniently receive all their earnings on a single card.

Beyond the gig economy, full-time employees also have the option to direct a portion of their paycheck to a prepaid card. For example, a worker might allocate $100 from each pay period to save for the holidays, budget for dining out, or plan for a big-ticket purchase.

Even at companies with high direct deposit participation, a secondary prepaid account can offer added value and engagement. While an employee may initially use the prepaid card to save for a vacation or receive a gig payout, the card remains active and can support a range of future needs.

“There’s an interesting opportunity to have that worker who has multiple work opportunities—maybe one’s full-time and one’s a gig—to have funding onto a similar source,” Hirschfield said. “They want to be able to use that money exactly how the merchant, or wherever they’re going to spend it, is accepting it. Tying that in is really a critical need, not just a want in this environment.”

Retaining Well-Versed Employees

Paying employees in their preferred payment type is important as more consumers become well-versed in the digital economy.

A consumer who can split a check with friends in near real-time using a P2P service may be disheartened to find that the only way to receive their paycheck is through a scheduled direct deposit to a traditional bank account.

This highlights how alternative compensation models are becoming a critical factor in improving employee satisfaction and retention. As companies come to rely more on a shifting workforce—including seasonal, temporary, and contract workers—their goal should be to provide a consistent experience.

“You really want it to be a repeatable opportunity where you bring that employee back in season after season,” Hirschfield said. “There’s a lot of opportunity to use this type of environment down the line—both with your full-time employees and even with workers that come in occasionally—to make sure they have that positive experience, come back, and recommend your organization as a place to work.”

Outside of retention, reloadable card products are often more cost-effective, especially when compared to issuing paper checks.

Additionally, many prepaid solutions include a mobile app or website where cardholders can check balances and receive alerts. Users can also load funds onto the card themselves through cash or check deposits.

What’s more, prepaid often go beyond the card itself, offering features like interest-bearing savings accounts, cash-back rewards, and person-to-person transfers.

Prepaid cards can be instantly issued, allowing companies with frequent new hires or contractors to keep cards on hand. These can be used for immediate payouts, off-cycle payments, termination pay, or any situation where a payment to an individual is needed right away.

They can also help reduce certain regulatory burdens that businesses face.

“Something I’ve been hearing about more frequently in recent client conversations is escheatment,” Ridgway said. “This is a challenge for businesses that are issuing a lot of paper checks. U.S. Bank retains 100% responsibility for escheatment on our card programs, so this completely eliminates this burden from our clients for any abandoned funds. We follow escheatment rules according to the state where the individual lives.”

Redefining the Landscape

The benefits of prepaid in payroll suggest it’s poised to play a larger role in the compensation landscape—and may even help redefine it.

“I think we’re moving into a new generation of how terms are being used,” Hirschfield said. “I still refer to, ‘Oh, my paycheck was deposited.’ Well, I don’t actually get a check anymore, it’s direct deposited. I think you will see the same thing with prepaid cards. Prepaid cards are part of the function of a much bigger and more powerful set of tools where the card is just the centerpiece.”

These tools allow employees to access their earnings and make transactions in a modern way, which ultimately puts them in the driver’s seat.

“The bottom line is that when people have better access to their earnings, they’re more empowered, they’re more productive and they’re more loyal to those companies that offer those benefits and that faster pay,” Ridgway said. “That’s a win-win for employees and employers and it’s a really powerful differentiator in a competitive labor market.”

The post Taking the Check Out of Paycheck: The Role of Prepaid in Payroll appeared first on PaymentsJournal.

Community banks are the heart and soul of their localities, often providing the spark that helps small businesses achieve their goals. However, the emergence of new technologies in recent years means that more financial services companies are vying for a share of the smaller institutions’ markets.

In a recent PaymentsJournal podcast, Matthew Wilcox, Deputy Head of Financial Institutions Group and President of Digital Payments at Fiserv, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed how community banks can select and implement relevant technologies and utilize the banking-as-a-service (BaaS) model to deliver a unique experience.

A Definitive Role

In addition to heightened competition, financial institutions are now serving a tech-savvy customer base with elevated expectations. Features like digital wallets, faster payment methods like Zelle or Same Day ACH, and account aggregation are increasingly becoming table stakes for every institution.

For many community banks and credit unions, incorporating all of these features can be a daunting task. However, in most cases, they don’t have to be a one-stop shop for every financial service.

“Many of the institutions that we’re seeing in this banking-as-a-service movement—if I can call it a movement—are the community banks,” Wilcox said. “They’re singling out specific use cases that they could play a role in. They’re utilizing their infrastructure and their technology to be a part of that equation of banking-as-a-service. We’re seeing a definitive role for community banks in banking-as-a-service, given their ability to focus in on it.”

Organizations can zero in on niches thanks to the modular nature of the BaaS model. This allows smaller financial institutions to launch new financial products quickly, without requiring substantial capital investment or facing major regulatory hurdles.

A community bank, for example, could use this system to significantly diversify its product line. However, given the rapid pace of innovation in the market, community banks must never lose sight of the factors that make them unique when expanding their product offerings.

“Community banks are not trying to solve for everything, but for the right things,” Wilcox said. “They are focused in on solving for what type of innovation and technology is important to their communities. What are the partnerships and the adoption of technology that they need to be focused in on?”

Finding Technology Evangelists

Implementing new technologies will largely come to fruition through partnerships with financial technology firms. Through these fintech relationships, institutions can introduce features like contactless payments, real-time payments through FedNow or RTP, tokenization, and digital wallets.

Two of the most powerful technologies in recent years have been artificial intelligence and cloud computing. A community bank might partner with a provider offering AI-driven fraud detection solutions or adopt cloud service to better organize and secure customer data.

“It’s about finding a solution for a community, not trying to be all things to all people, but focusing in on what is most critical, whether it’s their geography or the banking space that they’re serving,” Wilcox said. “It’s about community financial institutions using their relationships to their strength.”

While external partners will play a critical role in most banks’ strategies, a shift in mindset will also be necessary when it comes to building and empowering internal teams.

“Community banks are tremendous when it comes to financial acumen, but they are going to need technology evangelists within those community banks to focus specifically on the things that they need to innovate on,” Wilcox said. “The talent that a community bank is going to have to start recruiting is going to be different than the type of people they recruited five to 10 years ago.”

No Business Is Small

Once community banks have assembled their partners and team, they must consider their target customer base. Many community banks may already have established relationships with local industries.

However, one segment that is often overlooked is small business. This is unfortunate, as community banks are often best equipped to understand and meet the needs of local organizations.

“If you think about the small business, I think the community bank does a good job of getting that DDA (Demand Deposit Account) open for that small business,” Wilcox said. “Then they do a good job of getting them either a small business loan or some other form of capital for that small business to start their business, but then they let them be serviced by the retail channel or the commercial channel.”

Developing relationships with local merchants offers smaller banks a powerful way to deepen their roots in the community, where small businesses often play a central role.

“There’s the old saying that no business is small to the person who owns it,” Wester said. “It’s their entire life and they don’t need to be financial experts, that’s not what they do. They are running a small business, so the idea that you can have a community bank that can be your adjunct when it comes to financial services—when it comes to not just that DDA, but access to capital, access to loans—that is so important.”

“It’s one of those areas that I’ve always found to be unfortunately underserved, but there’s so much opportunity,” he said.

Blocking and Tackling

While there are many avenues for innovation, smaller financial institutions will face obstacles as they transition to this new paradigm. Internally, a bank’s geographic location may limit access to top talent, or fierce competition for financial professionals may drive wages too high.

Externally, engaging third-party vendors always introduces risk. Therefore, it’s critical for institutions to understand how their fintech partners operate to ensure all regulatory and compliance requirements are met.

“In the past two or three years, there have been some occasions where vendors have had issues, and I think it’s important for us to go in with our eyes open anytime we’re talking about banking-as-a-service,” Wester said.

“But I don’t think it’s any different now than it has always been in financial services in terms of winning and succeeding,” he said. “Know your business, know it well, and do it well. Pay attention to the blocking and tackling, risk and compliance. Banks that are the winners in this space are the ones that are just well-run banks.”

A Winning Hand

Though there are risks to consider, the potential of the banking-as-a-service model could not only put community banks on par with larger institutions, but also helps them step out of their counterparts’ shadows.

“For a long time, it was always assumed that smaller institutions would be followers, that there were going to be gaps that a smaller institution would have when dealing with different businesses,” Wester said. “What’s interesting is that community banks are positioned now to be leaders. The financial technology that’s available to community banks does put them at par with some of the other banks that we would think would be innovative.”

Banks that view these innovations as a critical milestone—and approach them with a methodical and disciplined strategy—will have a significant opportunity not only to better serve their communities but also expand their reach.

“They know their communities better than the larger institutions do because they’re immersed in those communities,” Wilcox said. “They can find the right mix of that strength with technology innovation, if they don’t get away from the core principles that have made them such a tremendous institution to date. It’s a very winning hand they have.”

The post Remodeling Main Street: How Community Banks Can Leverage the Banking-as-a-Service Paradigm appeared first on PaymentsJournal.

Consumers are inundated with accounts, apps, and subscriptions—often to the point where they lose track of what they’ve signed up for. This can be costly for consumers, but it also prevents financial institutions from gaining a clear view of a customer’s overall financial picture, limiting their ability to offer tailored services.

In a recent PaymentsJournal podcast, Kevin Hughes, Director of Product Management, Aggregation and Information Services at Fiserv, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed how personal financial management (PFM) tools can help consumers stay on top of their accounts—and position financial institutions as the central hub for their customers’ financial lives.

A Unified Representation

With a PFM tool, a customer could visit a dashboard and see their mortgage account balance, recurring payments, and total transaction volume all in one place—saving them the hassle of logging into dozens of apps or websites.

Although all this data is available to the user across various platforms, a unified visual representation can be far more impactful.

“We talk a lot about subscriptions, where customers don’t really have the visibility or, let’s say, the sensitivity to it until they see it all in one place,” Hughes said. “That’s one of the things that is getting a lot of traction these days. I can suddenly see that I have 10 places that I make recurring payments to, and it gives me the opportunity to ask the question: ‘Do I need these?’”

Additionally, a PFM tool gives users another layer of protection. For example, a customer might overlook a suspicious transaction on an account they rarely use, but they could easily spot red flags within a centralized resource.

To make monitoring more effective, notifications play a key role in PFM platforms. For instance, a customer could get a notification if they make a transaction over a certain amount, approach their credit limit, or have a recent withdrawal exceeding a certain amount.

The flexibility to create personalized notifications and interactions helps customers be more proactive about their finances, which could add up over time.

“When you look at all of those subscriptions across a 12-month period of time, it’s amazing how much that means in terms of real money,” Wester said. “A $10, $20, $50 subscription that you don’t think about because it’s maybe over in this account, or you may not use it that much, suddenly you start putting those together and it’s now $500, $600, $1,200 a year that you can save.”

Creating Stickier Relationships

Because consumers increasingly maintain multiple financial services accounts, it makes sense to centralize the personal financial management tool at the user’s primary financial institution, where most of their transactions originate and settle.

During the initial setup, the consumer will need to add their account and subscription information into the PFM. This creates an opportunity for financial institutions to position themselves as the central hub for their consumers in a highly competitive landscape.

“It creates an environment where the consumer—from the bank’s perspective—becomes a little bit stickier to that relationship,” Hughes said. “When you see that trusted relationship at the core of all of your financial relationships, in that one place that you go, it does create the opportunity I think for a higher rate of retention for those customers and the opportunity for some cross-sell.”

Additionally, PFM tools can supercharge an organization’s marketing efforts because they provide the bank with data elements that weren’t previously available. Based on this data, the bank or credit union can then personalize their outreach to the customer.

Even if cross-selling isn’t an institution’s top priority, a PFM’s insights can be invaluable, as they give the bank an accurate view of their customers’ behaviors and financial picture.

“They can make better decisions on pricing, on risk, on scoring, on what products to serve to someone, and I think that’s all good stuff,” Wester said. “It’s good for the bank because they’re able to both grow that relationship, but also make decisions that protect the bank. When you use this data it helps a customer with their financial health, but it also helps the bank operate more efficiently.”

The Central Anchor

Sharing customers’ financial data with other financial services companies is a central tenet of the open banking model, which ultimately aims to give consumers greater freedom and access to better products.

The bar has already been raised. Modern consumers are now accustomed to choosing niche products and downloading multiple applications to meet their financial needs. As these accounts and relationships multiply, they will increasingly rely on PFM platforms to help them navigate this new paradigm.

“With the ability to have those multiple relationships, it’s become more important to have that central anchor, if you will, to be able to keep that stuff in sight and keep it in control,” Hughes said. “We all have people in our lives that we probably see that engage with a lot of different applications and it’s easy to lose sight of them. With the opportunity for more data sharing, it underscores the importance of having a tool like a PFM tool available for customers to keep them grounded.”

Although the open banking model is still relatively nascent in the U.S., it may follow a familiar playbook.

“I liken it to the way we look at healthcare,” Wester said. “I may go see a lot of specialists for lots of things, but I have my family doctor that’s ultimately the place where I go that knows me, knows my health, knows all of the things that all of those specialists are doing. They’re the place that ultimately, I go to hear what should I be doing from a health standpoint.”

“Same thing with PFM,” he said. “It’s for financial health, and I really do think that financial institutions positioning themselves in that same place as a primary care physician, where you have now options through open banking, you have all sorts of places where you can share your data. You can do all sorts of things, but ultimately, if all of that money is coming from that demand deposit account that you keep for paying bills—that is the center of your financial life.”

Whole-Picture Insight

There has often been a misconception that PFM tools are only for high-net-worth individuals, those with complex investments, or people looking for a robust account monitoring solution. However, financial health management is a universal need.

“Everybody can benefit from having that full picture,” Wester said. “If we go back to that idea of subscriptions—everybody has subscriptions. Everybody has a lot of subscriptions, especially now as we start unbundling things like cable and cell service and everything else. Being able to use a tool like that, it does benefit pretty much every consumer.”

There are also significant benefits for financial institutions. As consumer expectations continue to rise, users will expect more customizable and far-reaching oversight of their financial situation.

This means that banks and credit unions adopting PFM tools now will be better positioned to serve their customers in the future.

“We’re going to see less of a one-size-fits-all model and more of a configuration model as we go forward,” Hughes said. “As we move into a standardized model of data and a lot more use of APIs and that interaction, the data set becomes broader and the data itself becomes more reliable.”

“That’s one of the things that as we look at the evolution of data connectivity, those types of things that come out of those different types of models that will lead to just an easier connection, a more reliable connection, and ultimately the insight that can be derived from that—but with the whole-picture insight, not just a part of it at that time,” he said.

The post How FIs Are Cutting Through Subscription Clutter with PFM Tools appeared first on PaymentsJournal.

Although child identity theft has received increasing attention in recent years, most parents don’t discover it—let alone take action—until after experiencing a financial loss. Among families who reported a financial loss due to identity theft, roughly 96% did not have their children included in a family protection plan until after the breach had occurred.

For the past four years, Javelin Strategy & Research has focused on the issue of child identity theft and the risks that threaten children. In a PaymentsJournal podcast, Tracy Goldberg, Director of Cybersecurity at Javelin, and Eva Velasquez, CEO of the Identity Theft Resource Center, discussed the dangers children face on social media and the steps parents can take to protect them.

At Risk of Oversharing

The risks associated with social media are extremely concerning when it comes to child identity theft—and for fairly simple reasons. Nearly every child over the age of 10 has some form of social media presence. This might include school-based platforms, mainstream social media platforms like YouTube, Facebook, or Instagram, and even online gaming platforms like Fortnite or Minecraft.

Having grown up in a digital age where social media has always existed, children are naturally comfortable interacting with others online. They’re also more inclined to share personal information. This makes them particularly vulnerable, as they may engage with individuals they don’t know in real life.

Social media is, by nature, a network. Information spreads rapidly depending on who you’re connected with—and who they’re connected with. If you’re sharing personal details publicly, or interacting with strangers on gaming platforms, you’re exposing yourself to serious risks.

“When I was a child, we were taught to be leery of people you don’t know,” said Goldberg. “Children don’t feel that same kind of concern when it comes to interacting online. The dark web was a powerful place for cybercriminals to hide what they were doing and buy and sell and trade information. But cybercriminals don’t even need the dark web anymore. They can use social platforms to trade information, steal information, sell information, buy information, anything they want right out in the open.”

The Parents’ Role

Even though children have access to many devices and may seem even more tech-savvy than their parents, they don’t always have the critical reasoning skills needed to navigate them safely. Add to that the fact that they are battling criminal enterprises using sophisticated social engineering tactics, and it can be hard for adults to fully appreciate what they’re struggling with.

Parents also put their kids at risk by sharing too much on social media—tagging their kids in pictures or posting when they go on vacation. There’s a lot of education needed across all age groups.

Many parents still hold the notion that when kids are home, they’re safe. That used to be true, but it’s no longer the case. If children have access to a device, particularly one with internet connection, parents can’t assume they are safe. They need a heightened level of concern, just as they would if their kids were playing at a park.

“At Javelin we’ve advised our clients about steps they can take to help educate their customers about provisions that can be taken to help enhance their security,” said Goldberg. “We’ve also suggested that financial institutions or even wealth managers offer identity theft protection or ancillary services that could help make their customers’ accounts more secure. We see opportunities through employee benefits programs, because if your employees and their children are exposed to cyber risk, it ultimately exposes your company to risk.”

It’s a win-win situation for employers to provide security provisions that not only secure corporate-issued mobile device and laptops, but also extend to VPNs for the home network. Since the pandemic, more people have been working in a hybrid environment and are doing work on personal devices. More than likely, if that employee has children at home, they are using the same Wi-Fi connection—and potentially even the same personal devices their parents occasionally use to conduct business.

Protectors from Outside

Another direction the industry should pursue, according to Goldberg, is pushing social media companies to take on a greater role. It took time for the industry to recognize the need to secure e-mail transactions interactions, as phishing became increasingly prevalent. Socially engineered attacks—whether delivered through SMS text messages or direct messages on social media—follow the same pattern.

“What can we do within the realm of DNS blocking or spam filtering that would help prevent these types of interactions from reaching the children to begin with?” Velasquez said. “That’s the direction that we need to move in as an industry. There’s a role for ISPs, mobile carriers, and—importantly—social media platforms to play.”

Social media companies could respond to account takeovers more quickly and thoroughly. Once an account is taken over, it’s no longer under the control of the true account holder.

“Even if their parents are monitoring and doing all the things that they have to do in today’s climate, that scammer is going to bypass all of that because the kids think they’re talking to a trusted adult,” said Velasquez. “They think it’s their auntie or their teacher. Because these accounts are allowed to stay online and active under the control of the scammer for long periods of time, they’re doing a lot of damage.”

The Emotional Toll

Until the industry takes more steps to combat child identity theft, parents will have to remain on the front lines. They should consider not only the financial damage but also the emotional damage and reputational damage that can come from these types of attacks, particularly on social media. The image that teens project to their circle is very important to them.

“Kids who are dealing with this issue sometimes resort to self-harm and even suicide,” said Velasquez. “Please realize how important this is. It’s not just a minor inconvenience or one of those life things you can have to deal with. It can be life altering.”

Communication is key. An important step for parents is learning to recognize the behaviors their child might exhibit if they were being cyberbullied or manipulated in some way. It’s also essential to keep the lines of communication open with the child’s educators. 

“If parents were more in tune with the warning signs, we could address a lot of these things before the consequences become so dire,” Goldberg said.

The post Stranger Danger: Protecting Your Children from Identity Theft appeared first on PaymentsJournal.

Although generative artificial intelligence has powerful proficiencies, its limitations have become more apparent as the technology is deployed at scale. Now, however, Visa and Mastercard have unveiled platforms aimed at giving AI an even more prominent role—AI agents will soon be able to shop and make purchases with minimal consumer input.

In a recent PaymentsJournal podcast, Christopher Miller, Lead Emerging Payments Analyst, Suzanne Sando, Lead Fraud Management Analyst, Don Apgar, Director of Merchant Payments, Jordan Hirschfield, Director of Prepaid, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the barriers to agentic commerce, potential use cases for the emerging technology, and the broader future of AI.

A Vision of the Future

In both Mastercard’s Agent Pay and Visa’s Intelligent Commerce platforms, AI agents are effectively taking on the role of personal shopper.

“In this vision, the agent is everywhere,” Miller said. “It’s making your life easier; it’s saving you time; it’s relieving you of the burdens of your side of any transaction. It can find items for you to purchase, it can choose merchants for you to purchase from, and it can select which form of payment you wish to use at any given point in time. There’s a lot behind that vision, and many technical aspects will have to be addressed for a system like that to operate.”

Beyond concerns about security or accuracy, one of the main barriers to agentic commerce is the need for active customer participation. Until now, organizations have largely implemented AI initiatives behind the scenes.  

Persuading consumers to entrust their payment data to an AI agent will likely require a deeper understanding of AI than many users currently have.

“In the product discussion that Visa had when they did their product launch talking about agentic, one of the things that resonated with me was it was one of the products where people said, ‘We are going to have to pull consumers along,’” Wester said. “’We are going to have to show them and educate them on the magic of agentic commerce.’”

In addition to the awareness obstacle, there is growing skepticism about the accuracy of AI-produced information. While many concerns about artificial intelligence are unfounded, there are documented limitations that could cause consumers to be wary of agentic commerce.

“If you’ve used AI, the answers that it returns are just as often wrong as they are right,” Apgar said. “When you give a shopping agent a test to go find something and buy it for me, it’s not the buying part that worries me, it’s the finding the right thing. In today’s environment, you’ve also got AI hallucinations. It’s not everybody’s worst fear, but if you get a message that says, ‘Hey, I’ve bought this for you’ it’s like, ‘Wait, who asked for that?’”

The Potential for Exploitation

Along with concerns that an AI agent could make a costly mistake, it is inevitable that bad actors will attempt to exploit or manipulate these systems.

On one hand, fraud prevention has been a standout use case for AI, as it can detect suspicious activity across vast amounts of data. On the other hand, the emergence of a new technology connecting consumers, merchants, and financial institutions introduces risks that must be addressed.

“There’s obviously a major need for continuous authentication throughout the entire life cycle of the agent interaction,” Sando said. “At this point, we’re thinking data points, what behavioral analytics can I use to continuously authenticate the consumer to the agent? This is just like any other identity verification and continuous auth scenario.”

“It doesn’t matter what the channel is, whether it’s your digital wallet or you’re going straight to a merchant or you’re using the actual agent, even down to when you’re planning for situations where social engineering is suspected,” she said. “The best scam detection solutions are looking for those real-time clues where social engineering is taking place where a criminal is convincing a consumer to make a certain purchase.”

Many organizations use behavioral analytics to identify such clues—for example, when a user makes a purchase that is out of character or from a significantly different location.

However, if it’s unclear to a retailer whether a purchase is made by an AI agent or a human, it can be difficult for the business to distinguish fraudulent activity. In this scenario, merchants must rely on the agent service to have conducted proper due diligence in detecting illegitimate or unauthorized behavior before initiating the purchase.

Additionally, the services themselves present a potential avenue for cybercriminals exploitation.

“We should be expecting situations where criminals are creating fake websites and apps that offer a similar service,” Sando said. “They’re going to try and convince consumers to sign up for what they think is a legitimate agent service and then in turn, they will be giving up a whole host of PII and payment information and data for this particular scam.”

“On top of that, we should be expecting a surge in text and email scams from fraudsters that are impersonating legitimate agent services,” she said. “Not only do we have to worry about fake services, but now we’re worried about the use of generative AI that has already made impersonation scams easy for criminals to commit. I don’t think it’s at all far-fetched to assume that agentic commerce will be affected as well.”

The Training Wheels

While significant concerns surround agentic commerce, there are also powerful benefits. Many consumers struggle to fully leverage loyalty points, gift cards, and other rewards. In these split-tender scenarios, an AI agent could dramatically impact the customer experience.

“If you can split-tender, I can get the most value for my money by saying it’s going to understand how it can redeem reward points in a stored value account,” Hirschfield said. “How can I benefit if it’s earning more reward points through a particular card that it’s going to use? How does it pick and choose how to split up a payment to buy something that most benefits the consumer, so they get the most value for their money?”

Loyalty and rewards have become integral to prepaid accounts, which may also serve as the bridge connecting consumers to agentic commerce.

“Prepaid can be the training wheels,” Hirschfield said. “Obviously, you need to train the models and you need to train the consumer. With prepaid, consumers are already used to turning money over to prepaid accounts and stored value accounts.”

“Part of the issue is how do I trust a third party—be it the retailer themselves with a stored value account or an agent—with my money,” he said. “If I limit how much I give them and I’m giving them a pot of money, this is a more direct way to program that money.”

Agentic AI could also offer potential benefits for merchants. If a retailer can recognize that an AI agent is making a purchase, it may open the door to a new dynamic in commerce.

“Can the merchant now offer agent incentives to buy at their store versus somebody else’s store?” Apgar said. “If Target and Walmart have the same item and Target is now paying a sales performance incentive fund to the agent to make that purchase at Target versus making it at Walmart, now the merchant has the ability to apply leverage to the automated shopping process.”

The Limits of Imagination

While the impacts on consumers and merchants are yet to be determined, the promise of agentic AI suggests that an entire industry may emerge to power this new paradigm.

“At the end of the day, to the extent that this vision comes to pass, it is the providers of the agents themselves who are most likely to insert themselves as a new layer of the commerce stack and extract some form of value,” Miller said. “We’ve seen this play out repeatedly, so I’m going to suspect that’s who will benefit the most. Whether other participants benefit or not, I think is a TBD.”

Although many questions remain about the trajectory of agentic commerce, there is little doubt that it is gaining momentum. The launches of Visa and Mastercard’s platforms are imminent, and they are likely just the first of many agentic AI-powered initiatives.

“Skepticism is warranted, but this is happening,” Wester said. “If we are saying, ‘I can’t imagine why somebody would do something,’ that shows the limits of our imagination, not the limits of where this is going to go.”

“Approaching this with an open mind and understanding that there is going to be an entire industry of developers, systems integrators, and folks that are going to be aimed at this (is important),” he said. “It’s understanding that this is bigger and important, and we need to understand that in the context of our entire industry, as opposed to just saying this seems like a lot of hype.”

The post The Agentic Advent: How the Next Iteration of AI is Shaping Commerce appeared first on PaymentsJournal.

For mid-sized companies striving to compete with multinational giants, Vertical SaaS has become a game-changer, helping them bridge the gap in their software needs. One of the key factors driving this shift is outbound payments—empowering even the smallest businesses to process payments in real time, leveling the playing field.

Vertical SaaS seamlessly integrates a range of essential functions, like payments, and tailors them to the unique language and regulations of each industry. By offering a suite of interconnected services designed specifically for one vertical, Vertical SaaS has become the go-to solutions for businesses looking to scale and thrive.

In a PaymentsJournal Podcast, Lori Breitzke, Head of U.S. Strategy at B4B Payments, and Hugh Thomas, Lead Analyst of Commercial Payments at Javelin Strategy & Research, discussed the rapid growth of Vertical SaaS and the many benefits these programs are bringing to medium-sized businesses—particularly in the area of payments.

The Evolution of the Solution

Vertical SaaS has taken off in recent years as companies have realized that vertical selling is more effective than horizontal selling. Vertical SaaS offers finance, workflow management, workforce management, and payment services—streamlining operations for its clients, boosting their profitability, and helping them become stronger, more efficient organizations.

Initially, with early players like SAP and Oracle, these solutions were largely one-size-fits-all. They essentially delivered a “relational database in a box” to large corporations, leaving it up to the tech teams to figure out what needed to be measured, how to measure it, and what reports to generate.

As the market evolved and everything shifted online, it became easier to offer out-of-the-box, specialized solutions. This shift was driven in part by the fact that different industries have vastly different software needs. For example, the metrics an accounting firm tracks are very different from those of oil and gas company or a manufacturer. Modern solutions are better equipped to handle industry-specific complexities—like presorting requirements—that not only vary widely across sectors but are also becoming more intricate by the day.

“Vertical SaaS companies are speaking in the language of that vertical,” said Breitzke. “Oil and gas is going to speak differently from healthcare. By using those terms and using that language, it’s making for a much better user experience.”

