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.

Many financial institutions are feeling the urgency to make headway on payments modernization and digital transformation initiatives. However, all the factors involved in outsourcing an essential function like item processing might make a migration project seem like a daunting task. In a recent PaymentsJournal podcast, Candace Burleson, Senior Implementation Analyst at Fiserv, Amina Moyer, SVP of Core Banking Solutions at Community Bank, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the successful item processing migration at Community Bank, the issues it solved, and the opportunities the modernization project created. An In-House Shop Prior to the implementation, one of the biggest challenges at Community Bank was staffing. The Item Processing (or Proof) department struggled to retain knowledgeable staff. The roles were often considered entry level, even though the team was a critical component of the financial institution’s daily operations. “The hours can be demanding, and our Proof and IT teams had many late evenings to ensure the balancing and timeliness of the cash letter getting out the door,” Moyer said. “Our mainframe tasks were extensive, comprised of multiple checklists that were probably no less than three or four pages. That poses significant risks if the teams handling those tasks lacked any expertise or overlooked a step.” The bank’s IT teams were also responsible for server maintenance and timely software updates, which were crucial to preventing any processing disruptions. Before the migration, Community Bank was a fully in-house shop for all their processing, which is why it chose to first migrate item processing to an outsource environment ahead of its full core system migration. However, the project still presented challenges because the bank had to maintain daily operations. “That is a common refrain we hear from financial institutions, that they have a bank to run,” Wester said. “When they look at all the challenges of taking on a project like this, that's on top of all the stuff that has to be done in terms of running a bank, plus the fact that every bank is different. Everyone has their own challenges, whether it is staffing or the nuances of how they may run their business. It can be a scary thing to undertake.” Implementing the Migration Once Community Bank made the decision to migrate item processing—with Fiserv’s aid—the process was accomplished in steps. “First was discovery,” Burleson said. “We worked collectively as a team, the Community Bank team along with myself. We discussed processes and procedures that they were working on in-house, gathered data which assisted me with the best setups for the institution, both for capture and then the back-end processing approach.” The next phase of the process was development. Fiserv and Community Bank professionals worked on coding collectively. They identified the items that they would capture daily and the expectations for the receipt of files from item processing. Then came testing, which began internally on the Fiserv side and then was piloted at Community Bank. There was continuous testing to ensure that both parties were receiving the correct data on a timely basis. The final phase was the go-live and support process. “On go-live week, we monitored all incoming and outgoing files, outgoing meaning cash, letters, files back to the bank,” Burleson said. “We were able to exclude a lot of things that they were doing internally, and it was a good teamwork effort.” In-house to Outsource One of the immediate impacts of outsourcing item processing was that it alleviated many of the staffing issues Community Bank faced when employees retired or moved on to other opportunities. The bank was also able to initiate cross-training within their operations team, which turned out to be a significant advantage. Cross-training brought fresh perspectives to the table,

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,

Last year, PSCU and Co-op Solutions combined and rebranded as Velera. As part of this transformation, Velera seized the opportunity to assess its product journey and modernize its products and solutions to meet the rapidly evolving needs of credit unions and their members. This meant a commitment to developing new solutions and services, while at the same time improving its existing solution portfolio with new features, functionality and enhancements. One year into the integration, Velera’s Denise Stevens, Executive Vice President and Chief Product Officer, and Cody Banks, Senior Vice President for Product Experience and Enablement, reflected on the progress, highlighting goals set and the milestones achieved along the way. They spoke with Brian Riley, Co-Head of Payments at Javelin Strategy & Research about this on a recent PaymentsJournal podcast. Organizing the Desired Outcomes One of Velera’s first priorities was to create a strategic focus group made up of a diverse collection of credit union clients. Their role is to help Velera make informed decisions, navigate anticipated changes and make sure the impact on members remains a priority. That could mean anything from adjusting operations—such as staff or members interacting with a different interface—to something as simple as analyzing reports with slightly different data. Velera then organized the company’s solutions into four categories, each representing outcomes that matter most to credit unions and their members.   The first category focuses on delivering connected experiences, providing members with a seamless and relevant payments experience. These experiences range from users of mobile and online applications adopting features like setting travel notes, buy now, pay later and digital issuance to in-branch interactions. These innovations help create a more connected financial experience. The second category ensures operational efficiency. Velera developed a suite of tools designed to streamline business processes for members, whether they're visiting a branch or calling member service. The agent program for contact centers, along with frontline tools, plays a key role in enhancing service and efficiency. The third area is fraud and protection, ensuring that credit unions stay ahead of fraudsters—not just proactively, but also by swiftly adapting to emerging fraud patterns. “We take an omnichannel fraud approach where we have a number of products that are designed to move on from simply layering them,” said Banks. “Now we're moving more into linking these things together, especially to fight first-party fraud.” The final area is growth, which is especially important as credit unions look to attract younger members while also expanding into business accounts—an often untapped market. There is potential to attract higher-spending accounts, particularly among individuals who are credit union members but conduct their business banking elsewhere, such as at larger banks. “The whole focus of the asset concentration of credit unions becomes important,” said Riley. “There's a lot of unknowns ahead within this year. Delinquencies are up, some loan volumes are up and some are under real stress with their net-interest margins. Being able to balance that and keep the business running is really where the credit union industry needs to focus.” Finding the Key Products During their product assessment, Velera’s team identified products that clients could immediately take advantage of without necessarily relying on processing. However, they also wanted to ensure a thorough vetting process to confirm the products were market ready. This was especially important given the heightened expectations following the integration. “We identified nine products, including Zelle and our ATM network,” said Stevens. “They're already being evaluated by certain credit unions that weren't taking advantage of these products before.

