Will Uber become the place where you don’t just get a ride, but also buy shoes, groceries, and anything else you need? The rideshare company is betting on exactly that as it rolls out a sweeping expansion of its app into shopping and other digital services, and expands its partnership with payment technology provider Block Inc.

Uber introduced the new platform, calling it “one app for everything,” at its annual Go-Get Conference. According to CEO Dara Khosrowshahi, the “Where to?” bar in Uber’s app now returns results for places, food, and consumer items. A new “Shop for Me” feature allows users to request items from any store and have an Uber driver pick up and deliver them.

The model builds on an Uber Eats feature introduced in 2023 that lets delivery drivers shop for grocery items in-store before delivering them to customers.

As Seamless As Possible

The unstated premise is that Uber needs to strengthen its position to compete with DoorDash, which has been expanding beyond restaurant delivery into local retail purchases. Uber, however, is going further by enabling users to arrange delivery from virtually any merchant—even those not listed in the Uber or Uber Eats apps.

“This is a strategic move by Uber and helps users who are already struggling with app overload by connecting the dots and making related tasks as seamless as possible,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.  

Relying on Block’s Technology

Uber announced a major expansion of its global partnership with Block last month, including the international rollout of a new Uber Eats integrated payment service in Canada, Australia, and several European countries. In the U.S., Block helped extend Cash App Pay as a new payment option across Uber’s platforms. Uber says it could not have rolled out the new shopping features without Block’s expertise.

“This is very complex from a payments perspective,” said Apgar. “When you order from a listed merchant, either through Uber Eats or DoorDash, the platform parses the billing and settlement to ensure the driver and merchant are paid correctly. For off-platform purchases, the Uber driver actually makes the purchase on behalf of the user, so driver reimbursement and reconciliation add a new layer of complexity to the payments stack.”

“This really raises the bar in terms of what users can expect,” he said. “It also highlights Block’s capabilities in solving complex constructs like this.”

The post Uber Turns Its App into a Personal Shopping Service appeared first on PaymentsJournal.

Smaller enterprises are hitting a critical turning point. As long-time owners near retirement, many are looking to exit, but potential buyers are often held back by one persistent issue—outdated systems, especially in payments infrastructure.

According to data from Zelle, nearly half of small business owners over 50 have no exit plan in place, and roughly 41% said they would shut down if they can’t find a buyer.

However, fewer than a third of these owners report that their businesses are fully modernized, which can be a major barrier for prospective buyers—often younger adults who expect a sleek, digital-first experience. Payments, in particular, are a key concern. Approximately 88% of respondents said faster payments are critical to mitigating risk during the first year of operations.

Non-Negotiable Optionality

It is difficult to overstate the importance of a digitally driven business model for younger demographics. This preference has also fueled an evolution in financial services, where mobile and online banking have become the primary ways younger users engage with their banks. Gen Z and millennial business owners are also more open to using AI to support their banking experience—but not for major business decisions.

Another hallmark of this digital shift is an expectation of choice in nearly every aspect of business—from banking relationships to supplier selection. This expectation is even more pronounced in payments, where the rapid proliferation of payment types in recent years has driven demand for real-time payments and acceptance of digital assets.

The Zelle study found that this optionality has become non-negotiable, with more than two-thirds of respondents saying outdated payment options could derail a business deal entirely.

Heating Up the Competition

All these factors are reshaping the small business landscape, though it remains unclear whether the sector will evolve quickly enough to remain attractive to younger buyers. If not, millions of businesses could ultimately shutter as owners retire without a buyer in place.

Fortunately, business owners today have more tools than ever to modernize operations, including payments infrastructure. Much of this progress has been driven by fintechs emerging as key players in the small business space. As more owners approach retirement and look to increase buyer appeal, competition among providers is likely to intensify further.

The post Payments have Become a Make-or-Break Facet of Small Businesses appeared first on PaymentsJournal.

As more regions prioritize payments sovereignty, France’s Cartes Bancaires (CB) network is working to reclaim some of the market share it has lost to Visa and Mastercard.

The nonprofit network was created in the 1980s as a joint venture among France’s leading banks. However, CB has seen its domestic market share decline from over 90% to roughly three-quarters of card payments. This shift is partly due to the reliability and global reach of Visa and Mastercard’s networks, and partly due to the rise of digital-first financial players.

CB head Philippe Laulanie recently told the Financial Times that the network’s position has stabilized and interest in CB is growing again. Not only does the payments network hope to regain traction in France, but it also hopes to play a leading role in the broader push for greater payments independence in Europe.

“Cartes Bancaires is the French bank network much like an Interlink or Maestro here in the U.S.,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Most of their cards are co-branded, meaning they can run over Visa and Mastercard rails or on the CB bank rails—again, just like in the US.  However, the market share for CB has been shrinking as new fintechs like Revolut and others have driven towards exclusive deals and single-network architecture.”

Challengers and Competitors

UK-based Revolut has experienced meteoric growth, becoming a global fintech phenomenon. The company has set ambitious goals, including reaching 100 million customers by 2027 and expanding into 30 new markets by 2030. Revolut recently announced plans to establish a Western Europe headquarters in Paris and signaled that it will apply for a banking license.

Alongside fintech challenger like Revolut, CB also faces competition from emerging payment rails like digital assets—including euro-backed stablecoins and potentially the digital euro—the bank-backed Wero digital wallet, and prospective Europe-wide real-time payment systems.

An Off-the Shelf Alternative

Many of these newer rails have gained favor because the EU is increasingly searching for ways to reduce reliance on foreign payment systems. U.S.-based infrastructure, led by Visa and Mastercard, currently processes over 60% of card transactions in Europe.

Given recent geopolitical tensions and ongoing uncertainty, EU leaders have called for changes to the region’s payments infrastructure. This could potentially create an opportunity for CB.

“The political climate is now flashing a yellow light about over-dependency on US-based Visa and Mastercard, with the EU central bank pushing to bring a new network online by 2030,” Apgar said. “CB is already built and operating and could be extended in other EU countries as an off-the-shelf alternative to Visa and Mastercard.”

The post France’s CB Payments Redoubles Efforts to Vie with Visa and Mastercard appeared first on PaymentsJournal.

Many merchants have long eyed international expansion, only to be daunted by its complexity. That’s the challenge Airwallex is targeting with the launch of its in-store point-of-sale system.

The Australia-based fintech is attempting to stand out in a crowded market by offering a physical solution that allows businesses to accept in-person payments across multiple countries through a single platform—eliminating the need to partner with local vendors in each market.

These brick-and-mortar transactions integrate with online payments within Airwallex’s broader platform, which also includes reporting tools and back-office functionality.

“This is super interesting and brings me back to how I look at the merchant side of payments—processing moves data, acquiring moves money,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Many innovative fintechs have a laser focus on maximizing network performance and optimizing integrated payment workflows, while losing sight of the fact that the data represents real money that merchants need to run their businesses.”

The Operational Bottleneck

When expanding into a new market, merchants typically need to onboard a local acquirer, navigate regulatory nuances, and manage a web of domestic vendor relationships.

These operational hurdles have been often been a dealbreaker. Even among millennial and Gen Z business owners—who tend to show a greater appetite for international growth—the time and cost demands of the traditional cross-border model can make expansion feel like a bridge too far.

Infrastructure as Strategy

Airwallex is betting on its infrastructure as the differentiator. The company holds nearly 90 regulatory licenses across roughly 50 markets, maintains direct connections to local payment networks in more than 100 countries, and offers currency conversion capabilities.

This setup allows funds to be held, converted, and redeployed within local markets—where many competing systems still require immediate payouts to merchants’ accounts. If Airwallex can carve out a niche in the market, it will likely owe more to the strength of the global infrastructure than to the point-of-sale system hardware itself.

“The global POS platform that Airwallex has built is the kind of tech innovation that grabs headlines, but the real power of what they’ve built is the network of global banking licenses,” Apgar said. “Banking is regulated in every country, and while it lacks the sizzle of new tech, collecting money from customers is what merchants care about.”

The post Airwallex Takes Its Cross-Border Play In-Store appeared first on PaymentsJournal.

As credit card imprinters gave way to electronic processing, an entire industry emerged around selling payment terminals to merchants. Decades later, however, advancements in payments technology seemed to cast doubt on the future of that very industry.

Yet reports of the demise of independent sales organizations (ISOs) have been greatly exaggerated. While some ISOs were crowded out of the market, many adapted their business models to remain competitive.

As Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discusses in The Evolving ISOs: How Changes in Payments Influence Their Ongoing Shifts report, this full-circle evolution has not only restored ISOs’ role in the payments ecosystem, it has expanded their footprint and made them a critical component of the merchant payments landscape.

Door-to-Door Sales

In many ways, the original ISO model resembled the door-to-door sales approach once associated with vacuums and encyclopedias.     

“When we lived in New York, Verizon wired our neighborhood for fiber, and then we had a Fios salesman coming around knocking on the door,” Apgar said. “That’s kind of what happened in the credit card business. They hired the sales companies to go out and knock on all these doors. ‘Here’s a list of all our customers, go see them and convince them to buy a payments terminal.’”

“It grew into an industry because banks figured out that if I’m paying salesmen to be out there talking to my customers, they could go talk to my competitors’ customers at the same time,” he said.

The industry was highly lucrative, as individual sellers earned residual income based on a percentage merchant revenue. For example, if a sales agent sold a payments terminal to a local bike shop, they might earn $50 a month from that single account. Scaled across many merchants, this could quickly grow into a substantial revenue stream.

However, this attractive opportunity also drove fierce competition among ISOs, leading to rapid market saturated. Over time, more merchants adopted payment terminals, many of them locked into long-term leases.

The landscape shifted further when point-of-sale (POS) system providers introduced proprietary software tied to their hardware, making it harder for merchants to switch providers. This marked the beginning of a challenging era for ISOs.

“The software company started bundling payments,” Apgar said. “Square was a big example of that—you sign up for the software and it comes with payments built into it. You don’t have a choice to use anybody else, it all works together. It’s like the Apple ecosystem, you just get everything, and it all works. You don’t go somewhere else for your email and your music library and TV, you just use the stuff that’s there.”

Coming Full Circle

These bundled ecosystem effectively sounded the death knell for the traditional door-to-door model, because they left ISOs with fewer opportunities to sell payment systems. Many ISOs reached a crossroads: exit the industry by selling their portfolios, or evolve and find a new path forward.

For those that chose to adapt, continued innovation in POS systems ultimately created new opportunities.

“What happened was that the POS system started to get more complex because the systems were kind of basic—the Clovers and the Squares of the world,” Apgar said. “You could just go online and say, ‘Yes, send me one,’ and it was kind of like a MacBook. You open the box and it’s got the red card that says, ‘Stop, do this first. Plug it in, turn it on, put in your Wi-Fi password, and it’s all ready to go.’”

Modern POS systems are far more complex, moving well beyond simple plug-and-play solutions. This added complexity has restored the value of ISOs, as most merchants are not payments experts.

They often require guidance in selecting the right system, as well as support with installation, configuration, and ongoing operation. This renewed demand has once again positioned ISOs as trusted advisors in the POS landscape—an evolution that merchants have broadly embraced.

“The merchant wants somebody to sit down and say, ‘Here’s what I think you need,’” Apgar said. “’Do you sell online? Do you sell via mobile? Do you have a food truck? Do you take reservations? Tell me how you run your business, and here’s what I recommend. I’ve got these three different platforms, I’m going to set you up with these two stations, a kitchen printer, a handheld, and we’ll do payments at 3%.’”

Getting Vertical

Another factor sustaining ISOs is the increasing granularity of POS systems. Today’s systems are not just designed for broad categories like restaurants, they can be tailored to specific needs, from pizzerias to fine dining establishments.

On the surface, these vertical software-as-a-service (SaaS) solutions, which often include integrated payments, might appear to threaten ISOs. In reality, their complexity has only increased the need for personalized guidance.

That said, the growing sophistication of POS systems has required ISOs to evolve.

“It’s a big investment to be able to train all your independent salespeople to sell POS, because when you think about vertical SaaS, payments are a small portion of what that system does,” Apgar said. “The system basically runs the merchant’s entire business. So, now you’ve got a sales guy who’s used to talking about payments who has got to talk about everything.”

The specialization in these systems has largely forced ISOs to focus on verticals as well, such as retail or restaurant sales. These new-look ISOs represent a significant evolution from their original model—and their continued success stands as a testament to their adaptability in the face of disruption.

“This thing is coming full circle,” Apgar said. “We thought that the door-to-door sales guy was like the Fuller Brush Man, he was going to get replaced by merch, where you can just go online and order it yourself. That started to happen. The ISOs that that did not embrace technology pretty much retired or got bought or got forced out.”

“But the ones that made the investment and said: ‘This is the future, I’m going to partner with a POS platform and I’m going to train my sales guys,’ these guys are doing better than ever,” he said.

The post In Defiance of the Prognosticators, ISOs Are Thriving Again appeared first on PaymentsJournal.

PayPal is making a push into the creator economy with the launch of PayPal Links, a new feature that integrates with Canva and allows users to design content and accept payments in one place.

The move targets a persistent friction point for creators: getting paid. Many still spend significant time and money building standalone websites or storefronts just to process transactions.

By embedding payments into Canva’s design tools, PayPal is aiming to remove that barrier. The integration will give Canva’s 265 million monthly global users the ability to create, share, and monetize content without leaving the platform.

“This is a home run for PayPal,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “What they’ve done with Canva is a great example of the power of embedded payments and shines a bright light on the path to growth that all successful payments companies are following.”

The Growth Opportunity

This growth opportunity has attracted many leading payments firms to build infrastructure for the gig and creator economies. For example, PayPal recently introduced functionality allowing YouTube creators to receive payouts in its PYUSD stablecoin, which marked both a milestone for digital assets and a win for the company.

These partnerships also reflect a broader trend—the convergence of e-commerce and social media into social commerce. TikTok Shop has emerged as a pioneer in this space, largely due to its ability to integrate influencer demos and product videos with payments, creating an end-to-end user experience.

Ditching the Website

This convergence shows no sign of slowing. According to Statista, global social commerce sales are projected to surpass $1 trillion by 2028. This surging market makes it increasingly imperative for creators to embed payments into their content.

While e-commerce may be the primary focus of PayPal’s’ Canva integration, the company notes that PayPal Links also enables creators to bypass the need for a standalone website altogether. Creators can embed payment links, QR codes, and PayPal checkout functionality directly into their Canva designs, allowing them to accept payments via social media, email, or even in person.

This optionality—along with increased support for payment types—should be a welcome addition for creators who often struggle to meet consumers’ high expectations around payments.

The post PayPal Gives Canva Creators a Unified Solution for Payments appeared first on PaymentsJournal.

Bolt, the one-click checkout solution turned financial super app that has raised nearly $1 billion in venture capital, has laid off a third of its staff and announced a pivot to AI—apparently a last-ditch effort to save the company.

The layoffs come amid reports of financial strain and difficulty paying vendors. Fintech Business Weekly reports that Bolt has struggled to cover even mission-critical necessities, including Amazon Web Services, since the start of the year. The company has also eliminated most of its independent contractors, some of whom have not been paid since January.

The downfall has been swift for the company that announced its super app just a year earlier. The platform was billed as a one-stop solution for digital banking, crypto trading, peer-to-peer payments, and even featured an AI agent capable of shopping, making recommendations, and completing purchases on behalf of users.

Despite the fanfare, the super app has failed to gain traction. Google Play shows only about 5,000 downloads, far below Bolt’s claim of a “network of 80+ million U.S. shoppers.” For context, the banking app MoneyLion has more than 5 million downloads, according to Fintech Business Weekly.

Moving Forward from Merchants

Originally, Bolt built its reputation by offering checkout solutions for merchants, but the company believed that expanding into a consumer-focused super app would drive broader adoption of its services.

“Bolt tried to compete with Shopify’s ShopPay and EWS’ Paze, which offer one-click checkouts,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Both ShopPay and Paze are marketed primarily to merchants, adding value by reducing cart abandonment and facilitating guest checkouts. Bolt took a different approach by marketing to consumers, offering a discount shopping plan through their network of merchants. Merchants are enticed to sign up on the premise that Bolt can deliver customers, so it becomes a marketing play, not an operational advantage.”

“At the end of the day, their value prop isn’t compelling enough to consumers and doesn’t resonate with merchants that already have strong brands,” he said. “Bolt has constructed a network of struggling brands trying to attract consumers, while struggling to attract consumers with a network of merchants that doesn’t include any household names.”

Will AI Help?

Bolt’s next move is a pivot to AI, which it hopes will accelerate product development and improve operational efficiency.

“AI may help cut costs and drive efficiency but won’t help a lukewarm value proposition,” said Apgar. “If you’re going in the wrong direction, getting there faster won’t help you much. Unless somebody buys them, Bolt will likely be gone by the end of the year.”

The post Bolt, Facing Financial Struggles, Pivots from Super App to AI appeared first on PaymentsJournal.

After processing more than 106 million disputes last year, Visa is rolling out new AI tools to tackle a growing—and often understood—problem.

Many of these disputes arise from unrecognized, but often legitimate, charges on consumers’ increasingly complex statements. This surge represents roughly a 35% increase over the past six years.

To address this pain point, Visa is launching six AI-driven tools. Three are designed to help issuers better analyze and centralize dispute data, while the other three focus on merchants, aiming to improve a longstanding challenge: data sharing between merchants and card issuers. 

“The legacy chargeback and dispute process was designed around consumers working with their card issuers and merchants working with their acquirers,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “At the same time, legacy data formats like ISO 8583 were designed to be compact for fast communications. They only allow 23 characters to be transmitted for the merchant descriptor, with no supporting info on what was purchased.”

“As consumers use cards more and more, monthly statements are typically multiple pages and consumers are challenged to remember where they shopped and what they bought,” he said. “With cryptically brief merchant descriptors and no purchase details, consumers frequently click on the ‘dispute this charge’ button next to an unremembered in their bank’s mobile app, hoping the card issuer can provide the details.”

Timed-Out Inquiries

In the current model, issuers often lack direct access to key transaction data. Compounding the issue, retrieving the information requires a complex chain of communication among the acquirer, merchant, issuer, and ultimately the consumer.

“This whole process runs on a short time window in order to provide good service to the cardholder,” Apgar said. “If the response process isn’t completed in time, the default is a chargeback to the merchant and the consumer gets reimbursed for the purchase.”

“The result is that chargebacks are increasing, simply because the legacy process is being overloaded,” he said. “Many of these chargebacks get classified as friendly fraud, where the consumer intentionally tries to evade a valid sale. And in fact, some of them are, but many are simply the result of timed-out inquiries.”

Piloting an Answer

Because many steps in the dispute process are still manual, the current system struggles to scale alongside the increasing volume of credit card transactions and disputes.

“The answer is to build a process where card issuers can communicate directly with merchants to obtain more detailed info about who the merchant is and what the consumer bought there,” Apgar said. “There are number of different models being piloted now, including a shared database where merchants upload info for access by issuers and an API hub that enables issuers to query merchants and for merchants to provide automated replies.”

“Issuers can also use this data to proactively expand their cardholder statements and head off inquiries from consumers by providing detailed purchase info upfront,” he said.

The post Visa Streamlines Credit Card Disputes with New Tools appeared first on PaymentsJournal.

The European Central Bank (ECB) has reaffirmed its ambition to reduce reliance on non-European payment systems—most notably the networks operated by Visa and Mastercard—in a new position paper outlining a roadmap for the future of retail payments in the EU.

U.S.-based rails still process more than 60% of card transactions in Europe, with 13 of the 21 eurozone member states relying exclusively on international card schemes. The ECB’s strategy aims to strengthen Europe’s strategic autonomy and resilience by reducing dependence on a handful of non-European providers, while also shielding the payments ecosystem from geopolitical risks and cyber threats.

Building Their Own Rails

The roadmap reflects a broader policy shift towards enhancing the EU’s financial sovereignty and fostering competition in a market long dominated by global card networks. The EU has already announced plans to develop its own payment network, similar to Brazil’s Pix, with account-to-account (A2A) payments at its core. The initiative is currently targeting a 2030 launch.

In parallel, a UK consortium has announced plans to build a domestic payment rail to rival Mastercard and Visa, also aiming to be operational by 2030. The two payment giants currently handle roughly 95% of all card transactions in the UK.

“Given the geopolitical climate, Europe is nervous about being dependent on U.S.-based companies,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The EU had a wakeup call about relations with the U.S. Not that they are actively looking to kick Visa and Mastercard to the curb, but if something should go sideways, the EU doesn’t want to be left with no payment network.”

Relying on A2A

The ECB’s paper places renewed emphasis on A2A payments as a cornerstone of Europe’s future payments infrastructure. Also known as pay-by-bank, A2A payments allow funds to move directly between bank accounts, reducing transaction costs and supporting real-time settlement.

Perhaps most importantly, A2A payments could help diversify payment options, enhancing consumer choice while improving the overall reliance and reliability of the payments system. The immediate challenge will be to establish them as a credible and widely adopted option for European consumers.

“It’s not that Europe is in love with A2A payments,” Apgar said. “A2A payments in the EU are about at the same levels as they are here in the U.S.”

The post The EU Seeks to Break Its Dependence on Visa, Mastercard Rails appeared first on PaymentsJournal.

A proposed ban on credit card surcharges in New Zealand, set to take effect in May, appears to be on its last legs after a key political party withdrew its support.

New Zealand introduced legislation last year to ban in-store surcharges on both card and contactless payments. An industry group, Retail NZ, opposed the move, warning that businesses would likely have to raise prices elsewhere to recover payment costs.

Now, the ACT Party, which had been working with the government to refine the bill, says the proposed ban is effectively dead. The opposition Labour Party had never supported the measure. While the country’s Commerce and Consumer Affairs Minister maintains the bill is still under consideration, its political backing has largely collapsed.

“It was obviously appealing to take away a fee that a lot of customers hate, but if it only puts that fee on to the small business, it’s not actually a win,” ACT Party leader David Seymour told RNZ. “It’s just a shift, and often carried by people that can’t afford it at all.”

A Political Hot Potato

These extra fees have become common in the U.S., where only three states—Massachusetts, Maine, and Connecticut—explicitly ban credit card surcharging. But debate over the fees, like the charges themselves, is becoming more visible. Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, describes the situation as a “political hot potato.”

“If you’re in favor of surcharging, then you get framed as anti-consumer because these large merchants already make millions,” Apgar said. “If you’re anti-surcharging, then you get framed as being against small business.”

Consumer Complaints Are Being Heard

Consumers are starting to take notice of the surcharges—and they’re not happy. The issue may be approaching a tipping point where public sentiment turns against such fees for good.

“People are starting to pay attention to their bills and speak out against paying an extra fee,” Apgar said. “You’ll see the tide go out at about the same speed as it came in, with merchants gradually opting not to add surcharges.”

“I took my truck in for service last week and the guy has a notice on his website that credit cards will be charged an additional 3% fee,” he said. “But when I paid, no fee was added. I asked the owner, and he said he stopped surcharging because customers were complaining and he hadn’t updated the website yet.”

The post New Zealand’s Credit Card Surcharge Ban May Not Happen After All appeared first on PaymentsJournal.

A European coalition of retailers and wholesalers is pushing back against a proposed EU rule that would require businesses to accept cash.

In a statement, the industry group EuroCommerce responded to ongoing EU payment discussions taking place as consumers across Europe continue shifting toward contactless cards, mobile wallets, and other digital payment methods.

While merchants say they support continued access to cash, they are urging policymakers to include exemptions in any new regulation. They argue that mandatory cash acceptance could drive up costs, increase security risks, and disrupt digital retail models.

Exemptions Sought

The exemptions outlined by EuroCommerce are broad and, in practice, could allow many retailers to opt out. In its position paper, the group highlights scenarios such as unmanned environments, situations where safety is at risk, and cases where accepting cash could impose disproportionate costs. It also calls for the ability to display “no cash” signage.  

“Businesses want to meet customers where they are and accept however they want to pay,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The trend toward no cash is largely driven by the move toward cards and digital payments. When cash becomes a very small percentage of sales, most merchants are comfortable eliminating it entirely, because new customers that the business will attract are likely to pay digitally as well.”

The Cost of Cash

At the core of the debate is the cost of handling cash. In markets where digital payments dominate, maintaining the infrastructure to process cash can become disproportionately expensive.

These costs are not linear. If cash accounts for only 10% of sales, that doesn’t mean handling expenses fall by 90%. Much of the operational burden is fixed, and merchants can’t reduce it unless they’re permitted to stop accepting cash altogether.

“From the sellers’ perspective, digital payments offer not only cost savings, but better safety and security for employees who no longer have to handle, control, and transport cash, especially in challenging environments like overnight store hours, air transport, etc.,” Apgar said. “Not accepting cash enables merchants to eliminate those functions and the associated hardware from their businesses, streamlining operations and overhead in the process.”

“The concern for merchants is that once the government steps in and disrupts this free market trend with legislation that mandates cash, merchants will be stuck with the fixed cost of cash acceptance even though it’s no longer benefitting their business or customers,” he said.

The post European Retailers Fight EU Plan to Mandate Cash Acceptance appeared first on PaymentsJournal.

Third-party fintech companies have transformed financial services and accelerated the rise of open banking, but their access to sensitive customer data continues to introduce significant risks.

While the U.S. has largely allowed industry participants to address these challenges on their own, countries like New Zealand have adopted a more regulatory approach. After instituting open banking rules in December, New Zealand’s regulators have indicated they plan to move forward with more extensive reforms.

The objective of these efforts is to secure open banking interactions, drive competition among domestic financial institutions, and imrpove payments efficiency.

“It is great that New Zealand is approaching open banking from a regulatory perspective,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Mandating compliance forces the banks to invest in the technology and creates a level playing field. Of course, retailers are excited about the potential for lower fees compared to card-based transactions, but enabling the technology is only the first step to making direct bank payments a reality.” 

Developing the Standard

One of the main steps New Zealand’s banks have taken is the development of standardized application programming interfaces (APIs), which allow authorized third-party firms to access data and perform services—provided customers give consent.

Similar to the revised Payments Services Directive (PSD2) implemented by the European Union, New Zealand’s framework also aims to reduce the practice of screen scraping, in which non-bank providers extract financial data for use within their own platforms.

Secure APIs help mitigate the need for screen scraping, along with the associated security and privacy risks.

Challenges and Advantages

In addition to enhanced security, pay-by-bank options offer consumers an alternative payment rail at a time when many are burdened by debt from credit cards and buy now, pay later loans.

For merchants, adding account-to-account payments means they also have an alternative to card networks and their associated interchange fees. However, implementing pay-by-bank functionality presents its own set of challenges.

“Merchants must also make the investment to connect to the new payment rails being built by the banks, and consumers need to see a clear value proposition to paying via open banking versus using their cards,” Apgar said. “Card payments have become remained popular with consumers because of rewards structures and easily accessible dispute mechanisms with zero liability.”

The post New Zealand’s Regulators Expand Open Banking Efforts 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.

The latest extension of the longstanding partnership between Visa and Fiserv has the potential to be a game-changer in Europe, where merchants have long faced the challenges of operating across multiple markets with fragmented payment processes.

The Visa Acceptance Platform will be embedded into Fiserv’s acquiring environment, with the aim of creating a more unified, cloud-based infrastructure across the region. The API-driven acceptance layer is expected to impact both fintech firms and retailers in the EU.

The platform offers a single integration point into Visa’s acceptance services, consolidating access to authorization, data enrichment, and network connectivity within a cloud-native environment. In practice, this may help merchants improve approval rates, manage fraud and chargebacks more effectively, and streamline the checkout experience.

“Merchants benefit from a single point of integration that is both simpler and more robust that what was previously available,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Merchants and fintechs are able to get to market faster, realize better authorization performance, reduce settlement complexity and benefit from powerful data analytics all through a streamlined API connection.”

A Way to Enable the Clients

Its impact may extend beyond in-store payments. The platform is also intended to simplify onboarding processes and reduce backend complexity for fintechs and financial institutions, while supporting faster payments and richer transaction data—though the extent of these benefits will depend on adoption and execution.

“Visa has done a great job in bringing this tech to market and positioning it in a way that enables their clients rather than competing with them,” Apgar said. “Legacy processors have struggled to re-engineer their platforms not just into API connectivity, but cross-connecting systems to enable clients to do more with fewer APIs. Connecting to the Visa Acceptance Platform and making that available to their clients was a very strategic move by Fiserv, and greatly accelerates the value they bring to the market.”

Expanding in Other Regions

Visa has rolled out related initiatives in other regions. Earlier in March, it introduced its Intelligent Authorization orchestration tool in the Asia-Pacific region, positioned as a single-API pathway for acquirers to route transactions across card network infrastructure.

In the U.S., Visa recently launched Visa & Main, a platform focused on small business support. The offering is intended to improve access to capital and provide operational tools, though impact will likely vary depending on uptake among entrepreneurs.

The post Visa and Fiserv Roll Out Unified Payments Platform in Europe appeared first on PaymentsJournal.

A plumbing company and a quick-serve restaurant have little in common operationally, but both now rely on specialized software platforms designed specifically for their industries. During the Software-as-a-Service (SaaS) renaissance, solutions emerged to serve distinct verticals, such as Toast for restaurants, Mindbody for fitness studios, and ServiceTitan for contractors.

Although these platforms were built for niche industries, many providers have discovered a powerful revenue opportunity in a universal business need: payments.

As Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discusses in the Vertical SaaS: Best Practices for Monetizing Payments report, this opportunity also presents a challenge for integrated software vendors—developing a compelling embedded payments strategy that meets the unique needs of their vertical while effectively mitigating risk.

Preparing for the Unseen Future

These strategies have become a critical focus for SaaS firms, in part because their cost-effective point-of-sale (POS) platforms have seen widespread adoption among small businesses. As payments have been embedded within these systems, they have delivered several key benefits to business owners.

“It’s important for the workflow of the business owner,” Apgar said. “If you have a POS system, being able to take customer payments and have those payments posted and reconciled within the software is a big time-saver. It’s a great customer experience because it reduces the friction, you don’t have a separate device, and all those good things.”

“But on the back end, the software companies quickly realized that much like the independent sales organizations (ISOs), there’s a residual component to payments,” he said. “From a revenue standpoint, payments revenue became in some cases more lucrative than software fees for some of these companies.”

The revenue potential is one reason the small business segment has become a prized target for many of the world’s leading financial services firms. In response, the market has seen a wave of new product launches aimed at this sector, including POS systems, payments orchestration platforms, and working capital solutions.

Amid this surge of interest in small enterprises, the vertical SaaS sector has also attracted its share of attention.

“As private equity becomes more interested and invested in the software space, one of the big PE drivers is, ‘What are you guys doing with payments?’” Apgar said. “At the same time that payments became more important to consumers—because now everybody wants to tap their card, that’s the whole pandemic-driven customer experience, and cut the payments time down—it became more important to businesses to have them integrated.”

“Payments also became more important to software companies because of the revenue potential, so you’ve got those three factors coming together at the same time,” he said.

Changing the Construct

While consumer behavior and payment processor preferences are important considerations, one of the most pressing questions for SaaS providers is ultimately what merchants want.

“What they want is a connected workflow and reasonable pricing,” Apgar said. “It doesn’t have to be the cheapest, but the rat-hole that some of the SaaS companies have gone down is, ‘I integrate payments and I create a so-called walled garden where if you use my software, you have to use my payments.’ It’s creating the perception of, ‘I can overcharge the merchant out the wazoo and they have no option.’”

In truth, switching SaaS vendors is not always easy for merchants, though this is not solely due to payments reliance. For example, a restaurant using Toast will likely have its entire menu, including ingredients, loaded into the system. This makes tasks like building checks seamless, but operational advantages extend far beyond that.

“The POS has become about more than just ringing up sales, it’s running your business,” Apgar said. “You’ve got your servers, you’ve got your tips loaded in there, and if you want to switch from Toast to somebody else, it’s a big effort.”

“Changing is not impossible, merchants do it all the time, but it’s not as easy as just pulling out the Bank of America payment terminal and putting in the Chase payment terminal,” he said. “There’s a whole construct around that. It’s not installed software—it’s easy in that regard to change—but it’s the dataset that’s the killer.”

Knowledge Rolls Upstream

Even so, while these factors can make switching vendors difficult midstream, merchants now have more options than ever. If their SaaS provider pushes too hard in the wrong direction, many will ultimately take their business elsewhere.

“Merchants want stability and predictability,” Apgar said. “Don’t hit me with a fee or create a policy that jams me up. Merchants want it just to work, to be reliable, to be predictable and to be efficient. It is just back to basics, if you will, for the software companies.”

Payments remain one of the most fundamental considerations. SaaS vendors that can offer well-integrated payments services stand a better chance of gaining, and keeping, merchant loyalty.

However, delivering reliable, secure, and efficient payments is just as important for the financial services firms that facilitate these transactions.

“If you go back to the processor level—the Fiservs and the Chases of the world—software companies have become an important distribution channel for payment services, because merchants aren’t going into the bank to open a payment account,” Apgar said. “They’re not responding to salesmen, independent agents knocking on their door and saying, ‘Would you like to switch your payments over?’”

“When the merchant buys the software, that is when they buy their payment processing,” he said. “But it has become an important distribution channel for the service companies that provide payment processing. Knowledge rolls upstream, so it’s important for the SaaS company to know what the merchant wants. But then you go up to the ladder and it’s important for the processor to know what the SaaS company wants.”

The post Vertical SaaS Is Cashing in on Payments appeared first on PaymentsJournal.

As some merchants continue pushing customers to pay through their apps, one major retailer is moving in the opposite direction. The Florida-based grocery chain Publix recently notified customers by email that its payment app will be discontinued starting March 19.

The Publix Pay app allowed shoppers to store payment methods—including debit cards, credit cards and gift cards—on their mobile devices. In-store, customers could scan a QR code at checkout and complete the transaction using a PIN-protected payment tool.

Publix has not offered a reason for the decision, but it may reflect a challenge common to app-based checkout: distinguishing between customers who paid through the app and those who simply walk with unpaid merchandise.

“Changes to their payment tech stack could have forced this change, but I suspect it was something more basic: inventory shrinkage,” said Don Apgar, Director of Merchant Services at Javelin Strategy & Research. “For example, you can use the app to pre-order deli items, and presumably you could pay through the app as well. The big question is, how does the store confirm payment when you are walking out with the products? This basic problem has thwarted all major retailers from implementing a pay-by-app function.”

Trying to Find Savings

Retailers could stop shoppers who use the app to confirm that payment was made. But assigning an associate to that task would eliminate any labor or time savings. It would also offer little added convenience for customers, who could just as easily stop at a register or self-checkout to pay.

Even if the store can confirm that a payment was made from a shopper’s device, it still must ensure the payment covers everything in the basket. That requires a more sophisticated system than a simple payment app.

“Theoretically, this could be accomplished using an RFID tag on every item and geofencing for your phone,” Apgar said. “As you exit the store, scanners can detect every item in your cart and match them with the payment you made via the app. But this tech is very expensive to deploy at scale, so the question loops back to whether this offers enough convenience to justify the costs?”

Other Options Remain

The app would still have been secure for in-store pickup and home delivery orders, where consumers aren’t leaving the store with items. Going forward, shoppers using those services will pay via the retailer’s website.

Publix customers can still use gift cards stored in their digital wallets, and contactless options such as Apple Pay and Google Pay will continue to work at store registers.

The post Publix Is Shutting Down Its Payment App appeared first on PaymentsJournal.

Consumers expect to pay seamlessly across any experience—from social media platforms to small business e-commerce checkouts. They also want choices, including buy now, pay later services, real-time payments, and digital assets.

Supporting these options requires payment gateways capable of bridging the gaps between payments processors and merchants. But a crypto gateway can do far more than simply add a “Pay with Crypto” button at checkout.

As Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research, detailed in the Crypto Gateways: Digital Money Routers report, crypto gateways are complex solutions that take many forms. More importantly, all of these models function as powerful payments orchestration platforms, optimizing payment routing and settlement while ensuring compliance.

Eliminating the Infrastructure Expert

The expanding role of crypto gateways is driven in part by the sheer number of digital assets technologies—including cryptocurrencies, wallets, integrations, and infrastructure layers. These platforms also address a key barrier to mainstream adoption: the volatility of cryptocurrencies like bitcoin and Ethereum.

For example, bitcoin reached an all-time high of $126,000 in October, only to fall to around $67,000 less than six months later.

“There have been developments going down the route of direct crypto acceptance versus indirect,” Hugentobler said. “There are third parties involved with the indirect side because at the end of the day, all the indirect crypto gateway method is that you can pay with crypto at checkout. But whoever’s accepting that payment on the other end doesn’t want crypto, so they have that third party swap it out.”

Despite short-term swings, many cryptocurrencies remain highly lucrative investments. Companies like Strategy have even made bitcoin investment central to their business models. Organizations with a similar focus might consider a direct crypto gateway, allowing them to accept crypto and actively manage it.

For most business owners, however, the complexities of treasury management and digital assets make an indirect gateway more appealing, where a partner handles crypto conversions. It is possible, though, to achieve a hybrid approach that combines the benefits of both models.

“With a hybrid method, it solves the issue of why merchants haven’t adopted crypto,” Hugentobler said. “Merchants can use a stablecoin or accept a stablecoin if they want, but if they don’t want it as-is, they can use this product and leverage this instant finality, this instant settlement, the cheaper method of sending fees without even really knowing they’re using stablecoins.”

“That’s where we’re headed and that’s been the issue with crypto payments for the longest time,” he said. “If you have to become an infrastructure expert, this stuff isn’t going to scale.”

The Demand for Digital Assets

Interest in crypto acceptance among merchants is growing, driven in part by consumer demand for payments flexibility. A recent survey by PayPal and the National Cryptocurrency Association found that inquiries about crypto payments are common—especially from millennial and Gen Z customers.

Merchants also cite lower transaction fees compared with credit cards as a major advantage. Speed and security are additional benefits, with crypto payments typically settle in near real-time on transparent blockchain networks.

These benefits extend to cross-border payments, which historically have been costly and slow. Cryptocurrencies, and particularly stablecoins, dramatically reduce fees, delays, and foreign exchange challenges.

A hybrid crypto gateway that leverages stablecoins is an attractive option for most merchants. However, there are still some wrinkles to be ironed out.

“There are issues like chargebacks, where I think everyone has been so used to the traditional chargeback method. It has to be a whole new leg with crypto, that’s just the way it is,” Hugentobler said. “However, stablecoins are a little bit different than bitcoin or Ethereum Blockchain where it’s immutable; there’s just some discretion that issuers have.”

The fact that stablecoins are privately issued by companies like Tether and Circle has been a point of concern because these issuers must maintain sufficient fiat reserves to redeem the tokens, even during high-volume periods. To date, these concerns have largely proven unfounded.

“What it comes down to is—is this simple and easy to use?” Hugentobler said. “Does it do what it says it does—settle instantly, reduce my cost, and reduce my overhead? Is the consumer happy? Is the end user happy? Can I have fiat in my bank account or wallet? That’s what they want. I think when you start adding layers though is where you get additional risk.”

Addressing the Uncertainty

Despite the risks, digital assets offer clear benefits to both merchants and consumers. Financial institutions and payments processors should consider crypto gateways as a practical entry point into crypto transactions.

While regulatory uncertainty has made some U.S. organizations hesitant to adopt digital assets, these concerns are no longer a significant barrier.

“Financial institutions need to figure out what they want to do to participate, and they need to commit,” Hugentobler said. “From there, you can build roadmaps of who do I need to get involved—third parties, compliance, exchanges, whatever it is—that’s the biggest thing.”

“But it’s also realizing that with the GENIUS Act and the CLARITY Act coming down the pipe, there is a push to leverage private digital money to exert dollar dominance,” he said. “From a bigger picture standpoint, this type of stuff is just going to continue to proliferate and those that wait on the sidelines for any more regulation to hit the market are just going to lose market share.”

The post Crypto Gateways Offer Access at an Inflection Point for Digital Assets appeared first on PaymentsJournal.

The great American coin-op laundromat may be nearing the end of its lifespan. A new poll finds that more than half of self-serve laundries in the U.S. now generate the majority of their revenue from cashless payments.

The survey underscores the shift: slightly more than half of respondents say that much of their self-service machine revenue comes from payment types other than coins or cash bills. Among stores that offer digital or card-based payment, 52.3% report that cashless transactions have increased significantly over the past three years.

Many laundromats have already moved well beyond cash. Only two-thirds of respondents said they still accept coins, and just 37% reported that coins generate the majority of their revenue. Meanwhile, nearly half accept payment from a mobile app, and another 37% accept credit or debit cards.

A Range of Benefits

Customer convenience is driving much of the transition, with 70% of operators citing it as a key reason for adding or considering cashless payment options. But owners are seeing other benefits as well.

Digital payments provide data that can help operators better understand customer habits and refine their business strategies. Cashless systems also make it easier to implement loyalty programs and enable more flexible pricing beyond the traditional 25-cent increments.Some laundromats are experimenting with time-of-day discounts and other creative promotions. They can also streamline the day-to-day operations.

“Coins are labor intensive,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “On a daily basis, machine coin boxes need to be emptied and the coins counted and returned to the bill changer machines.”

Worth the Cost

There are some drawbacks. Customer friction may deter some users from downloading and using a payment app.

“Adding card payments is an investment for laundry operators,” Apgar said. “They need to spend money on the card devices that either integrate every machine or use a central device that issues prepaid cards from credit and debit purchases. Either way there is hardware, software and set up fees involved, in most cases thousands of dollars.”

On top of that, payment processors charge a fee for every transaction, typically ranging from 1.5% to 3.5%.

Even so, most operators report a positive return on investment from increased sales and reduced operational costs. Some laundromats have seen revenue jump between 17% to 22% after introducing card payments—gains that suggest the era of the traditional coin-op laundry may be coming to an end.

“Customers like it;” said Apgar. “Most laundromat customers are regulars, there because they don’t have a washer/dryer setup at home. Loading a prepaid card helps them budget for laundry costs and is safer to give to dependents vs. cash.”

The post Cashless Payments Gain Ground at Self-Serve Laundries 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

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Consumers can now pay with everything from digital wallets to crypto and real-time payment rails—and merchants increasingly expect to support them all. That shift is putting new pressure on merchant acquirers, the financial institutions responsible for processing payments on merchants’ behalf.

Acquirers now face fresh challenges as payment methods grow more complex. To help address these, Visa is launching its Intelligent Authorization platform for acquirers in the Asia-Pacific region.  

The platform is designed as a single-API pathway that allows acquirers to process transactions using the infrastructure of card networks. This can eliminate the need for banks to build dedicated infrastructure while also delivering operational efficiencies.

“This is an extension of what Visa has been building with their Visa Acceptance Solutions platform,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Historically, Visa has relied on acquirers to provide connectivity to the Visa network, either through their bank’s own tech stack or via a third-party processor like Fiserv or WorldPay.”

“Visa now offers merchant-level network connectivity that enables acquirers of all sizes to bring a competitive processing offering to market,” he said.

Finding the Right Rail

One reason payments orchestration platforms have proliferated is that many banks were never designed to process transactions via technologies such as mobile wallets or stablecoin platforms. However, payments orchestration platforms have the added benefit of providing intelligent payments routing.

This means these platforms can determine the optimal payment rail for a transaction based on factors like speed and cost—and dynamically switch to another option if needed. This flexibility can dramatically reduce declines while saving merchants and acquirers both time and expense.

The Absence of Parameters

When artificial intelligence is added to the mix, routing decisions can become even more dynamic. AI agents now have the capability to navigate the complexities of the modern payments landscape and make real-time routing decisions, even without predefined parameters.

As AI agents begin to play a greater role in payments orchestration, these platforms could also help accelerate the growth of agentic commerce. With many financial institutions evaluating infrastructure strategies for AI-driven transactions, streamlined payments orchestration should be a key consideration.

The post Visa Enhances Payments Orchestration Tools for Merchant Acquirers appeared first on PaymentsJournal.

Amid reports that Stripe is considering an acquisition of some or all of PayPal, a broader question emerges: Is the once-dominant payments giant worth more in pieces than as a unified company?

Competition has been steadily eroding PayPal’s position for years. Zelle has surpassed Venmo in payment volume, while tech giants such as Apple and Google have expanded aggressively into digital payments, encroaching on PayPal’s core territory.

The pressure has shown up in the numbers. PayPal’s stock has suffered steep declines over the past year, and the company recently parted ways with CEO Alex Chriss after issuing a profit outlook that fell well of Wall Street expectations.

A Tricky Package for Buyers

News of Stripe’s interest first, first reported by Bloomberg, suggested that the company may be targeting only select divisions of PayPal rather than pursuing a full acquisition.

“Stripe is one of a handful of large companies, including industry leaders Fiserv and JPMorgan, who are rumored to be interested in acquiring PayPal,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “But it’s hard to see how selling the company as-is to a single buyer would maximize shareholder value.”

“What’s interesting about the business that PayPal has built are the components: branded checkout, consumer wallet, Braintree merchant processing and Venmo,” he said. “From our view there isn’t a single buyer that would benefit acquiring all of those individual pieces, and it’s likely that anyone buying PayPal in whole would likely spin off or shutter one or two divisions that weren’t a fit for their business.”

No Consumer Experience

A full merger would combine Stripe’s modern payment infrastructure with PayPal’s vast consumer and merchant base. Braintree already competes with Stripe in merchant processing and could likely be integrated into Stripe’s platform. Stripe could also leverage the PayPal brand to strengthen its branded checkout offerings.

However, Stripe lacks a consumer-facing businesses, raising questions about how it would manage assets like Venmo and PayPal’s digital wallet. Stripe’s merchant-first reputation also prompts concerns about its readiness to handle consumer issues.

“Stripe built its brand on ease of integration for businesses,” Apgar said. “All of their service and support is AI-based. Any merchant who has had a service issue with Stripe will tell you it’s a nightmare. Stripe’s feeling is that it’s cheaper to handle the resulting attrition than hire staff to build out human-based service. If you imagine this same approach in consumer-facing businesses like PayPal wallet and Venmo, they will burn those businesses to the ground.”

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New York is stepping up to protect consumers in the rapidly growing buy now, pay later market. The state has proposed new rules aimed at preventing surprising fees, ensuring clear loan terms, and giving borrowers the rights to dispute charges and get refunds that credit card users already enjoy—safeguards that were lost last year when the Consumer Financial Protection Bureau withdrew a similar rule.

For BNPL providers, the most significant change is that New York would become the first state to cap the fees that drive much of their revenue. In most cases, BNPL providers in New York would be limited to charging an $8 penalty fee. Governor Kathy Hochul’s proposed rules would target excessive convenience, late, and other penalty fees, reshaping the economics of these loans.

Impact on BNPL Providers

These regulations are not entirely unexpected. In 2024, the CFPB under President Biden issued an interpretive rule—later rescinded—that provided similar protections for BNPL borrowers, matching those already available to credit card users.

“BNPL vendors have largely been anticipating these types of regulations, which have been discussed for several years,” said Ben Danner, Senior Analyst of Debit at Javelin Strategy & Research. “The most damaging part for to BNPL vendors would be the fee limits, as fees are a significant revenue stream for lenders, particularly offering pay-in-four interest free loans. 

According to a 2025 study from the Richmond Fed, merchant fees account for most BNPL provider revenue, with late fees and penalties representing a secondary source.

Targeting Lending Practices

Predatory lending practices have become a target for Governor Hochul. In December, she signed the Fostering Affordability and Integrity through Reasonable Business Practices (FAIR) Act, which strengthened protections against junk fees and hard-to-cancel subscriptions. The BNPL regulations were mandated under a provision included in the state’s 2026 state budget.

Once the proposed rules are published in the State Register, a 60-day public comment period will begin, with the law scheduled to take effect 180 days after adoption.

The post New York’s BNPL Rules Would Limit Fees Providers Can Charge appeared first on PaymentsJournal.

Secure real-time payments are foundational to the open banking model, enabling users to pay directly from their bank accounts across a wide range of use cases. This capability is largely delivered through APIs provided by third-party fintechs.

This is the model that eBay plans to implement in the UK, where the e-commerce giant will tap into the substantial pay-by-bank network of TrueLayer to introduce account-to-account payments for its customers.

However, this partnership goes further than simply adding another payment option. eBay is also making a substantial investment in TrueLayer through its venture capital arm, signaling confidence in both the fintech itself and the broader open banking model. While this is a notable development, the long-term implications remain to be seen.

“This will be interesting to watch,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “It’s a stretch to say that the fact that eBay implemented pay-by-bank is now a broad validation for open banking platforms. What will amount to validation is how many eBay shoppers choose that payment method at checkout vs traditional card payments.”

“The proof will be in the figgy pudding—as they say across the pond—when we see the payment volume materialize,” he said.

Two Key Features

Many merchants have been drawn to real-time payments as a lower-cost alternative to credit cards and their associated interchange fees. That said, credit cards do offer certain benefits that help justify their costs.

“Card payments have evolved over their 50+ year lifespan, and the two-step process enables sellers to verify and claim good funds immediately at the time of purchase, while not actually charging the cardholder until the goods are shipped,” Apgar said. “This, combined with a well-defined chargeback and dispute process, highlights two key payment features that consumers forfeit when opting for pay by bank.”

A Challenging Road

These advantages, coupled with the dominance of card payments, suggest that real-time payments still face a challenging path to wider adoption in the UK.

“The lower fees and real-time settlement are certainly advantages for sellers, and we may see eBay and others offer incentives to consumers who select pay-by-bank,” Apgar said. “While there are many great use cases, it remains to be seen if buying goods from e-commerce marketplace sellers is one of them.”

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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.”

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Merchants can dangle discounts or tack on surcharges, but it rarely changes how consumers pay. Consumers overwhelmingly stick with their preferred payment method, driven more by habit than by small financial incentives.

That’s one of the key findings in a new report from the Federal Reserve Bank of Atlanta, Merchant Steering of Consumer Payment Choice. Credit card surcharges are now legal in all but four states, and earlier studies have found that consumers strongly dislike them. But that hasn’t been enough to change their payment habits.