Making Payments Faster

Take, for example, companies in the construction industry, which face challenges unique to their field. Managing payments to multiple subcontractors and suppliers often requires waiting on invoice approvals, leading to delays and operational slowdowns. Relying on checks or manual invoicing further slows disbursements. As a result, contractors wait an average of 54 days to get paid, with 83% resorting to liens due to these delays.

“We’re still seeing a lot of checks and a lot of ACH,” said Breitzke. “The numbers from NACHA on same-day ACH are going through the roof because people really need their money now. Automating payments and getting away from those traditional payment methods will help suppliers get paid faster. Certain suppliers will give discounts to businesses if they get paid faster, so that’s going to improve their cash flow as well.”

“If you’re waiting that long to get paid, your credit could get bad,” she said. “You’re missing out on making other payments that you need to make because you don’t have that cash flow. Embedding outbound payments is one of the critical features of a Vertical SaaS platform, reducing the administrative workload.”

Driving Toward More Efficient Payments

One key goal for Vertical SaaS is to squeeze as much non-productive capital out of the flows as possible. A check in the payment flow could result in a one- to three-day delay between invoice, receipt and approval—and when the actual payment finally lands in the hands of the suppliers. Whenever companies can move away from these slower payment processes, suppliers stand to benefit.

Checks are an increasingly antiquated system, with use cases dwindling by the day. The more a system can be built to anticipate the sunsetting of checks, the better off the process will be.

Globally, there’s a shift from a regulatory perspective toward reducing slack in the payments space. In particular, governments are looking to curb balance sheet building by large buyers at the expense of small suppliers. While regulatory mandates around specific payment timeline have not yet been introduced, there have been moves aimed at accelerating the system. This includes a push toward real-time payments, improved reporting, and greater transparency—allowing suppliers to highlight when certain buyers are consistently slower to pay.

The Efficiency of the Economy

Small businesses may be the backbone of the U.S. economy, but they’re often strapped when it comes to working capital. Whenever there’s an opportunity to shift more payment responsibility from large buyers to their small suppliers, it’s a net positive for the economy.

The emergence of the gig economy has also brought solutions like this to the forefront. A business may have a large but atomized base of small suppliers to pay, and they want to settle those payments as quickly as possible. The ability to push a payment through an option like a virtual card solution—as soon as goods or services are rendered—is almost a must in the gig economy.

“You want to be looking for a partner who understands the space in terms of ability to write credit for it and to monitor and manage risk such that they are making sufficient risk-adjusted returns on capital as a bank,” said Thomas. “Expertise in the space is absolutely key from a risk writing perspective, but also from a process perspective too. Having your financial partner understand the unique process needs is absolutely key in succeeding with something like this.”

Compliance is another critical factor, especially in highly regulated industries like oil and gas or healthcare. It’s crucial to receive proper reports confirming that the partner company is compliant and has appropriate anti-money laundering controls in place.

The true strength of Vertical SaaS is its ability to accommodate all of these industry-specific challenges by connecting disparate but related concerns—like compliance and payments—under one solution.

“That’s something that I would recommend companies look at when they’re looking for a partner,” said Breitzke. “They’ve got their own vertical industry compliance needs to worry about, so they don’t want to have to deal with that. Let us worry about those payment compliant things.”

The post From Underdogs to Industry Leaders: How Vertical SaaS Powers Mid-Sized Firms appeared first on PaymentsJournal.

As digital connections have fostered a global community, the demand for cross-border payments has surged. And yet, the cross-border payments paradigm—where correspondent and intermediary banks work with originating banks to process payments—has remained largely unchanged for the past 50 years.

In a recent PaymentsJournal podcast, Gary Palmer, President and CEO of Payall Payment Systems, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the limitations of global payments systems, the emerging solutions to cross-border payment challenges, and the potential impacts on the global payment landscape.

Coining a Phrase

The current model for cross-border payments relies on a patchwork of banks. One of the main issues is that many of the core banking systems these institutions depend on have been in place for decades.

Another issue is that many banks operating in the cross-border space have a limited scope. They tend to focus solely on the specific products they are licensed to offer in a given area—such as bank accounts, car loans, or mortgages.

The combination of outdated technology and narrow focus has made an already complex process even more daunting, leading many institutions to hesitate before entering the market.

“I have coined a phrase—that cross-border payments and correspondent banking for cross-border payments are governed by fear and friction,” Palmer said. “When you introduce the concept of cross-border payments, now you’re dealing with multi-jurisdictional issues, you’re dealing with multiple currencies, you’re dealing with Know Your Transaction complexities that change all the time. You’re dealing with sanctions checks that extend beyond your border.”

“It’s a whole area of subject matter expertise that the core banking systems and the usual players in this technology have never addressed,” he said. “It’s the elephant in the room of why there’s fear and friction.”

An Opaque and Mysterious World

Adding to the friction, over the last decade there has been a 25% reduction in the number of correspondent banks. Even as cross-border trade has grown—and is likely to continue growing—the entities that facilitate it have declined.

This puts even more pressure on the existing correspondent banks, which are already struggling under the weight of manual processes. For example, a correspondent bank looking to onboard an originating bank must verify that it is a legitimate entity—a process includes a 100- to 300-question due diligence Excel worksheet and extensive document requests.

“They make sure they have good AML policies, they complete the Wolfsberg Questionnaire, they go through critical infrastructure,” Palmer said. “Then they say, ‘OK, Mr. Bank, we trust that you’re not going to do bad things or lie or that your customers do bad things when you send money around the world.”

“That’s generally how the system works, it’s manual” he said. “The whole relationship is built on an inefficient relationship of manual documents, manual checks, and manual revisits of that relationship. The counterparty risk of a manual system like that is the foundation of why there’s fear and friction.”

In addition to inefficiencies, there is a lack of transparency. For instance, an originating institution might make a payment through a correspondent bank to an intermediate bank, ultimately reaching a final financial institution.

The bank at the last leg of the process has limited visibility into how effectively the originating institution executed their Know Your Customer, Anti-Money Laundering, and other compliance checks.

“It is amazing to me how little people understand correspondent banking,” Wester said. “When they need to send a payment overseas or over a border into another country, how little they get what’s going on in the background. The fact that it has been so resistant to change, given how much everything else has changed around the world in technology and in financial services specifically, means cross-border remains this sort of opaque and mysterious world.”

A Big Bug in the System

Even though many institutions want to dispel the opacity around cross-border payments, there are three conditions that prevent banks from having the capital and the resources to innovate.

“One, it’s protecting their systems and their data from the bad actors all around the world,” Palmer said. “Two, some banks have hundreds, others have thousands of third-party and home-grown systems, and these systems have to be fed and maintained with updates and patches and reboots, and that sucks a lot of resources away. The third thing is the bank’s existing core products are constantly facing regulatory changes.”

Many financial institutions are also resistant to change. As a result, cross-border payments under the current framework tend to be expensive, the service is often inadequate, delivery times are slow, and there is a pervasive lack of transparency.

However, not all of these aspects are necessarily seen as disadvantages—especially in the case of delayed settlement, which can sometimes be beneficial.

“People coming into the space might look at that and say, “Oh, that seems to be a big bug in the system,’” Wester said. “But when you’re coming at things from ‘my job as a financial institution is to mitigate all the risk on my side’, what you’ll find is that a lot of the folks don’t look at all of that as a bug. That’s a feature that’s protecting them.”

“They aren’t looking at it from the perspective of ‘Gary needs to send money overseas, let’s make it easy on Gary,’” he said. “They look at it from a money and a risk mitigation standpoint. It’s ‘I’m not really worried about Gary. He can’t go anywhere else, so he’s going to have to deal with the system the way it is.’”

The Most Powerful Correspondent Bank

While payment delays may give an institution the time it needs to conduct manual compliance and risk mitigation checks, they can cause substantial frustration for the sender. This frustration is only exacerbated by the efficiency of consumer payment systems where transactions are increasingly moving toward real-time, transparent settlement.

These heightened expectations, coupled with surging cross-border payments demand, are driving a shift in the paradigm.

“The topic that we’ve called opaque and filled with friction in the last 50 years has become a topic that every financial institution, every fintech, every financial technology vendor, everybody wants to talk about,” Wester said. “I think it’s just the sheer weight of everyone realizing that things have been broken, or at least weren’t delivered as well as they could have been.”

“Everybody’s now beginning to realize that cross-border transactions are the low-hanging fruit,” he said. “They are an opportunity.”

Two of the main organizations taking advantage of this opportunity are Mastercard and Visa. These credit card companies have built global cross-border payments empires based on three main assets.

First, in nearly every country where they operate, they are connected to local bank transfer systems. This allows them to pull money from a card issuer and send it to a card acquirer located elsewhere in the world.

Second, Mastercard and Visa maintain substantial global liquidity in every currency they trade. This enables them to pull money in the card issuer’s currency, convert it, and deliver it in the local currency of the country where the card was used—whether at an ATM or point of sale.

The third asset is their role as credit card companies managing roughly $2 trillion of foreign currency trade, which allows them to set foreign exchange rates.

“If we forget for a second that Visa and Mastercard have a card business and just think about those three assets—bank transfer connectivity, massive FX trading efficiency, volume and foreign liquidity capacity—these three assets are extraordinary,” Palmer said. “When you combine that together, it looks like the coolest, biggest, most powerful correspondent bank on the planet.”

Taking the Market by Storm

These cross-border networks have advanced to the point where credit card companies have given them their own brands: Visa Direct and Mastercard Move. For banks and credit unions, these systems can represent a significant upgrade from the traditional correspondent banking model.

This means a bank could contact Mastercard Move and specify the sender’s and recipient’s currencies and locations. The platform can then deliver the payment to a bank account, a mobile money account, a digital wallet, or even as cash. This functionality is available in roughly 60 countries, and most transactions are processed in real time.

Additionally, all parties will receive an email or text message confirming delivery. The platform can also specify the exact amount the recipient will receive, without FX volatility or foreign transaction fees charged by the receiving bank.

“Mastercard has developed a cross-border product and Payall makes it easy for financial institutions to get live with Mastercard whilst providing a host of other risk and compliance capabilities,” Palmer said. “Think of us as the cross-border processor into Mastercard Move to allow a bank to deliver a payment to 90% of the world’s population, whether they’re banked or unbanked. It’s nearly real-time and super-efficient, with great FX rates and confirmed delivery.”

“It’s all the things that a bank customer wants and needs, and it’s priced in a way that the smallest credit union to the strongest regional bank can still make good money on it,” he said. “This is a breakthrough. This is a new paradigm, a new alternative to correspondent banks, and it’s taking the market by storm.”

The post Fear and Friction in Cross-Border Payments: The Alternative to Correspondent Banking appeared first on PaymentsJournal.

For the 18th year running, gift cards topped wish lists as the most requested holiday present—solidifying their role as a cornerstone of seasonal giving¹. With more occasions to gift than ever before, demand is surging, and retailers can’t afford to miss the opportunity.

Insights from the 2025 Best Digital Gift Card Programs, Consumer Experience Benchmark Report, conducted by NAPCO research in partnership with Blackhawk Network (BHN), look at the trends behind this booming market, exploring who’s buying and why, and the retailers that are staying ahead of the curve. In this PaymentsJournal Podcast, BHN’s Sarah Kositzke, Global Research Lead and Hilary Spidaliere, Director of Product Marketing, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research discussed what leading brands are doing to keep their gift cards front and center with consumers—and how they’re using them as a powerful growth engine for their businesses.

The Gift Card Opportunity

By 2028, the gift card market is projected to hit roughly $267.3 billion, with the digital gift card segment expected to soar to $115.3 billion. Clearly, gift cards have evolved far beyond a holiday-only trend. Consumers are now snapping them up year-round, taking advantage of promotions, loyalty points, and rewards. When brands create loyalty programs that benefit both the buyer and the user, they transform gift cards into a 365-day opportunity for customer engagement.

Kositzke shared that while nearly every type of buyer purchases gift cards, the buyer demographic tends to skew male, with a strong presence among Gen Z and millennials. The findings also show that gift card purchases are more common among married individuals, or individuals in a relationship, with children at home, as well as Gen Z and millennials.

Physical cards still account for the majority of purchases, but it’s worth noting that nearly half of consumers are also buying digital gift cards.  

Research from this past holiday season shows that consumers received an average of about three gift cards, with a total combined value of just over $200. When the recipient isn’t nearby, digital cards are often the preferred choice. The report also found that nearly half of all gift card buyers are opting for digital formats, which are increasingly popular for smaller purchases.

“We are seeing more of what you might call micro gifting,” Spidaliere said. “Especially as more people are remote or hybrid or have friends and family across the country, you may want to send $5 to say thinking of you or congratulating them.”

Thinking about where consumers are buying their gift cards, Physical retailers who sell multiple gift card brands remain the leading point of purchase, closely followed by the brand’s own physical stores. However, there is one generational exception: among the youngest respondents—particularly Gen Z and Gen Alpha—physical stores are the clear favorite.

When it comes to digital gift cards, “We’ve seen a lot of parents who would prefer that their kids didn’t overcharge their credit card,” added Kositzke. “That lends itself to a digital platform, because the kids just want to be able to use the card online, whether it’s gaming or shopping or whatever it might be.”

When shopping for others, the average buyer purchases around four gift cards—typically one of which is digital. However, when buying gift cards for themselves, consumers choose digital formats more frequently, with two out of four being digital.

“I think that’s a really good indicator of the progression of the market,” said Hirschfield. “It was 70% physical a couple years ago, but we’re converging on this long lasting 50/50 equilibrium between digital and physical.”

About the Research

For the latest BHN survey, NAPCO research evaluated 100 U.S. merchants across 17 industries, including department stores, fashion, entertainment, home improvement, consumer electronics, and convenience stores. The study assessed more than 120 criteria, focusing on areas such as discoverability, purchaser flexibility, faceplate design options, and payment options.

Spidaliare noted that the research expanded to include the ability to send an e-gift card via messaging apps or text, in addition to evaluating the purchasing experience via email. While email remains the primary channel for driving engagement, shifting demographics suggest that may not last. Reaching audiences in the right format is becoming increasingly important, especially for those who are unlikely to open emails—or may not even use email at all. These consumers want to discover gifts quickly, whether they’re scrolling through text messages or browsing on social media.

“We see a lot of growth right now in SMS delivery and also direct into merchant app delivery, different ways of getting the gifts into their hands that are most accessible to that recipient,” said Hirschfield. “Some of that is about training the giver on how to get the card to the recipient in the best form factor. We’re seeing movement there, and I think it’s going to continue on a pretty rapid pace.”

Brand’s Own Gift Card: 2025 Results

Staples secured the top spot this year, followed by Amazon, while Best Buy, Sephora, and Target tied for third place. Staples expanded the reach of its B2B program and increased availability across several credit card rewards programs.

“Staples had great discoverability,” said Kositzke. “Across all different devices—on a desktop, in mobile apps and on the mobile web—we were able to find the Staples cards very easily. They had an excellent mobile experience and purchase flexibility, and just an enjoyable recipient experience.”

The top ten brands in the report generally ran more gift card promotions and explored new ways to amplify both brand and merchant visibility. One of the most notable areas of improvement was mobile web usage. Leading brands made it easier for consumers to find gift cards through their apps and provided multiple options for sending them.

“All of the top ten got high scores for their app experience,” said Spidaliere. “All ten had an app with their gift card program included there. Your most loyal customers are your app users, so it’s really important to make sure gift cards are prominently available there.”

Key Takeaways to Consider

The report focuses on specific details around how merchants can build and best leverage a digital gift card program for their brand. For merchants unsure of where to start—or how to grow their own gift card efforts—Spidaliere offered a few best practices to consider:

• Feature your gift card program prominently on your website and in your app, ensuring it’s easy for customers to find and access.
• Simplify the self-use purchase path by removing unnecessary steps for consumers who are purchasing for themselves.
• Allow credit card reward points to be redeemed for your brand’s digital gift cards to help expand the program’s reach and attract a new audience.
• Protect against gift card fraud by securing the digital gift card purchase and delivery process.

“We encourage merchants to conduct a benchmark of their own program, so we’d recommend you use the criteria from this year’s study as a framework,” Spidaliere said. “Go through your own purchase and recipient experience across all your devices, determine what’s working well and anything that you need to work on.”

To read the Consumer Experience Benchmark Report: 2025 Best Digital Gift Card Programs, conducted by NAPCO Research in partnership with BHN, or to watch the webinar, click HERE.

¹ NRF 2024 Holiday By the Numbers

The post The Gift Card Boom—and What’s Driving It appeared first on PaymentsJournal.

When a driver misplaces their fleet card or uses it to fuel a personal vehicle, the consequences can be significant for the organization. Shifting to digital payments can help alleviate these pain points, yet many fleet managers have been hesitant due to concerns about maintaining control.

In a recent PaymentsJournal podcast, Parker Pierce, Senior Product Manager at Highnote, and Ben Danner, Senior Credit and Commercial Payments Analyst at Javelin Strategy & Research, discussed the challenges fleet managers face with current payment systems, the benefits of emerging technologies, and strategies for modernizing fleet payments.

Tokenizing Payment Prompts

One of the main barriers keeping fleet managers from adopting mobile payments is that fuel cards operate differently from many other credit cards. They have purchase restrictions built into their EMV chips, which dictate whether the card can be used for fuel, maintenance, or other products.

These chips can also have built-in security prompts that require the driver to enter their driver ID or mileage before a purchase is approved.

In the past, when a fleet card was tokenized and added to a digital wallet like Apple Pay or Google Pay, these purchase restrictions and prompts were not carried over. This was a dealbreaker for many fleet managers, who didn’t want restricted products, such as a fuel-only card, to act like an open card when added to Apple Pay.

“That’s changing now, as we’re seeing support added from the payment networks and the issuers,” Pierce said. “Now, when you tokenize your card into Apple Pay, if it was a fuel-only card on the physical side, it’s going to act like a fuel-only card in the Apple Pay wallet, which is a huge innovation. All the advantages for digital payments carry over to fleet—without that added risk of losing those restrictions that you wanted.”

Digitizing fleet payments also allows managers to expand their control over transactions. With a physical card, security prompts are built into the EMV chip when the card is issued. If it is initially set to request a driver ID, it will prompt for this information on every transaction for the card’s lifetime.

With an application, the fleet manager can adjust these prompts as needed.

“For one driver, they may want to put in a driver ID,” Pierce said. “For another driver, they may want another type of question for security reasons or just for tracking different types of information. For some drivers, they may ask them one question, while for another driver, they might have three, based on their route or their risk profile. Beyond just the ease of use, there’s also added benefits of security and flexibility for these app-based solutions.”

Embedding Fleet Payments

Once the door to digital payments is opened, fleet managers can leverage a host of other innovations. For example, some companies offer apps that can connect a device to an automated fuel dispenser (AFD), allowing drivers to pull up to the pump and complete the transaction directly from the app, dramatically reducing friction.

Additionally, emerging technologies could accelerate this process even further.

“Looking towards the future, what I think is exciting are embedded devices, which are beyond even the phone and the physical card,” Pierce said. “It’s that same EMV chip that’s in a physical card but put into some other entity. For a driver, they could have a key fob that is enabled for payments.”

“It can get really exciting to start combining these technologies—to have a key fob mixed with an AirTag, all in one on the driver’s key chain,” he said. “Then they can just come up and tap-to-pay with their key fob and their location is being tracked as well. We’ve heard about this with clothing, bands, and watches. There are all sorts of exciting things coming down the line on the payment instrument front when we talk about embedded devices.”

The Persistence of Physical Cards

Though there are real-world use cases for these emerging technologies, one thing is clear: physical cards aren’t going away anytime soon. Just as they continue to resonate with consumers, physical cards remain in demand for fleet operations for several reasons.

Some drivers may not be tech-savvy and lack the know-how to download and use a payment app effectively. Others may simply prefer the familiarity and reliability of physical cards.

On certain rural routes, drivers may not have reliable cell or Wi-Fi signals to complete a transaction. Additionally, some fueling stations may not yet support tap-to-pay.

For these reasons, most fleets won’t be able to fully phase out physical cards.

“As excited as I am for digital, there is still a place for physical cards,” Danner said. “The future will be more of what we’ve been calling a ‘strategic coexistence of different payments products together.’ It isn’t an all or nothing thing. You can have drivers with physical cards that want to bring them into the digital space, or you can continue to have physical cards in the mix.”

“You could have your physical card on you and still have that card embedded in your mobile device, and then it’s up to the driver to make that choice,” he said.

Balancing Digital Payments

Fleet cards keep drivers on the road, so managers want options that make fuel and fleet maintenance purchases as frictionless as possible. However, they must constantly balance ease of use with risk and fraud considerations.

“At the same time, those same fleet managers need accessible tools so they can manage the spend for their drivers,” Pierce said. “They need to be able to analyze that spend after the fact to reduce fraud. Not just looking at a report of what happened, but being able to see things like real-time alerts when a transaction occurs that’s over a certain amount or maybe at a location that isn’t on a driver’s particular route.”

Additionally, fleet managers seek efficiency gains by minimizing manual processes, such as capturing receipts. They also aim to control costs by leveraging the powerful rebate and fuel discount programs offered by commercial cards.

Digital payments enhance these efforts. With smartphones and payment apps now ubiquitous, the learning curve is often shorter—and drivers are less likely to misplace a phone than a physical card.

The risk of device loss drops further when company-issued phones with location sharing are used. This data can also help organizations monitor transaction locations and reduce fraud.

Digital payments offer another key benefit: drivers don’t need to visit the office or wait for a card in the mail. Instead, they can receive a digital card, load it onto their phone, and begin using it right away.

Perhaps most significantly, digital payments accelerate transactions—delivering speed alongside convenience.

“There’s something to be said for digital payments and reducing friction at the point of sale,” Danner said. “All of this is controlled in a unified mobile experience without having to reach in your wallet and fumble and look around for that physical card. Everything is going into this digital world and that goes a long way toward reducing friction.”

The Best of Both Worlds

While physical cards remain reliable, the benefits of digital payments suggest that fleet companies should consider a hybrid approach. However, the added complexity can leave many fleet managers uncertain about the best path forward.

“First and foremost, fleets need to consider what are their biggest pain points right now with payments,” Pierce said. “Is it lost physical cards? Are you having trouble with friendly fraud, like a driver letting someone borrow the card or using their card to fuel up their personal vehicle? Do you have a lot of remote fuel locations?”

“Beyond that, how do you manage your cards—is it per driver or is it per vehicle?” he said. “Do you provide company issued phones or not? Lastly, how tech-savvy are your drivers? Fleet managers need to consider all those things and then decide: do we want to go fully physical cards, fully digital or most likely, are we going to have some mix of both that best fits our situation?”

The post Driving Into Digital: How Modernized Payments Platforms Impact Fleet Management appeared first on PaymentsJournal.

Financial institutions have traditionally been risk-averse, relying on tried-and-tested products and services. However, transformative innovations—such as real-time payment rails, artificial intelligence (AI), ISO 20022 adoption, and increasing demands for cybersecurity and fraud management—along with a constantly shifting regulatory backdrop—are making it critical for organizations to adopt new technologies.

In a recent Payments Journal podcast, Radha Suvarna, Chief Product Officer for Payments at Finastra, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the trends shaping the financial services industry and how organizations can seek new opportunities while keeping security and compliance top of mind.

Resilience Amid an Unpredictable Future

One of the main trends impacting the financial industry is the growing expectation—among customers, partners, and regulators—of what a bank should be.

“Let me call it resilience,” Suvarna said. “Given the growth of real-time payments globally and the criticality of payment infrastructure to the local economies in many countries, we are seeing a lot of regulators who are starting to expect more from banks, both in terms of platform availability as well as disaster recovery requirements. In turn, expectations around 24/7 service and responsiveness have increased.” 

Finastra has developed our Global Payments Framework (GPF) to underpin the modernization approach for our suite of payments and financial messaging products (see below).

Many small to mid-tier banks are unprepared for new payment formats coming down the road, such as ISO 20022. This makes speed to market increasingly important, allowing these banks to comply with the new specifications before they become mandatory.

Another trend impacting the industry is the move to combine multiple rails into a single payment hub. This approach centralizes a financial institution’s payment processing, simplifying the technology stack, streamlining operational processes, and enabling innovative use cases.

At a broader level, organizations across industries are adopting cloud-based solutions. In the financial sector, banks and credit unions of all sizes are leveraging these platforms to move away from costly data centers. Instead, a technology vendor can manage the payments orchestration end to end.

Another overarching trend is the adoption of generative AI in various forms. For example, Agentic AI solutions are both enhancing the customer experience and improving operational efficiency.

Whilst the potential of these trends is clear, navigating the path to adoption can be extremely challenging.

“There’s so much complication on the business side, and now the technology departments are being told you need to be ready to do all of this. Also, can you anticipate everything that’s going to happen in the future?” Wester said. “With things like Gen AI, do we really know exactly what’s going to happen with that? No, we don’t. You now have to future proof against a future that used to be somewhat predictable, but now is completely unpredictable.”

Playing Offense with Payments Modernization

Though these emerging payments technologies may seem daunting, they are ultimately just tools that financial institutions can use to fulfill one of their most fundamental functions: moving money from one account to another.

With this mindset, organizations can begin to break down the elements of payments modernization that will have the greatest impact on them.

“In my mind, the business case and the business value around modernization should be seen in two lenses—I would call them offense and defense,” Suvarna said. “On the offense side,  modernization should drive product innovation and enhance the customer experience, whether it’s faster and immediate funds availability for cross-border payments, greater transparency, or a reduction in cost.”

An example of playing offense would be embedding payment initiation within a customer’s ERP system. In the past, users may have had to upload files with batches of payments to the bank’s website. If customers were able to integrate payment initiation directly inside their ERP systems, it could be a game changer in many use cases. Also, a highly configurable solution means banks can avoid risky and expensive customizations, allowing them to introduce new rails, features, and process payments around the clock without upgrading the entire payments system.

Another way to play offense is by incorporating intelligent payments routing, or smart routing. When multiple payment mechanisms are available—such as a real-time payments or wire transfers—smart routing can help determine the best option based on a wide range of criteria such as speed and cost.

This same principle can be applied to cross-border transactions, which have traditionally been a pain point in payments. Smart routing technologies could evaluate options like Swift, Visa Direct or Mastercard Move to determine the best way to send the payment.

Another offensive maneuver could be streamlining the payment reconciliation process. For instance, ISO 20022 has a flexible and XML-based structure where the invoice amount, invoice number, and other data can form part of the transaction payload. This additional information can make it much more efficient to reconcile payments and invoices; or automate the process completely.

“The next stage is how do we leverage the specification to drive incremental value to the customers, and go after the customers that the banks don’t have today?” Suvarna said. “All of that is possible through modern technology and architecture. That’s all offense—to drive incremental market share and incremental customer and business value.”

Protecting Against the Downside

Though it is critical to be proactive to stay competitive, financial services organizations can’t forget their foundations.

“At the end of the day, financial institutions are about compliance,” Wester said. “They are about risk management, governance, security, and all those things have reasserted themselves. We want to bring in new clients and deliver them delightful products, but still—as a financial institution—you need to be paying attention to those things.”

Defending against the downside means that financial institutions must stay abreast of new regulations, which are constantly changing. For example, as real-time payments become more prevalent, they will likely be governed by a more stringent set of rules than those that apply to other payment types.

This is because when an instant payment is sent, it is irrevocable. In contrast, the delays inherent in ACH transactions allow for payment to be reversed in cases of error or fraud.

Fraud, scams, and the increasing sophistication of cybercrime are critical threats to all organizations, but especially to financial institutions. That’s why building and maintaining strong fraud prevention capabilities is an essential part of playing defense.

“That’s the number one topic that we hear from both financial institutions and vendors now is that discussion on risk, compliance, governance, security, and they’re all changing very quickly,” Wester said. “Those same macro trends and micro trends apply to what bad guys are doing and how they can do what they’re doing, and the risks that are in the market.”

A Maniacal Focus on Customer Value

These risks, coupled with an uncertain future, have kept many financial institutions on the sidelines, waiting for a moment when it might be more convenient or less expensive to modernize their payments stack. However, institutions that delay modernization now will be even less prepared for what comes next.

“It’s exciting times, but it means that this is one of those things where I like to say, ‘There is no destination, it’s all journey,’” Wester said. “You’re never going to get to the point where you can say, ‘OK, we’re modernized, we don’t have to deal with this anymore.’ Understand that everything is changing, is going to continue to change, and over the horizon there are going to be more changes.”