Back in 2011, a group of Iranian hackers launched a series of distributed denial-of-service (DDoS) attacks against nearly 50 U.S financial institutions. The attacks were alarming enough, disabling bank websites and preventing customers from accessing their online accounts. However, the situation became even more troubling when it was revealed that these attacks were sponsored and directed by the Iranian government. Since then, nation-state cyberattacks have remained a top concern for cybersecurity professionals. Countries like Russia, China, and North Korea have joined Iran in being held responsible for these advanced persistent threats, commonly referred to as APTs. In a PaymentsJournal podcast, Stephanie Schneider, Cyber Threat Intelligence Analyst at LastPass, spoke with Tracy Kitten, Director of Fraud and Security at Javelin Strategy & Research, about what financial institutions can do to combat these threats from rogue nations. The Big Four The four nations carrying out these attacks are playing the long game. They're patient, developing tools and tactics to achieve their objections, and essentially have an open checkbook to fund their operations. They're also good at remaining undetected for as long as possible, allowing them to continuously siphon information or maintain access for future operations. Understanding these nations’ geopolitical context and their distinct motivations for engaging in cyberattacks is key. The Chinese government, for example, conducts cyber activities to advance their national interests and economic position. They're interested in obtaining intellectual property and data from private and public sectors to position themselves as an economic powerhouse. By actively infiltrating Western critical infrastructure, they've aimed to establish persistent access for potential disruption during future conflicts. The Russian government enables broad-scope cyber espionage to suppress certain sociopolitical activity, such as in their ongoing war in Ukraine. Their focus is on stealing valuable information related to active conflicts to position themselves as a great power, rivaling the West and the U.S. North Korea aims to collect intelligence, conduct disruptive attacks, and generate revenue. They continue to seek ways to get around their heavy economic sanctions to fund their weapons program. Finally, the Iranian government has exercised increasingly sophisticated cyber capabilities to suppress sociopolitical activity. They also see themselves in competition with the West, specifically the U.S. Interestingly, Iran has also started to conduct more financially motivated attacks, like ransomware. Like North Korea, Iran is under tight sanctions and needs to generate revenue. But they’re also interested in creating chaos and disrupting their adversaries’ incident responses, as the 2011 attacks demonstrated. “Iran’s attacks were a big wakeup call,” said Kitten. “That catapulted information-sharing among financial institutions. That helped to cement the fact that we need to be sharing threat intelligence and looking for indicators of compromise.” The Nature of the Threat There are three basic types of threats at play here. The first is monetary attacks, particularly as several of these countries seek ways to bypass restrictive sanctions. As a result, they're targeting banks and trying to steal cryptocurrencies. Financial espionage also provides an avenue for gaining political leverage. “Think about the sensitive personal information that a bank has access to,” said Schneider. “They’re trying to erode customer trust in critical infrastructure, things that regular citizens depend on. If they can shake that trust, that can also be beneficial for them.” Then there’s the idea of hybrid or unrestricted warfare. There is an increasing number of attacks on critical infrastructure, including not just financial institutions but also sectors like energy and water.

Commercial solutions offered by banks have typically been tailored to larger corporations, with a one-size-fits-all approach that often doesn’t meet the unique needs of small businesses. As a result, many small business owners have turned to consumer-focused products, which lack many of the key functions they need. The lack of compelling options available have driven many to seek financial solutions outside of their financial institution. In a recent PaymentsJournal podcast, Tim Ruhe, VP, Head of Small Business Payments at Fiserv, Ryan Looper, Director of De Maison East, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed the challenges small businesses face and the opportunities financial institutions have to better support their small business clients. The De Maison East Case Study De Maison East is a beverage company founded in 2020, right at the beginning of the pandemic. “Everything changed,” Looper said. “In that moment, it was like diving into a pool in the dark and hoping there was water there. One of the challenges was our customer base had just been decimated, because all restaurants were closed. This put a spotlight on connecting with customers and getting revenue going, getting accounts receivables and payables going as part of our operational load. It just felt like one of the things we needed to focus on.” During the pandemic years, the company focused on examining its business processes and identifying potential growth strategies. While the beverage industry is well-established, it remains somewhat conventional in many ways, and many of De Maison East’s customers were still paying invoices by paper check. Recognizing digital payments as a powerful growth driver, the company began to encourage its customers to make digital payments. “It might sound a little far-fetched that digital payments would be innovative, but they definitely are for our business,” Looper said. “As we were thinking about scalability and the customer experience, we decided to go with a fintech partner. The move allowed us to give very fast feedback to our customers with regard to payments. To this day, we still receive a majority of our payments digitally, and it was a blessing in disguise that we could do that in a difficult time.” The Goldilocks Solution The speed and transparency gained from the shift in payment processing made an immediate operational impact for De Maison East, which typically handles numerous smaller transactions. The improvements in the receivables process helped De Maison East optimize cash flow to focus more on its customer relationships and driving its business forward. “One of the things we hear from small businesses is they're spending close to 20 hours a week managing the back office and payments, and they're not able to focus as many hours and cycles on their businesses they'd like to,” Ruhe said. “Businesses are finding themselves using lots of different tools from different providers and not necessarily going through their financial institution.” Small businesses want to perform and automate tasks such as paying suppliers, receiving payments from customers, sending invoices, and performing transactions at their physical point of sale. In many cases, an integrated solution isn’t available to accommodate their needs. The commercial offerings from financial institutions can be daunting because they are highly sophisticated. While they are capable, they are often not designed for companies with less than 30 employees. On the flip side, consumer solutions don't offer enough capabilities for small businesses. They may be able to pay bills, but an organization will have trouble paying suppliers. There’s also no invoicing capabilities or merchant services. “What we're finding is that there's this Goldilocks segment,” Ruhe said. “How do financial institutions serve the small business segment and their needs while retaining the capabilities and the...

