PaymentsJournal

As the holiday season approaches, small and medium-sized businesses (SMBs) have an uphill battle to secure their piece of the sales pie. But the key for SMBs to win this year’s Q4 is not to play the same game as the major retailers but rather to play to their niche and delight their customers with an exceptional, personalized experience.

During a recent PaymentsJournal podcast, Nitin Prabhu, General Manager SMB, Developer and Payments at PayPal, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discussed the findings of PayPal’s SMB and Consumer Survey 2023 and determined what SMBs can do to differentiate themselves from larger retailers, leverage current technology (such as PayPal PPCP) to acquire new customers, and widen their customer base as they prepare for the holiday season.

SMBs struggle with particular challenges related to their size and scope of operations. And with the holidays on the horizon, SMBs face stiff competition from big-box stores and their slick marketing and advertising campaigns.

Moreover, SMBs incur considerable expenses to invest in additional inventory, of hiring new and knowledgeable staff to manage the influx of customers and sales, and of course shipping costs. If any of these efforts falter, there can be negative impacts on profitability and future customer acquisition.

PayPal surveyed thousands of SMBs at the start of the year, and a few key challenges were discovered:

“SMBs are not logistics experts, they’re not payments experts, they’re not returns experts,” Keyes said. “They are SMBs trying to make sales and get by and build their business. But they don’t come in with this level of expertise or NSA experience.

“It’s just a lot to handle, while a major retailer has whole teams for these issues. While an SMB might have one person, it’s just a lot to handle for a small business.”

The key differentiation tactic that Prabhu recommends is for SMBs to not only know their limitations but also to play to their strengths. The reality is that SMBs may not have the operational sophistication and the logistical support to reach all markets throughout various geographies.

The PayPal survey discovered that 80% of consumers expressed a willingness to purchase from small businesses, provided that the product they seek is available and at a comparable price. So how can that willingness be translated into sales? Prabu said the latest trends reveal that consumers are finding their products mostly online but also in-store.

As a result, he asks SMBs to consider where they can channel their marketing dollars to reach these customers where they shop. Prabhu suggests that social media is an effective platform to reach potential customers. Additionally, he encourages businesses to ask for reviews from customers within their niche as another way to build trust and brand awareness.

Offering exceptional customer service is another winning strategy Prabhu recommends, one that creates an essential loop tapping into customers’ feedback, which can then be incorporated into product and sales strategy. SMBs can also leverage the advantage of being smaller, as larger retailers are slower to respond to customer feedback.

“If you create a very personalized experience for your consumers, you engage them, understand what the needs are, how they like the product, what do they want to see in the next holiday shopping season, or in the next quarter,” Prabhu said. “You can quickly realign your inventory, your services, and customize, and this ability and nimbleness can take you much further ahead than the large retailers.”

Finally, SMBs must leverage technology. They must be able to offload any tasks that take them away from customer acquisition, such as inventory management, logistics, accounting, sales, or search engine optimization.

Luckily, many solutions providers are now developing their offerings to cater to the specific needs of SMBs.

“There’s a lot of opportunities to take advantage of—new areas that SMBs have largely had to leave to the bigger merchants before, “ Keyes said.

“And with these new tools, there’s opportunities to increase revenue, increase retention, improve loyalty, and so much more with the addition of some solutions.”

A final piece of the puzzle would be a game-changer in equipping SMBs to compete for holiday market share and enhance customers’ experience: leveraging the latest solutions. PayPal Complete Payment Solution (PPCP) has just launched in the United States, with SMBs in mind and based on direct feedback from this target market.

Prabhu believes that the features included in the solution will give SMBs a competitive footing equal to that of their larger retail counterparts.

With PayPal Complete Payment Solution, consumers can safely save their payment information directly on a merchant’s e-commerce website for future purchases. This feature not only reduces friction but also promotes conversion because more consumers will choose where they shop based on whether their preferred payment method is offered.

Plus, customers enjoy tracking their online orders, and PPCP now has package tracking available with more than 5,000 merchants through UltraCart, WooCommerce, and BigCommerce.

PPCP also offers foreign exchange as a service and enables merchants to list all products in the currency where the customer lives.

“Creating a seamless experience, “ Keyes said. “I think that’s the most important thing as merchants look to sell in different geographies and accept different payment types and sell online and in-store. It’s really important that not only do they do all those things, but they make sure that the experience for the consumer is consistent, whether that is how it looks or also how easy it is to go through the process.

“You have consumers in different places or paying in different ways. There’s a lot of opportunities for things to go wrong or not being consistent or be confusing. Then you lose sales, you lose loyalty, and that’s obviously not what merchants want when they’re adding all these new capabilities. So it’s really important to make sure that everything remains cohesive. Having it all on one platform is certainly a way to do that.”

Faster payments have plenty of benefits for businesses and consumers, but the technology has also opened the door to a new breed of fraud: authorized push payment (APP) fraud. Banks and their customers have taken a considerable financial beating due to APP fraud. As losses soar, FIs are struggling to get a handle on this increasingly sophisticated fraud scheme, which could mean a loss of customers to competitors who are more invested in protecting their customers.

During a recent PaymentsJournal podcast, Dave Scola, CEO of Form3 (US), and Tracy Kitten, Director of Fraud and Security at Javelin Strategy & Research, discussed the formidable challenges banks face to mitigate APP fraud, why inbound transaction processing could be the catalyst for confronting APP fraud, and how banks can be the key change-makers in curbing this fraud scheme.

APP fraud is a scheme by which a criminal deceives a consumer or a business into sending funds to a fraudulent account. These bad actors target their victims to part with their money through social engineering or impersonating a real person or an existing company.

Banks face tremendous pressure to stop these malicious attacks. The problem is that these increasingly sophisticated attacks are rapidly outpacing the FIs’ ability to detect and mitigate such fraud.

“What makes it challenging is that most of the bank systems that are in play today have been geared towards monitoring the sender rather than monitoring the receiver,” Scola said.

“That puts a lot more onus on the banks to shift their position and start to look at the receiving end of that transaction, which is a change in posture for the industry as a whole.”

APP fraud is essentially a two-fold problem, according to Kitten. It has a technical component and a social engineering component, making it an incredibly complex fraud tactic to overcome.

“There is obviously a technology piece that plays a role here, but there’s also a human element, a psychological piece that’s a big part of this,” Kitten said.

“I think part of what makes resolving the scam issue so challenging, because as you know from the FI’s perspective, these are legitimate transactions. These are transactions that the users are actually authorizing.