In this shifting landscape, the first step in the payments modernization process is to embrace the change, get comfortable with it, and adapt the mindset to deliver value around the unique business and customer needs that a modern, agile solution can address.

“There is no one-size-fits-all solution in my view, but customers want scalability that is hosted by the vendor,” Suvarna said. “It’s more modern, resilient, and multitenant, which makes it a bit more cost effective for them. We need to adapt the modernization agenda, an objective that is number one.”

Once these needs are clear, financial institutions should explore how they can leverage partnerships and third-party solutions. For example, a cloud-based platform like Finastra’s Payments To Go, hosted on Microsoft Azure and designed for mid-tier banks, can serve as a plug-and-play solution, offering institutions scalable, secure, and around-the-clock functionality.

Partnering with a robust payments modernization provider can take the heavy lifting off financial institutions, allowing them to refocus on what they do best.

“Above all, it is critical to maintain a maniacal focus on delivering customer  and business value, whether it is internal stakeholders or external stakeholders, and avoid distractions from the next shiny object,” Suvarna said. “Having a deliberate strategy, sticking with it, and keeping the eye on the ball is going to be critical. That approach ensures the best modernization outcomes for the institution and the customers we serve.”

The post Playing Offense and Defense: Why Now Is the Time for Payments Modernization appeared first on PaymentsJournal.

A critical factor is often overlooked when focusing on improving the customer experience: ensuring payments go through successfully. A failed payment is more than simply a lost sale. It can lead to wider-scale revenue impacts and erode customer confidence over time.

In a recent PaymentsJournal podcast, John Winstel, VP of Optimization Product at Worldpay, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the factors influencing authorization rates and examined how even small improvements can drive gains in both revenue and customer satisfaction.

The Four Pillars of Payments Authorization

Why do payments fail? For many reasons, actually, such as technology failures or inaccurate payment data. A payment may also be incorrectly flagged as suspicious and declined if a merchant’s fraud prevention tools are misaligned. These issues are even more pronounced in e-commerce, where the risk of fraud is higher and declined payments are more common.

Thankfully there are four primary components for optimizing payment authorization to address these issues. The first is consumer optimization, where an organization focuses on streamlining the checkout experience with a focus on the customer experience.

“In my own experience, I love it when I’m shopping at a merchant that is new to me or I don’t shop at very often and they have Apple Pay as a way for me to complete that transaction,” Winstel said. “It’s so easy to do, and you’re not having to fill in all your billing and shipping card information. It’s creating that seamless experience for consumers that is key.”

Conversion optimization—the second factor influencing payments authorization rates— ensures the merchant always maintains the most updated customer credentials on file. The third aspect of authorization optimization is risk optimization, which remains a constant challenge for many organizations.

“We’ve done some studies internally looking at how having a strong fraud authentication strategy can lead to not only benefits from a fraud savings perspective, but you also start to see a huge uplift in your issuer approval rate when you have your fraud rates below six basis points or less,” Winstel said. “You see double-digit growth in your issuer approval rates because those issuer models are viewing that traffic as being much safer.”

The fourth and final pillar of payments authorization optimization involves optimizing for cost, where we identify the most cost-effective way to route a customer’s payment. While keeping all four of these considerations in mind is difficult, the optimization process becomes even more challenging because merchants aren’t operating in a static environment. If a busy retailer has predictable periods of lower activity, they may shift gears to better meet customer demand.

“Slower response times coming in from certain networks may deprioritize those routing paths over faster paths,” Apgar said. “Even though they are more expensive, it will produce better throughput at the point of sale and ultimately a better customer experience. It’s a dynamic environment because you can’t ever optimize in a static prioritization.”

Lightening the Workload

Fortunately for merchants, effective tools do exist to combat complex authorization rate optimization and take care of the heavy lifting. For example, to optimize the conversion aspect, retailers could employ account updaters which utilize artificial intelligence (AI) to ensure the merchant is using a customer’s most current card information.

Similarly, network payment tokens—the digital identifiers issued by credit card companies to replace primary account numbers—can be leveraged to obtain the most accurate card data.

Another component of conversions is the retry process. In many cases, retrying a payment could result in success but many organizations don’t have the bandwidth to continually retry payments. This is where AI can play a role by powering a smart retry system that can mitigate many payment failures.

When it comes to optimizing costs, debit routing solutions can identify the least expensive rail including PINless routing, which leverages regional debit card networks so customers don’t have to enter their PIN at checkout.

Fraud management tools are also critical, but organizations must balance fraud prevention with authorization optimization to minimize false positives. Additionally, merchants need tools that account for their specific regulatory environment—and even issuers’ individual preferences.

“Do they want to see 3DS authentication?” Winstel said. “Would they rather see a TRA exemption? And if you do have those declines when you send an exemption through, what is your acquirer doing from a soft declined perspective? Is it a hard decline that the customer sees or is it something where it just goes back and sends it through for 3DS authentication?”

“Leveraging those tools can ensure that you’re having the highest auth rates and you have a plan for recovering revenue,” he said.

Data at Their Disposal

It’s somewhat baffling that one of the most important tools merchants can leverage is data, yet many of the largest retailers only have access to their own datasets. Using a payments authorization solution can quickly open more doors.

“Our fraud models are informed by the over 20 billion transactions that we see across the breadth of Worldpay, and that can create such strong impacts in terms of managing fraud—being able to pick up and detect those fraud attacks before it hits those merchants,” Winstel said. “They have that benefit of this huge ecosystem, which we can also take into account to understand issuer preferences.”

With a broader spectrum of data at their disposal, merchants can make more informed decisions and build stronger models.

“The logic—whether it’s machine learning or AI—that drives the real-time reprioritization of the attributes of the transaction can be done in a predictive manner, as opposed to a reactive manner,” Apgar said. “That has got a lot more potential to drive stronger performance overall than an individual merchant just doing it with their own data.”

Uncovering Additional Revenue

In the simplest of terms, higher authorization rates lead to greater revenue so investing in a payments authorization solution  should be a no brainer.

“A higher auth rate translates into higher sales,” Apgar said. “Better risk management translates into lower chargeback losses. Every one of these components has a return on investment that can be calculated from it, so it’s easy to see the results. But you can go beyond that and say what is the halo effect on my brand? Everything feels so much better when a customer has a better experience at checkout.”

Yet many merchants are hesitant to take the plunge on payments authorization platforms because they don’t fully understand the importance of authorization rates. Even a modest 1% to 2% gain can have a significant impact on a merchant’s net revenue.

Still, customers are the highest priority. And can you truly quantify the loss of a customer? Hint: it’s big so don’t chance it.

“Ensuring the highest possible authorization rates can lead to better overall customer satisfaction,” Winstel said. “The cost of losing a customer is just so expensive, and then you have to try to attract new customers. Anything that you can do to make sure that you have the most up-to-date credentials on file is so key.”

The post Boosting Revenue for Merchants by Optimizing Authorization Rates appeared first on PaymentsJournal.

When customers make purchases using Apple Pay or Google Pay—or enter their card info at online checkout—their sensitive data is protected by replacing it with a token. While this safeguards consumer privacy, it has also created a challenge: because the same card can be tokenized differently across multiple merchants, businesses are losing access to vital customer insights that could drive smarter marketing, stronger loyalty programs, and better fraud prevention.

In a recent PaymentsJournal podcast, Andrew Sjogren, Director of Product Marketing at IXOPAY, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed a promising solution: using personal account reference (PAR) values as a consistent, secure link across transactions to help merchants reconnect with critical customer data and unlock new insights.

A Single Consistent Value

As the e-commerce space has evolved, a personal account number (PAN) from a single card can be tokenized countless times. That same card might also be tokenized in multiple formats, including network tokens, PSP tokens, and universal tokens. This has led to a more secure, yet increasingly fragmented, digital economy.

“As in so many times in payments, the solution becomes the problem,” Apgar said. “After so many data breaches, everybody rightfully invested in tokenization. Now that merchants are moving ahead with orchestration strategies to optimize other metrics and payments, competing token strategies mean merchants have lost track of the customer journey, because they’re no longer able to connect the dots and follow the breadcrumb trail from disassociated tokens.”

Despite these challenges, merchants have found workarounds to link transactions to customers. For example, the merchant might have a customer log into their website or enter their information at a point-of-sale device. A small coffee shop, for instance, might ask customers to enter their phone number at checkout to manage their participation in a rewards program.

Though these patches exist, they are manual workarounds that require customer participation and can often cause friction at checkout.

Tracking transactions using a PAR value could offer a universal solution requiring no manual intervention. PAR is a 29-character alphanumeric identifier associated with a single card account, developed by EMVCo several years ago.

“With so many different token formats, you lost sight of these tokens being associated with just a single card account,” Sjogren said. “All of a sudden EMVCo says, ‘We’re going to establish this PAR reference value, it’s going to be that common thread so no matter what token format or where it’s tokenized, you’re going to have a single consistent value linked to that card.’ That’s a transaction that you can operate on—without being afraid that it’ll come within PCI scope.”

Satisfying Compliance and Reducing Fraud

The fact that PAR satisfies merchants’ Payment Card Industry (PCI) obligations is a significant advantage, and the protocol could help mitigate many of the fraud and compliance challenges merchants face.

“From a compliance standpoint, it can descope your PCI, if you’re storing PAN anywhere for customer record keeping,” Sjogren said. “Maybe you’re passing on the PAN to a fraud services provider to associate with an account. PAR can just replace PCI-sensitive data in many cases where it is used outside the transaction, and you’re incurring no scope there.”

Beyond improving compliance, PAR can help merchants fight fraud more proactively by providing fraud prevention tools with deeper insights into potential threats through access to more data.

There are also specific types of fraud that PAR can address head on. For example, when merchants run promotions designed to attract new customers, existing customers often create additional accounts to take advantage of the offers. Sometimes, a single customer may create multiple accounts using different email addresses to repeatedly access discounts and promotions.

PAR can help mitigate this behavior by identifying each instance where a card account is used to create a customer account. It could also be leveraged to assess whether an account carries a higher risk of friendly fraud.

“You can say, ‘Wow, this account looks like a high risk for friendly fraud because we have a very high dispute rate here,’” Sjogren said. “If that persona gets flagged with a friendly fraud warning, even if they come back and add their Google Pay as opposed to their direct card in this new account, if it’s related to that underlying card account, you can quickly identify that account and take the correct measures to control the promotional abuse.”

PAR at the Ballpark

Beyond improving fraud prevention, PAR can also have a substantial impact on the customer experience.

This is possible because PAR can serve as the connecting thread across all transactions—whether the customer paid with Apple Pay or Google Pay, the merchant submitted the transaction as a network token or a universal token, or the card was tapped or swiped in person.

“My favorite metaphor is that baseball season is starting up,” Sjogren said. “Here in Boston, I’m getting our Fenway Park tickets and I’m taking my kid, who just turned 6, to his first baseball game. I buy tickets online and have those mailed to me; I walk into the park; I buy a few concessions as we’re heading to our seats. When we’re in our seats, I buy him his favorite Italian ice. Afterwards, we go and pick up a jersey at the shop, maybe a few other souvenirs.”

In the current paradigm, all these transactions occurring within a single environment would appear as separate, unrelated events, making it difficult for the ballpark to link them to a single buyer.

By utilizing a PAR value, the organization could gain insight into the customer’s preferences—from their favorite snacks to their favorite player—putting the ballpark in a much stronger position to engage the consumer through targeted loyalty and marketing programs.

“The ballpark example is interesting because, when you peel it back and get into all the different point-of-sale environments, types of transactions, reasons for the transactions, and the timing, it (reveals) a complex ecosystem,” Apgar said. “That’s a really good use case for a data technology like a PAR, to connect the dots of the customer journey.”

A Quality-of-Life Addition

The potency of the technology also increases as merchants scale. While PAR is specific to a single card account, it can create significant value for merchants who utilize multiple payment channels and various token formats.

Although PAR technology has been around for some time, it hasn’t gained as much traction as other tokens, largely due to the ubiquity of alternative formats and a general lack of merchant awareness. However, the benefits of PAR suggest that the protocol is likely to be thrust into the limelight soon.

“The reason that we pushed this on our roadmap was that, as an orchestrator sitting on top of an entire payment stack, we’re in a unique position to add value across the entire merchant payment ecosystem,” Sjogren said. “By offering it as an orchestrator, we can support the entire payments flow and make it standard across your vaulting and transacting.”

“PAR essentially can be a quality-of-life addition,” he said. “What PAR does is it steps in and it takes the busy work out, and it provides a leak-proof foundation so that you’re not seeing a lot of slippage in the tracking that you’re doing.”

The post The Connecting Thread: How PAR Values Can Mitigate Fraud and Supercharge Loyalty Programs appeared first on PaymentsJournal.

A cursory survey of sports venues will reveal fields sponsored by Citi, Chase, PNC, and Truist—just within Major League Baseball alone. However, the connection between payments and the arenas and stadiums that host events runs much deeper than naming rights. With a captive audience of thousands, there’s a strong opportunity to drive loyalty and revenue, which is why so many stadiums and arenas are exploring new pay methods.

In a recent PaymentsJournal podcast, Christopher Miller, Lead Emerging Payments Analyst, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed their experiences at sports arenas across the U.S. and the emergence of new payment protocols at entertainment venues.

A Cash-Free Stadium

The greater movement away from cash and toward digital payments has been gradual shift on a national scale, but many event venues have already made the transition to cashless operations.

“I went with some friends to Charlotte to a soccer game for the team we support in Atlanta,” Hirschfield said. “You walk in this big 70,000 seat football stadium, and the first thing you see is a massive banner that says, ‘We are a cash-free stadium.’ I go to enough games, and almost every stadium I’m in nowadays is cash-free. It creates a lot of openings for organizations to grow their revenue base through new kinds of payment activities.”

One unique aspect of sports and entertainment events is that they attract a captive audience of tens of thousands. Many attendees have paid a premium for entry, and re-entry is often not permitted. Not only are most patrons there for the duration, but they are also frequently loyal and enthusiastic supporters of the team or artist they came to see.

These factors create opportunities for venues and payment firms to drive revenue and foster innovation.

“Many new technologies—and I’ll take biometric authentication as an example—have the best application in scenarios where you have loyal, repeat customers for whom it is worth the effort to enroll. And they believe that there is a benefit to them of enrolling that they will receive repeatedly,” Miller said. “Folks like season ticket holders are a slam dunk of a category there.”

Season ticket holders have already invested a substantial amount of money, are likely to spend more, and visit the sports venue frequently. This gives the team or arena a strong incentive to provide them with unique and distinctive experiences to engage and retain them.

“It’s really a sweet spot for both piloting and implementing these types of things,” Miller said. “We’ve been seeing, for example, biometric entry for a couple of years. There are some stadiums that have done away with every form of media whatsoever—there’s not even digital tickets. Your face is your ticket, your face is used for payment, and there’s just nothing but your face, not even digital wallets. But that’s at the far end of the spectrum.”

Cautionary Tales

Though stadiums and arenas can be effective environments for introducing these new programs, the initial scope should be manageable.

“The Intuit Dome in Los Angeles was the first one I know of that went fully biometric,” Miller said. “The first event there was a concert, and the biometric entry system was broken, and long lines formed of angry people who had been told they didn’t need tickets. It was a cascade of technological failure that delayed individuals from experiencing the concert or, at the very least, colored their perception of what type of experience the arena could be trusted to give.”

These issues can impact repeat patronage, but they are also common when dealing with emerging technologies.

“I was at a soccer game in Atlanta this past weekend and the Just Walk Out technology was down, so all of these stands were inoperable,” Hirschfield said. “They had food spoiling on the shelves, the hot food, but it goes to show there are limitations still in current technology that need to be addressed. There’s a lot to learn and these are great ways to learn without putting too much at risk.”

Because hiccups occur, piloting new technology programs is the best route. For example, at Chase Center in San Francisco, a biometric payments pilot was limited to a certain concession stand.  

The pilot was rolled out as a unique, one-off experience, allowing the technology to be tested and challenges to be identified before scaling it throughout the venue.

Blending Team and Brand Loyalty

Another area of opportunity is for retailers to bring their full loyalty programs to the arena environment. There is a growing presence of retailers in arena concession stands, such as the Chick-fil-A stands in the Mercedes-Benz Superdome in Atlanta. However, these locations don’t fully function like their other franchises.

“It adds to a little bit of confusion on the part of the patron because I have a Chick-fil-A loyalty account and prepaid account, but I cannot use them at what they call their licensed venues,” Hirschfield said. “Gift cards are not applicable at the venue, and I can’t use the app to order. It shows there’s a need to grow—they need to figure out how to blend my loyalty to Chick-fil-A and my loyalty to my team.”

This pain point may ease due to moves happening behind the scenes. There has been a long-term trend of consolidation, involving major companies like Ticketmaster and Live Nation, as well as other arena management and ticketing vendors.

Additionally, there has been substantial consolidation in ownership across sports franchises and leagues. It has become more common for ownership groups to purchase multiple teams, creating opportunities to deliver experiences across multiple franchises.

One of the main reasons licensed stores at venues can’t offer loyalty and prepaid services is that their payment systems are tied to the arenas, which have historically been highly fragmented across the nation.

As consolidation reduces the number of management companies, it will become easier for companies like Chick-fil-A to integrate and offer their full experience at sports and entertainment venues.

“Being able to use a prepaid card issued by the retailer with whom you have a loyalty relationship in these license scenarios changes the game of what’s possible for those types of partnerships, who can obtain value, and how they can attain value,” Miller said. “I think there’s a technical problem there to be solved. There’s a good business opportunity to step into that niche and bridge this gap.”

Opening Opportunities Through Wallets

Another way to leverage the stadium environment to build loyalty is through prepaid wallets. More venues are offering tickets pre-loaded with benefits like $20 in concession value or discounts at arena retailers, but there is still plenty of room for improvement.

“I was in Utah at the Utah Jazz’s arena, and they have a great app where you can pay in the app and then go pick up your food,” Hirschfield said. “It reduces a lot of friction, but how do you load a wallet into that? Then you get those benefits that we’ve seen from other stored-value wallets, like reducing the amount of transaction fees because you’re doing it on a one-time basis versus a many-time basis.”

“In sporting events, I’ll sometimes go to three different concession stands in one event, because I’m with my wife and my kids,” he said. “My daughter wants ice cream, my wife wants a piece of pizza, and my son wants a hot dog. Those are three different places and three transaction fees that can be easily eliminated through technology.”

A team-centric digital wallet also opens possibilities for new partnerships and rewards programs. For example, at T-Mobile Park in Seattle, if a customer uses their Alaska Airlines Bank of America credit card on a Friday night, they receive a discount. However, to take advantage of this benefit, consumers must remember to bring the card and use it for transactions.

“Shifting all of those payments to a team-operated wallet changes the nexus of how valuable that partnership might be for both sides,” Miller said. “If the take rate across all the consumer base can be increased, than the economics of that partnership are improved and we haven’t had to do much. This is relatively small potatoes from a technical perspective, but it does acquire a scale at which it makes sense to take that leap.”

The post Sports and Entertainment Venues Can Be a Proving Ground for Payments appeared first on PaymentsJournal.

Because digital payments offer such powerful use cases, many speculate that they will inevitably replace physical cards. However, this perspective overlooks several key factors—not only are physical cards highly reliable at the point of sale, but they also offer personalization options that create a tangible connection between consumers and their payment method, something digital payments can’t replicate.

In a recent PaymentsJournal podcast, James Sufrin, Senior Vice President of North American Payment Services at IDEMIA Secure Transactions, and Christopher Miller, Lead Emerging Payments Analyst at Javelin Strategy & Research, discussed the continued prevalence of physical cards, how customized card offerings with advanced card designs, features and metal cards, can help brands drive loyalty, and the future of premium card products.

The Digital Wallet Dilemma: Convenience vs. Adoption

Digital wallets can be a gamechanger in e-commerce, allowing consumers to skip the hassle of reentering card details at checkout. However, their advantages are less pronounced in retail, dining, and entertainment settings.

“Physical cards are important, and we think that the market is demonstrating that they aren’t going away anytime soon,” Sufrin said. “Quite frankly, I just started to use my digital wallet in earnest last year and it’s still a mix for me. I still sometimes pay with my digital wallet and sometimes with my physical card, and honestly, I don’t know that I could even tell you why in certain instances.”

The “why” we favour certain methods of payment or even certain bank cards, can be complex and indeed we may not understand it. In a National Library of Medicine study¹ into our subconcious ability to authenticate banknotes, it was found that accurate authentication of banknotes is possible within one second of viewing. Every moment of every day, we are all experiencing and acting on cues all around us, and the payment experience is not excluded from this phenomenon. The look, feel, weight, and sound of a payment card provides us with cues which we interpret emotionally, without knowing we are doing it. A certain payment method can make us feel safe, cool, or part of a particular group we have a positive association or aspiration to. Even for those who tend to favour the digital experience, the presence of that physical card in their wallet carries huge importance, whether they are aware of it or not.

The ongoing rise of Metal payment cards supports these findings, with banks and their customers increasingly opting for a payment card with a heavier and more distinctive metal composition and design.

This sentiment is reflected in recent Javelin research, which found that nearly all respondents had used a major credit card in the past 12 months. However, only about 20% of older users and roughly 85% of younger users have used a digital wallet in the same period. These numbers dropped substantially when respondents were asked if they had paid with a digital wallet in the past seven days.

This highlights a major flaw in the digital-versus-physical payments debate—the assumption that the two are mutually exclusive and that one will inevitably dominate.

“Cards are there, wallets are also there, and I think it’s important for us to understand that many people are both,” Miller said. “We like to divide the market into segments as if those are separate groups of people, but they are not. A digital wallet user can still want a physical card for no reason, for some reason, or for a specific reason. Those all remain possibilities even as digitization continues.”

Customizing for Brand Loyalty

Regardless of their payment method, consumers have become extremely accustomed to customization in their products, services, and experiences. With the rise of hyperpersonalization, they are also increasingly willing to pay a premium for tailored solutions that reflect their individual preferences.

“They may have a perfectly good, non-expired payment product in their wallet, but if they see something that piques their curiosity, maybe they’ll pay $2, $5, or $50, depending on what it is, because they find value in that,” Sufrin said. “It goes back to choice and optionality”.

Delivering this personalization is critical for financial institutions, especially given that the U.S. has more financial institutions than any other country in the world.

In the fierce competition to be a customer’s top-of-wallet wallet choice, customized offerings are a powerful tool for financial institutions to drive brand loyalty.

“Recently, we’re coming across a number of neobanks or fintechs who are really struggling,” Sufrin said. “This is also the case for some classical banks and credit unions, they’re struggling to maintain an active user base. Why? Because customers have choices, and when they have choices, they’re going to pick and choose based on a level of customization and a level of experience that that they find satisfying.”

“That brand loyalty becomes super important—certainly to the consumer—but I would argue it’s more important to the financial institutions that are serving that consumer base,” he said.

Developing Unique Experiences

One effective way to build customer loyalty is by offering an experience that is unique. To develop this strong connection with consumers, many organizations are taking a more personalized approach from the very beginning.

For instance, many financial institutions are now notifying their customers at each stage of the process—from the moment their card is produced to when it is on the way to their mailbox. This level of communication is especially important for premium products, such as metal cards, where a luxury mindset should shape every aspect of the customer experience, including the packaging.

Take, for example, Apple, which sends out its metal card in packaging that reflects the company’s trademark sleekness. This attention to detail has made a lasting impact.

“The unboxing experience is such that people literally posted videos of themselves opening the package that they received with the card that was in it,” Miller said. “That’s more than just it being metal, there’s also how is it delivered to you, which reinforces the nature of your association with that particular product. At least that’s the theory, and there’s pretty good evidence that it does create some bonds or exclusivity there.”

It is telling that a tech giant, known for its digital wallet, also offers a physical card. Certainly, a physical card gives mobile wallet users the full spectrum of payment capabilities. For example, in certain situations—such as dining out—digital wallets still fall short of delivering the ideal payment experience.

However, Apple has invested into the design and packaging of its card, recognizing that many consumers view premium cards as both a status symbol and a reflection of their personality. Brands offering these kinds of experiences are becoming more desirable to consumers.

“It’s not even that they’re considering one financial institution versus the other in terms of the selection of whatever they’re buying,” Sufrin said. “It’s that experience that’s going to drive them to loyalty. I think that loyalty is so critical to the success of these companies, whether they’re banks or consumer electronics companies.”

Blurring Segmentation Lines

The desire for customization and a premium experience may have been associated with affluent demographics in the past, but market segmentation has increasingly blurred over the past few years.

This shift has prompted financial institutions to take a closer look at their customer base, not only within the mid-market but also within the subprime segment.

“There’s a higher end of the subprime customer base that they want to serve with a more premium product or a metal product,” Sufrin said. “What we’re seeing is that the consumer themselves are saying, ‘Why not me? Why would it just be for the wealth management clientele or for a big bank or a credit union or a fintech?’ Those segmentation lines are clearly not as defined as perhaps they once were.”

Balancing Digital and Physical Payment Innovation

The growing demand for personalized payment methods across all demographics means consumers will continue to expect more from their financial institution. This creates new opportunities for these organizations to better serve their customers.

“There’s still a sense in which consumers have to make a choice to acquire a particular product,” Miller said. “Lots of pieces, including physical media, influence their decision to acquire that particular product. Even if they don’t use the physical product in the moment of making the payment, it is still part of gaining their attention and their choice—their repeat love, if you will—in their ongoing payment experiences.”

While premium cards are often seen as a status symbol, they can also serve as a practical, everyday payment option. For example, a metal card is far more durable than conventional PVC cards. This combination of functionality and customization makes for a payment method that can resonate with consumers in a more tangible way.

Although digital payments should remain a key focus for every financial institution, physical payment cards aren’t going anywhere anytime soon and should still be top of mind for organizations.

“From my perspective, it’s convenience, its status, and it’s the experience,” Sufrin said. “It is evolving, and that customization, that optionality, that premiumization, is a big part of it. It’s really important that financial institutions figure out ways to differentiate in any small manner they can, so that they can not only capture that client, but retain them long-term.”

Learn more about how consumers prefer to pay via new research from IDEMIA Secure Transactions.

¹ Banknote authenticity is signalled by rapid neural responses – PMC

The post The Future of Payment Cards: Metal, Personalization, and the Power of Design appeared first on PaymentsJournal.

Reconciliation has traditionally been seen as a back-office function, but modern technology has made it a priority. Automation, real-time data, and embedded finance solutions are transforming cash flow management, risk mitigation, and operational efficiency, enabling businesses to take a more strategic approach to maintaining their books.

Penny Townsend, Chief Product Officer at Qualpay, explored the evolving landscape of reconciliation during a PaymentsJournal podcast. She spoke with Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research, about leveraging reconciliation to drive profits and the impact artificial intelligence will have on the future.

A Technological Makeover

Twenty years ago, reconciliation was a straightforward, even sleepy process. An accountant or bookkeeper would check the business’s bank account, then perhaps walk into the next office to ask how many sales had been completed that day. Early software like QuickBooks or Quicken helped streamline the process, but the responsibility fell almost entirely on a single person.

Fast forward 20 years, and everything has changed. Advances in technology have dramatically improved the flow of information. Aligning cash management with sales has become a priority. Merchants now have much greater control— not just over distributing products and services in a timely fashion, but also over tracking revenue from those sales. In addition, with payments being accepted in different ways—digital wallets, crypto, ACH, credit cards—merchants need to be able to handle various transaction methods.

As a result, payment processing and reconciliation have evolved into strategic priorities.

“We as an industry have done a good job of making it easy for the merchant to accept payments, embed them into software, and integrate them with other workflows,” said Apgar. “But we’re still, for the most part, sending out statements of card transactions and leaving it up to the merchant to reconcile that to a paper bank statement that comes in the mail. The next step in the payments automation revolution is automating the rest of the workflow in the back-office, not just at the front counter.”

Bringing Flexibility to the Statement

Many of these statements are still just pieces of paper that merchants can’t click on or interact with. While some service providers have replaced paper statements with online portals, the statement itself is often nothing more than a glorified PDF.

Viewing the information online doesn’t give the merchant any real advantage over seeing it on paper. The challenge is compounded by the need to reconcile the merchant account, the bank account, and the merchant’s internal records.