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.

There have been remarkable strides toward U.S. real-time payment adoption in recent years, driven by growing demand among businesses and consumers. As the long-awaited ubiquity of instant payments draws closer, the financial institutions that have yet to adopt this nascent payment method face tremendous downsides. In a recent PaymentsJournal podcast, Justin Jackson, Head of Enterprise Payments at Fiserv, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discussed the concerns many institutions have about instant payments support, the benefits of real-time payment adoption, and the steps institutions can take to stay competitive. Real-Time Concerns There are approximately 9,000 banks and credit unions in the U.S., and roughly a quarter of them are active in instant payments. While financial institutions are often separated into adopters and non-adopters, the actuality is a bit more complex. “We often speak as though the other 75% are one homogeneous group that all look and think and act the same, but that's not the case,” Jackson said. “They're all individual businesses. They have their own strategies and their own goals and concerns. Each of them has factors that influence their decision of what they're going to do with real-time payments.” Some institutions are concerned about potential technology challenges when implementing instant payments. They aren’t sure about the magnitude of the change, its impact on operational processes and existing systems, and whether it will require additional staff. Cost is another major concern for many banks and credit unions, as they worry that instant payments could introduce incremental expenses beyond their control. For example, if an originator were to come online and the volume of received instant payments increased by 10X or even 100X overnight, it could lead to unforeseen ramifications. Additionally, many banks remain uncertain about the fraud risks associated with instant payments. These concerns—spanning technology, fraud, and cost—are weighing on institutions to varying degrees. However, as more organizations adopt instant payments, many of these worries will subside. “They're thinking through these concerns, and they are seeing what their peers and their colleagues are doing and they're deciding that maybe it’s time,” Jackson said. “We're nascent in the adoption of instant payments within the U.S., with FedNow being live for about a year and a half and we’re not even at a decade with the Clearing House’s RTP network. We have about 25% of the industry live and that's tremendously fast for a totally new payment mechanism like this.” Table Stakes: Powering Deposits and Efficiency  For all the concerns about adopting instant payments, the disadvantages are mounting for financial institutions that lag behind. Consumers have quickly become accustomed to real-time experiences, such as instant access to vast libraries of music and movies. As these experiences become the norm, both consumers and businesses are increasingly perplexed as to why moving money still takes so much longer. “Retail goods are an example that comes to mind, where you can order something on your phone and sometimes receive it the same day,” Tavilla said. “There is also the precision and the transparency with my packages, where I know exactly where the UPS guy is. But when you move your money, it takes multiple days, and you don't have the precise information as to when and where the money is in terms of the process.” The increased demand for real-time money movement means instant payments are becoming a table stakes offering for financial institutions. However, real-time payments are much more than an obligation—they are a transformative force that delivers substantial benefits. “There's one credit union that we worked with to take live on the instant payments networks,” Jackson said. “In the first couple of days after going live,

After years of discussion about the new messaging protocol, ISO 20022 is now an inevitability. Though there are substantial benefits to adopting the protocol, many financial institutions—especially in the mid-market tier—are still unprepared to meet compliance by the July 14 deadline (delayed from March 10). In a recent Payments Journal podcast, Mihail Duta, Director of Solution Consulting and Transaction Banking at Finastra, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the obstacles to ISO 20022 adoption, the advantages the protocol provides, and the opportunities it uncovers for mid-market financial institutions. Learning A New Language The shift to ISO 20022 will be like learning a new language for many banks and credit unions. Some institutions may attempt to bridge the transition from the FAIM format by building translators, but there are challenges with that solution moving forward. Many translators have limitations that could lead to data truncation, and incomplete or inaccurate data could potentially cause payment processing failures.  Another issue for these banks will be ensuring that all their interfaces and solutions beyond payments processing are ISO 20022 compliant. Across-the-board standardization will be especially critical when sending cross-border payments. U.S. instant payment rails FedNow and RTP were built on the standard, and SWIFT cross-border payments will move to ISO 20022 in November 2025. This means the institutions that aren’t fully leveraging the protocol will be at a competitive disadvantage. “ISO 20022 is no longer a nice-to-have,” Duta said. “It's the only way you're going to be able to process Fedwire transactions come July 14, so you must be compliant.” As Duta pointed out, standardization facilitates seamless communication and interoperability between banks and across borders, with valid message instances to ensure compliance with the standard. The Richness of Data Though the looming deadline may be top of mind for many institutions, supporting the standard goes beyond mere compliance. The new protocol offers substantial benefits that mid-tier financial institutions can leverage to enhance their services and identify new revenue streams. “Given the richness of data that comes with the ISO 20022 format, more fields are available to transactions, compared to what we have today” Duta said. “We're moving from three lines of address to 24 lines of address, to give just one example. “Structured data can be fed into AI capabilities or machine learning, improving the detection of complex anti-money laundering scenarios, but also improving operational efficiency with higher STP rates,” he said. The data from ISO 20022 transactions can also drive significant improvements in fraud management. Enhanced data quality and consistency allow for more sophisticated fraud detection algorithms, potentially reducing fraud losses. The ISO 20022 standard also improves payments processing by minimizing manual interventions and associated costs. Taken together, the protocol’s benefits create a faster, more efficient, robust payments engine, offering a powerful competitive differentiator. “We're still talking about how we meet compliance but lost in that discussion is the idea that this impacts everybody,” Wester said. “That's one of the things about the payment space—we are all interconnected. Mid-market institutions are going to need to maintain or gain integration with the global banks and payment networks. For mid-market financial institutions, this is about new products and services being offered to customers and it's about being competitive and remaining competitive.” The Implications of the Format The adoption of ISO 20022 can mean much more than efficiency gains. Supporting the protocol can be the first step toward creating a fully modernized payments ecosystem. An institution that supports the standard will be prepared to ...