“These are authorized push payments, but because they’ve been manipulated, socially engineered in some way, and they result in fraud. So it’s a huge challenge, and it’s one that is only going to continue to get worse.”

Banks have typically focused on outbound transaction processing, which monitors transactions originating from the sender. However, inbound transaction processing enables banks to monitor and examine transactions originating from the recipient’s account, where the bad activity in cases of APP fraud is actually instigated. This is where banks must redirect their focus to combat such fraud.

“It becomes much more effective to monitor the receiving accounts than it is the sending accounts,” Scola said. “Because as we look across the industry and the activity that’s going through various payment rails, you can start to see similar types of transactions, similar amounts, similar times for these transactions that I think help reflect the fact that they are fraudulent.

“It’s working to identify those commonalities on the inbound side that make the identification of that fraudulent activity possible.”

Inbound transaction screening can be a dependable way to detect fraud, such as anomalies in these transactions.

“But I think that some of those things that we’ve talked about in the industry for a long time, some of those tried-and-true methods can really be things that we can fall back on,” Kitten said. “I think back to the days of ACH account takeover and wire fraud. What were some of the indicators of compromise there?

“We looked at the time of day of the transaction, the transaction, transaction amount, if you know this was a transaction that perhaps has been initiated by a sender that doesn’t normally have interactions with this particular recipient. Some of those types of things can assist.”

With the speed and nature of faster payments, banks are simply not fully equipped to detect fraud. More banks are leveraging emerging technologies to revolutionize how they detect APP fraud.

“On the bank’s side, beyond relying on clients to identify [APP fraud], there are some other mechanisms that are starting to come into more popular use amongst the banks,” Scola said. “And that is the application of AI.

“I know everybody mentions AI is the solution to all things these days. But I really believe particularly in the payment side that fraud is the ultimate use case for AI. And the reason is, as Tracy mentioned, you are dealing with instant payment systems. They are irrevocable payments. They are happening within seconds.

“The only way you can successfully monitor that data at that speed is through the application of AI and really looking for commonalities among the payment activity that’s going through the network.”

Another powerful tactic to mitigate APP fraud, Scola said, is for banks to collaborate. Fraudsters will initiate this type of fraud across many banks. If these banks were to share their data, they could easily detect the fraudsters’ activities as well as the accounts they are leveraging. That would allow banks to ultimately close them down and block the funds from further distribution.

Kitten noted that many fraudulent activities, and the losses incurred, go largely unreported. It could be due to embarrassment. But this, according to Kitten, is a mistake.

“My recommendation would be anytime there’s some kind of fraud or scam that’s reported that it be tracked in some way or another, so we have some kind of grasp as an industry on how much is being lost or how much is potentially being lost,” she said. “Then there’s an opportunity for these teams to get some budget to make some investments in actually thwarting this issue.”

Without question, real-time payments are here to stay. To remain key players in this increasingly competitive environment, banks need to focus on reinforcing their fraud detection solutions.

“A lot of the banks we see are now leveraging API integration to start tying together best-of-breed technologies, micro-service environments where they can start to piece those together, using APIs to integrate and increasingly leverage the cloud for scalability and speed in activities that were kind of anathema in the past for banks to move off premium bank accounts,” Scola said.

According to Kitten, there is still work to be done among banks when it comes to fortifying themselves against real-time payments-related fraud.

“A lot of the institutions that I spoke with nearing the end of last year had done nothing as far as technology advancements, improvements to address the launch of FedNow,” Kitten said. “So, this has been back-burned again. Budgets are tight. A lot of fraud issues to look at.”

“Unless they’re really seeing losses that they can track and put on a budget line, it’s difficult for them to really pay attention to it. But I think that’s going to quickly change as we see a lot of losses linked to faster payments.”

In a world of immediate payment options like Venmo and Zelle, most U.S. banks are still using the same payment-processing technology they installed in the 1980s. Consumers have come to embrace real-time payments, looking increasingly to digital-first nonbank financial players for increased speed and convenience. It has created a landscape where many legacy banks are lagging behind both their customers’ expectations and their competitors’ capabilities.

To explore how legacy banks can get up to speed on real-time services, PaymentsJournal sat down with John Brady, Chief Architect and Head of Engineering at BillGo, as well as Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research.

Legacy U.S. banks have several real-time payment options right now, with FedNow going live in July as well as other options like working through the Clearing House and debit card and credit card networks. The key question is whether banks’ legacy infrastructure can truly process real-time payments. 

As Brady explained, most banks’ payment processing today is still batch-oriented. But for the first time in over 40 years, there’s a new real time payments infrastructure and technology that can move money in real time, whether that’s through RTP or FedNow.  “The rest of the financial infrastructure as well as operation needs to catch up and update to a 24/7/365 environment in order to get the most value and benefit out of real-time payments,” Tavilla said.

Most banks handle Same Day ACH by running batches multiple times a day. “To get to a truly real-time system, you’re not going to be able to run the batch for every single transaction,” Brady said. “Some of that fundamental infrastructure really needs to change in order to handle real-time payments going forward.” 

For legacy institutions to truly come up to speed, they need to address real-time payments, real-time settlement, and real-time core processing. Given the demand for faster as well as actual real-time payments, the infrastructure behind the scenes will need to be caught up. 

“As more systems process transactions in real time, it’ll be increasingly important for the legacy core systems to be able to clear and settle in real time,” Tavilla said. “Otherwise, the lag and the complexities where the different types of payments and transactions aren’t aligned in terms of the actual movement and settlement time can pose challenges, whether it’s fraud or insufficient funds or other issues.”

Many banks will rely on a memo post so the customer perceives the transaction to be happening in real time, but it won’t actually post against the core system in real-time. “So the banks are kind of faking it in terms of this real time aspect of things,” Brady said. “As payment products get more sophisticated, it’s going to be harder for banks to do that fake-out type of real-time posting.” 

According to Tavilla, consumers in recent years have become accustomed to being able to send money to friends and family or other uses in real time, although behind the scenes. The money might not be moved and or cleared and settled in real time,” Tavilla said. “That emphasizes the importance of financial institutions adopting systems that are actually able to move the funds in real time.”

In today’s world, these banks impose transaction limits, putting a dollar limit on Zelle or debit card transactions. As banks move toward real-time settlement, those limits could potentially be increased because there is more of a guarantee that the funds will clear.

