PaymentsJournal

Business email compromise (BEC) scams have become a top concern for organizations engaged in B2B transactions, as they target financial assets and sensitive information. According to the 2023 AFP Payments Fraud and Control report, 71% of organizations were targets of such scams in 2022.

In a recent PaymentsJournal podcast, Elly Aiala, Chief Compliance Officer at Boost Payment Solutions, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, delved into the intricate web of BEC scams, their evolving techniques, and the urgent need for proactive measures to safeguard the integrity of B2B operations.

In business email compromising fraud, cybercriminals send highly targeted and convincing emails to individuals within an organization as part of phishing attacks, often posing as trusted colleagues or partners. The emails may reference recent company events, projects, or even internal jargon, making them appear genuine.

B2B payments firms are prime targets for BEC scams because of their involvement in financial transactions. The improved sophistication of AI-generated content makes it easier for fraudsters to craft convincing emails with payment requests, invoices, or fund transfer instructions that appear legitimate. B2B payments firms may unwittingly process these fraudulent transactions, leading to significant financial losses.

“From my research, I expect an ongoing increase in B2B payments fraud over the next few years,” Bodine said. “I’ve noticed significant spikes in areas like occupational fraud, particularly related to business email compromise. Everybody really needs to be on high alert about those AI tools that are out there right now.”

Dealing with the aftermath of a successful BEC scam can also cause significant operational disruption for B2B payments firms. Funds may need to be recovered, investigations conducted, and security protocols enhanced. This can divert resources and time away from core business activities.

According to the AFP report, larger organizations were more affected by BEC fraud, with 82% of them reporting incidents, compared with 62% of smaller organizations.

“My theory is that bad actors have pivoted to focus their efforts on larger organizations with more funds to potentially exploit as the risk-to-return ratio is better for them,” Aiala said. “In addition, the larger the organization, the greater the potential to find process deficiencies to capitalize on.”

Another risk factor is that large companies might harbor disconnects with the company mission, leading to complacency and a neglect of detail when it comes to security protocols  

“If the operators of these business-as-usual activities become desensitized to their daily processes and complacent in what they’re doing, a potential bad actor may have more success infiltrating that desensitization than at a smaller company where those employees may feel a greater impact or direct impact of their daily activities,” Aiala said.

“We cannot completely categorize or generalize here. Some large firms have the most sophisticated internally transparent processes, particularly when compared to say a smaller mom-and-pop shop.”

In smaller companies, employees often have a broader understanding of their tasks and responsibilities, as they are involved in various aspects of the business process from start to finish. This end-to-end visibility allows them to recognize when something doesn’t seem right, even in seemingly routine situations like receiving an email from a vendor that requests changes to account information.

On the other hand, in larger organizations, employees tend to have more specialized roles and may be focused on handling large volumes of specific tasks. This leads to a narrower perspective, where employees might not have the same holistic view of the entire process. Consequently, they may be less likely to notice anomalies or potential security threats, such as a seemingly harmless email that could be a phishing attempt.

“One thing we all need to keep in mind is that strata layers and complexity work to the benefit of bad actors,” Bodine said. “Very often, at the largest organizations in the world, the pot of gold is much bigger. So naturally, that’s where the bad actors want to go.”

One common form of BEC fraud is email spoofing, with 73% of organizations having experienced it, according to the AFP report. Aiala offered a hypothetical scenario.

“Your point of contact at ABC company may be Greg at ABCcompany.com,” Aiala said. “A bad actor could send you a request that’s been copied from the ABC Company standard communication, but the email comes from Greg at ABCompany.com, missing a ‘C.’ The difference is slight and requires great attention to detail from your employees.

“Organizations can buy lookalike email addresses to prevent those bad actors from doing it before them. It’s not a perfect control, but it’s one that can boost your security and anti-fraud efforts.”

Domain spoofing is another popular tactic, which leads to web traffic diversion and malware downloads. Organizations can combat this in a similar way, by buying lookalike domains.

Another method involves compromising an actual email account within a company and using it to send fake payment instructions to potential victims. What makes this scam particularly tricky is that the emails appear genuine because they come from a legitimate corporate email account, making it challenging for recipients to identify the fraud.

Bad actors often swoop in when employees have their guards down. This could happen when an employee is away on vacation or even too busy to notice something off, such as preparing to launch a new product. Times of global distress, such as a natural disaster, are also opportune for fraudsters.

“A region experiencing extreme weather may opt for a rescue fund via the Red Cross,” Aiala said. “Bad actors could identify this as an opportunity, create a spoofed website that mimics Red Cross’s donation page, and pocket the money that comes in.”

Aside from buying lookalike email addresses and domain names, companies can take other core steps to prevent BEC fraud. Among them:

BEC scams have become a menace to B2B payments operations, especially with rise of generative AI. Larger organizations in particular are increasingly susceptible to BEC fraud due their complex structures and siloed departments.  

To counter this growing threat, companies should focus on measures like two-factor authentication, employee training, cautious online behavior, and partnering with B2B platforms that prioritize anti-fraud security and streamlined processing.

Preventing fraud is crucial because it safeguards finances, operations, reputation, legal compliance, and employee morale. It’s a worthwhile investment in long-term success. And as shown in this article, it is doable, with the right steps.

U.S. banks are finding themselves at a crossroads, balancing the advantages of relying on dominant service providers with the pressing need to maintain operational autonomy.

From core banking systems to payment processing, service providers offer banks the ability to scale their operations, increase efficiency, and reduce costs. But too much reliance on third-party service providers has pitfalls.

During a recent PaymentsJournal podcast, Oscar Munoz, Vice President of Sales, Ren Americas at Euronet, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, discussed the double-edged nature of relying on large service providers and the imperative for banks to have the flexibility to innovate.

Banks face a potential erosion of operational autonomy when they delegate to external providers. They also risk losing control over data security, customer experience, and regulatory compliance.