In the fast-changing world of financial services, modernizing payments technology has become essential for businesses looking to reduce costs, enhance customer experiences, and stay competitive. Santander Consumer, a full-spectrum auto lender, stands as a prime example of how bold leadership and strategic decision-making can transform payments infrastructure to deliver long-term value. On a PaymentsJournal podcast, Santander Consumer Chief Technology Officer, Don Smith, spoke with PayNearMe Chief Revenue Officer Mike Kaplan and James Wester, Co-Head of Payments at Javelin Strategy & Research, about Santander Consumer’s approach to modernization and the benefits the company gained from it. Why Payments Modernization Matters Financial institutions operate with a fairly straightforward business model: they lend money and borrowers repay it. "Payments is a really important part of our business," said Smith. “We lend people money to procure vehicles and then we really, really like it when they pay us back!”  Smith noted that modernizing their payments platform was critical to addressing service-level challenges and supporting scalability that existed with their incumbent provider. PayNearMe’s Kaplan highlighted the broader implications of modernizing payment systems. “When payments go right, they are frankly really easy,” said Kaplan. “It's when they go wrong that you need a modern platform and modern systems to address those things and drive the extra costs out of it.” The motivation behind Santander Consumer’s decision to overhaul their payments technology was clear: outdated systems were creating inefficiencies, service disruptions, and unnecessary costs. As Smith explained, “When outages occur with a payment provider, it’s a big problem because customers can’t pay us. Reliability and stability in a payments platform are absolutely critical.” A High-Risk Decision Service-level challenges and stability issues prompted the company to evaluate opportunities to make a change with their payments provider. In addition, as a contract neared its end, Santander Consumer saw an opportunity to reassess its existing provider and consider whether to renegotiate or look at alternatives. Finally, the company asked whether the current platform and strategy could expand, improve efficiency, and better service customers. If not, it was time to consider a change. “All those things coalesced together as I was introduced to PayNearMe,” said Smith. “We started evaluating their capabilities and looking at the stack and the architecture that they provided.” Transitioning to a new payments platform is no small feat, particularly for a large organization like Santander Consumer. "These projects are high-risk,” acknowledged Smith. "Success requires a clear vision, the right partner, and active executive sponsorship. It’s not enough to just approve the project; leaders must stay engaged and work closely with teams to address challenges in real time." Wester praised Santander Consumer’s approach. “Many financial institutions struggle with modernization because they view technology as an ancillary function rather than a driver of business efficiency. Santander Consumer’s focus on aligning technology with business outcomes is a model for success,” said Wester. “You need to be able to step up and drive transformation in your organization, and not fear the hurdles that you have to jump over,” added Smith. Total Cost of Acceptance For forward-thinking organizations like Santander Consumer, considering the total cost of acceptance—not just transaction fees—can transform their approach to payments. As Kaplan explains, the goal should be to address all costs associated with payment acceptance, including system costs, manual interventions, and exceptions from failed or delayed payments. “It's not just reducing the cost of an individual transaction, but really, the whole ecosystem becomes more efficient the more you take...

Virtual cards have been a popular option for consumers for years, but they’re just now gaining traction among businesses. With an increasingly globalized economy, corporate entities are seeking efficient ways to move money across borders, and virtual cards are filling that role—maximizing efficiency while reducing costs. Mark Anthony Spiteri, Global Head of Card Business at Nium, sat down with Brian Riley, Co-Head of Payments at Javelin Strategy & Research, during a PaymentsJournal podcast to discuss the growing demand for B2B cross-border payments and the emerging use cases driving their adoption in industries like insurance and travel. The Pandemic Effect B2B payments have been a cornerstone of commerce for decades, but like many other aspects of business, the pandemic brought significant changes. For one, companies had to grapple with the possibility of their suppliers going out of business. This created an urgent need for processes that could move funds quickly between merchants and suppliers, ensuring payments were delivered reliably. Post-pandemic, many companies diversified their supply chains to reduce risk and work with multiple global suppliers The challenge, however, is that the payment rails in some of these countries may have not been tried and tested. Fundamentally, businesses need assurance that they can pay and get paid quickly, cost-effectively, and reliably across borders. Volatility and Regulation Since the pandemic, two additional factors have been changing the fundamental nature of B2B payments. The first is the impact of volatility. ”At the moment there's a lot of volatility across the political landscape,” said Spiteri. “We saw what happened in the U.S. election and how the Asian market reacted, with significant impact to the Chinese Yuan. Suddenly, there was a lot of fluctuation in FX. If that happens, you need to be able to control those payments in a way that you can predict exactly what's going to happen. It needs to be accurate, reliable, and in real-time.” The second is the increasingly complex regulatory landscape. Given the heightened scrutiny from regulators, it has become more difficult for businesses to rely on a single payment method for global transactions. The immediacy of virtual cards has helped alleviate many of these concerns. “Something I've always liked is how quickly you could settle real-time payments across borders,” said Riley. “The Eurozone was a leader in real-time payments, but now it's moving through many different countries, and it's finally in the U.S. These payments settle once they hit the books, and they clear very quickly and safely.” Advantages of Virtual Cards As a self-confessed ‘cards guy’, in Spiteri’s opinion the biggest challenge with real-time cross-border payments is how you connect a fragmented landscape of localized, regional networks around the world. In addition to global real-time payment networks like that offered by Nium, this is where virtual cards come into play. Being able to move money quickly and securely across borders with virtual cards is a powerful way for businesses to improve liquidity and cash flow management. “Before it was like, pay in 30 days, or pay in 60 days, right?” said Spiteri. “Now, you can pay now. And one of the best ways to do that effectively and guarantee when the payment will arrive is with a virtual card.” One key difference between virtual cards and other real-time payment methods is the chargeback protection that cards offer. If a supplier or merchant goes bankrupt, buyers are guaranteed to recover their funds. Virtual cards also offer better controls. When employees use corporate cards, for example, it can be difficult to reconcile transactions and track where payments are going. Overall, they offer more flexibility. They can be configured as single-use or multi-use cards. A virtual card might be restricted to a specific merchant, set for a particular spending limit,