Discounts Have Little Effect

The Fed found that offering discounts for cash payments did not increase the likelihood that a customer who prefers to pay with a card would switch to cash. Cash discounts did not affect consumer behavior until transaction amounts exceeded $1,000. However, because most retailers offering cash discounts were restaurants, gas stations and convenience stores, transactions of that size were rare.

Consumers who favor credit cards are particularly consistent: nearly three-quarters of their transactions are made with a credit card. By contrast, just over half of the transactions by cash-oriented consumers are paid in cash. Debit users fall in between, using that method for 64.1% of their transactions.

“Merchants are shooting themselves in the foot trying to outsmart their customers,” said Don Apgar, Director of the Merchant Payments at Javelin Strategy. “Credit card users are going to use their card no matter what. These also tend to be the better customers who make larger purchases more frequently, so adding a fee to their credit card purchases just alienates their best customers.”

The Power of Inertia

The most effective way merchants can steer payment choices is by refusing to accept cards for purchases below a mount—or, in more extreme cases, by refusing card payments altogether. Anything short of that is unlikely to shift consumer aways from their preferred method.

Earlier Fed research found that most consumers prefer to use the same payment method for all or most of their transactions. The report cited several reasons for this inertia:

• Using a single payment method eliminates decision-making at the point of sale.
• It requires less forethought. For example, cash users can make a single ATM withdrawal to cover the day’s expenses.
• It simplifies record-keeping when all payments appear on a single statement.

These factors help explain why small financial incentives rarely alter how consumers pay, reinforcing that, at the point of sale, routine often trumps reason.

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A UK consortium has put plans for a payment rail to rival Mastercard and Visa on the front burner, with meetings among top British banking officials scheduled for this week. The aim is for the new system to be operational by 2030.

Visa and Mastercard currently handle roughly 95% of all card transactions in the UK. The new system, DeliveryCo, is intended to ensure the UK payments network can function even if the U.S. government interferes with their ability to process transactions overseas.

UK Finance, the industry trade body, is coordinating the initiative, with the planning group led by Barclays UK chief executive Vim Maru. Executives from Lloyds Banking Group, Nationwide, and NatWest are also involved. Mastercard and Visa are participating, taking stakes in the project.

A Switch in Attitude

Amid uncertainty surrounding NATO, the UK is concerned that its payments system could be at risk if U.S.-based rails like Visa and Mastercard become unavailable in the EU—or even if U.S.-based rails simply become less attractive to EU banks and consumers.

Historically, there hasn’t been a compelling case for creating new payment rails. EU regulations have kept interchange fees low, so merchants have not faced the same concerns over card acceptance costs as in the U.S.

“There has always been some concern that the only debit scheme in the UK is non-domestic, but the banks there have been happy not to have to pay to build and manage a domestic switch,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research. “It’s only really now, with the U.S. schemes being seen as a potential vulnerability, that the conversation has taken this turn. My expectation is that this will spur a sustained effort to onshore UK debit switching in the long term.”

Prepare for the Worst

For now, UK banks appear focused on preparing for potential risks rather than pushing into the launch of a new UK-based rail, balancing caution with the understanding that the threat is not yet immediate.

“The incredible cost and difficulty in standing up such a scheme in a short period of time would require more than just the threat of losing access to Mastercard and Visa,” Thomas said. “It would need to be something close to a certainty.”

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Visa has been the sole card provider for the Olympic Games for roughly 40 years, but its dominant positioning has become a point of concern at this year’s Winter Olympics.

The main issue is that all official souvenir stores at the Milano Cortina games only accept Visa or cash. With cash usage declining across Europe, many visitors without Visa cards have faced long ATM queues to access funds.

While such logistical challenges are not unusual at major events, they highlight Europe’s resilience on foreign payment providers—a dependence that has disquieted many EU leaders. This has fueled increasing calls for a stronger, independent payments infrastructure to reinforce the EU’s standing as a global financial services hub.

“The Olympics has been Visa-only since that marketing deal started way back when, but now they’re shoved into the spotlight because of global affairs, so they are scrambling to install ATMs and let people use cash,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Banks in the EU issue Visa- and Mastercard-branded credit and debit cards just like they do in the U.S; Visa and Mastercard are global brands but are headquartered in the U.S.”

“With everything that’s been happening with NATO, Ukraine, Greenland, etc., now the EU is wondering if their payments system could be at risk if the U.S. does something that makes Visa and Mastercard unavailable to the EU, or at a minimum less desirable for EU banks and consumers,” he said.

A Digital Alternative

Although there is no indication that changes to card networks are imminent, financial services are increasingly a focus for EU lawmakers. The rapid rise of U.S.-dollar-backed stablecoins has also raised concerns about the euro’s role in global transactions.

The emergence of stablecoins has intensified discussions around a central bank digital currency (CBDC). However, progress toward a digital euro has been arduous, with ongoing debates about security and the necessity of the digital asset.

Despite these challenges, the European Central Bank plans to launch a digital euro by 2029, contingent on establishing an appropriate regulatory framework. If successful, the CBDC could debut just ahead of the 2030 Winter Olympics in France.

Protecting from the Splatter

The EU’s concerns extend beyond Olympic souvenir payments. Lawmakers recently met to discuss a comprehensive payments plan that would include a euro-backed stablecoin, tokenized deposits, and a focus on ensuring that all lending and aid efforts are denominated in euros.

These discussions followed a landmark trade deal with India that carried significant financial services implications. Collectively, these initiatives signal that payments stability is a top priority for EU leaders.

“There’s also nervousness in the EU about U.S. debt at $31 trillion and growing fast, based on tax cuts and spending in the U.S. right now,” Apgar said. “Many U.S. bondholders are EU countries who are unwinding their U.S. investment positions. Combined with tariffs, Iran, Venezuela, and Gaza, some EU economists are becoming bearish on the U.S., and if our economy hits the deck, the EU is trying to protect themselves from the splatter.”

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Running a business shouldn’t mean navigating a maze of payment options. But the sheer variety of ways there are to pay today puts pressure on businesses to accommodate every option—or risk losing a sale.

To meet this challenge, many businesses with simple payment needs are turning to payment gateways for businesses, which help them seamlessly accept a wide range of payment types. These systems manage the entire transaction process, from the moment a payment is initiated at the point of sale to when it’s submitted to the processor. Payment gateways can accept credit and debit cards, eChecks, digital wallets, contactless payments, and transactions made online or via mobile.

You can simplify things even further by choosing a payment gateway that also provides a merchant account. Authorize.net has an all‑in‑one solution that means you don’t need to separately contract with a bank or third-party processor to get set up. This can speed up onboarding, reduce administrative overhead, and give you a single point of contact for both payment processing and gateway support. For small and mid‑sized businesses, this often translates to faster access to funds, fewer integration headaches, and a more streamlined payment experience overall.

But it’s not just about convenience. A payment gateway can give you access to more innovative payment experiences that let you capture more sales, give you greater control over the payment process, enhance fraud prevention, and access to a wealth of data to drive your strategies.

How to Keep Up With Innovation

Payment gateways are creating better ways to serve their users all the time. Visa’s recent relaunch of Authorize.net introduced features that make it even more user friendly, with an updated interface that’s seamless to navigate, a customizable dashboard, and an AI support tool with expanding capabilities.

Authorize.net has also optimized its merchant onboarding, withpricing templates that reduce repetitive tasks and minimize errors, plus a portfolio default that automatically generates sales profiles for a seamless start every time.

How to Accept More Kinds of Payments

Authorize.net is currently one of the most popular payment gateways for businesses, supporting 400,000+ small to mid-size businesses in the U.S.

Today’s shoppers expect their preferred payment method—whether it’s a physical credit card, a digital wallet, or something else—to be accepted wherever they shop. In addition to online purchases, in-person point-of-sale transactions have also grown more complex. Consumers may want to pay with a gift card, tap to pay, or even use cash. At one time, investing in hardware to handle all these options required significant effort.

But gateways like Authorize.net can provide a virtual point-of-sale (VPOS) that allows you to connect a compatible card reader to a computer. You can simply log in and start accepting payments. This flexibility gives you the ability to stay up to speed with trends and offer customers a way to pay that feels right for them.  

How to Manage Recurring Payments

Recurring payments have long been a challenge for businesses looking to save customers the hassle of manually re-entering billing or payment details for every transaction. The problems multiply when a customer’s card is updated or replaced and the payment information changes.

A payment gateway can communicate with the card issuer to update the card details automatically—without any input from the business. Not only does this make the process smoother, but it also helps retain customers. Repeatedly asking for payment details—or even just re-confirming a card number—gives customers an opportunity to reconsider whether they want to continue the service.

If your business is subscription-based or relies on repeat customers, look for a payment partner that offers an easy-to-use recurring billing tool. Make sure it allows you to customize billing schedules to fit your business model and includes features like trial periods so customers can try your product or service before being charged.

How to Prevent Payments Fraud

Over the next five years, analysts project that small and medium-sized businesses will lose more than $130 billion due to payments fraud, per Jupiter Research. Most businesses with simple needs would be overwhelmed trying to handle such challenges.

Consider a payment gateway that offers fraud detection capabilities, like Authorize.net. Its built-in fraud tool, Advanced Fraud Detection Suite, has 13 configurable filters to help you set things like minimum transaction thresholds, payment velocity, and country limits—so you can be vigilant against fraudulent transactions

How to Leverage Payments Data

Another essential feature of a payments gateway is the ability to view payment results and data at a glance. A high-quality payments dashboard should provide a clear overview of any urgent and pending tasks and offer you one-click access to common actions such as accepting payments, locating transactions, and sending invoices. And the dashboard should be customizable to fit your needs, highlighting relevant opportunities and information. It should also leverage the full range of payment data flowing through the gateway.

Compiling and analyzing payment data can be a key advantage for any business. It’s important to ensure your gateway includesvisualizations of key trends and metrics—like settled payments and transaction volumes over time—to help you focus your efforts.

“Analytics are the lifeblood of any business today. Data tells us things about a business that we may not observe anecdotally. A business owner takes hundreds or thousands of credit card transactions a month, and you’re not going to sift through them to identify patterns. A good dashboard packages them up gives you key metrics so you can see how the business is doing. What ZIP code are my customers coming from? What are the payment trends in my business? That’s the crucial kind of information a payment gateway can give you.” – Don Apgar, Director, Merchant Payments Practice, Javelin Strategy & Research

Authorize.net in Action

One business that has fully leveraged the benefits a payment gateway can provide is online mailing service Click2Mail. They’ve relied on Authorize.net for years, going beyond simply processing payments to helping improve their business operations.

When a customer enters their payment information during a purchase, it’s stored securely for future transactions, making recurring payments seamless. With Authorize.net’s Account Updater, Click2Mail can automatically update expired or reissued card details, reducing the time spent reaching out to customers for updated information.

And when a customer’s payment is declined, Authorize.net gives specific information about why the payment was unsuccessful. This helps resolve issues more quickly, reducing chargeback fees and creating a smoother experience for customers. The secure tools now immediately identify and review suspicious transactions, allowing Click2Mail to act swiftly and prevent losses. The gateway’s proactive approach allows Click2Mail to approve legitimate transactions, void fraudulent ones, and flag suspicious activity.

Click2Mail has already utilized Authorize.net’s new features, like the dashboard that groups together related tasks for easier navigation. At a glance, a Click2Mail associate can focus on customers, payments, reports, accounts, or the marketplace—whichever needs attention.

This means Click2Mail’s team can concentrate on delivering cutting-edge software solutions that simplify sending mail for their customers.

“Because the gateway’s whole business is getting the transaction from the merchant to the processor, the process can focus on that ‘first mile’ of the transaction. That lets them support more transaction types from different kinds of hardware, gives them the rich data they need, and leaves the retailer free to run their business, not the payment process.” – Apgar

Learn more about what a payment gateway like Authorize.net can do for your business.

The post How Payment Gateways for Businesses Can Help You Offer Your Customers More Options appeared first on PaymentsJournal.

Germany is bidding farewell to the paper check. Once a staple of everyday payments, checks are now all but obsolete, and the government plans to eliminate them completely by the end of 2027—a glimpse of a check-free world that’s unfolding in the U.S.

A report from the Library of Congress underscores just how far Germany has come: checks now account for a mere 0.01% of cashless payments. As recently as 2007, more than 75 million checks were processed annually; by 2024, that figure fell to 2 million.

In response to this steep decline, the Bundesbank, Germany’s central bank, has announced it would switch off the technical infrastructure for automated interbank check processing, reserving checks only for rare, exceptional cases.

Alternative Payment Methods

What caused the demise of paper checks? It wasn’t credit cards, which have never been especially popular in Germany. According to Statista, Germany had just 6.58 million credit cards in circulation in 2023, compared with 143 million debit cards.

Cash usage also remains popular in Germany, although it too has been declining. In 2008, the Bundesbank found that cash was used in 82.5% of all transactions. By 2023 that share had fallen to around half of all payments.

Instead, the Bundesbank attributes the shift to the increasing use of alternative payment methods—chiefly SEPA (Single Euro Payments Area) real-time transfers. In 2024, about 335 million SEPA instant transfers were made in Germany. At the same time the German government is busy dismantling the check-processing apparatus, it has become mandatory for payment service providers in the EU to offer SEPA instant transfers.

As in the U.S., government services in Germany have also moved away from issuing paper checks. Germany’s Federal Employment Agency recently introduced prepaid SocialCards to pay benefits to citizens without a bank account, replacing previously issued government checks.

Similar Moves in the U.S.

The U.S. may be looking to Germany as a model as it transitions away from paper checks. From 2015 to 2024, check payments dropped from 6% to 2.5% of consumer transactions, according to the Atlanta Fed.

That decline preceded the federal government’s decision—effective September 30—to stop issuing checks for tax refunds and other payments, a move that will only accelerate their disappearance. Some government agencies, such as FEMA, have already begun issuing payments through alternative rails like FedNow.

The post Germany Plans to Eliminate Checks Entirely by 2027 appeared first on PaymentsJournal.

Small businesses power the U.S. economy, but for many, the access to reliable financing remains a persistent challenge.

To help close that gap, Visa has launched Visa & Main, a platform designed to centralize working capital and provide critical tools for smaller enterprises.

“Offering working capital and client acquisition tools are not new in the merchant space, acquirers and processors have been offering these tools for over 20 years,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “However, they are not available uniformly across the merchant market.”

“Some acquirers (like Square) have been very active in offering these tech and financing tools to merchants, while other acquirers don’t have them on their radar,” he said. “So, the play lines up with what Visa is doing. Rather than competing with our processor/acquirer customers, we will bring services to market that enable them.”

Walking a Fine Line

The growing small business market has become a central focus for many leading payments firms, fueling the launch of new point-of-sale systems, embedded finance platforms, and payments gateways.

“It’s an interesting move, although it tracks with their recent strategic moves in acquiring,” Apgar said “Within the last two years, Visa brought previous acquisitions Authorize.net and CyberSource together with VeriFi under the banner of Visa Acceptance Solutions (VAS). This strategy walks a very fine line between enabling your customers and competing with them.”

“Customers here are the banks and processors that deliver Visa services to merchants,” he said.  “Visa is no longer relying on their distribution through customers to bring technology to merchants, it advertises VAS directly to merchants and then works in conjunction with the merchant’s named acquirer to implement the tech.”

Controlling the Narrative

Visa also aims to entrench its solution by delivering a holistic platform for smaller merchants that helps level the playing field. For example, Visa & Main includes cloud-system capabilities and fraud detection tools.

“Both VAS and Visa & Main are designed to provide Visa with more control over the narrative that merchants hear,” Apgar said. “In other words, they are taking their tech story direct to market rather than relying on their acquirer/processor distribution channel to tell it. But at the same time positioning their efforts as helping their distribution partners, rather than competing with them.”

The post Visa & Main Brings Holistic Tools and Financing to Small Businesses appeared first on PaymentsJournal.

Retailers across Japan have begun alerting customers that they will stop accepting WeChat Pay and Alipay, China’s two largest digital payment systems. While political friction is contributing to the growing economic separation between the two countries, the shift also reflects heightened concern over money laundering.

Chinese media outlet Vision Times also reports that several Japanese supermarkets have posted signs stating they will stop accepting the Chinese payment platforms starting February 13. The once-ubiquitous WeChat Pay signage had already noticeably declined by the end of January.

Japanese merchants initially embraced these payment systems following a surge in Chinese tourism. In fact, by 2019, more than 300,000 retailers across Japan had signed up to accept Alipay.

As Vision Times points out, relations between the two nations have since cooled. After the Japanese government warned China against military action in Taiwan last December, Beijing urged its citizens to avoid travel to Japan. According to Tripla, hotel bookings from China decreased by 57% following the announcement.

Japan’s AML Crusade

There is also a more prosaic factor at play: Japan’s tightening anti-money laundering regulations. Authorities are concerned that Chinese criminal groups have been using digital payment platforms to purchase high-value goods in Japan for resale, effectively converting yuan into yen or U.S. dollars.

This crackdown has manifested in several areas. In October, the government dismantled a ring of Chinese nationals accused of money laundering through luxury condominiums purchases. Last week, police called for harsher penalties to address the illegal trading of bank accounts under Japan’s Act on Prevention of Transfer of Criminal Proceeds.

Big Business in China

Meanwhile, money laundering has become a lucrative industry in China. In recent years, the government has made it increasingly difficult for ordinary citizens to move money out of the country, fueling a boom in illicit cross-border activity. The U.S. Treasury estimates that Chinese networks launder as much as $150 billion annually.

According to Chainalysis, Chinese-language money-laundering networks processed nearly $40 million in crypto per day in 2025. The firm estimates that these networks now launder more than 10% of the funds stolen worldwide through so-called “pig butchering” scams.

The post Japan Retreats from Chinese Payment Apps Amid Money Laundering Concerns appeared first on PaymentsJournal.

The rise of Software as a Service (SaaS), AI technologies, financial services APIs, and embedded finance has reshaped the payments ecosystem, creating value beyond simple transactions. These shifts mean traditional payment models now compete directly with independent software vendors (ISVs) and payment facilitators (PayFacs). In fact, 87% of U.S. merchants choose their payment provider at the same time as their business software.[i]

Notably, the rise of embedded finance and proliferation of SaaS solutions has accelerated the growth of the PayFac model. Case in point: according to Growth Market Reports, the global payment facilitation market size will reach $50.1 billion by 2033. This growth highlights why it’s critical for ISVs to understand the benefits of transitioning to the PayFac model.

Delivering a Better Merchant Experience

Now more than ever, merchants face a wide range of options when choosing a payments partner. The merchant experience—and, by extension, their customers’ experience—drives the success of any payments partnership. PayFacs deliver significant advantages by simplifying onboarding/underwriting, streamlining risk management, and ensuring compliance with industry regulations, a time-consuming and arduous process for merchants.

However, the merchant experience extends well past the onboarding stage. PayFacs add value throughout the entire customer lifecycle. ISVs that adopt this model typically scale their businesses and sales channels to deliver value-added services that strengthen relationships with merchants and end customers—and go beyond payments. By adopting the PayFac model, ISVs can deliver a more holistic solution, incorporating embedded finance features such as advanced customer data analytics via dashboard reporting and flexible financing options for customers.

Optimizing Revenue Potential for You and Your Merchants

Businesses can realize significant cost savings because the PayFac manages individual merchant account setups and the underwriting process. For ISVs adopting the PayFac model, this approach strengthens customer relationships and reduces churn. The value goes beyond payments—embedded finance becomes a true competitive differentiator. For example, many PayFacs offer funding solutions that eliminate the need for costly money transmitter licenses. Fast funding is now table stakes. But funding that actually reduces costs for customers? That’s a significant value add.

Beyond operational savings and enhanced customer stickiness, the PayFac model also empowers ISVs to unlock new strategic growth opportunities by integrating payments more deeply into their product ecosystems. As ISVs gain visibility into transaction‑level data, they can surface richer business insights, personalize customer experiences, and introduce data‑driven features that further differentiate their platform. This embedded data intelligence can lead to tailored pricing strategies and new service tiers that boost overall revenue.

Determining the Right Partner Program for Your Business – U.S. Bank | Elavon

In a today’s payment landscape, selecting the right payments partner and model is paramount to building the blueprint for your success. So, how do you evolve to meet this changing demand and position your business for sustainable growth? Backed by the strength and stability of U.S. Bank, we can help you scale your business with our comprehensive payment facilitator program.

Elavon solutions serve as a connecting force—integrating your entire payments system, so you can focus on what matters most: moving your business forward. It’s why more than 1,000 integrated partners, 1,700 financial institutions, 350+ ISOs/MSPs, and payment facilitators trust us to grow their business. Call us at: 844.904.0429 or contact us.

[i] Visa – Visa Perspectives | Visa

The post The Payment Facilitator Model as a Growth Strategy for ISVs 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.

As is typical with hot new developments in the payments industry, everyone is talking about agentic AI as if it appeared overnight—and everyone feels like they’re already behind the curve. The one group that doesn’t seem excited? Merchants. Much of the discussion has centered on the technology itself, not on how it will actually be deployed.

In a new report Agentic Commerce: Green Light or Flashing Yellow for Merchants?, Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, explores the major questions around this emerging technology: How should a retailer apply agentic AI? How can a merchant validate that an agent is truly acting on behalf of the cardholder? And how are payment credentials secured? As Apgar notes, this much-discussed tool still has a long way to go before it matures.

The Return Quandary

Most of the work around agentic AI has focused on technology, leaving the human side largely unexamined. Take returns, for example. Merchants currently see an average of about 18% of their merchandise returned.

“If you take the human out of the equation and you have your bot making the purchase for you, what does that do to customer satisfaction and returns?” Apgar asked. “If a fifth of the stuff is coming back when you’re personally making the buying decision, how much is going to start going back when you’re not making that buying decision?”

There is also much to resolve around marketing strategies that agents will encounter. If someone is shopping for a new lawnmower, a local hardware store wants its site to appear prominently and its product details visible. But it doesn’t want a price shopping bot that only seeks the lowest price, bypassing the store’s curated merchandising strategy.

Lost Opportunities

Merchants carefully design their merchandising programs. They highlight loss leaders—like the way a Walmart or Target displays 99-cent 12 packs of soda near the entrance—knowing that shoppers are likely to add higher-margin items as they move through the store or site. With agentic commerce, that opportunity disappears. The merchant becomes a fulfillment conduit, blind to the consumer’s journey.

“When I do a search and go to a retail site, I might think: ‘Hey, this guy’s got a lot of good stuff, let me see what else he’s got. I didn’t want to spend more than $300, but maybe I will.’ Those are the kinds of human interactions you lose when the robotic agent is now doing the shopping,” Apgar said. “It’s only going by the criteria that you programmed in. It’s depriving the merchant of that opportunity to cross sell, upsell, develop a relationship, get an e-mail address.”

Indeed, many retailers have been reluctant to accommodate agentic shoppers. Ecommerce marketplace eBay, for instance, recently updated its user agreement to explicitly prohibit buyers from using “unathorized” AI shopping agents.

“Because it’s a marketplace and they’re not the seller, that chargeback and return problem could be massive for them,” said Apgar. “There’s nothing to say it’s going to stay that way permanently, but they’re preempting it for now until they get their arms around how they can implement this effectively.”

Four Categories with Potential

Apgar identified four retail categories where agentic AI could have the most impact. First are commoditized goods such as paper towels or dish soap, which carry little brand differentiation and are often purchased primarily based on price.

The second category is gifts. Imagine a shopper looking for a $40 gift for their nephew, a high school graduate who plays football, is a hardcore gamer, and loves blue. An AI agent could narrow options based on the criteria given and help consumers hone in on the right gift.  

Third is travel, where sites like Trivago and Expedia already aggregate options. AI can streamline this process even further, reducing legwork for the consumer.

“If you are going to Chicago and want to stay down by the water on the Magnificent Mile, rather than have to go to pull up a map and see what hotels are around there, you can go to Trivago today and get that same hotel room,” said Apgar. “But if you’ve got a bot going out and doing it for you, why do you need Trivago? The bot can go right to the hotel websites.”

Finally, there are B2B applications. If a plant manager needs a widget that Grainger does not have in stock, a shopping agent could purchase it from another retailer, saving time and effort.

The Value Is Yet to Be Defined

Retailers should also note that agentic shoppers are unlikely to increase overall spending—they mainly redirect it. If a merchant invests heavily in technology to support agentic commerce, the consumer could simply buy the same item at a lower price elsewhere, reducing the store’s margin—or worse, purchasing from a competitor and leaving the merchant with no revenue at all.

“Everybody wants to be a category leader, but nobody wants to be the king of the of the low margin, high-cost sales channel,” said Apgar. “Everybody’s saying agentic AI is going to take off this year, but we’re not going to see any serious traction probably till next year. As usual, the technology is way ahead of the business.

“The technology is a facilitator,” he said. “How we get value out of the technology is yet to be defined.”

The post How Merchants Should Navigate the Rise of Agentic AI appeared first on PaymentsJournal.

Amazon is closing all 72 of its Amazon Go and Amazon Fresh locations, shifting its focus to Whole Foods locations and grocery delivery from Amazon.com. But the company isn’t ready to walk away from the much-ballyhooed Just Walk Out technology that powered many of its retail experiments. Instead, Amazon plans to double down on marketing that technology as a service to third parties.

At its peak, 27 of the 44 Amazon Fresh stores used Just Walk Out, which allowed shoppers to grab items and leave without stopping at checkout. Amazon removed the system from all U.S. Amazon Fresh stores in 2024—not because it failed, but because customers showed a preference for more traditional checkout options.  

“Amazon’s innovative unattended retail experiments are failures in the same sense that early versions of lightbulbs, automobiles, and other great technical innovations were failures,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “These aren’t technical failures in the sense that they didn’t work at all, but rather commercial failures because they weren’t able to be produced and distributed efficiently at scale sufficient to make them a profitable venture for the company.”

Moving to B2B

Amazon hasn’t given up on Just Walk Out. The company is reaffirming its commitment to a B2B strategy, positioning the system for use by third-party operators such as sports venues and hospitals.

“Our Amazon Go locations served as innovation hubs where we developed Just Walk Out technology—now a scalable checkout-free solution operating in over 360 third-party locations across five countries,” Amazon noted on its blog. “The customer impact has been transformative, from reducing cafeteria wait times from 25 to just 3 minutes at BayCare’s St. Joseph’s Hospital, to enabling sports fans at Scotiabank Arena to grab concessions in 30 seconds.”

Apgar noted: “I don’t think this is the end of unattended retail, but rather a crucial step in the evolution of a commercially successful model.”

Goodbye to Amazon One

Not all of Amazon’s retail technology is getting a second life. The company is fully retiring its Amazon One palm recognition ID system on June 3, and says all user data will be automatically deleted.

The technology was installed in Whole Foods stores as recently as 2023 and was even piloted in healthcare settings in 2025. Ultimately, however, customers proved reluctant to move away from fingerprint- and face-based authentication.

The post After Retail Closures, Amazon Pivots on Just Walk Out Technology appeared first on PaymentsJournal.

In the 17 years since the first bitcoin was mined, cryptocurrencies have been labeled everything from a passing fad to the next big thing. In recent years, latter view has gained traction, driven largely by the rise of stablecoins and increased institutional investment.

And yet, widespread crypto payments at retail points of sale have remained elusive. That may be starting to change, according to research by PayPal and the National Cryptocurrency Association. The study found that around 39% of merchants already accept crypto, including roughly half of businesses generating more than $500 million in annual revenue.

“Merchants, especially the large enterprise retail brands, are always looking for ways to improve their customer experience and drive incremental sales, and customer payments are an important part of that process,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Crypto continues to become more popular with consumers, and in turn that will continue to drive its popularity with merchants.”

Attracting Sought-After Customers

Customer interest has played a key role in this growing acceptance. Most merchants surveyed said inquiries about crypto payments were common, and those questions often came from highly sought-after younger customers in the millennial and Gen Z demographics.

Beyond attracting and engaging younger customers, merchants cited transaction speed and security as key benefits of crypto payments, which typically settle in near real-time on transparent blockchain networks. These advantages extend to cross-border payments as well, potentially opening up meaningful new markets for merchants.

Given these benefits, roughly 84% of respondents believe crypto payments will become common in the next five years.

Doing the Heavy Lifting

One reason crypto payments haven’t seen broader adoption to date is concern over the volatility of many digital assets. However, as major payments players have built out crypto infrastructure in recent years, they have increasingly removed conversion and volatility management from merchants’ responsibilities.

For example, Visa recently launched a stablecoin acceptance platform that allows merchants to accept cross-border stablecoin payments without handling tokens directly. PayPal has also launched a crypto platform that does the heavy lifting for merchants, allowing them to accept payments in over 100 cryptocurrencies from leading wallets like Coinbase Wallet, MetaMask, and Kraken.

With strong demand from consumers and growing enablement on the merchant side, mainstream adoption of digital asset payments at retail appears closer than ever.

The post Customer Interest and Efficiency Attract More Merchants to Crypto appeared first on PaymentsJournal.

With increasing fraud and heightened customer expectations, merchants need a payment solution they can trust. Giving them the tools to accept digital payments can help them compete in today’s complex payment ecosystem.

This is the market Visa has addressed with the recent reimagining of its well-established Authorize.net platform, one of the most trusted payment gateways for businesses. Authorize.net—already with nearly half a million users and processing $200 billion in annual payment volume—has received a substantial upgrade, giving payment technology partners a powerful tool they can use to become a trusted partner for their merchants.

See the Benefits 

Authorize.net’s upgraded platform has launched in the U.S., with more countries to follow, and it brings a bevy of benefits to businesses with simple payment needs. These include an enhanced user interface and improved dashboards for day-to-day operations. It will also support both in-person card readers and tap-to-phone technology.

Additionally, artificial intelligence (AI) will play a larger role across the platform. Included in the new features is an AI agent that provides around-the-clock support with a conversational interface to answer questions quickly.

For example, if a merchant has a question about a transaction, Ask Anet can often answer it based on frequently asked questions. It can also connect them to a human when more complex guidance is required. All in all, the platform’s AI features help merchants speed up their workflow and streamline operations.

Improved Workspaces 

Authorize.net’s updated interface introduces five new workspaces that merchants can leverage for a variety of functions.

The customer workspace allows merchants to onboard new customers, add their payment and shipping details, and manage key aspects like transactions, subscriptions, and refunds for existing customers. This intuitive setup reduces the time spent searching for features and information, boosting efficiency.

The payments workspace enables payment acceptance—including credit cards and eChecks—through a streamlined virtual terminal and the creation digital invoices as well as management transactions. It also allows merchants to add a simple checkout button to websites and manage recurring billing for subscriptions.

In the reports workspace, merchants can access detailed insights into operations, such as settled credit card transactions and stored card details that were automatically updated over the past month if they’re using Authorize.net’s customer information manager and account updater tools.

There is also an account workspace, where merchants can view profile and business details, manage billing status and payment information, and review their Authorize.net users. You can also manage account and API settings in this section.

Finally, the marketplace workspace lets merchants activate additional Authorize.net products such as the customer information manager tool, which stores sensitive payment information in compliance with PCI DSS regulations.

Other add-on services in the marketplace include Authorize.net’s automated recurring billing software for subscriptions and account updater, which automatically refreshes stored card data.

More Flexibility

While all these features are powerful, one of the most important aspects of the platform is its flexibility.

“What Visa has done with Authorize.net is say, ‘Hey, we bolted all this stuff on here, but you don’t have to use all of them,’” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Because some tools are better suited for subscription merchants and some tools are better suited for e-commerce merchants—there are different variations and subtleties in the merchant environment.”

“As a merchant, you don’t have to say, I only have these tools at my disposal—they’re not the best ones, but they’re the ones that integrate with my network,” he said. “Visa has said, ‘You don’t have to go out and spend the money and reinvent the wheel. We’ve integrated all these tools, so you can use all of them if you want or you can pick the ones that have the highest efficacy for your business.’”

Peace of mind is more important than ever, as bad actors now have more sophisticated tools at their disposal that allow them to commit fraud on a greater scale. To help protect its users, Authorize.net offers a comprehensive fraud protection suite that combines customer verification tools with 13 customizable fraud filters, including minimum transaction thresholds. They can also access tools that measure payment velocity, helping them detect suspicious spikes in payments. Plus, merchants can trust that their data is secure, as all sensitive data is stored on Visa’s infrastructure.

The Largest Payments Ecosystem 

With a new interface, AI integration, enhanced workspaces, and upgraded services, the new Authorize.net is an impactful platform for both reseller partners and businesses. But these features become even more powerful when backed by the largest payments ecosystem in the world.

Visa’s position as a payments leader ensures that Authorize.net leverages its strength, scale, and security. More importantly, Visa’s payment solutions offer merchants and partners confidence that their transaction data is secure—a hallmark of Authorize.net.

“From an ecosystem standpoint, they’re pretty much the top of the supply chain,” Apgar said. “They control the interactions between the card holders and the merchants through the issuers and the acquirers, so they’re in a position where they want to bring better technology to the market.”

“Now Visa can say, ‘You don’t have to build all this yourself,’” he said. “’Let us bring it to market and use our network. We’ll make a tech investment, and you can leverage it and go out and sell it to merchants. In fact, we’ll help you sell it to merchants.’”

Learn more about becoming an Authorize.net partner or explore payment gateways for businesses.

The post How Merchants Can Tap Into Support from the World’s Largest Payments Ecosystem appeared first on PaymentsJournal.

Does Google have what it takes to become the dominant player in agentic AI? Its Universal Commerce Protocol (UCP), unveiled at the National Retail Federation’s annual show, is an ambitious initiative designed to let AI agents manage the entire shopping journey—from discovery through checkout. Still, the effort may face an uphill battle in gaining acceptance from both merchants and consumers.

UCP was developed in collaboration with companies including Shopify, Etsy, Wayfair, and Target. Its first rollout is expected to be a new checkout feature that allows users to buy directly from Google’s AI Mode or Gemini.

“Google has long been number one in search, and now consumers are using AI searches to shop,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.  “Companies like OpenAI and Perplexity are rushing to build standards that they hope will help them protect their corner of the market in agentic commerce. For example, if the Google standard takes hold, OpenAI may lose relevance in search when it comes to shopping.”

Who Does It Work For?

The broader offering also includes a chatbot, Business Agent, which allows shoppers to interact directly with brands. Still in testing is a service called Direct Offers, which would enable retailers to surface promotions and discounts to AI agents. Together, these services raise a fundamental question: who is the shopping bot ultimately working for—the consumer or Google?

“If you follow what happened in search, first we got search results, then we got sponsored results at the top of the page, now we have AI results at the top of the page,” said Apgar. “When the Google shopping agent makes a purchase, is the bot getting the best deal for the consumer or making the choice that makes the most money for Google?”

The Problems for Merchants

That’s not the only concern. Retailers may face increased exposure to fraud, higher return rates if AI agents—not consumers—are making the purchasing decisions, and potential dilution of brand equity. As a result, merchants could end up charging a premium to agentic shoppers, much as consumers today pay higher prices for food delivered via DoorDash.

“The fact that Google assumes that merchants are clamoring so much to support agentic commerce that they will offer a discount is unrealistic at this stage,” said Apgar. “Merchants today use bot-blocking software to keep competitors from scraping price info and clogging up their servers with unwanted traffic that slows response times for real customers. Now merchant have to figure out which bots to allow and when.”

The post Google’s Agentic AI Ambitions Face a Steep Climb appeared first on PaymentsJournal.

In another record-breaking holiday shopping season, consumers increasingly turned to their mobile phones. The majority of online transactions occurred via smartphone, surpassing a quarter of a trillion dollars for the first time.

According to the 2025 Holiday Shopping Trends report from Adobe, two trends continued to drive mobile purchases: buy now, pay later and agentic AI.

Good old-fashioned convenience also played a part, as mobile shopping peaked on Christmas Day, accounting for two-thirds of all sales. Cyber Monday remained the biggest e-commerce day of the season, with $14.25 billion in online spending—up 7.1% from 2024.

BNPL for the Holidays

For the first time, BNPL spending hit $20 billion, a 9.8% increase and $1.8 billion more than the 2024 season. More than $1 billion of this was spent via BNPL plans on Cyber Monday alone. Originally an e-commerce service, BNPL has only recently expanded into physical cards, with over 80% of purchases made via smartphones this past season.

“BNPL is nearly ubiquitous for all major e-commerce retailers at checkout, and BNPL vendors operate their own digital marketplaces which encourage shopping through strategic offers,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “BNPL is particularly popular among higher ticket item purchases, which certainly occur around the holidays—think of getting that new 4K TV. Its strong growth particularly in the holiday season is demonstrative of its success in the market.”

Agentic AI Enters the Store

Although smaller in scale than BNPL, agentic AI grew even faster during the holidays. Traffic to retail sites from generative AI tools jumped nearly 700% from 2024, reflecting their increasing prominence throughout 2025.

Separate data from Salesforce reported that agentic AI influenced more than 20% of global retail sales during the season. Usage surged closer to the holidays, with shoppers relying on these tools 66% more in December than in November.

The post Holiday Mobile Shopping Sets Records, Fueled by BNPL and AI appeared first on PaymentsJournal.

Biometric payments are moving from futuristic concept to everyday reality. Point-of-sale provider Clover is adding face and palm scanning technology to its platform, bringing faster and more secure checkout experiences to small- and medium-sized businesses.

The integration comes through a deal with Wink, aiming to bring biometric authentication to ra range of retail settings.

“This is a fantastic strategic move by the Clover team, and really redefines the level of POS tech available to SMBs,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Innovation at the checkout has long been driven by enterprise retailers who have both the resources and capital to implement new technologies. Now, the frictionless process of biometric payments and loyalty is available to millions of SMBs as part of the Clover platform.”

A Biometric Mainstay

Beyond security and convenience, one of the main drivers of biometric adoption in merchant use cases is consumer familiarity. The near-ubiquity of smartphones has made facial and fingerprint recognition a routine part of daily life.

However, adoption has faced challenges, as consumers must actively opt into biometrics programs. This creates both educational and security responsibilities for providers. To the latter end, Clover will manage customers’ biometric profiles via tokenization, keeping personal data separate from payment credentials.

From Pilot to Implementation

The opt-in requirement does, however, limit certain use cases, as many shoppers won’t enroll for a one-off purchase. Clover plans to initially rollout the program in quick-service restaurants, sports venues, and retail stores.

Sports and entertainment venues are particularly suited for biometric integration, as the technology can dramatically shorten queue times. Season ticket holders and loyal fans may also be incentivized to join their team’s biometrics authentication program.

This loyalty angle is another reason why more pilots and trials of biometric payments are emerging. While many programs are still in early stages, recent developments signal process. Notably, Amazon Pay became one of the first digital wallets to support biometrics on India’s real-time payments giant UPI. Along with Clover’s launch, this suggests that biometric programs are increasingly moving from trial phases to broader implementation.

The post Clover to Add Wink’s Biometric Tech for Retail Payments appeared first on PaymentsJournal.

Online retailers are pushing back after Amazon’s Shop Direct agentic AI program trained its bots on their websites without permission. In addition to not being asked to participate, some retailers claim that Shop Direct directs customers to products they don’t even stock.

Businesses have been posting about the issue on social media, fueling a wider conversation. Angie Chua, who runs a Shopify website that sells stationery, told CNBC that she began receiving orders from Amazon’s Buy for Me agent despite never opting into the program. She ultimately had to request that Amazon pull her products—a process that took several days to complete.

A Losing Proposition

Even for merchants seeing incremental sales through Amazon, the gains may be a temporary victory. Retailers want customers spending time on their own sites—browsing products, reading content, and personalizing their experience. That engagement helps merchant build direct relationships with customers, enabling follow-up marketing and the development of a distinct brand identity.

Many merchants have already decided not to sell through Amazon at all. Beyond paying a fee to the platform, their products risk becoming just one of many indistinguishable listings. And shoppers scrolling through Amazon’s listings are generally just looking for the lowest price.

“This is very much a Trojan Horse strategy,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Once Amazon gets the customer used to going to their site first, they become the gatekeepers for customers. Pretty soon, sites will lose their ability to attract their own customers.

“This is the primary reason that online retailers use bot-blocking technology, to keep shopping services from scraping prices from their site,” he said. “No retailer wants to be the low-cost seller to somebody else’s customer.”

Not Ready for Prime Time?

The bad blood between Amazon and its unwitting partners has left some analysts wondering whether the agentic AI program was ready to be rolled out.

“Amazon is following the previous tech generation’s ‘shoot first, ask questions later’ playbook,” said Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research. “Every merchant will have to be diligent in controlling and protecting its information.

“These kinds of attacks won’t stop,” he said. “It highlights the importance of having a strong strategy for online presence. For smaller retailers, that means having a good partner on the e-commerce side who is developing robust capabilities around the emerging agentic space.”

The post Retailers Fight Back Against Amazon’s AI Shopping Program appeared first on PaymentsJournal.

Imagine you’ve wrapped up a long, fun-filled weekend in Las Vegas and are now at the airport heading home. You’re tired, cranky—maybe a little hungover—and all you want is a snack and a drink for the flight. The last thing you feel like doing is interacting with anyone. 

Then you spot a Hudson News with no checkout counter. There is an attendant standing outside the entrance, but they’re not monitoring shoppers or manning a register. You swipe your credit card to enter, grab a bag of nuts and a bottle of iced tea, and simply walk out. There’s no checkout line. No small talk. No friction.

“There is one employee that stands outside in case anyone needs help,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “It’s got a very limited selection, so somebody standing at the turnstile can easily watch everything that’s going on in the store.”

That kind of kiosk already exists today—and it represents a future many retailers have been chasing: stores that are unattended, where checkout is virtually effortless for consumers. The appeal is obvious on both sides. Merchants like the idea of reducing labor costs, while shoppers appreciate the speed, convenience, and efficiency.

So why hasn’t unattended checkout taken off beyond a handful of convenience stores in tightly controlled environments? The idea has encountered challenges everywhere it’s been tested, yet retailers continue to experiment with it. If it works for a tiny airport shop, could it scale to a fully stocked grocery—or are the roadblocks too immovable for widespread adoption?

Vending Machines: The First Unattended

In some ways, unattended checkout has existed for more than a century. Vending machines, which first appeared in London in the 1880s, have been dispensing cigarettes, snacks, and hot and cold drinks.

Globally, Grand View Research has estimated that the vending machine market surpassed $70 billion in 2024, with more than half of that revenue coming from the Asia Pacific region.

While vending machines have traditionally been limited to low-cost items, that’s beginning to change. Nearly three-quarters of vending machine revenue now comes from cashless transactions, eliminating the need for coins altogether. And as machines selling headphones and other electronics have demonstrated, consumers are increasingly willing to spend real money in unattended retail environments.

“I would have no problem sticking my card in a Best Buy machine and buying a set of earbuds for $100,” Apgar said. “You know the merchant, you know the product, so it’s not complicated. Coming out from that angle, people are saying, ‘Where else can we sell in an unattended environment? Where else is there a fit?”

One answer was service stations, where drivers evolved from paying an attendant to pump their gas to handling the entire chore on their own, from fueling to payment. The modern self-serve station dates to 1964, when attendants inside the store could activate the pumps outside. Paying at the pump followed in 1973, first introduced at a station in Abilene, Texas.

Moving Forward from Self-Checkout

From there, it was a short step to self-checkout lanes, which first appeared at a Kroger store in Atlanta in 1986. Their spread seemed to point toward an even more radical idea: stores without attendants at all, where shoppers did all the work themselves. But while some retailers experimented with fully unattended shopping, several major chains ultimately pulled back from self-checkout.

In 2022, Dollar General went all in on self-checkout at some locations, only to reverse course within two years after theft losses mounted. Target followed with a more cautious approach, limiting self-checkout to customers with 10 items or fewer, while discount gift retailer Five Below adopted a hybrid model it calls “shopper-assisted checkout,” in which customers scan items but a clerk completes the transaction.

Even as these retailers scaled back, others pushed ahead with cashierless concepts. The most ambitious effort came from Amazon, which unveiled its Amazon Go stores—fully cashierless outlets where shoppers scan the Amazon app when entering and technology tracks the items they take from the shelves.

That vision dimmed when it was revealed that Amazon’s proprietary Just Walk Out technology relied on approximately 1,000 workers in India, who were manually reviewing the transactions. After peaking at 30 locations, the number of Amazon Go stores has since dwindled to around 15. Much of the Just Walk Out technology has been supplanted by the Amazon Dash Cart, which allows consumers to scan items as they shop, pay, and leave without interacting with an employee.

A similar fate befell Presto Automation, an artificial intelligence-powered drive-thru company that promised automated ordering for fast food restaurants like Hardee’s and Del Taco. Regulatory filings later showed that 70% of orders had to be completed by off-site human workers.

A Success Story in Germany

One area where cashierless stores have found a home is in Germany. Since the opening of the country’s first modern unattended store in July 2019, unmanned smart stores have rapidly expanded, with roughly 600 locations now operating nationwide.

One key to their success has been placing them in rural areas where there was not enough demand to support full-service supermarkets.  Around 270 of these stores are found in rural Germany, according to a data from Stephan Rüschen, a German food retailing professor. There are also roughly 150 direct farm retail stores that enable local farmers to sell directly to consumers. These models stand in contrast to the U.S. landscape, where unattended stores are concentrated in urban areas.

But as in the U.S., Europe has seen its share of hiccups. For instance, German supermarket chain Aldi introduced its Shop and Go stores in the UK as a cashierless grocery concept. Customers complained about a required £10 deposit upon entering; if they spent less, the money was refunded, sometimes taking several days. Shoppers who pressed the entry button multiple times before entering were sometimes charged multiple times.

Three Thorny Issues

Completely unattended stores have struggled to find a foothold outside of small, tightly controlled environments. Even in those cases, an attendant if often required to hover just outside the store. 

There are essentially three unresolved challenges. The first is safety. One potential advantage of a cashierless store is the ability to operate around the clock. But would a lone shopper feel comfortable entering an empty store at 3 a.m.?

The second issue is security. Shoppers are already stealing from self-checkout lanes, even with attendants nearby. Research from Lending Tree found that 27% of respondents admitted to intentionally taking something from a self-checkout without paying, and another 36% accidentally left with an unscanned item.

In a fully unattended store, what would stop someone from walking out with armfuls of goods? Theoretically, requiring a card swipe to enter could leave a paper trail, but this could spark an ongoing technological arms race between retailers and thieves.

The third concern is customer service. What happens if the internet goes down while a shopper is in the store, or the technology doesn’t work for some other reason? Without staff to help, the value of an unattended store could quickly diminish.

For stores more complex than a simple convenience outlet, customers may need help finding items or answering questions. When Target reduced its checkout clerks to focus on self-checkout lanes, it found that the best way to invest the savings was to place more associates on the sales floor to assist customers while they shopped.

“All that laying off cashier staff did was irritate the customer,” said Apgar. “Instead of laying those people off, the store would be better off having them do different things. That was a discovery process on behalf of the merchants. It wasn’t obvious that was the right path.”

Where Do We Go From Here?

Optimists about the future of unattended retail can point to several success stories. Self-serve airport bodegas and airline kiosks, where travelers check in and tag their own bags, demonstrate that automation can work in certain contexts.

“The European model is not a foregone conclusion,” said Apgar. “That’s an experimental phase, and they may very well determine that they need to have at least one person in the store when it’s when it’s available. We don’t have to staff at the same level as a regular store, as the Hudson News showed. But they can’t leave it empty.”

The challenge is designing a format that gives shoppers the convenience they want while remaining profitable for retailers. The technology itself isn’t the problem—it’s the comfort level. What shoppers think they want from unattended checkout may not match what they are actually willing to use in their everyday lives.

“Not every choice is best made by the consumer,” Apgar said. “Sometimes we, as consumers, are our own worst enemies too.”

The post Is There a Future for Unattended Retail? appeared first on PaymentsJournal.

Most merchants take an analytical approach to their store layouts, positioning items in both in-person and digital environments for strategic advantage. Could these same strategies—using the retailer’s ubiquitous planogram—also be applied to payment processes?

A report from Javelin Strategy & Research, Merchants Should Planogram Payments, draws a parallel between the shopping experience and the payment experience. As author Don Apgar, Javelin’s Director of Merchant Payments explains, the same lessons learned from designing a store layout or website can be used to make payment options more efficient and effective for customers.

The Logic of the Planogram

For those unfamiliar, a planogram is a diagram retailers use to determine what products they’re going to stock and how those products will be displayed. The underlying principle is that no store has unlimited space—and even if it did, no customer would want to navigate a store carrying every product ever made.

As a result, decisions about what to stock, how much of each item to carry, and how products should be presented become critically important. The most popular items get the most space, but stores also need to offer a mix of brands, flavors, and sizes. Sales data informs how shelf space is allocated: retailers must avoid running out of top-selling products while also minimizing inventory devoted to items that consumers rarely buy.

“It’s a balance,” said Apgar. “If you only stock the hot sellers, you’re not going to draw a lot of customers, because customers want choice. At the same time, merchants don’t make money by putting stuff on shelves. They make money by selling the stuff that’s on the shelves.”

Strategic Shopping

Merchants have been using planograms for decades, dating back to when they were pioneered by Kmart in the 1970s. For example, retailers analyze all the sales data for Coca-Cola to answer questions like: Was the two-liter size the most popular? How many did we sell? How many do we realistically need to keep on the shelves? If the Coke representative comes every 10 days, what does a 10-day supply of two-liter bottles look like, and how much shelf space does that require?

The same principle applies at stores like Walmart or Target. A sweatshirt may come in eight colors, but chances are a shopper will find only three or four colors on the shelves, along with a limited size run—perhaps a couple of smalls, some mediums and larges, and maybe two or three XLs.

This similar logic extends to e-commerce. On most retail websites, the menu and navigation structure roughly mirror how products are organized and merchandised in a physical store.

“The old example is when you go to a grocery store, the milk is always in the back,” said Apgar. “In most stores you have to walk down the candy aisle or the cookie aisle or the chip aisle to get there. The planogram of how stuff is on the shelves roughly correlates to how products are placed on the page, because most websites may show you only 20 products. The order they’re showing you the products in is not random.”

Would It Work in Payments?

The old way of thinking was that no matter how a customer wanted to pay, the merchant should accept it. Today, however, there are so many variations of payment types that the industry has entered the era of payments orchestration. But, as with the sweatshirt example, it doesn’t make sense for every merchant to offer every form of payment.