“Many financial institutions are taking back control of their issuing and acquiring offering from the full outsourced model that we have seen become so popular in the U.S.,” Munoz said. “A lot of the sponsor banks in the U.S. are looking to own their own tech stacks instead of continuing to refer that forward to another company, which many times puts them at risk.”

Munoz emphasized the need for banks to control the final mile of customer interaction, highlighting its increasing importance. When banks take back control, they regain influence over how they communicate with their customers, something that’s especially critical for mid-tier and smaller financial institutions that place a high value on their customer relationships.

In the search for operational efficiency, banks must strike a balance between in-house capabilities and external services, all while staying compliant with evolving regulations. However, excessive reliance on third-party service providers—as mentioned before—can lead to generic, one-size-fits-all solutions that may not align with the value propositions every bank offers.

Wester pointed out that adaptation is not just a choice but a necessity. Banks must reevaluate their legacy systems and technologies in this fast-evolving landscape, even if they have been reliable and effective.

“For the longest time, that was acceptable,” Wester said. “But fast-forward to now, and suddenly fintechs are coming in, offering things that maybe weren’t seen as important. Or there were things that a financial institution might look at and say we don’t even really need to worry about that, nobody’s asking for—I didn’t know they could get it. Now that I know they can get it, they’re going to start asking for it.”

However, Munoz cautioned that modernization isn’t as simple as flipping a switch and moving from traditional systems to the cloud overnight. Banks must carefully consider the pace of their transformation and ensure they adapt to new technologies while meeting regulatory requirements.

The rise of real-time payments has brought an increase in the speed at which fraud occurs. Traditional fraud prevention methods employed for credit cards—which allow chargebacks and reversals—are not applicable to instant payments. Munoz emphasized how important it is to recognize the differences and deploy fraud prevention strategies accordingly.

“If you’re managing different worlds, they’re going to need different tools because the way you can fix the problem after the fact is very different depending on what kind of transactions you’re working with requires unique expertise and tools and modern technology,” Munoz said.

“Compliance and fraud require that unique expertise, tools, and modern technology to manage both. We’re handling those concerns every day because we’re having these discussions with clients every day, and it’s one of the first things they bring up.”

Wester added that he’s had similar discussions with financial institutions.

“Compliance is something they’re absolutely paying attention to because, as we all know, compliance is baked into the DNA of financial institutions,” Wester said. “They have to be paying attention to all sorts of things across different lines of businesses and across different types of payments.

“And the other thing is, nobody believes that compliance is going to get easier anytime soon.”

Euronet’s Ren Payments platform aims to help banks modernize their legacy systems and maintain the autonomy to adapt at their own pace.

Ren Payments offers banks connectivity to various real-time payment networks and card processing platforms—and bridges the gap between multiple payment channels, including wires, ACH, instant payments, card issuing and acquiring—all under one unified platform.

As financial institutions grapple with compliance and fraud prevention challenges, solutions like Ren Payments offer a lifeline. Compliance will only become more complex with regulatory changes, and banks need to be prepared to handle these changes swiftly.

“Our solution leverages over 12 years of experience in instant payments to deliver fraud prevention solutions tailored to the specific characteristics of each payment type,” Munoz said.

Navigating operational efficiency for U.S. banks is a balancing act. While third-party service providers present enticing solutions to streamline operations and enhance capabilities, banks retain their autonomy, particularly when it comes to the pivotal area of customer experience.

This autonomy becomes even more crucial when viewed through the lens of technology. With Fintechs reshaping the financial landscape, banks, especially mid-tier and smaller institutions, must be agile and responsive. It’s not just about the present efficiencies but ensuring that these institutions are resilient and adaptable for the challenges and opportunities of tomorrow.

But operational efficiency goes beyond the mere act of balancing. It’s a strategic move to future-proof the bank. By modernizing and adapting, banks equip themselves to cater to evolving customer demands, traverse the intricate maze of regulations, and safeguard against real-time fraud threats. In this ever-changing financial ecosystem, the success mantra for banks lies in harmonizing in-house strengths with external services. This synergy will determine which institutions merely survive and which thrive.

Fintechs are celebrated for offering sleek payments solutions, yet they often cling to outdated manual processes for back-office tasks. The primary offender: Excel spreadsheets.

Because of the manual nature of data entry, relying on spreadsheets can have serious negative consequences, including costly mistakes. Manual processes also don’t scale up well to take advantage of the new wealth of data available.

Automation is the key to addressing these issues and ushering in an era of efficient reconciliations and reporting within the payments industry. Automated systems can process vast amounts of data and generate reports and dashboards in real time, thus reducing operational risk. By shifting the focus away from manual data manipulation, teams can dedicate more time to understanding and analyzing data and inspiring more informed business decisions.

In a recent PaymentsJournal podcast, Marc McCarthy, Chief Commercial Officer at Kani Payments, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the benefits of automating back-office processes and how automation not only ensures data accuracy and compliance but also unlocks valuable insights and cost-saving opportunities.

Payments reconciliation is a complex task in the payments industry, with the need to match countless transactions across various platforms and networks. The process is essential to ensuring the accuracy of financial records, complying with regulatory requirements, and detecting discrepancies or fraud.

Traditionally, companies have relied heavily on spreadsheets and internal systems to handle these tasks. However, the sheer volume and diversity of data—often coming from multiple sources—make manual reconciliation error-prone.

“Approximately 25% of spreadsheets globally contain errors,” McCarthy said. “From a management perspective, the accuracy of the data I receive as a C-suite member is crucial for making decisions that shape the company’s direction. My daily choices heavily rely on the reports I receive, so if I lack confidence in their accuracy, it distorts my understanding of the company’s path forward.”

Spreadsheets are the original backbone for many companies, and as a result, some organizations are reluctant to move away from them.

“It kind of works, so why fix it? We come across that sort of that sort of approach a lot,” McCarthy said. “My rebuttal to that would be: ‘Why do you think a process that you set up 30 years ago is fit for purpose today?’”