“Merchants have to log into each of those different portals to be able to see that 360-degree view,” said Townsend. “But every time you make a hop between systems, data gets lost. That little piece that matched the transaction probably disappeared somewhere along the line. By the time that you look at your bank statements, you’re like, ‘Oh my gosh, what happened?’”

More Money, More Problems

Not only does the merchant have to verify that the money goes into the right account, but also that they’re being charged the correct fees and how those fees were deducted from sales. Everything must balance, and the process becomes more complex as the business grows.

Some vendors offer all-you-can-eat buffet pricing, where everything is charged at a flat 3.5%, making reconciliation straightforward. Flat-rate pricing is almost like charging merchants a premium for simplicity, but it only really works for smaller businesses.

Larger businesses must focus on minimizing costs upfront while ensuring they receive the proper amount of cash in the right amount of time. The reconciliation process isn’t just about verifying what happened—it’s also about identifying what didn’t.

“In a previous organization, when we were doing reconciliation, we fed it into the accounting package we had,” said Townsend. “And then all we had to do was to look at exceptions. We used to have an accountant spend a full day doing the reconciliation work, but we decreased it down to this accountant having only to look at exceptions.”

When merchants reach that level of efficiency, it can have a material monetary impact. While they primarily focus on fees and payment transaction costs, they also incur soft costs, such as indirect payroll expenses and employees’ time. This is where the reconciliation process can make a difference.

“The questions merchants bring to the table are usually, ‘how much is it going to cost me?’” said Townsend. “They should be asking, ‘how can I improve what I’m doing?’ ‘How can I offer newer payment types?’ It is a mind shift in how people think about it, making payments more strategic than operational.”

Dealing With the AI Data

Data from additional sources adds complexity to the reconciliation process, but also creates opportunities, especially with the integration of artificial intelligence. As a result, there is greater flexibility in connecting sales data to bank deposits. With automated information delivery, merchants can act on real-time data rather than relying on month-end batch processing.

AI will transform both payment processing on the front end and reconciliation on the back end. It will provide faster ways to analyze discrepancies and identify mismatches.  Businesses like restaurants, with their rapid cashflow, will be able to consume data, match it to sales, account for fees, and quickly flag exceptions.

The biggest challenge for merchants will be finding a processor or acquirer that delivers the necessary data and has the backend processes to support it.

“I feel privileged to be part of a company that is thinking about these things every day and how we can improve for our merchants,” said Townsend. “When it’s done right, reconciliation can transform a business. You can focus not just on cash but cash forecasting as well. Figuring out what doesn’t work versus what’s actually working is always a good idea in a business.”

The post Reconciliation Isn’t Just for the Back-Office Anymore appeared first on PaymentsJournal.

Last year, a breach of cloud storage company Snowflake resulted in data stolen from more than 150 companies, with more than $2 million extorted from victims. The attack was carried out by an infostealer, a type of malware that didn’t directly infiltrate Snowflake but instead entered through a client with weak security measures. The growing market for financial data stolen by hackers has made these attacks an escalating threat to financial institutions worldwide.

In a PaymentsJournal podcast, Mike Kosak, Senior Principal Intelligence Analyst at LastPass, and Jennifer Pitt, Senior Analyst in Fraud and Security at Javelin Strategy & Research, looked at the threat that infostealers currently pose to banks. They discussed how infostealers present risks even to third-party vendors, and how organizations can stay one step ahead in protecting their sensitive information.

What Are Infostealers?

Infostealers are a specific type of malware that collects critical information from victims’ computer systems. They primarily target browser-based data, such as credentials, session tokens, and details about software that can be extracted from the operating system and sold to malicious brokers.

Infostealers are generally small, lightweight programs built for speed. They’re designed to execute quickly and then delete themselves. This rapid execution is a key reason why infostealers are so difficult to detect. In 54% of the cases that security service Spycloud examined, the victim had an active antivirus program running on their system.

Infostealers are typically sold by initial access brokers, a subset of the cybercriminal ecosystem focused on gaining entry to systems. This initial access allows other, more specialized groups to take action using the stolen information, including ransomware operations and nation-state threat actors. These brokers are agnostic to the buyer, willing to sell the data to anyone.

FIs Are Especially Vulnerable

Infostealers often target financial institutions, not just because they hold the money, but because they can scrape passwords from customers’ browsers, which frequently include login credentials for financial institutions. This tactic is a way to circumvent many of the fraud and account takeover prevention measures that FIs have in place.

Customers at financial institutions often reuse passwords across multiple accounts, including those at different banks. Many of these financial accounts are linked to other services like email or social media, with the same passwords being used. These reused credentials are especially valuable to infostealers.

These kinds of attacks are not limited to customers; employees have also fallen victim. If multi-factor authentication is not enforced for employees, they often use weak, short passwords or reuse them across multiple systems. Some employees continue to access personal accounts or use personal devices at work.

In recent months, major browsers have implemented strong mitigations, but larger infostealers have been quick to figure out workarounds.

“They’re constantly evolving,” said Kosak.  “It’s a very effective marketplace and a very effective tool. It’s cost effective and it works. That keeps bringing on more of these threat actors, both people who are trying to make money on the initial access broker sites and the developers themselves.”

Infostealers are also targeting session tokens, which can be used to circumvent credentials if the right protections aren’t in place. If criminals get the data fresh enough, most of it ends up available for sale within a day of the of the time that it’s stolen.

The Hidden Risks

The risks to financial institutions from infostealers are broader than they might initially appear. While the primary threat is theft, there is also fraud loss, operational risk, and reputational risk. Once a financial institution starts losing a significant amount of money from this, if it lacks proper protections in place with the media, the reputational risk can be massive.

FIs should also consider their business-to-business connections. Infostealers can target supply chains and third-party vendors just as easily as customers or the business itself. Supply chain vulnerabilities can have second- and third-order effects, impacting customers as much as a direct breach of the institution.

When an organization hires cloud service providers or third-party vendors to protect its data, the original institution remains responsible for vetting that third-party processor. It must ensure the vendor has the proper security protocols in place to deter infostealers.

“The Snowflake data breach happened because they hired a third-party company that didn’t require multi-factor authentication,” said Pitt. “Ultimately, the customer is going to hold the initial institution responsible. They’re going to start leaving banks for somebody else that will actually protect their credentials.”

The Latest in Prevention

Identity and Access Management (IAM) programs can significantly reduce the risk posed by infostealers. An effective IAM strategy includes strict access controls and continuous monitoring to detect and respond to suspicious activity. When only authorized users can access sensitive data, it becomes much harder for threat actors to exploit stolen credentials.

Multi-factor authentication remains absolutely critical, as is requiring customers to use unique and complex passwords for every account. If passkeys are an option, use them as well.

“That’s an absolutely critical next step when we think about how to mitigate this risk in the longer term,” Kosak said. “Passkeys are going to become more and more important. We’re still very early in the adoption cycle on that, but they’re phishing resistant.”

Another important factor for FIs to be aware of is cracked software. People concerned about infostealers should resist the temptation to download and install free software applications.

“If you see something that looks a little off the books, it’s probably going to come with a nasty surprise,” said Kosak. “They direct people to these YouTube links that deliver malware. Stick to known app stores.”

Behavioral detection, including user behavior analytics and device fingerprinting, is emerging as a strong defense against infostealers. They help detect account takeovers, for instance. If an FI detects any anomalous behavior, they can have processes in place to mitigate these risks and cut off the actions as they’re happening.

Polite Paranoia

All financial institutions have annual training requirements that everyone must complete to understand the threat environment. There’s another aspect that can be a bit harder to implement and articulate—the culture side. The core issue is instilling a culture of polite paranoia.

“You’ve got to be willing to raise questions both up and down the chain if you see something that’s suspicious,” said Kosak. “Being willing as a new junior associate to raise your hand and say, ‘hey, this seems suspicious to me, that’s a cultural aspect to an institution.’ Being willing to be challenged if you’re a senior in that institution and say, ‘hey, I’m glad you’re asking that question.’ That’s really powerful too.”

“These threat actors will use fear and intimidation and psychological pressure to get people to act without having the time or feeling like they have the channels to raise questions,” he said. “Polite paranoia takes that away from them.”

The post Infostealers: The Latest Cyberthreat Facing Financial Institutions appeared first on PaymentsJournal.

Across industries and companies—from small businesses to large enterprises—organizations are constantly searching for ways to improve corporate culture and boost employee engagement. However, in large, dispersed companies, providing employees with the personal touch needed to maintain motivation can be particularly challenging.

In a PaymentsJournal podcast, Julie Gu, Vice President of Sales and Marketing, North America, at Prezzee, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, examined key trends in employee incentive programs, the challenges organizations face, and how customized gift card program can effectively drive engagement.

Don’t Skimp on the RICE

Just as important as understanding what employees bring to the table at work is recognizing who they are as individuals. This is why organizations are increasingly interested in their employees’ hobbies, wellness, and inclusion interests.

As companies explore ways to boost employee engagement, there is an acronym—RICE—they should keep in mind.

“You know I’m Asian, so I never skimp on the rice,” Gu said. “What that means is that ‘R’ is for rewards and ‘I’ for incentives. ‘C’ is for celebrations—and that’s celebrating moments big and small, professional, and personal. Then, there is ‘E’ for engagement, which is making sure you’re forming a daily habit throughout, and that transcends all the aspects.”

Fostering engagement on a daily basis can be difficult in a busy office—and even more so in virtual or hybrid teams.

“We’re very virtual in our organization, so I joined a running group,” Hirschfield said. “I’m a poor runner, but it motivates me to run. Someone just ran a marathon, so it’s a great opportunity to celebrate that. With all these groups, we’re getting updates on coworkers who are having babies or weddings or things that humanize the organization. You don’t want to be an organization that’s robotic.”

Reinforcing the Right Behaviors

This shift toward interest groups is a key engagement trend. While many companies have already implemented enterprise resource groups (ERGs) to foster inclusion, interest groups can be more enjoyable and feel less obligatory than ERGs.

One of the most common types of interest groups is step challenges. However, many organizations are evolving past simple challenges like reaching 10,000 steps in a day. Micro-challenges, such as hitting 500 steps in a day, can be even more impactful.

“The micro-goals are important because that person who hasn’t been participating in an exercise program might be intimidated by 10,000 steps,” Hirschfield said. “I look at myself—I work at home, so I’m not walking from my car to the elevator, which adds a couple hundred steps here or there. Getting to 10,000 steps can be difficult for some people, but when you have attainable goals, they get that feedback and engagement.”

In addition to setting smaller goals, more companies are creating groups around shared experiences. As they organize these activities, organizations should ensure they support interests that positively impact their company.

“The first step is to think about what behaviors are already happening around the organization that you want to reward?” Gu said. “What do you want to continue to validate and celebrate? Who can you showcase as a great example of somebody who’s already living our core values who we can show as an ideal value ambassador? You want to reward those behaviors and make that a daily habit.”

Once organizations recognize existing behaviors, they can begin identifying the activities they want to incentivize. For instance, many employers emphasize mental health and wellness initiatives, as a healthier workforce tends to be happier and more productive.

“Think about which ways you want to reward versus incentivize, and from there,  cascade down to the snackable ways (you) can start, so you can start small,” Gu said. “It shouldn’t feel like this big three-year-long, road-map project that you have to tackle, because that’s where budget constraints and a lot of challenges start to happen.”

Closing the Feedback Loop

As companies refine their employee engagement plans, one of the most important aspects to consider is the employee themselves.

“I have three keywords—feedback, feedback, feedback,” Hirschfield said. “Employees want to feel like they’re being heard. Incentives are going to boost morale—Javelin has a lot of data that proves that—but what also boosts morale is giving employees what they want. That doesn’t mean you need to cater to their every whim of the employee; it means you’re listening to them.”

If employees see that even one program is introduced based on their feedback, it will make them feel that their voice matters and that they belong within the organization.

However, as organizations shift their incentive plans from being employer-driven to employee-driven, it’s important not to overlook the link between the two.

“People leave companies, but they stay for managers,” Gu said. “It’s critical to empower managers when we talk about employee rewards and engagement and incentives. It’s about how do we make sure that employees’ direct support every day is empowered. It makes them feel that they have a sense of community, and that they have this closed feedback loop and can feel heard.”

This community isn’t possible if the manager themselves doesn’t feel equipped with the tools or support needed to reward their teams effectively. One simple, turnkey way to empower managers in driving employee engagement is by enabling them to deliver gift card rewards.

Many companies have adopted this approach using small-denomination gift cards. For example, a manager could send a $5 gift card to recognize a team member for excelling at a task or contributing in a meeting—an appreciation that can have a greater impact than a simple kudos.

“A $5 card when it came from my manager probably feels a lot better than $25 coming from some generic HR inbox or a person who I’ve never met,” Hirschfield said. “The opportunity to make that connection is a huge step. If it’s an HR department that controls these budgets, it may be empowering managers to have access to it and make it easy for them to personally provide those rewards. It’s critical in terms of making that human-to-human connection.”

Beyond Monetary Value

Personalized incentive programs that utilize gift cards are an integral way to create connections and make an employee feel appreciated. Not only are gift cards the most popular gift among recipients, but they can also be tailored to the employee in many ways.

“You can include additional messages so that when I send you that gift card—even though it’s only for $5—the message that I send is that I noticed that you are training for a marathon, so here’s $5 towards your training regime,” Gu said. “It’s not really the monetary value, it’s the fact that you feel heard, seen, noticed and appreciated—and you feel supported for something that’s a big task.”

When giving a gift card, a little extra thought goes a long way. If the employee is training for a marathon, they might appreciate a $5 gift card to Starbucks. However, a gift card to a Dick’s Sporting Goods along with a personal message could have a much stronger impact.

“When you personalize it, you provide that reward or incentive or celebration that speaks to what that employee is doing, so making sure those are choices available to the HR department or the manager who is providing that opportunity, those are key,” Hirschfield said.

A Means to an End

For many organizations, implementing a personalized engagement program that leverages gift cards can be a daunting task. However, companies like Prezzee offer solutions that tailor incentive plans to an organization’s specific needs.

“We make your goals our goals,” Gu said. “Where are you struggling to find engagement or retention? Are you having attrition issues? In terms of employee engagement, we are constantly thinking about it every single day, from our employees to your employees, and we think of the gift card as a delivery vehicle—and a means to an end.”

The post Personalized Gift Cards Are the Cornerstone of Employee Engagement Programs appeared first on PaymentsJournal.

When Academy Bank first considered outsourcing its item processing, it anticipated a challenging and uncertain journey. However, partnering with Fiserv transformed the experience, delivering both anticipated and unexpected benefits—ranging from a streamlined training process to a significant reduction in client impact errors.

In a PaymentsJournal podcast, several members of the Academy team—including CIO Shannon Gilley, Executive Vice President & Director of Deposit Operations  Margaret Bosley, and Item Processing Assistant Manager Dionne Green—discussed the challenges that outsourcing presented and how the new system has changed how they operate. They spoke with Candace Burleson, Implementations Analyst at Fiserv, and James Wester, Co-Head of Payments at Javelin Strategy & Research. 

A Legacy of Problems

As Academy embarked on its outsourcing journey, the bank encountered numerous challenges. The proof team was tasked with monitoring140 branches, overseeing everything from the opening run to the end run. Many branch scanners were nearing the end of their lifespan, and perhaps most concerning, the physical tickets were increasingly contributing to negative client experiences.

“One of the biggest challenges for us was that we were the frontline of support for all of the branches,” said Green. “We had over 140 branches that we were balancing daily, with just eight full-time employees that divided all of those runs. If there were any connectivity issues when the branches were trying to open up their runs or any issues related to the scanner, we were the front line of support.”

The Academy team had a single dedicated resource that was responsible for custom scripting. If there were any issues or incidents with that individual, there was no contingency plan in place.

Balancing was an issue because of all of the manual or physical tickets being run at the branch level. The team had to wait for batches to close at the end of the day and often were forced to double their efforts by handwriting tickets and manually inputting them into the teller system. The manual processes also resulted in errors affecting client accounts.

The branches were saddled with hardware that was near the end of its life and was in bad need of standardization. The different types of printers across the branches resulted in a continual need for additional software or logins.

Increased Efficiencies

Once outsourcing was in place, Academy found several efficiencies on its end. The proof team was reduced by two full-time employees who had been handling keying and balancing proof work. Additionally, Academy had been relying on an external provider for keying assistance when short-staffed, at a cost of $600 to $800 per month. This expense was completely eliminated.

“It was always difficult for us to maintain eight FTEs for this department,” said Green. “When folks get into banking, they expect bankers’ hours. These were not bankers’ hours. Because of the different time zones that we support, our balancers would have to work until 8:00pm and 9:00pm, and sometimes on Saturday.”

The efficiency gains were significant. With fewer client-impact errors at both the branch and operations levels, the time spent correcting those errors dropped to just five to seven person-hours a week.   

Branches were able to shift their focus to sales, while the proof team redirected its efforts toward more critical functions, such as receiving training to identify check deposit fraud.  

 “Our goal,” said Gilley. “is to focus on our clients, making sure that we are working on the products and services that are meaningful to those clients every single day. Moving that technology to our software provider has really freed us up in order to focus on the more important things.”

An Involved Process

Outsourcing can initially seem challenging and expensive. But the costs of keeping everything in-house can often be even higher.

“Don’t underestimate your current costs when you look at everything involved with your in-house process,” said Bosley. “Don’t underestimate those costs, because you are going to see significant savings in areas that maybe you didn’t even expect to.”

At the same time, banks should be transparent with their employees about the process. While it will be a journey, understanding the long-term benefits will make it worthwhile for everyone involved.

The post Inside Outsourced Item Processing: A Client Case Study appeared first on PaymentsJournal.

Many organizations still rely on paper checks, with no immediate plans to phase them out. However, one of the key issues with checks is that criminals favor them as well.

Last year’s AFP Payments Fraud and Control report found that checks are the most frequently targeted payment method for attempted payments fraud—nearly twice as much as ACH transactions.

In a recent PaymentsJournal podcast, U.S. Bank’s Scott Pope, Senior Vice President, Senior Manager of Risk and Compliance; Consumer and Small Business Payments and Mike Watercott, Vice President and Working Capital Consultant, Treasury Management, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the vulnerabilities of paper-based payments and the advantages of shifting to electronic transactions, particularly through prepaid disbursement options.

An Increasing Liability

Check fraud has been the impetus behind the rising prevalence of mail theft, with criminals robbing postal carriers for arrow keys to access blue mailboxes. Once checks are in their hands, they have numerous ways to either sell the data or manipulate it for fraudulent purposes.

Though these crimes may seem like isolated incidents, check fraud is often carried out by sophisticated criminal networks.

“In many cases, it’s a sophisticated supply chain of bad actors, where the person stealing the checks and posting them for sale on the dark web is just one link in the chain,” Watercott said. “Fraudsters may alter or ‘wash’ stolen checks. Washed checks may also be copied, printed, and sold to third-party fraudsters on the dark web, generating even more fraudulent transactions.”

Beyond fraud or theft, issues with checks don’t always stem from nefarious activities—sometimes mail is simply lost or misdelivered. These vulnerabilities increasingly make paper-based instruments a liability.

“It starts with control,” Pope said. “When a company is using a paper check, once they have signed that check and placed it in the mail, they have lost control of it. In contrast, with electronic payments, including prepaid, the control is always there. If the payment has been misdirected or stolen, there are processes in place to quickly replace it and to end its access to the underlying funds.”

Dramatically Safer

In addition to their vulnerabilities, checks also lack many of the fraud prevention tools that electronic payments provide. With digital transactions, the sender can proactively investigate recipients before ever sending a payment.

For example, the payer can verify whether the account is open and in good standing and whether it is owned by the intended recipient. With prepaid payment methods, additional controls are built into the card activation process.

Though some fraud mitigation tools exist for paper checks, such as positive pay, these processes aren’t as robust as their electronic counterparts. Positive pay verifies checks by matching them against a customer’s issued records. Any discrepancies are flagged as exceptions, requiring the customer to approve or reject payment.

“Just as the check payment process is manual and time consuming, so is the fraud mitigation process,” Watercott said. “You’re sending check issue files to the bank, you’re reviewing and reacting to positive pay exceptions daily, and then you’re reissuing checks. As you move away from checks, you gain opportunities to tap into more proactive risk mitigation before payments even happen.”

In addition, regulatory requirements at both the state and federal levels provide protections for prepaid and electronic transactions that don’t exist with checks.

Once a check clears, the only data typically available in statements or transaction histories is the check number and amount. In contrast, electronic transactions and prepaid cards provide organizations with a wealth of additional details, such as the merchant’s name, terminal ID number, location, and phone number.

Many organizations use this information to identify potential fraudulent transactions. For example, a business owner might recognize the merchant where a transaction took place but not the city in which the purchase occurred.

Once they report a suspicious transaction to their financial institution, the bank is legally obligated to investigate and determine whether the transaction was fraudulent. If fraud is confirmed, the customer  can receive a full refund of the transaction amount.

“Throughout that entire process there is a level of transparency; financial institutions are required to send notices and information to the customer during the process, which adds to the outcome,” Pope said. “From a regulatory and risk management perspective, I clearly see electronic payments and the use of prepaid cards as dramatically safer than checks.”

The Tortoise and the Hare, Reversed

Electronic payments offer enhanced security and controls, along with tangible benefits driven by improved efficiency. Chiefly, they elevate the customer experience—the convenience of credit, debit, and prepaid cards is a key reason these payment methods have outpaced checks.

While consumers will certainly cash a check if they receive one, electronic payments are preferable to paper checks sent by mail, which require a trip to a brick-and-mortar financial institution.

“Electronic payments reduce so much friction in the whole process,” Hirschfield said. “It’s the opposite of the tortoise and the hare. We always hear about how slow and steady wins the race but here, quick wins the race. The tortoise is going to run into roadblocks—be it bad actors or just unforeseen circumstances—that get in the way. You want to be the hare in a payment, the one who is getting there quickly.”

Another integral aspect of a positive customer experience is the freedom of choice. Supporting a wide array of electronic payment options allows consumers to customize their payment experience to suit their preferences.

Beyond consumer benefits, electronic payments offer powerful advantages for businesses as well. While some businesses have leveraged the float inherent in check transactions, electronic payments provide greater working capital benefits. With a known settlement date and increased transaction visibility, payers can better manage cash flow and financial planning.

“I think of the visibility of checks as like ordering something online but receiving zero shipping tracking,” Watercott said. “If that check is stolen, you might not know about it until you get a call weeks later asking, ‘Where’s my payment?’ Just removing the payment from a check is already a step in the right direction in terms of fraud risk reduction.”

Implementation Considerations

As organizations transition to electronic payments, there are many considerations. First and foremost, they must understand the scope and breadth of the unique rules that govern electronic payments.

For example, there are regulations like the Electronic Fund Transfer Act, also known as Regulation E, which was enacted to protect consumers’ rights in electronic transactions. Additionally, network rules, such as those governing the ACH process, provide protections for both consumers and the organizations using these services. Ensuring compliance with all applicable rules and regulations becomes even more complex when third-party vendors are involved.

However, financial institutions still have strict compliance mandates that remain in place regardless of outsourcing certain tasks to third parties. If a fintech fails to uphold its share of the compliance burden, the bank—not the fintech—will ultimately be held responsible.

“As institutions are transitioning from paper to electronic disbursements, they need to be aware of the organizational structure that they will be involved in,” Pope said. “Are they looking to leverage a fintech as part of this process, and how does that fintech manage their risks associated with partnering with banks? There is a lot to consider, depending on the model that you’re going to be engaging in.”

A Balancing Act

Though the task may be daunting, the benefits of payments modernization make the transformation a necessity. For many organizations, an incremental approach is the best way forward.

“In the grand scheme of things in the industry, there’s no finish line to this,” Hirschfield said. “There’s never going to be a world without fraud—we have to be realistic about that—and there’s never going to be a world without payments. It’s all about continuing to progress so that we are working in a world with less fraud and with increasingly faster payment options.”

However, as organizations transition to faster payments, they can’t fully abandon legacy payment methods.

“Payments is a balancing act,” Watercott said. “You have to be both a master in defense, I call that checks, but also be on the offense by embracing digital payments. The sports cliché that defense wins championships doesn’t always apply to payments. It has to be a balance of embracing innovation, but doing it in a secure, risk-oriented way. Work with your partners towards setting a goal of making check issuance an exception and not the norm.”

The post Beyond Checks: Why Prepaid Cards and Digital Payments Are the Smarter Choice appeared first on PaymentsJournal.

Many businesses are familiar with payments optimization, which focuses on enhancing the outcome of individual transactions. However, the growing field of payments orchestration takes a broader approach. It addresses larger issues, such as deploying the latest payment methods and technologies faster than competitors and improving payment performance at scale. The goal is to deliver the most secure, frictionless customer experiences while also driving profitability.

Orchestration, at its core, provides the foundation for payments optimization to thrive. In a PaymentsJournal podcast, Brady Harris, CEO of IXOPAY, and Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research, spoke about the benefits of payments orchestration, from dynamic routing to enhanced data and analytics.

Like Conducting an Orchestra

Simply put, payments orchestration unifies a merchant’s payment operations, providing a comprehensive view of what’s happening across the entire ecosystem. It allows them to identify where breakdowns are occurring, resolve inefficiencies, and enhance security by leveraging multiple fraud prevention tools, optimizing authentication processes, and ensuring compliance with global security standards.

Large enterprise merchants typically have as many as 20 or more integrations with various payment service providers (PSPs) and acquirers around the world. IXOPAY has had customers with more than 150 to 200 different processors they’re managing behind the scenes, requiring upwards of 150 to 200 full-time employees. Businesses are starting to move away from off-the-shelf orchestration solutions in favor of a global network of payment providers, typically through a third-party orchestration layer.

“Companies in different industries and sizes start to play this game of payments whack-a-mole,” said Apgar. “They start out with a PSP and find there’s something missing—a new payment type or fraud solution. So another integration layer comes into play and eventually you wind up with this massively complex web of integrations.”

The orchestration mindset drives efficiency into this web of integrations, which were originally built to fill gaps in what was once a simple payment process.

“Before I fill another gap, why don’t I take a step back and see what are the universe of payment solutions that I would like to have?” Apgar asked. “How can I put them all together in one basket, even if I need to use multiple providers and do it in an efficient fashion? It’s like conducting an orchestra where all the all the instruments are playing their individual sounds, but come together to form the music.”

 The Promise of Tokenization

IXOPAY started hearing from large global merchants with substantial payment volumes who realized they wanted to own their own data through vaulting solutions. That’s where tokenization comes in. With tokenization, businesses can not only own their data but also leverage it to improve authorization rates and reduce fraud and risk.

“Think about millions of transactions and all of the intelligence that sits at that transactional level—how can you create actionable insights that the business can then synthesize and operationalize back into the business,” said Harris. “When you combine them together in highly configurable, very customizable ways, you are now effectively offering these very large merchants a way to customize and build their own payments infrastructure with out-of-the-box solutions. To me that is next-gen orchestration.”

While tokenization has significantly enhanced data security, it has also reduced visibility into customer data. Tokenization makes it challenging to track customers across different channels and geographies. However, this challenge highlights the importance of orchestration, especially as more enterprise-level merchants explore tokenization strategies that can help unify customer interactions across multiple sales channels.

Another major advantage of payments orchestration is its ability to optimize soft declines, through card lifecycle management tools. In a recurring billing environment, where payments are repeated, cards can expire, or customers may need to replace lost or stolen cards. Even so, the card is still linked to the same name and associated data. Payments orchestration allows entities to refresh this sensitive but important card-level data, resulting in higher authorization rates.

 Making Use of the Data

Data and analytics continue to be a major challenge for many merchants.

“We (work with) a large fashion retailer who said they didn’t have a good data strategy on how their different payment methods are being used,” said Harris. “But payment analysis for that merchant is manual. This leads to all kinds of challenges as to where to grow the business, where to expand geographically, what payment acceptance types they should invest in. It’s hard for them to even build out basic roadmap priorities in a way that helps optimize sales and drive revenue.”

Financial reconciliation of this data presents another hurdle. Merchants managing multiple acquirers in an orchestrated environment must reconcile and understand the fees. Additionally, when it comes to chargebacks, merchants need to determine where a transaction was authorized and ensure it’s properly routed back to the right acquirer.