“The guys that are selling orchestration will say, if you add another connection to Chase, you can boost your approval rate on Chase cards by two percentage points,” said Apgar. “But that’s just looking at accepting the transaction and switching it over to Chase for an authorization. If you have to have a business relationship with Chase, you’re getting a statement from them, plus chargebacks and disputes.

“Now you’re going to deal with three processors because that’s how many you need to optimize the performance of the front end for authorization and response time, and you’ve got to figure out the cost of dealing with three guys on the back end.”

Even if a merchant can raise its authorization rate by two percentage points by adding another connection, it still has to weigh the business resources required to manage that relationship—such as IT and development effort, as well as customer service. When a dispute arises, the merchant must also determine which processor it came from. Different processors have different rules for handling disputes, and that complexity can escalate very quickly.

A Familiar Concept

A planogram is very familiar to anyone who works in retail, meaning that while it represents  a new way of looking at payments, it’s also fully understandable. In the tried and true planogram method of allocating warehouse space for e-commerce or store space for retail, that same strategy applies to payments.

“Saying let’s orchestrate payments to make sure that that every single customer gets the the best experience, that’s like saying, we need to stock every single size and style of sweatshirt to make sure that no customer leaves disappointed,” said Apgar. “You have to apply that same critical thinking to payments and say, this isn’t an unlimited budget, where I’m going to throw money at this and create this complex payments engine. What are the critical parts of my payment strategy? Where do I invest money? How do I know if it’s worth the additional back-office expense to add another service provider to increase approval rates on certain types of cards?”

The Key to Understanding Costs

The payments planogram aims to satisfy the maximum number of customers while managing the cost basis. It doesn’t make sense to add a process that is used so infrequently that it fails to deliver enough value to the organization relative to the cost of maintaining it.

“If you make the decision to put something on the shelf that’s a slow seller, at least understand what the cost of doing that is,” said Apgar. “It’s the same thing with payments. If you decide to support a payment process that only helps a few customers, it’s costing you money. Just like you use the sales data to support the planogram, you use that same data to support or measure the costs of your payment infrastructure, so you can apply that same logic.

“If it’s making you money, you should know how much. If it’s not making you money, you should also know how much.”

The post How the Principles of the Planogram Can Apply to Payments appeared first on PaymentsJournal.

In an era of mobile wallets and instant payments, cash is proving far more resilient than many expected. More than half of U.S. consumers surveyed by Siena University say their use of cash has remained the same—or even increased—over the past five years.

The vast majority of respondents said they had paid with cash in the last 30 days. About 17% described themselves as cashless—people who rarely or never use cash. Nevertheless, 60% of these cashless consumers had still used cash in the past month.

A Sense of Safety

Why are consumers holding onto cash? The most prominent concern is safety. Many consumers say paying with cash better protects their privacy than digital or card payments, while others cite the increased risk of identity theft associated with cards and payment apps.

These attitudes extend to the broader economy. Some 94% of respondents want the U.S. to keep cash available in case national security threats disrupt the electronic payments system, and slightly fewer (85%) say cash is a more resilient option in the face of natural disasters, computer glitches, and grid outages.

Laws Supporting Cash

It’s not surprising that most U.S. consumers want to prevent the country from going cashless. A majority say that all businesses should be required to accept cash, while only about a quarter believe businesses should be free to decide whether to accept cash or not.

These views suggest support for the Payment Choice Act now pending in Congress. The legislation would require most businesses to accept cash for in-person purchases of up to $500—a step that many states and cities have already taken. When Siena survey respondents were told about the Payment Choice Act, 85% said they support requiring most in-person retailers to accept cash.

While consumers want to preserve the option to pay with cash, some businesses have chafed at the requirements adopted by several states.

“Every business owner makes choices when it comes to how best to serve their customers and that includes what payment types to accept, including cash,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.  “Advocating for laws requiring business owners to accept cash is no different than requiring all restaurants to serve both Coke and Pepsi products.” 

The Ohio legislature is currently considering a compromise version aimed at minimizing that burden on businesses. Known as the Currency Access to Spend Here (CASH) Act, the proposal would require each store to offer at least one cash-accepting register or payment option. Violations would not carry fines or criminal penalties, but customers would have the right to sue retailers that fail to comply.

The post Seeking Security, Consumers Are Not Giving Up on Cash appeared first on PaymentsJournal.

Despite macroeconomic concerns, the holidays are still a priority for consumers. Early data from Visa shows that U.S. holiday retail spending rose 4.2% year-over-year, excluding inflation.

The report is based on payments activity tracked from early November and excludes automotive, gas, and restaurant spending. While in-store purchases still account for nearly three-quarters of holiday spending, e-commerce emerged as the primary driver of growth.

Artificial intelligence also played a role in the online shopping boom. Visa found that roughly half of surveyed consumers said they planned to use AI tools for comparison shopping and to help narrow down gift choices.

“It’s good news that holiday sales are up over 4% and e-commerce sales largely drove that by growing almost 8%,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Certainly, AI is playing a role in this growth by making it easier to search for products with less-defined input.”

“So-called agentic search uses AI to discern meaning and intent from user search requests, rather than just matching on key words,” he said. “Because agentic search can deliver more accurate context-aware results, users are more likely to follow through with purchasing one of the suggested items.”

Picking It Up Today

It’s important to distinguish between agentic search—where AI agents help users discover products or services—and full-fledged agentic commerce.

For example, a recent agentic search partnership between PayPal and AI platform Perplexity allows users to consult an agent and complete purchases within a chat interference, but the final decision remains with the shopper.

This trend is prompting many merchants to rethink their strategies, though it doesn’t diminish the importance of the brick-and-mortar experience.

“While there’s no question that agentic search is giving e-commerce a boost, what’s notable in all of this is that physical retail still accounted for almost 75% of total retail spending this holiday season, according to Visa’s research,” Apgar said. “While agentic search can only discover results on the web, this underscores the importance of omnichannel alignment for retailers.”

“In-store inventory and buying options need to be available for agentic search engines so the consumer still gets meaningful results when they add ‘that I can pick up today’ to the end of their search query,” he said.

The Agentic Holidays

Despite these dynamic shifts, the retail sector is still far from true agentic commerce, in which AI agents independently handle most or all aspects of a transaction with minimal user involvement.

While agentic commerce has yet to gain the same level of adoption as agentic search, Visa expects that to change. The company said it already completed hundreds of AI-driven transactions through trials of its Intelligent Commerce program and anticipates that millions of consumers will rely on AI agents as personal shoppers during next year’s holiday season.

The post Holiday Shopping Soars, Driven by AI and E-Commerce appeared first on PaymentsJournal.

When the latest iteration of the settlement involving Visa, Mastercard, and various merchants was proposed in November, there was speculation that the deal could reshape the credit card rewards model. However, a group of retailers led by Walmart argued that the settlement doesn’t go far enough to create a meaningful impact for merchants.

Under the proposed deal, Visa and Mastercard would lower the credit card interchange fees that merchants have increasingly criticized, reducing fees from roughly 2%-2.5% by about 0.1% for several years.

Perhaps the more impactful part of the settlement is that merchants would gain the ability to decline certain credit cards—particularly high-fee rewards cards—that they were previously required to accept. Still, Walmart and other retailers emphasized that this latest settlement doesn’t sufficiently address the ongoing challenges merchants face.

“What’s being offered to merchants is not really a practical solution, allowing them to not accept higher-cost rewards cards,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “That defeats the purpose of having a shared acceptance mark like Visa or Mastercard—that was the whole power of the brands when they started. For a store to say, ‘We accept some Visa cards, here’s a list of Visa cards we do and do not accept,’ is ridiculous.”

“Retailers don’t want to be put in a position of instituting fragmented payment policies that disadvantage consumers and add friction to the shopping experience,” he said. “Merchants, for the most part, acknowledge that card payments are fast and convenient, but the rising cost of interchange and network fees has damaged the value proposition for merchants.”

Perks with Payment

One of the factors driving calls for change is that rewards cards have shifted from being the exception to the rule. Once the domain of luxury credit cards—such as those issued by American Express—more card issuers have added benefits to attract cardholders.

As consumers have come to expect perks with their payments, rewards programs have become an integral part of the credit card landscape. However, even as consumers enjoy cash back and discounts, credit card companies pass a portion of these costs to merchants. This has intensified merchants’ calls for a reduction in interchange fees.

Overlooking the Benefits

Amid the focus on costs, the substantial benefits of credit cards should not be overlooked. These payment cards have become the dominant form of payment in the U.S., offering consumers flexibility, protection, and efficiency.

The widespread use of credit cards has led to measurable increases in shopping activity and spend per visit at merchants. E-commerce, mobile payments, and contactless transactions have all benefited from their adoption.

What’s more, transaction times at the point-of-sale have been substantially reduced, while the risks and expenses associated with handling large amounts of cash have been minimized. 

“Sadly, the great benefits that branded card acceptance has brought top large-chain retailers are being completely ignored in these conversations,” Apgar told PaymentsJournal. “Cards have been part of our daily shopping lives for long enough that merchants have stopped tracking the benefits and focus solely on the expense of the fees to accept cards.”

The Final Analysis

For their part, Visa and Mastercard have been working toward a solution with merchants for years, even as they continue to deny any wrongdoing. Prior to the November proposal, the two companies reached a $30 billion settlement with merchants last year, which was initially considered a win for retailers.

However, in the final analysis, this settlement only amounted to a 0.07% reduction in interchange fees over five [or several years]. The deal was later struck down by a New York federal judge for failing to provide adequate relief to merchants.

The Walmart-led group has petitioned a federal judge in Brooklyn to reject the latest settlement on similar grounds. Additionally, there are concerns that accepting this settlement could affect other ongoing actions against the card companies.

Impacting the Business Model

The uncertainty surrounding these actions has put many credit card issuers in limbo. If the latest settlement is approved, it could significantly disrupt their rewards-driven strategies, potentially forcing them to scale back on cashback and points programs.

“There (would be) a shift of control at the acceptance point, from the card issuer to the merchant,” Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research told PaymentsJournal. “The big deal to watch is whether cardholders will lose confidence in their card. Consumers may need to have multiple cards in their wallets or purses to ensure the merchant will accept the product.”

“For some large issuers that have strong merchant relationships, this might be a positive,” he said. “But expect chaos for small issuers who might just issue one type of a credit card.”

The post Why Walmart Is Taking the Lead Against the Visa and Mastercard Settlement appeared first on PaymentsJournal.

PayPal has filed an application for a bank charter to expand and strengthen its lending services to small businesses. The application has been submitted to the Utah Department of Financial Institutions and the FDIC to establish PayPal Bank, which would be chartered in Utah.

To date, PayPal has extended more than $30 billion in loans across roughly 420,000 small business accounts worldwide. To be eligible for these loans, businesses are required to have a PayPal Business account. Historically, however, all lending has been facilitated through third-party banks. While PayPal originated the loans and managed the customer relationship, the actual lending has been conducted by traditional financial institutions such as Wells Fargo, JPMorgan Chase, and Goldman Sachs.

A Lifeline for Small Business

PayPal’s lending practice has long focused on the lower end of the small business market. The minimum revenue requirement for a PayPal Business Loan is $33,300, while the PayPal Working Capital Loan has a minimum of $1,000. According to figures compiled by TechRepublic, nearly 70% of PayPal’s small business loans in 2022 went to low- and middle-income areas.

The company has also concentrated on areas largely abandoned by traditional banks. More than half of their loan value between 2017 and 2022 went to zip codes where 10 or more bank branches had closed, per TechRepublic.

“The overwhelming majority of small business lending is done by non-banks today as a form of factoring on card payments,” said Don Apgar, Director of Merchant Services at Javelin Strategy & Research. “PayPal has visibility into the daily volume of card payments processed by a merchant customer, so it can offer a reasonable loan that is repaid daily as a percentage of card payments from customers. By tying repayment to daily cash flow, the business will never be cash strapped due to a large fixed loan payment during a slow period.”

What’s in it for PayPal?

If the charter is approved, PayPal would expand beyond small business lending to provide interest-bearing savings accounts to its customers as well.

“The question for PayPal is what advantages they expect to get by chartering a bank except for additional compliance requirements,” said Apgar. “A bank charter would enable them to offer bank accounts to these small business customers and expand into other embedded finance products. But that approach didn’t work out for them on the consumer side, and led to the departure of CEO Dan Schulman, who had championed building a complete suite of financial products for consumers on top of their PayPal accounts.”

The post PayPal Seeks Bank Charter to Take Small Business Lending In-House appeared first on PaymentsJournal.

Despite the inroads made by digital wallets and agentic commerce, shoppers still turn to the simplest and most convenient ways to pay. Worldwide, many consumers continue to prefer manned checkout stations over unattended alternatives, and credit or debit cards over digital wallets.  

That’s what a new survey from Australian payments firm TNS found. Across several payment scenarios, simplicity and reliability remained the most important factors for shoppers in the U.S., the UK, and Australia—the three key regions TNS examined. When transactions are simple, customers feel in control.

Nearly half (47.4%) of U.S. respondents said they preferred in-person checkout. By contrast, only 19% preferred an unattended or self-service checkout—despite many retailers continuing to explore and invest in this area. Sentiment for in-person checkout was significant in the UK and Australia as well, with 40% and 53.4% of respondents, respectively, saying they preferred in-person interactions when paying for goods and services. Similarly, far fewer respondents in those regions favored cashierless options.  

Pushing Toward Self-Checkout

While the survey represents just one study, the findings are notable given retailers’ increasing investments in self-checkout and cashierless experiences. Separate data from the Food Industry Association last year found that 44% of grocery store transactions were completed through self-checkout, up from 29% in 2022. Consumers’ stated preferences suggest that many feel pushed into self-service payment processes rather than choosing them willingly.

Ultimately, as TNS’ research shows, it all comes down to creating a streamlined experience. When asked about their biggest frustrations when paying for goods and services, roughly a third of respondents across the U.S., the UK, and Australia said they had no major issues. But among the remaining respondents—largely consistent across regions—several pain points emerged. These included having to sign up or create an account instead of using a guest checkout option, encountering too many steps in the process, lacking preferred payment methods, and experiencing transactions that took too long to complete.

TNS’ data underscores a clear message: innovation only succeeds when it removes friction rather than adds it. Retailers that prioritize simplicity will be well positioned to earn consumer trust.

“Shopping as a guest often comes to post-sale frustration,” said Brian Riley, Director of Credit at Javelin Strategy & Research. “Had I taken the time to build a relationship, I might have received rewards, but even more importantly, I would have been able to return to the site much more easily.”

Cards Are Still No. 1

Consumers aren’t just looking for simplicity at the point of sale—they expect it throughout the entire purchase journey. Whether it’s avoiding unnecessary steps at checkout or preventing post-sale frustrations, shoppers want payments to feel intuitive from start to finish. And that desire for ease and control also extends to the methods they choose when paying.

TNS also asked consumers what payment type they prefer, and unsurprisingly, credit and debit cards still dominate. In fact, nearly 70% of U.S. respondents said they prefer to pay this way. By contrast, fewer than 10% of U.S. respondents said they prefer to pay via a mobile or digital wallet—though interestingly, nearly twice as many UK respondents favored digital wallets compared to those in the U.S. TNS attributes this difference to the relative immaturity of payments technology in the U.S. market.

In the end, consumers are signaling a simple truth. Meaningful progress in payments isn’t about adding more choices, but about making the right ones simple and easy to use.

The post Payments Simplicity Is Still Key for Most Shoppers appeared first on PaymentsJournal.

Guest checkout at retail websites remains hugely popular—so much so that even shoppers who already have accounts are still more likely to choose the guest option. The next challenge for merchants will be striking the right balance between security and a seamless checkout experience.

Customers, especially younger ones, increasingly resist creating accounts on retail sites. According to research from Experian, just 40% say they’ve opened a new retail account in the past six months.

Among those ages 18 to 24, roughly 20% couldn’t even remember whether they had opened a retail account at all. For many consumers, onboarding has become optional enough that they either don’t bother with it—or streamlined enough that they don’t recall doing it.

Experian’s report cited earlier research from Capterra, which found that 72% of shoppers use guest checkout even when they already have an account. More than half of respondents said they’ll abandon their cart if asked to reenter payment or shipping details. A separate study from the Baymard Institute found that nearly one in five U.S. shoppers will abandon a cart if they are forced to create an account.

Fraud in a Low-Information Environment

Balancing transaction conversion and data security become more complex in guest checkout scenarios, where merchants have limited information to assess risk. The challenge is even more pressing for younger consumers, who not only prefer guest checkout but also show lower trust in traditional authentication methods.

“This becomes a double-edged sword for merchants,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “They want to offer a frictionless guest checkout experience, but at the same time they would rather the consumer create an account so they can store more data about the consumer and their purchases.”

Behavioral analytics offers a way to evaluate fraud risk without requiring a full login, helping maintain streamline checkout flow. It also aligns with Gen Z preferences: according to Experian, roughly three-quarters of Gen Z respondents said they view physical biometrics as the safest security method, followed closely by behavioral biometrics.

Spanning Many Retail Sites

Another emerging solution is the use of third-party services that facilitate guest checkout across multiple retailer sites, like Shopify’s ShopPay and Early Warning Services’ Paze.

“Consumers can store details like shipping address and payment credentials in these accounts,” said Apgar. “Typically, a returning consumer is ID’d via browser cookies. They work across a network of participating merchants, enabling the consumer to use guest checkout each time.”

The post As Guest Checkout Gains Popularity, Merchants Seek to Keep It Secure 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.

Apple has now brought its contactless payments platform to its 50th market, marking a major milestone in the company’s global push to turn the smartphone into a full-service point-of-sale terminal. Accepting payments on a phone has become a critical lifeline for small businesses and independent workers—from gig drivers to creators.

Apple has long targeted this segment with its tap-to-pay platform, and the service is now available in Singapore. The technology, sometimes called tap-to-phone, allows merchants to accept contactless payments directly on their devices through both digital wallets and physical cards. In the past, small business owners typically needed to purchase or rent a dedicated POS terminal for the same functionality.

“It’s great that Apple continues to expand the available footprint for tap-to-phone,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “While POS platforms like Square and Clover continue to expand in small storefronts, tap-to-phone brings that same level of efficiency in embedded payments to merchants that don’t operate from a storefront.”

“This key market includes field service providers like tradespeople, and individuals in the creator and gig economies that need a fast, secure way to accept cashless payments from customers,” he said.

Expanding Worldwide

The rollout comes amid a surge of tap-to-pay solutions, a trend accelerated by Apple’s decision to open its NFC technology to third-party developers. That shift has thrust the tech giant deeper into a crowded small business POS market that once dominated by Square dongles.

Apple launched the service in eight countries earlier this year: Belgium, Croatia, Cyprus, Denmark, Greece, Iceland, Luxembourg, and Malta. And its arrival in Singapore brings the total to 50 countries and regions.

As in other markets, Apple has strived to make sure its platform is compatible with major domestic payment methods. In Singapore, the platform will support payment Adyen, Fiuu, HitPay, and Revolut, as well as cards issued by Visa and Mastercard, among others.

Banking on Ubiquity

Despite this rapid proliferation, small business owners now have more options than ever. Many small business payment terminals, including models from Clover and Square, closely resemble smartphones, but these devices are still largely designed for merchants with employees.

Visa also offers a tap-to-phone solution, which has experienced a threefold increase in adoption over the past year. While Visa may have a more developed payments infrastructure, the near-ubiquity of the iPhone may give Apple an advantage in this market.

The post Apple Expands Contactless Payments to Singapore appeared first on PaymentsJournal.

A proposal requiring retailers to accept cash for purchases up to $500 is moving through the Ohio legislature. While much of the debate has focused on how this would affect retailers— especially those relying on self-checkout—the bill is designed to make compliance as seamless as possible.

The measure mirrors a bipartisan federal effort introduced last July that would require retailers nationwide to accept up to $500 in cash. Several states have already adopted similar laws, but Ohio’s version includes additional provisions aimed at minimizing the burden on businesses.

The bill’s sponsor, David Thomas, says the law is intended to ensure “all Ohioans have the ability to use cash” while also accommodating retailers’ operational needs. Notably, the proposal requires only one cash-accepting register or payment option per store.

The bill would also prohibit charging cash-paying customers more than those using digital or card payments. This could be a shift for many retailers that currently impose higher prices on credit card transactions to cover the interchange fees.

The Rise of Self-Checkout

The initiative appears to be fueled in part by the rise of self-checkout lanes, which offer advantages for both shoppers and retailers.

“I’ve not heard any rumblings about retailers not wanting to take cash at all, but you can see it coming,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Self-checkout stations that don’t have to accept cash and dispense change are less expensive than card-only machines and require much less maintenance.”

Under the proposal, violations by retailers would not result in fines or criminal penalties. Instead, they would be classified as unfair or deceptive practices, giving customers the right to sue.

Other states that have enacted similar legislation have found enforcement challenging. When Colorado Governor Jared Polis signed the state’s bill into law in 2021, he warned that the measure would be difficult to enforce. An investigative reporter in Denver later found no evidence of Colorado businesses being penalized for violations.

Serving the Unbanked

The 2023 FDIC National Survey of Unbanked and Underbanked Households found that 4.2% of Ohio households don’t have a bank account, and nearly one in five have limited access to mainstream credit.

“I don’t think you will ever see big box retailers ever go completely cash free,” said Apgar. “That’s for one reason: the nation’s 25 million unbanked consumers.”

The post Ohio Cash-Only Law Would Carve Out Protections for Retailers appeared first on PaymentsJournal.

Amid an uncertain regulatory environment, technology that continues to grow, and shifting consumer demands, the merchant payments landscape is undergoing significant changes. Three important trends at the forefront right now are widely expected to keep evolving in 2026: artificial intelligence, embedded payments, and merchant surcharging.

The 2026 Merchant Payments Trends report from Javelin Strategy & Research looks at where these three trends stand now and where they may be headed in the coming year.  “The story is still unfolding,” said Don Apgar, Director of the Merchant Payments Practice at Javelin and the author of the report. “There’s so much that can still be written on these three topics. They might still be in the trends report next year. You never know.”

Where Is AI Headed?

While people talk about how AI could change the payment process, it has not had much of an impact yet, except in the back office, where it is starting to make real contributions. So much of the back-office efficiency is rules-based: If one thing happens, then a second thing needs to happen as well.

And that is what AI does best. It excels at digesting large amounts of data into nuggets in a very brief amount of time, in some cases in real time. Payment processors face such  situations in several  areas.

One obvious case is fraud and risk. The more data an entity can analyze from different vectors and different points, the better risk decisions it can make. Another is transaction routing involving different countries and different card and payment types.

“You’re always balancing the cost of the transaction, how long it takes to get a response, and what your approval rate is,” Apgar said. “So you’ve got AI decisioning in those realms.”

Maybe the most visible use of AI thus far has been in customer service, where many websites ask their customers to converse with a chatbot. What the consumer may not realize is that type of interaction has gone up the supply chain as well.

“Businesses that sell payments are being serviced by their upstream processors and PSPs in an AI fashion, which offers processes of predictability tools,” Apgar said. “When is a merchant likely to attrite? These are the characters or the conditions that cause merchants to attrite. How early can we predict them?”

It’s vital that processors understand these risks before they happen. Once a merchant announces that it is switching service to somewhere else, it’s too late. To prevent a customer from canceling requires anticipating their problem. That’s what AI is capable of now.

Small Businesses Can Keep Up

AI is, at this point, hugely expensive, but small businesses are not in danger of losing to the giant multinational retailers in this area. Apgar compares the situation to small businesses that sell through e-commerce. Even though their access to cutting-edge technology lags behind that of their larger competitors, long gone are the days when the business owner has to do everything himself, like build his own website and mail his own packages.

Merchants are buying those services from organizations that aggregate all those products. Those same merchants will likely end up consuming some AI services from whoever is providing their web services.

The Long-Term Outlook for Embedded Payments

Another important trend is the rapid growth in embedded payments, which Javelin expects to accelerate significantly in 2026. Just as embedded payments have grown in the market through various distribution models, savvy technology providers are adding value for their business customers by bundling a wide range of financial services offerings directly into their software.

Fiserv has found that small to medium-sized businesses spend an average of 18 hours per week on banking and financial matters. Most of that time is spent reconciling data from multiple applications and platforms, often by importing to a financial app.

That makes embedded payments very appealing. The problem is that, although embedded payments promise long-term reductions in expenses, they also incur higher costs over the short term.  

“The merchant has to go out and buy a terminal, or a payment device that supports tap to pay,” Apgar said. “Assuming it’s a small shop, he’s got one POS device at the counter. It’ll cost him $400 or $500 for a terminal that supports tap-to-pay. That’s a higher cost over the short term, but then over the long term, tapping is so much faster than sticking the chip in the terminal.

“The whole contactless revolution was driven by the pandemic. Contactless and tap-to-pay were the first payment acceptance feature that has not been pushed on merchants by regulation or rules. It’s strictly consumer-driven. The consumers like being able to tap-to-pay.”

The Unsolved Problem of Cash Discounting

Merchants have begun to use cash discounting as a response to the higher interchange fees imposed by card companies, offering a reduced price for cash as opposed to credit. But more and more consumers are starting to look at their receipts, and say, “I’m not paying that.”

The merchant is supposed to have a sign explaining the surcharge. Before the customer even pulls out their wallet and decides to pay with cash or card, they should know that it is going to cost more to pay with card. But many merchants don’t put up the sign. At the same time, consumers who use a credit card for the rewards points are starting to catch on to this and ask if there is a surcharge.

“You don’t have to be a genius to figure out, well, I’m getting 2% cash back on my Capital One card, but it’s going to cost me 3% to use the card,” Apgar said. “It’s very much a not-solved problem right now.”

Al of these trends are still in development, and it’s anyone’s guess where they will end up. One important key to a successful payments innovation seems to be presenting customers with something they want to use.

“Especially in the fintech space, we have to stop talking about: Can we build it?” Apgar said. “The engineers are always asking if we can build something that does X. The real question is: Should we build something that does X? The side of the road is littered with companies that figured out too late that nobody wants this thing that they built.”

The post The 3 Key Trends That Will Shape Merchant Payments in 2026 appeared first on PaymentsJournal.

Although consumer payments have become increasingly digitized, many business-to-business transactions still rely on manual processes that add unnecessary friction. This dynamic is beginning to shift.

Freight management software firm Carrier Logistics has introduced FACTSPay, an online payment tool designed to streamline invoice settlement for shippers. Currently, paying freight invoices—whether by credit card or ACH—often requires contacting customer service. Moving these interactions into a digital, self-service environment could bring substantial benefits to the industry, reflecting similar trends seen in other sectors.

“Independent software vendors (ISVs) in the B2C space have been the hottest market for integrated payments and embedded financial services,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Toast is a good example, where restaurants benefit from seamless payment processing and other business financial needs like payroll and working capital.”

“Combine that with the B2B supplier space which still represents the largest greenfield expansion opportunity for card acceptance, and this announcement from Carrier is significant,” he said.

The Primary Blocker

Along with ease of use, this model also presents opportunities for cost reduction. By enabling self-service payments, motor carriers can reduce administrative work associated with collecting from shippers, while shippers face fewer barriers when paying their invoices.

“The primary blocker to card payments in B2B is the 3% average cost that businesses will pay to accept corporate and purchasing card types,” Apgar said. “In this application for the less-than-truckload (LTL) logistics vertical, the cost of accepting payments over the phone and fielding inquiries about invoices and payments is significant.”

“Embedding payment processing into the software that enables users to look up invoice data and make payments on their own represents a huge potential cost savings for the carriers,” he said.

Underpinning the Next Wave

For many software-as-a-service companies, embedded payment capabilities represent just the beginning. For example, Toast evolved from a restaurant point-of-sale solution into a full-scale financial services provider.

As flexibility and cost savings become increasingly important in B2B commerce, platforms that integrate payments directly into operational workflows are set to play a much larger role in the future of the payments landscape.

“This will be one to watch, because if successful it will be the case study that underpins the next wave of growth for electronic payments in B2B applications,” Apgar said.

The post Carrier Logistics Launch Is a Case Study for Next-Gen B2B Payments appeared first on PaymentsJournal.

With the holiday shopping season already underway, many gift givers may be enticed by the promise of deferred-interest financing. Although buy now, pay later options have stolen much of the spotlight from this older model—once popular when shoppers were as likely to have a store card as a general-purpose credit card—a handful of card issuers and a wider range of retailers still promote these plans. Their days, however, may be numbered.

Under these arrangements, retailers offer zero-interest introductory periods but then apply interest retroactively if the buyer misses a payment or fails to pay off the balance before the promo period ends. When that happens, the regular interest rate is applied to the entire original purchase amount, effectively erasing any benefit of the introductory offer.

What makes these plans even riskier, according to a deferred interest study from WalletHub, is that stores are not always transparent about how they work. And because store cards often carry exceptionally high interest rates, shoppers can end up paying as much as 35.99% at retailers like Michael’s and Kay Jewelers. In many cases, retailers disclose these APRs only in fine print or in places customers are unlikely to notice.

Private Labels Are Disappearing

Consumers are catching on. According to WalletHub, roughly half of respondents say deferred-interest plans should be outlawed—and, in what’s likely a related finding, roughly the same share admits they don’t fully understand how these plans work.

How long can these offerings hold on? Store cards that once promoted them as introductory perks have lost much of their appeal, with usage steadily declining over the past two decades, according to Javelin Strategy & Research.

“Deferred interest plans have been typically attached as promotional deals to private label credit cards,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “There, the model still has relevance for acquisition at the point of sale, usually through signage or store clerks recommending the financing option.”

Many Other Options

Shoppers now have plenty of options when choosing how to pay. BNPL plans also let consumers delay payments, but without the risk of steep interest charges suddenly popping up a few months down the line.

“The main threat that has taken share of traditional deferred interest programs has been BNPL, which offers similar 0% terms although paid in installments for a fixed period of time,” said Danner. “For this holiday season, expect to see a plethora of financing options at the POS.”

The post In the Era of BNPL, Deferred Interest Offers Hang On appeared first on PaymentsJournal.

As the 2025 holiday season approaches, a convergence of payments technology—from embedded financial services to agentic AI—will influence consumer shopping behavior. Adobe for Business projects point-of-sale financing transactions will value $1 billion on Cyber Monday alone. Additionally, shoppers will use mobile payments for 56.1% of holiday sales, marking the first time mobile purchases exceed half of overall spending.^[i] Are your merchants set up for success?

Let’s look at a use case. A merchant offers flexible financing options to a customer shopping for a smart TV at checkout. The customer chooses a 6-month installment plan, receives instant approval, and finishes the purchase directly on the merchant’s website or within their app. The shopper gains immediate access to financing, making the high-ticket holiday purchase more manageable.

For the retailer, embedding lending means higher conversion rates, reduced cart abandonment, and increased average order sales. The ISV benefits through monetizing the lending feature through a referral fee or revenue-share model while creating more value for its merchants. Everyone in this scenario benefits.

What to Look for in a Lending Solution

So, how can ISVs implement financing options in their software? They can integrate a fully headless API solution to gain maximum flexibility in customizing the user experience. This approach enables ISVs to tailor the financing flow to their brand’s specific needs, differentiate themselves in the market, and accelerate their speed to market.

Beyond providing a holistic software solution, ISVs need to consider a solution that supports how consumers want to pay, including mobile terminals, self-checkout kiosks, and unattended payment methods—all optimized for holiday traffic and offering financing options.

Software companies should seek a robust suite of RESTful APIs that supports every stage of the point-of-sale (POS) lending lifecycle, offering granular control and customization. Alongside advanced API capabilities, they should prioritize clear documentation, strong developer resources, and a sandbox environment that streamlines integration and reduces friction.

Bringing it All Together – U.S. Bank | Elavon

ISVs thrive with a payments partner that goes beyond basic acceptance. In a crowded market, offering end-to-end payments technology—from checkout to financing—helps your merchants boost revenue and build stronger customer relationships. When shaping your long-term strategy, choose a proven partner that supports your growth and embeds value throughout the payments experience.

Explore what’s possible with our award-winning APIs^[ii], a comprehensive ecosystem of integrated software solutions, and Avvance™, our point-of-sale lending platform designed to streamline the consumer journey.

Ready to expand your capabilities? Backed by the strength and stability of U.S. Bank, we bring global payments expertise so you can focus on delivering more value to your customers. To connect with us, simply fill out our short form.

[i] Adobe for Business
[ii] 2024 API Awards

The post Empowering Merchants with Embedded Lending: How ISVs Can Optimize Revenue This Holiday Season appeared first on PaymentsJournal.

After decades of contention, Visa and Mastercard are reportedly ironing out another settlement with merchants over interchange fees.

According to the Wall Street Journal, the two companies may agree to incrementally lower credit card interchange fees merchants pay—from current rates of roughly 2% to 2.5% to about 0.1% over several years.

While that reduction would be significant, another aspect of the proposed settlement could have even greater implications: it would allow merchants to decline certain credit cards—namely high-fee rewards cards—at the point of sale, when they were previously required to honor all cards.

“The core value proposition of the Visa and Mastercard brands is the ability to unite many issuers and merchants under a common brand,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The brand mark tells consumers that you can use your card here, you don’t have to worry if the merchant accepts only Chase or Citibank cards.”

“Splitting the Visa and Mastercard brands into rewards and non-rewards will create confusion among cardholders about which type of cards that a merchant accepts—the exact issue the brands were created to avoid,” he said. “Will merchants need new signage that says which kinds of cards they accept?”

The Price of Milk

This uncertainty could rapidly become disruptive because rewards cards have shifted from being the outlier to becoming the norm. Visa and Mastercard initially introduced rewards cards to compete with American Express for high-income customers.

Because Amex charged merchants more to fund its rewards program—roughly 3.5%—Visa and Mastercard issuers followed suit, introducing their own rewards cards with higher interchange fees. At first, the limited number of rewards programs meant the share of transactions subject to higher fees was small, so the impact on merchants was nominal.

“What nobody saw coming was a war among issuers racing to get in on the action, building up to where 90% of cards now are rewards cards,” Apgar said. “Even though the interchange rates haven’t gone up per se, the effective cost to the merchant has increased steadily as more of the cards they accept qualify for the higher rewards interchange.”

However, the higher transaction fees are also one of the reasons American Express has not been as widely accepted as Visa and Mastercard. Now, those same companies are facing similar pushback from merchants.

“Nobody expected the rewards market to get so big, but how do you get the toothpaste back in the tube?” Apgar said. “I think Visa and Mastercard are betting that merchants won’t opt out of rewards card acceptance, and they’ll get merchants to accept a compromise they can’t use. That’s a risky strategy in my opinion, as there are merchants ready to do that. Costco has one foot in that direction—where they accept Visa, but the only Mastercard they accept is the Costco Mastercard.”

“I go back to Econ 101: the price of milk must be low enough so that consumers will buy it, yet high enough that farmers will produce it,” he said. “That’s when the market is in equilibrium. The interchange seesaw has tipped too far, and merchants generally agree that the cost of card acceptance is too high. Farmers aren’t selling milk—they are turning it into cheese.”

A Shift of Control

The question for Visa and Mastercard and their issuers is how to restore equilibrium—where merchants view interchange fees as fair and consumers can still enjoy the rewards they value.  

While there may not be an immediate answer, any settlement between the credit card companies and merchants would still require court approval—a stage where previous proposals have stalled. Still, credit card issuers should prepare for a sea change.

“In the new world, consumers will need to know if a merchant will accept their specific card,” said Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research. “The situation can get very complicated if the card is an enhanced product such as Mastercard World Elite or Visa Infinite. There is a shift of control at the acceptance point, from the card issuer to the merchant.”

“The big deal to watch is whether cardholders will lose confidence in their card,” he said. “Consumers may need to have multiple cards in their wallets or purses to ensure the merchant will accept the product. For some large issuers that have strong merchant relationships, this might be a positive. But expect chaos for small issuers who might just issue one type of a credit card.”

The post Visa and Mastercard’s Merchant Settlement Could Imperil Rewards Cards appeared first on PaymentsJournal.

Massachusetts is the latest state to update its money transmission laws—a move welcomed not just by consumers but also by the fintechs the law is meant to regulate.

The primary goal of the new legislation is to strengthen consumer protections for users of services such as Venmo, PayPal, and CashApp, “With this new law, consumers in Massachusetts will now have protection when transferring money to friends and businesses through payment apps,” Governor Maura Healey said when signing the bill earlier this year.

The updated rules establish a uniform licensing and compliance framework for all entities engaged in money transmission. Payment apps will now be required to obtain a license and adhere to the regulations and consumer protection standards set by the commonwealth’s Division of Banks. Non-bank entities offering banking services will also face oversight similar to that of traditional financial institutions, including more frequent and detailed reporting requirements.

A Consistent Set of Rules

With the Consumer Financial Protection Bureau taking a back seat under the Trump administration, states are stepping in with new laws of their own. Regulators are working to bring greater consistency to how transmission activity is defined, licensed, and monitored nationwide. A coalition of state financial regulators has adopted a model framework that allows regulators across multiple states to collaborate on these efforts—an approach known as networked supervision.

Building on that effort, Georgia, Nebraska, Colorado, and Connecticut each updated their transmission statutes earlier this year, bringing the number of states with modernized transmission laws to more than 30.

Appreciating the Guidance

While the new regulations increase the burden on bank-like fintechs, they also create a more navigable landscape for a growing array of payment processors. Many of the older state money transmission laws were designed primarily for services like Western Union and Moneygram.

“New payment entities range from earned wage access entities like Dailypay, to online gambling, to peer-to-peer apps like CashApp and Venmo,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Fintechs generally appreciate the guidance instead of having to spend their own legal efforts to figure out what laws apply, if they apply, how they apply, and so forth.

“Organizations like CashApp have to go state by state and get 50 individual licenses to offer their services to residents of those states,” he said. “It’s important that they have consistent laws to deal with.”

The post Massachusetts Updates Money Transmission Laws appeared first on PaymentsJournal.

Consumers are expected spend more on holiday shopping this year—as usual—but much of that apparent gain will be offset by inflation.

Shoppers plan to spend an average of $736 on holiday gifts, according to data from Visa’s 2025 Holiday Spending Outlook. Nominal holiday spending is expected to reach 4.6%, but after adjusting for inflation, real growth is just 2.2%—down from last year’s 2.5% increase. In other words, inflation is driving most of the apparent sales growth this season.

To evaluate this trend, Visa developed a “holiday CPI,” a tailored index that reflects the typical basket of goods sold during the season. According to the index, inflation for holiday-related items is just slightly below the overall inflation rate. Prices for recreational goods, which make up about 30% of the holiday CPI basket, are up 3.1% over the past year.

The good news for retailers: despite inflation and waning consumer confidence, shoppers are still spending. In April, consumer confidence fell to its lowest level since the pandemic, yet Visa reports that real spending growth continued to rise, reaching 2.7% in August, the latest month with available data.

Holiday Shopping Starts Early, Goes Mobile

In a potentially related development, the holiday shopping season is kicking off earlier than ever, and Visa is now tracking it across the entire fourth quarter to capture the extended buying period. As a result, Visa found that more than 15% of consumers started their holiday shopping in September or earlier, with an even higher share among millennials. It found that more shoppers are looking to secure gifts before prices climb further.  

At the same time, holiday spending continue to shift online, particularly to mobile devices. More than 45% of consumers say they plan to use their mobile devices for most or all of their holiday shopping, per Visa.

That aligns with an earlier forecast from Adobe for Business, which estimates that mobile revenue will reach a record 56.1% share of total holiday sales—the first time mobile will account for more than half of overall spending. Roughly $142.7 billion is expected to be spent via mobile this season, up 8.5% from last year, with seven in 10 online retail visits occurring on mobile devices.

The post Inflation Will Put a Dent in Holiday Shopping This Year appeared first on PaymentsJournal.

For most merchants, getting customers to enroll in an autopay program is a highly desired outcome. But T-Mobile’s recent move to close a credit card payment loophole for its autopay customers signals there may be an even bigger ambition at play: avoiding interchange fees.

T-Mobile has long offered a $5 monthly discount to customers enrolled in its autopay offering. To qualify, customers were required to use a debit card or a bank account as their autopay method—credit cards were ineligible.

However, a kind of cheat code had emerged. Some savvy customers discovered they could register a valid debit card or bank account to secure the discount, then manually pay their balance with a credit card before the scheduled autopay date. Because the bill was already paid, T-Mobile didn’t process the automatic debit, but the customer still received the discount.

Losing the Discount

As of last week, these customers will lose their monthly discount if they make an early one-time payment on their bill using an ineligible payment method, such as a credit card. T-Mobile has apparently decided that avoiding interchange fees outweighs the value of keeping customers enrolled in autopay, despite the many benefits the subscription model provides.

“Autopay itself delivers the bulk of the benefits to the merchant,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “They save the cost of generating a bill, mailing it, and then waiting for payment. Even in our digital age, where you can create a PDF of a bill and email it, they still have to wait for you to pay it. Autopay even enables the merchant to put a fine point on their revenue forecast, because they are taking the money from me on an established date, not waiting for me to send it.”

Pushing Them Elsewhere

The strategy hinges on the assumption that T-Mobile customers who use credit cards almost certainly also have bank accounts. The gamble for the carrier is that these customers will be willing to switch to alternative payment methods rather than opt out of autopay—or worse, switch to another carrier.

“It’s no secret that rewards cards and business credit cards have high interchange costs for merchants,” Apgar said. “By limiting payment options to debit and ACH, they keep those costs down.”

The post T-Mobile Closes Autopay Loophole for Credit Cards 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.

Amazon Web Services has recovered from an outage that disrupted online activity worldwide for nearly a day, affecting businesses like Venmo and Coinbase to small merchants who rely on AWS for payment processing. After the third shutdown in five years, questions are mounting about how dependent businesses have become on the cloud computing giant.

The outage began shortly after midnight on October 20. The disruption originated at AWS’s largest and most essential data hub in Northern Virginia—the same location that experienced outages in 2020 and 2021. Services were mostly restored by that evening, but the interruption let merchants unable to process payments and disrupted sales for nearly a full day.

Slowly Migrating to AWS

In recent years, merchants, payment service providers, banks, and other companies across the payments supply chain have quietly migrated to AWS as a way to scale their businesses without the fixed costs of building or expanding a physical data center.

“Cloud platforms promise secure, scalable and most importantly redundant data processing,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Pay-as-you-grow data services have also enabled many fintech startups to get traction without having to invest significantly in data facilities. They can focus on the talent that will create the code, not the secure, climate-controlled buildings that will house the machines that run it.”

Seeking Stability Elsewhere

One of the primary selling points of large data centers, such as those operated by AWS, has been their reliability. Without that stability, many smaller companies might seek backup alternatives.

“Redundancy and uptime has always been part of the core value proposition of AWS,” said Apgar. “It will be interesting to see if this event will have a meaningful trend impact on AWS users either rethinking their cloud computing strategy or driving customers over to alternative providers, like Microsoft Azure.”

In the cloud computing market, Azure ranks second in market share behind AWS, but it has been steadily closing the gap. Meanwhile, the CrowdStrike outage in July 2024, which disrupted much of the internet, predominantly affected Microsoft systems.

The post AWS Outage May Have Merchants Seeking Backup Elsewhere appeared first on PaymentsJournal.

A Compass Coffee location in Washington, D.C. became the first store to accept a bitcoin payment using Square’s new point-of-sale system.

Square Bitcoin enables merchants to accept bitcoin payments with zero processing fees and also allows them to convert traditional card sales into bitcoin within the included wallet. Compass Coffee tested Square’s platform and successfully completed transactions from 10 different wallets over the Lightning Network.

These payments were processed using the standard Square device—a mainstay for many small businesses. While the coffee purchase itself may have been small, it represents another meaningful step forward for bitcoin and the broader adoption of digital assets.

“This is super cool, and it lines up with everything we’ve been talking about here at Javelin—Layer 2’s, Lightning Network, and reward programs,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “Square continues to be a leader in payments by providing optionality. It’s pretty awesome to see this stuff unfold right in front of us, and I think more companies will follow.”

Gaining Mainstream Traction

For over a decade, there has been ongoing discussion about when bitcoin payments would finally achieve mainstream adoption. One of the concerns surrounding bitcoin and other cryptocurrencies has been their volatility. Yet, despite short-term fluctuations, bitcoin has continued to surge to new heights, largely driven by increased adoption among leading financial institutions.

In addition, broader platforms are emerging to facilitate bitcoin transactions. For example, Walmart-backed OnePay recently added crypto functionality, and PayPal launched a crypto platform enabling merchants to accept payments in over 100 cryptocurrencies while allowing consumers to connect wallets from platforms like Coinbase Wallet, MetaMask, and Kraken.

Copying the Strategy

One of the key factors across these platforms is flexibility. Accepting payments in crypto doesn’t mean merchants are required to hold digital assets. For example, Square’s business owners can choose to either accept crypto payments or hold digital assets as a store of value.

Given bitcoin’s success, the latter option can be a game changer. Many companies have integrated bitcoin investments into their business models—a strategy most notably employed by MicroStrategy, which later rebranded as Strategy.

“There have been dozens of digital asset treasury companies trying to copy Strategy’s strategy hitting the market,” Hugentobler said. “It shows there is a demand for institutions to hold this stuff on their balance sheets—and this process allows for them to do it in a different way.”

The post Square’s Platform Sees First Bitcoin Payment at Coffee Shop appeared first on PaymentsJournal.

As artificial intelligence plays a growing role in purchasing decisions, Visa is launching its Trusted Agent protocol to give merchants more visibility into the process.

In the emerging agentic commerce environment, merchants will need the ability to screen AI agents and filter out bots and bad actors. Visa’s platform was developed to enable exactly that—using agent-specific cryptographic signatures and other unique identifiers.

These identifiers can convey information about an agent’s intent, such as details about the products being sought or evidence of prior interactions between the consumer and merchant. Visa’s system can also determine whether an agent has payment functionality compatible with a merchant’s preferred checkout methods.

The Continued AI Emergence

Visa underscored that this solution was necessitated by the continued rise of AI in retail transactions. The company cited data from Adobe showing that generative AI traffic increased by 4,700% year over year as of July, with most consumers who have used AI reporting that it has improved their shopping experience.

These trends have driven more companies to deploy AI across an array of use cases. For example, Klarna teamed up with Google to leverage its AI models to create personalized visuals and customized marketing campaigns within Klarna’s app.

Shepherding the Agents

Agentic commerce takes this a step further, giving AI agents the power to initiate and complete payments. This has naturally raised concerns about the safety and security of agentic transactions.

In Google’s Agent Payments Protocol (AP2)—another framework designed to shepherd AI agents—safeguards are implemented through the use of mandates. These digital contracts securely verify that an AI agent has followed a user’s instructions, including detailed data about the parameters and timing of a purchase.

Regardless of the specific protocol, security and fraud mitigation controls are necessary for agentic commerce to advance. This presents a challenging task: beyond detecting bots and fraudulent activity, these systems must also minimize false positives—while maintaining full transparency for both consumers and merchants throughout the process.

The post Visa Aims to Safeguard Agentic Commerce Transactions appeared first on PaymentsJournal.

In a challenging economic climate, more merchants are turning to their payments providers for guidance on how to be more efficient with their payment operations. Many are also exploring ways to lower costs by encouraging customers to use cash or debit cards instead of credit.

Nearly half of the merchants surveyed by Wind River report that their processing rates have increased over the past year. As a result, nearly 70% say they have adjusted how they accept or manage customer payments.

Today, 69% of merchants process payments through their software provider—an indication that many are relying on independent software vendors (ISVs) to help turn payments from a cost center into a revenue opportunity. Vendors are responding: nearly all ISVs working in payments either offer integrated solutions already or plan to introduce new monetization strategies this year.

Seeking Cash, Raising Prices

To counter higher processing fees, merchants are increasingly steering consumers toward lower-cost payment methods such as debit and ACH. Some are offering cash discounts, while others have added surcharges for credit card transactions.

These decisions inevitably affect the end consumer. Nearly half of merchants say they’ve raised prices to offset increased costs, while two-fifths have chosen to absorb the impact themselves.

Headwinds in Fighting Fraud

Fraud is another area where merchants are turning to their payments providers for support. Nearly two-thirds of respondents said they experienced fraud in the past year, and a large share indicated they’re willing to pay more for stronger prevention methods. Key areas where merchants want help include setting custom rules for transaction amounts, stopping fraudulent attempts before funds are moved, and accessing chargeback guarantees for high-risk industries.

Chargebacks—where customers dispute legitimate transactions—continue to be a top concern. More than a quarter of merchants reported experiencing fraudulent chargebacks.

This challenge has been exacerbated by decisions made by Visa and Mastercard, which held merchants responsible for chargeback costs unless they updated their point-of-sale systems to include chip readers. The two payment giants were recently ordered to pay merchants nearly $200 million in class-action lawsuit over these chargeback policies.

The post Merchants Look to Save On Payments Amid Rising Costs appeared first on PaymentsJournal.

As buy now, pay later services grow in popularity, more states are updating their laws to address this emerging financial offering. A new law taking effect this month in Nevada makes it easier for BNPL firms to operate locally, while also giving regulators stronger oversight of these loans.

Passed by lawmakers and signed by the governor earlier this year, Senate Bill 437 ends a state requirement that internet-based consumer lenders—such as those offering BNPL—maintain a physical location in the state. When the law was being considered, a representative for Affirm testified to lawmakers that it maintained a physical office in Nevada to comply with state law, but had never had a single customer visit the location. Other BNPL companies, meanwhile, chose not to operate there at all.

The law also requires lenders to use state law to govern these loans. Previously, lenders could rely on  able to use choice-of-law clauses to select which state’s rules would apply, often opting for states like Utah or New Jersey, where consumer protections were less stringent.

Ready to Adapt to the Law

BNPL providers will become the new standard, even as they face increased scrutiny at the state level.

“Not having to retain a physical footprint will make it easier for BNPL firms to operate in the state, although there are provisions that require the loans and disputes are subject to Nevada law,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “From what I’ve seen in the bill, BNPL firms will be ready for—or ready to adapt to—Nevada’s consumer credit laws.”