There’s also a perennial problem with legacy technologies: When they break, there’s no one left who knows how to fix them. “Trying to find the programmer who put this Excel sheet together is the same kind of challenge as finding a COBOL programmer to fix my legacy code,” Riley said. “It’s like speaking Latin or Greek. It’s archaic language, undocumented, and not a way to run a business, that’s for sure.

“A major U.S. network is being fined by the CFPB for inaccuracies in interchange processing over a seven-year period. When things go wrong, do you want to present outdated, untraceable Excel code to the lead regulator of the jurisdiction? Using an industrial-strength, proven system is a much better way to face off with a regulator in any region.”

Today, organizations are no longer equipped to fully lean on manual reconciliations, especially when they are handling a plethora of data.

“Digital payments are expected to reach nearly $15 trillion by 2027,” McCarthy said. “With the volume of payments that we’re going to see over the next decade or so, it’s just impossible to assume that a spreadsheet is the right way to go.”

Many third-party companies, including Kani, help organizations automate their reconciliation and reporting. Although current systems are primarily rules-based, artificial intelligence and machine learning capabilities will soon become standard, drastically improving accuracy and efficiency in reconciliation.

For midsized financial institutions, the conversion process can take as little as a few weeks.

Reconciliation may sound like a one-time process, but according to McCarthy, it’s more than that. It takes data, validates it, and places it into a common data model, making information from various sources consistent.

“This allows us to view data from different sources like Visa, Mastercard, FIS, and others in the same way, making it easy to create reports and perform analytics,” McCarthy said.

Kani offers 35 different reports for different teams, including accounting, management, and compliance—all tailored to the teams’ needs. “The real value of Kani lies in its user-friendly interface, making it easy for users to find whatever information they need. We can send reports automatically by email, all within one platform,” McCarthy said. “If you were to replicate all these functionalities yourself, it would take a long time.”

For many business owners, the return on investment for automating back-office processes may not be clear. But that’s because the resources spent on maintaining and repurposing are greater than most think.

“In the UK, our surveys found that around 700,000 hours per week are spent on reconciliations. A medium-sized business typically spends about 3.6 hours on this task, which I think is very conservative,” McCarthy said.

“I recently spoke to a large bank about their QMR reports, and they initially mentioned that only two or three people were involved. However, when we had our first meeting to discuss their requirements, a staggering 20 people showed up. This illustrates the hidden cost of these processes and the fact that there are far more people involved than we initially realize.”

Many companies feel that they should automate internal processes in-house. But according to McCarthy, this is a tedious and needlessly expensive process.

“If you attempt to build an in-house solution, it would take at least six months and require a minimum of three skilled engineers,” McCarthy said. “They would be developing something already available off the shelf from Kani that costs less than developing it in-house.”

The payments industry is undergoing a transformative shift toward automation and efficiency in reconciliation and reporting. Manual methods are increasingly obsolete, unable to keep up with the rapid growth in digital payments.

Working with a fintech reporting and reconciliation firm like Kani Payments can help businesses not only streamline their operations but also harness the power of data for better decision-making and forecasting.

Come and chat with the Kani team at Money20/20 in Vegas—they’ll be at booth 13520. If you’d like a demo of the platform, you can book one here:

With the launch of FedNow, instant payments have become ubiquitous, and their adoption will only grow. But there are complexities to consider, particularly for banks and payment service providers (PSPs) that are figuring out how to best integrate this new service without incurring significant operational costs.

In a recent PaymentsJournal podcast, Nicholas Botha, Global Payments Sales Manager at AutoRek, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discuss how banks and PSPs can overcome these obstacles and how automation can help.

Instant payments, by their nature, result in a significantly higher volume of payments at a faster speed. As such, it is essential that companies are equipped with some form of automation to ensure operational efficiencies. Many are still working with legacy systems that, unfortunately, are not capable of handling instant payments.

Implementing operational efficiencies downstream will not only drive down operational costs but also ensure wider profit margins. These lower costs can eventually be passed down to customers or can bolster the financial health of the companies.

“With this new payment rail, you can expect more competition to enter the market,” Botha said. “Typically, when we see more competition, you should expect there to be pressure on those costs, which essentially means that there’s more requirement for creating those operational efficiencies to try and expand those margins as wide as possible.”

Reducing the manual components of the operation is also important. Tavilla noted that automation helps create greater efficiencies and can reduce the errors that result from paperwork or other non-digital methods.

“This is a great opportunity with FedNow for businesses and operations to improve automation,” Tavilla said. “It’s the first time in 40 years we have this new rail and this new technology, especially in the payments industry.”

Automation can be considered the golden ticket to ensuring that FedNow payments are leveraged to their highest potential. The use of automation ensures that payments are processed instantly, securely, and cost-efficiently—something that’s difficult to get from traditional payment flows designed for more traditional payment rails.

“Companies onboarding FedNow payment rails will need their operational flows to match the nature of what the payments are to ensure a couple of things,” Botha said. “One of the main things is to ensure customer adoption. You need to create that confidence in what has been adopted more widely and help create that fast adoption across the market by creating trust in what the process is.

“The second thing is to match your customers’ expectations. If customers are making payments in real time, and there are any issues or discrepancies, they want to know the results of those in the same nature as the payments taking place.”

With the launch of FedNow, treasury teams now have the task of ensuring that liquidity is accessible to settle payments 24/7. Again, this is an area where the use of automation could significantly mitigate risk.

If treasury teams are reliant on legacy platforms or processes for their reporting requirements, they may be exposing themselves to more operational risk with instant payments’ 24/7 settlements.

“An effective way of looking at this would be to deploy automated reconciliation and automated reporting solutions with real-time reporting capabilities,” Botha said.

Botha emphasized that it is vital for treasury teams to have continuous access to the real-time liquidity status to manage their risk more effectively.

As we approach the holiday season, particularly Black Friday and Christmas, payment volumes are expected to spike. It’s important for businesses to leverage the necessary tech platforms to ensure they’re set up for success.