“There’s a lot of day-to-day blocking and tackling of data before you even get into analytics,” said Apgar.

Promise for the Future

Next-gen payment orchestration involves a simplified operations layer designed to handle millions of transactions at scale across multiple providers. It also includes a central access point with dynamic routing that can switch in real time between different processors based on sophisticated rules or requirements. Merchants can customize these rule engines to establish how payment transactions are cascaded.

This is also where artificial intelligence comes into play. As merchants add new geographic locations, and layer in different interchange card types and issuer transactions, rules-based routing becomes increasingly complex. An AI agent, however, can account for all the variables that influence routing decisions, moving beyond a static set of hard-coded rules.

“It’s mind-blowing what that’s going to do as we continue to iterate on this idea of dynamic routing,” said Harris. “I don’t know where it’s headed, but holy cow, the future is bright.

“If you’re a mid-market retailer, look at orchestration as a solution,” he said. “There’s a lot of optimization and a lot of business benefits, typically at a much lower cost. That really frees up businesses to focus on what they do well, which is growing revenue and expanding their business.”

The post Down the Path to Full Payments Orchestration appeared first on PaymentsJournal.

E-commerce giants such as Amazon and Shopify use data to create highly personalized customer experiences. Yet, bill payment remains largely untouched by this transformation, leading to friction, higher costs, and customer frustration. Despite the wealth of payments data available, many organizations fail to leverage it to enhance customer interactions and reduce costs.

This gap presents a major opportunity: by applying data-driven insights, businesses can not only improve the payment experience but also drive efficiency, reduce costs, and boost customer satisfaction.

In a recent PaymentsJournal podcast, PayNearMe’s John Minor, Head of Product and Gustavo Jordao, Product Manager, joined Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, to discuss how payments data can help organizations deliver better payment experiences.

Unlocking the Power of Payments Data

Payments data provides organizations with deeper insights into consumer behavior, extending beyond transaction details. It captures factors such as time of day, device used, and payment method, offering an in-depth understanding of consumer interactions.     

These data points can be synthesized to create a comprehensive view of the customer’s mindset and context during payment, enabling billers to turn transactions into personalized interactions that improve the overall customer experience. 

Beyond improving customer experiences, payments data plays a key role in operational efficiency, helping businesses reduce operational costs. Businesses that embrace automation and data-driven decision-making can streamline processes and lower their total cost of acceptance.

“One of our clients in the lending space was able to save $44,000 a month just by leveraging automation,” added Jordao. “By triggering specific rules based on transaction data, they streamlined payments and significantly cut costs.”

The Importance of Clean Data

Any discussion of data inevitably leads to artificial intelligence (AI). However, success with AI or machine learning depends on clean, structured data.     

“There’s so much buzz about AI, but we put in our 2025 forecast that it’s going to be the second adopters of AI that will really reap the benefits, as opposed to the first movers and early adopters,” Apgar said. “So many companies are rushing to find so many applications for AI that I think it’s too easy to stub your toe, especially in a customer-facing or risk-facing application.”

AI depends on high-quality data. Poor data can lead to unreliable insights. To ensure accuracy, organizations must prioritize data cleanliness, implement strong monitoring systems, and maintain transparency in AI decision-making.

“It’s about understanding the interactions and making sure you’re instrumenting the transactions you rely on to create good datasets,” Jordao said. “That’s one of the key things about AI—making sure that you have a way to trace and audit how it’s being used, because it’s a very complex tool. You should be able to control its application and drive it toward      performance and a better experience for consumers.”

AI and Fraud Prevention

Fraud detection is an area where AI excels, analyzing vast amounts of data to identify anomalies and automate responses—a costly and time-consuming task. Fraudsters are becoming more sophisticated, making it more difficult to flag fraudulent transactions based on isolated data points. 

“Risk is a highly complex interaction—there’s no single red flag for fraud. That’s where machine learning takes the spotlight as a tool to be used,” said Jordao. “One of our gaming clients reduced fraud by 60% just by leveraging AI to analyze transactions in real-time—something that would be impossible to do manually.”

ML models excel at recognizing patterns and triggering automated actions. Unfortunately, few organizations have fully leveraged the power of AI and machine learning to enhance the bill pay experience.

“As it relates to bill payment, generative AI could be used to replace or automate several aspects,” Minor said. “Automated bots could handle outbound and inbound calling, messaging, and communication using generative natural language processing. That could help lower the costs required to collect the payment.”

Enhancing Personalization in Bill Pay

E-commerce has set the standard for data-driven personalization and the bill pay industry must follow-suit. “In e-commerce, data is being used to personalize what you see, how you can pay, and what items belong together, which varies by consumer,” Minor said.

“Those insights are gained by leveraging clean data like past purchases, browser history, and location. Bill pay is no different. Consumers need access to different content and options beyond just completed transactions. They want to complete what they’re there to do at a given point in time.”

For example, a customer logging into their bill pay account may not intend to make a payment immediately. If their bill isn’t due yet, they may be looking for information such as their payoff date or account details. A personalized experience can anticipate this and present relevant options.

Additionally, payment experiences should adapt based on the access point. If a customer pays through a mobile device, the system could suggest payment methods optimized for mobile transactions.

Despite these possibilities, many organizations have not prioritized personalization in bill pay.

“What you see sometimes in bill pay is that organizations haven’t given the process the same amount of focus as they have on the product they’re selling to the consumer,” Minor said. “Unfortunately, they are often using fragmented platforms that aren’t able to ensure the consumer is able to complete the thing that they’re there to do at a given period of time.”

With Data Comes Greater Responsibility

Data offers significant advantages; it is not just an asset—it’s the foundation of growth and innovation. However, the true power lies in how organizations interpret and apply their data. 

Leveraging data gives businesses the ability to better understand customer behaviors, preferences, pain points, and purchase drivers. To maximize value, businesses should seek partners who provide actionable insights that drive measurable results. Clean, structured data not only improves efficiency, but also serves as a springboard for delivering exceptional payment experiences.   

“We’ve heard a lot in the news about payments orchestration,” Apgar said. “That’s been the buzzword in the payments business for the last couple of years. That is also data-driven, but I think the way that we’re talking about using data in this context takes the payment experience to the next level of payment orchestration, not only from the data that is being captured, but the way it’s being applied.”

As AI continues to shape the future of payments, organizations must carefully evaluate potential partners, ensuring AI is used responsibly and critical data remains protected. “With great data comes great responsibility,” Minor said.

The future of payments isn’t just about adding new technology—it’s about creating an experience that is seamless, secure and deeply personalized. True, sustainable innovation requires more than just ‘bolting on’ the latest shiny object; it demands a strategic approach that drives real value.

“Data is behind everything we do. If you’re not thinking about data, you’re already behind. Our job is to democratize it, make it actionable, and help our clients lower their total cost of acceptance,” said Minor. 

The post The Untapped Power of Payments Data in Bill Pay appeared first on PaymentsJournal.

Just as organizations are implementing artificial intelligence and machine learning in novel ways, cybercriminals are continually looking to incorporate AI into their attacks. The disruptive technology allows criminals to find targets more effectively, scale their efforts, and forge better attacks that are increasingly harder to detect.

In a PaymentsJournal podcast, Alex Cox, Director of Threat Intelligence, Mitigation, and Escalation at LastPass, and Jennifer Pitt, Senior Fraud and Security Analyst at Javelin Strategy & Research, discussed the AI-powered methods cybercriminals use, the impacts of AI-related fraud, and the ways that organizations can protect their customers and themselves.

A Big Data Problem

One of the areas where AI excels is in sifting through massive datasets to pinpoint an anomaly. Many organizations use that capability to identify fraudulent activity. On other hand, criminals use that functionality to find their next target.

“Bad guys have a big data problem that AI is helping them address,” Cox said. “For example, there was the MOAB list that came out recently, which is the Mother of All Breaches, and it had billions of username/password pairs. If you think about the magnitude of credentials that are available publicly, the amount of data makes it difficult. The bad guys figured out that if they put these things into language learning models and use AI to help them manage that data, they’re able to pull things out more efficiently and summarize it.”  

Once criminals have parsed large data sets to find their target, AI can also be implemented to make fraud attacks more effective. In the past, phishing attacks were much easier to spot. There may have been incorrect grammar in the email, a logo that wasn’t quite right, or other cues that the communication was fraudulent.

“Enter AI and LLMs, and criminals can go to this LLM and say, ‘Help me craft this phishing e-mail based on this lure,’” Cox said. “It will write it for you in very convincing English language that appears it’s from a native speaker. Once you get past all the technical controls, the final barrier is the person. If the person can look at an email and think it sounds like a person, it’s not a phishing e-mail, and they respond to it, it has made the bad guys that much better.”

A Blended Threat

Another way that cybercriminals are employing AI is to create deepfakes, with the objective of either creating a convincing persona or assuming an existing identity. This ability is just one aspect of the growing AI arsenal available to criminals.

“The combination of these capabilities is significant,” Cox said. “Microsoft has analyzed how some of the bad guys use ChatGPT, and you see them using it the same way that the traditional good guys are using it. They’re summarizing, they’re getting help with coding, and they’re getting ideas on how to improve their attacks. With this blended threat, they are able to use AI to pull information on a target, based on their internet presence, and craft an attack that is potentially able to compromise the target’s machines.”

The powerful technology has led to a decrease in the technical sophistication required to carry out damaging cybercrimes. There has even been a shift toward AI agents, which are fully autonomous fraud engines. It means criminals can lean on artificial intelligence to do much of the heavy technical lift.

“AI is allowing these bad guys to do this en masse,” Pitt said. “We used to see phishing emails where you’d have one single attacker that would have scripts and send out a few phishing emails or a few social engineering attacks. Now it’s all being automated with AI, so it’s thousands of emails, thousands of social engineering attacks, thousands of malware attacks all at once. It’s just easier for them to get that information out there.”

People, Process, Technology

Just as criminals find new ways to implement AI, many financial institutions are searching for ways to combat these attacks. To do so, a three-pronged approach that considers people, process, and technology is required.

On the people side, it means education. Organizations should ensure that their employee base, and potentially their customer base, understands that fraud attacks are now more sophisticated. The end user should understand that they can never fully trust the communications they receive, and they should question unusual asks.

From a process standpoint, organizations should take a zero-trust approach which includes constant authentication.

“We need to look at what we call perpetual KYC,” Pitt said. “In banking, traditional Know Your Customer processes often occur once, typically during onboarding, or on a cyclical basis. We look at the sanctions list, the person’s income, perform their identity verification, and then it’s set aside. Perpetual KYC uses AI to do continuous authentication in the background automatically in real time.”

Integrating AI to combat AI-driven fraud is one of the most powerful technology approaches available to organizations. Fraud and security teams can use artificial intelligence for anomaly detection among large data sets, and they can use it to summarize the gist of a large collection of documents. Organizations can also use AI to make their fraud prevention efforts more effective at a larger scale.

Tracking the Threat Environment

Though there are powerful benefits to adopting the disruptive technology, AI has many well-documented flaws. For instance, the technology is only as good as its data set, and it has been known to produce false or misleading information. These issues have caused some misgivings about AI adoption among many professionals.

“It’s important to use these tools as fraud professionals,” Pitt said. “We may be hesitant to use tools that we think are going to be used by the bad guys. Start using the tools and get familiar with that, if you’re not already as an individual. Tell your organization how AI can be beneficial. Yes, AI is absolutely used by the fraudsters, but if we don’t how to use it for good, we will never, ever beat them.”

For many institutions, another barrier to AI adoption is the organization’s resistance to change.

“I spent about half of my career working for big banks,” Cox said. “Typically, when a new technology comes out, they will ban it and then bring it on board over time in a way that makes sense. I think that AI is moving so fast that that approach is not going to work anymore, because you’re going to be at a disadvantage.”

One benefit for financial institutions is the sheer amount of education that’s available to them about artificial intelligence. AI has dominated the attention of the tech world for over a year, and the disruptive technology has been heavily scrutinized from every angle.

The amount of information available means security and financial professionals have a multitude of training opportunities they can use to educate themselves and their organizations. There is also constant news about the emerging capabilities of AI, and the techniques that cybercriminals use.

“Think about what you do day-to-day,” Cox said. “Think about the work that you have to do at your job and then start thinking: how can AI help me here? It should be clear very quickly that it will be valuable for a lot of different things. Just keep track of the threat environment, understand what’s going on, and that will help you make the right decisions to protect your firm.”

The post AI Has Become an Integral Part of Fraud Prevention—and Fraud Attacks appeared first on PaymentsJournal.

Imagine a world where payments are seamless, customer data is secure, and merchants can easily manage a multitude of payment options while still providing the best customer experience. That’s the goal of unifying payment credentials. Payment tokenization is a crucial technology that is no longer a luxury but a necessity for merchants looking to thrive in today’s digital economy.

In a PaymentsJournal podcast, Sheena Cherian, Director of Product Management at Worldpay, and Don Apgar, Director of Merchant Services at Javelin Strategy & Research, discussed the evolution of payment tokens and highlighted how partnering with a trusted expert can help merchants maximize their full potential.

Developing the Token

Think of tokenization as giving each credit or debit card a secret nickname or surrogate value. Instead of storing a customer’s actual card details on an e-commerce site, merchants can store this surrogate value—a unique string of characters called a token. While this token has no intrinsic value, it acts as a secure placeholder and is mapped back to the underlying card during authorization. Tokenization technology was introduced in the early 2000s with acquirer tokens, sometimes called merchant tokens. These were the first steps but had limitations.

Initially, acquirer tokens were designed to protect cardholder data and fight fraud. Network tokens emerged next, offering more security. Network tokens involve card networks like Visa and Mastercard and add another layer of protection. However, even these tokens are not foolproof. Setting them up involves coordination between several players: the merchant, the customers, and the card issuer.

As retailers began adopting channel-specific strategies and processor-specific tokens, the pursuit of more advanced technology created new hurdles, such as managing multiple tokenization systems and reconciling data across different platforms.

Ideally merchants would tokenize every transaction to create a complete picture of the customer’s shopping journey. While this helps personalize offers and improve overall experience, merchants also need flexibility. They might work with different payment processors (PSPs) or other service providers and tokenization shouldn’t restrict these choices. So how did we get here?

Omnichannel Payments & The Customer Journey

Today’s shoppers expect a seamless experience as they constantly switch between devices and channels. “I could be starting my journey on an iPad, browsing through different products on a retailer’s site, and then pick up where I left off on my mobile device,” said Cherian. “The seamlessness extends to the methods in which I can make a payment.”

While beneficial for customers, this omnichannel journey can create a major headache for merchants: how can they keep track of their customers across various touchpoints? Each device and channel can generate a unique token, making it difficult to recognize the same customer moving between platforms. This can lead to issues like misapplied loyalty points and an increase in friendly fraud.

“Our recent research on omnichannel payment strategies revealed a core issue,” said Apgar. “How do merchants unify these tokens and get a clear view of the customer journey?”

Some merchants are tackling this by building their own token vault—a highly secure, specialized data hub that protects sensitive information—or partnering with specialized vendors. This gives them control over token generation and flexibility with different payment processors (PSPs). But running a private token vault is expensive, even for large businesses. “Your tokens are only useful within your own system,” said Cherian. “If no one else can read them, managing your vault becomes a real burden.”

Vaulting as a Service

For merchants seeking an orchestrated payment environment without the headache of managing their own vault, Vaulting as a Service (VaaS) offers a compelling solution.

“A few larger merchants have included their own token vault as part of a larger orchestration strategy and so by controlling the vault they have ultimate flexibility to link tokens and engage PSPs as needed,” said Apgar. “But running a vault is expensive.”

Worldpay has stepped in to help merchants overcome this challenge.

“Our standalone payment credential platform helps merchants manage, unify and leverage their payment credentials for a variety of use cases,” said Cherian. “We offer our own acquirer tokens, network tokens and life cycle management for both cards and tokens. We’ve intentionally designed our platform to avoid silos. Think of it as a beehive: different honeycombs representing different token types and services work together within the hive, creating a powerful synergy.”

Worldpay’s payment vault acts as a secure central hub of the credential management platform, ensuring sensitive data is segregated and protected from unauthorised access.

While the company has boundless capacity to solve current and future merchant challenges with tokenization, Cherian highlights three methods for deploying payment credentials, managing everything from tokens to other sensitive customer data like Personal Account Number and Personally Identifiable Information. 

The first approach is designed for merchants who want a simple solution. Worldpay’s fully managed service handles everything, providing secure network tokens with no effort required from the merchant.

The second approach is for merchants who require more control. Worldpay offers a SaaS model via API access that enables integration with external systems while leveraging the benefits of its credential platform.

Finally, the third and most comprehensive approach incorporates the idea of a universal token. “Our platform enables merchants to work with multiple acquirers while providing a single, unified view of their customers’ shopping journey across all channels. This is what merchants need,” said Cherian. This approach solves the challenges of security, customer visibility and platform flexibility all at once.

As Cherian explained, it’s important to select a payment service provider with a deep understanding of payment credentials. This expertise, honed through years of experience, experimentation, and research, allows them to effectively navigate complex use cases. Partnering with a PSP who is dedicated to working closely with merchants ensures optimal payment solutions and seamless integration.

The post Unifying Payment Credentials: Simplifying the Complexity of Payment Tokenization for Merchants appeared first on PaymentsJournal.

Many financial institutions are feeling the urgency to make headway on payments modernization and digital transformation initiatives. However, all the factors involved in outsourcing an essential function like item processing might make a migration project seem like a daunting task.

In a recent PaymentsJournal podcast, Candace Burleson, Senior Implementation Analyst at Fiserv, Amina Moyer, SVP of Core Banking Solutions at Community Bank, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the successful item processing migration at Community Bank, the issues it solved, and the opportunities the modernization project created.

An In-House Shop

Prior to the implementation, one of the biggest challenges at Community Bank was staffing. The Item Processing (or Proof) department struggled to retain knowledgeable staff. The roles were often considered entry level, even though the team was a critical component of the financial institution’s daily operations.

“The hours can be demanding, and our Proof and IT teams had many late evenings to ensure the balancing and timeliness of the cash letter getting out the door,” Moyer said. “Our mainframe tasks were extensive, comprised of multiple checklists that were probably no less than three or four pages. That poses significant risks if the teams handling those tasks lacked any expertise or overlooked a step.”

The bank’s IT teams were also responsible for server maintenance and timely software updates, which were crucial to preventing any processing disruptions. Before the migration, Community Bank was a fully in-house shop for all their processing, which is why it chose to first migrate item processing to an outsource environment ahead of its full core system migration.

However, the project still presented challenges because the bank had to maintain daily operations.

“That is a common refrain we hear from financial institutions, that they have a bank to run,” Wester said. “When they look at all the challenges of taking on a project like this, that’s on top of all the stuff that has to be done in terms of running a bank, plus the fact that every bank is different. Everyone has their own challenges, whether it is staffing or the nuances of how they may run their business. It can be a scary thing to undertake.”

Implementing the Migration

Once Community Bank made the decision to migrate item processing—with Fiserv’s aid—the process was accomplished in steps.

“First was discovery,” Burleson said. “We worked collectively as a team, the Community Bank team along with myself. We discussed processes and procedures that they were working on in-house, gathered data which assisted me with the best setups for the institution, both for capture and then the back-end processing approach.”

The next phase of the process was development. Fiserv and Community Bank professionals worked on coding collectively. They identified the items that they would capture daily and the expectations for the receipt of files from item processing.

Then came testing, which began internally on the Fiserv side and then was piloted at Community Bank. There was continuous testing to ensure that both parties were receiving the correct data on a timely basis. The final phase was the go-live and support process.

“On go-live week, we monitored all incoming and outgoing files, outgoing meaning cash, letters, files back to the bank,” Burleson said. “We were able to exclude a lot of things that they were doing internally, and it was a good teamwork effort.”

In-house to Outsource

One of the immediate impacts of outsourcing item processing was that it alleviated many of the staffing issues Community Bank faced when employees retired or moved on to other opportunities.

The bank was also able to initiate cross-training within their operations team, which turned out to be a significant advantage. Cross-training brought fresh perspectives to the table, which identified opportunities for process improvements and efficiencies.

The additional training not only increased the depth of knowledge within the institution’s teams, but it also helped employees recognize their value to the organization. The staff was more aligned with the bank’s broader goals because they had time to stop and see where they were on the bank’s road map, when previously they were too bogged down with day-to-day tasks.

“I’d also say our client experience improved,” Moyer said. “In addition to migrating item processing, we introduced front counter teller capture at our branches, which reduces errors. In the past, those types of errors that were occurring at the teller line posed both a financial and reputational risk to our bank. The teller capture solution came as a benefit through migrating and implementing the item processing solution.”

A Team Effort

Within the banking industry, front office projects often take precedence. However, the middle and back-office touch so many aspects of a financial institution’s operations that updating these functions can have a dramatic impact. Still, the work involved in modernizing those aspects of the business has made many banks hesitant to take on such a demanding task.

“For financial institutions, this is a shining example that these processes are difficult, but they can be done,” Wester said. “If you are looking at manual processes, paper-based processes, it’s beyond the point where these things need to be taken care of. So much of what we’re looking at in financial services—from a technology standpoint—depends on a completely digital middle and back office.”

These manual day-to-day tasks can not only mire down a bank’s operations, but they also create operational risks when there are errors and delays. However, a staff that understands these functions can be instrumental in a successful migration.  

“The collaboration was key, in addition to having teams that are intimately familiar with the day-to-day and the whole experience here,” Moyer said. “The strength of the teams on both sides is what contributed to the success of this migration. It just gave a comfort level to the team when they were trying to unwind years of these manual tasks and relating them to what today is going to look like.”

The post Item Processing Migration Success: A Client Case Study appeared first on PaymentsJournal.

For more than 15 years, PayNearMe has helped billers optimize the payment experience. In a PaymentsJournal podcast, John Minor, PayNearMe’s Chief Product Officer, joined Brian Riley, Co-Head of Payments at Javelin Strategy & Research, to discuss how poor payment experiences contribute to rising operational costs and drive up the total cost of acceptance.

Lowering the Total Cost of Acceptance

Many billers struggle with outdated technology that offers limited payment options and delivers subpar user experiences. This often results in increased exceptions such as higher call volumes, chargebacks, and manual interventions—all of which drive up operational costs.  

“Payment exceptions are on the rise which really drive up the cost of acceptance,” said Minor. According to Minor, an exception is anything that causes a payment to fail, be delayed, or not happen at all. These exceptions require manual intervention and extra resources such as service calls or ACH returns, which ultimately increase expenses.

“Taking a good payment is easy; the complexity lies in managing exceptions,” he said.

Workflow automation plays a critical role in minimizing exceptions and reducing operational overhead. One of the most common payment exceptions—ACH returns—can take days to process due to the delayed nature of the network. Without the right workflows in place, managing these returns can become costly and inefficient. Minor pointed out that implementing automated workflows to process exceptions efficiently, reduce manual intervention, and provide consumers with the right payment options helps businesses minimize costs and improve overall payment efficiency.

Reliability is Fundamental

Platform reliability is paramount to a business’ success. Reliability means ensuring every payment is processed smoothly from start to finish—every time. “If you can’t take the payment, nothing else matters,” said Minor. “Clients have told us that failed payments keep them up at night. Reliability is fundamental, and we’ve built our platform to deliver consistent performance.”

Riley agreed, adding “Ensuring transactions go through without issues is critical.”

Convenience for Consumers and Businesses

Consumers expect payments to be as seamless and effortless as shopping on Amazon or ordering an Uber. By focusing on convenience and ease of use, billers can enhance customer satisfaction while reducing internal efficiencies 

A platform that consolidates all preferred payment methods helps businesses stay ahead of evolving trends. PayNearMe enables clients to accept payments via traditional methods as well as alternative options such as Apple Pay, PayPal, Venmo, Cash App Pay, and cash.

“Businesses really need a unified solution that evolves with new payment trends,” Minor stated. “With our platform, they don’t have to worry about development costs every time a new payment type emerges.”

Driving Down Costs with Self-Service

Self-service is a key factor in reducing the total cost of acceptance. Businesses are turning to self-service solutions for efficiency, while consumers increasingly expect the convenience they provide. The indirect costs of payment acceptance, such as employee time spent assisting with transactions, add up quickly when self-service options are lacking.

“We’ve worked with several clients to increase self-service rates and seen places where it improved as much as 40%,” said Minor. With PayNearMe’s Smart Link™ technology, clients have significantly increased self-service adoption—reducing manual support needs while enhancing the customer experience.

Self-service empowers consumers to complete essential tasks—such as making a payment, setting up autopay, or checking due dates without customer service assistance. This streamlines the payment journey and eliminates unnecessary operational costs.

On the business side, self-service provides real-time visibility into payment workflows, access to critical data, and the ability to take action within the platform without needing direct support. By democratizing access to insights and automating routine tasks, self-service capabilities can reduce overhead, enhance efficiency, and ultimately lower the total cost of acceptance.

Three Key Takeaways: What to Expect from a Modern Payments Partner

According to Minor, businesses evaluating a payments platform should focus on three key factors for long-term success and cost reduction:

1. Stability and reliability: A consistently stable and secure platform ensures payments are processed without disruptions. 

2. Optimized payment experience: A modern platform enables communication with consumers where they are, leverages data to deliver personalized interactions, and actively manages the end-to-end payment experience to reduce costs.

3. Effective exception management: The right partner proactively identifies and prevents exceptions, uses data-driven insights to minimize them, and implements tools to help reduce manual intervention costs.

By prioritizing these factors, businesses can enhance payment experiences, improve operational efficiency, and significantly reduce the total cost of acceptance.

The post The True Costs of Poor Payment Experiences (And How Modern Technology Can Help) appeared first on PaymentsJournal.

Last year, PSCU and Co-op Solutions combined and rebranded as Velera. As part of this transformation, Velera seized the opportunity to assess its product journey and modernize its products and solutions to meet the rapidly evolving needs of credit unions and their members. This meant a commitment to developing new solutions and services, while at the same time improving its existing solution portfolio with new features, functionality and enhancements.

One year into the integration, Velera’s Denise Stevens, Executive Vice President and Chief Product Officer, and Cody Banks, Senior Vice President for Product Experience and Enablement, reflected on the progress, highlighting goals set and the milestones achieved along the way. They spoke with Brian Riley, Co-Head of Payments at Javelin Strategy & Research about this on a recent PaymentsJournal podcast.

Organizing the Desired Outcomes

One of Velera’s first priorities was to create a strategic focus group made up of a diverse collection of credit union clients. Their role is to help Velera make informed decisions, navigate anticipated changes and make sure the impact on members remains a priority. That could mean anything from adjusting operations—such as staff or members interacting with a different interface—to something as simple as analyzing reports with slightly different data.

Velera then organized the company’s solutions into four categories, each representing outcomes that matter most to credit unions and their members.  

The first category focuses on delivering connected experiences, providing members with a seamless and relevant payments experience. These experiences range from users of mobile and online applications adopting features like setting travel notes, buy now, pay later and digital issuance to in-branch interactions. These innovations help create a more connected financial experience.

The second category ensures operational efficiency. Velera developed a suite of tools designed to streamline business processes for members, whether they’re visiting a branch or calling member service. The agent program for contact centers, along with frontline tools, plays a key role in enhancing service and efficiency.

The third area is fraud and protection, ensuring that credit unions stay ahead of fraudsters—not just proactively, but also by swiftly adapting to emerging fraud patterns.

“We take an omnichannel fraud approach where we have a number of products that are designed to move on from simply layering them,” said Banks. “Now we’re moving more into linking these things together, especially to fight first-party fraud.”

The final area is growth, which is especially important as credit unions look to attract younger members while also expanding into business accounts—an often untapped market. There is potential to attract higher-spending accounts, particularly among individuals who are credit union members but conduct their business banking elsewhere, such as at larger banks.

“The whole focus of the asset concentration of credit unions becomes important,” said Riley. “There’s a lot of unknowns ahead within this year. Delinquencies are up, some loan volumes are up and some are under real stress with their net-interest margins. Being able to balance that and keep the business running is really where the credit union industry needs to focus.”

Finding the Key Products

During their product assessment, Velera’s team identified products that clients could immediately take advantage of without necessarily relying on processing. However, they also wanted to ensure a thorough vetting process to confirm the products were market ready. This was especially important given the heightened expectations following the integration.