Cyber fraud presents a unique threat to small and mid-sized financial institutions, which often lack the resources or expertise that major banks possess to fend off account takeovers and other cyberattacks. However, they face the same risks from hackers as any larger institution. In a PaymentsJournal podcast, Mike Kosak, Senior Principal Intelligence Analyst at LastPass, spoke with Tracy (Kitten) Goldberg, Director of Fraud and Security at Javelin Strategy & Research about the evolving threat landscape confronting smaller financial organizations. Their discussion covered the emergence of nation-states as threats, the rise of deepfakes, and why information-sharing may be the most effective defense. Where the Threat Lies The biggest threat currently facing FIs is financially motivated cybercriminals. Their attacks typically focus on finding other ways to access legitimate accounts, as well as infiltrating the institutions themselves. Their goal is to either steal money directly or collect data to use as ransomware. These institutions are also facing threats from so-called hacktivists aiming to cause reputational damage. Such actors seek to acquire data that can embarrass either the institutions or their customers. While these infiltrators are often assumed to be rogue operators or members of hacker gangs, there’s also the possibility that they’re sponsored by nation-states, such as Russia, Iran, or China. “One of the things that smaller financial institutions need to keep in mind is that it's not just the data, it's not just the money, and it's not just ransomware gangs,” said Kosak. “It may be their connections to other organizations. A lot of nation-states are increasingly targeting FIs based on their connections to other organizations, to get their foot in the door within that larger sector.” How Criminals Are Leveraging Social Engineering In the fight against cyberattacks, humans are always the weakest link. The same techniques used to socially engineer consumers into falling for scams can also be waged against bank employees or contact center staff. These employees may then be coerced into divulging sensitive information, such as intellectual property or details about customer accounts. One tactic that has grown in popularity in recent years involves performing reconnaissance on LinkedIn or other social media platforms to figure out the right individuals to target. Once a criminal successfully impersonates an employee, they call the IT help desk to try and reset a password, which also gives them access to protected information. “These attacks are getting much more targeted,” Goldberg said. “They could include everything from stealing from consumers to roping them into money mule activity that's being used to launder funds. This could be used to support some kind of terroristic financing. You might assume it would be larger institutions that would be more concerned about that, but it can trickle down to the smaller institutions as well.” One of the most dangerous threats to smaller banks comes from infostealers, a type of malware designed to collect information from targeted computer systems. Over the past five to seven years, industry specialists have seen these attacks grow by more than 200%. Initial access brokers leveraging infostealers are quick, efficient, and they've got plenty of buyers for the data they pilfer. From a supply-and-demand perspective, this creates strong incentives for others to move into this space. Even when law enforcement disrupts the work of a significant infostealer, there are still plenty of opportunities for initial access brokers to fill the resulting void. Collective Insights Help Fight Fraud When institutions share the threats they encounter and their analysis of the situation, everyone gains from the collective insights. However, when banks choose not to share that information, the only ones who benefit are the threat actors themselves. ...