“Modern technology platforms that have the option to be hosted via a cloud are an effective way to reduce any risk around shortfalls or any errors within your infrastructure setup,” Botha said.

“It’s a more cost-effective way for businesses to host their infrastructure with these multi-tenanted environments that these large cloud providers have to offer. So you actually pay for the space that you’re requiring without having to provision for these huge spikes well in advance,” he said.

Instant payments will keep growing, and as the space evolves, banks and PSPs will need to evolve with it. Implementing and leveraging the latest technology to guarantee their customers a fast, cost-effective, and safe way to send payments will be key.

“With a new system like FedNow and instant payments, there’s a lot of potential for businesses to improve efficiency—whether it’s through automation, digitization, reduction of manual processes and also from a data capacity perspective by using cloud technology that increases capacity for businesses as well as other players,” Tavilla said.

Said Botha: “I would suggest having conversations with all different actors within the payment space, within these geographies, to really build that trust within the U.S. market with regards to FedNow payments.”

Eco-focused cards are emerging as a significant force in reshaping the relationship between financial institutions and consumers—not only in the reduction of first-use plastics in payment cards but also in having a positive impact on the environment.

In a recent PaymentsJournal podcast, John Lowe, EVP of End-to-End Payment Solutions at CPI Card Group, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, explore how banks and credit unions can be better equipped to address the sustainability concerns of their customers and the impact these sustainable cards could have for years to come.

The use of recycled PVC, a synthetic polymer of plastic, in card products is not new. In fact, the practice can be traced back to about 25 years ago. However, it failed to gain a significant foothold in the market even as consumer interest in more sustainable products grew.

Recognizing this opportunity, CPI consulted with its research and development team to determine a way to include recovered ocean-bound plastics in the production of payment cards. According to UNESCO, about 10 million metric tons of plastic end up in oceans each year.

“One of our longstanding leaders of our R&D team engineered a solution that was able to incorporate recovered ocean-bound plastic into the core of a payment card,” Lowe said. “CPI then branded and launched the solution that we call Second Wave® in late 2019. And this led us to partner with one of the largest issuers in the U.S.” Since that launch in 2019, CPI has shipped ~100 million eco-focused cards.”

Over the years, CPI has taken a stronger position around sustainability and continues to amplify its efforts within the space. CPI’s market research found that more than 80% of consumers would consider switching to an ocean-recovered plastic card if it were made available by their current issuer. And more than half of respondents said they would move from one financial institution to another if there were an offering for a card made from recovered ocean plastic.1

Ensuring that products and services are more sustainable aligns with the growing focus on ESG. This includes increasing regulatory and reporting requirements, in addition to consumer demands that companies take steps to reduce environmental impacts.

Banks and credit unions have an opportunity to ramp up their sustainability efforts, and they can begin by offering eco-focused financial products and services.

“These efforts help create more demand for recycled materials and increase the incentive to collect them across the globe,” Lowe said. “We’re also in the process of bringing recovered ocean-bound plastics cards to our instant-issuance solution, a solution that we have in thousands of financial institution branches across the U.S.”

This strategy aims to marry convenience for the cardholder and loyalty to the card as it aligns with the  sustainability principles of CPI’s customers and the financial institutions’ customers. Lowe further explained that CPI is driven by a desire to be a force for good. The company aims to be mindful of the social impact and responsibility of its work, he said.

The trend toward eco-focused payment cards is well underway. Earlier this year, Mastercard announced that as of January 1, 2028, all new cards on its network will be made of sustainable plastics. Larger U.S. issuers are already moving along this path.

If there are any doubts among financial institutions about the viability of this trend, they will soon discover that it’s not a flash in the pan, Riley noted.

“The Mastercard issue is a big deal,” Riley said. “You can really see the cards are behind it when you start doing the math on how many plastics are in circulation. We’re in the billions and billions, so there’s certainly a lot that can be impacted here.”

“You’d be surprised at the amount of time and effort that goes into the branding, the marketing, the artwork on a payment card,” Lowe said. “The fact that we can create an eco-focused card that essentially looks like your typical payment card … we’re going to see eco as a means to expand payment cards long term.”

Sustainability is a top-of-mind concern for many financial institutions. In a survey conducted by Javelin, involving 100 executives of small and mid-sized financial institutions, more than 80 reported having sustainability initiatives already in place.

What’s more, many respondents reported being very concerned about sustainability and having a budget allocated specifically for related issues.

“The numbers indicate that most institutions are already preparing for the moves,” Lowe said. “And if you haven’t, it’s something that you should definitely be focused on.”

Another key finding in the survey, unsurprisingly, is that younger demographics showed the highest interest in eco-friendly payment cards. Because this group was found to be highly receptive to this type of product, Riley said, this is a great opportunity for banks and credit unions to grow their portfolios if they do issue credit cards.

Financial institutions can do much to appeal to their customers’ concerns about sustainability. It may seem overwhelming at first, but many can begin by offering financial products and services that align with their sustainability values.

Providing the option for an eco-focused payment card is a step in the right direction, letting their customers know that their financial institutions are committed to promoting responsible actions that can contribute to a healthier planet.

1CPI consumer insights fielded November 2022 n2100

The FedNow instant payments rail has the potential to be a boon for smaller financial institutions, including credit unions and community banks. By leveraging FedNow, these smaller institutions can expand into business services such as on-demand payroll services and vendor payment tools, offering faster and more convenient payment options.

During a PaymentsJournal podcast, Jon Budd, CEO of Juniper Payments, a PSCU company, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, spoke about the future of real-time payments and what they mean for small financial institutions. They explained that although participation is optional for banks and credit unions, the move toward instant payments offers new opportunities for credit unions and community banks to attract new customers and increase revenue.

The process of setting up faster payments takes time because it involves significant changes to the banking system, moving from batch processing to real-time payments, available 24/7.

“It’s a slow-rolling snowball that will build momentum over time,” Budd said. “FedNow is a top-down initiative. Now that it has been deployed, it’s up to 10,000 financial institutions to upgrade their systems to offer this technology to consumers and businesses.”