The rule comes as the federal government has stepped back from oversight of these products. In May 2024, the CFPB under President Biden administration issued an interpretive rule stating that truth-in-lending regulations would require BNPL lenders to investigate disputes, refund returned products for cancelled service, and provide billing statements in the same manner as credit card companies. However, this May, the Trump administration announced it would not enforce that rule.

Other States Take the Lead

With the CFPB shrinking its presence, states have been stepping into the regulatory vacuum. Earlier this year, New York State passed a law requiring BNPL providers to be licensed by the state and to comply with various disclosure and practice requirements.

Since 2020, California has classified BNPL products as loans and required providers to obtain license to operate in the state. With the CFPB no longer overseeing these offerings, it is likely that other states will follow suit.

The post Nevada Tightens Rules Around BNPL appeared first on PaymentsJournal.

After nearly a decade, Visa and Mastercard have agreed to pay merchants $199.5 million to settle a class-action lawsuit over chargebacks.

Merchants filed suit after the companies changed the rules around chargebacks, which occur when payments are reversed following customer disputes.

Retailers alleged that Visa and Mastercard violated antitrust laws by coordinating to alter the rules, making merchants responsible for chargeback costs unless they updated their point-of-sale systems to include chip readers.

Merchants said this change increased their expenses, as they faced higher chargeback costs while transaction fees remained unchanged.  Although the credit card companies have admitted to no wrongdoing in the case, Visa agreed to pay $119.7 million and Mastercard will pay $79.8 million to settle the lawsuit.

Creating Contention

As cards have become the predominant payment method in many parts of the world, Visa and Mastercard have assumed a central role in the financial services landscape. However, many merchants have pushed back against practices they consider unfair.

For example, London’s Competition Appeal Tribunal recently ruled that the interchange fees charged by these companies violate Europe’s competition law, following lawsuits filed by hundreds of merchants.

Additionally, a law in Illinois banned credit and debit interchange fees on taxes and tips. While many merchants welcomed this legislation, it sparked concerns among financial institutions, which argued that such fees are critical to the ongoing operation of the credit card industry.

Approving the Settlement

While these actions are significant, one of the largest lawsuits involved the decades-long battle between U.S. merchants and Visa and Mastercard over interchange fees.

A $30 billion settlement in this longstanding suit was reached last year. Although many declared the settlement as a victory for merchants, Chief U.S. District Judge Margo Brodie ultimately rejected it, arguing that it didn’t go far enough to compensate retailers.

Similarly, many are calling the most recent settlement a win for merchants. However, the agreement still requires approval, and since the lawsuit was filed in a Brooklyn Federal Court, Judge Brodie will have the final say on this settlement as well.

The post Visa and Mastercard Resolve Longstanding Dispute with Merchants appeared first on PaymentsJournal.

The 2025 holiday season is shaping up to be the biggest yet for mobile shopping.

Adobe for Business forecasts that mobile revenue will reach a record 56.1% share of total holiday sales, making the first time mobile accounts for more than half of overall spending. An estimated $142.7 billion will be spent via mobile this holiday season—a 8.5% increase from last year—with seven in 10 online retail visits occurring on mobile devices.

This surge also points to a strong season for buy now, pay later (BNPL) options. Adobe projects $1 billion in BNPL transactions on Cyber Monday alone, making it the first day to reach that milestone.

What’s Driving the Growth

That growth is fueled in part by the increasing availability of BNPL options at checkout. Separate data from Javelin Strategy & Research also shows that BNPL usage is strongest in online channels, particularly on mobile.

Other factors are also contributing to BNPL’s continued growth, according to Ben Danner, Senior Analyst, Credit and Commercial at Javelin. “I think it’s a mixture of factors,” he said. “The economic situation leads people to seek out no to low interest rate financing on BNPL transactions, as well as the flexibility to extend transactions to lower the immediate burden. There’s also the ubiquity of the method—practically all the large retailers accept it now, as well as a growing number of small businesses.”

A Banner Year for BNPL

Overall, the holiday season is projected to generate roughly $20 billion in BNPL spending, up about 10% from the 2024 holiday season. While Cyber Monday is expected to be the biggest day for BNPL purchases, Black Friday is also forecast to see around $750 million in such transactions.

Earlier this year, according to Adobe, roughly four-fifths of BNPL revenue came through mobile devices. Based on that ratio, an estimated $16 billion in BNPL spending could be made via mobile during the holiday season.

Online retail through other channels is expected to see more moderate growth this season. Even so, Adobe forecasts a record $253.4 billion in total online spending this holiday season, which would be the first time that figure has surpassed a quarter of a trillion dollars.

The post Mobile and BNPL Poised to Drive a Strong Holiday Shopping Season appeared first on PaymentsJournal.

Ace Hardware’s new partnership with Affirm, which offers pay-over-time options at the point of sale, gives the retailer another way to show its advantages over big-box stores.

As a cooperative, with most of its locations independently owned and operated, Ace has already worked to ensure shoppers enjoy consistent payment options. Now, it can provide Affirm to in-store customers—a more challenging and valuable offering than simply enabling it through e-commerce.

Previously, Ace had made buy now, pay later (BNPL) services available through Apple Pay, but those were limited to shoppers using that app. Under the new system, any Ace shopper can scan a QR code at checkout, complete a real-time eligibility check, and access payment options for purchases over $50.

Positioning Above the Big Boxes

Hardware is a prime category for BNPL, as these stores often carry high-priced, aspirational items. The partnership between Affirm and Ace will give customers greater flexibility in how they choose to split the cost of goods, making these purchases more accessible.

“This is a great fit since Ace has positioned the brand at a level above the big-box stores,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “In addition to all the name brands in tools, they go upscale in the outdoor category, carrying brands like Green Egg and Weber, which you won’t find at Home Depot or Lowe’s.”

A Consistent Consumer Experience

Ace operates more than 5,200 stores across the U.S., the vast majority of which are independently owned. Thus far, about 1200 Ace stores are making use of the Affirm technology. In the past, the retailer has gone above and beyond to ensure all locations maintain the same level of service.

“Ace has done a great job of creating a consistent consumer experience around their brand while still allowing franchisees enough flexibility to run their businesses according to their local markets,” Apgar said. “For example, if you look at the Ace website, the item selection is consistent, but prices of items will change when you change the store location.”

Ace also requires franchisees to use its corporate point-of-sale software. While this helps with inventory management and e-commerce pricing at the franchise level, it also ensures a consistent customer experience—particularly with programs such as Ace’s rewards system.

“This common functionality across the stores also enables features like Affirm without too much difficulty,” said Apgar. “When you’re ready to drop some serious cash on that new Green Egg, shop confidently knowing you can make four easy payments.”

The post Why Affirm’s Pay-Over-Time Plans Make Sense for Ace Hardware appeared first on PaymentsJournal.

In the race to handle payments, banks are increasingly losing ground to smaller, nimbler paytechs—companies that provide not only end-to-end payment solutions but business accounts and operational tools.

Data from Capgemini highlights how these companies are challenging banks with faster services, more cost-efficient services. Onboarding a merchant through a bank can take up to seven days and cost as much as $496. Paytechs, by contrast, can activate a merchant in less than an hour for as little as $214.

Paytechs are also leading in innovation. More than two-thirds already offer payment orchestration, which consolidates a merchant’s payment operations and delivers a comprehensive view of the entire ecosystem. Fewer than half of traditional banks provide such services. Paytechs have further distinguished themselves by adopting emerging technologies— such as generative AI and stablecoins—at a much higher rate than banks.

According to Capgemini, these findings reflect how banks have deprioritized merchant services, leaving a gap that paytechs have readily stepped in to fill. Merchants, meanwhile, are focused on achieving high payment success rates and dependable infrastructure—yet only 19% of banks surveyed expressed confidence in their ability to deliver on these needs.

The pressure is especially pronounced among smaller and mid-sized merchants, nearly half of whom say they plan to switch to paytechs within the next year.

Still Looking for Stability

Interestingly, the majority of merchants still prefer traditional providers for their financial services needs. They point to banks’ strong brand reputation, perceived stability, and broader suite of financial products as key advantages over paytechs.

At the same time, merchants indicate a willingness to return to traditional payment providers if they can deliver industry-specific, value-added services—such as loyalty programs tailored for retailers. In fact, most surveyed merchants said they would consider switching back if a bank offered comparable services at similar costs to a paytech.

Room for Improvement

Customized services are one of the strongest opportunities for improvement. While paytechs have proven more agile in tailoring solutions to specific segments, fewer than a quarter of merchants surveyed said they receive meaningful, personalized value-adds from banks.

Fraud prevention is another critical area where banks can regain ground. Merchants reported losing nearly 2% of their total revenue to payment fraud, yet only about a quarter of bank executives expressed confidence in their institutions’ ability to deliver advanced fraud prevention and data security.

The post How Banks Can Regain the Ground They’ve Lost to Paytechs appeared first on PaymentsJournal.

A glitch in split-tender payment processing allowed a group of criminals based in Miami to steal more than $1.5 million, according to the Justice Department. The scheme exploited a flaw in a retailer’s specific payment processing software rather than a vulnerability anyone could easily use.

According to the DOJ, the men purchased expensive merchandise and split the cost between two debit cards, then returned the items in-store. While one refund was being issued to the first card, accomplices deliberately stalled the second refund by presenting incorrect cards or entering wrong PINs.

During the return, others monitored the first card’s account remotely and quickly withdraw or transferred the credited funds. The delay on the second card kept the first transaction open, resulting in repeated credits to the first card.

Incorrectly Coded Software

This is not how payment processing normally works, which suggests the criminals had found a flaw in a specific point-of-sale (POS) system.

“If the POS software was coded correctly, it would have processed the split-tender refund as two transactions,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “So when the credit to the second card failed, it would only re-attempt that credit, not start over and re-credit the first card as well.”

Another key factor was their knowledge that the store offered instant refunds.

“While one crook was in the store playing the game, his accomplice was withdrawing funds from the first card after each credit was applied,” said Apgar. “Normally, refunds wouldn’t hit a debit account until the following day, but there are new technologies that enable real-time credits, such as Visa Direct. The crooks would have to know that this store was using newer payout rails so they could grab the erroneous credits in real time before they were reversed.”

Leaving Retailers Vulnerable

The retailers affected by the scheme were not named in the indictment—possibly to avoid drawing attention to vulnerabilities in the software. The indictment noted that the scheme was carried out at dozens of stores in various cities across the country.

“This is such an arcane scheme,” said Apgar. “It sounds like one of these guys had insider info on this glitch in the store’s POS software.”

The post Split-Tender Scam Exploits Retail Software Glitch appeared first on PaymentsJournal.

Faster payments have made a big splash in the payment processing industry, with the Federal Reserve’s FedNow platform rolling out in 2023 to join its older rival, the Clearinghouse’s RTP network. But for merchants, the revolution has not happened yet—and might never happen. The use cases for retailers, to this point, simply do not exist.

In a new report, Real-Time Payments: Use Cases in Acquiring, Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research, looks at the ways merchants might take advantage of faster payments. His advice: pump the brakes. The benefits that have driven the growth of real-time payments are a long way from having an impact on merchants.

The Challenges of Real-Time Payments

Real-time payments have been growing rapidly. RTP handled 343 million payments per day in 2024, while FedNow settled 2.13 million in the second quarter of 2025 – up from 156,000 in the year-earlier period. It’s understandable that merchants would wonder whether this technology might benefit them as well. In an ideal landscape, these processes would allow every merchant to use pay-by-bank and avoid having to pay interchange fees, with processors paying merchants in real time for batches submitted.

But some fundamental challenges exist in making this transition. For one thing, FedNow and RTP are akin to wire transfers. Wire transfers are irreversible, so once the money is sent, it can’t be reclaimed. If the money was sent in error or transferred under fraudulent circumstances, no mechanism exists for reversing that transaction.

“From a consumer’s perspective, there’s no ability to dispute that transaction,” said Apgar. “Merchants don’t have the details to help them initiate refunds if that becomes necessary. It’s not built for people to buy goods from a store, whether that store is physical or online.”

Any payment sent by wire settles during business hours, which limits their availability. That could be a boon for real-time payments, which operate 24/7 and allow merchants to get paid on the weekends.  The problem is that Visa and MasterCard still use wire transfer and still settle only on business days. If a processor wanted to pay its merchants on Saturday or Sunday, it could use real-time payments to do that. But that would also require the processor to float that money, because it would not receive funds from Visa till Monday or Tuesday.

“If I’m paying you real time as a processor, which I could do, I have to have a line of credit then or some or money in the bank someplace to get that money to float it to you until I can get it from Visa MasterCard,” Apgar said. “If you’re operating at scale, there’s a cost to borrowing money. Will merchants pay a premium for that? I don’t know.”

No Recourse for Taking Payments

Another problem is that a payment must be instigated by the purchaser, which limits what the merchants can do to initiate a payment. There is no way to pull money through RTP and FedNow; it can only be sent.

“If you say, Don, I want to send you $1,000, you could send that to me all day long,” Apgar said. “But you can’t tell me, Don, take $1,000 out of my account. I don’t have that ability. At the store level, I can’t just give you my card and say take money from this like I do today. I’ve got to actually send the money. There has to be a mechanism for it.”

It’s possible that faster payments could in the future could include an automated request for payment. That would allow a merchant to ask to take that $1,000 out of a customer’s account and complete the transaction themselves. Such a scenario might offer a potential use case down the road for merchants. But the consumer would still need to be persuaded to use pay-by-bank and sacrifice all their dispute rights. Apgar considers that unlikely.

Limited Practical Applications

The growth of the industry indicates several use cases where faster payments make a lot of sense. Apgar cites the example of a website called PrivateAuto.com, a marketplace for used cars, as a largely retail-driven site.

PrivateAuto.com sells high-end vehicles. If someone is selling a car for $50,000, it’s unrealistic to expect the buyer to show up with a pocketful of cash. The faster-payments process can act as an intermediary to both parties, handling the title exchange and the money exchange to make sure that the buyer gets what he paid for and the seller gets his money.

Real-time payments could also enable real estate closings to take place on weekends, which basically doesn’t happen now. The buyer could initiate an RTP payment on a Saturday at 3 p.m. to remit the closing costs. Those are the kinds of use cases where faster payments are likely to grow because they can help with cost issues, but the merchant space remains a very different landscape.

“Even though there’s a lot of buzz, let’s distill down to what the practical applications are,” Apgar said. “I don’t see any practical applications for real-time payments in either consumers paying for stuff or businesses paying other businesses. That’s really the long and short of it. It’s not to say that this technology is a nothingburger. It certainly is a valuable development in in the way money moves. But with the way that the market is established right now, it doesn’t really have applicability as a replacement for what we do with cards today.”

Despite the conversations around faster payments, practical use cases for merchants don’t exist now. Given how merchant payments are configured today, extremely limited value can be derived in using faster payments compared with established methods like ACH.

“That makes wire transfers good for buying cars on marketplaces, or for real estate transactions, where you want the funds to be available now and the transaction is indisputable and irrefutable,” Apgar said. “Everybody wants to say, ‘Oh, yeah, faster payments, man, this is where it’s at.’ But as of now there are no practical applications for either consumers using faster payments to buy goods or for processors and acquirers using faster payments to service merchants.”

The post Is There Any Reason for Merchants to Dip Their Toes into Faster Payments? appeared first on PaymentsJournal.

As businesses continue shifting toward digital payment solutions, Automated Clearing House (ACH) transactions have emerged as a dominant force in B2B payments. Known for their reliability, cost efficiency, and security, ACH payments are increasingly replacing paper checks and even some card-based transactions. But as technology evolves and real-time systems gain traction, the question arises—are ACH B2B payments still growing in value?

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Real-Time Payments: Use Cases in Acquiring

ACH B2B Volume Growth, in Trillions of U.S. Dollars

• 2020 – $41.74
• 2021 – $49.79
• 2022 – $52.53
• 2023 – $54.20
• 2024 – $58.24

Source: Nacha.org

About Report

Emerging technologies often capture attention for their potential to redefine the way we work and transact—and the introduction of real-time, around-the-clock payment systems is no exception. Platforms such as The Clearing House’s RTP and the Federal Reserve’s FedNow are transforming expectations for speed and availability in financial transactions.

In traditional banking, “float”—the gap between sending and receiving funds—played a major role in managing cash flow. While electronic payments have already minimized that delay, the rise of real-time rails raises new questions about added efficiencies for merchants and acquirers. This Javelin report explores how instant payment capabilities are reshaping the acquiring landscape, examining key use cases, adoption challenges, and what lies ahead for faster payments in commerce.

The post Is the Value of ACH B2B Payments Growing? appeared first on PaymentsJournal.

A gig economy marketplace seeking to pay a creator could soon issue payouts via text message, thanks to a new platform from Visa Direct and messaging commerce company Authvia.

However, the potential applications go far beyond the gig economy. According to Authvia and Visa, the platform could allow organizations across industries to send refunds, payments, incentives, and reimbursements.

The platform expands Authvia’s TXT2PAY functionality to include real-time payouts to Visa cards in select markets. Once a recipient verifies their identity and payment details, they can receive funds by SMS directly to their Visa card.

A Critical Operation

Payouts are the lifeblood of many businesses and a critical operation across countless industries. Yet, they’ve often been deprioritized in favor of payment acceptance—especially as new payment methods have emerged.

In healthcare and insurance, this imbalance has left reimbursements and claims heavily reliant on manual, time-consuming processes.

Many of these payouts are still issued by paper check, which can delay funds for weeks. On top of that, paper checks introduce risk: they can be lost in transit, sent in error, or highly susceptible to fraud.

Where Payouts Are Prevalent

For these reasons, many companies in sectors where payouts are prevalent—including healthcare, insurance, automotive services, and the gig economy—are actively seeking ways to make the process more efficient.

This often means shifting away from checks to real-time payment methods. Not only does this reduce time spent on administrative tasks, but it can also positively impact a company’s brand. For example, a real-time payout to a gig worker could go a long way toward keeping that worker loyal and engaged.

However, there are still risks that come with real-time payments, as faster payment often mean faster fraud. SMS and other messaging protocols have been common attack channels for bad actors. There are already many SMS-based “smishing” scams where criminals attempt to manipulate users into sending their payment data or accepting a fraudulent payout.

Despite these threats, real-time payouts could revitalize many industries. This means platforms like Visa and Authvia’s will likely continue to gain traction.

The post Authvia Adds Visa Direct to Its SMS Payments Platform appeared first on PaymentsJournal.

China has been at the forefront of mobile payment adoption, but this progress has also opened the door to new attack vectors for cybercriminals.

Traditionally, stealing card data has been the central objectives of fraud schemes such as phishing and malware attacks. Now, however, a technique known as ghost-tapping allows criminals to use stolen credentials for in-store purchases.

Once they obtain card data, they can add it to digital wallets like Apple Pay or Google Pay by intercepting the one-time authentication codes sent by these platforms. Using burner phones, they then make payments to retailers or even withdraw cash from compatible ATMs.

According to researchers from Recorded Future’s Insikt Group found, this trend originated in Southeast Asia and spread quickly across the region. But ghost-tapping could prove equally effective anywhere contactless digital wallet payments are accepted.

An Organized Network

Perhaps more concerning than the specifics of the fraud vector is the substantial infrastructure that supports it. Insikt Group identified organized networks that disseminate both the phones and the phishing software used in ghost-tapping fraud.

It also means that once a criminal makes a fraudulent purchase, they have a network to turn to for selling their ill-gotten goods. Many of these networks had been using the Telegram messaging platform until the company strengthened its security measures last year.

However, the report noted that this only pushed bad actors to shift to other platforms, and that the substantial volume of advertisements and recruitment messages there indicates a burgeoning market for goods obtained through ghost-tapping.

Future Fraudulent Use

These networks represent a growing trend in fraud: the emergence of cybercrime-as-a-service. Such syndicates provide the technology and software used for malware or ransomware attacks to other parties—for a fee.

These groups can increase the scale at which fraud attacks occur, while simultaneously making it harder for authorities to pinpoint the bad actors. Additionally, they lower the barriers to entry for criminals. Insikt Group noted that syndicates would often recycle burner phones and send them back to criminals for future fraudulent use.

The post How Bad Actors Add Stolen Cards to Digital Wallets Via Ghost-Tapping appeared first on PaymentsJournal.

Gift cards are thriving, but they are just one aspect of the booming prepaid industry. For example, many consumers may not realize that when they are reloading their account at Starbucks, Target, or Dunkin Donuts that they are essentially purchasing a digital gift card for self-use.

As Jordan Hirschfield, Director of Prepaid Payments at Javelin Strategy & Research, found in the Javelin Prepaid Consumer Sentiment: 3-Year Trend Highlights report, this is just one of the many trends driving the prepaid industry forward.

The study spotlighted upward trends, downward trends, and stable areas. All provide valuable data points for organizations deciding how they should invest in this segment and how they can better reach their customers.

Digital and Physical Equilibrium

Since the consumer sentiment survey was revamped three years ago, Hirschfield has seen several patterns emerge. One of the most-watched trends in the prepaid industry has been the continued prominence of digital gift cards.

As with digital payments, some have assumed that digital gift cards would eventually dominate their physical counterparts. However, this pattern may not hold true with prepaid.

“What’s interesting with digital and physical is it’s never going to be a flip to digital—it’s going to be an equilibrium,” Hirschfield said. “I think the data over three years is showing that there’s been a lot of stability in terms of the number of physical cards and digital cards in volume.”

Retail gift cards are still skewing toward physical cards. There are roughly 3 to 3.5 physical cards sold per person per year compared with approximately 1.5 digital gift cards.

Although these numbers have been steady, signs point to an upward trajectory for digital gift cards. Notably, there has been a substantial increase in load volume on digital gift cards.

Second, it is likely that the number of digital gift card purchases has been skewed. For example, the Starbucks or Target cards that consumers reload often aren’t reported as prepaid purchases because many individuals don’t consider them to be a gift card, per se.

As these statistics become clearer and funds continue to flow into digital gift cards, there is an increasing likelihood of an even digital-physical split.

“That’s how you’re getting to that equilibrium perspective, and that’s where I’m advising people I speak with—it is not an either-or scenario, it is a combined effort, and you need to be focused on it,” Hirschfield said. “Also, not only how does your physical support itself and your digital support itself, but it’s also how do they support each other? You have to be thinking of physical and digital, and the way it’s trending out over three years is as a 50-50 proposition.”

Self-Use vs. Gift Use

Outside of the digital and physical divide, there is also a growing split between those who buy prepaid products as a gift and those who buy them for self-use.

Some of the most popular segments where consumers buy gift cards for others have not seen substantial growth over the past few years. This includes food service companies, mass merchandisers, and apparel shops.

These industries have been relatively neutral, but that isn’t a negative. All of these segments are already in a strong position, so rapid growth isn’t to be expected.

However, several industries are experiencing growth in the gifting segment.

“Where we saw a lot of growth is in travel and entertainment: so hotels, casinos, resorts, theme parks, and airlines,” Hirschfield said. “That—to me—says, ‘That’s a great gift to give where there is no physical gift alternative.’ You can’t really give someone a hotel room, but you can give them the ability to get a hotel room. You can buy someone an airline ticket, but you don’t know their schedule.”

When it comes to consumers who buy prepaid products for themselves, substantial growth has been seen in the fast-food or quick-service restaurant (QSR) category. Interestingly, there has not been as much growth in the coffee segment, likely because many of the larger chains have already leveraged their prepaid programs.

There has also been growth in purchasing prepaid products for self-use from self-care providers, drugstores, and sporting-goods stores. Another segment that has emerged in the past few years is the online gaming and gambling sector.

“Online gaming, such as your Xbox, that is definitely growing, and that is definitely a self-use category,” Hirschfield said. “People who are gamers, that is part of their identity. But people who aren’t gamers just probably aren’t going to give it as a gift as much and aren’t really interested in it. So, it’s thinking about how do I get my user as a gamer to buy more of my prepaid products. That’s a big thing.”

Buying vs. Receiving

Hirschfield also examined the differences between what consumers want to receive as gifts and what they want to give as gifts—and found very different perspectives on either side of the equation.

“What people want are cash and cash alternatives, leading with gift cards,” Hirschfield said. “The No. 1 thing they want is a general-purpose gift card—your Visa, Mastercard, American Express, or Discover—because it’s accessible anywhere. The No. 2 thing they want—year after year—is cash, because cash is usable pretty much everywhere.”

After general-purpose gift cards and cash, recipients want retailer gift cards. This means that gift cards are the most popular choice for recipients by far. Roughly half of consumers would choose some form of gift card if they had only one choice.

However, there is a significant shift from the gift giver’s perspective. Even though cash is desired by recipients, most givers don’t want to give cash as a gift. Gift buyers also have a stronger preference for retailer-specific cards as opposed to general-purpose gift cards.

“The giver prefers a retailer gift card because they want it to seem a little more personal,” Hirschfield said. “But then the other thing, they still prefer to give actual gifts. They want someone to open something and have that experience. Cash doesn’t give you a gift experience. It’s a case of, ‘Hey, you may just go and buy something that’s a need, not a want.’”

A Positive Secondary Gift Carding Experience

However, this preference for giving physical gifts is opening up a new paradigm in prepaid.

“That physical gift is an interesting area for the prepaid industry, because many times that turns into a return, and a return turns into a store credit potentially—especially when it’s been a gift and it can’t go back to the original point of purchase,” Hirschfield said. “That store credit then becomes—in essence—another gift card.”

This trend has been increasing as more stores have loosened their return policies. This means there will continue to be opportunities for merchants to leverage this process because there is a pronounced desire among givers to give a physical gift, whereas recipients still want a gift card.

“How you handle a return is important, and not just by giving them a store credit, but maybe it’s a store credit with a bonus promotion and incentive,” Hirschfield said. “The behaviors are all still there—people who utilize gift cards buy more expensive items and spend more than the value of the card. That’s an interesting thing if you are a retailer or a program manager for gift cards.

“Especially in retail gift cards, it’s having that opportunity to say, ‘How do we make this physical item a positive secondary gift carding experience?”

The post Exploring the Trends Driving the Continued Success of Prepaid Products appeared first on PaymentsJournal.

Meal kit delivery company HelloFresh will pay $7.5 million to settle a civil lawsuit in California, which alleged the company deceptively enrolled consumers into auto-renewing subscription plans without proper disclosure or consent. These actions were found to violate the state’s Automatic Renewal Law and False Advertising Law.

Considered some of the strongest subscription regulations in the nation, California’s Auto Renewal Law has expanded significantly in recent years. Businesses using subscription models across the country will need to stay on top of these developments.

The complaint alleged that HelloFresh failed to clearly disclose subscription terms before collecting payment, did not obtain affirmative consent before charging customers’ credit or debit cards, and neglected to offer a simple and accessible cancellation mechanism.

In settling the suit, HelloFresh admitted no liability. “We take our commitment to customer transparency very seriously, and our subscription model and cancellation policies have been consistently clear to customers throughout the whole customer journey,” the company said in a statement.

A Law Grows Even Tougher

California’s Auto Renewal Law has long been one of the most comprehensive laws on subscription payments in the U.S. Over the years, it has led to settlements with businesses ranging from Peacock to SeaWorld.

Importantly, California keeps revisiting the law to add more teeth to it. Notable updates in recent years include measures that went into effect in July.

Among the changes: consumers must now receive an annual reminder that clearly states the renewal frequency, the amount to be charged, and step-by-step instructions for cancellation. In addition, businesses must offer cancellation options through the same channel the subscription was initiated—for example, if sign-up happened online, cancellation must also be available online, not just over the phone. 

Changes Around the Country

Other states have begun to follow California’s lead. In November, new restrictions will take effect in New York that are, in some ways, even stricter than those in California. For example, businesses operating in New York will be required to clearly disclose the price and terms of any automatic renewal offer—including detail cancellation instructions—before they can even request a consumer’s consent.

These state-level protections are being strengthened at a time when the federal government is pulling back. Just last month, a federal appeals court blocked a “click-to-cancel” subscription rule issued by the Federal Trade Commission during the final months of the Biden administration.

The post California’s Subscription Laws Gain Another Victory appeared first on PaymentsJournal.

Klarna will sell off $26 billion in buy now, pay later loans to Nelnet, a U.S.-based financial services firm primarily focused on servicing student loans, as it continues preparing for its much-delayed initial public offering.

The agreement allows Klarna to offload newly originated, short-term, interest-free pay-in-four receivables to Nelnet over multiple years. For Klarna, the transaction provides a cleaner balance sheet ahead of the IPO, converting outstanding loans into investable cash. The funds will also help support upcoming initiatives, including the launch of a Klarna-branded debit card later this year, as well as a credit card.

Uncertainty Delays the IPO

The Klarna IPO was expected earlier this year but was delayed as the Trump administration rolled out new trade tariffs. In its prospectus, Klarna noted that an economic downturn—driven by factors such as trade agreements or changes to immigration policies—could reduce consumer spending and negatively impact the financial health of its merchants. Last week, Klarna filed an amended agreement with the SEC, signaling that it is once again moving forward with its IPO plans.

Tough economic times disproportionately affect lower-income earners, who make up Klarna’s primary user base. These consumers tend to cut back on discretionary spending and focus on essentials, while wealthier shoppers continue to spend on higher-priced items.

“Klarna’s IPO plans are on hold due to uncertainty in the U.S. over the tariff plans and economic situation,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “If the economy sours, people are going to stop paying on their pay-in-four loans, particularly if the activity is not getting reported to the credit bureaus.”

Klarna’s rival Affirm recently began reporting BNPL payment activity to the credit bureaus, but Klarna has pushed back on the idea, arguing that the bureaus aren’t receiving accurate data on BNPL loans, which could unfairly impact consumers’ creditworthiness. At the same time, Klarna may also be banking on the notion that consumers will appreciate not having their BNPL activity affect their credit scores.

Worries About Stability

The BNPL business remains in relatively good shape for now. Klarna’s delinquency rate on BNPL loans fell below 1% for the first time in Q2 2025. However, ongoing tariff wars may weigh on the long-term value of these loans. By offloading a portion of the portfolio, Klarna was able to add some stability to its bottom line.

In addition, while BNPL and similar payment methods have grown in popularity, they have yet to deliver meaningful profits for Klarna. In its most recent quarterly earnings report, the company said revenues rose to $823 million this year, an 21% increase. Still, it posted a $53 million loss for the three months ending in June.

Seeking Profits in BNPL

Klarna and other BNPL providers have struggled to keep these loans profitable on a sustained basis. Klarna’s Form F-1 registration statement from earlier this year admitted that the fintech has “a recent history of incurring losses and may not be successful in effectively balancing growth and profitability in the future.” That document reported nearly half a billion dollars in consumer credit losses in 2024.

The primary benefit of these loans, from the retailer’s standpoint, is to increase sales rather than profit from lending activities. Data from the Journal of Financial Economics found that BNPL increases sales by 20%, driven by low-creditworthiness customers. The study concluded that the benefits of offering BNPL significantly outweigh the costs for merchants.

“Increasing average order value is the selling point from the BNPL company to the merchant,” Danner said. “With expanded access to credit, a consumer might have the credit to now buy that upgraded TV instead of just the standard TV. The revenue model is based around merchant fees for the transaction, as well as delinquency and late fees.”

That’s why BNPL providers have been introducing new products, like Klarna’s debit and credit cards. The BNPL model, while impressive from a sales standpoint, may not be enough on its own to drive significant profits.

“Given the challenges with profitability for these large fintech firms, I’m not surprised to see the expansion into traditional banking products and services like physical cards and savings accounts,” Danner said.

The post Klarna Sells Off $26 Billion in BNPL Loans Ahead of IPO appeared first on PaymentsJournal.

Wirecard was once the darling of the German stock market and a leading global payments player—until it went bankrupt due to mismanagement and fraud. The collapse left many major organizations unable to accept payments, having become too reliant on Wirecard as their sole payment service provider (PSP).

While this may be an extreme case, overreliance on a single PSP remains a costly—and all too common—mistake.

As IXOPAY’s Jobe Harrison, Solutions Architect, and Adam Vissing, VP of Global Enterprise Sales at IXOPAY, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed in a recent PaymentsJournal webinar, it is just one of many missteps payments teams make that can leave revenue on the table.

The Build-or-Buy Conundrum

Most payment errors stem from a single theme—organizations often take a set-it-and-forget-it approach to payments. This could mean they simply want to select a PSP and move on, or even believe they can build their own payments infrastructure from scratch.

“Most companies are not payment companies, but everyone needs to take payments,” Vissing said. “What we often see is that merchants that have large technical teams set out on payments implementation projects, thinking that they have all of the engineering know-how in-house and all of the payments know-how in-house to build a platform that scales with their business across all of the markets that they operate in.”

While many teams may be able to cobble together a solution that is sufficient for the company’s current situation, they often come to realize they aren’t equipped to handle all aspects of the payments process.

As the business environment shifts or the company scales, the organization will likely face a hard decision: whether to keep pouring money into the in-house solution or scrap it entirely.

Oftentimes, the sunk costs from these projects would have been better invested in leveraging an existing platform. This makes the build-or-buy conundrum one of the most significant decisions a business faces.

“It’s not super challenging to get payments right, but the challenge is how do you deal with changes?” Apgar said. “Business changes open up new sales channels, geographies, and product mixes that change the risk profile. Then you have regulatory and compliance changes like PCI 4.0 that are coming out this year. At some point, after you’ve gone through a couple of iterations, most merchants sit down and say, ‘How do I make it easier to manage change?’”

A Silent Anchor

Merchants seeking help with payments often turn to a PSP. Although a payment service provider can take many burdens off a merchant’s hands, overreliance on a single PSP comes with its own set of challenges.

“It doesn’t show up as a fire on day one but over time, it becomes like a silent anchor for your business, holding you down,” Harrison said. “One of the first big signs is when your payments team starts saying things like: ‘We’d love to test another PSP, but there’s always a but.’ Or they say: ‘It’s too complex, it would require too much engineering effort.’ Or worse: ‘We can’t because all our data is siloed in our current PSP’s token vault.’”

Another red flag is when a merchant’s decline rates spike and they have no visibility into where the issue lies—or any recourse to make adjustments. At this point, the problem goes beyond technical issues and becomes a strategic constraint.

For example, a business may identify an opportunity to expand into Brazil. However, if their PSP doesn’t support Pix—the most popular payments platform in the country—the company will likely face bottlenecks, plummeting authorization rates, and be forced to implement workarounds.

Another issue with relying on a single PSP is that it puts the merchant at the provider’s mercy. The PSP could conceal their prices or restrict services, leaving the business without a benchmark for comparison.

Perhaps even worse, the organization is exposed to serious risk if the PSP stops processing payments altogether.

“In a situation where you cannot take payments anymore, in the majority of cases, these are resolved relatively fast and the impact may be limited,” Vissing said. “Or it could also be a disaster, conversely, if it happens on the wrong day of the year. If your PSP decides to sever their relationship to you, you suddenly find yourself in an absolute emergency situation.”

“Sometimes you get termination notices from PSPs on very short notice,” he said. “We have seen this happening time and time again across many different industries. Not only those that are commonly treated as high risk, but also more traditional ones across financial services and across travel have had these experiences.”

Data-Driven and Dynamic

The potential for a PSP outage is one of the main reasons many organizations have adopted payments orchestration platforms. However, a common mistake is not leveraging these platforms to their full potential.

Smart routing has become a cornerstone of orchestration platforms enabling businesses to optimize payment selection. For example, cascading—a strategy where failed payments are retried through alternate channels—can drive significant additional revenue.

Maximizing authorization rates is another way to boost top-line growth. A smart routing platform can use historical data to identify the processors most likely to authorize a transaction.

Cost optimization is also a key objective of smart routing, though it has become more complex due to emerging payment types and regional nuances.

“There are stark differences when you’re working with debit cards in Europe or in the U.S.,” Vissing said. “In environments where interchange is regulated, routing has perhaps less of an impact on the bottom line, as in other markets such as the U.S., where the routing of a debit card transaction can have a massive impact on the cost that you have for a payment.”

Another key element of smart routing platforms is they give merchants a fallback if their preferred processor is unavailable or a transaction fails.

“For me, smart really means that it’s data-driven and dynamic,” Harrison said. “It’s not just about randomly splitting traffic across PSPs, it’s about those intelligent decisions based on what’s happening in your payment flows. Routing should take those performance metrics like authorization rates and rates by issuers, region, and card type, into account.”

“For example, if PSP A performs better with cards from a certain bank, while PSP B handles cross-border transactions more reliably, a truly smart routing strategy takes all of this data into account,” he said. “Your routing solution shouldn’t be hard-set rules, it should be dynamically altered based on that data that you’ve iterated on and learned from, just like you would with any other product.”

An Innovation Springboard

Many organizations also take a narrow view of tokenization, treating the technology as a checkbox to maintain PCI DSS compliance. In and of itself, PCI compliance is an important process that protects cardholders, lowers the chances of data breaches, and eases the audit burden.

However, fully leveraging tokenization can unlock benefits beyond compliance. For example, issuers largely trust the network tokens issued by Visa and Mastercard more than the primary account numbers that are tied to specific merchants.

This is because the credit card companies’ tokens are dynamic. If a card is reissued or its details change, the network token is automatically updated. This means issuers are more likely to approve these transactions, and incremental improvements in authorization rates can compound into significant revenue gains.

For consumers, tokenization powers aspects like one-click checkout, card-on-file, and in-app payments—all of which have become standard expectations. Yet, the technology holds even greater potential.

“It’s much more than just a security checkbox,” Vissing said. “Of course, as a PCI DSS level one compliant provider, tokenization is also a security checkbox for us. But it has really been an innovation springboard, something that has allowed us to build a fantastic platform. With those merchants that choose to build a larger part of their payments infrastructure themselves, that’s typically one of the first things that they have to implement before they can get anywhere.”

Real Business Impacts

Because of the rapid shifts in technology and regulations, one of the most important considerations for merchants is to build flexibility into their systems from the beginning. Although it may be tempting for an organization to choose the PSP that offers the fastest integration or the flashiest products, this often leads to bottlenecks down the line.

“You should instead think about how are you going to stay portable?” Harrison said. “Things like setting up your stack in a way that makes it easy to plug in new PSPs are important nowadays. The moment you have multiple PSPs, multiple routes, the ability to shift traffic, that’s when you gain that negotiating leverage. I’ve seen merchants drop basis points off their processing fees just by introducing a secondary provider, so the business impacts are real.”

In addition to partnering with more PSPs, an organization should leverage smart routing to reduce fees and increase authorization rates. This functionality becomes critical as businesses scale or enter markets dominated by specific payment methods, such as in Southeast Asia.

Another way to ensure flexibility is by creating an agnostic vault. If a company’s tokens are owned and stored by a single PSP, switching providers can be difficult. The organization would either need to recollect card data from all its customers or undergo a lengthy migration process.

“Either way, you’re locked in with your PSP, and that’s more than a technical limitation, that’s a risk,” Harrison said. “Contrast that with agnostic tokenization or even network tokenization, where the tokens are portable and they’re not tied to one processor or PSP. Now, you own that customer relationship.”

“You can route transactions based on performance, and you can failover during an outage,” he said. “You can run A/B tests across PSPs, which allows you to scale globally without re-architecting everything. It puts you back in control.”

Moving to a Growth Lever

To reclaim control, merchants who have previously treated payments as an afterthought must now make them a priority.

“If you still think, ‘I’m going to go with the largest PSP I can find or the first PSP that answers my request, and that will be enough to set me up for success for the next few years,’ I think you’re going to have a bad time,” Vissing said. “The mindset you should be at includes a layer of abstraction—call it an orchestration layer—that is the basic blueprint for payments infrastructure today.”

As more organizations adopt this approach, one of their highest priorities should be payments optionality.

“It’s really about a shift from thinking of payments as plumbing to thinking of it as a product,” Harrison said. “Something you can iterate on, optimize, and even use as a competitive advantage. When teams start to think that way, everything else follows. Better architecture, better data, better customer experience, that’s truly when payments move from a cost center to a growth lever.”

The post The Greatest Payments Mistakes, and How to Solve Them appeared first on PaymentsJournal.

Stripe’s network of businesses will be able to offer their customers in Brazil the option to make Pix payments in Brazilian Reals, with settlements available in the merchant’s domestic currency.

The integration, facilitated by Latin American payments firm EBANX, will be available to both businesses directly integrated with Stripe and those using e-commerce platforms built on Stripe’s infrastructure.

A key use case for the launch is cross-border payments. One of the most effective ways to improve international transactions in Brazil is to offer local payment methods.

This approach can deliver measurable results: data from EBANX shows that merchants who support Pix increased revenue by 16% and grew their customer base by 25% over a six-month period.

Capitalizing Upon Ubiquity

Pix has quickly become the predominant payment method in Brazil since its launch in 2020. The real-time payments system processed over six billion transactions per month last year, and 93% of Brazilian adults say they use Pix.

The main reasons the network has gained traction so rapidly are that it is fee-free and transactions are real-time. These factors have driven the platform to surpass credit cards as the leading payment type in Brazil.

Pix has capitalized on its ubiquity by launching new features like contactless payments, recurring payments, and a buy now, pay later service. These features have increased the platform’s popularity to the point where merchants who want to tap into the Brazilian market must offer Pix capabilities.

Options Are Effective

Reaching more customers in Latin America is one of Stripe’s goals, as Brazil is the largest market in the region. It also represents a shift toward incorporating more real-time payments, after Stripe has been heavily focused on crypto-related ventures in recent months. The company also made significant acquisitions of both stablecoin company Bridge and crypto wallet Privy.

However, the Pix integration isn’t Stripe’s first foray into instant payments—it already  operates its own pay-by-bank platform, which was first launched in the UK before expanding into France and Germany.

While there have been questions about how much traction this platform will gain, certain options have proven effective. Stripe noted that merchants offering at least one additional relevant payment method beyond cards saw average revenue growth of 12%.

The post Stripe Adds Pix Payments Through EBANX Integration appeared first on PaymentsJournal.

Even though a federal judge has vacated the Federal Reserve’s cap on debit card swipe fees, the issue remains far from settled. If the cap is ultimately suspended, the merchants who brought the suit could end up facing even higher transaction costs.

In the case, the judge granted summary judgment in a 2021 federal lawsuit filed by Corner Post, a North Dakota truck stop and convenience store. The ruling means the Fed’s proposed cap reduction will not take immediate effect, allowing the agency time to appeal.

Before the Dodd-Frank Act passed in 2010, directing the Federal Reserve to cap swipe fees, retailers paid as much as 44 cents per transaction—making it costly for small businesses to accept debit cards. The fees remained unregulated until the Fed set a cap of 21 cents in 2011 following the law’s passage.

In 2023, the Fed proposed lowering the current debit fee cap even further, to 14.4 cents. At the time, the National Retail Federation suggested the limit should be closer to 10.5 cents per transaction. These fees are set by Visa, Mastercard, and other card processing networks.

What Is Reasonable?

The specific requirement in Dodd-Frank states that banks must set swipe fees at a reasonable and proportional level. The Fed claims its rule was adopted in full compliance with Dodd-Frank, but Corner Post argued that the swipe fee cap exceeded what could be considered reasonable.

“The merchant is arguing that the Fed did not follow the rules of Dodd-Frank in setting a single price, and that the Fed should establish a more comprehensive pricing approach that addresses variables such as purchase amount and merchant category,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “In taking this approach, the merchant is anticipating that this will result in even lower debit pricing for convenience stores, but that may not be the case as banks weigh in with their costing input.”

Rolling the Dice

The Federal Reserve now has the opportunity to appeal the ruling. However, given the administration’s broader anti-regulatory stance on many types of financial transactions, the Fed may lack the appetite to reassert its authority on swipe fees.

“Corner Post is rolling the dice that the court will force the Fed to establish lower fees for convenience stores, but if they eliminate the cap completely, the merchant will end up paying more,” said Apgar. “This is dead center in the ‘be careful what you wish for’ category.”

The post Merchants Face Uncertain Consequences in Lifting of Debit Card Swipe Fees 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.

Handwave has raised $4.2 million to bring its biometric tech into stores. The startup’s contactless system allows shoppers to leave their phones and wallets in purses and pockets, enabling them to pay, verify their identity, and collect loyalty points simply their palm.

By and large, the company is betting that its palm-scanning tech can eliminate checkout friction.

Palm payments have been around for some time, with the most notable implementation being Amazon One, the biometrics system introduced by Amazon and rolled out in more than 500 Whole Foods stores, as well as other locations. While Amazon’s push has made an impact, the biometric authentication landscape remains fragmented.

“There’s no question we’ve seem a surge in biometrics payments technology in the last 18 months,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Handwave is following Amazon’s lead with palm recognition, in contrast to JPMorgan Payments in the U.S. and Facepay in South Korea who are deploying facial recognition technology for payments.”

A Leading Contender

Initially, palm scanning was not a leading contender to become the biometric of choice, largely due to consumers’ familiarity with fingerprint and facial scans via mobile phones. However, there’s growing evidence that palm biometrics are gaining traction.

Palm scans are highly accurate and, unlike fingerprint scans, they don’t require users to touch the scanner. They are also gaining ground outside of Amazon. China’s tech giant Tencent has led several recent palm payment initiatives, and Poland’s Autopay has piloted its HandGo palm payment system.

Piloting Amid Challenges

There are still many obstacles to bringing biometric payments to brick-and-mortar stores. One of the main challenges is the cost of installing and maintaining scanning equipment at checkout. To mitigate this, Handwave is leveraging a different model to keep transaction costs down.

“Handwave is incorporating pay-by-bank enrollment, enabling them to offer a lower cost of payments to merchants as an incentive to deploy the technology,” Apgar said.

In this model, merchants would pay a transaction fee when they use Handwave’s tech, which the company touts as being lower than the typical transaction fee.

Beyond cost, another challenge with biometric systems is the need for additional consumer buy-in. Consumers must enroll with the merchant or the system and be willing to trust their data to these platforms.

All of these issues help explain why there are a rapidly increasing number of biometric pilots but few large-scale implementations.

This is also applies to Handwave. After three years, the fintech is preparing for market pilots that will deploy its palm-scanning devices at retail stores. It remains to be seen whether the company can gain traction among competing players and biometric formats.

The post Handwave Sharpens Focus on Palm Biometrics in Retail appeared first on PaymentsJournal.

In the latest convergence of digital assets and mainstream financial services, PayPal is launching a platform that enables merchants to accept payments in over 100 cryptocurrencies.

The service, Pay with Crypto, allows consumers to connect their existing crypto wallets from major platforms like Coinbase Wallet, MetaMask, Kraken, and OKX—unlocking access to a market of 650 million crypto users. At launch, the platform will be available to all U.S. users except those in New York.

One of the key drivers behind PayPal’s launch is the need to address inefficiencies in cross-border payments, which are often plagued with payment delays and high fees. PayPal noted that the platform will charge merchants a 0.99% transaction fee on crypto payments—a rate it claims is 90% lower than the average credit card processing fee.

Inclusive, Borderless Commerce

The crypto launch follows last week’s unveiling of another cross-border-focused solution from PayPal: PayPal World. With this platform, PayPal and Venmo wallets can connect to leading global wallets, including India’s Unified Payment Interface (UPI), China’s WeChat Pay, and potentially Latin America’s Mercado Pago.

This means PayPal and Venmo users can send payments to users of these other systems—even if the recipient doesn’t have a PayPal account—and vice versa. While PayPal World and Pay with Crypto are currently two disparate systems, Alex Chriss, President and CEO of PayPal, noted how both launches are indicative of the “the future of inclusive, borderless commerce.”

Yields for Merchants

Digital assets have long been considered one of the driving forces behind the emerging payments paradigm. A key component of this shift is PayPal’s stablecoin, PYUSD, as all transactions on the platform are automatically converted into PYUSD or fiat currency at checkout.

Though PYUSD was launched roughly two years ago, it has yet to gain substantial ground in a market where Tether holds a commanding lead. However, PYUSD’s market cap has increased roughly 80% since the beginning of the year.

This momentum is expected to continue due to PYUSD’s central role in PayPal’s crypto platform. However, it also coincides with a wave of new stablecoins entering the market, including one from payments competitor Stripe.

The immediate conversion to PYUSD also benefits merchants by allowing them to accept crypto payments without exposure to volatility—and potentially earn a yield.

In a statement, Chriss also noted that “the business can accept crypto for payments, increase their profit margins, pay lower transaction fees, get near instant access to proceeds, and grow funds stored as PYUSD at 4% when held on PayPal.”

The post PayPal Brings Crypto Payments to Checkout appeared first on PaymentsJournal.

As e-commerce scams mount, Amazon is investing in a 3D imaging company that could help address the growing problem of returns fraud.

The issue stems from a gap in the current online shopping model: a consumer can request a refund, and it is typically issued once the product is shipped back to the retailer. However, bad actors are increasingly sending back empty packages—or ones that don’t contain the original item—and still pocketing the refund.

To combat this, Amazon is backing Cambridge Terahertz, a startup that builds package-scanning technology for supply chain and security applications. Ideally, the tech can inspect returned packages to verify that they contain the correct items before Amazon processes a refund. It’s also compact enough to be installed at multiple points throughout Amazon’s supply chain.

Unlocking Attack Vectors

As data from Appriss Retail reflects, returns fraud is a growing issue, accounting for $103 billion in losses last year. It’s just one of many fraud concerns for e-commerce merchants.

The e-commerce zeitgeist has unlocked new frontiers for merchant—but it also opened new attack vectors for bad actors. One of the main ways cybercriminals are exploiting e-commerce is by impersonating well-known brands.

The emergence of AI has further empowered bad actors, giving them the tools to make their impersonations more convincing. Okta recently discovered that AI can be used to create realistic phishing sites that clone brands like Microsoft, Amazon, or eBay with just a few simple prompts.

Social Media-Driven Scams

Social media has given cybercriminals a new way to both study and attack their targets. For example, a bad actor may follow a social media influencer to learn which products they are promoting and attempt to capitalize on the latest craze by sending phishing emails that mention the influencer or the product.

Amazon and eBay have also been singled out in other scams driven by social media.