Amid constant speculation about the future of payments technology, the ACH Network had its best year yet. The ACH Network processed more transactions, moved higher dollar values, and established more use cases for businesses and consumers. With new initiatives on the way designed to increase security and foster innovation, the ACH Network’s impressive growth could just be beginning.  In a recent PaymentsJournal podcast, Michael Herd, Executive Vice President of ACH Network Administration at Nacha, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discussed the growth areas for the ACH Network, the continued rise of Same Day ACH, and the future of the platform. Milestone Growth The ACH Network is a firmly established payment network that connects to nearly every U.S. bank account, making last year’s growth even more impressive. In 2024, the ACH Network added more than 2 billion payments to its annual volume, reaching a total of 33.6 billion payments. ACH’s 6.7% growth rate significantly outpaced the previous year's 4.8% increase. The scope and scale of the ACH Network are highlighted by its remarkable dollar volume: more than $86 trillion was moved on the ACH Network last year, representing a 7.5% year-over-year increase. Nacha also reported that consumers are increasingly making bill payments and account transfers online. In fact, online ACH payments grew by 8.4% last year to exceed 10.7 billion payments, making it the single largest category of ACH payments. The second-largest growth area for ACH was business-to-business payments, which increased by 11.6% in 2024, reaching a total of 7.4 billion payments. Within this segment are healthcare claim payments, where insurers compensate medical providers, including doctors, dentists and hospitals. This category grew by roughly 5%, surpassing 500 million payments. “The third-highest growth area was Direct Deposit transactions, which have been the bread-and-butter ACH transactions over the years,” Herd said. “That includes payroll, benefit payments, and other types of consumer payments. We continue to see growth in that segment at 8.6 billion payments, which was a 3.7% year-over-year increase. Overall, there was across-the-board growth in anything that begins life electronically and digitally, and a sharp decline in anything that started off based on a paper check.” Renewed Interest The declining usage of checks accelerated during the pandemic, when staffing an office to issue, receive, and deposit high volumes of checks became a challenge. Since then, there hasn’t been a reversion to paper checks, even among small businesses. Security, cost, and convenience concerns have driven the shift to alternative payment methods. “Several retailers stopped accepting paper checks in their stores last year, including Target and Petco,” Tavilla said. “Primarily, this is because there's very low consumer demand to pay with checks anymore. More retailers are offering decoupled debit or their private label debit cards, which the consumer can use to pay with funds from their checking account, and they can also take advantage of rewards and loyalty incentives that are offered by that retailer.” For years, large mobile carriers like Verizon, T-Mobile and AT&T have offered autopay discounts to incentivize their customers to move away from paper payments in favor of ACH. In addition, the ongoing push for eco-friendly, low-cost solutions has spurred interest in one of the original ACH use cases: recurring bill payments. “We've seen interest in recurring ACH for things like donations and subscriptions, where you have a repeat payment scenario between a known payer and payee that looks a lot like a bill payment,” Herd said. “It's not quite literally paying a bill, but the payment characteristics look almost exactly like it. That's a sweet spot for recurring ACH debit in those use cases.” The peer-to-peer space is another area of growth ...

Criminals are continually looking for ways to circumvent fraud detection systems, and money mules have become a popular vehicle to move illicit funds between accounts. Mules are favored because they are effective—often, they are everyday people, many of whom are already customers of a financial institution who have passed verification checks. Glenn Fratangelo, Head of Fraud Product Marketing at NICE Actimize, and Jennifer Pitt, Senior Fraud and Security Analyst at Javelin Strategy & Research, sat down for a PaymentsJournal podcast to discuss the evolving ways money mules are deployed, their impacts on banks, and the ways financial institutions can protect themselves from this emerging threat. Scam-Fluencing Recruits One of the most disheartening aspects of the money mule phenomenon is that it often isn’t difficult for criminals to recruit help. In many cases, mules are ordinary people that are willingly moving funds for criminals in exchange for a portion of the proceeds. These individuals can be students, retirees, or lower-income individuals who are looking for financial relief. Criminals deliberately target those who seem unexceptional to avoid raising suspicion. In many cases, mules are recruited through social media, where there is often a receptive audience. “On TikTok, Facebook, and YouTube, there is almost a gamification or a scam-fluence, where individuals are diminishing the level of criminality associated with becoming a mule,” Fratangelo said. “When it’s being presented on social media platforms with fast-paced music and an engaging speaker, magically it becomes not illegal to become a money mule. It’s being driven by the idea of easy money.” Though some mules are willing participants, there are also many instances where the mule is being coerced, blackmailed, or tricked into moving the funds. In these cases, the mule is just as much a fraud victim as the institution. “There is a victim/perpetrator paradox here, where these mules are active participants, but many are scam victims themselves,” Fratangelo said. “It makes it even more morally and legally complex, because how do you classify these individuals? Oftentimes, financial institutions find themselves stuck between wanting to stop the criminal activity, but also not wanting to further victimize the mule if they are in the cycle of scam and victim.” A Trojan Horse Regardless of how the mule was recruited, many of them are already in the institution and have already passed control checks. Once they become a mule, they have effectively become a trojan horse within the financial institution that is used for short-term, high-value transactions. The technology available to criminals since the advent of generative AI only adds to the sophistication of money mule operations. Cybercriminals can combine AI agents and automation to create accounts and facilitate mule recruitment on a massive scale. “The ability of generative AI tools to create synthetic identities that look indistinguishable from real people makes it hard to identify fraud,” Fratangelo said. “They operate in a 24/7 environment where thousands of accounts can be created simultaneously, and they're incredibly believable.” In addition to AI, the digital payments revolution has created vulnerabilities that criminals can exploit. Payments are faster, more frictionless, and increasingly global, which allows criminals to move money quickly and in substantial amounts. Perpetual Verification The emerging technologies, coupled with the availability of mules, has created a devastating ripple effect that goes beyond fraud. Money mules enable money laundering, terrorist financing, and a multitude of other nefarious activities. Addressing money mules requires an approach that considers the whole customer lifecycle. From the start, there should be robust identity verification checks, but Know Your Customer (KYC) checks shouldn’t stop there.

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,

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.”