And among the financial institutions participating are many smaller institutions that have stayed on the sideline up to this point.

“Many credit unions, as well as regional and community banks, have more trust and prefer to participate in FedNow because it is operated by the Federal Reserve, as opposed to RTP, which is a private system operated by their larger bank competitors,” Tavilla said. “Overall, it is definitely a positive development because it gives financial institutions options, and it also offers resiliency for instant payments overall.”

According to Budd and Tavilla, credit unions have an opportunity to leverage FedNow as they work to get into the small-business space—whether it’s offering on-demand payroll services or tools for small businesses to pay vendors and receive money from vendors.

“According to several studies, over 70% of consumers and businesses look to their primary financial institution—which certainly includes credit unions—to offer faster payments, including real-time and instant payments,” Tavilla said. “This is a great opportunity for credit unions to participate and innovate upon real-time payments.”

Instant payments can be a real game-changer, helping consumers and businesses in various scenarios. Budd relayed a recent experience he had while buying a car.

“I purchased a vehicle online from a private seller located about 1,500 miles away from me in Kansas,” Budd said. “I flew to Reno, Nevada, to inspect the vehicle and confirm its condition matched the online pictures. We agreed on a predetermined price, and the seller opted for a cashier’s check. I provided the check, and he called the issuing bank, a small community bank in Kansas that I’ve had an account with since I was 8 years old. I’ve never waited more than about three rings for someone  to pick up a call, but this time it took 20 minutes to reach someone because the bank was going through a phone system transition.”

The experience might have gone differently, Budd explains, with instant payments.

“I could go to my app and initiate the transaction, and as soon as the seller refreshes his account information on his mobile app, he would see that the funds have been deposited. The whole process would take roughly 60 seconds,” Budd said. “That’s a game-changer. Anytime you would be using a wire or a cashier’s check is a perfect time for an instant payment.”

Budd’s example is just one of many use cases involving instant payments. Funding digital wallets, paying gig workers, and sending disbursements for car loans and mortgages are just a few scenarios we expect to see more of.

In fact, according to Tavilla, the quick disbursement of loans could be one that small financial institutions specialize in. “Many consumers prefer credit unions and smaller financial institutions due to the personal relationships and better rates they offer,” she said. “These financial institutions often serve businesses in their communities, making it possible to streamline billing, enhance transparency, and improve cash management.”

According to Budd and Tavilla, there are many misconceptions related to FedNow, including that the government will get rid of paper currency and track consumers’ transactions. But these concerns are off the mark.

“We’ve been operating ondigital currencies for decades,” Budd said. “FedNow is simply just another avenue, a kind of ‘toll road’ to do things quicker than some of the alternatives out there. There’s not necessarily more data that the Federal Reserve could look at as compared to what they’ve been looking at before, but that’s certainly not the intention.”

Another misconception, Tavilla said, is using FedNow as a verb. “People saying, ‘I’m going to FedNow you,’ like ‘I’m going to Venmo you,’ which you wouldn’t be able to do because the Federal Reserve doesn’t provide services to consumers. FedNow is a behind-the-scenes rail similar to ACH.”

It’s important to remember that FedNow is a product upgrade, which will be standard in the future.

“We moved from dial-up internet to high-speed internet, and now that is standard,” Tavilla said. “Similarly, one day, we’ll receive our payments instantly without having to wait for days to receive our paychecks and other payments.”

The FedNow instant payments rail has the potential to usher in a renaissance for smaller financial institutions, such as credit unions and community banks. These institutions, with their strong customer relationships and local presence, can leverage FedNow to expand their services into the realm of real-time payments. This shift offers a range of exciting opportunities, including on-demand payroll services and efficient vendor payment tools, providing faster and more convenient payment options for businesses and consumers.

To remain competitive and attract customers, smaller financial institutions will need to offer services that match or exceed what larger banks can provide. Failing to adopt modern payment solutions like real-time payments could lead to a loss of market share and a decline in competitiveness.

Overall, the introduction of FedNow represents a significant step forward in the world of payments. Smaller financial institutions can seize this opportunity to expand their services, cater to evolving customer demands, and solidify their positions as trusted and innovative players in the financial services industry.

Zelle has laid the groundwork for what could be the massive P2P wave that has taken consumers and financial institutions by storm. Consumers want more convenient ways to pay, and this solution was the answer to many of their pain points. Consumers are now expecting their FIs to provide this type of P2P service as part of their regular offerings.

But many FIs are concerned about making the leap and possibly being on the hook for millions of dollars.

In a recent PaymentsJournal podcast,  Karen Buell, SVP of Operations, Banking and Fintech Solutions at Paymentus, and Kevin Libby, Fraud and Security Analyst at Javelin Strategy & Research, discuss the true story behind the headlines of these P2P fraud schemes, how can fraud be confronted, and how FIs can enter the P2P market armed with information and not fear.

With popular P2P platforms such as Zelle making the news, and with increased incidences of fraudulent attacks on consumers who have no recourse, it’s no wonder that many FIs are leery of adopting these payment platforms and offering them to customers.

“In 2022 alone, 28% of identity fraud scam victims that suffered a loss ended up losing that money through P2P transfers,” Libby said.

“That percentage is essentially flat year over year, but that’s a significant number of consumers, and from a consumer protection point of view, the fraud we’re seeing is enough to get the attention of consumer advocacy groups and regulators, and I think that’s why we’re seeing some of the headlines that we have.”

Headlines aside, consumers want an easier way to pay. They don’t always carry cash, and even if they do, it’s rarely the right amount. P2P payment platforms offer them a way to conceivably pay at any time, any place.

The key to settling the apprehension customers feel about using P2P payment platforms is to provide education. Although fraud is still taking place, current statistics, according to Libby, show that “as a percentage of transactions, fraud on P2P platforms is very low.” In fact, reports have shown that the incidents are lower than 1% and even decreasing.

“FIs can do a lot to educate consumers that they don’t need to be afraid of these tools, of these payment methods, but they do need to be smart about using them,” Buell said.