Real-time capabilities are having an impact on legacy infrastructure. Under normal payment flows in bank systems today, a bank will process an ACH transaction in a batch file, then pass it to a money movement hub or run it through its fraud systems. These fraud systems are necessarily designed to expect a delay in settlement. Once the transaction goes into the core systems, there are multiple balances, including the memo balance, available balance, collected balance, and available balance. Those balances are updated multiple times through multiple batches throughout several days as the various funds settle and clear with other banks. 

“If you think about a true real-time settlement, that whole payment processing up front is going to have to change,” Brady said. “The fraud models are going to have to change, the funds availability models are going to have to change, and the core processing on the back end is going to have to change as well.” 

Said Tavilla: “The top real-time payments use case for both FedNow as well as RTP is the ability for consumers to be able to make a last-minute, real-time bill payment. Based on Javelin’s research as well as other studies, one of the aspects that consumers appreciate most about paying bills is the instant notification or confirmation. With real-time payments, the messaging and the finality of instant bill payment would improve the customer experience as well.”

Another impediment to the full embrace of real-time payments is the siloing that is prevalent at banks.

“I’m concerned that a lot of these systems today are owned by different departments within the bank,” Brady said. “If banks don’t take a holistic approach, each of these departments is going to devise their own strategy for how to deal with real-time processing.”

There is broad agreement on what needs to happen: Bill pay needs to be fully integrated with payment acquisition systems, risk systems, and core systems. Banks also need to consider how regulations interact with that. It’s only within that kind of comprehensive framework that banks can continually improve and, ultimately, provide their customers with better service.

Acquirers, processors, and payment facilitators (PayFacs) are grappling with a host of challenges involving risk—including sophisticated fraud attempts—that demand innovative solutions. These industry players must harness cutting-edge technologies to strengthen their risk management strategies and ensure the integrity of the payments ecosystem.   

In a recent PaymentsJournal podcast, Amyn Dhala, Chief Product Officer at Brighterion, a Mastercard company, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, delved into the frustrations many are facing and the technologies they should consider to tackle these obstacles.

One can argue that the single most important thing within the payments space is the irrefutable ability of the transaction. For acquirers, processors, and PayFacs, that means the payments system has integrity and the controls in place to ensure the transactions are indisputable.

But that’s easier said than done. Many factors are attacking the system, and many players continually seek to disrupt it.  

“You have people that might go outside the bounds of their credit lines or their available credit and people gaming the system,” Riley said. “But having the fundamental controls there are really what distinguishes the payment process and an effective transaction through the whole system.”

Dhala agreed, stressing that merchants are ultimately looking to increase their bottom lines. 

“It’s basically a very dynamic space with lots of opportunities,” Dhala said. “But at the same point in time, it has its own challenges. It comes back to the core (of it) for acquirers and PayFacs, and that’s how do we actually increase revenue? And how do you minimize fraud risk?”

Artificial Intelligence has become a popular and effective tool for industry players to leverage in detecting and preventing fraud. That’s because AI solutions can analyze an enormous amount of data, which can then detect patterns and anomalies, revealing fraudulent activity. It can also lessen the number of false positives.

“Fraudsters are operating at scale,” Dhala said. “So, there are some quick learnings which you can get by leveraging (AI) insights.”

It’s important to note, however, that an AI solution must be fed an enormous amount of data to be truly effective and accurate in its predictions.

“The importance of AI is to keep learning,” Riley said. “It’s not to have a static model that says these are the exceptions we do. The more transactions that go through give (payments players) the ability to learn more on what’s a good or bad transaction.

“If you do this in a box on your own as an issuer, you’re limited to the information that you have. And your solution really uses a lot of the learnings with consortium data to apply that logic throughout the cycle. That really helps make this more powerful.”

An AI solution is only as good as the quality and variation of the data it collects, but amassing data for the sake of it is not the answer. Payments players need to be able to continually learn from every transaction, every approval, and every declination that goes through. Doing so will give them a larger knowledge base, Riley says.

“It’s all about that particular balance, which is so crucial to maintain,” Dhala said. “For the acquirer, for the acceptance ecosystem—and frankly the whole commerce ecosystem—to succeed, that’s the core objective. That’s the basis for some of the market model transaction fraud models because it really leverages the network intelligence, which we have at Mastercard.”

A common roadblock to the full adoption of AI solutions is the complexity of its integration. However, Brighterion’s AI Transaction Fraud Monitoring solutions are not only market-ready but also require 30 data elements to train the model, versus hundreds of types of labeled data elements.

“We’ve honed the technology over the last couple of decades, and our fraud intelligence is enriched every year with over 100 billion transactions,” Dhala said. “The combination of this delivers exceptional accuracy, which we can enable to our customers through these transaction fraud models.”

The holiday season is quickly approaching, and consumers and retailers are gearing up for what’s to come in the world of gift-giving. The economic roller coaster of the past year has given rise to a cautious but optimistic consumer mindset where value and deals reign supreme.

Changing consumer sentiment is driving retailers to adapt and provide attractive incentives to draw shoppers in. Not surprisingly, gift cards are emerging as the stars of the upcoming holiday season and are expected to make up a substantial 43% of the holiday budget, according to Blackhawk Networks’ recent “Better & Better: 2023 Holiday Gift Card Shopper Research.”

To shed light on what to expect this holiday season and offer valuable insights into consumer behaviors, gift card trends, and retail strategies, PaymentsJournal sat down with three industry experts: Jay Jaffin, Chief Marketing Officer at Blackhawk Network; Sarah Kositzke, Director of Research at Blackhawk Network; and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. They dug into Blackhawk Networks’ research, which explores:

Although concerns around inflation and job security are top of mind for many consumers as the economy continues to fluctuate, consumer confidence is increasing. According to Jaffin, this year’s retail outlook looks positive, with more consumers planning to shop for the holidays. That said, consumers are erring on the side of caution, shifting toward fewer shopping trips and fewer locations, conducting most of their shopping online. As a result, retailers need to maximize each visit and focus on providing incentives to attract shoppers.

“I would encourage retailers to really focus on value and deals,” Jaffin said. “When we talk to consumers, roughly two-thirds are planning to change their shopping behavior in some way this year. What we hear is that they’re moving more of their purchases to store brands or off-brands, buying more on sale, and using more coupons.

“In general, they’re buying a little less, and that’s some of the things to keep in mind as we enter the busy holiday season.” 