The United States employs multiple real-time payment schemes; however, unlike those in many emerging markets, these methods are not driven by a central government or central bank. In the absence of a centralized entity to organize payment processes, other stakeholders must take the lead in enabling instant, cross-border transactions. In a recent PaymentsJournal podcast, Alex Johnson, Chief Payments Officer at Nium and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the latest efforts aimed at integrating the U.S. into the realm of international real-time payments. The U.S Plays Catch-Up In many ways, the U.S. economic landscape lags behind some emerging economies in payments innovation. This is partly because emerging markets have faced more pressing challenges, driving them to harness technological advancements to help solve specific, regionally unique use cases. “Compared to networks like UPI in India and Pix in Brazil, our level of maturity and sophistication in the United States is not quite there yet,” Bodine said. “As most people know, RTP and FedNow are not even interoperable now.” But, it’s time for the U.S. to catch up. One of the key drivers of payments innovation in the U.S. is the global supply chain. Even small and medium-sized businesses are starting to source goods and services from regions like India. In India, real-time payments are the most widely used payment method for both citizens and businesses. Extending the supply chain to India therefore requires developing systems that can facilitate real-time payments effectively in that market. A significant advantage of real-time payments is their efficiency. They always provide complete visibility into the payment’s status, letting buyers optimize their working capital for a longer period. However, sellers may prefer traditional payment methods, as they often receive their funds slightly earlier. “CFOs don’t want to see money go out of their account in 20 seconds,” said Bodine. “We have to look at the strategic coexistence of all the pay types and not assume that any one is going to be applicable to all situations.” Fraud Concerns With the rise of real-time payments, there has been an increase in account-to-account fraud for those sending payments. But, real-time payments are not inherently riskier than traditional methods. Since the money moves instantly, there is never any question about its status at any point in time. Account verification plays a big role in boosting confidence in the global adoption of real-time payments. For example, if someone is completing a transaction to Nigeria or Thailand, it’s now possible to verify the ownership of the receiving account. “You can put in an account number and name, ping our API, and within seconds you get a response to say, ‘Yep, that matches’ or ‘No, it doesn't,’” said Johnson. “In some jurisdictions, we can also pass back the actual name on the account. You can be absolutely certain that the money's going to exactly who you think it's going to, separate from and prior to a transaction. That's a huge prevention of fraud, giving people more comfort in using real time payments. We've seen a 58% reduction in return transactions just by the use of this tool.” A Partnering Plan The global cross-border payments network is led by Swift, run by a consortium of international banks. What many may not realize is that a Swift transaction is not the payment itself, but rather the messaging service. Swift acts as a tool that creates interoperability between different payment systems. Most financial institutions have already completed the integration with Swift, allowing them to use its functionality to send wires globally. “At Nium, we can now accept transactions via Swift messages from financial institutions,” said Johnson. “They can make Nium an intermediary on those transactions,

The most familiar example of surcharging might be the cash-or-credit pricing at gas stations, but more businesses are following that lead. While it’s becoming common for customers to pay for the right to use a credit card at restaurants and retailers, credit card surcharging hasn’t been a common practice in the healthcare industry.  In a recent PaymentsJournal podcast, Ali Badawy, Director of Enterprise Healthcare Payments Solutions at U.S. Bank, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed how healthcare providers can leverage credit card surcharging to cut costs significantly while keeping their customers engaged. Consumer Conditioning Credit card surcharging has been permitted in most states since 2013, and it allows businesses to offset the credit card processing fees charged by card brands like Visa®, Mastercard®, and Discover®. The fees are instead passed to the customer when they use a credit card at the point of sale. The surcharge amount is often a percentage of the overall purchase and can range from 1% - 4% and can be applied in any environment where a cardholder makes a payment—in-store, online, and even in text-to-pay. Surcharges are only allowed for credit card transactions, so consumers can avoid them if they pay by debit card, check, ACH, or cash. “When surcharging was launched, business customers were skeptical, and understandably so,” Badawy said. “However, as it has developed over the years, consumers are more conditioned to it. If a customer’s transaction is in the government space, or with an online retailer or service business, those environments have adopted surcharging to where now consumers expect it.” The Proliferation of Surcharging The normalization of surcharging has expanded its use cases, which now covers industries across the spectrum. As businesses have shifted online, surcharging has evolved to become a factor in e-commerce. The driving force behind the proliferation of surcharging is cost savings. Even though credit card fees of 1% to 4% might seem relatively nominal, the aggregate can quickly become a significant amount. Reducing those costs is what makes surcharging attractive to business owners, especially for enterprise-scale businesses. “For example, a large healthcare franchise in the ambulatory space was exploring options to help their franchisees reduce their overall costs,” Badawy said. “After they researched surcharging, they found out they could save over $1 million each year based on their volume numbers.” A Safe Strategy The main concern about surcharging is that it could alienate customers, but that is rarely the case. Once a business starts a surcharge program, they are highly unlikely to terminate it. “There are often apprehensions when an organization’s average ticket size is large, ranging from $5,000 to $20,000,” Badawy said. “The business owner might be concerned that if they apply a surcharge, they will lose the customer, but that’s usually the farthest thing from the truth. Healthcare providers might still be reluctant to surcharge because it isn’t a common practice in the industry yet, but those concerns are likely unfounded. “Most consumers aren’t shopping for a healthcare provider based on cost,” Apgar said. “They go to a doctor or a dentist because they have a connection with that provider and they’re receiving good care. Especially in industries like healthcare, where there can be substantial inelasticity in pricing, a nominal credit card surcharge isn’t enough to alienate a customer. From a business perspective, it's an increasingly safe strategy to use.” Every Endpoint When researching banks or processors that offer both credit card processing and surcharging, business owners should also look for a processor that specializes in healthcare. In addition, the business owner should understand if the platform allows surcharging at every endpoint where the provider collects pa...