“We identified nine products, including Zelle and our ATM network,” said Stevens. “They’re already being evaluated by certain credit unions that weren’t taking advantage of these products before. We’re really excited about the nine that have already hit the market, and we’re well-positioned to deliver on our integration plans to upgrade a lot of the existing products.”

Velera has more than 50 agile teams working behind the scenes to manage the development process for the integration. They recently completed the first round of migrations to a new 3D secure platform, consolidating Velera’s clients onto a single platform. These efficiencies led to a 177-basis-point reduction in fraud.

The Challenge of Subscriptions and First-Party Fraud

A new feature now available is Card on File,  an enhancement within digital applications that also integrates via API to keep merchants updated whenever a card is stored.

“I personally lost my card a few weeks ago and had to get a replacement,” said Banks. “It took me a few hours to scroll through my bank statement to figure out Netflix, Hulu and everywhere else where my card was on file. We have introduced a new feature that allows members to see and update everything seamlessly and efficiently. It’s a tremendous cardholder efficiency, and it keeps the card top of wallet, which is so important.”

This tool provides credit unions with the ability to track where their members have active subscriptions—an area closely linked to first-party fraud. By offering better visibility into recurring payments, credit unions can proactively identify and mitigate fraudulent activity.

Fraud continues to be a top concern for many, especially as younger demographics—an essential target group for credit unions—express heightened worries about it. In response, credit unions have intensified their efforts to combat fraud, and it’s yielding positive results.  Recent findings from Velera show that 77% of credit union members are now at least satisfied with how their financial institutions handle fraud, a notable increase from 63% in 2023.  

A Continued Push Forward

With a diverse range of utility-driven features in their product offerings, Velera remains focused on leading with value. The team has kept its eyes on clients’ needs, first and foremost—recognizing that this member-first approach is essential.

“It is a delicate balance to make sure that we’re hitting all the key themes and categories,”  said Stevens.  “We have a responsibility to deliver a seamless integration and maintain business as usual, along with a commitment to deliver innovation to the industry.”

The post Transforming Credit Unions: A Case Study appeared first on PaymentsJournal.

Back in 2011, a group of Iranian hackers launched a series of distributed denial-of-service (DDoS) attacks against nearly 50 U.S financial institutions. The attacks were alarming enough, disabling bank websites and preventing customers from accessing their online accounts. However, the situation became even more troubling when it was revealed that these attacks were sponsored and directed by the Iranian government.

Since then, nation-state cyberattacks have remained a top concern for cybersecurity professionals. Countries like Russia, China, and North Korea have joined Iran in being held responsible for these advanced persistent threats, commonly referred to as APTs. In a PaymentsJournal podcast, Stephanie Schneider, Cyber Threat Intelligence Analyst at LastPass, spoke with Tracy Kitten, Director of Fraud and Security at Javelin Strategy & Research, about what financial institutions can do to combat these threats from rogue nations.

The Big Four

The four nations carrying out these attacks are playing the long game. They’re patient, developing tools and tactics to achieve their objections, and essentially have an open checkbook to fund their operations. They’re also good at remaining undetected for as long as possible, allowing them to continuously siphon information or maintain access for future operations.

Understanding these nations’ geopolitical context and their distinct motivations for engaging in cyberattacks is key.

The Chinese government, for example, conducts cyber activities to advance their national interests and economic position. They’re interested in obtaining intellectual property and data from private and public sectors to position themselves as an economic powerhouse. By actively infiltrating Western critical infrastructure, they’ve aimed to establish persistent access for potential disruption during future conflicts.

The Russian government enables broad-scope cyber espionage to suppress certain sociopolitical activity, such as in their ongoing war in Ukraine. Their focus is on stealing valuable information related to active conflicts to position themselves as a great power, rivaling the West and the U.S.

North Korea aims to collect intelligence, conduct disruptive attacks, and generate revenue. They continue to seek ways to get around their heavy economic sanctions to fund their weapons program.

Finally, the Iranian government has exercised increasingly sophisticated cyber capabilities to suppress sociopolitical activity. They also see themselves in competition with the West, specifically the U.S. Interestingly, Iran has also started to conduct more financially motivated attacks, like ransomware. Like North Korea, Iran is under tight sanctions and needs to generate revenue. But they’re also interested in creating chaos and disrupting their adversaries’ incident responses, as the 2011 attacks demonstrated.

“Iran’s attacks were a big wakeup call,” said Kitten. “That catapulted information-sharing among financial institutions. That helped to cement the fact that we need to be sharing threat intelligence and looking for indicators of compromise.”

The Nature of the Threat

There are three basic types of threats at play here. The first is monetary attacks, particularly as several of these countries seek ways to bypass restrictive sanctions. As a result, they’re targeting banks and trying to steal cryptocurrencies. Financial espionage also provides an avenue for gaining political leverage.

“Think about the sensitive personal information that a bank has access to,” said Schneider. “They’re trying to erode customer trust in critical infrastructure, things that regular citizens depend on. If they can shake that trust, that can also be beneficial for them.”

Then there’s the idea of hybrid or unrestricted warfare. There is an increasing number of attacks on critical infrastructure, including not just financial institutions but also sectors like energy and water. These attacks are designed to disrupt operations, incite panic, and spread misinformation in the background of ongoing conflicts.

Security professionals are growing more concerned about the idea of collaboration between these nation-states. Different techniques are being used by China, for example, as opposed to Russia. If Russia collaborates with China, it could become challenging to determine whether a cybercrime is being perpetrated by Russia or China.

“In the coming year, the discussions around threat intel—and especially around attributing indicators of compromise to specific threat actors—is going to become critically important,” said Schneider.

Tools of the Trade

Nation-states are continuing to invest and develop their tools to be harder to detect and defend against. They tend to use large language models (LLM) like ChatGPT in their cyber operations as support for their campaigns rather than using these tools to develop novel techniques.

But for the most part, they’re turning to the easiest way in, which tends to be social engineering and phishing. Humans remain the weakest link in security.

“We’ve seen time and time again these Russian APT groups using watering holes and conducting social engineering to get folks to click on links,” said Schneider. “It’s really basic stuff, but it’s effective.”

Criminals have also been creating synthetic identities, using them to set up bogus accounts and carry out attacks against financial institutions.

“The APT groups purchase bits and pieces of PII [Personally Identifiable Information] from multiple sources and then create a new identity,” said Kitten. “That’s been challenging for financial institutions to detect and track.”

Technology is moving toward creating realistic deepfakes specifically designed for fraud and account takeover attacks. As the financial sector uses more voice verification, someone could take voice samples of an individual and create a deepfake call powered by an LLM that’s been trained by using stolen credentials, biographical, or personal information from that individual. The result is that voice-authenticated AI could respond to challenge questions based on that stolen data in real-time.

Taking Protection

What should organizations do to protect themselves from these threats? The first step is practicing good cyber hygiene.

“APTs have access to advanced tools and resources, but they will use the easiest method available so that they don’t burn those novel tools,” said Schneider. “Using a password manager, creating long complex passwords for each account, making sure that your systems are up to date—those types of things are really simple, but really important to get right.”

The entire organization should buy in to these efforts, from the CEO down, to provide investments in solutions that can be used across departments. Employee training and awareness is crucial to protecting against things like social engineering threats.

About half of the population is now using pass keys to mitigate cyber threats, according to some reporting. These allow users to log into a site or device by using something like a fingerprint or PIN.  Pass keys have the advantage of being phishing-resistant, reducing the human element, and they cannot be shared.

Finally, organizations should consider setting up an advanced threat detection program, including threat intelligence.

“I would encourage financial institutions, especially smaller ones, to ensure that they’re working with third-party vendors who are trusted, experienced partners,” said Kitten. “Make sure they’re asking the right questions and thinking five years out about what this solution is going to look like.”

Schneider added: “If we’re aware of who is interested in targeting us, and staying up to date on the latest tactics, techniques and indicators of compromise, we will be in a much better position to defend against those threats.”

The post The Growing Threat of Cyberwarfare from Nation-States appeared first on PaymentsJournal.

Commercial solutions offered by banks have typically been tailored to larger corporations, with a one-size-fits-all approach that often doesn’t meet the unique needs of small businesses. As a result, many small business owners have turned to consumer-focused products, which lack many of the key functions they need. The lack of compelling options available have driven many to seek financial solutions outside of their financial institution.

In a recent PaymentsJournal podcast, Tim Ruhe, VP, Head of Small Business Payments at Fiserv, Ryan Looper, Director of De Maison East, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed the challenges small businesses face and the opportunities financial institutions have to better support their small business clients.

The De Maison East Case Study

De Maison East is a beverage company founded in 2020, right at the beginning of the pandemic.

“Everything changed,” Looper said. “In that moment, it was like diving into a pool in the dark and hoping there was water there. One of the challenges was our customer base had just been decimated, because all restaurants were closed. This put a spotlight on connecting with customers and getting revenue going, getting accounts receivables and payables going as part of our operational load. It just felt like one of the things we needed to focus on.”

During the pandemic years, the company focused on examining its business processes and identifying potential growth strategies. While the beverage industry is well-established, it remains somewhat conventional in many ways, and many of De Maison East’s customers were still paying invoices by paper check.

Recognizing digital payments as a powerful growth driver, the company began to encourage its customers to make digital payments.

“It might sound a little far-fetched that digital payments would be innovative, but they definitely are for our business,” Looper said. “As we were thinking about scalability and the customer experience, we decided to go with a fintech partner. The move allowed us to give very fast feedback to our customers with regard to payments. To this day, we still receive a majority of our payments digitally, and it was a blessing in disguise that we could do that in a difficult time.”

The Goldilocks Solution

The speed and transparency gained from the shift in payment processing made an immediate operational impact for De Maison East, which typically handles numerous smaller transactions. The improvements in the receivables process helped De Maison East optimize cash flow to focus more on its customer relationships and driving its business forward.

“One of the things we hear from small businesses is they’re spending close to 20 hours a week managing the back office and payments, and they’re not able to focus as many hours and cycles on their businesses they’d like to,” Ruhe said. “Businesses are finding themselves using lots of different tools from different providers and not necessarily going through their financial institution.”

Small businesses want to perform and automate tasks such as paying suppliers, receiving payments from customers, sending invoices, and performing transactions at their physical point of sale. In many cases, an integrated solution isn’t available to accommodate their needs.

The commercial offerings from financial institutions can be daunting because they are highly sophisticated. While they are capable, they are often not designed for companies with less than 30 employees.

On the flip side, consumer solutions don’t offer enough capabilities for small businesses. They may be able to pay bills, but an organization will have trouble paying suppliers. There’s also no invoicing capabilities or merchant services.

“What we’re finding is that there’s this Goldilocks segment,” Ruhe said. “How do financial institutions serve the small business segment and their needs while retaining the capabilities and the simplicity? There’s this new category, which is integrated small business solutions, that they’re trying to solve for.”

A Home Base

Although the lack of a fit-for-purpose solution has caused many businesses to partner with fintechs, many would still prefer a solution provided by their financial institution—if it were available.

“If a financial institution provided a small business with an easy to use and highly capable solution, it would be a huge advantage and very appealing, because it creates less dispersion of platforms,” Looper said. “We’re constantly in our financial institution, so if it was a home base, that would be incredibly advantageous.”

One main reason a small business solution offered through a financial institution is so compelling is that it’s a one-stop shop. Instead of paying for multiple platforms and spending time manually reconciling the information, the payment data can be consolidated in a single dashboard.

Another critical advantage is that banks can offer access to real-time payment rails like FedNow and RTP. Overall, the speed and efficiency gains that a financial institution can provide can have an exponential effect on small businesses.

The End State

The small business segment has been somewhat underserved by financial institutions, which is why many companies have turned to fintechs. As banks begin to tailor their small business offerings, they should start by taking a holistic view of their customers.

“If a financial institution had the ideal full relationship with a small business, what would that be worth?” Ruhe said. “I’m sure they have a need for business cards, and I’m sure they have deposit accounts. I’m sure they need, in many cases, invoicing capabilities or merchant services. What would be the value of that relationship? Put a number on it and do the math. Now you can say, how am I doing in terms of wallet share?”

Once an institution understands the full needs of their client, they can deliver an integrated experience that includes all the key jobs to be done and work to win the customer back.

“If you define that as your end state, it gives you a good road map,” Ruhe said. “Now you know what the value of the business is, you know how well you’re doing in serving that small business. You’ve done an assessment, and you have a clear road map for how to deliver an integrated solution. The customer doesn’t want to go to different places, he just needs the best possible set of capabilities.”

As financial institutions consider their small business solutions, they should understand that there can be a vast difference between organizations. A physician and a plumber might both be considered small businesses, but they have far different financial needs.

“It’s not just a one-trick pony about fixing the receivables and the cash flows, it’s getting deeper into the relationship with that business,” Riley said. “As the business grows, the relationship could move to treasury services and deposits and even bleed over to the consumer side of the business. Having that whole view is important in an area that’s somewhat amorphous because of the definition of a small business.”

Small Businesses: The Heartbeat of America

Even though small businesses have varying needs, there are many common threads between them. One of those threads is they are constantly looking to their financial institution for help.

“The messaging to small businesses is important,” Looper said. “It’s a massive opportunity for financial institutions, especially in the beverage space, which is a bit of an analog space, to transition us over. We’re all using banks. We have our financial institutions. It’s a huge opportunity to bring us over and give us some tools to grow an important segment in the U.S. economy.”

For financial institutions, there are solutions that can help them deliver the key functions that small businesses require. For instance, Fiserv recently launched its CashFlow Central platform designed to support a small business’ accounts payable, invoicing, merchant services, cash flow management, and business card demands. The integrated platform can help financial institutions deliver the solutions their clients need and take advantage of a unique opportunity.

“We have a market of 34 million small businesses in the U.S., representing 43% of the GDP and 70% of GDP growth,” Ruhe said. “That’s $150 billion in value to financial services, so there’s a tremendous opportunity here. Small business is big business—it’s the heartbeat of America and the fuel of our economy. So I would say start tomorrow.”

The post Financial Institutions Can Be the Payments Hub That Small Businesses Need appeared first on PaymentsJournal.

There have been many highly publicized efforts to introduce biometric authentication into the merchant space, such as Amazon’s palm payment technology. While widespread adoption of biometrics in retail has yet to occur, intriguing use cases continue to emerge.

In a recent PaymentsJournal podcast, Christopher Miller, Lead Emerging Payments Analyst, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the scenarios where biometric verification has proven effective for merchants, the challenges hindering widespread adoption, and the future of identity verification technology.

The Rise of Biometrics: Transforming Authentication and Payments

Over the past few years, biometric technology has gained traction in three key areas.

The first is consumer authentication for rewards and loyalty programs. For example, some fast-casual restaurants have implemented facial recognition software at kiosks to quickly connect users to their accounts.

“It is primarily used as a means of reducing friction for the consumer and potentially rewarding loyal customers with a unique experience,” Miller said. “Lurking behind that is the notion of authenticating payments, because the store or the merchant can of course have payment information on file that is authenticated by your biometric, but that’s not necessarily the driver or the problem that the merchant is trying to solve.”

The second area is payment authentication, where biometrics enhance identity verification. In the EU, for instance, it’s increasingly common for issuing banks to request biometric authentication through their apps when customers transact with a card. This additional security layer helps reduce risk, fraud, unauthorized transactions, and even returns.

Many merchants have also adopted biometric authentication to minimize fraud, particularly when renting out high-value goods.

“If you want to secure a bulldozer for a weekend project with a credit card, it’s important that the merchant who is renting the bulldozer knows that you who are renting this are actually the person who owns that credit card, and you haven’t given them a bad card, or one that eventually is going to be declined,” Miller said. “Because once you leave with the bulldozer, it’s over, and that’s a big loss.”

The third area of biometric adoption is replacing traditional payment devices with biometric credentials, such as in pay-by-palm, facial scanning, or fingerprint recognition. In these cases, the customer presents a biometric credential linked to their payment method, authorizing and completing the transaction seamlessly.

The Merchant Perspective

From a merchant’s perspective, there are two main barriers to biometric adoption. For in-store biometrics, the primary challenge is the cost of the systems such as optical scanners or fingerprint readers. For major merchants with thousands of point-of-sale stations and checkout lanes, this expense can be significant.

The other challenge is the consumer adoption process, which often involves multiple steps and introduces friction.

“About 20 years ago there was a pilot with a company called Pay By Touch that enabled you to pay with your fingerprint in the grocery checkout,” Apgar said. “But that required consumers to pre-register and to put their payment card and their fingerprint in a database. Then the reader could access and translate the fingerprint into the payment card. In the case of the bulldozer rental, that would require me to have my fingerprint on file with the issuer.”

To address these issues, companies like CLEAR, which provides identity verification at airports and stadiums, offer reusable biometric credentials. CLEAR already has a large customer base that has enrolled for streamlined airport authentication. These existing customers could use their credential at any merchant that partners with CLEAR—or a similar network—without needing to re-enroll.

“The emergence of reusable networks of biometric credentials goes a long way towards solving some of the consumer friction problems,” Miller said. “In the same way that it was impossible to expect that consumers would establish a unique credit line at every store that they shop. The same consumer logic that led to the general-purpose credit card is likely to lead to at least a small number of general-purpose biometric credentials.”

Out of Alignment

Though consumer adoption may present a challenge, consumers have shown they are not opposed to biometric authentication. In fact, many routinely use biometric credentials every time they pick up their mobile devices. In many cases, they also rely on biometrics to make payments through digital wallets.

“One of the advantages of Apple Pay in the e-commerce environment is that if you pay by Apple Pay online, you can use your fingerprint on your iPhone as an authentication method,” Apgar said. “Validation and identity confirmation is much more important in e-commerce and in remote transactions than it is in in-lane, in-store transactions, because in the e-commerce space, merchants have liability for identity fraud.”

Retailers bear the full burden of chargebacks in e-commerce transactions, giving them a strong incentive to verify consumer identities. However, cart abandonment remains a major concern, as businesses strive to balance security with a seamless customer experience. In an ideal scenario for merchants, payment methods would free, transactions would be irreversible, and consumer identities would be fully authenticated.

“Consumers want the ability to charge back a transaction if the package doesn’t arrive like it’s supposed to,” Apgar said. “They like having the card issuer, in the case of card payments, being able to intervene as the arbiter if the merchant doesn’t deliver as promised. There is a cost to that, and there is this back and forth; the needs of consumers and merchants aren’t entirely aligned.”

Another point of contention between merchants and consumers is privacy. Payment authentication is often seen as a threat to privacy, as a record of a consumer’s purchases can paint a detailed portrait of their behavior.

“There are ways that those connections can be severed such that nobody knows that a person, who is actually me, bought these embarrassing items at this embarrassing store,” Miller said. “Rather, it’s some token of a card that I have that is confirmed by another party, and that’s less good for the merchant, if only because they can do less with the data at the end, but also because they’re less able to monetize the data that they’ve gathered around consumers.”

The collection and use of consumer data have long been sources of tension in the marketplace, and this issue is unlikely to be fully resolved. The introduction of biometric data adds another layer of complexity, raising critical questions about who stores this data and how is it secured.

The Impetus to Implementation

The cost and privacy concerns likely mean that the return on investment for biometric authentication investments isn’t there for merchants right now. However, issuers are also involved in these transactions and may have a stronger incentive to implement biometric authentication in retail environments to reduce fraud and risk.

The expense will likely be lower for issuers since they wouldn’t need to install fingerprint readers or other physical devices. Instead, they are more likely to leverage existing mobile apps to collect biometric credentials. Some banks have even discussed how implementing a biometric authentication program for their customers could strengthen their relationships.

“If there’s a place where this is more likely to happen, it is issuer-driven,” Miller said. “It is mobile-gathered and performed, and it is possibly part of a larger grab by those issuers. It’s interesting to think of banks becoming potentially identity-confirming sources of their own. Certainly, the larger banks might have the ability to take their networks of 30 or 50 or 100 million customers to create biometric authentication methods for their own purposes.”

The post Biometric Authentication Faces Barriers, But Use Cases for Merchants Have Emerged appeared first on PaymentsJournal.

There have been remarkable strides toward U.S. real-time payment adoption in recent years, driven by growing demand among businesses and consumers. As the long-awaited ubiquity of instant payments draws closer, the financial institutions that have yet to adopt this nascent payment method face tremendous downsides.

In a recent PaymentsJournal podcast, Justin Jackson, Head of Enterprise Payments at Fiserv, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discussed the concerns many institutions have about instant payments support, the benefits of real-time payment adoption, and the steps institutions can take to stay competitive.

Real-Time Concerns

There are approximately 9,000 banks and credit unions in the U.S., and roughly a quarter of them are active in instant payments. While financial institutions are often separated into adopters and non-adopters, the actuality is a bit more complex.

“We often speak as though the other 75% are one homogeneous group that all look and think and act the same, but that’s not the case,” Jackson said. “They’re all individual businesses. They have their own strategies and their own goals and concerns. Each of them has factors that influence their decision of what they’re going to do with real-time payments.”

Some institutions are concerned about potential technology challenges when implementing instant payments. They aren’t sure about the magnitude of the change, its impact on operational processes and existing systems, and whether it will require additional staff.

Cost is another major concern for many banks and credit unions, as they worry that instant payments could introduce incremental expenses beyond their control. For example, if an originator were to come online and the volume of received instant payments increased by 10X or even 100X overnight, it could lead to unforeseen ramifications.

Additionally, many banks remain uncertain about the fraud risks associated with instant payments. These concerns—spanning technology, fraud, and cost—are weighing on institutions to varying degrees. However, as more organizations adopt instant payments, many of these worries will subside.

“They’re thinking through these concerns, and they are seeing what their peers and their colleagues are doing and they’re deciding that maybe it’s time,” Jackson said. “We’re nascent in the adoption of instant payments within the U.S., with FedNow being live for about a year and a half and we’re not even at a decade with the Clearing House’s RTP network. We have about 25% of the industry live and that’s tremendously fast for a totally new payment mechanism like this.”

Table Stakes: Powering Deposits and Efficiency 

For all the concerns about adopting instant payments, the disadvantages are mounting for financial institutions that lag behind. Consumers have quickly become accustomed to real-time experiences, such as instant access to vast libraries of music and movies.

As these experiences become the norm, both consumers and businesses are increasingly perplexed as to why moving money still takes so much longer.

“Retail goods are an example that comes to mind, where you can order something on your phone and sometimes receive it the same day,” Tavilla said. “There is also the precision and the transparency with my packages, where I know exactly where the UPS guy is. But when you move your money, it takes multiple days, and you don’t have the precise information as to when and where the money is in terms of the process.”

The increased demand for real-time money movement means instant payments are becoming a table stakes offering for financial institutions. However, real-time payments are much more than an obligation—they are a transformative force that delivers substantial benefits.

“There’s one credit union that we worked with to take live on the instant payments networks,” Jackson said. “In the first couple of days after going live, incoming transactions hit the 1,000-payment milestone. After a few months, they got to the point where they were processing 10,000 transactions a month for their members, who were receiving these real-time payments from originators outside of their institution.”

The resulting deposit growth at the credit union was almost $60 million in net new deposits, simply due to taking their real-time connection live.

Other advantages of real-time payments are more efficient controls and better risk management processes. When an institution initiates a payment, it knows exactly what the balance of the account is. The financial institution secures funds instantly when its user makes a payment, and it can restrict unauthorized use of those funds. In addition, the bank doesn’t carry the risk that the funds aren’t there.

The institution is also immediately ready to process a payment at any time, and it is guaranteed credit. If a bank receives a transaction and posts it to an account, it doesn’t face the risk that comes with a return window of two to three business days, where a payment could be clawed back. This extra control is a significant benefit that isn’t available with non-instant payment methods.

There is also a less obvious benefit to the acceptance of instant payments: customer retention. For example, after many gig economy workers perform their food-delivery or ridesharing services for the day, they want to cash out their earnings immediately to pay for groceries or bills.

Many fintech companies that facilitate gig economy platforms have touted their ability to pay out instantly to attract talent. However, that real-time payment capability is only available if the worker’s financial institution supports it.

In some instances, if a contractor requests instant payment but their bank isn’t eligible, fintech companies have encouraged them to switch to a competing institution that supports real-time payments.

“That’s huge, when someone else is marketing against you and encouraging your customers to go to another institution because you don’t offer the service,” Jackson said. “That attrition risk is something that just kind of comes out of left field. It’s easy to solve for—just accept the instant payment—but it’s something that isn’t often thought about. It’s becoming more of a problem for the institutions that have decided not to get into instant just yet.”

Business Impacts

In addition to mounting consumer demand, recent research indicates that 90% of businesses consider instant payments to be important or very important.

“As a business owner, one of the things that’s most important is cash flow and access to working capital,” Jackson said. “The nice thing about instant payments is they are 24 hours a day. There is no availability window, they are seven days a week. There’s no weekends or holidays, they are 365 days a year. At any time, a business owner can receive or send a payment and know that within 15 seconds it’s available and it’s confirmed.”

These transactions could include payments to vendors and suppliers or incoming payments from customers or investors. Immediate access to money movement is tremendously valuable to business owners, as it increases efficiency. Business owners know exactly where their payments are, and once received, there are no exceptions—no two-day return window and no risk of a clawback.

Real-time payments allow organizations to use funds immediately and confirm that an obligation has been satisfied. They also give business owners more time to focus on running their company and serving customers.

“The improved customer experience that I get from my bank or my credit union as a result of the instant payment goes a long way,” Jackson said. “There is a lot of impact to the business owner by having access to instant payments and that is going to become more of a drag on the institutions that haven’t gotten into this space. Businesses are starting to think about where they bank based on the availability of instant payments functionality.”

Getting Into the Game

The demand from businesses and consumers means real-time payments adoption is going to continue to grow by leaps and bounds. As adoption accelerates, there will be increasing pressure on banks and credit unions to become real-time. Though these institutions have a myriad of concerns about implementation—and no two banks are the same—there are solutions for every situation.

Some financial institutions may want to manage all the network integrations and run software in their own data center. Others might prefer to outsource the whole operation and buy instant payments support as a service from a provider. Still others might want to integrate instant payments via API directly into an app that they or a third-party has built.

“At all ends of the spectrum, regardless of what you want to do with instant payments, there’s a solution out there,” Jackson said. “I would say for any financial institution that’s not yet in this space, talk to your provider, whether it’s Fiserv or someone else. Ask them what they have, tell them what you’re looking to do, and get into the game here.”

The post The Downside of Not Offering Real-Time Payments appeared first on PaymentsJournal.

After years of discussion about the new messaging protocol, ISO 20022 is now an inevitability. Though there are substantial benefits to adopting the protocol, many financial institutions—especially in the mid-market tier—are still unprepared to meet compliance by the July 14 deadline (delayed from March 10).

In a recent Payments Journal podcast, Mihail Duta, Director of Solution Consulting and Transaction Banking at Finastra, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the obstacles to ISO 20022 adoption, the advantages the protocol provides, and the opportunities it uncovers for mid-market financial institutions.

Learning A New Language

The shift to ISO 20022 will be like learning a new language for many banks and credit unions. Some institutions may attempt to bridge the transition from the FAIM format by building translators, but there are challenges with that solution moving forward. Many translators have limitations that could lead to data truncation, and incomplete or inaccurate data could potentially cause payment processing failures. 

Another issue for these banks will be ensuring that all their interfaces and solutions beyond payments processing are ISO 20022 compliant. Across-the-board standardization will be especially critical when sending cross-border payments.

U.S. instant payment rails FedNow and RTP were built on the standard, and SWIFT cross-border payments will move to ISO 20022 in November 2025. This means the institutions that aren’t fully leveraging the protocol will be at a competitive disadvantage.

“ISO 20022 is no longer a nice-to-have,” Duta said. “It’s the only way you’re going to be able to process Fedwire transactions come July 14, so you must be compliant.”

As Duta pointed out, standardization facilitates seamless communication and interoperability between banks and across borders, with valid message instances to ensure compliance with the standard.

The Richness of Data

Though the looming deadline may be top of mind for many institutions, supporting the standard goes beyond mere compliance. The new protocol offers substantial benefits that mid-tier financial institutions can leverage to enhance their services and identify new revenue streams.

“Given the richness of data that comes with the ISO 20022 format, more fields are available to transactions, compared to what we have today” Duta said. “We’re moving from three lines of address to 24 lines of address, to give just one example.