Javelin research backs up many of these points, Hirschfield pointed out. Confidence is on the rise, with many consumers planning to buy gift cards this holiday season. The key to capturing their interest lies in providing promotional incentives and flexible choices. “We’ve found that (roughly) 84% of consumers plan to buy gift cards, with 72% motivated to make a purchase if a gift card is offered as a promotional incentive,” he said.

Research from Blackhawk Network is finding that holiday shopping will start a little later this year. That’s because there will be five holiday shopping weekends, which will give consumers more time to find promotions and discounts.

“It’s really this mid-late November to early December shopping time when folks are about to begin,” Kositzke said. “For Gen Z, they’re almost entirely beginning their holiday shopping in November and December in particular.” Sarah noted that much of GenZ will be kicking off their shopping on Black Friday, and that they are out there looking for those sales and promotions, and they’re often looking at those new product releases as well.

On average, consumers plan to spend about $770 on gifts this holiday season. Although this amount is relatively flat compared with last year, gift cards are expected to account for 43% of that spending, a significant increase from the prior year.

Gen Z specifically is a driving force, with a 12-point year-over-year increase in its share of holiday spending allocated to gift cards, Jaffin says.

Overall, younger generations, including Gen Z and Millennials, are leading the way in purchasing physical and digital gift cards. Gen Z, in particular, plans to purchase approximately 17 gift cards, with a nearly equal split between physical and digital cards. Older generations are more inclined to buy physical gift cards.

“Gen Z loves to gift, they have more people to think about on their holiday list, and the value and the ability to give them those digital options is really where we’re seeing  that love for gift cards,” Kositzke said. “Not only do they love to give gift cards, but they want to receive them.”

Hirschfield also noted that there’s a growing interest in multi-brand gift cards and open-loop options, and stressed that retailers should consider offering more choice in their gift card programs, with an emphasis on flexible value loads.

When it comes to holiday shopping, younger generations are keen on using digital wallets and stored value. Digital wallets enable consumers to store and spend their gift cards conveniently, and as a result, 72% of consumers who prefer digital gift cards are likely to store and spend them through their mobile wallets.

Sustainability is also becoming a crucial consideration. According to Jaffin, 57% of consumers are interested in gift cards made from recycled materials. That’s a key focus for retailers today, as more are focusing on eco-friendly options, pledging to convert plastic gift cards to paper substrates. As sustainability gains momentum, this aspect will become more important for consumers and retailers.

“Consumers are becoming more conscious of not only the gift card brand or type, but what the gift cards are actually made of,” Jaffin said. “We made a pledge last year to work with our partners to convert the majority of their plastic gift cards to paper substrates by the end of next year. This is going to be a trend that gains more and more momentum.”

Retailers should take an offline and online strategy this holiday season, making the most of all their channels—including in-store displays, online options, and multi-brand gift card displays. Capturing consumer attention in various areas enhances the chances of gift card sales. In fact, by implementing a “be everywhere” strategy, retailers can see benefits that extend into Q1 and beyond, with increased consumer spending, visits, and engagement.

“We don’t always know exactly what people need or want, so having the flexible options available around every corner for consumers is helpful,” Kositzke said.

Emphasizing flexibility in payment options, promoting the value of digital wallets and stored value, and offering a range of digital and physical gift cards can also help retailers cater to different consumer preferences, Kositzke noted.

It’s key that retailers use all available channels to capture the benefits of gift card strategies. According to Hirschfield, 40% of consumers tend to spend more than they normally would when they have a gift card, and 25% opt for more expensive items. What’s more, 30% are inclined to visit stores more often, leading to long-lasting advantages well into 2024.

Shifting the discussion toward employees, Jaffin underlined the value of gift cards as a holiday gesture from employers. He shared insights from Blackhawk Network’s research, which revealed that employees highly appreciate receiving gifts.

“When you hand out gifts at the end of the year, it makes employees feel valued and really helps bring a new energy for the year,” Jaffin said. “Last year, very few employees received gifts and fewer are expecting anything this year, and there’s nothing better than a nice surprise.

“Gift cards are an affordable holiday gift, and they can easily be delivered because with digital gifting, it doesn’t matter where you are.”

The 2023 holiday shopping season is poised for change, with gift cards playing a central role. Retailers that embrace digital and physical gift cards, focus on promoting flexibility, and take a more sustainable approach will be well-positioned to meet the needs of diverse consumer preferences and ensure a successful holiday season.

Despite concerns about the economy, consumers are planning to hit the stores, shifting their focus to value and deals. Retailers need to provide promotional incentives and flexible choices to capture consumers’ interest. Meanwhile, Gen Z is playing a significant role in driving holiday spending toward gift cards, favoring physical and digital options—and retailers should take note not to overlook this group.

Finally, retailers are encouraged to take an omnichannel approach, combining in-store displays, online options, and multi-brand gift card displays to maximize their efforts. By offering a diverse range of gift card options—and, again, emphasizing flexibility in payment methods—retailers can create goodwill, increase spending, and enhance brand loyalty during the holiday season and beyond.

To download BHN’s, Better & Better: 2023 Holiday Gift Card Shopper Research, ebook, click here.

To learn more about rewarding employees during the holiday season, click here to download, The Holidays & Rewards: It’s Good Business, an easy-to-read BHN infographic.

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Gen Z is embracing emerging technologies as a form of payment at checkout more than their older cohorts, particularly when it comes to mobile wallets.

That’s according to PSCU’s 2023 Eye on Payments research, which—for the sixth year in a row—set out to gauge just how much payment preferences have evolved. During a recent PaymentsJournal podcast, Tom Pierce, Chief Marketing Officer at PSCU, Norm Patrick, Vice President of Advisors Plus Consulting at PSCU, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, dove deeper into the report and glimpsed into the key factors influencing consumers when it comes to payment method choice.   

Younger consumers have taken to different forms of payment at the point of sale, leaning more on emerging technologies, including digital wallets, as their preferred payment methods.

“Nearly four in 10 respondents say they like to use a mobile wallet at the point of sale or when paying for something at a retail location,” Pierce said. “And particularly in the younger audience, at least 28% of older Millennials, younger Millennials, and Gen Zers say they like to use a mobile wallet a few times a week at the point of sale.”

Because Gen Z consumers hold a lot of buying power, it’s important that credit unions and financial institutions market to this specific group—especially when, historically, their target demographic skewed older.

“When you think about what COVID did, it changed so many things,” Riley said. “That was really a launch point for NFC (near-field communication) to start climbing as it did with mobile devices. It’s really starting to scale now, and that’s an interesting point.