Specifically, FIs should warn customers not to give away their banking credentials, as this seems to be a more common occurrence. Furthermore, implementing technology that protects consumers is essential for FIs to safeguard against and mitigate fraud.

Implementing challenge questions that only the consumer and the recipient would be familiar with would help offer that protection. This can also avoid situations where the sender might mistype a phone number or provide another type of vulnerability that can enable an account takeover to happen.

Preventive measures are key, as P2P payments are essentially real-time payments. They are immediate and final.

Buell emphasizes the importance of FIs’ role as a trusted partner, equipping customers with the critical knowledge they need to protect themselves and their accounts. Ultimately, FIs should empower them to use these platforms with confidence.

FIs should also educate their customers on what banks will never do or how they will never engage in a certain way with their consumers. For example, it’s important that FIs communicate with their customers that they will never ask for their PIN number or their one-time passcode.

“Analysts at Javelin, in our fraud and security practice, have been arguing for years that education is the cornerstone of any building plan designed for reducing fraud across most payment channels,” Libby said.

“I think that’s especially true for P2P fraud, particularly since many identity fraud scams culminate in P2P transfers. Susceptibility to scam victimization is largely about being educated about what’s out there, what scams are taking place, how to recognize them when you see them, and what to do if you believe you’ve been targeted.”

Knowledge is power. Educating consumers on some of the pitfalls of using these platforms better equips them to use the solutions carefully and responsibly.

“Another thing that FIs can do to reassure consumers is to let them know that they understand the fraud that’s taking place and that they’re employing and constantly refining very sophisticated fraud detection and prevention tools that are very effective at rooting out fraud and protecting their customers,” Libby said.

With any new foray, FIs must proceed with a well-thought-out plan. Also, despite all the media coverage on P2P-related scams, FIs should not simply write off these solutions and avoid them at all costs. These platforms are clearly growing in popularity among consumers and are not going to disappear.

“They can’t be afraid of P2P, even if it’s one of the most targeted payment rails,” Buell said. “It’s important for the FIs to have a specific strategy, certainly an overarching payment strategy.”

Buell said fraud departments have been adept at confronting fraud for decades, but as the P2P space is relatively new, as are the fraudulent activities targeting it, the focus should be directed to getting educated on fraud as it applies to the P2P landscape.

She also recommends what her clients are currently doing: attending their local compliance chapters and AML groups to get familiar with all the latest fraud practices and trends. Staying informed is a key to staying ahead of the ever-growing and changing fraudulent tactics.

Moreover, although segmentation is a great tool for marketing purposes, it can also be leveraged for payment risk mitigation. Setting up different limits and rules for each customer avatar can help FIs further understand their customers and can help with the customization of fraud mitigation and fraud education.

“What financial institutions need to do is to bring to bear the technology that they have to intelligently leverage robust data sets to build models well trained at rooting out and arresting the fraud that’s attempted,” Libby said.

“They won’t be able to stop all of it, but they can make meaningful strides to that end. And in the case of P2 fraud scams, it will most likely require pulling in data from diverse sources, even from third parties that can provide insight into the context surrounding the P2P transactions.”

In forming a partnership with a technology solutions provider, communication is key. Buell said Paymentus reaches out to FIs, asking them for feedback on their specific fraud situations. If there is a “confirmed fraud situation feedback,” this information gets added to the Paymentus database.

Buell explained that there is constant juggling of the customer experience and the risk mitigation strategies of FIs. It is a tricky balance, for sure. But customers should always have as many payment method options as possible available to them.

“We don’t want it to be visible to the end user what’s happening, but we collaborate directly with our financial institutions, sharing best practices and providing them those tools to really dial up or down their strategy,” Buell said.

Paymentus also has relationship managers who meet with FIs quarterly or semiannually to check in with their payment strategy and determine how they are protecting their business. During these meetings, fraud mitigation tools and segmentation can be discussed, all with the purpose of becoming trusted advisors on the FIs’ journeys, with Paymentus offering advice and support along the way.

As consumers continue to adopt digital payments, P2P payments will also increase in popularity. As new technologies grow, fraud follows closely behind.

Fraud will never go away entirely, so FIs must be prepared to meet it head-on. The key is partnering with trusted technology solution providers to not only mitigate risk but also continue enhancing the customer experience.

In a recent podcast, PaymentsJournal talked with experts from different parts of the payments world to discuss how real-time payments are proceeding throughout the world, and particularly in the United States and Australia. It featured Elisa Tavilla, Director of Debit Payments, Javelin Strategy; Adrian Lovney, Chief Payments & Schemes Officer, Australian Payments Plus; Nathan Churchward, Payments Domain Lead, Cuscal; and Kate Knudsen, Senior Program Director, BHMI.

With the launch of FedNow, the United States has fully embarked on its journey toward real-time payments. Across the globe, real-time payments are creating not only competition among payment methods but also new use cases, making previously unattainable services accessible to businesses and consumers.

Yet the road to global ubiquity in real-time payments has challenges. Technical hurdles, legacy systems, and the imperative of interoperability need to be overcome. In a world with seventy-nine countries operating real-time payment systems, achieving cross-border real-time payments requires diplomacy and meticulous planning. Furthermore, the modernization of outdated back-office systems is imperative to keep pace with the exponential growth in real-time transactions. The good news is that businesses recognize this urgency and are upgrading technology infrastructures and streamlining processes.

Real-time payments are quickly becoming more widely available throughout the world. In the United States, FedNow’s launch in July is starting to increase traffic and demand for real-time payments.

“In the U.S., the FedNow service recently launched with 35 financial institutions,16 service providers, the Department of the Treasury, and more set to join,” Tavilla said. “The RTP network, run by The Clearing House, hit 500 million transactions with over 370 participating institutions. With two real-time gross settlement systems live in the U.S. now, I’m optimistic that it will help accelerate the growth and adoption of instant payments here [in the U.S.].”