“You go to Facebook Marketplace, you click on an ad, and it redirects you to another site,” Tracy Goldberg, Director of Cybersecurity at Javelin Strategy & Research, told PaymentsJournal. “Often, it’s going to be a typo domain. Let’s say that I think I’m buying a Louis Vuitton. But when I click on that link and it takes me to the site, Louis Vuitton will be a typo domain, maybe with one of the T’s missing.”

“These particular types of attacks are getting much more sophisticated, and consumers have a false sense of trust. If they see a link that comes to them through a marketplace that they think is a trusted site, how often do we look at the domain once we click on the link?” she said.

Under Direct Attack

In addition to attacks aimed at social engineering customers, merchants themselves are often targeted by direct cyberattacks. Department store chain Marks & Spencer (M&S), a fixture of the UK’s retail landscape for over a century, faced significant losses and operational disruption following a ransomware attack.

A group of hackers infiltrated the company’s systems and threatened to shut down its network unless a ransom was paid. M&S refused to comply with the bad actors’ demands—resulting in the loss of access to critical systems. The department store was forced to halt all e-commerce operations and continued to grapple with the aftermath for months.

A Tipping Point

The constant onslaught against merchants’ systems, communications, and customers has brought the industry to a tipping point. Many fraud attacks are now powered by sophisticated technology and even perpetrated by organized cybercriminal organizations. As a result,  many merchants are seeking tech solutions of their own.

Artificial intelligence has factored into many of these solutions because the technology can parse vast amounts of data and identify red flags. This functionality is especially applicable in card-not-present environments like e-commerce.

However, any tech-based fraud defense comes with challenges. Because AI models are imperfect, the technology can make mistakes if given too much rein in the fraud mitigation process.

“Sometimes a decision is very obvious, but in cases where it’s not, if you’re not restrictive enough, you’re going to take a fraudulent transaction,” Don Apgar, Director of Merchant Payments at Javelin Strategy & Research told PaymentsJournal. “If you’re overly restrictive, you’re going to alienate a good customer who was trying to make a legitimate purchase.”

Playing Catch-Up

Customer friction, regulatory concerns, and brand reputation are constant concerns for merchants, but these considerations mean nothing to bad actors. This imbalance is a key reason why criminals have gained such a head start in adopting new technologies, leaving merchants in a perpetual game of catch-up.

Even Amazon, one of the world’s largest retailers, is only now beginning to close the loophole around returns fraud—after losing billions of dollars. To stand a chance against a rapidly escalating fraud epidemic, organizations will need have to think outside the box and embrace more innovative, proactive approaches.

The post Amazon Takes on Returns Fraud appeared first on PaymentsJournal.

Consumers increasingly interact with their phones by using facial recognition software and fingerprint scans. This familiarity—coupled with the technology’s potential for fraud mitigation and friction reduction—has been a driving force behind the movement to implement biometrics at the point of sale.

However, as Christopher Miller, Emerging Payments Analyst at Javelin Strategy & Research, discovered in the report Global Biometric Pilots Help Smooth the Way for U.S. Adoption, the increasing number of biometric pilot programs hasn’t translated into many real-world implementations.

Additionally, because most of these pilots are limited in scope or conducted in markets outside the United States, U.S. organizations must consider many factors before diving into biometric payment initiatives.

The Universe of Payers

One of the reasons biometric programs haven’t been deployed on a wider scale is timing. A pilot that launched late last year could have been a 12-month trial run that hasn’t reached maturity. Even with the trials that are nearing completion, a period will follow when stakeholders will evaluate the data and decide to move forward, pivot to a different project, or scrap biometrics entirely.

This means that the key data point that can be gleaned from biometric pilots is simply that there is an increasing number of them.

“Pull up five full-scale implementations and say, ‘Here are the use cases of how you can make money on this,’” Miller said. “That is—generally speaking—how payment point-of-sale technologies are sold. That’s the deck that would come to a merchant. They would say, ‘If you implement this, we’ve seen a 30% increase in ticket size. It only costs 5% of the ticket, so you’re ahead 25%. It’s a great deal—when would you like to sign?’ In this case, we aren’t there.”

Even as some of the initial data from the pilots trickles in—be it about customer satisfaction or outcomes—the results should be taken with some skepticism. The participants in early-stage trials are a small sample and often aren’t representative of the entire market.

Additionally, organizations shouldn’t bank on results from early pilots that tout biometric tech’s effectiveness at improving back-office functions like fraud reduction or payment acceptance.

“It could turn out that—on widespread adoption—it somehow is easy to defraud the biometric point-of-sale devices that are being tested now,” Miller said. “That doesn’t show up in a small-scale pilot because everybody in the pilot is vetted and screened and you presumably didn’t allow a lot of world-class villains into your pilot.

“So, your universe of payers is not the same. It is a less threatening universe of payers than the real universe of payers, where criminals are able to identify the weak links in a chain. ’”

Things to Iron Out

Although the initial participants in a pilot aren’t always an indicative sample, the limited data available suggests that most consumers are open to wider-scale biometrics adoption.

Additionally, there has been a growing emphasis on biometrics by the leading players in the U.S. market, including Visa, Mastercard, and JPMorganChase. All three companies have initiatives in the works to build a better biometric payment infrastructure.

However, the organizations seeking to move biometrics forward must consider the impacts on all parties—not just consumers but also regulators, merchants, resellers, and payments processors.  

They also must consider aspects such as payment network standards, standardized hardware, and all the components necessary to make biometric payments a reality.

“If you said, ‘Hey, I want to do this,’ and you’ve already made up your mind, it’s not necessarily easy,” Miller said. “If you start to ask questions about, ‘Well, what are the network standards? What happens if the payment is reversed? Who owns it? What’s my risk?’ Those sorts of things are still being ironed out.

“I think it’s also quite reasonable to think that those sorts of issues can be resolved in a satisfactory manner for early adopters over a two- to three-year period. It doesn’t happen in three months, it’s not going to happen by the end of the year, but progress can be made month over month, quarter over quarter, year over year.”

Suited to the Space

In addition to the nuts and bolts, organizations must consider if their space is suited to biometrics. In many cases, the costs and the management of a biometric payments program don’t justify the investment.

However, the technology can make a significant impact in some areas. For example, a consumer making a one-time purchase at a convenience store isn’t likely to engage with the merchant’s biometric payment program. In an entertainment venue or sports arena where there are large crowds, many users could be enticed into participating.

There are also many loyal fans and season ticket holders in this space who have firmly established relationships with their teams and are more than willing to go through the enrollment process.

“If you’re going to go somewhere all the time and it makes sense to you, it’s an easier payoff to say, ‘Will you bother to do this?’” Miller said. “If you are somewhere where you never intend to be there again, it is less likely that you will do it. The arena offers us, I think, a very helpful way of understanding how those experiences might be segmented such that it makes sense to do it here.

“It’s kind of cool for our season ticket holders. It’s part of why their experience is unique and fun and convenient and super awesome. People who just showed up for a concert who are never going to come back again, that’s fine, we’ll take their cards. We don’t need to go through the trouble of establishing them.”

An Uneven Future

Although there are many considerations for future implementations, the increase in biometric pilots means momentum is building to bring the technology to retail environments. However, biometric payments at a merchant’s point of sale aren’t likely to be universal soon.

“What does the future look like?” Miller said. “It looks like uneven adoption. It looks like segmentation based on use case and value. I think we continue to make the argument that the value proposition for biometrics that is rooted in customer experience is likely to be where we’ll see some of the first successful implementations. It’s probably not going to be at the grocery store, because that is full of one-time users.”

However, the accuracy of the technology and its potential for fraud reduction mean biometrics will move beyond trial runs in the next three to five years.

“From the perspective of someone who has a responsibility in the U.S. market—if I have to think about what is it that my team needs to be working on over that time period, this now fits in that timeframe,” Miller said. “The technology is there; it does actually work. You can go look at it and see there are activities underway to find weaknesses, to determine strengths, to do these learnings.

“They’re not quite there right now, but that’s OK, because you’re not talking about doing it right now. You’re thinking, ‘Should I do this in three to five years?’ You have the luxury of time to follow these types of pilots and this space to gather the information that would allow you to say two years from now, ‘OK, in three years, we are going to have biometrics implemented across 20% of our store base for this type of use case.’”

The post Biometric Payments Pilots Are Picking Up, But U.S. Adoption Is Years Away appeared first on PaymentsJournal.

Two U.S. Senators have introduced the Payment Choice Act, the latest attempt to ensure that consumers can use cash at physical retail stores. While several states and cities have passed similar laws, previous efforts to enact cash acceptance legislation at the federal level have stalled.

Under the proposal, businesses that accept in-person payments at a physical location would be required to accept cash for transactions up to $500. Additionally, retailers would be prohibited from charging cash-paying customers a higher price.

The bill’s sponsors, Senators Kevin Cramer (R-N.D.) and John Fetterman (D-Pa.), noted that approximately 4.5% of U.S. households lack access to banking services, making cash transactions necessary for these individuals. The Senators also argued that the dollar is the nation’s legal tender and that any business operating in the U.S. should be willing to accept it.  

“Forcing the use of credit and debit cards or imposing premium prices on goods and services paid for with cash limits consumer choice,” Cramer said in a statement. “Americans should have the option of using cards or cash, but they should be the ones who make that choice.”

Consequences for Retailers

Cramer introduced an earlier version of the Payment Choice Act in 2023, but it failed to gain traction. Industry experts warn that eliminating cash could have serious consequences for small merchants, who have consistently opposed such measures.

“Merchants complain about the cost of accepting card payments, but the merchant also gets a lot of benefits from card payments, including not having to handle and control cash, reduced risk of armed robbery and theft by the staff, no night drops to make at the bank, etc.,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The full benefit of these savings are realized when the merchant eliminates cash and the all the associated supporting functions.

“If the merchant still accepts cash, even in small amounts, the big savings from not needing any cash functions are greatly diluted,” he said. “This is what is driving many merchants to add surcharges to credit card purchases, because as a business they can’t eliminate the cost of cash and yet still have to pay fees for card purchases.”

Similar State Measures

The idea gained popularity during the COVID-19 pandemic, when public health measures and scattered coin shortages made it more difficult for some consumers to make cash purchases. Colorado and Washington, D.C., passed cash-acceptance laws, following earlier measures from New Jersey and New York City.

However, similar proposals in states like Idaho, Mississippi, and North Dakota did not pass. Many Republicans sided with business groups arguing on behalf of retailers, saying they should be free to choose how to serve their customers.

Even in states that have enacted such legislation, enforcement has proved difficult. When Colorado Governor Jared Polis signed the state’s bill into law in 2021, he warned that the measure would be largely unenforceable. An investigative reporter in Denver later failed to find any instances of Colorado businesses being fined for violating the law.

In New York City, a high-end chain of ice cream shops openly ignored the city’s cash requirement—going so far as to post signs stating that credit cards were the only accepted form of payment. Their bold defiance eventually put them on the city’s radar, and they ultimately agreed to accept cash after paying a fine.

These laws also include exceptions for transactions that are typically conducted by card. In Colorado, hotel and car rental security deposits are exempt from the cash requirement. Detroit carved out an exception for sporting venues like Comerica Park and Little Caesars Arena, both of which provide machines that convert cash into prepaid cards that can be used within the venues.

The current version of the Payment Choice Act contains similar exceptions, allowing retailers to offer cash-to-card conversion as long as no fee is charged. Retailers also aren’t required to accept bills of $50 or larger.

Pushed by the ATM Lobby

The movement to require businesses to accept cash has been fueled in part by Cash Matters, a nonprofit supported by the ATM industry. Founded in 2017, Cash Matters advocates for the continued use and relevance of cash as an essential part of the payment landscape. According to the group, cash is used in 12% of all point-of-sale transactions in the U.S.

“The big push on this type of legislation comes from ATM operators who profit from the convenience fee that we pay to withdraw cash at a non-bank ATM,” said Apgar. “As cash usage continues to decline and is replaced by digital wallets, these guys are trying to stay relevant and keep cash alive as a payment option.”

The post Legislation Requiring Cash Acceptance Faces an Uphill Battle appeared first on PaymentsJournal.

In the latest convergence of artificial intelligence and payments, OpenAI will integrate a payments checkout system into ChatGPT.

Earlier this year, ChatGPT and Shopify partnered to upgrade the shopping feature within the AI platform. The collaboration enabled users who search for a product on ChatGPT to see the top results with prices, reviews, and links to relevant sites. However, to buy the product, users were still directed to the merchant’s platform.

According to Reuters, consumers will soon be able to complete their purchases directly on ChatGPT. Open AI is working with Shopify and other brands to develop the system and negotiate rates, as merchants fulfilling orders through ChatGPT would pay a commission to OpenAI.

Growing Payments Integrations

This integration reflects a growing trend of AI chatbots and agents being empowered to perform transactions. Perplexity recently announced that its Perplexity Pro subscribers would be able to make payments directly within its AI interface.

This functionality is enabled by PayPal, with both PayPal and Venmo payment methods supported. The goal is to give Perplexity users the ability to make one-click payments once they’ve selected their preferred product through the AI platform.

The Rush Toward Agentic Commerce

Taking this model a step further, both Visa and Mastercard have rolled out agentic commerce platforms designed to make AI agents into full-scale shopping assistants. Mastercard’s Agent Pay and Visa’s Intelligent Commerce platforms are built to handle every aspect of a transaction—including payment—with little customer interaction.

However, giving AI this level of control has raised concerns, particularly around the technology’s potential for inaccuracies and hallucinations. These risks are somewhat mitigated in the Perplexity and ChatGPT models, where the final payment decision still rests with the user.

Nonetheless, privacy and security concerns remain across all these scenarios, as bad actors could exploit these still-nascent AI models in various ways. Still, for all the valid concerns, the rush toward agentic commerce doesn’t appear likely to lose momentum.

“Skepticism is warranted, but this is happening,” James Wester, Co-Head of Payments at Javelin Strategy & Research told PaymentsJournal. “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 OpenAI to Add Payments Checkout in ChatGPT appeared first on PaymentsJournal.

Many merchants have adopted card surcharging to reduce costs and drive customers to use alternative payment methods. However, Australian regulators consider the practice outdated.

The Reserve Bank of Australia (RBA) has proposed eliminating card payment surcharges—a move the central bank estimates could save consumers roughly A$1.2 billion per year.

“Australia seems to be in a similar situation as the U.S. with regards to payment card usage—with merchants increasingly opting to add a surcharge to card payments to offset what they feel is the high cost of the interchange fees paid to card issuing banks,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.

“Meanwhile, the central bank is looking at the big picture of the value and efficiency that card payments create for both consumers and merchants. It’s proposing what would amount to a compromise that bans merchants from surcharging card payments in exchange for lower interchange fees,” he said.

A Simmering Situation

The RBA also cited the decline of cash as a key reason to scrap surcharges. Since surcharging was first introduced, cash has dramatically fallen out of favor as a payment method.

With card payments now predominant, surcharges have lost their intended effect of steering consumers toward alternate payment options. Instead, they’ve effectively become a penalty for using the most common form of payment—a practice that often breeds consumer resentment.

Even so, merchants have continued to defend surcharging as a necessary measure to protect their profits.

“Recent Javelin research shows this situation simmering and beginning to boil in the U.S., as more merchants in everyday business categories turn to surcharging to offset rising card acceptance fees,” Apgar said.

“Credit card issuers are realizing record APR margins over 14%, while credit cards yield among the highest return on assets of any bank product. So there is an argument to be made that there is room to restructure interchange fees without unfairly impacting card issuers’ profitability,” he said.

An Ill-Advised Strategy

While there may be room for reform, credit card surcharging has become an ill-advised strategy for merchants. Some argue that if surcharging is banned, businesses will simply embed transaction costs into their prices, but this is often a better solution. After all, merchants don’t typically itemize other costs of doing business when presenting prices to customers.

Although surcharging may be outmoded, merchants’ ongoing calls for a revamp of the credit card model suggests it is time for a broader shift in the paradigm.

“Interchange paid to card issuers isn’t the only culprit behind rising merchant costs; brand and network fees imposed by Visa and Mastercard have driven record profitability for those companies, and payment service providers have steadily raised fees to fund tech innovation and product delivery for merchants,” Apgar said.

“Given the trend toward a hands-off regulatory environment in the U.S., it’s unlikely that the Fed will step in, as happened in Australia,” he said. “But it begs the question whether the overall fee structure for card payments needs a rethink before consumer momentum is permanently damaged by growing surcharge activity.”

The post Australia to Ban Surcharging on Card Payments appeared first on PaymentsJournal.

As digital wallets and contactless cards gain ground, the way consumers pay at physical stores is shifting fast. But which payment methods are actually winning at the checkout counter? What are the top payment preferences in brick-and-mortar locations, and what do today’s shoppers reach for first—is it tap of a phone, a chip-enabled card, or still, for some, good old-fashioned cash?

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Surcharging on Card Transactions: In Search of Balance

Preference of Credit, Debit, Cash Usage by Consumers in Physical Locations in Past 12 Months, by Percentage

• 42% of consumers prefer major credit card usable anywhere.
• 28% of consumers prefer major debit card usable anywhere
• 14% of consumers prefer cash.

Source: North American PaymentsInsights, 2024

About Report

Charging customers extra for using a credit card—commonly referred to as surcharging—might seem like a practical way for merchants to recover processing fees. However, in many cases, the potential backlash outweighs the benefit. With more consumer-friendly payment options available and a growing emphasis on seamless checkout experiences, passing costs directly to shoppers can quickly become a liability.

A new report from Javelin Strategy & Research takes a close look at how surcharging is playing out in today’s market. It outlines the legal and operational risks merchants face, the obligations involved, and how different businesses are approaching this tactic. The report also compares two real-world surcharging strategies used by small businesses and highlights alternative ways to boost margins without turning customers off.

The post Top 3 Payment Preferences in Physical Locations appeared first on PaymentsJournal.

Now that agentic AI is handling shopping on behalf of consumers, the next step may be an AI-only shopping platform. A new collaboration between Visa and startup New Gen is exploring the possibilities in that direction.

New Gen has announced a platform for AI-native storefronts, enabling agentic commerce through AI-initiated transactions. In combination with Visa, the tool could help merchants launch full-service, AI-ready versions of their websites, allowing AI agents to shop and complete checkouts on behalf of users.

The result could be retail sites entirely invisible to consumers. Since agentic shoppers don’t need to experience websites the way humans do, this opens the door to storefronts that serve as minimal placeholders—structured purely for machine-to-machine interaction. These sites would provide access to product details and purchasing functions. By eliminating the need for design and user experience, merchants could even lower prices to AI commerce agents.

“Shopping agents don’t need to view a website with pictures and descriptions like humans do, which will lead to a next generation of e-commerce,” said Don Apgar, Director of Merchant Services at Javelin Strategy & Research. “We’ll start to see e-commerce sites built specifically to be found and shopped by AI agents. For example, Target.com would launch ai.Target.com, a site that’s not viewable by humans but designed specifically to be navigable and shoppable by AI agents.”

A Fast-Growing Trend

The demand for AI-assisted shopping is growing sharply. According to New Gen, traffic to U.S. retail websites from generative AI sources increased by more than 1,200% between July 2024 and February 2025.

This surge is happening despite the fact that today’s web infrastructure isn’t entirely compatible with AI’s programmatic interactions. Currently, AI agents are still unable to directly engage with most retail sites.

New Tools for AI

There are signs this is starting to change. Both Mastercard’s Agent Pay and Visa’s Intelligent Commerce platforms now enable AI agents to effectively act as personal shoppers.

Convincing consumers to entrust their payment data to an AI agent will likely require a deeper understanding of AI than many users currently have. However, as Apgar noted in a recent PaymentsJournal podcast, these tools could prove highly attractive to retailers.

“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, the merchant has the ability to apply leverage to the automated shopping process.”

The post Next Up: Stores Exclusively for AI Agents? appeared first on PaymentsJournal.

Bringing payment processes in-house can be expensive, but the rewards can be great enough to make that investment worthwhile. Merchants turn to do-it-yourself payment solutions to take advantage of benefits such as customer data, more control over the experience, and more options. It’s not a way for them to save money; it’s a way to make money.

A new report from Javelin Strategy & Research, In-House Payment Options for Merchants: Time for a New Look, examines the ways companies can leverage their own payment systems. “Merchants should lean into the unique features that payments can bring to their businesses,” said Don Apgar, Javelin’s Director of the Merchant Payments Practice and the author of the report. “Clearly communicating that value will increase both sales and loyalty by improving the customer experience.”

Leveraging the Wealth of Data

One common misconception about in-house payments is that the merchant can save money by handling the process itself. But it’s exactly the opposite: Doing it yourself is more expensive because payment processing has become so sophisticated.

“You’ve got to be something like a $500 million merchant to have truly have your own branded in-house payment option,” Apgar said. “It’s going to cost significant money operationally, and if you’re extending credit to customers, that’s a whole other dimension of expense. But if the merchant leverages it properly, it’s all worthwhile.”

The chief benefit an in-house payment system delivers is the market data merchants can glean from it. The best way to leverage this is to get a good market research firm to help understand what customers want. The company could anecdotally survey the client base, but asking consumers in a structured manner that yields actionable insights is where the real benefit lies.

Apgar offered examples of several payment preferences that can come through this research: “I love the buy now, pay later thing that you guys are doing, but four installments is not enough. Is there any way you can do six or eight installments? That would be a lot better for me.” Or: “I love the idea of the app, but I order on the app, but then I get to the store and I have to pay. Why can’t I pay on the app?”

The Starbucks Model

Starbucks has done an exemplary job of leveraging its payment processes. Starbucks’ app costs the company a great deal of money to run, but it’s worth the expense. For one thing, it caters to the many Starbucks devotees who are into the whole experience. But the primary reason Starbucks spends all that money and drives customers to the app is the data it generates.

“You can tell how far away somebody parked from the store, or where else they went to before and after Starbucks, because it’s right on their phone,” Apgar said. “But you’ve got to be prepared to do something with that data. If you’re not going to communicate to your customers and market to them, deliver them offers, advertise specials, get them into the store, the app that creates the data is not a good spend.”

Collecting that data through an in-house payment system like a proprietary app gives the merchant a captive audience and exceptionally rich data. It requires a marketing infrastructure that can leverage that data to drive more loyalty and more sales.

Building Something of Your Own

Another advantage of an in-house payment system is that it can be built on the shoulders of others but with a result uniquely suited to the business. The process does not have to start from zero, but it also doesn’t pay to simply replicate someone else’s payment program.

“If you’re Dunkin’ Donuts, you might look at the payment program at Starbucks runs and want to do exactly the same thing for my stores,” Apgar said. “But it’s not just drag and drop, because Dunkin’ Donuts is a different store from Starbucks. The menus are different. It caters to a different type of person. You order differently.”

In this example, Dunkin’ could benefit from looking the parts of the Starbucks program it could leverage. If it took something Starbucks built for its particular customers, stores, and experiences, then copied it, the effort would fail. Each merchant’s payment experience needs to be something that reflects its brand, appeals to its customers, and is unique to its stores.

Every program is as different, as are the stores that run it, and each entity will have a certain amount of expertise in running a payments program. A vendor like Synchrony or Citi Retail Services can do a complete turnkey program or any part of it.

The Challenges of Credit Cards

Running a proprietary credit card program is more expensive because the operator has to service the customer, take payments, and mail out statements. It can hire a servicing company like Synchrony to service the program and take all the bad debt losses and service the program, but that’s not the most challenging hurdle. As a percentage of sales, the merchant doesn’t pay 3%, as with a Visa card, but more like 6% or 7%. But there are advantages as well, mostly involving the control the merchant can wield over the program.

“Everything is a trade-off,” Apgar said. “If you say, ‘OK, I’m going to absorb credit losses,’ well, then, that 7% can get reduced to 3 or 4%, the same as a Visa or MasterCard payment would cost. You don’t necessarily want to absorb credit losses, but it gives you the ability to say who you approved and who you don’t approve, depending on where your store is located, who your customer is, who you’re selling to. If the ability to offer credit is key to your store’s prosperity, then it’s worth it. It’s understanding what aspect of control gives me the most benefits.

“It goes back to finding out what my customers need. Do they need access to credit? Do they do they want fast transactions? An in-house payment system lets you provide your customers with exactly what they’re looking for.”

The post The Rich Benefits of In-House Payment Systems appeared first on PaymentsJournal.

The federal government’s efforts to phase out checks comes at a time when check usage is already in sharp decline. From 2015 to 2024, check payments dropped from 6% to 2.5% of consumer transactions, according to data from the Atlanta Fed.

The study underscores how broad and consistent the decline has been. Consumers across all demographics are using fewer checks, and they’re used less frequently across nearly every type of payment.

Consumers gave checks low marks for convenience, security, and speed. Only cash was rated lower for security, while money orders scored worse in the other categories. More than 90% of consumers reported that they prefer not to use checks to pay bills—only 6% actually did.

New Options for Businesses

The decline in check usage has had ramifications across a wide range of payment environments. From 2015 to 2024, the share of payments by check made to contractors dropped by half, from 53% to 27%, as more began accepting payments via mobile apps. When many churches introduced electronic collection baskets with automatic weekly contributions, checks written to charities fell from 33% in 2015 to 20% in 2024.

The federal government remains a significant source of check usage, with 23% of benefit recipients still receiving assistance in the form of checks or vouchers as of last year. However, the Trump administration has set September 30 as the target date to eliminate paper checks for government disbursements.

The Personal Touch

The shift is even more pronounced in personal transactions. Not long ago, it was common to write a check to a babysitter or tuck one into a birthday card. A decade ago, 17% of person-to-person payments were made by check. By 2024, that figure had dropped to 6%.

This decline is part of a larger trend toward digital P2P apps. In 2015, 87% of P2P payments were made using cash, checks, or money orders. By last year, that share had fallen to 45%. Today, more than half of all P2P payments are completed using a card, bank transfer, or funds stored in an app.

Although baby boomers are often seen as the last generation loyal to checks, even their usage is waning. In 2015, consumers over 65 made more than 10% of their payments by check. As of 2024, that number has dropped to just 5%.

The post Paper Check Usage Is in Freefall appeared first on PaymentsJournal.

Following its success in the UK, Stripe is expanding its pay-by-bank offering to France and Germany. While the process streamlines payment processing for merchants, its adoption by shoppers and end users remains an open question.

The technology relies on TrueLayer’s open banking infrastructure, which enables connectivity to bank accounts across Europe. Stripe highlights the benefits such as improved conversion rates, enhanced security, and the elimination of card processing fees—ultimately lowering transaction costs. Real-time payment processing also helps merchants improve cash flow and reduce payment delays.

A Hard Sell to Consumers

The benefits for customers are less immediate. Stripe says consumers can bypass entering card details and instead authorize payments directly from their bank accounts. However, in more mature economies, similar convenience has already been achieved through other methods such as debit cards or digital wallets.  

“This pay-by-bank announcement is similar to other pay-by-bank products that outline in detail the benefits to merchants, but don’t list any benefits to consumers,” noted Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “This is largely because there aren’t any incremental benefits to consumers of using a pay-by-bank construct like this. Consumers can use their debit cards to pay-by-bank today and get the chargeback rights and purchase protections that come standard with branded debit cards.”

That said, pay-by-bank adoption has been strong in many European markets, with a clear trend toward greater appeal among younger shoppers. Research from MX found that more than a third of respondents ages 18 to 29 reported using pay-by-bank daily or weekly, compared to just 25% across all age groups.

Convincing more experienced consumers to switch to the new method remains a challenge. Many baby boomers, according to MX, said they would never use pay-by-bank, versus an average of 28% across all other generations.

What’s in It for Banks?

In addition to customer resistance, banks may also be reluctant to adopt pay-by-bank solutions.

“Banks would prefer their customers use their debit cards versus a pay-by-bank construct like this because they earn interchange fee income every time customers use their debit cards,” he said. “’Build it and they will come’ may be true in baseball, but it’s never true in payments unless there are benefits to all stakeholders in the ecosystem—including banks and consumers, not just merchants.”

The post Stripe Extends Pay-by-Bank Offerings to France and Germany appeared first on PaymentsJournal.

Following last month’s agreement with artificial intelligence firm Palantir, Bolt has signed a new deal with Klarna to integrate flexible payments into its checkout platform.

The partnership will place Klarna’s payments technology front and center on the websites of merchants using Bolt’s CheckoutOS. Once the integration goes live in the U.S. later this year, Bolt’s customers will be able to offer Klarna’s buy now, pay later (BNPL) services to their customer without any additional legwork.

While Klarna is best known for its BNPL loans, Bolt CEO and co-founder Ryan Breslow told Techcrunch that the partnership is not just about BNPL. The two companies plan to collaborate on building a new model for flexible payments that extends beyond traditional BNPL offerings.

“We know that Klarna has launched an aggressive partner strategy, and they have integrated with basically anyone who aggregates merchants—like Bolt and others,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Bolt says that this Klarna integration will be special—like no other—but stops short of the details on what Bolt would do to accomplish that.”

You Can Afford This

Expanding its footprint—both beyond BNPL and outside its native Europe—has been a key objective for Klarna in recent months. The company recently launched a debit card and unveiled ambitious plans to become a super app, much like China’s Alipay and WeChat Pay, aiming to handle all aspects of customers’ lives.

However, BNPL loans remain the company’s bread and butter. While these are popular with consumers, their impact on merchants is still uncertain.

“We know from research data that BNPL offerings perform much better when they are integrated at the merchant level and displayed on the product page in e-commerce,” Apgar said. “The idea is that when the consumer is looking at the item and deciding if they can afford it, you want the BNPL offer to be right there saying, ‘Yes! you can afford this.’”

“Displaying BNPL on the checkout page as a payment option is a convenience for consumers, but it doesn’t help the merchant drive conversion, because the shopper has already made the decision to buy the product, hence the reason they are on the checkout page,” he said.

A Significant Partnership

Regardless of the implications for merchants, the Klarna partnership is significant for Bolt, which has grappled with leadership turnover and funding shortfalls in recent years.

Breslow stepped down in 2022 amid allegations that he inflated metrics and misled investors. He later returned as CEO under renewed controversy—this time tied to an ultimatum issued to Bolt shareholders and an ambitious goal to raise $450 million and hit a $14 billion valuation.

While it appears Bolt did not secure that funding, the company gained momentum by signing a deal with Palantir to launch an AI-powered checkout solution that customizes the shopping experience based on consumer behavior.

Like Klarna, Bolt has also expressed plans to evolve into an all-encompassing financial services platform for consumers. The partnerships with Klarna and Palantir mark meaningful progress for the fintech, but the company’s long-term outlook remains uncertain.

“Since Bolt is a checkout solution—and even though they claim to be powering their checkout product with AI from industry leader Palantir—it’s not clear how their addition of Klarna as a payment option is going to drive additional value for their merchants compared with other BNPL offerings,” Apgar said. “Competition in the checkout space is heating up, especially with Paze getting aggressive this year in soliciting merchants to integrate to its checkout platform.”

“Bolt’s adjusted strategy has it expanding horizontally as a consumer wallet that travels across merchants and will support stablecoins, etc., but the digital wallet space is just as crowded for consumers as the checkout space is for merchants,” he said. “It’s hard to tell whether this isa cohesive strategy or just a larger product roadmap that attempts to justify the $14 billion valuation.”

The post What the Klarna Deal Means for Checkout Platform Bolt appeared first on PaymentsJournal.

After lawsuits by hundreds of merchants, London’s Competition Appeal Tribunal unanimously ruled that the interchange fees charged by Visa and Mastercard are a violation of Europe’s competition law.

According to Reuters, the legal team representing the merchants called the ruling a major victory for businesses that have long been burdened by what they argue are unfairly high interchange fees imposed by Visa and Mastercard.

However, this is far from the first time interchange fees have been challenged, both in the UK and abroad, and there has yet to be a significant shift in these fees. For their part, both Mastercard and Visa voiced their opposition to the ruling, and Mastercard said it would seek to appeal the “deeply flawed” decision.

“It’s more of the same warmed over—merchants don’t want to pay fees to accept card payments” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The facts are the same though, if you eliminate interchange fees as a source of income for card issuers, they will be forced to raise prices and/or raise underwriting standards to curtail losses—both of which deflate spending power of consumers.”

A Polarizing Topic

Despite these concerns, interchange fees have become an increasingly polarizing topic in recent years. Just months ago, the UK’s Payment Systems Regulator (PSR) criticized Visa and Mastercard for raising fees and consolidating their dominance in the card payments landscape.

PSR reviewed the market and found that debit and credit card fees on these payment rails add an extra £170 million ($219.7 million) in annual costs for businesses. Additionally, the regulator stated that Visa and Mastercard have increased service fees to acquirers by roughly a quarter over the past eight years, offering little justification for the hikes.

Due to these rising costs, interchange-related legal actions have continued to crop up around the world. For example, a law was recently passed in Illinois that banned credit and debit interchange fees on taxes and tips. However, it has already faced significant pushback from financial institutions.

There was similar contention in the decades-long battle between U.S. merchants and Visa and Mastercard. While a $30 billion settlement was reached last year—declared a win for merchants—a judge ultimately rejected it, stating that it didn’t go far enough to compensate retailers.

Unlocking Payments Opportunities

One reason for the growing pushback against interchange fees is that many merchants are struggling with difficult macroeconomic conditions. This has also led some merchants to begin surcharging their customers—a practice that is often best avoided. Similarly, reducing interchange fees could have significant impacts.

“If you have taken an econ class, think about the definition of a market in equilibrium,” Apgar said. “For example, what’s the right price for a gallon of milk? If milk is too expensive, consumers won’t—or can’t afford to—buy it. However, if milk is too cheap, farmers won’t be incented to produce it, so maybe they make cheese instead.”

“We covered this in our recent research on in-house payment systems, and—while not apples-to-apples with interchange—one of the key findings in our research is that merchants need to focus less on the cost of payments and focus more on leveraging what opportunities payments can unlock for their business,” he said. “Remember it’s card payments that enable buy online and pick up in-store, payment at time of order for restaurant takeout, unattended kiosk payments, etc.”

The post Visa and Mastercard Interchange Fees Face UK Challenge 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.

Walmart has Sparky; Amazon has Rufus. These AI-powered shopping assistants have begun to take a more prominent place in the e-commerce apps of the world’s largest retailers. Although chatbots have been an early use case for artificial intelligence, they are just the beginning of how merchants can leverage this powerful technology.

As Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, found in the report AI in the Payments Ecosystem merchant use cases for artificial intelligence  cover such areas as transaction routing and regulatory compliance. However, merchants also must consider risks as they race to implement AI.

Fraud, Compliance, and AML

Along with customer service, one of the most frequent implementations of AI has been in fraud detection. Artificial intelligence can dig through vast amounts of data and identify patterns and red flags. This capability is especially applicable in card-not-present environments like e-commerce.

Although AI excels at parsing data, fine-tuning can be done in how models analyze their findings and present conclusions. If AI has too much autonomy in fraud response, unintended consequences can occur.

“Sometimes a decision is very obvious, but in cases where it’s not, if you’re not restrictive enough, you’re going to take a fraudulent transaction,” Apgar said. “If you’re overly restrictive, you’re going to alienate a good customer who was trying to make a legitimate purchase.”

Despite these issues, artificial intelligence has the potential to supercharge the fraud defenses of not only merchants but also the payment processors that serve them.

Another area where AI can make an impact at the processor level is in compliance. Payment processors have been increasingly held responsible for anti-money-laundering (AML) monitoring.

In this use case, AI can ensure that processors are compliant by verifying that a merchant account is legitimate. Artificial intelligence can scour the internet and provide troves of data that help processors vet their customers.

“AML is a little trickier because of the amount of data,” Apgar said. “A lot of banks and processors are having trouble with this because just simply the volumes of data that have to be analyzed to be able to detect these patterns. In today’s compliance environment, whether or not those rules continue to be enforced as vigorously as they were in the previous administration is unclear, but that doesn’t mean that AI won’t have a role in that going forward.”

Routing the Transaction

Another operational area where AI will play a larger role is transaction routing. As more payment types have become available, organizations have increasingly explored payment orchestration efforts. Selecting the most efficient payment method can dramatically cut costs and improve the customer experience.

However, determining the right path for sending a payment can be complex, especially when cross-border elements come into play.

Today, many of these platforms are rules-based, whereby the user will program rules to define the process. Some degree of adaptive learning and machine learning still comes into play, but adaptive learning is limited because it can handle only cases that it has seen before. The model understands that when a certain event occurs, a certain result was obtained.

As more variables are introduced, adaptive learning is likely to struggle.

“Machine learning is based on experience with transactions that share similar attributes, but the first time that transaction comes in the door and a transaction with those attributes has never been seen before, how do you make that decision?” Apgar said. “That’s where AI comes in. AI is able to handle broader amounts of data beyond the task at hand, which is how do I route this transaction?”

Pushing the Envelope

Though artificial intelligence can provide efficiency gains throughout an organization, the promise of AI means that it will continue to be implemented in customer-facing situations.

“If you think of AI like a search engine on steroids, it’s extremely useful,” Apgar said. “It creates a lot of efficiencies—especially for merchants—where customers come to the site and say, ‘Hey, I need help finding this; I have a question about that.’ It can bring them right to the point in the FAQ, and some small percentage of inquiries still go to a live operator.”

Although AI has been successful in many chat use cases, some organizations will want to push the envelope.

In fact, some of the world’s most dominant financial companies have already given the technology a larger role. Visa and Mastercard have rolled out platforms built to harness agentic AI. In this model, AI agents can shop and make purchases with little customer interaction.

To some consumers, it would be a substantial boon to simply give AI a general direction—find a 25^th anniversary gift for my wife, for example—and have an agent do all the legwork and make the purchase. However, many customers would be hesitant to give AI the reins due to the tech’s potential to make a mistake, spend too much, or disclose private data to the wrong party.

For these reasons, merchants still must maintain a buffer around any public-facing AI initiatives.

“You never want AI right now to be in the critical path of anything, because AI is found to make mistakes,” Apgar said. “It hallucinates, as they say—it makes up stuff that’s not there. You want to be able to leverage the efficiencies of AI, but you never want it to create a point of failure in a workflow.

“It’s easy to fall into that trap where, as in the chatbot example, ‘AI is handling 80% of the inquiries—what if we just didn’t have staff?’ True, but you’re never going to get to 100%, at least not in today’s technology. At some point in the future, you will, but not now. So you always want to have that backstop, and it’s the same thing if you look at the operational side.”

The post Merchants Find More Use Cases for AI Amid Risks appeared first on PaymentsJournal.

The future of unattended retail may have taken a big step forward with the union of two major players in the market. Cantaloupe, a fintech specializing in self-service commerce, has been acquired by 365 Retail Markets for $848 million.

The acquisition combines Cantaloupe’s expertise in payment processing and software services with 365 Retail Markets’ self-checkout technology. The goal of the merger is to create a comprehensive platform for markets such as convenience stores and hospitality, which are seeking continued growth in the sector.

“This is one of those acquisitions that delivers a strong strategic fit in addition to accretive earnings potential,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “Cantaloupe was very early to market with the tech that made card payments at vending machines both practical for consumers and affordable for merchants. There’s no doubt that 365 Retail Markets will continue to improve on the card payment tech pioneered by Cantaloupe and incorporate it into other platforms.”

Amazon Tried It First

Unattended retail is one of the fastest-growing categories in the industry, favored by consumers for its 24/7 accessibility and by retailers for the operational efficiency it provides. The concept of the unattended retail market is still evolving as retailers search for the optimal model, but it’s clear that shoppers are willing to embrace the technology.

The first major effort in this area, Amazon’s Just Walk Out, flopped when it was revealed to rely heavily on people remotely monitoring shoppers via cameras. While the approach failed technologically, it did serve as a proof of concept—demonstrating that consumers are willing to shop in a completely unattended environment.

Surprising Benefits

There are many potential use cases across products and locations where the tech will continue to iterate to meet specific needs. So far, the benefits of unattended retail have been surprising.

“Stores like Target are discovering that self-checkout doesn’t work best as a means to cut payroll, because customers get frustrated by lack of assistance,” Apgar said. “The formula now is we keep store payroll the same and redeploy staff from behind the registers and onto the floor where they can help customers. One benefit of self-checkout is not lower costs but higher sales.”

The post Two Trailblazers in Unattended Retail Are Teaming Up appeared first on PaymentsJournal.

If the holy grail of marketing is reaching an audience of one, as some have said, a new partnership is bringing that vision closer to reality. Checkout technology company Bolt has teamed up with AI software provider Palantir Technologies to launch Checkout 2.0, a platform they hope will revolutionize the online checkout experience.

The system is designed to replace traditional static checkout forms with personalized pages that dynamically respond to the behavior and preferences of individual customers.

“We take behavioral data, browser data, shopper data, transactional data, to understand who you are as a shopper,” Bolt CEO Ryan Breslow told Inc. magazine. “Are you a discount-oriented shopper or a high spender? Are you a high-frequency shopper, or are you a one-time bulk shopper? Do you like financing options? Do you like just paying with your Amex?”

A Democratized Solution

Mega-retailers like Target and Amazon have already implemented similar processes. But Bolt and Palantir aim to bring this tool to online retailers of all sizes.

“While the tech is new enough to be exciting in its own right, the big news here is the scalability created by the Bolt/Palantir partnership,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “Once the domain of category leaders like Target and Amazon—who had the data needed to deliver customized checkout experiences—Checkout 2.0 follows the path of most tech as it scales, democratizing it for a much broader user base.

“Using this tech to personalize the checkout experience has the potential to deliver a very strong ROI,” he said. “Small improvements in checkout conversions and reductions in cart abandonment can deliver big margin gains for retailers.”

Learning from Advertising

Web media technology has delivered personalized ads based on customers’ search and browsing data for years. It only makes sense that retailers would now use that same data to personalize the overall shopping experience.

Bolt is known for its all-in-one payments platform that simplifies online transactions. That makes them well positioned to capitalize on this technology.

“Every online merchant is wading into this pond and applying AI tools to deliver some level of customization throughout the shopping journey,” said Apgar. “But the game changer here is the amount of data that Bolt has accumulated across their merchant base. Specialty retailers can leverage this platform to deliver a customized checkout experience for customers who may be shopping on their site for the first time. Even though the customer is not in the merchant’s data set, they are likely in Bolt’s.”

The post Are Personalized Checkout Pages the Future of Retail? 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.

Fingerprint and facial scanning are commonplace due to their use in mobile devices, but palm scanning is finding a niche in retail.

One of the main reasons palm biometrics have been adopted in new merchant implementations across Europe, Asia, and the Middle East is that they don’t require users to touch the scanner. Additionally, palm scans are highly accurate and secure due to the uniqueness of palm ridges and veins.

China’s tech giant Tencent has led several recent palm payment initiatives, including a new launch in Thailand to compete with rival Alipay’s PL1 palm reader. Early trials of Tencent’s platform have focused on convenience stores, where the demand for frictionless checkout may drive biometric adoption.

In Europe, Poland’s Autopay is piloting its HandGo palm payment system. The company has highlighted the product’s potential impact in the wellness and sports industries.

Fan Facial Recognition

Sports arenas are becoming a proving ground for payments, as they can reduce long queues and improve the fan experience. Biometric authentication is a natural fit in these environments, but U.S. consumers’ relative comfort with facial recognition has positioned this technology ahead of palm scanning.

For example, San Fransisco’s Chase Center, home of the NBA’s Golden State Warriors, recently trialed a facial recognition payment system that allowed fans to pay-by-face at concession stands.

Taking it a step further, Gilette Stadium, home of the NFL’s New England Patriots, unveiled plans to let fans use facial recognition for both ticketless entry and concessions payments.

The Number of Competing Formats

While there are clearly use cases for biometric authentication, there are also many barriers to widespread adoption in retail environments. One of the main obstacles is the cost of installing and maintaining scanning equipment at checkouts.

Additionally, customers must voluntarily provide their biometric data to either a merchant or a reusable biometric credential provider like CLEAR, which offers expedited airline entry via biometrics.

Another challenge is the number of competing biometric authentication formats. In addition to facial scanning, fingerprint identification, and palm scanning, there is also the potential for iris scanning platforms to gain traction.

The post Palm Scanning Gains Ground as Retail Biometric of Choice appeared first on PaymentsJournal.

From the early days of check and credit card processing to wire transactions and today’s real-time options, each payment rail has developed along its own lines, necessitating separate hardware, software, and operational teams, amounting to a set of parallel rails that often do not intersect. This puts each of the payment systems in its own silo, with little interoperability among them, creating duplicated costs and efforts and fragmenting customer experiences.

“Many legacy core banking systems were built 30 or 40 years ago,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “They weren’t built to accommodate the newer real-time payment systems that exist today.”

As payment rails expand in their capabilities and complexity, those limitations have become more of an issue for financial institutions. Customers want the flexibility that comes with multiple payment options. For example, sometimes they need to complete a transaction as quickly as possible, whereas other times they need to complete one as inexpensively as possible. 

The Trouble With Legacy Systems

Legacy payment systems frequently get in the way of providing these options. Some banks that would like to offer new rails to their customers are wary of the costs. Even if the bank decides it’s worthwhile to include a new payment rail, it’s also creating another silo, another process separate from the others.

“If a business or a bank wants to connect to all those networks for different payment types, they have to spend the money to engineer a connection to the payments network,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “They have to test it, certify it, connect it to their internal systems, and have a way to audit control it.”

The process could also create additional customer friction. Banking clients may not care which payment rail their payment rides on, but they do want the opportunity to send funds quickly, or cheaply, or some combination thereof. And the more sophisticated the customer, the more options they expect their bank to provide. 

Accounting for the Opportunity Cost

Expanding into new payment rails isn’t just about how to pay for it. Everything comes with an opportunity cost.

“There isn’t an organization alive that has free IT resources,” Apgar said. “Everything’s on a backlog list. Everything’s on a 12-month rolling project plan. It’s nice to be able to say yes, we’d like to connect to this new rail, but that’s not the most important thing our IT team needs to work on right now.”

Given customer demands, it can become an issue not of whether to make new options a priority but rather how soon the organization can free up the resources to make it happen. If the entity chooses to work within its existing systems, the question becomes whether to add newer capabilities or overhaul the entire system.

Let the Hub Make the Decisions

Many organizations deal with these challenges by turning to payment hubs. Rather than managing a set of parallel rails, the process turns into a set of spokes with a central control point.

These systems unify all of a financial institution’s payment processes, from account-to-account payments and card processing to real-time transactions. By coordinating these, a payments hub can position the bank to innovate, compete, and thrive in a payments market that will continue to evolve at lightning speed.

A payment hub makes all the various payment types available to an organization, without the need to maintain its own connections. It gives banks the ability to let their customers set up their own rules for payments, and through optimal routing, the hub can find the appropriate rails to move the transaction most efficiently and according to the customer’s needs.

“If you’re the CFO of a large company and you’re paying bills, you may know what all the networks do,” Apgar said. “But you still have to make decisions on a payment-by-payment basis, balancing availability, speed, and cost.

“With a hub, you can set up a business rule that says, ‘Make sure payments get there as fast as possible, with no exceptions.’ Or you can ask to send more payments via the cheapest path and to notify the initiator if there’s a conflict. You’re not having to make those decisions on a payment-by-payment basis. The hub automates most of that logic.”

A Win for All Involved

A refined payments hub can benefit all parties involved in an organization’s payment processes.

For a head of technology, it removes the headache of managing disparate and siloed systems and all that entails, including such concerns as regulation, compliance, and outages. For a head of the payments business, it supports the twin—and occasionally competing—imperatives of revenue generation and cost containment. It also simplifies the launching of new payment products. And for a head of operations, it reduces the specter of errors, delays, and breaches by streamlining the entire process and letting the rails interact with each other.

“Interoperability has long been one of the challenges, because the different rails aren’t necessarily interoperable,” Tavilla said. “For example, if you want to send a real-time payment, the institution sending the payment might be set up for FedNow, but the one that’s receiving it might have to default to ACH or one of the other options. If the systems weren’t operating together, that creates inefficiencies and makes it difficult to move the money easily and seamlessly.”

Even the newer capabilities are not always interoperable. It could require investing resources separately for a financial institution to connect to each rail. A payments hub helps route and orchestrate behind the scenes, making the system more efficient financially but also easier to set up and train the staff in how to use it.

Most important are the benefits a payments hub provides to the customers. Their preferred ways of paying are supported seamlessly, and new products are designed and launched to cater to their needs and expectations. It simultaneously provides them with more options and makes their decision-making process easier.

Leading the Industry

What a payments hub comes down to is future-proofing the business. Customer demands and products evolve and emerge regularly, so a business risks losing customers to competing institutions if it is not set up with capabilities to route and process transactions quickly and efficiently. And it has to be ready for new payment systems to emerge.

“That’s what your customers will demand,” Apgar said. “If you can’t meet their needs, you risk them going to a different financial institution that offers the service that would.”

The leading, most advanced refined payment hub solution is ACI Connetic, which constitutes a redefinition of payments, covering processing, monitoring, and delivery through a highly advanced technological lens. It unifies payments, from A2A to cards to wires, including advanced authentication/fraud detection, all in a single architecture.

ACI Connetic provides all of these benefits to organizations and their customers while uniting the goals of those customers and the stakeholders within the organization. It provides the efficiency, revenue, and resilience that the heads of technology, operations, and the payments business are seeking.

Learn more about how modern solutions like ACI Connetic can break legacy limits and power digital growth.

The post All in One: How a Payments Hub Eliminates the Pain Points appeared first on PaymentsJournal.

Consumers expect flexibility at checkout, and Mastercard has inked deals with PayPal and Deutsche Bank to deliver more payment alternatives.

The partnership with PayPal centers around Mastercard One Credential, a platform that allows consumers to pay in multiple ways using a single credential—both online and in-store.

According to Mastercard, this functionality resonates with Gen Z users, who expect more personalized payment experiences. The collaboration with PayPal will not only allow both companies to develop new features in One Credential but also extend the platform’s reach to a broader consumer base.

Taking a Different Tack

In Europe, Mastercard is taking a different tack toward expanding payment options. Its collaboration with Deutsche Bank will leverage Mastercard’s open banking network to bolster the bank’s merchant payment solutions.