“When you talk about the appeal younger age cohorts have, that’s really important, especially when it comes time to talk about credit unions. The median age in the U.S. is 36 to 37 years old, and certainly an older age group for credit unions. So it’s a perfect place to appeal to.”

Unlike their younger counterparts, older consumers are less inclined to use emerging payment methods, opting for traditional payment methods, the PSCU study found.

According to Patrick, 96% of Baby Boomers on the older end of the spectrum prefer more traditional payment methods—particularly debit, credit, and cash.

Overall, there are a lot more payment options available for all consumers. Roughly 80% of Gen Z respondents agreed that they were paying with a larger variety of payment methods in the past few years. By contrast, only 42% of the Boomer segment said that they were paying with a larger variety of payment methods.

Emerging payments are continuing to take root, with 40% of credit union members having expressed interest in using mobile payments at the point of sale in a retail location.

There was also a growing interest in buy now, pay later (BNPL) services. In fact, among respondents whose FI offers BNPL, 74% said they have used it. That’s an increase from 69% a year prior. What’s more, a third of respondents said that if their FI offered a BNPL program, they would be inclined to use it.

Riley said BNPL should not be reserved only for merchants and that credit unions can certainly leverage this platform as it continues to grow in demand and popularity.

“BNPL is becoming an important strategy for credit unions to have,” Riley said. “The model there is really a post-purchase model of buy now, pay later. It’s not the Klarna version where you tie in with the merchant. And to me, that works. It’s a very sound way of doing it.

“One of the big flaws of BNPL is if you could put steam on the mirror, you were able to get a buy now, pay later loan. The model that is within the credit union world lets you look at transactions and deal with it accordingly. If you want to select a payment term, the model there’s a winner,” he said.

PSCU also found that over the past year, there’s been more interest in cryptocurrency. Pierce noted that despite the uncertainty that continues to surround that industry, there was an increase in respondents who said they have invested in cryptocurrency or are holding it. Millennials were more likely to hold or invest in cryptocurrency.

“There’s still a slight increase of the respondents from the number of folks who said they either have invested in or hold,” Pierce noted. “It is up from 19% to 23%.”

For the fifth year in a row, debit was the preferred payment method, according to 43% of respondents. And for the first time, PSCU found, Baby Boomers prefer debit over credit. Roughly 42% of this group said they do, while 38% preferred credit. Patrick indicated that this was a key insight in this year’s study.

Gen X, which Patrick referred to as the “debit-leaning generation,” also preferred to pay via debit cards, with 47% of this group indicating so. Although Millennials also selected debit as their preferred payment method, the study revealed a drop from the previous year. In 2022, debit was the top payment method according to 46% of Millennials, but that figure dropped by 8 percentage points in 2023.

Credit unions can learn a lot from PSCU’s Eye on Payments study, and Patrick pegged one key focus as education—lots of it.

For consumers to feel ready and equipped to adopt the newest payment solutions and potentially enhance their financial lives, they need to be taught how to use those tools. Of those surveyed, 51% said they would use educational resources if they were offered.

For Pierce, innovation is another important pillar to build upon.

“It’s easy to want to back off in this challenging time to (keep) credit unions from investing in innovation and focusing on some of the other areas where you might need to put some of the dollars,” Pierce said. “But now is not the time to let the foot off the gas in terms of investing in your capabilities from a digital perspective.

“You can see where consumers have high expectations from their payment solutions. You need to be there at the front line. So keep innovating and investing in those areas that’ll meet their demands.”

Access the full Eye on Payments study here.

Payment processing has turned into an intricate web of challenges for many merchants and payment service providers. Various factors—payment types, channels, and geographical influences—have created a complex ecosystem where managing transactions and ensuring financial accuracy can feel overwhelming.  

Because payment processing comprises various payment types and sales channels, merchants juggle multiple acquirers, processors, and gateways, resulting in a labyrinth of payment data that requires meticulous reconciliation.  

During a recent PaymentsJournal podcast, Dan Coates, Principal Solution Evangelist at ACI Worldwide, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, explored the complex payments ecosystem and how payment orchestration allows merchants and PSPs to tackle obstacles head-on. 

Over the years, the payments industry has seen an influx of alternative payment methods, including cryptocurrency, BNPL, and digital wallets. On one hand, different payment methods give consumers the flexibility and convenience they crave. On the other, merchants need to add more payment channels into the mix, and that makes the reconciliation process a lot trickier.  

“When you look at most merchants, especially most merchants of a certain size—even those who have one acquirer—they really tend to struggle,” Coates said. “They may have one acquirer, but they’ll have multiple channels. They have a web channel, an app channel, and an in-store channel. 

“When you look at the statistics, more than two in five finance leaders don’t trust the accuracy of their financial data, and that’s absolutely wild. More than a third of the month is wasted just identifying and rectifying mistakes. Nearly two-thirds of merchants’ back-office teams’ time (is) spent on data consolidation, and then it finally takes over a month or nearly a month to close the end-of-year books. There’s a lot of waste there, and there’s a lot of lost revenue.” 

As Keyes pointed out, merchants aren’t payment experts. They don’t have a full command of everything available to them and don’t often understand everything they’re looking at. Many merchants are seeing increased transaction volumes on various channels, and every one of those systems has a complex file format, and there are multiple currencies they’re dealing with. On top of that, they have to tackle disputes, refunds, and chargebacks, all of which lead to a lot of frustrations and frenzy.  

“They need support in other ways in order to be able to take advantage of the tools available to them,” Keyes said.  

Global operations, infrastructure management, and increased costs are just some of the challenges merchants face today.  

Merchants deal with multiple payment channels around the world, which means they also deal with multiple payment providers, gateways, and acquirers in those regions. And as they expand and grow their business, they end up in an infrastructure crunch. It becomes time-consuming for them to expand because of this scalability problem.  

“I have more channels so I have to reconcile more things,” Coates said. “It becomes a scalability limiter because I can’t expand to more regions until I get more people to reconcile things. In the end, more money, more problems. It’s that simple. When you look at it, we have revenue leakage because we’re getting in more money from more sources.” 

According to Keyes, it’s never been easier to scale a business because merchants are suddenly able to sell worldwide without too much effort—at least when compared with years prior. And a lot goes into that, particularly on the back end, to do it effectively.  

All the layers merchants need to get through add up. For example, there’s the authorization layer, then on top of that are a processor’s layer, an acquirer’s layer, a network layer, an issuer layer—and so on.  