In many cases, real-time payments are much more developed abroad. For example, Australia in 2018 launched its New Payments Platform (NPP) for real-time payments, and it has taken off ever since.

“Around 30% of the volume that was previously processed through the bulk Electronic Clearing System in Australia has now transitioned to NPP in the past six years,” Lovney said.

Initially, purchases on the platform were mostly P2P, but now, it is increasingly used by businesses and corporations. Some examples include paying taxi or Uber drivers at the end of their shifts and making insurance or emergency payments.

According to Lovney, the next phase of use cases will involve recurring (bulk) debit payments, such as subscriptions or utility payments.

“We expect to see bulk payments coming from businesses, corporations, and government entities, such as salary or dividend payments,” Lovney said. “Australia has set a goal to potentially phase out the ACH system by around 2030, approximately 12 years after the launch of NPP.”

As Churchward hinted, all of this is slowly creating significant competition among payment methods.

“During the pandemic, as cash usage declined and electronic payment methods increased, including ACH, we saw significant growth in account-to-account payments, especially person-to-person credits, accounting for 38% of the total payment volume growth,” Churchward said. “However, NPP’s growth has outpaced that of ACH. Currently, real-time payments represent 37% of all account-to-account credit transfers among our clients, which include banks and payment service providers.”

But real-time payments are creating new use cases, not just the substitution of existing ones.

“Payment service providers, in particular, are offering receivables management services to businesses using account-to-account payments that weren’t available before NPP,” Churchward said. “Customers love using Pay ID, a feature that links their mobile number or email address to their bank account—80% of payments received by our payment service providers from business customers use this feature.”

The United States has over 11,000 financial institutions, and many of them, especially the smaller ones, rely on legacy systems.

“Transitioning to a payment system that operates 24/7, 365 days a year will take time, and ensuring everything works seamlessly together (interoperability) is another task at hand,” Tavilla said.

Adding to the overall complication is the fact that the United States has two operational systems in place, FedNow and RTP. As they were designed independently, interoperability is a concern.

“Both FedNow and RTP are using ISO 20022 messages, which should facilitate interoperability not only within the U.S. but also with international real-time payment systems,” Tavilla said. “Both systems are continually introducing new features, with FedNow exploring cross-border capabilities and directory services.”

And that is just in the United States.

Seventy-nine countries have at least one real-time payment system in operation, and integrating them all for real-time cross-border payments will be a real challenge. This will take diplomacy and careful planning by individual countries.

For example, the NPP in Australia is in the final stages of launching a dedicated real-time international payments business service to process cross-border transactions. The service clearly differentiates international payments from domestic ones and attaches information about the sender, including name and date of birth.

“This international payments business service is designed to accommodate various types of international payments, be it through SWIFT, TransferWise, Western Union, or others, and ensures that the domestic leg of these payments is instantly available,” Lovney said.

Amid the technical and diplomatic challenges in implementing real-time payments, other challenges are much more mundane.

“The most significant challenge we’ve observed for companies aiming to support real-time payments is their outdated back-office systems,” Knudsen said. “While they invest in modernizing their payment front ends, the back office often lags behind. This is a big issue because the back office is where payment processing happens after authorization by the front end.”

“Many of these back-office systems were created decades ago and weren’t designed for real-time payments, making it difficult for them to keep up with the speed and increasing volume of real-time transactions,” Knudsen added.

Another problem: Because legacy systems were initially designed exclusively for card-based transactions (ISO 8583), they lack the flexibility to handle new kinds of transactions, such as person-to-person (P2P) payments.

“The good news is that many companies are recognizing the urgency of modernizing both their front-end and back-end systems to keep pace with the rapid growth of real-time payments,” Knudsen said. “We’re seeing progress in terms of upgrading technology infrastructure and implementing APIs to enable real-time processing. Additionally, companies are streamlining back-office processes, simplifying workflows, and automating manual tasks to align better with the speed of real-time payments.”

In 2022, India led the world with a total real-time transaction volume of 89.5 billion, representing 46% of global real-time transactions. In the same year, Australia processed 1.2 billion real-time payments, which is obviously far less in absolute terms but only 25% less than India on a per-capita basis. The United States recorded a real-time transaction volume of only 1.8 billion in 2022, way less per capita than India or Australia. But it seems more than likely that this will change with the advent of FedNow this year.

According to Churchward, making real-time capabilities open to non-banks and focusing on P2P payments to address customer needs is key. These steps can foster adoption and drive higher use of real-time payment systems in countries that are lagging. At least that has been Australia’s experience.

“One noteworthy feature in both the Indian and Australian markets is a focus on peer-to-peer payments and facilitating access for payment service providers that are non-bank entities,” Churchward said. “This approach has led to substantial transaction volumes.” 

“Enabling P2P payment platforms that address common pain points for consumers and businesses is a fundamental use case. These pain points include ensuring interoperability between P2P platforms and providing real-time notifications and reconciliations for businesses,” Churchward added.

As more real-time payment schemes come into play, focusing on interoperability will be key.

“Payment systems moving toward ISO 20022 is a strong foundation for cooperation,” Lovney said. “Additionally, frameworks like the Open Wallet Coalition can underpin efforts to create interoperability with other systems worldwide.”

Some companies still have skepticism about real-time payments. Churchward indicated that companies need to keep up with their clients’ demands.

“Real-time payments can be challenging but highly rewarding,” Churchward said. “They offer significant value to your clients and help them stay competitive in a rapidly evolving landscape.”

And a big part of getting real-time payments right is having the appropriate back-office software. “Software plays a crucial role in enabling real-time payments,” Knudsen said. “It needs to support any transaction type and provide connectivity for processing payments in real time, both domestically and internationally. Automation is key. Automating settlement and reconciliation processes streamlines real-time payments.”

Real-time payments have evolved from a budding concept to a transformative force. The industry’s focus on interoperability, adoption of standardized frameworks, and investments in modernization indicate that real-time payments are here to stay. As skepticism wanes and adoption grows, the future of payments has a real-time bent, offering immense value to clients and ensuring competitiveness in a rapidly evolving landscape.