By enhancing Deutsche Bank’s request-to-pay service, Mastercard will effectively introduce real-time payments at checkout. While this model has become commonplace in countries like Brazil and India, it has struggled to gain traction in many other regions.

Real-time payments offer substantial benefits for merchants, such as low transaction costs and a more transparent reconciliation process. However, in the United States, the ubiquity of cards has hindered widespread adoption of real-time payments, as many consumers view paying by debit card as equivalent to pay-by-bank.

Another barrier to real-time payments adoption in the U.S. is that the rails—FedNow and RTP—haven’t historically supported payment requests. This limitation makes it more difficult for merchants to accept real-time payments as seamlessly as card transactions.

Gaining Momentum

Mastercard’s partnership with Deutsche Bank is designed to address this issue in Europe and boost open banking efforts in the region.

Open banking has seen increased adoption in Europe, largely due to government backing. While the model has been a key driver in reshaping the payments landscape over the past few years, it’s unclear whether Europe will follow in the footsteps of countries like Brazil and India.

“Pay-by-bank is gaining momentum in Europe through this new request-to-pay product announced by Mastercard and Deutsche Bank,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Leveraging account-to-account payments presumable means lower costs for merchants, and it will be interesting to see if consumers are attracted to using this new payment type in lieu of traditional card payments.”

The post Mastercard Launches Initiatives to Drive Choice at Checkout appeared first on PaymentsJournal.

Most organizations factor in the cost of doing business when pricing their products or services. However, the costs of credit card acceptance have been a sticking point with many merchants for years, prompting some to tack on a surcharge when their customers use a card.

Although this line of thinking may be understandable, as Craig Lancaster, Payments Analyst at Javelin Strategy & Research, found in Surcharging on Card Transactions: In Search of Balance, substantial risks come into play when a business decides to surcharge, and there are often better ways to pass on costs without alienating customers.

Scaling the Conversation

Most businesses don’t itemize their overhead or supplier costs when presenting the price of their product or service because it immediately invites questions from customers.

“I recently bought a car, and if they had put in front of me that here’s what we’re going to pay the salesperson for having brokered this deal, I would have said, ‘What, you weren’t willing to negotiate with me on price? I see exactly where you could give me a little bit of a break,’” Lancaster said. “Not just in commission, but things like, ‘Do you really need a facility fee?’ or whatever.

“There’s a reason that they don’t line all that stuff out—because they don’t want to put the cost of doing business in the face of the people who come in and buy their products.”

Although it is often not the best practice to single out credit card card acceptance fees as the expense to pass on to customers, there are instances when it is appropriate.

Lancaster examined the case of a small, independent Montana bookstore whose owner took to social media to inform her customers that card acceptance fees were becoming a burden.

The bookstore owner understood that card acceptance was a necessary part of business and did not want to surcharge the full 2.6% interchange fee. Instead, the business owner instituted a 15-cent transaction fee on card payments, a cost imposed by the payment processor. Most of her patrons were sympathetic.

“She said she has seen more cash payments since making the announcement,” Lancaster said. “Cash has its own risks—not the least of which is that it’s sitting there in the till—but a small merchant like that doesn’t have a lot of options. She can accept checks and all that goes with that, and she could guide her customers to cash, and that’s pretty much it.”

Although there are digital options like ACH or even real-time payments, small businesses don’t yet have the tools to implement these payment types for everyday operations.

Additionally, a bookstore owner’s options are limited by the fact that most barcodes on the back of a book are embedded with a price.

“It’s not like she can raise her prices 3% across the board,” Lancaster said. “The customer will ask why the bookstore is charging $18-plus on a $16.95 paperback. I think she probably did the most responsible thing she can do. She’s going to offset her per-transaction cost because that’s locked in, and she has a personal relationship with her patrons where she can guide them toward cash. You can scale that conversation if you own an independent bookstore.”

Penalties and Pushback

Although the bookstore owner took the right tack, many other businesses aren’t surcharging appropriately.

“I stumbled across this one by accident,” Lancaster said. “It was a restaurant in Montana that I hadn’t been to before, and I wanted to try it out. I got up to the front and there’s a sign that declared, ‘We’re going to surcharge 3.5% on all card payments, both credit and debit.’ But surcharging debit cards is in violation of their card network agreements—you can’t do that.”

A small restaurant or merchant may get away with surcharging on debit cards for some time, but the card networks have increasingly begun to crack down on these infractions. Visa and Mastercard have even utilized mystery shoppers to investigate if a business is compliant with these rules.

If they aren’t, the merchant could face thousands of dollars in penalties, just on the first offense.

“If you persist, you can end up on a blacklist where you cannot accept card payments anymore, and that’s not a place a merchant wants to be if you accepted them in the first place,” Lancaster said. “It’s not an abstract risk; it’s a real one. This restaurant might get away with it for a long time, but it absolutely should not be doing it. It’s in violation of its card network agreements.”

Beyond repercussions from the card companies, there is a substantial possibility that the restaurant’s policies will drive business away. Even if some customers aren’t aware that they can’t be surcharged for debit card transactions, many will resent the extra fee.

If they are aware, it puts the customers in the tough position of having to stand up for themselves over what some may view as a nominal charge.

“Do you want to have this fight with a beleaguered restaurant owner while everybody else is sitting around trying to have their breakfast?” Lancaster said. “I glancingly asked the guy—he wasn’t the owner—who was ringing up my sale, ‘What do you think of the surcharge?’ He goes, ‘I wish we didn’t do it; we get too much pushback.’”

Merchant Dependent

Resistance from customers who are simply using their preferred method of payment—which happens to be the predominant payment type in the United States—isn’t likely to diminish. However, some consumers may endure a surcharge in certain scenarios.

“If they like your restaurant or they like your product, they’ll suck it up,” Lancaster said. “If you’re a coffee shop owner and you’ve got a lot of competitors, you have to be mindful of the cost you’re presenting them for what you deliver. If you’re a specialty person like an RV upholsterer and you’ve got very few competitors, you can pretty much tell people, ‘Hey, this is what it costs to do what I do. Take it or leave it.’”

Although some merchants may be able to surcharge with near impunity, the more that fees mount up, the more likely it is that customers will be deterred. For example, during the recent egg shortage, some restaurants decided to institute a per-egg surcharge.

Much like credit card surcharges, most customers probably understood that the price of their meal was higher because of circumstances outside the business owner’s control. This increased transparency would even allow the customer to choose an item that didn’t include eggs to avoid the fee.

However, the more that customers must be selective about the items they order or the types of payment they use, the greater the chance that the customer experience will be diminished. This could have a significant impact on a local retailer.

“It’s the smaller merchants who are the ones that are most likely to surcharge because the Walmarts and the Targets and the big-box stores of the world can erase it with volume,” Lancaster said. “The smaller merchants are the ones that are more likely to surcharge, but they’re also the ones that are in the most tenuous position with their customers.”

Off the Receipt

There are several factors that small businesses should consider as they seek a balance between offsetting interchange fees and pleasing their customers. First off, they must understand their role.

“Do you know your customers?” Lancaster said. “I don’t mean that in the authentication way. I mean that when a guy walks through the door, do you say, ‘Hey, Wesley, how’s it going? it’s good to see you again.’ If you’ve got that relationship, you can leverage that for, ‘Hey, man, listen, I got to tell you, these card processing fees eat me up. I love having you in the store; I love catering to your tastes. Is there any chance you could bring cash?’”

Most consumers are reasonable, and they understand the concepts of card acceptance. If they have a personal relationship with a merchant, the customer will likely be amenable to shifting from their norm.

Beyond steering customers to other payment types, the cost of card acceptance—like other business expenses—should be folded into the price whenever possible.

If a business must charge a fee, it is often best to itemize the charge by another name. For example, if a bar has bouncers, it could list the charge as a security fee. If a theater troupe rents performance space, it could call the surcharge a facility fee.

Regardless of the approach a business takes, card acceptance costs are best kept off the receipt.

“I call surcharging a perfectly understandable bad idea because that’s what it is,” Lancaster said. “My own personal view is that it’s too risky in any number of ways, but mostly in the customer relationship. If I show up somewhere and I want a product or a service and I can’t pay the way I want to pay, that’s the quickest way to drive my business somewhere else.”

The post A Perfectly Understandable Bad Idea: Why Merchants Should Reconsider Surcharging appeared first on PaymentsJournal.

In today’s competitive marketplace, consumer incentives have become a key strategy for businesses aiming to attract and retain customers. From cashback offers and loyalty rewards to promotional discounts and rebates, companies are deploying a variety of incentive programs to influence purchasing behavior and drive engagement.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2025 State of the Industry: Commercial Prepaid Cards

Reasons for the Receipt of Consumer Incentive(s), by Percentage

• 45% – For participating in a survey
• 44% – Rewards program incentive
• 37% – From making a return
• 32% – Received it with a purchase
• 18% – As a rebate

Source: Javelin Strategy & Research

About Report

The commercial prepaid landscape is positioned for steady expansion, particularly in areas beyond government-funded programs. Sectors like healthcare, employee incentives, and private disbursement solutions are expected to play a larger role in driving this growth.

This analysis continues Javelin Strategy & Research’s ongoing exploration of prepaid trends in the commercial space. While prepaid solutions still account for a relatively modest portion of the overall commercial payments ecosystem, they serve specific functions that are not easily replaced by traditional postpaid alternatives. This consistent niche presence offers long-term reliability for providers focused on private-sector use cases. However, those operating in public-sector prepaid programs may encounter uncertainty as federal policy direction remains unsettled.

The post Top 5 Reasons Consumers Receive Incentives appeared first on PaymentsJournal.

Since the opening of Germany’s first modern cashierless store in July 2019, unmanned smart stores have rapidly expanded, with around 600 locations now operating across the country.

In just six years, retailers have introduced several different autonomous formats, with the largest share—around 270 stores—found in rural areas, according to a study from Stephan Rüschen, a German food retailing professor. Other categories include direct farm retail, specialty retail such as butcher shops and florists, and travel retail at gas stations and train stations.

Ruschen defines cashierless stores as unmanned, operating around the clock, having a small footprint, relying on cashless payments, and requiring mandatory registration via an app or access card.

“The rapid growth in unattended speaks to the convenience that it offers to consumers,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “Increasing the flexibility for consumers about when and where they can buy groceries is certainly a good thing.”

Similar Models in the U.S.

Could such a model find a home in the U.S.? In some ways, it already has. One area of growth in Germany has been fuel and travel stores—similar to the convenience stores with fuel operated by Wawa.

But the model also harkens back to earlier times. The rural farm-to-consumer model was a staple in the U.S. long before the advent of cashless payments. 

“Most local farmers offered a farmstand for local consumers to purchase what the farm produced, whether dairy or produce, and most relied on the honor system for consumers to leave their payment when the stand was unstaffed,” Apgar said. “Even though agribusiness in the U.S. has eliminated most of the farmstands, the pre-registration requirement for unattended shopping in Germany makes you wonder if farmstands ever existed in rural Germany.”

In Germany, the unattended model is predicated on consumers pre-enrolling to become eligible to shop in an unattended store, not unlike Costco or Sam’s Club in the U.S.

Cultural Concerns

That’s not to say there aren’t drawbacks. According to the study, app registration requirements and delayed billing introduce friction for shoppers. Additionally, many shoppers prefer having an employee on-site as a point of contact.

“Unattended retail must prioritize the needs of consumers before they will get the traction that drives growth for retailers,” said Apgar. “Those needs can vary significantly with cultural norms in our global society.”

The post As Germany’s Cashierless Stores Boom, Could They Thrive in the U.S.? appeared first on PaymentsJournal.

As the battle for small business point-of-sale (POS) solutions heats up, Apple has expanded its platform that transforms iPhones into payment terminals.

The company’s Tap-to-Pay service has launched in eight additional countries:  Belgium, Croatia, Cyprus, Denmark, Greece, Iceland, Luxembourg, and Malta. This solution enables merchants to accept contactless credit and debit card payments directly on their phones using NFC technology.

Tap-to-Pay will be compatible with a variety of payment platforms tailored to each country, including those offered by Adyen, Revolut, Mollie, and Stripe. Contactless transactions initiated by wearables and other devices will be supported, and customers can also pay using Apple Pay or other digital wallets.

Apple noted that all payment data will be encrypted and processed using its Secure Element technology. This technology plays a critical part in securing Apple Pay transactions, and Apple stated that, under this model, it has no knowledge of what is being purchased or who is making the purchase.

A Crowded Field

The recent boom in tap-to-pay technology (also known as tap-to-phone) has largely been made possible after Apple opened its NFC tech to third-party developers. As a result, the tech giant has become a serious competitor in the crowded small business POS market.

Many small business payment terminals now resemble smartphones—such as Clover’s Flex system and Square’s newly launched Handheld. However, these devices are just one component of a broader platform that often includes industry-specific features like waitlisting and inventory management. This indicates that these solutions are increasingly geared toward upmarket merchants with employees.

A Growing Middle Ground

Apple’s Tap-to-Pay platform primarily targets the audience once served by Square and its signature dongles. This includes merchants like local artists, gig workers, and sole proprietors who require a portable payments terminal.

While the need for additional accessories may be waning, demand for phone-based payment acceptance is expected to grow.

“Once the use cases manifest themselves, tap-to-phone will become increasingly popular,” Don Apgar, Director of Merchant Payments at Javelin Strategy & Research told PaymentsJournal. “There is a growing middle ground where individuals need some business capabilities on their personal account.”

The post Apple Expands the Reach of Tap-to-Pay for Small Businesses appeared first on PaymentsJournal.

Consumers may be becoming more savvy about using buy now, pay later (BNPL), also referred to as pay-over-time options. Most people who used longer-term payment plans in the past year chose to pay off the loan over six months or more, even when they could afford to pay upfront.

Research from Affirm suggests that consumers are increasingly using such payment methods as a way to manage their cashflow. This aligns with separate data from Bankrate, which shows that BNPL usage is not primarily among those who can’t afford their purchases, but remains relatively consistent across all income levels. According to Bankrate, 31% of respondents in both the highest and lowest annual household income brackets have used BNPL at least once.

A New Financial Strategy

The Affirm study found that over half of U.S. consumers believe that longer-term payments with clear terms help them make smarter financial decisions for larger purchases. Evidence shows these plans are becoming just another payment option, depending on how well they align with consumers’ shopping habits.

Nearly two-thirds of pay-over-time users say they value interest-free payment offers as much as, or more than, traditional discounts.

Seeking Clarity on Terms

If there’s anything deterring consumers from using new payment methods, it’s uncertainty around the terms. Affirm found that more than half of respondents avoided certain payment methods due to concerns over hidden fees like late charges and interest. Nearly all respondents said it’s important for financial institutions to provide transparent terms without hidden fees.

Only recently have BNPL lenders been required to follow some of the same rules as credit card companies, including clearer disclosures and the right to dispute charges. Last year, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule subjecting the industry to regulations currently governing credit card products, requiring BNPL vendors to provide periodic statements much like their credit card counterparts. Given the current administration’s rollback of many CFPB initiatives, it is unclear how long that regulation will remain in force.

The post BNPL Services Settle in as a Cashflow Strategy appeared first on PaymentsJournal.

For over 140 years, Marks & Spencer (M&S) has been a fixture of Britain’s retail landscape, but the department store has faced sharp losses and operational issues following a devastating cyberattack.

Shortly after the April ransomware incident, M&S halted online and in-app order—services the retailer has yet to restore. According to Reuters, Marks & Spencer hasn’t resumed its online operations out of an abundance of caution.

A group of hackers gained access to the store’s systems and threatened to shut down the company’s network if a ransom wasn’t paid. M&S refused to succumb to the threat actors’ demands and is now working to restore all its systems.

The attack is estimated to have cost Marks & Spencer $80 million, but the impacts could go beyond monetary losses. While M&S said it was surprised by customers’ willingness to shop in-store, store-sourced voices raised concerns that customers could eventually lose patience with the lack of digital options—potentially leading to reputational ramifications if the outage persists.

Aggressive, Creative, and Effective

The M&S attack was the handiwork of a loosely affiliated network of hackers known as Scattered Spider, which has carried out attacks around the globe. A smaller group within the network, called DragonForce, is behind the M&S hack as well as similar efforts against UK retailers Harrods and the Co-op.

Though British merchants have been the initial targets, Google recently warned that Scattered Spider could be just as likely to target their U.S. counterparts.

“US retailers should take note,” John Hultquist, Cybersecurity Analyst at Google, told The Independent. “These actors are aggressive, creative, and particularly effective at circumventing mature security programs.”

The Magnitude of These Attacks

Bad actors targeting large organizations is not a novel phenomenon, but the scale of damage is broadening. For example, crypto exchange Coinbase was recently hacked in an incident that could cost the company up to $400 million, after cybercriminals bribed Coinbase contractors to divulge protected customer data.

Similarly, the M&S breach derived from a contractor relationship. At least two logins used in the hack were linked to Tata Consulting Services, a company that provides IT and help desk services for the retailer.

The magnitude of these attacks will likely prompt many organizations to reevaluate their partnerships and reassess their security measures. However, as criminals become increasingly innovative, businesses will also need to find creative ways to defend themselves.

The post One Month Later, Marks & Spencer Is Still Reeling from a Cyberattack appeared first on PaymentsJournal.

To further solidify its standing as a leading payments player, Global Payments is launching its Genius point-of-sale (POS) system, designed specifically for small businesses.

The company made waves with its $22 billion acquisition of Worldpay, a deal that creates a global payments company serving more than six million customers and  processing roughly 94 billion transactions.

The acquisition of Worldpay brings balance to Global Payments’ strong small to medium-sized business (SMB) segment, as Worldpay has a more established footprint among larger enterprises. Genius will be launched under the Global Payments brand and will initially focus on restaurants and retailers within the SMB market.

Tough Sledding

Genius for Restaurants is positioned to meet the needs of restaurants, offering features like waitlists and reservations, reporting and marketing tools, and tableside payments. Similarly, Genius for Retail is designed as a unified solution for retailers, with capabilities to manage orders, track inventory, and facilitate accurate checkouts.

While these solutions may be potent, the highly competitive small business POS market could make it tough sledding for Global Payments.

“Our POS scorecard found that system features needed to be both broad and deep,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Breadth enables you to address as many different types of merchants as possible, and depth in each category is what enables the system to grow with the merchant without the merchant outgrowing the system.”

“Global says that Genius is going to be everything to every merchant everywhere, starting with restaurants,” he said. “I have yet to see a single POS platform that can address the needs of every kind of restaurant everywhere, but if these guys have done it, that’s awesome.”

Maxing Out Features

In an interview with Barron’s, Global Payments CEO Cameron Bready said that Genius can differentiate itself by avoiding the clunkiness that often plagues similar business users. He noted that Genius is built specifically for restaurants and retail, and that its POS system can serve everything from quick-service restaurants to stadium venues to local coffee shops.

“So, feature depth set to max for restaurants, not max out feature breadth and do that for every type of retail and service merchant and you have a POS platform that will collapse under the weight of its own features—meaning that the system will become so complex that it will be incredibly complicated to maintain and update,” Apgar said. “Also, how do you train sales reps to sell something so complex? What about help desk and support?”

The post Global Payments Launches POS After Worldpay Acquisition appeared first on PaymentsJournal.

Some of Square’s best-known products are accessories that turn phones into point-of-sale (POS) terminals. But its new device, Handheld, removes the phone from the equation.

Roughly the size of a smartphone, Handheld features a built-in barcode scanner and camera. In addition to supporting traditional card payments and tap-to-pay, it also offers inventory management functions via the Square POS app.

According to the Verge, the app will soon get an upgrade that enables Handheld to adapt to different types of businesses—such as quick-service restaurants, retailers, or bars—based on the merchant’s industry.

“This is a great move by Square and fits well with their trend upmarket to larger merchants,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The original Square dongle that worked via a phone’s audio jack enables business owners to use their own device to accept payments, and Square still does that via a tap-to-phone app. These are great solutions for the smaller farmer’s-market types of merchants.”

“This new device is geared more towards businesses with employees—whether wait staff or sales assistance—and ties in seamlessly with Square point-of-sale,” he said. “You don’t want to rely on employees to use their personal phones to scan orders and take payments, and employees aren’t crazy about jobs that require that. Data security for payments can be an issue also.”

A Technology War

The unique demands of small enterprises have sparked a technology war, with many companies competing to become the preferred point-of-sale provider. Square and Clover currently lead the pack in the POS market, and their solutions were neck and neck in Apgar’s recent 2025 Small-Business Point-of-Sale Scorecard.

While both Clover and Square offer systems adaptable to nearly all merchant applications—from fine dining to bicycle shops—Clover’s system edged ahead due to its greater depth of features.

Room to Go Deeper

With Handheld priced at $399, Square aims to provide a more affordable alternative to Clover’s Flex system, which offers handheld POS devices for $749. Still, Square operates in a dynamic field marked by constant innovation.

“There’s always room to go broader,” Apgar told PaymentsJournal. “There’s always room to go deeper. With the speed at which these developments are coming out, it’s nothing less than an arms race in small business POS.”

The post Square Aims to Move Upmarket with Handheld POS Device appeared first on PaymentsJournal.

World Market is partnering with Affirm to offer buy now, pay later plans at nearly 250 stores, as well as online. For the specialty retailer known for stylish furniture, home decor, and international food, the program will replace what many of its competitors already offer: a co-branded credit card.

For a retailer without a store-branded card, a strong BNPL offering may be the next best thing. Customers can now choose between biweekly or monthly installments when using the service. In-store shoppers can simply scan a QR code to initiate a payment plan.

“It was inevitable that Affirm would have to offer an in-store option for large omnichannel retailers like World Market,” said Don Apgar, Director of Merchant at Javelin Strategy & Research. “Consumers expect a consistent experience regardless of how they interact with the merchant.”

Reaching a More Price-Oriented Customer

Affirm already boasts more than 358,000 retail partners, including World Market’s more upscale competitors like Pottery Barn and its subsidiary Williams Sonoma. In contrast, World Market caters to a more value-oriented customer base, making its shoppers especially well-suited for BNPL services.

“The World Market business model relies on cutting deals from all over the world and appealing to a more price-conscious buyer,” Apgar said. “Affirm strikes me as a good fit for World Market.

“The Pottery Barn family of stores also offers Affirm both in-store and online, but also offers a co-branded Visa card through Capital One,” he said. Apgar is currently working on a report on the relationship between BNPL programs and store-branded credit cards. “While the co-branded card targets reward-driven consumers and Affirm targets those who need access to credit, it would be interesting to see if that results in any cannibalization of the co-branded Pottery Barn card by Affirm.”

A Growing Model

According to Javelin’s 2024 North American PaymentsInsights report, more than 30% of U.S. adults surveyed last year had used BNPL services in the past 30 days.

Affirm has been at the forefront of this trend, reporting 21 million active consumers last year—a 23% year-over-year increase. According to the company’s research, retailers that offer Affirm at checkout see 70% higher average cart sizes and nearly 30% fewer abandoned carts compared to other pay-over-time providers.

The post Without Its Own Credit Card, World Market Turns to Affirm 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.

Even though payment decisions can have implications across an entire enterprise, the total cost of payments is often neither well-known nor properly measured. A true payments orchestration strategy must not only consider organizational impacts but also quantify them.

Conducting this type of assessment can help organizations identify which payment changes result in increased ROI and which do not. In the Payment Orchestration: Making the Juice Worth the Squeeze report, Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research, explains how organizations can ensure their payments strategy is financially beneficial.

Tracking the Additional Costs

Those handling payments for an organization are evaluated based on how effectively the payment systems perform. Their goal is to maximize the authorization rate while minimizing costs. However, as they build out their payments tech stack to achieve these goals, they also increasing the operational burden on the rest of the organization.

“Let’s say you’ve got a relationship with two processors today, and you decide you want to add a third processor because they can save you a few cents on some portion of your transactions,” said Apgar. “But that also means that now there’s a third settlement point. You have a third processor to deal with across the entire organization.”

Depending on the level of automation in the finance department, someone may need to spend several hours each month verifying that funds were received, reconciling fees and statements, and posting to ledgers. If a transaction is disputed or a customer has a question about an order, the appropriate teams may need to process it across three networks instead of two.

“It’s easy for the payments guy to say, ‘I added a third network and we improved our payments efficiency by 15%,’” said Apgar. “But maybe the finance department had to add another analyst to support the reconciliation. The IT department has a new connection to deal with, and they will periodically come back and say we’re making upgrades and implementing new code. Customer service now takes longer per call to service a customer because they have to go looking more places to get the information. All those are costs to the organization.”

Measuring the Changes

As many as 90% of merchants either don’t measure the impact of changes to the payments process or don’t know what to measure. It’s easy to fall into the trap of thinking some things can’t be measured.

Take this example: someone claims that customer service is better. That could mean anything. Did call handle time go down? Were more transactions approved—resulting in more purchases?

“It’s very hard to put a number on a feeling, but you have to you have to try,” said Apgar. “There’s no right way to do it, and there’s no wrong way to do it. There’s only how you translate that feeling and that goodwill into a dollar amount.”

Now, imagine the head of payments decides to invest $50,000 to upgrade the payments connection to shave 1.5 seconds off every transaction. Everyone likes faster card processing—but is it worth $50,000? Or could that money be more profitably spent elsewhere?

Keeping an Eye on Indirect Costs

When assessing these benefits, it’s important to consider the indirect costs as well. Changes to the payments process impact more than just payments—they carry costs or benefits for the entire merchant organization.

Payments orchestration can be thought of as the layer that connects Visa and Mastercard—and the rest of the world—to a retail store. Over time, the store may also integrate with other processors to route transactions, such as buy now, pay later services or a fraud prevention vendors. While these additions can offer clear benefits, they also introduce added complexity to the operation.

“Every time you’ve got two endpoints in your orchestration layer and you add a third, it’s got to work with the first two,” said Apgar. “When you add the fourth, it’s got to work with the first three. When you add the fifth, it’s got to work for the first four.”

Every time a retailer adds more features to that layer, it also becomes more expensive to implement each one. Each additional feature costs more because it requires increasing amounts of money and effort to integrate. At some point, the cost of adding a new feature may outweigh the benefits it’s expected to deliver across the relevant transactions.

“The punch line is, is the juice worth the squeeze?” said Apgar. “You have to know when to stop squeezing because you’ll always get some juice, but it may not be worth the cost.”

Changes Across the Organization

Payments orchestration is key to answering that question. It helps measure the effects of any change across the entire organization, providing a solid foundation for informed decision-making.

“There’s always benefit to be gained, but at some point, it stops meeting that ROI benchmark,” said Apgar. “At some point that $50,000 investment may only be worth $25,000, and you’re better off taking that $50,000 and spending it on new shopping carts or something.

“Whether or not you care enough to calculate ROI on every part of your payment stack is your own decision. But at least understand that it’s not only possible, but crucial to the decision-making process.”

The post Ensuring Payment Decisions Pay for Themselves appeared first on PaymentsJournal.

Artificial intelligence models are only as effective as the data they’re trained on, which is one reason why Stripe believes its AI-driven payments platform can better detect fraud.

At an event, the company said its Payments Foundation Model has been trained on billions of transactions that flow through its systems, which makes the AI model more attuned to the nuanced aspects of each transaction.

One example is card testing fraud, where criminals run small transactions to check if stolen card details are still active. Stripe said that while its previous AI tools had some success in blocking this kind of fraud, the new model could reduce card testing by 64% almost immediately—thanks to expanded access to the company’s transaction data.

Following in the Footsteps

Stripe is following in the footsteps of some of the world’s largest financial players, who are doubling down on their AI initiatives.

Both Mastercard and Visa have launched new platforms designed to capture the potential of agentic AI. Mastercard’s Agent Pay and Visa’s Intelligent Commerce platforms are built to handle all the aspects of a transaction autonomously—from picking out items to the final purchase.

In the crypto space, Coinbase has unveiled its x402 payments mechanism that leverages an existing HTTP protocol to enable both humans and AI agents to conduct stablecoin transactions during web interactions.

Replacing the Coach

As hot as AI is, stablecoins have also been making headlines in recent months. After PayPal launched its stablecoin two years ago, it seemed natural that Stripe would follow suit with one of its own. This launch became inevitable  after the company’s billion-dollar acquisition of stablecoin company Bridge.

However, Stripe has broader ambitions in the stablecoin market. The fintech’s leadership has indicated plans to bring stablecoin-backed, multicurrency cards for businesses. The goal is to give businesses in different countries the ability to operate using the same currency.

Additionally, Stripe is planning to roll out a range of new offerings, including everything from tax help to instant payment integration. However, it’s unclear whether this bevy of solutions will help the company move forward.

“Stripe is persistent, if nothing else, as it relentlessly chases global omnichannel merchants,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The press releases, product stack and required features/functions are all there, the only thing missing is the large enterprise merchants.”

“Like the sports team that continually replaces the head coach, at some point you have to wonder what the real issue is,” he said. “However, this fraud model could be a game-changer if it truly delivers the results that Stripe claims.”

The post Stripe’s AI Model Touted to Be More Effective Against Fraud 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.

Consumers spent more than $3.5 billion at food and beverage vending machines in 2024, a 15% increase over 2023. While vending machines were initially thought to be poorly suited for credit cards and digital payments—due to concerns over transaction fees on small purchases—the opposite has proven true.

Indeed, cash-operated vending machines are quickly becoming a thing of the past. Cashless payments accounted for 71% of all vending machine sales last year, a 17% increase compared to 2023, according to research from Cantaloupe. The study also forecasts that sales at food and beverage vending machines will grow another 8% in 2025.

Spending More with Cashless Options

Consumers are moving beyond card usage at vending machine. Contactless mobile payments now account for more than three-quarters of all cashless sales at such machines.

“Many thought that the merchant fees from card purchases would break the vending business model,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “But in fact, profitability increased, based on two key factors. For one thing, the bill acceptor is the most troublesome component on a vending machine, and substituting it for card payments greatly reduces the frequency of service visits needed, dramatically reducing operating expenses. Also, a card payment option drives inelasticity in prices, and consumers will gladly pay a higher price when they pay by card.”

Cantaloupe’s research supports that theory. Last year, the average purchase at a vending machine was $2.11, while the average cashless vending transaction was $2.24. In comparison, cash purchases averaged just $1.78.

A New World for Vending Machines

Card purchases in vending and other unattended retail platforms have expanded beyond traditional snack and drink machines. They are now common at self-service air pumps at gas stations, car wash machines, laundromats, and propane exchange kiosks. Additionally, there has been a proliferation of self-serve kiosks in fast food restaurants.

“Going cashless at these types of locations is the logical extension of card acceptance,” said Apgar. “Consumers prefer cards over cash, so accepting card payments drives cash usage to a very low percentage of the total. They are also not price sensitive when the cost of card payments is built into the product price.”

The benefits of going cashless reach beyond simply encouraging higher spending. Cashless systems significantly streamline the customer experience.

“Eliminating cash greatly speeds throughput when there is a line,” Apgar said. “And the costs of servicing the technology decrease significantly when there is no cash involved.”

The post Cashless Payments Are a Boon for Vending Machines appeared first on PaymentsJournal.

Truist is launching a bill pay solution for RTP, introducing an alias-based Request-for-Payment (RfP) platform within RTP, the instant payments platform operated by The Clearing House.

The solution will leverage 150 million available mobile and email tokens to keep user data confidential.

Although the service will be available to both consumers and businesses, Truist highlighted the benefits for large corporate billers. These include immediate acknowledgment of payment receipt—speeding up the reconciliation process—and faster access to funds, which should improve liquidity.

The financial institution also noted that the system would strengthen data management and security, while potentially reducing costs.

Expanding to B2B

There has been much speculation about when real-time payments networks will play a larger role in the U.S. payments landscape, and there have been significant recent strides in this direction. For example, the RTP network saw the total value of its processed instant payments nearly double in 2024.

While most payments on RTP were initiated by businesses, nearly all of them last year were business-to-consumer transactions. In an effort to expand its use to business-to-business payments, the Clearing House raised the network’s payment cap from $1 million to $10 million.

A Step in the Right Direction

Some of the proposed business use cases for RTP have been real-estate and supply chain transactions. However, both RTP and FedNow haven’t gained traction with retailers because they currently only allow users to send money—there is no request functionality.

Although it’s typically the customer who taps their debit card in a retail store, it is actually the merchant who initiates the payment request for these transactions. Currently, this functionality is not supported on RTP or FedNow. Additionally, the networks aren’t yet able to provide merchants with an approval code when a payment is declined.

While these issues will likely keep instant payments on the backburner for U.S. retailers, RTP’s expanded bill pay capability is a step in the right direction.

The post In the Next Step for RTP, Truist Pilots Bill Pay Solution appeared first on PaymentsJournal.

U.S. shoppers will soon be able to pay for their eBay purchases in installments, as the marketplace expands its partnership with Klarna.

Klarna’s buy now, pay later (BNPL) services have already been available to eBay shoppers in European countries like the UK, Austria, France, Italy, and Spain. Now, millions of U.S. consumers will be able to leverage BNPL loans to shop among more than two billion listings on the marketplace.

The deal extends beyond installment loans. Klarna has also recently introduced its resell feature to U.S. eBay shoppers. This allows users to list previous Klarna purchases, complete with pre-populated pictures and descriptions, on the marketplace to streamline the selling process. Since its launch in December, this functionality has already created over 500,000 new listings.

A Partnership Trend

The partnership continues a trend of major deals for both Klarna and eBay.

For example, eBay added Venmo as a payment option last summer to attract the peer-to-peer platform’s younger user base. Since approximately 60% of eBay’s volume comes from mobile devices, the marketplace expects that adding Venmo will lead to higher sales and reduce cart abandonment.

To streamline its global payment capabilities, eBay recently announced a partnership with UK-based digital payments processor Checkout.com. In addition to its payments platform, eBay plans to leverage Checkout’s fraud prevention tools and AI-driven transaction optimization capabilities.

Impactful Strides

As significant as these deals have been for eBay, Klarna has made more impactful strides—many of which have served to expand the Swedish-based company’s U.S. footprint.

The company recently signed a deal to bring its BNPL products to Clover’s point-of-sale systems. Clover is one of the leading POS providers in the U.S., especially among small- to medium-sized enterprises.

Klarna has also teamed up with the world’s largest retailer: Walmart. Under this agreement Klarna will become the exclusive BNPL provider for Walmart’s OnePay platform, a role previously held by BNPL competitor Affirm.

The post After European Success, eBay Will Bring Klarna BNPL to U.S. Shoppers appeared first on PaymentsJournal.

After a successful pilot at a store in Grapevine, TX, Sam’s Club will redesign all 600 of its locations to remove both self-serve and cashier checkouts, requiring customers to check out using its mobile app.

Traditional checkouts will be replaced by a system known as Scan & Go, which allows members to scan products with the store app and complete their purchases directly from their phones.

The Walmart-owned membership retailer has been steadily transitioning members to its app, moving away from physical membership cards. Stores have also been encouraging shoppers to start using the app as soon as they enter.

Checking Out with AI

This new update adds a layer of artificial intelligence (AI) to the checkout process. An AI scanner verifies the goods as customers leave, eliminating the need for receipt checks at the door. Since Sam’s Club operates under a subscription model, theft isn’t as much of a concern as it would be at a flagship Walmart store.

“When people pay to be members, they tend to view shopping there as a privilege, which they don’t want to lose by behaving badly,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “Shrink is not likely to be as much of an issue as it would be in general retail.”

Losing Personnel

One long-term goal is to reduce head count, which could be a risky proposition. While customers are being pushed to rely on their own phones for checkout, stores will still need associates to ensure a friction-free experience.

“Stores that went to self-checkout and redeployed cashier staff to other areas of the store where they could assist customers saw favorable feedback from customers,” said Apgar. “Stores that simply reduced staff damaged their customer experience. In the past, customers have always known that if they can’t find someone to help them in the store, there is always somebody at the register.”

It also remains to be seen how reliable the technology will be. Amazon’s similar “Just Walk Out” technology, which claimed to be based on AI, turned out to rely on teams in India monitoring store cameras.

“Several stores, including Target, offer this tech now,” Apgar said. “The question is whether AI will reliably audit those exiting the store—without resulting in a horrible customer experience.”

The post Sam’s Club’s Ambitious Plan to Forgo Checkout Lanes appeared first on PaymentsJournal.

There was substantial buzz when Walmart announced that—with Fiserv’s help—it was launching support for real-time payments through FedNow and the RTP network last year. However, for all the speculation that real-time payments will be the way of the future, there are reasons most consumers aren’t using pay-by-bank at retailers yet—and might not start any time soon.

In the report Implementing Pay-By-Bank: A Guide for Merchants, Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the use cases for instant payments, the limiting factors delaying adoption of real-time payments, and the future of pay-by-bank in retail environments.

The Benefits and the Use Cases for Merchants

Real-time payments appeal to retailers because they don’t come with the 2% to 3% interchange fees that credit and debit card transactions bring. Merchants receive their funds in real time, which means they can reconcile transactions quickly.

Instant payments can also be a powerful tool in many merchant use cases because of their around-the-clock availability.

“If you’re a business and your supplier says, ‘I’m not going to ship you any more pizza boxes until you pay the bill,’ you can use those technologies to push that money out,” Apgar said “If it’s 3 o’clock on a Sunday afternoon, you can say, ‘Fine, supplier, you got the money in your account.’ Unlike Fedwires that require manual intervention—so it’s only business hours—and ACH—that runs in batches and is posted only during business hours—real-time payments go 24/7, 365.”

This functionality could be a boon for a payment processor that is paying a merchant for its daily credit card sales. It could also be a powerful tool for insurance companies because they could resolve claims instantly and get victims of natural disasters and other incidents on the road to recovery.

Both of these use cases are unhindered by an attribute of U.S. real-time payments that is often considered a drawback: There is currently no way to dispute an instant payment transaction. This characteristic also opens up another potential use case.

“Let’s say you’re on a website selling a car and somebody says, ‘Here’s $5,000 for this rust bucket and I’ll FedNow it into your account.’ As a seller, when that money hits—here’s the title, here’s the keys, have a nice day. It’s cash in the bank,” Apgar said. “There are use cases where that is a valuable attribute, but buying stuff from a merchant is not one of them.”

No Dispute Mechanism

This irrevocability is one of the main challenges to the broader merchant use case for real-time payments. Most consumers have become accustomed to having the capability to dispute transactions that are suspicious or erroneous.

In this way, real-time payments operate similarly to peer-to-peer (P2P) payment platforms like Zelle and Venmo. These platforms have drawn criticism because if one of their customers is manipulated into sending money to a criminal, there is no recourse to be reimbursed. This has caused many P2P users to become prime targets for cybercriminals.

ACH, the most common pay-by-bank method in the United States, comes with payment delays but has a dispute mechanism built in. If a consumer notifies their bank of a fraudulent transaction, the bank can reverse it.

“That functionality doesn’t exist on RTP and FedNow,” Apgar said. “So, when we talk about use cases, it’s the sender knows the receiver, and the sender and the receiver agree on the amount. The sender agrees that there’s no dispute, and he’s got no claim to the money once it leaves his account. It’s done, and he has zero recourse.”

Send and Request Issues

Perhaps the main reason RTP and FedNow aren’t quite ready for merchant applications is they only allow users to send money.

“There’s no function where you can request money,” Apgar said. “If you walk into my store and tap your debit card, I’m sending a request and saying, ‘Take money out of his account and put it in my account.’ But there’s no way for me to do that. You have to initiate the payment.”

Additionally, in a card-based transaction, when the customer taps their card at the terminal, the merchant receives an approval code. If there is not enough credit or enough money in the account to cover the transaction, it won’t go through. This aspect doesn’t exist with real-time payments, so the merchant won’t know whether the transaction was approved.

“The way to check that you got the money is to look in your bank account,” Apgar said. “But if you’ve got thousands of point-of-sale stations, how do you do that? You would have to have some kind of AI bot scanning your bank account to see if there was a deposit for $16.33, when it was deposited, and that it wasn’t some other $16.33 purchase made by somebody else in another store.”

The Leapfrog Effect

These issues counter the narrative that real-time payments are sweeping the globe, and the United States is next in line. The first half of this assertion is true; in countries like Brazil and India, real-time payments systems like Pix and UPI have gained significant traction in a short time.

However, these countries are far different environments because their governments mandated Pix and UPI adoption. This regulatory-first approach was successful because a firmly established payment infrastructure was not in place.

“There is that leapfrog effect, and it’s the same thing with card payment technology,” Apgar said. “The infrastructure was not as developed in a lot of these countries as early as it was in the U.S., so card payments weren’t ubiquitous. Now that everybody’s got cellular capability in all these little towns, they can validate card transactions. It’s easy for the government to jump in and say, ‘We don’t need a debit card, we can just do pay-by-bank and tie it all in.’”

However, the debit card infrastructure is so entrenched in the United States that it doesn’t make sense for the Federal Reserve to mandate real-time payments to displace debit cards.

“From the consumers’ perspective, when you use your debit card, you’re already paying by bank,” Apgar said. “The merchant may avoid debit card interchange fees. but now that most debit cards are regulated under Durbin, the price is low. Unless the government is going to subsidize it to make the price even lower—like they do in Brazil and India—you kind of scratch your head looking for the business case.”

Searching for a Catalyst

Though more use cases for real-time payments are no doubt coming, there aren’t any new solutions on the horizon that could be the catalyst for more instant payments at retailers.

“This is fairly typical of the payments industry,” Apgar said. “As soon as something comes out, it’s plastered all over the media. ‘This is the next big thing—everybody jump on this bandwagon because the train is leaving the station.’ Everybody’s desperate to have something new to talk to their merchant customers about, and it is fun to talk about.

“FedNow and RTP are fantastic tools that will do a lot for money movement in the country,” he said. “But one of the things that they’re not built for is for consumers to buy stuff from merchants.”

The post Real-Time Payments Aren’t Yet the Next Big Thing for Merchants appeared first on PaymentsJournal.

Global Payments has agreed to purchase Worldpay in a deal worth over $22 billion.

FIS acquired Worldpay in 2019, but then sold roughly half of its stake to private equity firm GTCR four years later. Now, FIS and GTCR will divest themselves of Worldpay in a deal which will also see Global Payments selling its issuing segment—which has seen its share of struggles over the years—to FIS.

If approved, the merger would create a payments company with more than six million customers that would process roughly 94 billion transactions in more than 175 countries.

“Lots to talk about here, and let’s start off by saying that it’s not a given that this latest round of musical chairs will benefit any of the companies involved over the long term,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.

“Durable profitability in merchant processing requires a balanced portfolio; you need enterprise merchants to deliver large volumes that drive the scale that lowers unit costs, and also a healthy small- to medium-sized business (SMB) channel that delivers higher margins based on those lower unit costs,” he said.

Capitalizing on Strengths

The deal could potentially fit both of these requirements. According to Reuters, the combined company would handle $37 billion in volume, and its portfolio could put both companies in a position to capitalize on each other’s strengths.

“Worldpay has been a leader in the enterprise segment and has the platform tech and innovative leadership to grow there,” Apgar said. “Where it’s lacking is exactly where Global Payments excels—the SMB segment. Worldpay has been working to boost their share in the SMB space by trying to grow key distribution channels.”

Striking a Balance

While Global Payments would solidify its position in the merchant services industry through this deal, it still faces a competitive landscape that includes offerings from Fiserv, PayPal, Stripe, and Block.

Increasing market share in this dynamic environment will likely require Global Payments to strike a balance with its new partner.

“Worldpay brought on PayFac legend Matt Downs to build it out for platforms, and seasoned leader Denise Tahali to resurrect the old Vantiv ISO program,” Apgar said. “Global would do well to integrate those areas with their legacy business lines and leave the Worldpay brand to grow in the enterprise merchant segment.”

“If Global has demonstrated one thing consistently it has been their inability to compete successfully in the enterprise merchant segment, and attempting to bring that business to the Global platform will bring that back to the forefront,” he said.

The post What Global Payments’ Acquisition of Worldpay Means for Merchant Services appeared first on PaymentsJournal.

eBay is expanding its global payment platform capabilities and enhancing customer experience through a new partnership with UK-based digital payments processor Checkout.com.

With more than 2.3 billion live listings, eBay is one of the world’s largest online marketplaces, serving millions of customers in 190 markets. For eBay, Checkout brings valuable expertise in fraud prevention and AI-driven transaction optimization, simplifying operations for merchants.

It’s an important win for Checkout, which is recovering from the loss of its lucrative Binance business and working to rebuild its reputation. 

“This is an important deal for Checkout, not only because of the scale of eBay as a new customer, but because it underscores a renewed focus on their core payments expertise,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “Their relationship with Binance made great headlines but did little to advance their relevance in payments.”

Focusing on the Core Expertise

The company has set its sights on achieving a full-year profit in 2025. Checkout opened an office in San Francisco earlier this year. eBay is headquartered nearby in San Jose, California.

The eBay deal marks the second major win for Checkout this week, after the announcement of an alliance with CellPoint Digital. The CellPoint partnership is expected to go live in June and will offer travel merchants enhanced payment performance, global reach, agility, scalability, and transparent pricing.

A Change in Reputation

The partnership is the latest move into more mainstream businesses for Checkout, which originally made its name processing payments for industries like gambling and cryptocurrency. At one point, the company relied on Binance, processing $2 billion in trades for the crypto exchange in a single month back in 2021. It also counted the now-disgraced FTX as a client.

In August 2023, Checkout.com ended its relationship with Binance over concerns about money laundering. Although the company downplayed the decision, it noted that crypto accounted for less than 4% of its overall volume. Checkout also cut 230 jobs following the announcement.

At its peak during the Binance era, Checkout was valued at $40 billion, but its valuation has since dropped by 75%.

Nevertheless, Checkout’s revenue grew by 40% last year as it pursued a more globalized strategy. In the U.S., Checkout saw 80% growth over the course of the year, adding more than 300 new merchant partners.

The post Checkout.com Reaffirms Core Payments Focus via eBay Partnership appeared first on PaymentsJournal.

In a year full of major moves, Klarna has signed a deal to bring its buy now, pay later products to Clover’s point-of-sale systems.

Clover is one of the leading POS providers in the U.S., and this partnership will bring Klarna to over 100 of Clover’s merchants, with a broader rollout slated for early next year. There’s also potential for the two fintechs to expand their offerings to e-commerce merchants in the future.

This deal marks another step forward in Klarna’s mission to bring BNPL to Main Street,.  While BNPL products have traditionally been associated with e-commerce platforms, companies like Affirm and Klarna are focused on placing their offerings front-and-center at more brick-and-mortar checkouts.

The Depth of Features

The deal with Clover, which is owned by Fiserv, is another step toward U.S. ubiquity for Klarna. Small businesses have increasingly turned to POS providers like Clover to navigate the complexities of the payments landscape.

However, providing a single solution that can serve all types of merchants—from restaurants to retailers to service providers—is a daunting task. Clover was recently named the leading small business POS solution in a scorecard by Javelin Strategy and Research, because of the depth of features offered on its platform. The addition of BNPL should only further enhance the platform’s appeal.

While the deal appears to be a win-win for Klarna and Clover, it hasn’t all been positive news for the BNPL firm lately. Klarna had announced plans to go public on the New York Stock Exchange in what was expected to be one of the most anticipated initial public offering of the year. However, the company has since put its IPO plans on hold following turbulence in the stock market and the poor recent performance of Affirm’s stock.

Shifting the BNPL Paradigm

Klarna has also been working to expand its footprint in the U.S. The Swedish-based company was initially more dominant overseas, while Affirm had gained more traction stateside. That paradigm has started to shift following several significant deals by Klarna, most notably its recent agreement with Walmart.

With 255 million weekly customers, Walmart is the largest U.S. retailer. Under the new deal, Klarna will become the exclusive BNPL provider for Walmart’s OnePay platform—a role previously held by Affirm.

The post Klarna Expands U.S. BNPL Footprint with Clover Agreement appeared first on PaymentsJournal.

When the Coachella music festival kicks off, many attendees will have secured their tickets through an installment plan. Bypassing traditional buy now, pay later (BNPL) providers, Coachella’s payment plans have become especially popular with the festival’s mostly younger crowd—and a significant revenue source for its promoters.

According to reporting from Billboard, approximately 60% of general admission ticket buyers at this year’s festival opted to use Coachella’s payment plan. Buyers are charged a $41 upfront fee to enroll. With nearly 100,000 attendees expected, that fee alone generates more than $4 million, split between the ticketing company and the promoter.

In a sense, that $41 may seem minor compared to the overall cost—general admission tickets for the three-day festival started at $499, plus fees. The payment plan allows attendees to get started with as little as $19.99, with the balance spread out over several months. For Coachella, that generally means the three-month stretch between the January lineup announcement and the festival itself.

Differences With BNPL Plans

The use of these payment plans is soaring despite increased competition from traditional BNPL firms like Klarna and Affirm. With those providers, payments are generally made after the consumer has received their goods or services, and there are no fees.

Coachella attendees must complete their payments prior to the festival. If they miss a scheduled payment, they have 10 days to bring their account current, or their ticket order is cancelled. However, the attendee does receive a credit toward next year’s festival.

Feeling the Competition

Coachella first began offering installment plans in 2009, with just 18% of attendees opting in at the time. Since then, that number has grown significantly. However, with the rise of BNPL plans, promoters may soon face increased competition.

“BNPL plans offering 0% interest and no fee loans will usurp any prepay plans requiring an upfront fee,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “Especially with a festival like Coachella, which attracts a younger demographic who are already using BNPL.”

Coachella is not the only high-priced music festival to offer fans a similar payment structure. Tennessee’s Bonnnaroo festival, scheduled for June, allows fans to pay in installments but requires 50% of the ticket price upfront. The British heavy metal festival Bloodstock also offers a payment plan, letting attendees pay in six installments of £33.18 each.

The post Many Coachella Attendees Are Buying Tickets Through BNPL 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.