“There’s just 100 considerations for each individual payment if you’re expanding to other geographies or other areas,” Keyes said.  

Payment reconciliation is a top priority for merchants, which helps them simplify and optimize their operations. Payments orchestration can certainly help, but first, merchants must fully understand revenue leakage and how it’s affecting their business, Coates said.  

“It can mean several things, but I’ll give a few examples,” he said. “First, it’s chargebacks on refunded items. You have a customer, they have a dispute, they call you up, and you refund them for the item. But then—and maybe they were working on this simultaneously—they’ve also charged it back. So all of a sudden, you’ve given them the money back twice. 

“There’s also issues potentially where you have an approval somewhere along the path, but then an upstream entity doesn’t approve it. Maybe the processor approved it, but the acquirer didn’t. And finally, you could have a situation where the transaction could be approved, but you didn’t get funded for it. All of these things tend to be problems.” 

As Coates pointed out, revenue leakage can be a big challenge for merchants, and that’s why payments reconciliation is so important. Merchants need to be able to identify revenue leakage so they can tackle it.  

“Merchants don’t have the wherewithal to do this on their own,” Keyes said. “There’s a need for additional solutions and support in handling reconciliation because there’s a lot of considerations the merchants don’t know about.”

Payments orchestration is still an emerging solution, one many merchants aren’t quite familiar with. But there’s a lot of excitement around orchestration because it provides a holistic view for merchants to see different types of payment methods come in and how they’re routed—and they’re able to capture the necessary data and analytics that they can pull from to sharpen their operations.  

“Overall, merchants are looking to reduce mistakes, identify errors quickly, gain visibility of cross-channel and cross-region payments data, and free up resources,” Coates said. “At ACI, we have a product called Revenue Optimizer, which accomplishes all these things. It automates this time-consuming process and helps you with mistake-prone tasks. It also allows you to consolidate all of this data in one place and gives you transaction lifecycle visibility. 

“Merchants need to have a platform in place that will enable them to first identify these KPIs (key performance indicators) and then make necessary changes, continue to reconcile it, and make sure they’re meeting those KPIs. They need to make sure they’re making the most of all of these opportunities, and orchestration can really help with that.”   

Learn more about ACI Payments Orchestration. 

The holiday season can be a joyous and profitable time of year for merchants. But, if merchants do not take a proactive approach to protecting their enterprise against fraud, they could find themselves struggling to keep up with ongoing challenges. Although fraud is repeatedly characterized as simply a cost of doing business, the attitude and approach toward fraud should not be carelessly indifferent. Taking this approach will only lead to financial complications and stress.

In a recent PaymentsJournal podcast, Amanda Mickleburgh, Director of Merchant Fraud Product and MRC Board Member at ACI Worldwide, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, dive into what the fraud landscape looks like, what strategies merchants can implement to mitigate fraud, and how ACI can help merchants tackle fraud head-on.

As merchants gear up for another holiday season, more challenges are on the horizon that need to be addressed to ensure a more profitable and successful period. With a potential surge of transaction volumes comes the inevitable increased risk of fraud. Surprisingly, much of the fraud can be traced back to merchants’ own customers, many of whom initiate chargebacks after buying and receiving goods, as one example.

“We’re seeing an increased prevalence of friendly fraud,” Mickleburgh said. “If you looked at the top 10 fraud typologies, you’ve got the perfect storm of synthetic identity fraud being used to create accounts.

“But then equally, you’ve got genuine customers who are committing friendly fraud, possibly as a result of some of the economic challenges that we’re seeing in the industry.”

Adding complexity to the mix are the many alternative payment methods. Consumer payment preferences have increased, and as a result, it’s crucial that merchants enable a successful checkout. The fact that the payment journey is no longer linear adds to the challenge.

Mickleburgh emphasizes the need for merchants to get up to speed on new consumer buying behaviors. Although the pandemic did have some influence on consumers’ buying preferences, consumers still want a faster checkout experience, with little to no friction. It’s all the more reason to have a way of authenticating the digital identity of customers, to mitigate the potential for friendly and synthetic fraud.

Without digital identification authentication tools, Mickleburgh says, businesses will open themselves up to more fraud or will incur more costs by declining authentic customers.

“The holidays always exacerbate existing issues,” Keyes said. “I think merchants and merchant service providers often want to put their head down and get through the holidays, make a lot of sales, and figure out issues later.

“But you can’t do that with friendly fraud, going into the holidays, because they’re only going to pick up. There’s going to be more and more of them, and you can’t just cover your eyes. You need to have a plan for all these different issues, especially friendly fraud.”

Although friendly fraud can come in multiple forms, Mickleburgh mentioned that as many as 30 different types of friendly fraud are committed by genuine customers. She then zeroed in on the one that is most prevalent.  The most common friendly fraud she sees is when genuine customers are making purchases and deciding that they don’t wish to pay for them.

They might claim that the item never arrived and ask for another item. Or they received the item, and they were not pleased with it, requesting a chargeback and claiming they didn’t initiate the purchase, even though the retailer holds evidence that they were the actual customer.

She also mentioned refund and return abuse. This occurs when customers do not return the actual item but replace it with another item.  When a return is initiated, the merchant issues the refund back to the customer’s card. However, once the merchant receives the return, it discovers that either the correct item was not returned or it was damaged upon return.

To combat friendly fraud chargebacks, Visa has stepped in, implementing the CE (Compelling Evidence) 3.0 Initiative in an effort to lower chargeback cases for merchants. These new guidelines provide a list of compelling evidence that merchants can use to challenge an invalid customer dispute. Some evidence that can be submitted includes IP addresses and device IDs.

“Friendly fraud has increased significantly,” Mickleburgh said. “According to CapitalOne’s latest research, it was around $85 billion U.S. at the end of 2022, and we are expecting that over 10% of returns within most merchants globally are fraudulent ones. This isn’t a problem that’s going to go away.

“The more mitigating steps and the more consideration that merchants place on understanding their returns and refund data, the better. Quite often, there is a disconnect between the front-end sale and the refund and return that occurs in the background quite often because they’re different teams.”

Said Keyes: “There are many kinds of friendly fraud, which means that there’s not just one problem you’re facing as a merchant and also not just one solution to it. It’s a lot of different areas to consider

“There’s not just one Band-Aid you put on this. It’s a complicated issue with complicated solutions as well.”

There is no one magic bullet that can prevent all incidences of fraud. However, there are strategies that businesses can employ to ensure that, when they do confront fraud, they have a fighting chance to mitigate the damage.