“Structured data can be fed into AI capabilities or machine learning, improving the detection of complex anti-money laundering scenarios, but also improving operational efficiency with higher STP rates,” he said.

The data from ISO 20022 transactions can also drive significant improvements in fraud management. Enhanced data quality and consistency allow for more sophisticated fraud detection algorithms, potentially reducing fraud losses.

The ISO 20022 standard also improves payments processing by minimizing manual interventions and associated costs. Taken together, the protocol’s benefits create a faster, more efficient, robust payments engine, offering a powerful competitive differentiator.

“We’re still talking about how we meet compliance but lost in that discussion is the idea that this impacts everybody,” Wester said. “That’s one of the things about the payment space—we are all interconnected. Mid-market institutions are going to need to maintain or gain integration with the global banks and payment networks. For mid-market financial institutions, this is about new products and services being offered to customers and it’s about being competitive and remaining competitive.”

The Implications of the Format

The adoption of ISO 20022 can mean much more than efficiency gains. Supporting the protocol can be the first step toward creating a fully modernized payments ecosystem. An institution that supports the standard will be prepared to meet customer demands for instant and cross-border payments using a single system.

“Especially when you’re talking about commercial or corporate clients for financial institutions, it’s amazing how quickly they can go from a nice-to-have to a must-have,” Wester said. “Now they will expect this product or service from their financial institution, to help with reconciliation, to help with operational efficiency, or to help with fraud detection. All those things are why this discussion is so imperative right now.”

Customer expectations will continue to shift as the use cases for ISO 20022 are developed, and the full capabilities of the messaging standard begin to come into focus.

“The reality is that the expectation and the ask from your customers is going to evolve now that ISO 20022 is available to them and it’s becoming popular,” Duta said. “You’re going to see your customers asking a mid-market bank if they can send an ISO-formatted file with the expectation that the bank will take the file and process it through ACH. This is another element to think about that may not come to mind right away, but there are other implications to the ISO format beyond what’s directly in front of us.”

These implications will impact the entirety of an institution’s ecosystem because platforms like RTP and FedNow interact with systems outside of a bank’s payments solution. It means ISO 20022 adoption will affect everything from a bank’s fraud solution to its core solution.

For example, when a bank posts a transaction to their core system, they will receive additional data that provides clearer insights into the purpose of the payment—something that wasn’t always evident in the previous format. Beyond improving operational efficiencies, this data offers valuable details, such as purpose codes, and can pay dividends in the long run.

“This is a part of a larger evolution of payments that we’ve seen over the last decade or so of digital transformation leading to payment modernization,” Wester said. “As I’m fond of saying, it doesn’t stop here. We know that payments is going to move. We know that it can continue to evolve. How are we going to use AI for next-generation solutions for fraud mitigation? What new payment rails are going to be coming in?”

A Must-Have

The first and foremost concern for many mid-market financial institutions may be compliance, but ISO 20022 support is a must-have for banks and credit unions who are looking to stay competitive. It means the July compliance date is just the beginning of the road.

“Financial institutions should remain engaged with the way that these use cases and applications are developing and evolving,” Wester said. “It may sound strange to say, ‘Stay engaged with a data standard,’ but we are just beginning to see the ways in which ISO 20022 is going to be used, the ways it’s going to be implemented, and the ways it’s going to be integrated into other products and services. Stay engaged with the way this is evolving, because I think this is going to be a part of a bigger evolution.”

Because of the complexities of ISO 20022 compliance, many mid-market financial institutions will be searching for solutions to help them both reach compliance and take advantage of the protocol’s opportunities. Solutions like Finastra’s Payments To Go can offer access to multiple rails by proxy—in a platform that is ISO 20022-native. Payments To Go is built on Microsoft Azure technology, allowing it to fully leverage the benefits of these advanced technologies. The key advantage of Payments To Go lies in its support for ISO 20022, which enhances interoperability. Combined with open APIs, this has simplified pre-integration with the fintech ecosystem, enabling the delivery of comprehensive solutions that include compliance, AML, and fraud services.

“It’s a lot easier to adopt ISO when you have an application that’s ISO native, as opposed to an application that basically has to make significant changes to be ISO compliant,” Duta said. “There is a difference between an ISO 20022 native application and an ISO 20022 compliant application. Behind the scenes, to take advantage of the richness of this data, you need an ISO-native application.”

The post ISO 20022 Is the Beginning of the Road for Mid-Market Financial Institutions appeared first on PaymentsJournal.

In the fast-changing world of financial services, modernizing payments technology has become essential for businesses looking to reduce costs, enhance customer experiences, and stay competitive. Santander Consumer, a full-spectrum auto lender, stands as a prime example of how bold leadership and strategic decision-making can transform payments infrastructure to deliver long-term value.

On a PaymentsJournal podcast, Santander Consumer Chief Technology Officer, Don Smith, spoke with PayNearMe Chief Revenue Officer Mike Kaplan and James Wester, Co-Head of Payments at Javelin Strategy & Research, about Santander Consumer’s approach to modernization and the benefits the company gained from it.

Why Payments Modernization Matters

Financial institutions operate with a fairly straightforward business model: they lend money and borrowers repay it. “Payments is a really important part of our business,” said Smith. “We lend people money to procure vehicles and then we really, really like it when they pay us back!”  Smith noted that modernizing their payments platform was critical to addressing service-level challenges and supporting scalability that existed with their incumbent provider.

PayNearMe’s Kaplan highlighted the broader implications of modernizing payment systems. “When payments go right, they are frankly really easy,” said Kaplan. “It’s when they go wrong that you need a modern platform and modern systems to address those things and drive the extra costs out of it.”

The motivation behind Santander Consumer’s decision to overhaul their payments technology was clear: outdated systems were creating inefficiencies, service disruptions, and unnecessary costs. As Smith explained, “When outages occur with a payment provider, it’s a big problem because customers can’t pay us. Reliability and stability in a payments platform are absolutely critical.”

A High-Risk Decision

Service-level challenges and stability issues prompted the company to evaluate opportunities to make a change with their payments provider. In addition, as a contract neared its end, Santander Consumer saw an opportunity to reassess its existing provider and consider whether to renegotiate or look at alternatives. Finally, the company asked whether the current platform and strategy could expand, improve efficiency, and better service customers. If not, it was time to consider a change.

“All those things coalesced together as I was introduced to PayNearMe,” said Smith. “We started evaluating their capabilities and looking at the stack and the architecture that they provided.”

Transitioning to a new payments platform is no small feat, particularly for a large organization like Santander Consumer. “These projects are high-risk,” acknowledged Smith. “Success requires a clear vision, the right partner, and active executive sponsorship. It’s not enough to just approve the project; leaders must stay engaged and work closely with teams to address challenges in real time.”

Wester praised Santander Consumer’s approach. “Many financial institutions struggle with modernization because they view technology as an ancillary function rather than a driver of business efficiency. Santander Consumer’s focus on aligning technology with business outcomes is a model for success,” said Wester.

“You need to be able to step up and drive transformation in your organization, and not fear the hurdles that you have to jump over,” added Smith.

Total Cost of Acceptance

For forward-thinking organizations like Santander Consumer, considering the total cost of acceptance—not just transaction fees—can transform their approach to payments. As Kaplan explains, the goal should be to address all costs associated with payment acceptance, including system costs, manual interventions, and exceptions from failed or delayed payments.

“It’s not just reducing the cost of an individual transaction, but really, the whole ecosystem becomes more efficient the more you take manual effort and touch points out of the process,” said Smith. By partnering with PayNearMe, Santander Consumer streamlined workflows, reduced exceptions, and improved overall efficiency, delivering both cost savings and a better customer experience.

The Role of Self-Service

One of the standout features of the modernization effort was the emphasis on self-service capabilities for both Santander Consumer’s customers and employees. With PayNearMe’s help, Santander Consumer introduced a feature that allows them to send personalized payment links directly to customers’ mobile devices, enabling one-click payments. This eliminated the need for the company to contact a subset of their customers.

“We saw thousands of people adopt that new capability,” said Smith. “Otherwise, we would have had to phone them up, track them down, get them to answer their phone in the first place, and guide them into making a payment.” This capability not only enhanced the customer experience but also freed up internal resources to focus on more strategic priorities.

Measuring Success

Santander Consumer measures success across multiple dimensions, including customer adoption of new payment methods and channels, such as Google Pay, Apple Pay, PayPal and Venmo. The team also monitors service levels to ensure stability and scalability, while tracking operational efficiency gains in back-office functions such as reconciliations and reporting. Ultimately, success is defined by enhancing capabilities, reducing costs, and managing risk effectively–ensuring the modernization delivers long-term value.

Smith’s advice for organizations considering a similar journey was clear: “Don’t start a project like this without the right partner and active executive involvement. It’s a long and complex process, but with close collaboration and a clear vision, the results are well worth the effort.”

As payments technology continues to evolve, Santander Consumer’s success demonstrates the benefit of modernization—not just as a technical upgrade, but as an enabler for long-term value.

The post Fast, Secure, and Future-Ready: Santander Consumer’s Payments Tech Transformation appeared first on PaymentsJournal.

Virtual cards have been a popular option for consumers for years, but they’re just now gaining traction among businesses. With an increasingly globalized economy, corporate entities are seeking efficient ways to move money across borders, and virtual cards are filling that role—maximizing efficiency while reducing costs.

Mark Anthony Spiteri, Global Head of Card Business at Nium, sat down with Brian Riley, Co-Head of Payments at Javelin Strategy & Research, during a PaymentsJournal podcast to discuss the growing demand for B2B cross-border payments and the emerging use cases driving their adoption in industries like insurance and travel.

The Pandemic Effect

B2B payments have been a cornerstone of commerce for decades, but like many other aspects of business, the pandemic brought significant changes. For one, companies had to grapple with the possibility of their suppliers going out of business. This created an urgent need for processes that could move funds quickly between merchants and suppliers, ensuring payments were delivered reliably.

Post-pandemic, many companies diversified their supply chains to reduce risk and work with multiple global suppliers The challenge, however, is that the payment rails in some of these countries may have not been tried and tested. Fundamentally, businesses need assurance that they can pay and get paid quickly, cost-effectively, and reliably across borders.

Volatility and Regulation

Since the pandemic, two additional factors have been changing the fundamental nature of B2B payments. The first is the impact of volatility.

”At the moment there’s a lot of volatility across the political landscape,” said Spiteri. “We saw what happened in the U.S. election and how the Asian market reacted, with significant impact to the Chinese Yuan. Suddenly, there was a lot of fluctuation in FX. If that happens, you need to be able to control those payments in a way that you can predict exactly what’s going to happen. It needs to be accurate, reliable, and in real-time.”

The second is the increasingly complex regulatory landscape. Given the heightened scrutiny from regulators, it has become more difficult for businesses to rely on a single payment method for global transactions.

The immediacy of virtual cards has helped alleviate many of these concerns.

“Something I’ve always liked is how quickly you could settle real-time payments across borders,” said Riley. “The Eurozone was a leader in real-time payments, but now it’s moving through many different countries, and it’s finally in the U.S. These payments settle once they hit the books, and they clear very quickly and safely.”

Advantages of Virtual Cards

As a self-confessed ‘cards guy’, in Spiteri’s opinion the biggest challenge with real-time cross-border payments is how you connect a fragmented landscape of localized, regional networks around the world. In addition to global real-time payment networks like that offered by Nium, this is where virtual cards come into play. Being able to move money quickly and securely across borders with virtual cards is a powerful way for businesses to improve liquidity and cash flow management.

“Before it was like, pay in 30 days, or pay in 60 days, right?” said Spiteri. “Now, you can pay now. And one of the best ways to do that effectively and guarantee when the payment will arrive is with a virtual card.”

One key difference between virtual cards and other real-time payment methods is the chargeback protection that cards offer. If a supplier or merchant goes bankrupt, buyers are guaranteed to recover their funds.

Virtual cards also offer better controls. When employees use corporate cards, for example, it can be difficult to reconcile transactions and track where payments are going. Overall, they offer more flexibility. They can be configured as single-use or multi-use cards. A virtual card might be restricted to a specific merchant, set for a particular spending limit, or designated for use only at restaurants. This level of customization gives finance and procurement teams more control and granularity—and provides real-time transaction information to the employer.

“From the use cases I’m familiar with, where most cards are single-use, it simplifies reconciliation dramatically,” said Spiteri. “You can match the card to the original transaction, automatically plug the information into your ERP or accounting system, and you have end-to-end matching.”

Industry Use Cases

The travel industry was among the first to adopt this technology, primarily due to the immediate need for liquid cash flow and guaranteed payment protection. For every online booking, travel agencies and other intermediaries  must make payments to their airline and hotel suppliers around the world. Travel companies of all kinds also face sizable expenses, such as fuel purchases, often in cross-border locations. For instance, when planes require maintenance, businesses need the ability to quickly and securely transfer funds to cover repair costs.

Nium is also seeing strong demand in the B2B insurance sector, working with leading insurance firms to deliver innovative virtual card solutions. In one use case, Nium is the global issuer behind the launch of a new healthcare payment card, enabling members to pay for eligible outpatient treatment without using their funds, needing to submit a claim, or contacting their insurer to pre-authorise their treatment before they pay it.

“If I’m travelling and have an accident abroad, I need to find the hospital and get treatment urgently,” said Spiteri. “I pay with my own credit card, then I have to fill out some forms, then claim it back, then send it to my insurer, and so forth. Even then, I may not be reimbursed if my claim doesn’t meet the criteria of my cover plan. It’s a complicated process that is very time consuming, both for the customer and the businesses involved as money can take time to flow between the insurer and the hospital.”

“With the real-time healthcare payment card, now when I’m travelling and something happens, I can generate a virtual card on the insurance app in my Apple Pay or Google Pay wallet. When I pay for the treatment, it’s actually the insurer paying the medical facility immediately. No reimbursement headaches. All I have to do is upload an image of the treatment invoice to the app to be processed.”

Expect to see consolidation in the B2B payments industry in the coming years. The focus will likely shift toward addressing challenges like those in the insurance sector—a need that forward-thinking companies like Nium are already anticipating and solving.

“With consumer payments, you make a solution work,” said Spiteri. “You don’t throw everything at it and hope that it works, or else no one will use it. And that’s what’s going to happen in the B2B space. This will drive consolidation and increase the focus on solving tangible business problems with innovative payment solutions.”

The post What’s Driving the Adoption of Virtual Cards? appeared first on PaymentsJournal.

Cyber fraud presents a unique threat to small and mid-sized financial institutions, which often lack the resources or expertise that major banks possess to fend off account takeovers and other cyberattacks. However, they face the same risks from hackers as any larger institution.

In a PaymentsJournal podcast, Mike Kosak, Senior Principal Intelligence Analyst at LastPass, spoke with Tracy (Kitten) Goldberg, Director of Fraud and Security at Javelin Strategy & Research about the evolving threat landscape confronting smaller financial organizations. Their discussion covered the emergence of nation-states as threats, the rise of deepfakes, and why information-sharing may be the most effective defense.

Where the Threat Lies

The biggest threat currently facing FIs is financially motivated cybercriminals. Their attacks typically focus on finding other ways to access legitimate accounts, as well as infiltrating the institutions themselves. Their goal is to either steal money directly or collect data to use as ransomware.

These institutions are also facing threats from so-called hacktivists aiming to cause reputational damage. Such actors seek to acquire data that can embarrass either the institutions or their customers.

While these infiltrators are often assumed to be rogue operators or members of hacker gangs, there’s also the possibility that they’re sponsored by nation-states, such as Russia, Iran, or China.

“One of the things that smaller financial institutions need to keep in mind is that it’s not just the data, it’s not just the money, and it’s not just ransomware gangs,” said Kosak. “It may be their connections to other organizations. A lot of nation-states are increasingly targeting FIs based on their connections to other organizations, to get their foot in the door within that larger sector.”

How Criminals Are Leveraging Social Engineering

In the fight against cyberattacks, humans are always the weakest link. The same techniques used to socially engineer consumers into falling for scams can also be waged against bank employees or contact center staff. These employees may then be coerced into divulging sensitive information, such as intellectual property or details about customer accounts.

One tactic that has grown in popularity in recent years involves performing reconnaissance on LinkedIn or other social media platforms to figure out the right individuals to target. Once a criminal successfully impersonates an employee, they call the IT help desk to try and reset a password, which also gives them access to protected information.

“These attacks are getting much more targeted,” Goldberg said. “They could include everything from stealing from consumers to roping them into money mule activity that’s being used to launder funds. This could be used to support some kind of terroristic financing. You might assume it would be larger institutions that would be more concerned about that, but it can trickle down to the smaller institutions as well.”

One of the most dangerous threats to smaller banks comes from infostealers, a type of malware designed to collect information from targeted computer systems. Over the past five to seven years, industry specialists have seen these attacks grow by more than 200%.

Initial access brokers leveraging infostealers are quick, efficient, and they’ve got plenty of buyers for the data they pilfer. From a supply-and-demand perspective, this creates strong incentives for others to move into this space. Even when law enforcement disrupts the work of a significant infostealer, there are still plenty of opportunities for initial access brokers to fill the resulting void.

Collective Insights Help Fight Fraud

When institutions share the threats they encounter and their analysis of the situation, everyone gains from the collective insights. However, when banks choose not to share that information, the only ones who benefit are the threat actors themselves.

Smaller, resource-constrained financial institutions may find it challenging and time-consuming to determine not only how they’re being targeted but also who is behind the attacks. Yet, this information is key.

“If you can understand not just how they’re targeting you, but who’s targeting you, you get a much broader picture of the sort of tactics, techniques and procedures you need to defend against,” said Kosak. “If you’re just focusing on activity, you’ve already seen, you can block against those efforts, but you don’t know what’s next.”

The Growth of Deepfakes

The democratization of deepfake technology has advanced rapidly, leaving every financial institution vulnerable to its threats. Technology has progressed to the point where criminals can now create deep fakes on their phones, with just a few seconds of an audio clip.

Increasingly, deep fakes are being used to call into customer service centers and impersonate legitimate customers. This creates a problem for voice recognition technology as an authentication factor, intensifying the arms race between institutions trying to verify customer identifies and criminals attempting to bypass those efforts.

While the number of deep fake calls has gone up substantially over the last two years, the long-term concern is around video deep fakes. Perhaps the scariest part of this threat is that it’s only the beginning of how far it can go.

A related threat comes from synthetic identities. Criminals steal personally identifiable information (PII) to create new personas that can open accounts and infiltrate supposedly secure systems. These identities can be very difficult to detect since they do not involve using the identity of an actual customer.

Fighting Back

So, what should smaller FIs be doing to protect themselves from these threats? The enforcement of basic multi-factor authentication, for both customers and employees, remains absolutely critical. Moving toward passkeys as a technology, which are more phishing-resistant, is also important.

Beyond that, a right-sized threat intelligence program can be beneficial for any financial organization. A program that includes external engagement can help facilitate information sharing, allowing even small institutions to make critical connections.

Consumers have come to rely on financial institutions or other entities to let them know if their identities have been breached in some way. That makes educating both customers and employees a key part of any strategy.

People interacting with cybercriminals will always be the weak spot in the defense against them. Identity and Access Management (IAM) programs, which manage user identities and control who can access certain resources, are a way to automate a critical part of the process. Kosak and Goldberg advocate automating as much of the defense as possible.

“The more you can take the human out of the authentication process, the better off you’re going to be,” Goldberg said.

The post The Looming Cyber Threats Targeting Smaller Financial Institutions appeared first on PaymentsJournal.

Amid constant speculation about the future of payments technology, the ACH Network had its best year yet. The ACH Network processed more transactions, moved higher dollar values, and established more use cases for businesses and consumers. With new initiatives on the way designed to increase security and foster innovation, the ACH Network’s impressive growth could just be beginning. 

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 the growth areas for the ACH Network, the continued rise of Same Day ACH, and the future of the platform.

Milestone Growth

The ACH Network is a firmly established payment network that connects to nearly every U.S. bank account, making last year’s growth even more impressive. In 2024, the ACH Network added more than 2 billion payments to its annual volume, reaching a total of 33.6 billion payments. ACH’s 6.7% growth rate significantly outpaced the previous year’s 4.8% increase.

The scope and scale of the ACH Network are highlighted by its remarkable dollar volume: more than $86 trillion was moved on the ACH Network last year, representing a 7.5% year-over-year increase.

Nacha also reported that consumers are increasingly making bill payments and account transfers online. In fact, online ACH payments grew by 8.4% last year to exceed 10.7 billion payments, making it the single largest category of ACH payments.

The second-largest growth area for ACH was business-to-business payments, which increased by 11.6% in 2024, reaching a total of 7.4 billion payments. Within this segment are healthcare claim payments, where insurers compensate medical providers, including doctors, dentists and hospitals. This category grew by roughly 5%, surpassing 500 million payments.

“The third-highest growth area was Direct Deposit transactions, which have been the bread-and-butter ACH transactions over the years,” Herd said. “That includes payroll, benefit payments, and other types of consumer payments. We continue to see growth in that segment at 8.6 billion payments, which was a 3.7% year-over-year increase. Overall, there was across-the-board growth in anything that begins life electronically and digitally, and a sharp decline in anything that started off based on a paper check.”

Renewed Interest

The declining usage of checks accelerated during the pandemic, when staffing an office to issue, receive, and deposit high volumes of checks became a challenge. Since then, there hasn’t been a reversion to paper checks, even among small businesses. Security, cost, and convenience concerns have driven the shift to alternative payment methods.

“Several retailers stopped accepting paper checks in their stores last year, including Target and Petco,” Tavilla said. “Primarily, this is because there’s very low consumer demand to pay with checks anymore. More retailers are offering decoupled debit or their private label debit cards, which the consumer can use to pay with funds from their checking account, and they can also take advantage of rewards and loyalty incentives that are offered by that retailer.”

For years, large mobile carriers like Verizon, T-Mobile and AT&T have offered autopay discounts to incentivize their customers to move away from paper payments in favor of ACH. In addition, the ongoing push for eco-friendly, low-cost solutions has spurred interest in one of the original ACH use cases: recurring bill payments.

“We’ve seen interest in recurring ACH for things like donations and subscriptions, where you have a repeat payment scenario between a known payer and payee that looks a lot like a bill payment,” Herd said. “It’s not quite literally paying a bill, but the payment characteristics look almost exactly like it. That’s a sweet spot for recurring ACH debit in those use cases.”

The peer-to-peer space is another area of growth for ACH. Many P2P users fund their accounts using ACH rails, and several platforms use the ACH Network as their infrastructure. As these services have gained adoption, there has been corresponding growth in ACH usage.

A Lighter Lift

For all of last year’s success, the most significant news from 2024 was the rapid adoption of Same Day ACH. For the first time, total Same Day ACH payment volume surpassed a billion payments for the year—a 45% year-over-year increase.

Roughly 20% of all new ACH payment volume is same-day payments, and Same Day ACH is being utilized in many of the same use cases as standard ACH. There has been volume growth in consumer online payments like bill payments, account transfers, wallet loads, and in B2B transactions.

“It’s no surprise to see such significant growth this past year, the most to date,” Tavilla said. “ACH is already ubiquitous, so all the financial institutions who can currently send and receive standard next-day ACH can also easily accept Same Day ACH, making it a relatively lighter lift. The infrastructure is in place operationally and the financial institutions are already enabled to do that, so I anticipate that the growth will continue in both volume and value going forward.”

Though there has been speculation that faster payments will eventually eclipse more conventional payments, a more likely scenario is that both payment methods will continue to flourish. Depending on the use case, not every payment must be same-day or instant. Many of the core ACH use cases like payroll or bill payment are scheduled payments with known due dates and counterparties, and there may not be a good rationale for utilizing same-day settlement capabilities.

“Even within a standard use case area like payroll, you’ll have cases like payroll errors or payments to temporary workers, hourly workers, and gig workers, where it does make sense to take advantage of faster settlement speeds,” Herd said. “In bill payment, you may have bills that are late or overdue and service is scheduled to be cut off. These are one-off use cases where it may make sense to take advantage of a faster settlement speed.”

Areas of Focus

In addition to driving standard and Same Day ACH adoption, Nacha has three areas of focus for the upcoming year. The first is risk management. The organization’s members adopted a new set of rules that are designed to reduce the growing prevalence of credit push fraud, such as business email compromise.

These rules will require a base level of transaction monitoring on all parties in the ACH Network, except for consumers. While the major provisions won’t go into effect until 2026, Herd recommended that ACH Network participants, including financial institutions, work on implementing their protocols this year to be compliant when the rules go into effect.

A second area of focus is a pay-by-bank project created within Nacha’s Payments Innovation Alliance membership program. Pay-by-bank has become a common industry term over the past several years, but there’s no commonly agreed upon definition among industry stakeholders.

“There is also virtually no consumer recognition of the term, even though consumers are seemingly willing to use and link their bank accounts to make payments and conduct transfers,” Herd said. “The project is intended to forge a participant consensus on what pay-by-bank actually means, to describe use cases, and to identify any novel risks that pay-by-bank transactions might present.”

The last initiative will expand the capabilities for account validation services that Nacha provides through Phixius, their information network. These services can help financial institutions and their customers comply with the Nacha account validation rules for Internet-initiated payments.

“That can help with de-risking ACH payments for a wide variety of use cases, including validating vendor counterparties in the B2B space, and even in payroll in validating accounts for payroll Direct Deposit,” Herd said. “Watch this space this year for news and announcements about the expansion of Phixius account validation services.”

The post ACH Has Best Year on Record, Driven By Accelerating Same Day ACH Adoption appeared first on PaymentsJournal.

Criminals are continually looking for ways to circumvent fraud detection systems, and money mules have become a popular vehicle to move illicit funds between accounts. Mules are favored because they are effective—often, they are everyday people, many of whom are already customers of a financial institution who have passed verification checks.

Glenn Fratangelo, Head of Fraud Product Marketing at NICE Actimize, and Jennifer Pitt, Senior Fraud and Security Analyst at Javelin Strategy & Research, sat down for a PaymentsJournal podcast to discuss the evolving ways money mules are deployed, their impacts on banks, and the ways financial institutions can protect themselves from this emerging threat.

Scam-Fluencing Recruits

One of the most disheartening aspects of the money mule phenomenon is that it often isn’t difficult for criminals to recruit help. In many cases, mules are ordinary people that are willingly moving funds for criminals in exchange for a portion of the proceeds.

These individuals can be students, retirees, or lower-income individuals who are looking for financial relief. Criminals deliberately target those who seem unexceptional to avoid raising suspicion. In many cases, mules are recruited through social media, where there is often a receptive audience.

“On TikTok, Facebook, and YouTube, there is almost a gamification or a scam-fluence, where individuals are diminishing the level of criminality associated with becoming a mule,” Fratangelo said. “When it’s being presented on social media platforms with fast-paced music and an engaging speaker, magically it becomes not illegal to become a money mule. It’s being driven by the idea of easy money.”

Though some mules are willing participants, there are also many instances where the mule is being coerced, blackmailed, or tricked into moving the funds. In these cases, the mule is just as much a fraud victim as the institution.

“There is a victim/perpetrator paradox here, where these mules are active participants, but many are scam victims themselves,” Fratangelo said. “It makes it even more morally and legally complex, because how do you classify these individuals? Oftentimes, financial institutions find themselves stuck between wanting to stop the criminal activity, but also not wanting to further victimize the mule if they are in the cycle of scam and victim.”

A Trojan Horse

Regardless of how the mule was recruited, many of them are already in the institution and have already passed control checks. Once they become a mule, they have effectively become a trojan horse within the financial institution that is used for short-term, high-value transactions.

The technology available to criminals since the advent of generative AI only adds to the sophistication of money mule operations. Cybercriminals can combine AI agents and automation to create accounts and facilitate mule recruitment on a massive scale.

“The ability of generative AI tools to create synthetic identities that look indistinguishable from real people makes it hard to identify fraud,” Fratangelo said. “They operate in a 24/7 environment where thousands of accounts can be created simultaneously, and they’re incredibly believable.”

In addition to AI, the digital payments revolution has created vulnerabilities that criminals can exploit. Payments are faster, more frictionless, and increasingly global, which allows criminals to move money quickly and in substantial amounts.

Perpetual Verification

The emerging technologies, coupled with the availability of mules, has created a devastating ripple effect that goes beyond fraud. Money mules enable money laundering, terrorist financing, and a multitude of other nefarious activities.