Over the past 12 months, consumer spending habits have continued to evolve, and so has the way people pay. We look at which payment cards—credit, debit, and prepaid—have been most commonly used. By breaking down the data, we get a clearer picture of what’s driving consumer choices and which types of cards are gaining or losing ground.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 21st Annual U.S. Open-Loop Prepaid Card Market Forecast, 2024-2028

Top 5 Payment Cards Used in the Previous 12 Months

• 82% – Major credit card usable anywhere
• 66% – Major debit card usable anywhere
• 35% – In-store gift card
• 31% – General prepaid gift card (non-reloadable)
• 29% – Store-branded credit card

Source: Javelin Strategy & Research

About Report

Javelin Strategy & Research’s latest annual report on the open-loop prepaid card market outlines key developments and forecasts across several major categories. It highlights projected growth in areas such as general-purpose reloadable cards, payroll and benefits cards, and corporate expense cards. The report links these trends to broader economic indicators, noting that improvements in the economy and regulatory landscape are creating favorable conditions for certain card types. For example, lower inflation and evolving financial regulations are helping drive interest in benefit and general-purpose cards, which can serve as alternatives to higher-interest credit options. On the flip side, factors like a stronger job market and shifts in government aid programs are slowing growth in areas like unemployment-related cards.

The research also shows that consumer sentiment toward prepaid cards remains strong. Buyers are continuing to use these cards frequently, especially in high-volume categories, with many planning to maintain or increase their usage. This year’s findings build on previous trends, confirming that prepaid solutions are becoming a stable part of how Americans manage and spend money.

The post What Payment Cards Have Been Used in the Previous 12 Months? appeared first on PaymentsJournal.

As payment terminals have evolved into full-fledged point-of-sale (POS) systems, numerous companies are vying to become the preferred choice for small business owners. While one POS system may currently lead the market, the highly contested field suggests the race is far from settled.

In his latest report, 2025 Small-Business Point-of-Sale Scorecard, Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, examined the use cases of the leading POS solutions, evaluating their scalability and ability to support small merchants as they grow.

The Breadth of Features

As technology wars have played out in the payments industry, competition has also spread to small business POS providers. There is a clear connection—of the 10 companies Apgar reviewed, all were either owned by payments companies or sold their own payment solution as a reseller for a bank.

For example, Clover is owned by Fiserv and is distributed through all the fintech’s independent sales organizations. These resellers were the target audience for the report—the scorecard was not designed to identify the best system for the end user, but rather to determine which POS system was the best for a payments reseller to sell.

In that spirit, the platforms were evaluated based on two key criteria: the breadth and depth of their features.

“Breadth of features refers to how many kinds of businesses can use this POS system,” Apgar said. “The three main categories are food service or dining, retail, and then there’s the service-based stuff. The reason there are only 10 companies in the report is that in order to qualify, you had to have at least a basic offering for all three of these business types.”

Though there are only three categories, the range of features that POS systems must accommodate can vary widely. For example, the dining category includes everything from a local bagel shop, where patrons pay at the counter, to fine dining establishments, where customers pay at the table.

Retail settings present even more payment scenarios. A single bicycle shop, for example, might handle not only sales but also consignments, used bikes, repairs, and rentals—all of which the POS system must support.

The service category is equally diverse, covering businesses such as lawn care companies, salons, and self-storage providers. Some accept payments in person, while others bill customers monthly.

The breadth of features rating in the scorecard took stock of how many types of businesses and uses cases each leading point-of-sale system could handle.

The Depth of Features

Just because a system can be sold to a certain type of business doesn’t mean it has all the functionality they need. While this depth of features might not be as important for small businesses just starting out, its importance will quickly become apparent over time.

“Let’s say you have the pizza place where the guy’s making the best pizza in town, so all of a sudden he’s got another location on the east side of town,” Apgar said. “As the business starts to grow, it’s not just a matter of figuring out which toppings go on the pizza. Maybe he has a delivery thing now, or a website where people can go and order a pie for pick up. As businesses grow, they need more and more sophistication.”

The pizzeria owner may have initially bought a Clover, and it worked well. However, as the business expands and adds more services, gaps are likely to emerge. At some point, the merchant may transition to a POS system like Slice, designed specifically for independent pizza companies. Other types of restaurants might shift to Toast’s POS as they grow.

This demonstrates a direct correlation between the depth of features and customer retention.

“If I sign up your pizzeria and I get your credit card processing business and payment processing business and I sell you a Clover, when you outgrow that Clover, you’re probably not going to call me back,” Apgar said. “If you go to Toast, you’re going to want to put in their payments program. So, once you outgrow my platform, you’re pretty much gone as a customer.”

Part of the Payments Continuum

Some of the best small business POS systems are those that cater to a wide range of business types while offering the depth of features merchants need as they grow.

Among the 10 companies reviewed, most were competitive in terms of feature breadth. The top two systems, Clover and Square, were neck-and-neck in the types of business they could serve.

Where Clover distinguished itself—and secured the top spot on the scorecard—was in the depth of features, outperforming competitors in nearly every category. However, even though Clover may lead for now, the race is just heating up.

“There’s always room to go broader,” Apgar said. “There’s always room to go deeper. With the speed at which these developments are coming out, it’s nothing less than an arms race in small business POS. Nobody is selling standalone payment terminals anymore, which is why you see banks buying POS companies, like U.S. Bank bought Talech and PNC bought Linga. The small business POS market will expand as payment terminals continue to be replaced.”

Beyond competition in the space, new technologies are also emerging, such as tap-to-phone, also called tap-to-pay, which allows merchants to accept contactless payments directly on their mobile devices.

“With the whole tap-to-pay, you now can turn your phone into a terminal,” Apgar said. “If you’re too small, you’re a gig economy guy or a creator guy or someone at the flea market or the farmers market, maybe you don’t need a Clover, but you could certainly use tap-to-pay. It’s all part of the payments continuum.”

The post For Payments Resellers, Small Business POS Capabilities Are Critical appeared first on PaymentsJournal.

Affirm has joined JPMorgan Chase’s payments network, expanding the reach of its buy now, pay later services to millions of additional U.S. retailers. Just last month, Klarna, a key rival in the burgeoning BNPL market, secured a similar deal with JPMorgan.

The competition between the two providers is intensifying as more consumers turn to BNPL as an alternative to credit cards. Notably, Klarna replaced Affirm as the BNPL provider for Walmart just last week.

“It’s evidence of the hyper-competitive marketplace for BNPL right now,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “Affirm and Klarna are each trying to be the primary BNPL vendor for consumers. JPMorgan has one of the largest merchant networks out there, so partnering with them will get Affirm visibility in front of millions of consumers at the point of sale.”

A Booming Market

According to Javelin’s 2024 North American PaymentsInsights report, more than 30% of U.S. adults had used BNPL services in the past 30 days. Affirm reported 21 million active consumers last year, reflecting a 23% year-over-year growth. However, this still trails behind Klarna, which claims over 37 million users in the U.S. alone—its largest market.

Affirm’s latest move positions it as a challenger to Klarna, which is gearing up for its U.S. IPO. The Swedish fintech has already established partnerships with several major global processors. Prior to its recent collaboration with JPMorgan, Klarna teamed up with Worldpay last October and has also forged similar agreements with Adyen and Stripe.

The Benefits of Affirm

Affirm touts its customer service as a key differentiator from competitors. Through its new partnership,  any merchant using JPMorgan’s platform will be able to offer installment payments. Customers who pass a quick eligibility check will see a set of customized payment options with terms ranging from 30 days to 60 months. Affirm claims that approval decisions take approximately 10 to 12 seconds. Installment loans are available for purchases between $35 to $30,000.

Merchants within the JPMorgan payments network are expected to benefit as well. According to the company’s own research, retailers that offer Affirm at checkout experience 70% higher average cart sizes and nearly 30% fewer abandoned carts compared to other pay-over-time providers.

The post Affirm Partners with JPMorgan Chase, as BNPL Arms Race Heats Up appeared first on PaymentsJournal.

Klarna’s new partnership with DoorDash, which allows consumers to order meals from their favorite restaurants and break down the purchase into installments, may have more strategy behind it than meets the eye.

While Klarna is best known for its buy now, pay later services, the DoorDash plan offers multiple payment options, including the ability for consumers to choose a payment date that aligns with their paycheck schedule. In other words, they can buy dinner on Tuesday but wait to pay until they get paid on Friday.

Klarna is betting that this flexibility will be enough to entice consumers to download its app—giving Klarna a foothold in their financial habits.

“It’s about bringing customers into your app and giving them flexible payment options,” said Ben Danner, Senior Analyst of Credit and Commercial at Javelin Strategy & Research. “It seems silly to take an installment loan on a $50 meal purchase, so it’s likely that more customers will choose the deferred payment option. However, it also begs the question, why go through an intermediary for a pay-in-full purchase when they could just pay using a credit card direct to the meal delivery service?”

An Alternative to Credit Cards

Klarna may be positioning itself as an alternative to credit cards rather than just a specialty payment option, according to Danner. Like a credit card, Klarna offers a balance account that earns cashback rewards when used for payments, giving consumers an added incentive to download the app. The service also caters to individuals who may not qualify for credit cards.

While takeout purchases may not incur sizable payments, DoorDash also lets consumers purchase big-ticket items through third-party merchants, such as Best Buy and Home Depot. This could be another area where consumers opt for Klarna’s BNPL services.

Gearing Up for the IPO

Earlier this week, Klarna also became the exclusive provider of BNPL loans for OnePay, the fintech majority-owned by Walmart. This flurry of activity follows Klarna’s filing of its prospectus last week to become a publicly traded company.

“By continuing to integrate with everyday spending categories, Klarna further drives spend into its app ecosystem while enhancing its brand,” Danner said.

For DoorDash, Klarna marks its first BNPL alliance in the U.S., although the service has similarly focused on down-market alliances recently. Indeed, Dollar General recently said it would start accepting SNAP and EBT online payments from DoorDash customers.

The post What Klarna Hopes to Gain from the DoorDash Deal appeared first on PaymentsJournal.

In a strategic move to expand the global presence of its point-of-sale platform Clover, Fiserv is acquiring the European payment service provider CCV. This step is part of Fiserv’s ongoing strategy to support its ambitious expansion plans through acquisitions.

CCV provides a range of transaction processing solutions, online and closed-loop payments, acquiring services, and payment terminals for 600,000 businesses across the Netherlands, Belgium, and Germany. With a history of innovation in electronic payments, the company was responsible for facilitating the Netherlands’ first electronic transactions in the 1970s.

“The addition of CCV enables Fiserv to accelerate the deployment of our Clover platform and operating system, providing enhanced capabilities and innovation to our clients across Europe,” said Katia Karpova, Head of the EMEA region at Fiserv, in a prepared statement. 

Clover Keeps on Spreading

The acquisition of CCV follows Clover’s expansion last year into three new geographies: Brazil, Mexico, and Australia. Clover, which provides point-of-sale systems and card machines for small businesses, has become Fiserv’s major source of growth.

Clover’s revenue reached $2.7 billion in 2024, marking a 29% growth over the course of the year. Fiserv expects Clover’s revenues to reach $4.5 billion by 2026, suggesting a 28.5% year-over-year growth rate. While this goal may seem ambitious, Fiserv is taking the necessary steps to ensure that Clover meets these goals.

An Aggressive Series of Acquisitions

As mentioned, the acquisition of CCV aligns with Fiserv’s aggressive acquisition strategy.

Over the past few years, Fiserv has expanded its portfolio by acquiring numerous companies. In 2022, Fiserv acquired several fintech companies, including Finxact, OrangeData, NexTable, and City POS.

A year later, Fiserv acquired two Brazilian companies: Skytef, a financial software provider, and Sled, a payments software company.

More recently, at the end of last year, Fiserv acquired the Canadian company Payfare, a provider of instant payout and digital banking solutions tailored to the contractor workforce. This move was seen as a strong step toward the company strengthening its position in the gig economy, particularly among gig workers who often face challenges in accessing services during financial emergencies.

The post Fiserv Acquires CCV to Expand Clover’s European Footprint 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.

One of the biggest challenges in the payments landscape is that customer expectations are constantly evolving. Thirty years ago, customers knew they could expect one experience when shopping from a catalog and another when shopping in-store. But then, Amazon came along and redefined the process, shifting customer expectations forever.

Now, the evolutionary wheel has landed on omnichannel payment solutions. As Don Apgar, Director of Merchant Services at Javelin Strategy & Research, explains in his report, The Evolution of Omnichannel Payment Strategies, omnichannel has created a seamless experience for shoppers across various touchpoints. However, with the ongoing evolution of the payments environment, merchants can’t afford to rest on their laurels.

Putting the Customer First

No matter where a business is on its omnichannel journey, payment technology is always evolving. Every change in technology presents an opportunity to enhance the customer experience. In general, customers do not notice the payment process until it causes them problems. However, they have come to expect consistency in their payments across different venues and platforms.

This consistency plays a major role in  maximizing the customer experience.

“Let’s say I bought something in the store with my credit card,” said Apgar. “Then I go to use that credit card online, but it’s not available. Why doesn’t the online shopping process recognize me as an existing customer? Because I didn’t buy online, I bought in-store.”

Multiple sales channels are hardly a new concept in retail. When merchants operated catalog sales, consumers understood that catalog sales and store sales were separate entities—even if they fell under the same brand. As a result, consumers were willing to accept differences in how these channels handled payments. They didn’t expect the store to know anything about their catalog order, or vice versa.

Tackling Online Inconsistencies

The internet changed everything. As e-commerce replaced most catalogs, consumers no longer viewed shopping as separate experiences, and the idea of distinct shopping methods faded. For many retailers, the challenge became maintaining the consistency that consumers now expect. At this point, retailers needed to be extra cautious just to avoid frustrating customers.

“You don’t want to say, ‘OK, I take Apple Pay in-store, but I don’t take it online,’” said Apgar. “Or let’s say I want to buy a bike for my kid that costs $300. I can do buy now, pay later on the website and split it into four payments, but if I go to the store, I can’t do that.”

Too many retailers are still struggling with these inconsistencies. Their processing infrastructure was initially built to support a many brick-and-mortar stores, but 20 years ago, they realized they needed to transition to e-commerce as well.

In their search for the best e-commerce solution, many retailers found that their current processor handled in-store transactions well, but struggled with card payments on their website. So, they decided to adopt a processor specifically designed for e-commerce.

“That’s how you wind up with these siloed service stacks,” said Apgar. “You’ve got the best retail solution that there is and the best e-commerce solution that there is, but now the problem is they don’t talk to each other.”

A rise in fraud, combined with new data security requirements and emerging payment types like digital wallets, pushed payments deeper into siloed sales channel. While consumers increasingly expected a seamless omnichannel experience, retailers inadvertently moved their payment operations in the opposite direction—addressing channel-specific challenges with channel-specific solutions.

Opening Lines of Communication

For large retailers, there are additional considerations to ensure their systems communicate effectively with each other. These systems not only track payments but also manage inventory and monitor customer behavior. Retailers have started using this data to offer rewards or special offers, but it also presents the risk of damaging customer relationships if not handled carefully.  

“Let’s say I went into a store, bought something with my credit card, and never signed up for anything,” said Apgar. “Then when I go buy something online and enter my card number, a box pops up that says, ‘Hey, I see you just bought something at the local store.’ It gets to be a little Big Brother-ish, and it freaks people out.”

Another concern is fraud. One of the biggest challenge in e-commerce is verifying that the shopper actually owns the credit card they’re using for the transaction. The omnichannel solution, with its ability to exchange information across all areas of the business, can be an advantage in addressing this issue.

“There’s an easy way to verify that,” said Apgar. “If a cosnumers bought something in-store with their card, and they’re using it online a month later, it’s a pretty safe bet that it’s their card. I don’t have to spend however much it costs to go out to different fraud prevention algorithm vendors and run the transaction through. I’ve already seen you as a customer. Even though I haven’t seen you on the e-commerce side, I’ve seen you in my store.”

Planning for Expansion

With a few exceptions, it’s generally better for retailers to build for omnichannel from the start, rather than focusing on one specific channel and later adapting the process for others. Even if full omnichannel implementation isn’t feasible initially, it’s beneficial to plan for it during product design. This approach will save both time and prevent headaches in future implementations.

At the same time, the complexity of changes in payments often leads to a more focused approach on the issue at hand. When retailers address an immediate problem, they can minimize risk by limiting the impact of the change.

As problems arise, Apgar recommends addressing the issue at hand and containing the scope of change. As he often says when it comes to changes in the payment processes, “don’t try to boil the ocean.”

The post Navigating an Omnichannel Payments Strategy appeared first on PaymentsJournal.

Amid strong competition to become the go-to point-of-sale provider for small- to medium-sized businesses, Intuit has introduced a solution that allows QuickBooks Online users to accept payments directly on their iPhone.

While tap-to-pay tech isn’t new, Intuit’s offering integrates is that it seamlessly with its QuickBooks suite, allowing small business owners to reconcile payments and manage their finances in one place.

According to data from QuickBooks, nearly half of U.S. small businesses report that cash flow is a significant challenge. Intuit believes its solution can help optimize cash flow while giving customers a convenient payment option—without the need for a traditional point-of-sale (POS) system.

“Intuit used to have a POS that worked with QuickBooks, but when I went to research for our recent Small Business POS Scorecard, I discovered that Intuit announced the end of life (EOL) on the POS platform,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “It looks like from this announcement that the POS is being replaced by an app that includes tap-to-phone payment acceptance and some basic features like invoicing.”

“In putting together our scorecard, I saw how super-competitive the POS market has become for small business,” he said. “It makes sense that QuickBooks would pull back from trying to keep up in that space, and switch to offering a mobile app that includes basic functions like the ability to accept card payments.”

Tap-to-Phone Traction

Mobile devices have been able to accept payments through add-on devices, like Square’s dongles, for some time. However, after Apple unlocked its NFC technology to third-party developers last year, many solutions have emerged that can turn iPhones into payment terminals.

Also known as tap-to-phone, these solutions have quickly gained traction with small businesses because they allow merchants to accept multiple payment types without the need for expensive hardware.

According to Visa, nearly 30% of tap-to-phone users are new small businesses. These solutions are especially powerful for gig economy workers, creators, and side hustlers, who can use their existing device to accept card payments anywhere.

The post Intuit QuickBooks Adds Contactless Payments for Small Merchants appeared first on PaymentsJournal.

Barclays is close to selling its payment business to investment firm Brookfield Asset Management for £650 million. However, the details of the transaction suggest that Barclays may have been eager to offload the business at almost any price.

It’s not uncommon for banks like Barclays to exit the merchant acquiring business when it operates as a standalone division, without strong integration into small business banking or enterprise treasury functions. What is unusual, however, is the structure of the sale. Brookfield will initially acquire a 10% stake in Barclaycard Payments, with a structured pathway to assume an additional 80% within three years. Barclays could retain a 10% minority stake.

In addition, Barclays is expected to invest £400 million into the unit to support its return to sustainable growth, according to Britain’s Sky News. It would also make a regulatory capital investment of approximately £250 million to secure approval for the deal.

A Declining Valuation

Barclays has been in a strong financial position lately, having announced a stock buyback of more than five million shares. But its payments business appears to be struggling against new competitors like Adyen and Stripe. Last October, reports suggested Barclays hoped to secure £2 billion for it, but the final sale price was at most a third of that.

“This sounds like Barclays is struggling to maintain a strong valuation on the business, with competitors blocking their path to continued sustainable growth,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “Even though the bank wrote down the valuation by £300 million last December, Brookfield is acquiring the business for £650 million with Barclays immediately re-investing £400 million, making it unclear what the true value of the business really is, and how much investment it will take to turn it around.”

Not Quite a Done Deal

Apgar suspects that the deal, while still not finalized, may not be settled yet. He said that if the business continues to struggle, Brookfield may still have an out.

“If Brookfield is unsuccessful in turning the business around, they may walk away from completing the 80% stake in 2028, leaving Barclays to start the sale process from scratch,” Apgar said. “If the business has significant technical and product debt, it might make more sense for Barclays to sell the portfolio of accounts to a competitor and shut down the business, rather than prop it up for an investor to try and make a go of it.”

The post Barclays Inches Closer to Offloading Its Payment Business appeared first on PaymentsJournal.

‍The Evolution of Card Payments and the Rise of Online Transactions

In the late 1990s, card payments entered a new era with the internet’s mainstream adoption. Traditionally, cardholders would swipe or dip their cards into a point-of-sale (POS) terminal in-store. This allowed some form of authentication to be carried out. However, the rise of e-commerce introduced card-not-present (CNP) transactions, where cardholders enter their details online without a physical interaction. This made it impossible for merchants to carry out in-person forms of authentication.

The Role of Zero Liability Policies in Online Card Payments

One factor that likely encouraged consumers to embrace online card payments was the protection offered by the Zero Liability policy. This ensured that cardholders were not held responsible for unauthorized charges should the card be used fraudulently, or the goods arrive incomplete or not at all. If an issue arises, consumers can initiate a chargeback process, requiring the merchant to prove that goods were delivered, and that the transaction complied with all relevant rules and regulations to avoid liability. Under certain circumstances, the liability for a fraudulent transaction will shift from the merchant to the card-issuing bank (a so-called liability shift). However, it is important to note that regardless of who is ultimately held liable, managing the chargeback process costs the issuer an average of $37 per disputed transaction.

The Surge in Transaction Disputes and Its Impact

Recently, there has been a notable increase in transaction disputes. In 2023, U.S. consumers disputed approximately 105 million charges worth an estimated $11 billion, with this number expected to rise by 40% by 2026. This surge can partly be attributed to the increasing simplicity of disputing transactions. 36% of US consumers view the ability to dispute charges in their mobile banking app as “extremely valuable.” This, alongside growing customer awareness of consumer rights, influenced by financial influencers (“finfluencers”), meant that banks had to simplify this process in order to remain competitive.

Combatting Friendly Fraud with Advanced Solutions

A significant portion of these disputes, around 86%, are categorized as friendly fraud, where legitimate transactions are mistakenly or intentionally contested by cardholders. To counter this, various initiatives have been implemented across the payment ecosystem. For instance, Mastercard has developed an AI-based solution that analyzes multiple data points to identify potential friendly fraud. If the AI analysis indicates that a dispute is likely to be friendly fraud, the card issuer then presents the data to the cardholder, allowing them to cancel their claim. Similarly, Visa has expanded the list of compelling evidence that a merchant can submit, helping merchants to build a stronger case against potential friendly fraud.

The Financial Impact of Chargebacks on Issuers

The chargeback process is a huge expense for issuers. In 2023 alone, there were 105 million chargebacks in the US. This, multiplied by the average of $37 per chargeback, would result in a cost of almost $4 billion for US issuers.

Technological Solutions for Fraud Prevention

Thus, it is important for banks to find effective solutions to combat both friendly and malicious fraud in order to remain competitive. A promising solution, based on FIDO passkey technology, enables consumers to create a digital signature and authenticate their online purchases by tapping their credit or debit card to their smartphone. This method prevents fraudulent transactions, as malicious fraudsters cannot complete an online payment unless they are in possession of the physical card itself (much like how they cannot pay in a physical store without the card). Similarly, friendly fraudsters would find it difficult to dispute transactions they verified by tapping their own card (just as they would struggle to contest a purchase made in person). This approach demonstrates how credit and debit cards can be leveraged beyond payments, enhancing security and convenience for consumers, banks, and merchants alike.

A card can do so much more.

The post Leveraging the Payment Card to Combat Friendly and Malicious Fraud appeared first on PaymentsJournal.

Handling takeout orders and processing payments by phone is a common pain point for many merchants. To ease this burden, CardFree and SoundHound AI have launched a platform that uses artificial intelligence to automate the ordering and payment process.

The solution has already been rolled out at Torchy’s Tacos, a Texas-based chain with over 130 restaurants across the U.S. The platform integrates SoundHound’s voice technology with CardFree’s checkout platform, including its text-to-pay technology.

By automating these processes, the solution aims to reduce workloads and mitigate fraud, with AI handling the heavy lifting. In addition, the platform allows customers to accrue and redeem loyalty points, use gift cards, and pay with digital wallets like Apple Pay or Google Pay.

Converging Trends

The CardFree and SoundHound platform represents the convergence of two key trends in the merchant experience: AI and the growing integration of embedded finance.

“A question I’m often asked is: what is the difference between integrated payments and embedded payments?” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Buying anything is a two-step process; first, you buy something and then you pay for it.”

“Integrated payments attach the payment workflow to the purchase, so it all runs together seamlessly,” he said. “Embedded payments incorporate the payment into the purchase, reducing a two-step process to one. As you can see in this process for Torchy’s Tacos, both ordering and paying are faster and easier for the customer, and the streamlined process means better throughput for the merchant.”

Global Reach

Business of all shapes and sizes have been experimenting with AI to optimize time-consuming tasks. Some of the largest fast food chains, such as McDonald’s, Wendy’s, and Taco Bell, have already piloted AI-powered voice technology to take drive-through orders.

However, concerns about errors that could lead to reputational damage and the loss of the human touch in customer interactions have largely stymied these efforts for now.

Despite these concerns, the benefits of automated order-taking suggest that merchants will likely continue exploring AI and embedded finance solutions.

“Embedded payments are changing the way Independent Sales Organizations (ISOs) go to market with card processing services,” Apgar said. “If you’re selling embedded payments, you can’t just sell payments, you have to sell the process that the payment is embedded in. In this example, CardFree bundles their payment processing with their ordering solution and SoundHound AI brings a comprehensive ordering and payment solution to the merchant.”

The post How AI Is Streamlining Takeout Orders and Payments 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.

Visa’s Tap-to-Phone technology has seen a threefold increase in adoption over the past year, driven by widespread support from millions of merchants and consumers alike.

Tap-to-Phone transforms any smartphone into a payment terminal using its near-field communication (NFC) capabilities. Unlike traditional tap-to-pay technology—where an NFC-enabled payment terminal read a card’s credentials when tapped—Tap-to-Phone allows the device itself to function as the terminal, enabling it to read tapped cards directly.

The pilot version of the service launched in the United States in 2021. Today, the U.S. is among the top three countries for Tap-to-Phone usage, along with the UK and Brazil.

“Several factors have driven the growth here,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “Apple has finally unlocked the NFC chip on iPhones to enable developers to access it for Tap-to-Phone tech. JPMorgan Chase and U.S. Bank have started offering apps to small businesses with their merchant accounts, while fintechs like SmartCube are creating apps for enterprise merchants.”

A Boon to Small Retailers

According to Visa, nearly 30% of Tap-to-Phone sellers are new small businesses. This technology allows them to adopt the latest payment solutions without requiring significant investments in additional hardware. The payments giant highlighted the experience of The Brooklyn Teacup, a vintage china shop in New York City, whose owner was able to open an in-person studio for customers without needing a traditional computer setup or register.

“For small businesses, especially the very small end that includes the creator economies and side hustles, merchants can easily accept card payments anywhere on the same smartphone they already have in their pocket,” said Apgar. “This tech is driving payment acceptance growth like Square did when it first debuted, except without the need for a dongle.”

Enterprise merchants are also leveraging Tap-to-Phone by equipping employees with compatible devices for work-related tasks. Home Depot, for example, provides staff with Tap-to-Phone devices, allowing them to accept payments anywhere customers are, rather than being confined to register lanes.

Beyond the Merchant Class

The use cases extend beyond retail and into other industries. Delta Airlines now issues company iPhones to all flight attendants to manage schedules, access the company intranet, and perform other work-related tasks.

Previously, planes had dedicated payment terminals on board for in-cabin purchases, including meals and beverages. However, last year, Delta added Tap-to-Phone on the flight crew’s iPhones. This not only eliminates the need for dedicated payment devices, but also enhances the utility of the existing fleet of company iPhones, enabling the cabin crew to operate more efficiently.

The post How Merchants Are Driving the Rapid Adoption of Tap-to-Phone 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.

As the use of stablecoins increases, Singapore’s Metro department store chain will begin supporting stablecoin transactions both in-store and online.

According to Cointelegraph, the integration will be powered by crypto platform Dtcpay. Metro customers will be able to make purchases using dollar-based assets like Tether’s USDT and Circle’s USDC, as well as FD121’s First Digital USD and the Worldwide USD (WUSD) stablecoin issued by the Worldwide Stablecoin Payment Network.

Founded almost 70 years ago, Metro department stores have since grown into an important brand across many Asian markets. However, stablecoin payments will initially be available only at the Metro Paragon and Metro Woodlands locations in Singapore.

A Viable Asset

Stablecoins have been considered one of the most viable digital assets for everyday transactions because they aren’t as volatile as many cryptocurrencies. However, until now, the majority of stablecoin transactions have been limited to crypto exchanges.

The adoption of stablecoins in retail represents another critical step toward what many consider an impending golden age of stablecoins. The use cases for a digital asset that tracks a fiat currency are numerous, such as in cross-border payments and in countries that lack a stable fiat currency.

Stablecoins Are Here to Stay

Though there are increasing applications for stablecoins, the most significant factor driving the momentum of these digital assets is their increased adoption by major players in the payments industry like PayPal and Stripe.

Two years ago, PayPal launched its PayPal USD (PYUSD) stablecoin, which soon reached a market capitalization of $1 billion. While PYUSD’s market share is still just a fraction of Tether’s industry leading USDT stablecoin, PayPal has a well-established network of partners and financial institutions that it can leverage to drive growth.

The same can be said for Stripe, which finally added crypto transactions into its payments platform after a series of attempts over the years. However, more significant than the crypto integration was Stripe’s $1.1 billion acquisition of stablecoin company Bridge in October.

The purchase was one of the largest acquisitions in crypto and digital assets history, but it also exemplified financial services providers’ growing belief that stablecoins are here to stay.

The post Singapore’s Metro Department Stores to Support Stablecoin Transactions appeared first on PaymentsJournal.

Checkout is a critical part of the e-commerce experience, and PayPal aims to reduce friction for UK and European merchants with its Fastlane service.

Fastlane was initially announced for U.S. merchants last January and expanded more broadly in August. Its rollout in  the UK and EU will be facilitated by JPMorgan Payments (JPM), which will introduce the offering to its substantial merchant network.

PayPal highlighted that 70% of consumers consider checkout a crucial part of the shopping experience, yet cart abandonment remains high. The payments giant asserts that FastLane addresses this challenge by accelerating checkout speeds by over 36% compared to traditional guest checkout.

“This is a good partnership—PayPal needs the broader distribution that JPM can bring in the UK and EU, and the FastLane product gives JPM great tech to offer e-commerce merchants that reduces friction in guest checkouts,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.

“If you’re not familiar with FastLane, it works similar to Shopify’s ShopPay,” he said. “If you are shopping online and elect for guest checkout (you don’t have to have or want an account with the merchant), FastLane recognizes you as a PayPal consumer as soon as you enter your email address. FastLane then sends a code to the consumer’s mobile on file with PayPal to authenticate the customer and prepopulates their shipping and payment info.”

Friction Reduction

PayPal’s one-click option was rolled out last year alongside a host of other artificial intelligence initiatives, including a smart receipts program and an AI platform designed to help merchants leverage customer data for personalized recommendations.

While many of these AI initiatives received a tepid response initially, FastLane appears to have gained traction on a wider scale.  

Beyond AI, merchants continue to explore biometric authentication technology in the checkout experience. Early applications of biometric verification primarily focused on in-store transactions, such as Amazon’s pay-by-palm initiative at its Whole Foods stores.

However, biometric payments may offer even greater potential in e-commerce checkouts.  

“The real need for identity verification is with card-not-present transactions, and it would be great to see facial recognition technology deployed in conjunction with technology like 3D Secure 2.0, where biometrics can work to reduce both fraud and friction in ecommerce transactions,” Apgar told PaymentsJournal.

The post PayPal to Expand FastLane Service to UK and EU, With Assist from JPMorgan Payments 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.

Consumers have become increasingly aware of the benefits of emerging payment methods and are accustomed to using different payment mechanisms in various scenarios. Gen Z, in particular, is especially payments-savvy—one of the reasons Mastercard is launching its One Credential platform.

One Credential allows customers to choose from multiple payment methods like debit, credit, buy now, pay later (BNPL), and prepaid, all within a single interface. Users can manage their selection of payment options through Mastercard’s online platform or app.

The payments giant believes this solution will appeal to younger consumers, who are digital natives and prioritize personalized experiences. This preference for experiences has fueled a resurgence in shopping at physical malls among younger consumers. However, Gen Z hasn’t abandoned e-commerce; instead, they are blending aspects of in-store and online shopping to create a hybrid shopping experience.

Structuring Credit

Another key aspect of One Credential is that it will provide structured credit solutions aimed at helping Gen Z build their credit scores and improve their creditworthiness.

Gen Z consumers haven’t been hesitant to embrace credit cards. A recent study by the Federal Reserve of Dallas found that younger consumers in Texas are more likely to own credit cards than previous generations at the same age and tend to use them more frequently.

Roughly 60% of Gen Z respondents reported having at least one credit card in their early 20s, with nearly a third saying they had a credit card that was 75% or more of its credit limit.

Filling a Role

Mastercard’s latest effort represents a growing trend in the financial services industry, where organizations are adapting their models to align with Gen Z’s preferences. Just as Gen Z adults are becoming more active with credit cards at an earlier age, younger consumers are also starting their investment journeys sooner. The digital-first mindsert of Gen Z investors has driven a shift toward AI tools and self-directed platforms.

Gen Z is also influencing a shift toward mobile and digital banking solutions at traditional financial institutions. While technology solutions are important, many younger consumers are also looking for guidance—an opportunity that financial institutions can seize.

“Gen Z consumers often have to rely on free financial education and advisors because they don’t have any alternative,” Gregory Magana, Digital Banking Analyst at Javelin Strategy & Research told PaymentsJournal. “Older generations, which are more financially established, have an easier time getting in-person help. There could be a significant return on investment from offering Gen Z consumers Finance 101, so they can boost their financial confidence.”

The post Mastercard Launches One Credential in Play for Gen Z Consumers appeared first on PaymentsJournal.

Washington, D.C., could be the next jurisdiction to tackle credit card swipe fees.

According to an exclusive from Axios, 13 other states have introduced similar bills, but the fact that this one is in the nation’s capital could bring extra salience to the issue.

Axios reports that D.C. councilmember Charles Allen plans to propose The Fair Swipe Act of 2025, which would require merchants to be charged processing fees excluding sales tax or gratuities from the total.

“Right now, every time you swipe your card, banks and credit card companies add a 2-4% fee – not just from the meal cost, but from the tax and tip, too,” Allen posted on social media. “That adds up to an average of $14,500 a year per DC restaurant—on tips and tax fees alone!”

Allen introduced similar legislation last year as part of a restaurant relief bill, but the swipe fee limits were not included in the final version that passed.

Swipe Fees in Other States

A law banning fees on sales tax and tips passed in Illinois last year. The law is set to take effect in July, making Illinois the first state to exempt taxes and tips from interchange fees.

However, banking and credit union groups have filed a lawsuit against the state of Illinois, leaving the law in limbo. Earlier this month, the U.S. District Court of the Northern District of Illinois declined to issue a preliminary injunction to stop the swipe fee law from applying to credit unions but extended a previous preliminary injunction that banned it from applying to out-of-state banks. 

It’s not clear what method Allen’s bill would employ. The Illinois law proposed that customers swipe twice—once for the base cost of the goods and once for taxes and tips. Pennsylvania had considered a proposal under which credit card companies could refund merchants the portion of the fee incurred by sales tax.

Either way, industry experts believe swipe fee laws will not have the intended effect for restaurateurs and other retailers.

“Merchants have the right to not accept payment cards if they don’t want to pay the fee, or they have the opportunity to pass the cost of credit card fees along to their patrons,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “If D.C. outlaws card fees, acquirers will no longer service those merchants, and now the merchant won’t be able to accept cards. So where today the merchant has choices, this law takes those choices away.”

The post D.C. May Experiment with Swipe Fee Limits appeared first on PaymentsJournal.

Point-of-sale system provider SoftPoint is adding facial recognition solutions to its network of retailers, in the latest integration of biometric verification in retail applications.

This integration will utilize BigBear.ai’s Trueface facial recognition software for payments at banks, restaurants, convenience stores, and event venues. One of the main reasons for incorporating biometrics is to mitigate fraud risk and prevent unauthorized transactions.

This follows news that South Korea’s mobile platform, Toss, will roll out its Face Pay biometric payments solution at the top three convenience store chains in Seoul’s Gangnam District.   

The Toss platform requires users to register their facial image and payment card credentials. Once the consumer’s face is recognized at the point of sale, their payment card is automatically charged for the purchase.

“Convenience stores are always looking to improve throughput at the point of sale and Toss Face Pay is next-level convenience for shoppers who don’t have to reach for their phone or wallet to pay,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.

Potential Bottlenecks

The demand for convenience is particularly high in busy shopping districts like the Gangnam District, where customers have come to expect speed and ease.

GS Retail, one of the retailers that will be incorporating Toss Face Pay, noted that customers often approach the register with merchandise and other items in both hands, making it difficult for them to use their hands to pay.

However, while facial recognition software could ideally address these checkout bottlenecks, it is unclear how many users have signed up with Toss Face Pay.

There are also concerns about accuracy. Another Seoul retailer, BGF Retail, reported nearly 100% payment accuracy during initial pilots of the facial recognition program. However, issues may arise with a wider deployment, driven by varying store conditions, inadequate lighting, or a broader user population.

Inevitable Adoption

Despite any initial hurdles, the security and convenience benefits of biometric authentication means its continued adoption is inevitable. While the SoftPoint and Toss integrations represent biometric verification in retail applications, there is clearly also a place for biometrics in e-commerce transactions.

“The real need for identity verification is with card-not-present transactions, and it would be great to see facial recognition technology deployed in conjunction with technology like 3D Secure 2.0, where biometrics can work to reduce both fraud and friction in ecommerce transactions,” Apgar said.

The post SoftPoint Adds Facial Recognition Amid Growing Biometric Authentication Adoption appeared first on PaymentsJournal.

Recent technological breakthroughs have given merchants more payment optimization options than ever before. However, the increasing complexity of the landscape makes it challenging to identify value and create opportunities while keeping expenses down.

In a recent Javelin Strategy & Research report, 2025 Merchant Payment Trends, Don Apgar, Director of Merchant Payments, and James Wester, Co-Head of Payments, examined the impact of three emerging trends shaping the merchant experience: artificial intelligence, the fintech bubble, and the shift toward value over cost.

Saving a Dime

Merchants are increasingly focused on payments performance, constantly seeking ways to optimize their payments operations. They closely track their organization’s metrics and often employ dedicated staff or vendors to monitor payments activities.

In pursuit of lower costs, many merchants have turned to payment orchestrations platforms. However, in some cases, the expense of these solutions outweighs the intended savings.

“If you’re running on a payment-orchestrated platform and you’ve got two or three processors, you may have somebody on the finance team whose job title is analyst, but in reality, they spend 100% of their time working on payments-related reconciliation and cost allocation,” Apgar said. “Also, you may have added a vendor who does loyalty or risk reduction or some other ancillary process that only applies when a transaction has certain characteristics.”

When multiple processors and vendors are introduced, the added complexity makes it difficult for merchants to ascertain the true cost of payments.

“It’s the old adage: ‘I saved a dime, but it cost me a dollar to do it,’” Apgar said. “I optimized authorization, and I sold an extra $100 in goods, but it cost me $1,000. I think there’s going to be a focus on drilling down in the merchant organization and asking, ‘What is the real cost?’ The answer is always somewhere in the middle of a completely deconstructed operation with multiple vendors, versus doing everything on your own.”

A Historic Bubble

The vendors that become an integral part of many merchants’ operations are often fintech companies that have sprung up in the past few years. However, these firms face stumbling blocks of their own, and an overreliance on fintech partners could create risks for merchants in the long run.

“I think we’re seeing another fintech bubble,” Apgar said. “History is repeating itself, like the dotcom bubble in the early 2000s. Investors were throwing money at every business plan that didn’t have a typo on it, and it didn’t have to make money, it just had to get market share. We’re seeing a lot of that in fintech, too. We have so many business plans that don’t have a navigable path to positive revenue, but it’s being obscured by all the headlines and the buzz.”

Some of these challenges became evident last year, exemplified by the collapse of Synapse, a fintech whose documentation lapses left banking customers unable to access $85 million of their funds.

The fallout from Synapse’s failure prompted regulators to scrutinize the role of fintechs in the modern financial system—an oversight that is set to intensify this year.

“We’ve seen a blizzard, not even a flurry, a blizzard of compliance fines come down from the Federal Trade Commission, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Commission,” Apgar said. “Everybody is worried about compliance, fraud, and money laundering. Banks can contract these things out to a fintech, but at the end of the day, the bank owns the responsibility for them.”

As regulators increase their focus on fintechs, pressure will mount on the organizations that don’t have a durable value proposition. Under this heightened scrutiny, some firms may consolidate, others may be acquired, and some may be forced to shut down entirely.

Second Movers

Despite these hurdles, financial technology has irrevocably altered the banking model, and its impact will only intensify as more financial services firms integrate AI. However, this adoption faces obstacles. While artificial intelligence is one of the most powerful and transformative technologies ever developed, it still has many imperfections.

For example, Google faced backlash after its Gemini AI engine provided inaccurate feedback on multiple occasions. There have also been instances where AI has “hallucinated,” generating fictitious information.

As organizations race to capitalize on AI’s advantages, they should be cautious about entrusting critical functions entirely to to artificial intelligence. For example, a financial institution may deploy AI to sift through millions of transactions as part of its compliance efforts—a task for which artificial intelligence is generally well-suited.

However, if AI overlooks something, fails to report an issue, or malfunctions, the bank will still be held accountable for any compliance failures.

“There’s another old adage: ‘You can spot the pioneers—they’re the ones with the arrows in their backs,’” Apgar said. “Our prediction for this year is there is going to be a second-mover advantage. I think that the folks that jump on the bandwagon early and are the first to roll out AI-driven chatbots on their website, they’re going to get a black eye because it’s not going to work.”

While there are still too many gaps to fully rely on AI, companies can’t afford to ignore it. In the coming years, organizations—and the world—will effectively help train the language learning models that power AI. As time goes on, AI will learn from its mistakes, and the technology will improve significantly  in the long run.

Therefore, organizations that take a slower, more measured approach to AI implementation will be in the best position to reap the rewards when the technology is fully optimized.

“It’s certainly not too early to start mapping out how a highly functioning model could create efficiencies and potential savings,” Apgar said. “Once the technology becomes more accurate and reliable, then you’ve already got a plan. You will have a framework to evaluate the progress of the technology and say, ‘I think this model is at a point where it’s suitable for this function.’”

“When you look at it in that light, when you do implement AI, you’ve got a much higher probability of success,” he said. “Success being defined as it didn’t blow up and cost me anything.”

The post Merchants Are Searching for Value in an Increasingly Complex Environment appeared first on PaymentsJournal.

An increasing number of merchants are shifting their view of payments systems from functional tools to key drivers of business growth.

According to a survey conducted by PXP among U.S. and UK merchants, nearly two-thirds recognize payments technology as essential for expansion. Over half of respondents are actively leveraging payments tech to unlock new revenue streams, monetize payment capabilities, and increase their appeal to consumers.

“This data from PXP underscores what Javelin is seeing in our research—a great payment experience for customers is becoming table stakes for retailers, both online and in-store,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “Merchants are working hard to deliver a better payment experience than their competitors.”

Expanding the Menu

One way to improve the customer experience is by offering more options, and this trend is becoming more prevalent across the merchant space. According to PXP, over a third of respondents are expanding their payment options. Merchants are also increasingly aiming to provide an omnichannel experience, where customers can seamlessly transition between a brand’s in-store, online, and mobile environments.  

However, delivering this experience is easier said than done. Merchants often face challenges in determining how to allocate funding and resource investments for their omnichannel solutions. In addition, tracking and managing inventory across e-commerce and physical locations can quickly become cumbersome, especially as a business scales.

Augmenting the Brand

To solve for these challenges, there has been an increasing demand for enterprise point of sale (POS) systems, according to a separate data from Shopify. An enterprise POS is a unified system that connects sales, loyalty programs, and inventory across multiple channels. This cohesive solution, powered by APIs, provides merchants with a holistic view of their operations.

Payments data plays a key driver in the omnichannel experience, as most merchants rely on it to track customer purchasing activity across various sales channels. However, as organizations introduce more payments solutions, it is important to ensure these systems enhance the brand experience, rather than detract from it.

“Enterprise retailers tend to value flexibility and extensibility above all other features in a POS platform—every retailer has their unique spin or ‘secret sauce’ that makes their business stand out from competitors and the POS needs to accommodate that,” Apgar told PaymentsJournal.

The post More Merchants Consider Payments Technology Indispensable appeared first on PaymentsJournal.

Nearly one million businesses will soon be able to offer buy now, pay later (BNPL) services to part of their menu of payment options. JPMorgan Chase’s payments processing unit, the world’s largest merchant acquirer, is partnering with Klarna to bring BNPL plans to its merchants. 

The service is set to roll out later this year, allowing some 900,000 businesses that use JPMorgan Payments to offer BNPL financing at the point of sale.

Klarna, which serves 85 million customers globally, has been rapidly expanding in the U.S. Headquartered in Sweden, the company is expected to launch an initial public offering in the U.S. later this year and has also been exploring the possibility of securing an American banking license.

The partnership with JPMorgan marks another milestone for Klarna, as it continues to build partnerships with major processors to become omnipresent at checkouts globally. Last October, Klarna teamed up with Worldpay to make its services automatically available through Worldpay’s merchant infrastructure. It has also entered into similar partnerships with Adyen and Stripe.

“This is all about giving merchants and customers more options at checkout,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “The partnership with the largest merchant acquirer in the U.S. extends Klarna’s reach immensely ahead of its IPO.”

Bringing BNPL Under the Chase Umbrella

BNPL services have been growing rapidly in recent years. Last holiday season, BNPL spending topped $18.6 billion, up from $16.6 billion in 2023 and $14.5 billion in 2022. A report from GlobalData predicts that the U.S. BNPL market will expand at an average annual rate of 21% between 2023 and 2028.

JPMorgan has offered its own BNPL option, Chase Pay Over Time, to its credit card holders since 2020. Last year, the banking giant banned customers from using its credit cards to repay outside BNPL services like Klarna or Affirm, citing that it did “not generally allow customers to pay for credit products” with their credit cards, according to a statement given to the New York Times.

Observers noted at the time that this move helped bolster JPMorgan Chase’s investment in its own BNPL product. The partnership with Klarna will accomplish much of the same.

The post Klarna Adds JPMorgan Payments to Its Ever-Growing BNPL Pipeline appeared first on PaymentsJournal.

Pretty much since their introduction, buy now, pay later plans have been a point of contention regarding their impact on users’ credit scores. BNPL providers worried that sharing users’ data could harm them in the long run. But now, Affirm has teamed up with Fair Isaac Corp. (FICO) to show that BNPL loans have little impact on credit scores—if anything, they may improve them. 

In a yearlong study, FICO examined the effects of BNPL loans taken out through Affirm. In most cases, the impact was negligible. New BNPL loans affected credit scores by approximately 10 points for more than 85% of the 500,000-plus Affirm customers surveyed.

However, that movement was more likely to be positive than negative. Most consumers who had recently taken out five or more Affirm BNPL loans either saw their scores increase or experienced no change.  

FICO stated it would use this research to develop a proprietary method for incorporating BNPL data into the credit-scoring marketplace. This could significantly alter how these loans affect credit scores.

The Battle to Report BNPL

BNPL providers have long been reluctant to share their data with credit agencies.

“One of the early selling points for BNPL firms was that they were not sharing data with the credit bureaus,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “The idea was that this lack of sharing would be attractive to consumers, particularly those concerned with their credit scores.

“However, with potential regulatory changes on the horizon, it makes sense for BNPL vendors to pivot towards a strategy that markets these loans as a credit enhancement tool,” he said. “This study demonstrates that integrating BNPL loan history into a credit score is widely beneficial and is predictive of payment behavior.”

These changes have been brewing for a couple of years. In a June 2022 blog post, the CFPB requested that the “consumer reporting companies should incorporate the BNPL data into core credit files as soon as possible.” However, following that request, the only major BNPL provider to begin reporting its loan data was Affirm.

When Apple announced in February 2024 that it would start reporting loans from its Apple Pay Later service to Experian, many observers expected more BNPL services to follow suit. Yet, none did, and Apple ultimately shut down Apple Pay Later.

The post How Do BNPL Loans Affect Credit Scores? appeared first on PaymentsJournal.

Aldi’s Shop and Go store, an attempt at a cashierless grocery chain in the UK, are facing criticism for requiring a £10 deposit from each entering shopper. Many customers are unaware of the deposit amount, and if they spend less than £10, the refund can take several days to process.

To enter, shoppers must either download the Aldi Shop & Go app and register a payment card or tap their card at the entrance. Those who use the app receive a message upon pressing the entry button: “We will authorise a small amount to validate your card.” According to the Pinnacle Gazette website, shoppers who press the button multiple times before entering may be charged multiple times.

On the other hand, shoppers who tap their card to enter are informed of the charge upfront. A screen display reads: “We will authorise £10 to verify your card.”

“I wouldn’t fault Aldi for authorizing £10 on a consumer’s card as the enter,” said Don Apgar, Director of the Merchants Payment Practice at Javelin Strategy & Research. “That’s part of the tradeoff that the consumer makes in exchange for unattended checkout. Lost or stolen cards, and those that don’t have £10 of purchasing power available, really raise the risk profile for Aldi. In a traditional store, if you’ve bought more than you can pay for, there is a cashier to help remove items from your bill and restock them. The idea is to minimize the probability of that happening.

“However, for debit card users, that authorization means that £10 of their money in the bank is being held and is not available to spend,” he said. “Aldi needs to be sure that these authorization reversals are happening in real time and that consumers’ balances are being restored when appropriate.”

Following Amazon’s Footsteps

Aldi is not the first retailer to hit roadblocks with its no-cashier technology. Shop & Go is patterned after Amazon Go, the no-contact convenience stores established in the U.S. in 2018. At their peak, Amazon operated around 30 of the cashierless stores, but that number has dropped to 16, and the no-checkout option has been eliminated from Amazon Fresh stores.  

Amazon struggled to find the right technology for the stores. The initial Just Walk Out system, which tracked shoppers’ purchases via camera and sensor technology, was replaced last year by a smart shopping cart that allows shoppers to scan and check out their groceries. It was later reported that the no-checkout stores were monitored by teams in India who logged what shoppers were buying.