Mickleburgh says that it’s all about the data.

“Taking a look beyond the checkout phase is key,” she said. “There’s a ton of data that happens before it gets to checkout. Behavioral analytics is a really important part of the process. Understanding the navigational behavior of that consumer. But again, if it’s a genuine consumer, that’s going to check out fine, invariably.

“So utilizing that returns and refund knowledge that’s been gleaned from previous transactions, making sure that there’s nothing obvious that could be changed in that internal process at the front end.

“There’s also the benefit of things like network intelligence. These are pools of information that is held from a number of different customers and merchants. It’s all anonymously pulled but contains data that relates to known previous frauds that can be a really beneficial snapshot of data that can add to that front-end checkout. Because if it’s happened before somewhere else, there’s a high chance that it could affect the merchant today.”

The objective, Keyes said, is to be precise in targeting instances of fraud.

“The tools help a lot in making sure you are not just pointing at your customers randomly and offending people who are not committing any kind of fraud,” he said. “There’s a different weight to it sometimes than other types of fraud because you are policing your own customers in a way that you are not always, which doesn’t mean that you shouldn’t do it. It just means it requires some additional thought and care as you go through the process.”

Much of the industry continues to claim that there is only one solution, a silver bullet of sorts, that can forever put fraud to rest. But Mickleburgh says there is no such thing. What’s available, she says, is a host of tools and technologies that can be used together to create a custom fraud orchestration that can benefit the merchant, based on its geographic location, its product sets, and the payment method used.

With this in place, the merchant would be freed up, enabling the tools and technologies to do all the heavy lifting, and thus fully optimizing the merchant’s revenue channels.

“What you really need to be doing is curating, understanding the data, understanding the problem that you’re trying to fix, and then using the tools that you have within that orchestration layer to effectively mitigate fraud, but most importantly optimize revenue, manage out cost,” Mickleburgh said. “And that is not a one-size-fits-all offering.

“It’s important to remember that not only is there not a silver bullet, the solutions that are available are not going to prevent friendly fraud from occurring in the first place in all cases.

“You can obviously limit it, and you should try to, but you not only need to limit it, you need to prepare to combat it after it occurs. It’s part of doing business as a merchant that there’s going to be all kinds of fraud.”

One thing ACI does not do is introduce clients to the latest and greatest shiny new fraud tools to haphazardly throw at the problem and hope for the best. It’s all about clearly identifying the issue, followed by an appropriate plan of action.

“It really is for us about making sure that when we form a relationship with a new merchant that we understand the problem we’re trying to fix first and then collaboratively have alignment over how we want that strategy to evolve and what the focus areas of that strategy needs to be,” Mickleburgh said.

ACI’s digital identity services can empower your payments strategies with an AI-augment fraud engine that decisions transactions in real-time. Utilizing over 10,000 data points including device ID, behavioral analytics, and geographic location, organizations can stop fraudsters and bad actors looking to partake in friendly fraud, with integrated network intelligence that shares intel across payment methods, channels, and borders to keep your revenue intact.

Speed and convenience are the name of the game in the consumer checkout experience. However, a checkout experience can quickly turn sour when a customer experiences payment friction.

Payment friction is any type of obstacle that prevents a customer from making a final purchase. This can involve a complicated checkout form, few payment options or having to enter numerous personal details. This is bad news for merchants. Payment friction is the usual suspect in cart abandonment, lower conversion rates, and ultimately, the loss of revenue.

In a recent PaymentsJournal podcast, Suman Chaudhuri, Vice President of Revenue at CSG Forte; Javan Watson, Executive Director of Strategic Business at CSG Forte; and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, delved into what contributes to friction in the payer’s experience, how to minimize that friction and what strategies can be implemented without compromising the bottom line of a business.

When we typically think of friction, we associate this event with the online checkout stage. But according to Chaudhuri, payment friction can occur at any point before, during, and after a payment is made. He also recommends that businesses begin seeing the payment process as a journey and not a point-in-time event.

“Customers today want choices when it comes to making a payment. They want choice of payment methods, choice of channel and choice of timing,” Chaudhuri said. “So, when you start to offer fewer choices in the areas of payment methods, channels and timing, it results in inconvenience, which thereby increases the chance of errors or missed payments and thereby decreasing customer satisfaction overall.”

Another point brought up by Chaudhuri is customers’ growing concern about fraud. After the onset of the pandemic, it was found that 60% of customer service agents worked from home. This can pose significant security concerns for consumers, who would mostly be disinclined to offer their credit card information over the phone, further contributing to payment friction.

Finally, siloed back-office systems are unable to provide instant data as to whether payments have gone through for customers or when businesses hope to be paid. “I think one of the things that is causing friction is the checkout process being clunky,” Watson said. “Requiring the customer to input more data than is absolutely necessary.”

Understandably, merchants require new customers to create accounts to build a database and establish a relationship, which allows merchants to send targeted marketing messages and offer discounts and promotions. However, Watson said, he often just wants to make his purchase. Not offering a guest checkout option can lead to cart abandonment, as many consumers simply do not want to enter all of their personal information.

Watson also points out that offering few payment options can lead to friction, as can redirecting customers off the merchant’s main website and on to a third-party site for payment. This creates distrust among consumers, contributing to payment friction and cart abandonment.

Keyes added, “customers want to be able to pay the way they want to pay. It’s frustrating when they can’t, and they may abandon a transaction altogether or at least be very frustrated.”

Checkout’s have never been more fragmented, with credit cards, debit cards, ACH, BNPL, digital wallets and a lot of different digital wallets and more and more options showing up every day. Businesses don’t need to offer each one, but they need to offer enough to give customers the right variety of options. Otherwise, it will really bother customers in a way that is really challenging to a business.”

To reduce payment friction, businesses need to meet customers where they are. If customers do not want to create an account during checkout, guest checkout should be offered. When invoices are issued, businesses must ensure that they are clearly identifiable with information on what and how much a customer is being billed for. Furthermore, businesses should consider optimizing their website for mobile use to appeal to consumers who are increasingly on the go. Not implementing these strategies will cause frustration, making consumers less inclined to make their payments.

Offering a number of payment methods also helps minimize friction. Beyond the mainstay of credit cards, businesses should consider offering ACH payments and accepting payments from digital wallets. Secure, recurring payments that are tokenized are another effective strategy, as consumers would not need to enter their personal information every month to make their payments. Setting up tokenized recurring payments also ensures cash flow for businesses.