Addressing money mules requires an approach that considers the whole customer lifecycle. From the start, there should be robust identity verification checks, but Know Your Customer (KYC) checks shouldn’t stop there.

“I would suggest that financial organizations invest in what we call perpetual KYC,” Pitt said. “Current KYC processes during onboarding look at identity verification, customer due diligence, account monitoring, and income verification one time. Instead, perpetual KYC would perform these checks on a constant basis with technology in the background.”

Inbound monitoring might be a standard part of the onboarding process, but most institutions’ systems won’t detect the initial mule activity. From a fraud detection perspective, there’s no fraud loss associated with an inbound transfer so there is no need to scrutinize it. It is not until after bad actors move money out that the transaction is flagged, which is often too late.

Because many mules are recruited after they have already completed the onboarding stage, more sophisticated detection methods, such as behavioral analytics, are necessary.

“It’s not only looking at historical data based on the typical customer, but looking at the behaviors of that specific customer,” Pitt said. “What are they doing with their keyboard? What is their keystroke pattern, their mouse pattern? How long does it take them to enter in data? Does it look like they’re copying and pasting things like date of birth, that are generally typed in?”

No Lone Wolves

Though identifying individual mules is important, financial institutions shouldn’t take their eyes off the bigger picture.

“Mules do not operate in isolation,” Fratangelo said. “There’s no such thing as a lone wolf in the mule world. They operate in herds, and they will even use the term ‘mule-herder.’ Criminal syndicates will connect multiple accounts into networks for moving money undetected, so institutions need to uncover these hidden relationships.”

Because these relationships are often indirect, financial institutions will have to deploy their own machine learning models to analyze connections between accounts. This includes shared phone numbers, e-mail addresses, or device transaction patterns. Graph database technology can visually map these networks and identify clusters of accounts that may belong to a mule ring.

AI-powered network analysis can also pick up on unusual relationships between new and existing accounts and flag collusion. The goal is to connect mules to the overarching scam network, where usually mules are only one aspect of the operation.

The final piece of the money mule prevention plan is sharing collective intelligence through industry consortiums. Mule activity might take place—and be documented—at the financial institution where it occurred, but other banks could be affected, and they would never know it. A consortium could be an essential component to facilitate data sharing.

Infused With Intelligence

To get ahead of money mule schemes, organizations must take a layered, proactive approach that incorporates cutting-edge technology. Traditional scam prevention is often reactive—and ineffective—in identifying and neutralizing mules.

“To combat mules, banks need to strengthen their technology and data infrastructure, develop scalable AI and machine learning solutions, and create more seamless data integration to break down silos,” Fratangelo said. “This means understanding onboarding, fraud, aftercare, claims, and recovery. The institution needs a 360-degree view of the customer’s activities.”

As fraud evolves, every aspect of a financial institution, including data, analytics, strategy, and operations will need to be infused with intelligence that can proactively work to identify threats.

“Every mule transaction leaves a trail of damage. This is why it’s not just banks, but society as a whole that needs to address mules,” Fratangelo said. “At the end of each mule operation is a scam victim, whether it’s a romance scam or an investment scam. It’s the movement of ill-gotten gains from things like drug trafficking or terrorist financing. Ultimately, it can leave significant reputational and regulatory damages for financial institutions.”

The post Money Mules Up the Ante on Fraud, Creating Significant Impacts on Financial Institutions appeared first on PaymentsJournal.

The buzz is growing louder. Many merchants are tired of navigating intricate payout processes that drain valuable time and resources. They want to be rid of payment headaches and welcome more seamless efficiency. Merchants demand a cutting-edge payout solution that helps them focus on their business while giving them the peace of mind that the complexities of their payout operations have been managed.

A Personalized Payouts Experience

Payouts have historically taken a back seat to adding new payment acceptance functionality for consumers and the resulting experience can be fragmented and inefficient. Each market has its own set of payout rails that can be leveraged by domestic merchants but trying to cobble together a unified, global payout experience that allows for personalization has been a substantial challenge for organizations.

In a recent PaymentsJournal podcast, John McNaught, Senior Vice President and General Manager of Payouts at Worldpay, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the importance of payouts, the ways merchants can customize the customer experience and the innovative tools that can optimize payouts.

No Longer Ignored

One of the main reasons there hasn’t been substantial headway in the payouts space is that it hasn’t been a high priority for many organizations. While merchants have fiercely competed over the shopper checkout experience, payouts have often been deprioritized and accomplished using traditional systems.

In the insurance industry, the payout experience was often purposefully neglected in the past. For example, an insurance company may have intentionally caused a poor payout experience by delaying the payment for weeks and sending a paper check in the mail. The company might have hoped that the check would get lost or stolen or the beneficiary would forget to take the check to the bank.

“That type of thinking has changed in the last few years because there has been an increase in competition,” McNaught said. “Particularly amongst marketplaces and similar platforms, the payout experience can drive overall ecosystem participation and directly generate more content and more goods for sale. It has made the payout experience something that can no longer be ignored and it’s a space where many platforms are now competing.”

As these platforms aim for global reach, they have faced significant challenges. Merchants have often relied on local payment rails accessed through traditional banking partners to pay domestic beneficiaries. However, when the beneficiary is located outside the merchant’s country, the payment experience often deteriorates dramatically.

“Oftentimes, the wrong currency arrives for the beneficiary and it might take three to five working days for the funds to arrive,” McNaught said. “The merchant might not know exactly how much to expect because correspondent banks will take off a varying amount from the transaction principal. It’s a horrible experience for beneficiaries and it’s a barrier to adoption for the service they’re being paid.”

 Gradual Realization

In the past, many merchants held onto their cash as long as possible, a practice that —while giving businesses greater control over the timing and management of payouts —often led to inefficient processes. This manual approach lacked transparency and created a frustrating experience for consumers.

“In fairness to merchants, there weren’t many good solutions for payouts up until the last couple of years,” Apgar said. “Now that merchants have new tools available, they are realizing that the benefits of a positive customer experience outweigh what you gain by optimizing payouts to the benefit of the company. It underscores how important the customer experience has become in all facets of interaction.”

When payout beneficiaries become aware of mechanisms and rails that allow them to receive payments reliably, in their preferred currency, in real-time, and often at no cost, it could profoundly transform the payouts industry.

“I call that the Amazon effect,” Apgar said. “You just need one disruptor in the market to get consumers to say, ‘Why can’t it be that easy all the time?’ That effect will start to get traction in the payout space. As consumers continue to have positive payout experiences, they will want that from all their interactions.”

This realization has led to a dramatic shift in the way many companies offer payouts today — touting the speed of their payouts as one of their most important selling points. However, speed isn’t the only consideration. Many companies now process payouts via different payment rails and in the consumer’s preferred currency, all to remain competitive in a crowded market.

This growing demand for efficient payouts is also driving changes across numerous other industries.

“The more business models that involve payouts to users who are not necessarily shoppers of the service —but are ecosystem participants —that is what will drive the gradual realization that a company’s payouts model must function correctly,” McNaught said. “Then the payout will become as important as the shopper checkout experience.”

Freedom of Choice

Personalization is one of the most effective ways to improve the payout experience. One way to tailor this experience is by giving beneficiaries the option to choose their preferred payment method. However, this flexibility should also extend to the speed of the payout.

Many platforms provide scheduled payouts, typically biweekly or monthly. Personalizing this process means offering users the option to expedite a payout for an additional fee.

“It allows the user to take control and customize the experience but it also takes the burden of choice off of companies,” McNaught said. “Do I accelerate payments for all my customers or do I do it for none of them? The sweet spot is when the user selects the time and the circumstances under which they receive their accelerated settlement.”

Users are often willing to pay a fee for earlier access to payouts. Similarly, many consumers would likely accept a higher foreign exchange fee just for the ability to receive their payout in their preferred currency and have clarity on the exact amount they’ll receive.

These tailored experiences contribute to greater user satisfaction, fewer barriers to adoption and increased engagement within the ecosystem.

“Consistency is the number one thing in the user experience,” Apgar said. “The last thing a merchant wants to do is have a footnote that says payouts are only available if you reside in certain country, use a certain payment method, or bank at a certain bank. For this to be a differentiating factor, merchants need a broad network of connections to enable a consistent experience.”

The Critical Battleground

Creating consistency can be difficult when every market has unique properties. This includes various payment rails, including bank rails, card rails and various types of wallet rails. There are also different data gathering requirements and regulatory considerations for each market.

Understanding the most effective payment methods for each market and what payment experiences fit each use case is crucial. Partnering with a trusted payments provider (like Worldpay), with proven expertise in global payouts, can help you navigate local complexities effectively and ensure you send funds to your customers in a way that works best for them. 

“The payout experience has historically not been something that companies have invested heavily in or fought over,” McNaught said. “However, we see the power of personalization becoming a critical battleground between services that use payouts. It’s a competitive advantage for your particular service that could increase user satisfaction and NPS scores and drive additional adoption. The advantages of a painless payouts experience will continue to drive demand for better solutions among merchants. Payouts are too important to today’s business operations and they are often too complex for merchants to accomplish on their own. That is why the buzz around a painless payouts experience will continue to amplify.”

The post Why Painless Payouts Matter appeared first on PaymentsJournal.

Payment integration is a powerful way to improve the user experience on any software platform by offering benefits that extend far beyond simple transaction processing. However, many business owners may hesitate to hand over such a critical function to an outside party.

During a PaymentsJournal podcast, Jessica Tate, manager of customer success at CSG Forte, Nathan Miller, president and founder of Rentec Direct, and Don Apgar, director of merchant payments at Javelin Strategy & Research, discussed the benefits of integrating payments, the remarkable growth it can drive, and the future of payments integration in the software industry.

One-Stop Shop

One of the central benefits of payment integration is its ability to keep users engaged on the platform. However, users also have high expectations for the payment experience, including access to diverse payment options and secure transactions. Meeting these demands can be a heavy lift, which is why many software companies partner with dedicated payment providers.

“It’s a one-stop shop, which improves the user experience,” Tate said. “Merchants can offer multiple payment options like ACH, credit cards or debit cards, which accommodates diverse customer preferences. There are also increased revenue opportunities. Some payment partners offer revenue-sharing models, while others will bill the merchant directly. Or we can bill a partner and the partner will, in turn, bill their merchants.”

Integrating payments also opens opportunities for upselling and cross selling by leveraging insights from payment data to identify new products or services to offer. As an added benefit, many payment processors can leverage their connections to a larger framework of financial institutions and processors.

Most payment partners offer advanced fraud detection and prevention tools alongside their payment integration solutions. They also offer data encryption and compliance tools to ensure secure handling of sensitive payment data, which helps maintain trust with end users.

“For a software company like us, we want to focus on what we do well,” Miller said. “We write software for property managers and landlords, and our job is to streamline their day and make their life and their processes easier. Payment processing is a whole different beast, and we wouldn’t want to recreate that when it’s already been created by others. It makes a whole lot more sense for us to integrate into an existing solution.”

A Growth Driver

Better payment processing improves the user experience, and is also a powerful growth driver for organizations. Faster transactions improve cash flow, allowing companies to reinvest in operations more quickly. Reducing payment failures also ensures consistent revenue.

“A lot of software companies are realizing that payments are not only integral to the functionality of the software, but a good revenue driver as well,” Apgar said. “Our research found that less than half of merchants now source their payment acceptance or merchant account from their bank versus their technology provider, which really speaks to the fact that payments align better with the technology workflow than with a bank.”

Turning to a dedicated payment partner can help software platforms implement a recurring payments model for steady and predictable income streams from subscriptions. Organizations will also be able to streamline their operations because all services and functionalities are available on a single platform.

“It reduces the need to switch between different systems or interfaces for the customer, and in tandem with that comes increased time efficiency,” Tate said. “Payments platforms can provide real-time data sharing across departments or teams, which enhances collaboration. Software companies can also leverage integrated data to offer tailored recommendations or services to their customers, which enhances the user experience by customizing it.”

A Double-Pronged Challenge

In the case of property managers, the ability to accept online payments is customers’ most requested feature. Adding payment support can not only bring in new customers, it can also help existing customers add more services.

“Payments is probably the number one reason for a software like ours to grow,” Miller said. “In fact, just in the last four years, we doubled the percentage of online payments that we were taking, while simultaneously adding about 1,200 customers a year. That’s a huge growth percentage that’s based around online payments.”

One of the major challenges in the property management space is that renters come from all backgrounds and span a wide range of ages, and some demographics are more familiar with (and comfortable using) payments technology than others. This means the platform must be simple enough for all users to make or schedule a rent payment in just a few clicks.

Simplifying billing related to merchant accounts presents another challenge, because these accounts are often highly complex. The right payments platform can ensure that property managers only see the charges they need to see on their bill.

“There are two layers of the customer experience in the software space,” Apgar said. “There are the merchants, in this case the landlords, who are looking for better reconciliation, automated posting and the business tools to manage payments better. At the same time, the end user is looking for an easier, low-friction way to pay. The software company has a double-pronged challenge to make it easier for both the merchant, [who’s] their direct customer, and for the end user.”

An Instant Payments World

The ease of use for all customers is one of the reasons that payments will continue to be integrated into the software landscape across all verticals. However, new challenges will arise as emerging new payments technologies, especially faster and instant payments, are connected to software offerings.

“Our customers love the idea of instant payments,” Miller said. “They want a tenant to make a payment and for it to land in their bank account three seconds later. On the flip side, when they pay their owner, they want to be able to run the report, email the report to the owner and the owner to be able to check their bank balance and it’s there. The dream of an instant payments world is always there.”

Unfortunately, with faster payments comes higher potential for fraud. When there is a one- or two-day hold, all parties have a chance to evaluate the transaction. That safety net isn’t there with instant payments, so it is important that the software companies and payments providers that are moving toward instant payments acceptance understand the risks.

Aligning With Payments

The risks associated with payments processing are one of the main reasons why many software companies are turning to payments platforms. In addition to fraud concerns, platforms must also be aware of the Payment Card Industry (PCI) standards and any local regulations.

The goal is to find a partner that can mitigate all these risks while facilitating the best user experience. The partner should be equipped to support the platform’s current payments volume, but also able to scale as the company grows.

“My biggest advice would be to understand your business needs and your user needs,” Tate said. “How do payments align with your product? Are you facilitating rent payments, subscriptions, one-time purchases or marketplace transactions? All these things shape your payment integration strategy and help you create a seamless, intuitive payment experience.”

The post How Integrating Payments Enhances User Engagement, Drives Revenue appeared first on PaymentsJournal.

The United States employs multiple real-time payment schemes; however, unlike those in many emerging markets, these methods are not driven by a central government or central bank. In the absence of a centralized entity to organize payment processes, other stakeholders must take the lead in enabling instant, cross-border transactions.

In a recent PaymentsJournal podcast, Alex Johnson, Chief Payments Officer at Nium and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the latest efforts aimed at integrating the U.S. into the realm of international real-time payments.

The U.S Plays Catch-Up

In many ways, the U.S. economic landscape lags behind some emerging economies in payments innovation. This is partly because emerging markets have faced more pressing challenges, driving them to harness technological advancements to help solve specific, regionally unique use cases.

“Compared to networks like UPI in India and Pix in Brazil, our level of maturity and sophistication in the United States is not quite there yet,” Bodine said. “As most people know, RTP and FedNow are not even interoperable now.”

But, it’s time for the U.S. to catch up. One of the key drivers of payments innovation in the U.S. is the global supply chain. Even small and medium-sized businesses are starting to source goods and services from regions like India. In India, real-time payments are the most widely used payment method for both citizens and businesses. Extending the supply chain to India therefore requires developing systems that can facilitate real-time payments effectively in that market.

A significant advantage of real-time payments is their efficiency. They always provide complete visibility into the payment’s status, letting buyers optimize their working capital for a longer period. However, sellers may prefer traditional payment methods, as they often receive their funds slightly earlier.

“CFOs don’t want to see money go out of their account in 20 seconds,” said Bodine. “We have to look at the strategic coexistence of all the pay types and not assume that any one is going to be applicable to all situations.”

Fraud Concerns

With the rise of real-time payments, there has been an increase in account-to-account fraud for those sending payments. But, real-time payments are not inherently riskier than traditional methods. Since the money moves instantly, there is never any question about its status at any point in time.

Account verification plays a big role in boosting confidence in the global adoption of real-time payments. For example, if someone is completing a transaction to Nigeria or Thailand, it’s now possible to verify the ownership of the receiving account.

“You can put in an account number and name, ping our API, and within seconds you get a response to say, ‘Yep, that matches’ or ‘No, it doesn’t,’” said Johnson. “In some jurisdictions, we can also pass back the actual name on the account. You can be absolutely certain that the money’s going to exactly who you think it’s going to, separate from and prior to a transaction. That’s a huge prevention of fraud, giving people more comfort in using real time payments. We’ve seen a 58% reduction in return transactions just by the use of this tool.”

A Partnering Plan

The global cross-border payments network is led by Swift, run by a consortium of international banks. What many may not realize is that a Swift transaction is not the payment itself, but rather the messaging service.

Swift acts as a tool that creates interoperability between different payment systems. Most financial institutions have already completed the integration with Swift, allowing them to use its functionality to send wires globally.

“At Nium, we can now accept transactions via Swift messages from financial institutions,” said Johnson. “They can make Nium an intermediary on those transactions, and we can route those payments into mostly real time. About 85% of the transactions we handle are delivered within 15 minutes or less.”

Because the differing global payment systems don’t speak to each other, a third-party like Nium is needed to bridge these connections. With the connections that have been made, these third parties are now beginning to create locally interoperable systems.

“Fortune 1,000 companies absolutely need to partner in these situations,” said Bodine. “They simply don’t have the resources or funding to support and maintain legacy systems while they’re branching out of these areas. Partnering with organizations like Nium is incredibly important.”

The Promise of ISO 20022

Despite the challenges of implementing it as a new messaging standard, ISO 20022 has been a boon to the world of instant payments.

“If we could get every scheme, SWIFT and otherwise, to ISO 20022, then interoperability becomes so easy,” said Johnson. “But a lot of the local schemes aren’t there yet. Once everyone is talking the same language, the translation between a SWIFT message to whatever that local scheme is becomes a lot easier.

“Interoperability will be a theme that we’ll continue to ride on in the next few years as we explore what that looks like,” she said. “There’s so much experimentation happening right now that I really look forward to seeing in the next couple years how this evolves.”

Bodine added: “We can communicate pretty much with every human being on earth. There is absolutely no reason we shouldn’t be able to transact funds between every human being and every business on Earth.”

The post The Power of Real-Time Payments on a Global Scale appeared first on PaymentsJournal.

The most familiar example of surcharging might be the cash-or-credit pricing at gas stations, but more businesses are following that lead. While it’s becoming common for customers to pay for the right to use a credit card at restaurants and retailers, credit card surcharging hasn’t been a common practice in the healthcare industry. 

In a recent PaymentsJournal podcast, Ali Badawy, Director of Enterprise Healthcare Payments Solutions at U.S. Bank, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed how healthcare providers can leverage credit card surcharging to cut costs significantly while keeping their customers engaged.

Consumer Conditioning

Credit card surcharging has been permitted in most states since 2013, and it allows businesses to offset the credit card processing fees charged by card brands like Visa®, Mastercard®, and Discover®. The fees are instead passed to the customer when they use a credit card at the point of sale.

The surcharge amount is often a percentage of the overall purchase and can range from 1% – 4% and can be applied in any environment where a cardholder makes a payment—in-store, online, and even in text-to-pay. Surcharges are only allowed for credit card transactions, so consumers can avoid them if they pay by debit card, check, ACH, or cash.

“When surcharging was launched, business customers were skeptical, and understandably so,” Badawy said. “However, as it has developed over the years, consumers are more conditioned to it. If a customer’s transaction is in the government space, or with an online retailer or service business, those environments have adopted surcharging to where now consumers expect it.”

The Proliferation of Surcharging

The normalization of surcharging has expanded its use cases, which now covers industries across the spectrum. As businesses have shifted online, surcharging has evolved to become a factor in e-commerce.

The driving force behind the proliferation of surcharging is cost savings. Even though credit card fees of 1% to 4% might seem relatively nominal, the aggregate can quickly become a significant amount. Reducing those costs is what makes surcharging attractive to business owners, especially for enterprise-scale businesses.

“For example, a large healthcare franchise in the ambulatory space was exploring options to help their franchisees reduce their overall costs,” Badawy said. “After they researched surcharging, they found out they could save over $1 million each year based on their volume numbers.”

A Safe Strategy

The main concern about surcharging is that it could alienate customers, but that is rarely the case. Once a business starts a surcharge program, they are highly unlikely to terminate it.

“There are often apprehensions when an organization’s average ticket size is large, ranging from $5,000 to $20,000,” Badawy said. “The business owner might be concerned that if they apply a surcharge, they will lose the customer, but that’s usually the farthest thing from the truth.

Healthcare providers might still be reluctant to surcharge because it isn’t a common practice in the industry yet, but those concerns are likely unfounded.

“Most consumers aren’t shopping for a healthcare provider based on cost,” Apgar said. “They go to a doctor or a dentist because they have a connection with that provider and they’re receiving good care. Especially in industries like healthcare, where there can be substantial inelasticity in pricing, a nominal credit card surcharge isn’t enough to alienate a customer. From a business perspective, it’s an increasingly safe strategy to use.”

Every Endpoint

When researching banks or processors that offer both credit card processing and surcharging, business owners should also look for a processor that specializes in healthcare. In addition, the business owner should understand if the platform allows surcharging at every endpoint where the provider collects payments.

“If the software only allows surcharging in the front office of a healthcare entity, for example, but the majority of its collections are in the back office or online, then that service is not likely to help the business achieve its goal,” Badawy said. “A business that’s considering credit card surcharging will have to evaluate every end point where they’re collecting payments and verify if the process can support their needs.”

Partnering with the right processor before shifting into surcharging is key because there are compliance requirements. Regulations don’t allow surcharges on debit cards, so the card acceptance technology must be able to discern a credit card from a debit card and only apply the surcharge to credit cards. 

A business is also required to advise customers that it will apply a surcharge to credit card transactions. There should be clear signage in the front office, but also everywhere a provider accepts payments, including online check-out. Another best practice is to detail surcharges on billing statements and invoices.

“A business has to apply a surcharge correctly and compliantly, but it should also generate a consistent user experience,” Apgar said. “As the customer does business with the organization across a variety of channels, whether it’s paying in an office or paying on a bill pay site, it’s important to find a process that that can support all those aspects.”

Getting Relief

Surcharging at the point of service will continue to gain momentum. Though some regulators have strived to reduce or eliminate credit card fees, there is no immediate shift on the horizon.

“The $30 billion settlement between Visa and Mastercard and merchants has been tabled, so who knows when businesses will see relief from interchange fees?” Apgar said. “Surcharging is a tool that merchants and healthcare providers can use today to offset some of the costs of credit card acceptance and still keep compliant and customer friendly.”

Particularly in healthcare, where many healthcare entities and systems have had lingering financial difficulties that were exacerbated by the pandemic, surcharging will pick up steam.

“As rewards cards, which often have higher processing fees, become more popular, surcharging is a means to offset those fees and keep business owners’ margins intact,” Badawy said. “Surcharging will grow within all verticals, but especially in healthcare, because it can substantially reduce costs. Healthcare providers can use those resources to serve their patients and scale their businesses.”

The post How Credit Card Surcharging Can Benefit Healthcare Providers 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 Debit

After 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 Methods

Mobile 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 Living

Card 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 View

Given 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.

The post Shifting Trends: Credit Cards and P2P Payments Take Center Stage appeared first on PaymentsJournal.

Over the past five years, the U.S. has experienced an average of $18 billion annually in 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 Help

The 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 Information

Another 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 Work

It’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 post Prepaid Cards: A Vital Aid for Disaster Relief appeared first on PaymentsJournal.

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 Prom

Nacha 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 Spectrum

There 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 Opportunities

There 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 Beignet

In 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

The post Nacha’s Smarter Faster Payments Conference Is an Industry Who’s Who appeared first on PaymentsJournal.

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 Guy

Thousands 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 Options

Despite 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 Innovation

As 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 Dance

The 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.”

The post Payments Modernization Can’t Be Delayed Anymore appeared first on PaymentsJournal.

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 Solution

Rules-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 Hood

A 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 Creativity

Rules-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.

The post How Rules-Based Fees Engines Drive Innovation appeared first on PaymentsJournal.

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 Scale

Criminals 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 Storm

Guardrails 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 Exposure

Fraud 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 Protections

Because 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 Hands

In 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.”

The post As Payments Speed Up, Slowing Down Fraud Is More Critical appeared first on PaymentsJournal.

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 Shift

The 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 Value

Merchants 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 Purchase

Making 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 Barriers

Although 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 Change

To 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.

The post Prepaid-Powered Loyalty Programs Drive Customer Engagement for Merchants appeared first on PaymentsJournal.

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 Threat

There’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 Burden

In 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 Usual

Generative 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 Celebration

One 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 Motivations

Holiday 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-Store

Given 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 Bet

Regardless 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 Threat

Driven 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 Cases

Imposter 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 Started

For 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. Working 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.

The post Taking On the AI-Assisted Fraudsters appeared first on PaymentsJournal.

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 Cases

One 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 Conversation

Although 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 Frontiers

While 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 Expectations

Instant 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.”

The post Very Real and Very Here: The Proliferating Use Cases for Instant Payments appeared first on PaymentsJournal.

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 Regime

After 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 Standards

When 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 Process

Every 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 Information

The 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.”

The post Bank of Canada Takes Oversight of Payment Service Providers appeared first on PaymentsJournal.

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, and Albert Bodine, Director of Commercial Payments at Javelin Strategy & Research, explored key findings from the 2024 Intuit QuickBooks Accountant Technology Survey and 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 Narrative

Unsurprisingly, 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 Priority

Partly 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 Leap

To 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 Gap

One 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 Success

Concerns 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.”

The post Accountants View AI as an Ally, not a Competitor appeared first on PaymentsJournal.

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-Have

More 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 Sales

Companies 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 Awareness

Manufacturers 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 Treat

Although 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 Solution

In 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 Expectations

An 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.”

The post Prepaid Cards Are Essential Components of Rewards and Incentives Programs appeared first on PaymentsJournal.

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 App

One 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 Sanctions

Many 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 Wait

For 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 Silo

Banks 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 Solution

Fraud 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 Functionality

In 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-End

Authentic 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 Office

The 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 Segments

Increasingly 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 Bottlenecks

As 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 Strategies

Tighter 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 Experience

Brands 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. Privacy

Gift 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 Visibility

With 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 Execution

Persistent 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.”

The 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 Alternatives

More 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 Lending

Small-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 Customer

A 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 Promises

ISO 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 Scale

As 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 Partner

If 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.” 

The post ISO 20022 Brings the Challenge of Standardization to Swift Participants appeared first on PaymentsJournal.

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 Perspective

Most 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 Environment

In 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 Sprint

Many 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 Field

Consumers 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 Surface

Though 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.”

The post Open Banking Can Be an Equalizer for Small Banks and Credit Unions appeared first on PaymentsJournal.

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.

Profound Importance

Visibility 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 Relationships

Some 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 Consolidation

Organizations 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 Payments

The 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 Usability

Even 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.

The State of ACH

Instant 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 ACH

There’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 Experience

While 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 Entry

Though 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.

Paper Power

Sustainable 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 Matters

The 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 Possibilities

Sustainable 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.” 

The post Paper or Plastic: Sustainable Cards Are the Wave of the Future appeared first on PaymentsJournal.

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.  

Building the Model

When 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 Revolution

Whether 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 Payments

Credit 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 Learned

Businesses 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?

The post Making the Most of the Recurring Payments Model appeared first on PaymentsJournal.

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.

A Fragmented Landscape

The 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 Hood

In 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 Experience

The 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 Pay

Whether 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.

The New Nacha Rules

In 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 Works

In 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 Prepared

Organizations 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.

The Wide-Open World

Criminals 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 Engineering

Criminals 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 Key

It’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 Leadership

A 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.

Transforming Transaction Data

Payments 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 Advantages

Throughout 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 Repository

Payments 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 Future

Another 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.

Learn more about BHMI’s Concourse Financial Software Suite

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.

Building on Trust

Ongoing 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 Children

Organizations 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 Oversharing

Experts 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.”