The post Aldi’s No-Checkout Store May Not Be Ready for Prime Time 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.

Klarna’s new distribution partnership with Stripe will make the Swedish fintech’s buy now, pay later service available as a payment option for merchants using Stripe in 26 countries. As Klarna prepares for its IPO, this alliance underscores the company’s commitment to BNPL, which remains the cornerstone of its growth strategy.

The partnership significantly builds on their initial collaboration, established in 2021, which allowed Stripe’s U.S. merchants to offer Klarna’s BNPL services.

One promising feature of the expanded partnership is the ability for Stripe’s merchants to perform A/B tests on Klarna products in real-time. This capability allows them to instantly see the incremental revenue gains that Klarna and BNPL bring to their business. According to Stripe’s research, offering BNPL services has increased revenue for merchants by 14% through improved conversion rates and higher average order values.

Klarna filed for its IPO in November 2024 and aims to present the strongest possible numbers to the market. Alongside its partnership with Stripe, Klarna added 100,000 new merchants to its platform in 2024, gaining access to 85 million active users across various markets.

Klarna has made several forays into diversification. In October 2024, it teamed up with Worldpay to provide streamlined payments integration for merchants worldwide. Additionally, it introduced Klarna balance, which lets users store money in a personal account for instant purchases and to pay off BNPL loans, signaling the fintech’s aspirations to evolve into a retail bank.

Growth Opportunities

BNPL remains the core of Klarna’s business. Interest-free BNPL products and longer-term financing options account for more than two-thirds of Klarna’s transactions, and this offering continues to grow by leaps and bounds. What’s more, this growth aligns with the broader global trend: BNPL transaction volumes continue to rise across the industry.

Indeed, a report from ACI Worldwide forecast a 237% increase in global transaction volumes for BNPL services in 2024.

Further supporting the rising popularity of BNPL, research has shown its impact on consumer spending behavior. An article last year in the Journal of Marketing analyzed the purchasing patterns of 75,000 consumers who adopted BNPL alongside 200,000 non-adopters. It found that BNPL users were 9% more likely to make a purchase and spent 10% more per transaction, highlighting the positive effect BNPL has on driving higher purchase volumes.

The post Klarna Reaffirms Its BNPL Roots Ahead of Its IPO 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.

A judge in Illinois’ Northern District has determined that challenges to a law aimed at banning credit and debit interchange fees on taxes and tips may have merit.

The Illinois Interchange Fee Prohibition Act (IFPA), passed last summer, is set to take effect this July. However, in August, the Illinois Bankers Association, American Bankers Association, America’s Credit Unions, and Illinois Credit Union League filed a complaint against the Illinois Attorney General, alleging that the IFPA is preempted by federal laws, unconstitutional, and invalid.

Chief Justice Virginia M. Kendall ruled that these claims have standing, but granted the request for a preliminary injunction only for national banks and federal savings associations. Judgment was reserved on federal credit unions, state banks, and credit unions. While not a complete victory, the ruling is seen as a positive step by those who consider the IFPA to be an overreach.

“It’s another example of government, in this case the state of Illinois, jumping in to regulate the industry without fully understanding how it operates,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The technical complexities alone are daunting—every credit and debit card terminal and point of sale system, including gas pumps and the like, would need to be reprogrammed to send tax and tip amounts separately and not as part of the purchase total.”

“The reporting that would be required to help the merchant reconcile their fees would also be very complex,” he said. “What’s worse is that this bill allows merchants to send in paper requests for fee reimbursements if they cannot communicate these details electronically, which places a huge manual burden on a highly automated process that serves millions of merchants.”

Tipping Points

Adding to a complex situation, the interchange fees that would be prohibited by the IFPA are paid by the card issuer. These fees often help offset the costs of operating the card program and covering losses from customer defaults. 

“A cardholder dining in a restaurant is presented with a $100 check and leaves a $20 tip, for a total purchase of $120,” Apgar said. “Under this law, the issuer only receives interchange fees on the $100 portion, but if the cardholder defaults on their account, the issuer will lose $120. In this scenario, it’s entirely possible that card issuers will refuse to post transactions for which they don’t receive interchange fee reimbursement.”

If implemented, cardholders might be limited to leaving tips in cash. Instead of increasing net tip amounts by eliminating fees—the IFPA’s intended purpose—this change could lead to a decline in net tips if cardholders can’t add them to their purchase.

“While this law attempts to restrict processors’ ability to ‘raise other fees to compensate,’ sending a tip amount separately from the check amount could be easily treated as a second transaction,” Apgar said. “It effectively doubles the number of transactions submitted by a restaurant and thereby doubles their processing costs.”

Tax Complications

Eliminating interchange fees on sales tax presents its own set of issues. If card issuers are not reimbursed, they could refuse to allow sales tax to be posted to a card account. It means a whole spectrum of cashless and unattended sales will no longer be available since tax would have to be paid in cash. 

“This would result in a giant step backwards in making payments frictionless and easy for consumers,” Apgar said. “Merchants already have the ability to add up to a 3% surcharge to credit card sales to offset their costs of interchange and processing fees, so this proposed law adds nothing but unnecessary complexity and inconvenience to a highly efficient and competitive service.”

The post Judge Grants Partial Injunction in Illinois Interchange Fee Case appeared first on PaymentsJournal.

Point-of-sale (POS) systems have evolved far beyond simply processing transactions at brick-and-mortar retailers, according to a trends report from Shopify.

As a business scales, it often struggles to meet consumer expectations for omnichannel shopping experiences. Tracking and managing inventory across e-commerce and physical locations can lead to challenges that quickly mount up. Left unchecked, these issues can even impact a brand’s reputation.

Retailers are increasingly looking for POS systems that can unify all aspects of their business into a single, cohesive solution.

“Enterprise retailers tend to value flexibility and extensibility above all other features in a POS platform—every retailer has their unique spin or ‘secret sauce’ that makes their business stand out from competitors and the POS needs to accommodate that,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research.

Omnichannel Driver

An enterprise point-of-sale system provides a unified approach that connects sales, loyalty programs, and inventory across multiple channels. Serving as a central hub—facilitated by APIs—an enterprise POS offers retailers a 360-degree view of their operations.

This broader scope is essential for businesses aiming to integrate omnichannel solutions. Shoppers increasingly expect the flexibility to move seamlessly between in-store and online experiences, and an enterprise POS can serve as the engine that powers this capability.

“Omnichannel demands that both in-store, online, and mobile all operate from a common database so that pricing, inventory in-stock, and other customer-facing data like rewards points stay in sync across all sales channels,” Apgar said. “Payments is a key driver in all of this since most retailers use payment card data to track customer purchase activity across various sales channels.”

A Robust Repository

Data received from payments is another critical driver for the personalized experiences customers demand. Consolidating payments data into a central source provides merchants with a robust repository to make better business decisions.

According to Shopify, an enterprise POS system can track everything from customer feedback on products to the marketing campaigns they have engaged with. These data points help merchants tailor their offerings and deliver better service.

The post Shopify Highlights the Growing Demand for Enterprise Point-of-Sale Systems appeared first on PaymentsJournal.

Amid the surging demand for cross-border payments, India’s BRISKPE has launched a platform designed to provide global reach for even the smallest businesses.

The platform is geared to address the needs of marketplace sellers, gig economy workers, exporters, and other micro, small, and medium-sized enterprises (MSMEs). Payment issues have long been a persistent concern for small business owners, with high fees, complex currency conversions, delays, and fraud risks often acting as barriers to entry into global markets.

Another issue has been the dearth of payment types available to merchants. To remedy this, BRISKPE’s platform will support both pay-by-bank payments and card transactions facilitated by PayPal and PayU, a Netherlands-based firm that has gained significant traction in India. PayU has been a strong supporter of BRISKPE’s cross-border efforts, contributing millions in seed funding to help launch  the platform.

Currency Capability

For pay-by-bank transfers, BRISKPE said that funds will be credited within one day. Initially, the platform will support transactions in six currencies—USD, GBP, EUR, CAD, AUD, and SGD. And it also support transfers in over 30 currencies using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) protocol.

SWIFT operates a global messaging network that has widely been considered a contender to handle cross-border operations. The organization has been actively working to support new payment types, including crypto and digital assets.

Unlocking Potential

Although SWIFT’s solution has gained greater traction, it doesn’t specifically address the cross-border payment issues faced by small businesses. To that end, the BRISKPE platform will charge business owners a flat 1% fee on all pay-by-bank transactions.

BRISKPE aims to streamline the onboarding process for merchants by offering instant Know Your Customer (KYC) approvals and providing tools to track and manage payments. To mitigate fraud, the platform will leverage the existing fraud detection capabilities that PayU and PayPal have in place for wallet and card transactions.   

“Our goal is to empower MSMEs by breaking down the financial and operational barriers that have held them back for too long,” said Sanjay Tripath, CEO and Co-Founder of BRISKPE in a statement. “By simplifying cross-border payments and offering a variety of payment options, including A2A, card-based and wallet-based collections, we’re not just helping businesses save costs—we’re enabling them to address diverse client needs and focus on growth, innovation, and unlocking their full potential.”

The post BRISKPE Launches Cross-Border Payments Platform for Small Businesses appeared first on PaymentsJournal.

Online retailers are highly likely to express interest in working with a payments provider that demonstrates a commitment to ESG (environmental, social, and governance) principles. For these merchants, ESG has a much more practical meaning compared to its broader interpretation by investors and other corporate entities. Environmental and sustainability issues are viewed less as political concerns—and thus less subject to changing political moods—than as economic ones.

According to research commissioned by global payments platform Ecommpay, 61% of e-commerce merchants stated they would definitely choose a payment provider based on its commitment to ESG. An additional 38% said they might consider doing so, indicating that  nearly the entire Ecommpay respondent base places value on furthering ESG efforts.

For these merchants, ESG initiatives are directly tied to their bottom line. For example, many organizations are exploring ways to eliminate paper checks from their payment processes. This shift not only benefits the environment but also reduces costs. The American Business Awards recently recognized an entity for its ESG efforts in minimizing paper check usage.

Similarly, credit and debit cards made from sustainable materials continue are gaining popularity. Paper-based cards are particularly cost-effective for single-use purposes, such as gift cards, while also being eco-friendly.

“Consumers are increasingly environmentally conscious of the products that they’re using and the providers that they buy from,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. She noted a Javelin survey in which 26% of consumers said that when they apply for a new credit card, having a card made of sustainable material is an important factor.

A Political Football

While ESG efforts remain a top priority for many, they have faced growing scrutiny in recent years as a corporate strategy. The Harvard Business Journal noted that several major U.S. companies are scaling back their commitments to ESG and sustainability initiatives, including Walmart, John Deere, Jack Daniels, and Black & Decker.

HBJ also notes an increase in “greenhushing,” a practice where companies downplay or remain quiet about their sustainability efforts to avoid sparking a political backlash. One CEO told the Journal: “We’re still committed to our sustainability goals, but we’re not going to stick our chin out.”

However, sustainability efforts become harder to ignore when they deliver significant financial savings, as is increasingly the case in the payments landscape. As long as these efforts continue to pare costs, they are likely to remain popular.

The post Why ESG Issues Remain Critical in the Payments World appeared first on PaymentsJournal.

As payment processes increase in variety and become more complex, they also represent a greater opportunity for retailers and digital businesses. Strengthening your payments setup can boost your customers’ experiences and scale with operational efficiencies at the same time. Optimizing payments doesn’t just increase efficiency and reduce the burden on your finance team. It can also unlock significant profit potential for your business.

These opportunities are underlined by all the new payment methods that are thriving around the world. In parts of Asia, for instance, 40% of consumers prefer using digital wallets like Apple Pay and Google Wallet to pay online. Buy Now, Pay Later is gaining popularity in European markets like Norway, Sweden, and the Netherlands. And Pay by Bank is a rising payment method in markets ranging from Brazil to Hong Kong.

That presents a number of targets for businesses to keep aiming for. The key is to shift perspective – digital enterprises need to leverage their payment methods strategically as a revenue driver to gain an edge in this highly competitive industry.

Source: Adyen Digital Report 2024: Unlocking potential: Drive business growth with payments optimization

Emerging Payment Methods

The subscription model is one payment method that has flourished in the U.S. as well as other parts of the globe. Recurring payments are convenient and seamless for customers, who can “set it and forget it” with a credit card or other local payment method. Three quarters of all businesses say they want to invest in a subscription model in the year ahead.

The subscription market is projected to grow globally from $690 billion in 2024 to over $900 billion by 2028. A survey from Adyen found that 72% of people subscribe to a film or TV entertainment plan, half subscribe to an entertainment plan for music, and a third subscribe to a food-delivery plan such as Uber One.

“Subscription based payment models have been a resounding success in the U.S. market. I’ve seen figures showing the average amount of subscriptions a typical consumer has ranging from three all the way up to twelve. The subscription economy is all about generating recurring revenue streams while offering customers convenience benefits and options to choose their level of service. If it resonates with the business model, a subscription program is a great way for merchants to grow their customer base and generate valuable recurring revenue.”

 – Ben Danner, Senior Analyst, Credit and Commercial, Javelin Strategy & Research

Another online payments experience that is gaining popularity among both consumers and retailers is Click to Pay. Click to Pay uses a process called an express flow that lets customers store their payment details securely. They don’t have to fill out their details for each purchase, allowing them to complete a transaction with just a few clicks. It’s an especially helpful solution for guest checkouts, where a customer does not have an existing account with a digital business.

What makes Click to Pay such a vital option is that so many online sales get lost at the moment of checkout. In fact, 74% of consumers surveyed will be deterred from making a purchase if their preferred payment method is not available online, and 44% will abandon their cart altogether.

The good news is that businesses can create a mobile-optimized and secure checkout in minutes, with just a few lines of code. An optimized checkout page delivers a superior payment experience, boosting your sales conversion.

“Click to Pay makes a ton of sense in ecommerce as a simple way to confirm the identity of the person using the card presented for payment. Two-factor authentication has been proven to be effective in reducing many types of fraud. Consumers are familiar and comfortable with the process, and generally appreciate that the extra step is working to their advantage to protect their sensitive personal, financial, and payment credentials. Javelin believes that 2025 will be a tipping point that sees the majority of ecommerce retailers adopt Click to Pay technology.”

–Don Apgar, Director, Merchant Payments Practice, Javelin Strategy & Research

Vital Security Measures

Partnering with an experienced payments provider does more than offer your customers a new way to pay. It also secures the remittances once customers have made an order, protecting the business from fraud and other losses.

Take declined payments, for instance. There are a multitude of reasons why payments can be declined, including insufficient funds, technical issues, and wrongly formatted messaging, such as when the CVC or expiration date data may be set up differently depending on the issuing bank.

Recovering payments is much easier with the right solution. For instance, Adyen’s RevenueAccelerate help your business recover declined payments two different ways:

The right partners can also help you recognize genuine customers and detect threats via fraud-detection technology. These systems use historical and cross-platform data between businesses to detect abnormalities.

To authenticate their customers and fight against fraud, many businesses have turned to biometric processes. These can range from the familiar thumbprint on the phone to more sophisticated measures, like analyzing a customer’s common decisions to detect suspicious anomalies. Worldwide, 40% of consumers use biometrics to authenticate online transactions. Markets in Europe and Asia have also been introducing regulations that mandate the use of authentication.

The key for online businesses is to balance convenience and security by offering the best authentication experiences. By leveraging payments innovation, businesses can detect and prevent fraud faster and reduce its impact with smarter methods of authentication.

The Path to Strategic Growth

Modern payments processes are about more than efficiency and convenience.  Making full use of payments data is helping businesses discover new solutions and identify customer needs. Some 80% of the surveyed enterprises agree that payments data supports how they streamline business processes.

Source: Adyen Digital Report 2024: Unlocking potential: Drive business growth with payments optimization

The value of partnering with the right financial technology platform goes beyond just payments. A platform that combines payments, data-rich insights, customer loyalty, risk management, and banking infrastructure is the key to unlocking innovation and growth for enterprise businesses.

Payments, when optimized right, become a revenue driver instead of a cost center. Businesses that partner with the right fintech platform are able to make payments a crucial element in their growth strategies, giving these online businesses an edge in a very competitive and saturated market.

Adyen’s robust, all-in-one platform empowers digital enterprises to navigate the most complicated challenges of 2024: unlocking profits, simplifying global complexities, and going beyond payments processing. Find out how Adyen can help your business get the most from its payments.

The post From Potential to Profit: Turning Payments Into a Revenue Center appeared first on PaymentsJournal.

The Justice Department and the Federal Trade Commission’s suit against the fintech Dave, filed earlier this week, is the latest in a series of enforcement actions under the Restore Online Shoppers’ Confidence Act (ROSCA). This law has been used to target several organizations over the past year that were accused of extracting unwarranted payments and violating subscribers’ rights.

Passed in 2010, ROSCA forbids any third-party seller from charging a consumer for goods or services sold online without the express consent of the shopper. Consumer must take affirmative action, such as clicking on a confirmation button or checking a box, to indicate approval for the payment. The FTC argues that to comply with ROSCA, companies should make it as easy to cancel a subscription as it is to sign up for one.

Among other violations, the suit against Dave alleges that the cash management app deducted so-called “tips” from user accounts without clear user consent. The complaint also charges Dave with claiming that users’ tips would fund meals for needy children, even though only a small fraction of the money actually went to charity.

A Series of Enforcements

ROSCA has been taking aim at these types of come-ons lately, undermining the subscription model that many merchants rely on today. The act itself is so outdated that it refers to memberships rather than subscriptions.

This recent instance isn’t the first time ROSCA has been enforced. Last June, the FTC filed a complaint alleging that Amazon enrolled millions of consumers into its Prime service without their consent and further made it difficult to cancel the service.

What’s more, earlier this year, telehealth platform Cerebral was ordered to pay $7 million in penalties and refunds for ROSCA violations. The FTC stated that Cerebral sold its subscription services on a negative option basis, meaning a consumer’s non-action was treated as consent to make a payment. Then in September, a federal court forfeited $40 million in assets from a group of defendants who allegedly defrauded consumers nationwide by enrolling them, without their knowledge, into subscription plans to buy CBD and keto-related products.

Most recently, a New York judge ordered SiriusXM to make it easier to cancel its subscriptions. “The policies may not rise to the level of fraud,” he wrote in his opinion, “but they do fail the simple mechanism requirement of ROSCA and constitute a violation of that statute.” 

For its part, Dave has called the lawsuit “government overreach.” The company also introduced a new fee structure in December that eliminated the app’s optional tips in hopes of heading off any enforcement action.

The post The FTC Takes Aim at Subscription Charges appeared first on PaymentsJournal.

While online purchases continue to grow, holiday shoppers this year returned to physical stores in greater numbers. In-store retail spending grew more this year than last, with three-quarters of all spending occurring in-person from November 1 through December 20.

According to the Visa Retail Spend Monitor, total retail spend in stores increased by 4.1% this holiday season, up from a 1.6% rise last year. Overall, holiday spending in the U.S. grew by 4.8% compared to 2023.

Online retail shopping also saw continued growth, though the pace slowed compared to previous years. After a 10.3% increase in 2023, Visa reported thatonline shoppers’ spending rose by 7.1% this year.

A similar study from Bain found a comparable trend in holiday retail sales, with in-store sales growing by 2.7% year-over-year, while non-store growth slowed from over 10% to 6.5% this year. This outcome surprised Bain as the global consultancy had predicted in September that holiday spending would rise by just 3%—well below the results Visa ultimately reported.

Surprisingly, many younger shoppers chose the brick-and-mortar route this year. Thomas McMillan, Director of the Center for Retailing Studies at Texas A&M University’s Mays Business School, found an 89% increase in 18- to 24-year-olds planning to shop in stores during the holiday season.

“They want the social experience: going out with friends, grabbing a bite to eat, catching a movie and doing some shopping all in one trip,” McMillan told Texas A&M Today. “It’s reminiscent of the old mall culture, but with a modern twist.”

Fraud Looms

As holiday spending rises, so too does fraud. Visa reports that on Cyber Monday alone, the payments giant blocked nearly 85% more suspected fraudulent transactions globally compared to last year.Overall, suspected fraudulent activity during the first shopping weekend of the season surged by 200% worldwide.

Visa credits the increase in attacks—and the effectiveness in combating them—to the growing use of artificial intelligence. Criminals are adopting more AI tools, which as a result, is enhancing this capabilities. According to recent figures published by Javelin Strategy & Research, AI-powered fraud could result in losses of up to $10.5 trillion by 2025.

The post In a Resilient Holiday Retail Season, Shoppers Embrace Physical Stores appeared first on PaymentsJournal.

Buy now, pay later has emerged as one of the most transformative innovations in the payments industry in recent years. While no longer considered a new technology, financial institutions like Citi continue to find novel ways to integrate the tech into their offerings.

Citi has incorporated BNPL into its Citi Pay suite of services, launched last year. The bank offers BNPL loans to consumers through a network of partner merchants instead of relying on an in-house network.

“It’s so interesting to see how this business has come full circle,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “When I ran sales and marketing for Citi Retail back in the 90’s, we were innovating on a retail model of department store charge cards that had been around since the 50’s.”

“The business had strong headwinds at that time, and our technology solutions couldn’t overcome the fact that retail credit was built on an old analog infrastructure and had very high fixed costs for the retailer with card production, statement generation, and more,” he said. “Going into the 21st century, consumers were flocking to general-purpose, co-branded affinity and rewards cards. Citi exited this business (as did GE Capital).”

Rich Data

Although Citi moved on from that line of business, retailers’ demand for credit services has remained strong. Offering credit to customers continues to be an effective strategy for driving engagement and boosting sales of products and services.

“Retail credit also delivers rich data on not just what was purchased, but information about the purchaser,” Apgar said. “In addition to targeted and personalized marketing, demographic data helps retailers position their brand in the market and informs advertising and marketing strategies that define the business for consumers.”

A New Breed

BNPL is changing the relationship between banks and major retailers by introducing new products and enhancing services. This shift is driven in part by changing customer preferences, as retail customers have higher expectations for digital payments and have access to more alternatives.

In comments to Tearsheet, Kartik Mani, Head of Retail Services at Citi, highlighted three things merchants want from their financial institution in order meet surging consumer demand: trust and consistency, a vision for emerging trends, and an ease of integration. Though Citi is not the first company to offer BNPL, it has the resources and positioning to bring the technology to the next level.

“Kudos to Citi for recognizing that the tech driving BNPL could be leveraged to deliver a new breed of digital-first retail credit programs for merchants,” Apgar said. “It can deliver the same benefits as old-fashioned store card programs without the high, fixed operating costs.”

 “A quote from Mani says it all: ‘Pushing the envelope is not always about being the first to innovate. Often it is about seeing the innovation in the industry and then moving quickly and at scale to improve on the existing innovation,’” he said.

The post Citi Is Pushing the Envelope on BNPL Integration for Merchants appeared first on PaymentsJournal.

Gen Z may be native to social media and mobile technology, but they are increasingly looking for physical retail shopping experiences.

According to a study by EY, roughly 63% of Gen Z respondents plan to make purchases at brick-and-mortar retailers this holiday season. By comparison, 50% of Gen Zers said they would shop online, a figure lower than any other generation except baby boomers.

This trend extends beyond holiday shopping. There has been a resurgence at malls across the U.S. that has been largely driven by Gen Z consumers.

“We are coming full circle on the social aspects of shopping,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “We published some research a few years back on the impacts of social commerce, and how shopping for non-essentials (especially fashion items) is more of a social activity than something that is a need, like grocery shopping.”

“We used to see our neighbors in the shops on Main St, and then the post-war growth of the suburbs brought sprawling malls,” he said. “Even though the format was more ‘modern’ than Main St, it still gave us that place to gather and socialize as part of our shopping experience. The efficiency of ecommerce is compelling, but it lacks that social element—it’s harder to get excited about buying stuff when you’re home alone with your laptop.”

Searching for Experiences

According to CNBC, Gen Z’s preference for physical shopping is driven in part by convenience. While they may research products online, shopping in-store eliminates the wait for shipping.  They also get to see, feel, and try on items before they purchase them in-store, reducing the likelihood of returns—which often requires shipping the item back and waiting for confirmation and a refund.

Many Gen Z consumers are also searching for more experiences they can share with friends, both in-person and on social media. Still feeling the effects of the pandemic, they are looking for ways to bolster personal connection.

Harbinger of the Renaissance

The search for experiences has brought many younger consumers back to malls. To fill that need, many retailers are offering new elements to make shopping more engaging, such as in-store concerts or signings. Mall owners are also working to attract consumers by adding features like rock climbing walls, ice skating rinks, and even art exhibits.

Though many online platforms have tried to replicate the shared shopping experience by integrating social media features, this model has yet to gain substantial traction among Gen Z consumers.

“Malls were already well along their path of decline when GenZ came of age, so, for many, e-commerce was the way that you shopped,” Apgar said. “With that perspective, the rebirth of the shopping mall is the natural extension—why meet your friends in the online store when you can meet them in the actual store?”

“As the CNBC article noted, stores are adding new features like selfie stations to reinforce the connection with social media shopping,” he said. “Early predictions are that social media in general may have run its course in society. Maybe this is the harbinger of the renaissance of physical retail shopping.”

The post Gen Z’s Penchant for In-Store Experiences Could Drive Physical Shopping Renaissance appeared first on PaymentsJournal.

In an increasingly digital world, the way we manage money is evolving rapidly, and mobile wallets are at the forefront of this transformation. From paying for a morning coffee with a tap of a smartphone to splitting dinner bills effortlessly through an app, mobile wallets have redefined convenience in financial transactions. But beyond the simplicity of use, what drives consumers to adopt these digital payment solutions?8

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Imagining a Cardless U.S. Payments Landscape, Part 1

Consumers’ Top 5 Reasons for Using Mobile Wallets, by Percentage

• 44% – It makes checking out quicker
• 41% – It is safe to use
• 32% – I have all my payment info in one place
• 29% – I don’t have to carry all my cards
• 28% – I like to try new technologies

Source: Javelin Strategy & Research, 2024

About Report

Exploring the possibility of a cardless future in U.S. payments begins with understanding what’s at stake. The focus isn’t on the underlying card network systems, which are expected to remain dominant for the foreseeable future due to their widespread adoption, security, and rewards structures. Instead, the question is whether the physical cards themselves—long a staple of point-of-sale transactions—will endure. The U.S. payments ecosystem is both fragmented and highly innovative, with numerous emerging players vying for even small slices of the market. While no single innovation has yet displaced cards, the cumulative impact of these alternatives may eventually signal a shift.

This report from Javelin Strategy & Research examines the evolving payments landscape, leveraging data on consumer behaviors and attitudes toward emerging payment methods. It also highlights how the fragmented nature of U.S. payments offers a measure of protection for traditional cards, which remain the dominant method of payment despite increasing competition.

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The rise of digital wallets has been subtle, often going unnoticed as people use them with a quick swipe on their phones or deep within the privacy of their laptops. Some consumers making purchases with services like PayPal and Google Pay might not even realize they’re using a digital wallet.

Yet, their usage is widespread. According to McKinsey, digital wallet penetration among Americans is approaching 90%. One study by Forbes suggests that a majority of Americans now use their digital wallets more frequently than traditional payment methods. Another study found that digital wallet usage is expected to double between 2023 and 2028, when there are projected to be 1.4 trillion digital wallet transactions worldwide.

The ongoing rise in customer satisfaction with digital wallets has led to their growing adoption—and vice versa. In March, J.D. Power and Associates reported that nearly half of all U.S. consumers had used a digital wallet in the past 90 days, a 12 percentage point increase from 2023. Overall customer satisfaction with digital wallets is also up, with ease of use—both online and in person—being the top factor driving this increase.

The most widely used digital wallet is PayPal, utilized by 40% of digital wallet holders, followed by Apple Pay at 28%, and Venmo at 22%. Apple Pay is the preferred choice among consumers who use their digital wallet for purchases five or more times a month, while those who use their wallet just once a month tend to favor Venmo and Cash App Pay.

The growth in this area has created ample opportunity for new competitors to innovate and offer consumers services they didn’t even know they needed. And a new bank-issued digital wallet, Paze^SM—from Early Warning Services, LLC, an innovator in financial and risk management co-owned by seven of the largest banks in the U.S.—could be the next major solution to disrupt the industry.

Several Advantages

It’s easy to see why consumers are gravitating toward digital wallets. Like many new technologies, the main appeal here is convenience. Studies show that consumers want their payment experiences to be more streamlined, and digital wallets—capable of executing payments with a single touch—make purchasing products and services online incredibly convenient.

They’re also faster. Payments made with a digital wallet can be completed more quickly than traditional payment methods. This is particularly true in online environments, where the need to manually enter card data is eliminated.

Equally important, digital wallets offer this convenience without compromising security. They typically protect data through encryption, and most require multi-factor authentication before approving transactions.

Data suggests that safety is the primary reason consumers prefer bank-backed digital wallets over guest checkout options. The vast majority of consumers trust their own bank’s security protections more than those offered by alternative payment methods.

Stumbling Blocks Remain

Digital wallet users are still navigating a few pain points. People who are unfamiliar with them often fear that setting up a digital wallet  will be more complicated than they would like.

Many shoppers have expressed a willingness to use digital payment tools if they were already set up for them. A Paze Pulse report indicates this could be an opportunity for digital wallets that come preloaded on consumers’ phones.

Another hurdle is that not all businesses are prepared to accept digital wallet transactions. Some merchants only accept digital wallets online, while others do so only in person. This inconsistency makes it difficult for some consumers to fully transition from their traditional wallets to digital ones.  

Benefits for Merchants Too

The convenience and security of digital wallets don’t just benefit consumers—retailers stand to gain as well. Some of the key advantages include: 

• Using a digital wallet for online purchases reduces friction and saves time since neither the customer nor the vendor needs to manually enter card information. 
• The technology for accepting digital wallet payments can be easily integrated into existing checkout systems.
• Offering multiple payment options gives customers the flexibility to pay how they prefer.
• Digital wallet usage is higher among affluent consumers. While slightly less than half of U.S. consumers use digital wallets, that number jumps to 55% among those earning more than $100,000 annually.  

Research also shows that consumers tend to spend up to 31% more when using a digital wallet for transactions. This impact is even more pronounced in the restaurant industry, where diners using digital wallets have contributed to a 33% increase in spending.

Smoothing the Way for eCommerce

Although ecommerce is a part of modern life for most American consumers, it still presents some difficulties for many shoppers. More than 70% of all online shopping carts are abandoned before checkout. One of the primary reasons this occurred was, according to consumers, that the checkout process was too long or complicated.

Digital wallets remove those concerns making ecommerce transactions smoother and more reliable for all concerned. With its stored, secure credentials, a digital wallet eliminates the need for customers to manually re-enter lengthy payment information during checkout.

Security is another major concern for people shopping online. More than 60% of the respondents to a recent Chubb survey said they have altered their behavior or reduced their usage of digital payment platforms due to concerns about cyber scams or other fraudulent activities. With features like tokenization and multi-factor authentication, digital wallets can protect sensitive customer data from being compromised during transactions, reducing the risk of fraud.

All these factors are becoming more significant as consumers make more transactions on their smartphones. There will be more than $500 billion in sales made via smart phones and other mobile devices in 2024. These devices are exceptionally well-suited for processing information and securely managing a significant amount of data.  

Before long, the question won’t be whether someone has adopted a digital wallet. We’re approaching the point where the real question will be: Are you offering your customers the option they want: to pay with a digital wallet?

Paze and Paze related marks are wholly owned by Early Warning Services, LLC and are used herein under license. Learn more about Paze

The post Digital Wallets Offer a Convenient and Seamless Online Checkout  appeared first on PaymentsJournal.

Just in time for the holidays, Google is updating the artificial intelligence engine behind its visual search tool Google Lens, aiming to help shoppers make more informed decisions at brick-and-mortar retailers.

According to Google, 72% of consumers use their smartphones in-store to find the right item at the right price. However, over half of these shoppers still leave the store empty-handed. The goal of the updates is to allow consumers to take a picture of a product and instantly access reviews, information on similar products at the same retailer, and price comparisons with other nearby merchants.

“We know consumers are really liking using Lens,” said Lilian Rincon, Vice President of Consumer Shopping Product at Google, in an interview with TechCrunch. “In fact, Lens is used for nearly 20 billion visual searches every month, and 20% of Lens searches are shopping-related. So, we’re excited to bring this to market. It gives some of that important information to help a shopper feel more confident.”

Significant Advancements

Google said the enhanced capability was made possible by significant advancements in its Gemini AI models’ image recognition technology, in conjunction with product listing data provided by its Shopping Graph platform.

The expanded Google Lens features will initially only work on toys, beauty products, and electronics in stores that share their inventory data with Google. Presently, the merchants who meet that criterion are national retailers like Target, Macy’s, and Ulta Beauty. In addition, shoppers who want to utilize the features will have to share their location data with Google.

Popular Additions

The tech giant also announced it will incorporate more shopping-related features for U.S. Google Maps users in the next few weeks. Consumers will be able to search for products like clothing, groceries, electronics, and home goods in Maps and find nearby merchants who sell them.

Once shoppers locate their items, they’ll have another payment option to choose from. Google said it is adding support for buy now, pay later service Afterpay in Google Pay, following its earlier integration of BNPL options through Affirm and Zip earlier this year.

BNPL services have soared in popularity in a few short years, becoming  a favored addition to digital wallets like Google Pay and Apple Pay. Google also shared that it was working to add Klarna as a payments option in the near future.

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Following a series of fraudulent purchases, a convenience store chain has temporarily halted its contactless payment system. Stewart’s Shops disabled its tap-to-pay technology in mid-October. However, experts suggest the decision may be an overreaction to a software glitch, emphasizing that tap-to-pay remains a secure payment method for consumers.

According to Stewart’s, criminals used tap-to-pay to make sizable purchases, allegedly with stolen or fraudulent credit cards. Although the transactions went through as if they were legitimate, the payments ultimately failed to process.

Stewart’s operates more than 350 stores across upstate New York and Vermont, with the scams reported from stores in Ulster and Orange counties. In response, the company promptly disabled tap-to-pay functionality across all locations but is actively working to  restore the service.

According to Don Apgar, Director of Merchant Services at Javelin Strategy & Research, the issue was likely a result of something other than a weakness in tap-to-pay technology. “It is very hard to drive fraud through contactless payments given the security that is built into the interface,” he said.

Compliance Is Key

Apgar noted that, in most cases, stores are not held responsible for fraudulent transactions. Merchants bear no liability for contactless transactions as long as their systems comply with PCI-DSS security standards.

“If these fraud transactions were straight-up stolen cards, then the issuers absorb that fraud,” Apgar said. “If the cards were not stolen, but cloned or fraudulent somehow, they may have had inside knowledge to exploit some non-compliant weakness in Stewart’s contactless terminals. In that case, the merchant would be liable for the fraud if their card platform was not PCI-DSS compliant.”

And that may be the case with what happened at Stewart’s. “It’s a software bug, not a breach,” Stewart’s spokesman Robin Cooper told the Albany Times-Union. “None of our customers’ information is in jeopardy.” 

A Safer Method

In general, tap-to-pay is considered a safer alternative to inserting a card at a gas pump. The FBI has even issued a bulletin encouraging consumers to use tap-to-pay for gas and similar purchases, noting that “tap-to-pay transactions are more secure and less likely to be compromised.”

Skimming, however, remains a serious concern for retailers. This crime involves devices illegally installed on or inside ATMs, point-of-sale terminals, or fuel pumps that capture card data and record cardholders’ PINs. According to the FBI, skimming costs financial institutions and consumers more than $1 billion each year.

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Some of the largest banks in the UK may have to pay billions of pounds to consumers over contentious lending practices at car dealers.

In response to an October judgement by the UK’s Court of Appeal, many British banks are considering halting auto lending entirely. The court ruled it was unlawful for car dealerships to receive bonuses from auto lenders without getting the customer’s informed consent.

UK financial institutions were not expecting the ruling and are now petitioning for clarity from the country’s regulators. These banks argue that they were following the guidelines that were in place at the time and maintain that they did not engage in deceptive practices.

“Auto financing has operated like this in the U.S. for years, where banks pay commissions to dealers for originating auto loans on their behalf,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The Finance and Insurance function at a car dealer is where you go to sign the docs and get the sales pitch on the extended warranty, upholstery Scotchgard, and all of the other stuff that dealers make money on.”

“In fact, most dealers make more on F&I than they do on the actual vehicles,” he said. “If Bank A pays the dealer a higher commission on loans than Bank B, the dealer may steer customers into loans from Bank A, even if the rates and terms to consumers are not as favorable as Bank B. This is not illegal in the U.S., if the rates and terms are clearly disclosed to the consumer, but dealers aren’t required to disclose their commission arrangements with banks.”

Injecting Uncertainty

UK auto dealers and banks had been operating under a similar model until the October ruling introduced uncertainty into the industry. According to CNBC, the UK’s Financial Conduct Authority said it would work to expedite a decision from Britain’s Supreme Court on whether lenders could appeal the decision.

The FCA, a consumer watchdog group similar to the U.S. Consumer Financial Protection Bureau, has indicated it might get involved if the appeal is approved. However, the FCA still advised UK auto lenders to set aside funds for potential consumer reimbursement. If the ruling stands, not only will the FCA need to revise its consumer disclosure rules, but banks could also face legal action.

Widespread Ramifications

The potential impact on UK financial institutions has been estimated at up to £28 billion, and it could prompt many lenders to exit the market entirely. There are also concerns that the precedent set by the ruling could have widespread ramifications for other forms of consumer lending in the country.

“Banks are saying they followed the FCA rules, which are not aligned with the court’s ruling,” Apgar said. “Courts can certainly overturn rules and force changes, but it doesn’t seem likely that banks will be held responsible to consumers for following the FCA rules that were in effect at the time the loans were originated.”

The post UK Auto Loan Controversy Could Cost Banks Billions appeared first on PaymentsJournal.

The U.S. has lagged behind other countries in the widespread adoption of financial innovations like open banking and digital assets. However, in the world of embedded finance—where financial products are integrated into non-bank software—the United States is leading the way.

According to a report from PSE Consulting and The Strawhecker Group (TSG), a third of small to medium-sized businesses in the U.S. use embedded finance services provided through software-as-a-service companies. In comparison, only 11% of smaller businesses in the UK and 6% in Germany and France use these services.

The study found that European merchants weren’t averse to SaaS solutions, but that the software companies in the region weren’t able to pique merchants’ interest with their current embedded finance solutions.

“The number of small businesses in the U.S. who have adopted embedded finance is even higher, according to a recent survey by Javelin’s small business practice,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “That research indicates that roughly half of U.S. merchants no longer obtain a business account from their bank. They are increasingly turning to their technology provider.”

No Business Too Small

In the past, a merchant’s point-of-sale system required multiple computers interconnected to form an internal server. This setup meant that a company needed substantial revenue to justify spending thousands of dollars on a payments system.

However, with the customer integrated system (CIS) model, merchants don’t require installed software to operate their business. They can purchase a monthly subscription from a SaaS provider and process payments through a tablet or device.

“It has made it much more accessible for businesses, and now there’s no such thing as a business too small to have software,” Apgar said. “That’s one of the differences between the U.S. and Europe. There has been a substantial focus on technology in the U.S., and companies like Square, Shopify, and Toast have made embedded finance technology affordable.”

Though the tech might not be ubiquitous, merchants worldwide have overwhelmingly indicated they would prefer to transition away from traditional payments processors to software platforms. The PCE and TSG study found approximately 70% of small to medium-sized businesses in the EU and the U.S. said they would choose a software platform the next time they select a payments supplier.

Beyond Embedded Payments

In Europe, embedded finance still mostly refers to payments processing within a software platform. In the U.S., software companies are moving beyond payments to incorporate a range of financial products.

“Point-of-sale companies like Toast are already offering additional solutions like business checking accounts,” Apgar said. “Embedded lending is gaining traction, as companies like Square already offer business loans to merchants. Players like Shopify, Toast, and Lightspeed are driving significant revenue from embedded finance, and they are constantly looking for new products they can bundle.”

One of the most powerful benefits embedded finance offers merchants is the ability to centralize accounting functions. As SaaS platforms include more financial aspects, they have the potential to be the central hub for all of an organization’s financial needs.

Small businesses have access to more data than ever before, but it often comes from disparate sources. They may pay a monthly SaaS subscription for tools to manage inventory and process credit and debit card payments. In addition, small businesses require a checking account, and the ability to receive and pay invoices from suppliers. They also need to manage employee payroll and benefits.

Most small businesses invest substantial time and money hiring accounting services to align all these data sources. If a merchant can reconcile all those functions in one place and with minimal effort, it could have a dramatic impact.

Managing all the accounting can be a major time drain. Even if a CPA is handling it, they will still need guidance on certain aspects since they don’t have in-depth knowledge of the business’ operations. The scarcest resource for small business owners today is time. By connecting all the data sources and uses, much of the manual work can be eliminated.

The Technology Intersection

As software companies take on more financial functions for merchants, the role of financial institutions in the business banking process has been diminished. However, the model has created an opportunity for banks to use software companies as distribution partners.

Financial institutions can embed their services directly into a merchant’s point-of-sale application to attract more customers.

“Fintech is the intersection of finance and technology, and software companies are actively looking for ways to disintermediate banks out of the financial chain,” Apgar said. “If half of merchants no longer go to a bank to open their merchant account, that’s significant. If software companies are already handling payments processing, it makes sense that banks should partner with these providers.”

The post The U.S. Is Leading the Way in Embedded Finance appeared first on PaymentsJournal.

TGI Fridays has declared bankruptcy, leaving holders of nearly $50 million in gift cards uncertain about how they will be able to redeem them. The main question is whether the parent company or its franchisees are responsible for this debt.

The bankruptcy filings include TGI Fridays’ 39 company-owned stores, but not the franchise locations. Franchisees operate 122 locations in the United States and another 316 overseas.

Under normal circumstances, when customers use gift cards at franchise restaurants, the company reimburses the franchise. However, according to court records, TGI Fridays’ franchises may be required to honor company-issued gift cards, even if reimbursement is uncertain.

To begin its restructuring under bankruptcy protection, the company borrowed $5.9 million. This has led many franchisees to worry that TGI Friday may not have the funds to cover the amounts owed to gift card holders.

The Consumer Side

From a consumer perspective, there is no differentiation between franchise-owned and corporate-owned restaurants; the gift cards are part of a unified program redeemable at any location.

“The issue arises in the franchisee-franchisor relationship,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “The franchisor can theoretically refuse to pay back the franchisee when a gift card is redeemed, leaving the franchisee on the hook for the sunk cost of that transaction.”

Certainly, the restaurants aren’t expecting all gift card holders to redeem their cards immediately. According to court documents, some of these cards date back as far as 2003.

However, TGI Fridays has committed to honoring the gift cards at stores that remain open. The judge overseeing the case has permitted the company to continue its gift card program, which would give franchisees more time to review their finances and confer with corporate administration.

“In the short term, consumers with Fridays gift cards should be able to redeem them,” said Hirschfield. “In the long term, the perilous financial outlook of the chain means that if further restructuring occurs, those cards may be rendered valueless.

“It also highlights the dynamic between of long-term liability on unused cards,” he said. “I would assume that the chain recognized revenue on a good portion of those cards, as they date back to 2003, but would still have to honor the value due to regulations that prevent expiration of gift cards. But it’s likely that a high percentage of this liability is on cards well over five years old that individuals have lost or forgotten, or cards with little value remaining that the user just wrote off.”

The post After the TGI Fridays Bankruptcy, a Battle Over Gift Cards appeared first on PaymentsJournal.

Seven years after the launch of The Clearing House’s RTP network and 15 months into the FedNow era, instant payments are proliferating, if not quite a household name. Small businesses and the bankers who serve them are searching for a set of “killer use cases” that will serve as catalysts for widespread adoption.

A new report from Javelin Strategy & Research, Identifying ‘Killer Use Cases’ in Small-Business Instant Payments, examines how the push to implement instant payment systems in the United States is accelerating. Although early adopters are already using instant payments for urgent transactions, payroll, and inventory management, most small businesses remain unsure of how these systems work or the benefits of usage.

Breaking Through to Understanding

Most small businesses are still looking for compelling use cases to prompt them to adopt instant payments. Many are experimenting with instant payments for such things as emergency payments to a supplier on a Sunday night, last-minute payroll adjustments, just-in-time inventory purchases, and large, specialized transactions. Yet awareness among the general small-business market remains low, and misunderstandings abound related to what “real-time” or “instant” payments actually entail, let alone how they could improve business operations.

To prepare the new report, Javelin received 400 open-ended responses from business owners who talked about how they are using real-time payments. One of the important findings this highlighted was the huge gaps in understanding. When Javelin asked if these businesspeople were using real-time payments, they often responded, “Yeah, I use PayPal or Zelle all the time.”

“They often conflate instant payments rails like FedNow and RTP with PayPal, or even with an instant transfer they might happen internally with their bank,” said Ian Benton, a Senior Analyst in Digital Banking at Javelin and the lead author of the report. “But it’s still going to take a few days for an ACH. I don’t think they fully understand the value of transferring money instantly between two different bank accounts or two different banks.”

Many of the respondents also failed to grasp the anytime aspect of instant payments. Being able to send a payment on the weekend or at night would be more valuable for many business owners than real-time processing.

The Importance of Messaging

Another overlooked advantage is the messaging capabilities attached to instant payments. FedNow and RTP have messaging attached directly to the payment itself. That allows merchants to include remittance information or to flag a partial payment they need to follow up on. Banks would do well to emphasize these benefits for the user experience when they promote instant payments.

“Business owners don’t have the expertise or the time to sift through their digital banking environments to figure out how to initiate an ACH or schedule it for the future,” Benton said. “So getting the UX right is going to be really important. Ultimately, this is going to go to intelligent payments routing, where you can say ‘This is who I want to pay. This is how. This is when I want the payment to arrive, and this is how much I’m willing to pay for that to happen.’ And that’s all you need to know.”

Getting Paid Faster

From a business owner’s perspective, the major selling point is payment acceptance. Everybody wants to get paid quicker. For banks looking to impress this feature on the general business audience, especially if they get paid by consumers rather than other businesses, being able to accept payments in real time will be critical.

The Javelin survey confirmed this. Business owners said outgoing payments are driven by urgency and unexpected circumstances. Some of the benefits cited by the comments Javelin received include:

• To make payroll and pay loans, credit cards, revolving credit lines, utility bills, and insurance premiums
• Emergencies and quick payments to employees
• To cover unexpected invoices  
• Urgent payments to vendors
• When something is needed quickly on the weekends

“Imagine you can just invoice a customer, or send an electronic invoice and they can pay you in real time,” Benton said. “That’s a really valuable use case for a general audience using outgoing payments, if you deal with suppliers. Being able to make a last-minute payment three days quicker than your competitors, or being able to do it on the weekend, or reimbursing your contractors or your employees. There are a lot of advantages for outgoing payments, but the number one low-hanging fruit is letting people collect payments more quickly.”

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Affirm has announced its first expansion outside North America, bringing its buy now, pay later options to the United Kingdom.

The company first expanded beyond the United States and into Canada in 2022, but the UK is its first overseas market. Affirm is launching in the UK with two partners: Alternative Airlines, a flight booking site, and Fexco, a global fintech and payments processor.

Affirm has already established partnerships with Shopify, Walmart, and Apple. Last year, Amazon made Affirm the first BNPL partner for Amazon Pay in the United States. As of this summer, Affirm claimed more than 16 million U.S. users.

The move to the UK makes sense for several reasons. In addition to being a springboard for further inroads into Europe, BNPL programs are very popular in the UK, despite its smaller population. Data from the UK’s Financial Conduct Authority (FCA) and the Consumer Financial Protection Bureau shows that a higher percentage of UK consumers used BNPL than those in the United States, even though around three times more U.S. consumers used BNPL than those in the UK in 2022.

“Affirm clearly sees an opportunity with merchant partnerships, and the UK is a great starting ground for later expansion,” said Ben Danner, Senior Analyst for Credit and Commercial at Javelin Strategy & Research. “Comparatively, Affirm is moving into a smaller market for BNPL, but UK consumers have a strong appetite for the product, and merchants are willing to partner. Affirm is clearly ready to adapt to the evolving regulatory framework from the FCA and is prepared for market changes.”

A Growing Market

According to Affirm, the UK’s BNPL market is poised for substantial growth, with payments expected to reach the equivalent of $34.28 billion in 2024, a 15% increase from the previous year. The BNPL industry in the UK is anticipated to maintain a projected compound annual growth rate of 9.8% from 2024 to 2029, when the gross merchandise value is expected to surge to an equivalent of $54.62 billion.

“The UK is one of the largest e-commerce markets in the world, and consumers here are sophisticated and savvy, with a clear appreciation for more flexible and transparent payment options,” Affirm’s UK Country Manager, Ruth Spratt, told PaymentsJournal. “Many of our global partners already operate in the UK. When we were initially evaluating where to go next, they expressed interest in offering Affirm in the UK. There’s an opportunity for a financial player who offers longer payment terms, especially one that is pro-consumer and doesn’t charge late or hidden fees.”

One advantage for Affirm: Nearly a quarter of BNPL users in the UK have incurred late fees, with younger consumers ages 18 to 34 being the most affected. Affirm does not have any late fees or hidden charges.

The post The Strategy Behind Affirm’s Move to the UK appeared first on PaymentsJournal.

You know the cannabis industry has come a long way when the state of Utah is naming an approved payment provider for pharmacies that sell medical marijuana.

Marijuana remains illegal at the federal level, hindering the industry’s ability to conduct financial transactions, but Colorado-based CanPay continues to chart new territory. The largest legitimate payment network for cannabis retailers and consumers, CanPay was recently named by Utah’s Division of Finance as an approved payment provider for pharmacies selling medical marijuana statewide.

Marijuana is legal for medical and/or recreational use in 38 states, but major banks and credit card providers remain unwilling to work with companies that sell it. Smaller credit unions and niche payment companies have stepped up to provide access. In the second quarter of 2024, a record 831 banks and credit unions reported that they had active involvement with marijuana companies, according to the Financial Crimes Enforcement Network (FinCEN).