Chaudhuri emphasized the importance of not only working to remove payment friction from the customer experience but also digitizing their experience. He recommends businesses collect a  working phone number and address from customers to reach out to them before a payment is due. He also mentioned the importance of having fallbacks. To maximize on-time payments, he encourages businesses to reach out to customers via email or text if a bill gets lost in the mail or the customer doesn’t open it.

“One thing that merchants are not always keeping in mind is that it’s very difficult to eliminate all friction from an initial purchase from a customer,” Keyes said. “You have to input some information somewhere because you’ve never shopped there before.

“But what merchants often don’t think about is how much consumers who are returning are expecting none of that friction again when they come back after the first time. They want to be remembered fully.  They can accept logging in, but the payment information, shipping information, what they’ve ordered before and any other information needs to be there, very easy to access, as few clicks as possible, or you’re not going to have a loyal customer.

Most businesses are aware that their customers experience payment friction and do want to address the issue. The biggest roadblock to resolving this problem is a lack of capital and resources.

Watson recommends businesses consider partnering with a payments provider, like CSG Forte, to assist them. CSG Forte has a ready-built, low-code platform that can help meet the payment needs of businesses of all sizes.

Chaudhuri also mentioned the importance of using analytics to determine which customers to reach out to, and then sending them payment reminders through the channels they prefer.

According to Chaudhuri, artificial intelligence (AI) and analytics will be key to offering businesses many benefits, including boosting on-time payments, delivering insights that help businesses determine what to cross-sell and upsell to their customers and creating personalized customer experiences that boost customer satisfaction and build brand loyalty.

Keyes mentioned it’s not just about providing as many payment options as possible but also including the right payment methods. It’s important not to overwhelm customers with a plethora of digital wallet options. AI analytics can shed some light on which payment methods consumers use most often and help businesses approach each consumer with the most appropriate payment options based on what they typically use.

Businesses should continue prioritizing the optimization of the customer payment journey. Doing so leads to increased customer satisfaction, on-time payments, and a predictable cash flow.

As businesses lean on digital technology to drive their success, the question isn’t whether they need to embrace digital transformation but rather how they can do so effectively.

U.S. Bank recently conducted a survey of 1,420 financial leaders and found that many are focusing on cost reductions, and the most common way they plan to deliver on those savings is through investment in digital technology. U.S. Bank found that more businesses are leaning on digital technology to deliver transformative results, but many (45%) are still in the early stages of their digital transformation.

In a recent PaymentsJournal podcast, Vipul Kaushal, SVP of Product Transformation, Global Treasury Management at U.S. Bank, and Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research, explore some key findings from the study. They also delve into what businesses should consider before they pursue digital transformation, why empowering people to become part of the solution is key, and the crucial role automation plays in all of this.

Fully leaning into digital transformation isn’t as straightforward as many businesses think. And before organizations take the leap, they need to work through some considerations.

“We need to make sure we involve the people who would be impacted by transformation,” Kaushal said. “And it’s also important to really understand the processes that would be looked at as part of the transformation itself.

“Then there’s the technology, where you look at the tools that will be the agents for these kinds of digital transformation.”

Particularly in the beginning, Miller said, organizations really focus on the people and processes—especially when technology can seem like the shiny new object everyone wants to get their hands on.

“I’ve heard it said that you really need to not fall in love with the technology solutions that you’re thinking about and instead think about the problems that you’re trying to solve,” Miller said. “That one in my experience has proven to be particularly challenging as digital transformation often ends up in the hands of technologists who must select the solution, design the solution, implement the solution, maintain the solution, and as a result they become very tied to that solution.”

Ultimately, consumers are the ones who are most affected by digital transformation, and therefore it is critical for them to know how they would benefit from the changes companies are considering.

“This typically leads to a more successful level of digital transformation as opposed to just taking a problem and using a tool, digitizing it, and then just flapping it on to people to say: ‘Now use this,’” Kaushal said.

Even when consumers’ needs are considered before new technologies are implemented, it’s important not to forget the employees who will have to relearn the new technology and the systems that accompany it.

“It’s very important to have that trust with both sides, be it employees or be it customers—to make them understand why we are making the change and what would those impacts be,” Kaushal said.

As emerging technologies surface, businesses must fight the temptation to automate all their processes. Kaushal advises organizations to first pause and think about how processes can be simplified, especially if they have been in place for decades.

“I think a lot of times we spend too much time, too much money on automating a process

that might be an edge case,” Kaushal said. “You know of all the customer transactions we might do, let’s say some of the processes are accounting for 2 to 3% of that volume, and it’s a super complex process.

“So is there value in investing a lot of dollars in automating such a process while the value created out of it may not be a lot?”

Kaushal questions whether automation is the answer if it doesn’t translate into a significant value for the considerable amount of money necessary to implement it.

Miller said the desire to automate might remove a critical touchpoint that might present as inefficient on the surface. This touchpoint can be between employees or between customers and employees.

“Removing that touchpoint through automation results in an unforeseen loss,” Miller said. “Whether that’s an unforeseen opportunity for new business or an opportunity for risk reduction or a double check in the process that simply wasn’t even understood.

“That’s something to keep an eye on because there is value that can be hidden and lost if you take only an efficiency-driven mindset.”

Businesses must carefully examine the impact digital transformation could have on their employees, and not solely focus on growth.

Digital transformation can help organizations scale their opportunities, including those related to talent. By carefully outlining the end goal, Kaushal said, companies can ensure that people will be more willing to go along with the journey toward digital transformation.

“As leaders think through that change, they need to understand the impact it would have on the workforce, what kind of skills they would need in the future once the transformation is in place, which might be a very different mix than they started from,” Kaushal said.

“That’s where it leads to opportunities for existing people to upskill, or those people could move to someplace else. Or, after the digital transformation changes, we hire different types of people.”  

Ultimately, digital transformation is the key to unlocking the potential that every business has. It is the means by which businesses can remain competitive, forward-looking, and agile in addressing the evolving needs of their customers.

“Digital transformation is the driver behind these two pillars [delightful customer experiences and efficiency],” Kaushal said. “One is excellent customer experience, and the second is providing time and efficiency to both our customers as well as our internal employees.”

Although the entire process and journey toward digital transformation can be daunting for all parties involved, it will be beneficial for forward-thinking businesses to adopt digital transformation strategies to engage and delight not only the customers they have today but also those they hope to attract in the future.