Financial institutions are exploring new ways to attract younger savers, and their payment habits are evolving in turn. Credit cards have now edged out debit cards as the preferred choice, even among younger generations. Additionally, digital wallets and peer-to-peer methods like Venmo and PayPal are gaining significant traction in this demographic.   Velera’s Eye on Payments study, a comprehensive annual assessment of payment choices among credit union members and other financial institutions, examines how these trends shift over time. Now in its seventh year, the research delves into the factors shaping consumer choices across various payment methods, with a particular focus on how these preferences evolve at different life stages.  In a recent PaymentsJournal podcast, Velera’s Tom Pierce, Chief Marketing & Communications Officer, and Norm Patrick, Vice President of Velera’s Advisors Plus, discussed the findings from this year’s survey with Brian Riley, Co-Head of Payments for Javelin Strategy & Research. They also explored how credit unions can leverage these insights to better serve their members. Credit Over Debit After five years of debit cards dominating payment preferences, Velera’s research reveals a notable shift toward credit. This year, 37% of respondents indicated a preference for using credit at the point of sale, surpassing debit at 35%. Relatedly, 40% of credit union members reported applying for a credit card within the past year. Source: Velera's Eye on Payments 2024 report Among younger demographics, the trend is even more pronounced. Half of both older and younger millennials, as well as Gen Z respondents, stated that they had applied for a credit card in the last 12 months. Velera’s findings show a 40% preference for credit as the primary payment method within these younger age groups. “That generational flip is really important in the credit union industry because of the aging membership,” said Riley. “Being able to react and have the right offerings in place for the younger generations is something that's essential for credit unions.” Other Payment Methods Mobile wallet usage has seen a significant surge in recent years. The percentage of respondents using a mobile wallet at least a couple of times a month jumped from 27% in 2022 to 34% in 2023, and this year, that figure rose to 50%. Overall, about 60% of credit union members plan to implement mobile wallets within the next six months. Not surprisingly, the lion's share of this activity is driven by younger consumers. Source: Velera's Eye on Payments 2024 report This demographic also expresses strong concerns about fraud and identity theft, highlighting the importance of engaging with them to build trust and increase their comfort with the fraud prevention tools issuers offer. Another payment method that has experienced a substantial increase is peer-to-peer (P2P) payments. Just 12% of respondents reported using P2P as a primary payment method in 2023, but that number more than doubled in 2024, rising to 25%. “As we look at the younger generations, there are a lot more people who are using P2P as a primary method,” said Patrick. “It's important that they be educated with the ins and outs of using those different solutions. When you have money sitting in your Venmo account, it is outside of the financial institution. It may not be insured, and it may not be a fraud check for losses. “With the boomer generation, there isn't a ton of interest in P2P,” he said. “In fact, 62% of those surveyed said they do not use P2P type of methods at all. But that means that there is some that do, and there could be some opportunity to encourage them to do more.” Design for Living Card design is also top-of-mind. In fact, more than half of credit union members said that card design influences what type of card they choose to use on a regular basis. “That was up from 39% last year,

Over the past five years, the U.S. has experienced an average of $18 billion annually in natural disaster-related damages. Millions of individuals are impacted by natural disasters each year, facing financial challenges such as damage to homes, the need for temporary shelter, and the replacement of personal belongings and food. With delays in funds distribution due to legacy payout methods and outdated processes, there has been a focus on the benefits of using prepaid cards for payouts. One popular solution to help people recover is prepaid cards. In a recent PaymentsJournal podcast, Marchelle Becher, Business Development Executive with B4B Payments and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, spoke about how these cards have become an essential tool for addressing the needs of disaster victims. Looking for Ways to Help The Federal Emergency Management Agency (FEMA) has been considering changes in the way it provides financial resources for victims of natural disasters. Given the frequency of disasters, aid programs and funders are becoming more proactive rather than reactive. “We've seen this past year that while we're reacting to Disaster A, Disaster B is hitting,” said Becher. “And when you look at what type of recovery aid is needed, there's a gap between those who need immediate aid for basic necessities versus the need for long-term assistance.” Prepaid fills the critical gap to deliver funds immediately to those without bank accounts and to those who don’t have access to their bank cards due to disasters. FEMA recognizes that prepaid cards are well suited to meet the distribution needs when disaster strikes. Traditional payment methods can be slow and costly, unlike prepaid cards that can be issued immediately, reloaded securely and simplify the reconciliation and reporting process. The flexibility of prepaid cards allows funders to set spend controls (closed-loop) for specific merchant purchases or (open-loop) allowing recipients to make purchases based on their individual family needs. Funders and recipients prefer the convenience and security of reloadable prepaid cards or virtual cards that can be used immediately for online purchases or loaded to a digital wallet. And the process is very streamlined. Unfortunately, survivors of natural disasters are left to navigate complex bureaucratic processes and the painful task of putting their lives back together. Dealing with the loss of property, emotional trauma and potential change in employment is compounded when trying to navigate the complex financial aid paperwork leading to delays in aid disbursement,” said Becher. “It can be months to years before funds are ever in the hands of those that need them. Most recently we've seen it with Maui, where over a year after those fires hit, there are still people who haven't received any funds.” Tracking Information Another benefit of prepaid cards is the ability to track how the funds are being used. These programs receive funds from many different organizations, and often, the funders want to determine how the money should be spent. With a prepaid program, they can restrict those funds to be used solely for food and housing, or make them inaccessible via ATM. At the same time, the ability to track spending gives funders insight into the needs of those affected. They can see how much is being spent in each category, as well as how quickly the funds are being used—whether that’s within the first couple days or over a longer period of time. Features like dynamic spend control and just-in-time funding help organizations improve cash flow and reduce fraud risk. “Accountability by both the recipients of the funds and also those who are in charge of distribution of funds is extremely important,” said Becher. “This information will help in the coming months and years as we continue to deal with natural disasters and build humanitarian aid programs to help.