With software playing a pivotal role in enabling such transactions, the stage is set for real-time payments to revolutionize the way we transact, offering not just speed but also efficiency and convenience.

Amid a rapidly evolving digital landscape, cybercrime continues to be a persistent and growing threat for financial institutions, which need to remain vigilant and proactive in safeguarding their systems and customer data.

In a recent PaymentsJournal podcast, Patti Reid, Vice President of Card Risk Solutions at Fiserv, and John Buzzard, former Lead Analyst for Fraud and Security at Javelin Strategy & Research, delved into how financial institutions can contend with fraud threats by closing vulnerabilities, detecting multichannel fraud, and mitigating consumer friction.

Technological advancements have contributed to the heightened sophistication of fraudster attacks—and fraudulent tactics have become so complex that they’re increasingly difficult to detect and prevent. Businesses must contend with phishing emails, fake websites and social media profiles, and identity theft, to name just a few.

“One of the things that we’re seeing an increase around is identity fraud,” Reid said. “Identity fraud is becoming more common for criminals because they have access to the information that we’ve traditionally used around authenticating.

“Victims are being preyed upon by criminals pretending to be the financial institutions. Additionally, data breaches have increased significantly around this and all of the traditional means of authenticating—either by being victims being scammed by criminals or the criminals going to the dark web and acquiring those means.”

Automation is also being used for nefarious purposes. Whether by sending thousands of phishing email messages at once or launching bots to detect vulnerabilities, automation is a powerful form of attack that occurs so swiftly that organizations have no time to react before damage is done.

“Criminals are very organized, but they’re also leveraging automation sometimes before legitimate financial service providers are, as is the case with things like bot attacks and scraping websites and trying to just assimilate information and put a dollar value on it,” Buzzard said. “And then they’re just obviously selling it back and forth to one another.

“The consumer is turned into this unwitting, involuntary mule of information and sometimes even money that’s moving back and forth. And it’s not their fault.”

To confront fraud head-on, a one-size-fits-all solution might not work.

“You must have a layered approach—multiple solutions that address the type of fraud you’re seeing, and it’s not limited to a single channel,” Reid said. “You have to look at the holistic view of consumer behavior, and you have to connect data within real time and use that data-driven decisioning to make the best choice around authenticating and authorizing these interactions.”

Another vital component to successfully mitigating fraud is for businesses to adopt a more proactive approach to 3DS security—short for 3 Domain Server, a protocol intended to prevent fraud involving online card transactions. It not only helps develop a safer environment for businesses but also ensures the safety of their customers.

“Every single financial institution out there should be figuring out what their 3DS situation is,” Buzzard said. “Do they have someone who’s helping them understand it and manage it between the bevy and increase of e-commerce? That’s a point that’s very difficult to control if you’re watching from the sidelines rather than really actively figuring it out.”

Because many sophisticated fraudsters have cracked the code and learned to bypass security measures, financial institutions must adopt a more layered approach to combating fraud.

Fraudsters have become adept at committing unscrupulous attacks against consumers, especially with account takeovers, which involve gaining unauthorized access to a customer’s account. This is an opportunity for financial institutions to form deeper relationships with their accountholders by reaching out via alerts when any nonmonetary changes occur, such as a change in an authorized user or even marital status.

“We’re in a world where we’re already reaching out with fraud anomaly, SMS, and e-mail alerts,” Buzzard said. “What we have to do—and what we recommended in this year’s identity fraud report—is really just blow up that model and say, you know what, you’ve got to reach out and start exploring and sending account-based nonmonetary change alerts if possible.”

In ensuring consumers don’t get caught up in the messiness involved in combating cyber fraud, partnership and communication between consumers and their financial institutions trumps any solution on the market.

Educating consumers is another effective strategy. Financial institutions must inform their customers what the current scams and phishing attempts look like and how they can protect their accounts.

“Deputize them with capabilities to let you as a financial institution know that what they see is not them (the customer). That information is invaluable in terms of any kind of models that are detecting,” Reid said.

Financial institutions should also be more proactive in letting their customers know what a normal interaction with their bank should look like, especially as fraudsters increasingly try to intercede by posing as the customer’s bank.

Reid recommends that financial institutions evaluate and determine any points of vulnerability in their fraud prevention tactics. FIs should examine their existing systems to look into fraud detection as well as the overall customer experience. Authentication factors should also be continually evaluated and changed.

As much as any organization would rather focus on generating more revenue and simply see fraud as a cost of doing business, this mindset could lead to untold damage.

By implementing the best tools and strategies to actively combat fraud, financial institutions can have more peace of mind, knowing that they can avoid fraud losses, avoid reputational damage, and enhance the consumer experience by instilling trust and confidence in their brand and organization.

Unified commerce is table stakes—but often misunderstood. For a truly compelling customer experience, retailers need to adopt a truly unified solution that brings their business’s backend closer to their customer.

Whether a customer is shopping in-store, online, or via their mobile device, unified commerce guarantees consistent pricing, promotions, and inventory levels—and establishes a fully integrated customer journey. 

During a recent PaymentsJournal podcast, Max Kirby, who works in Comms and Strategy at Stripe, Dil Hussain, Co-founder and CEO at Dines, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, dug into unified commerce, its role in the customer journey, and how it can enhance the overall consumer experience. 

When merchants first hear of unified commerce, the idea of omnichannel strategy also comes to mind—particularly as both involve developing a cross-channel shopping experience online and in-person. However, it’s much more than that, Kirby explained. Unified commerce means meeting customers where they are, throughout various channels and at any stage of the buyer’s journey. 

“I think people miss that it’s about bringing the front office and back office together,” said Stripe’s Kirby. “Unifying commerce means unifying both the customer’s commerce experience and the merchant’s commerce infrastructure.

“Merchants today want to sell direct to the customer, but also through retail partners. Maybe they’re an online marketplace, they may want to set up a loyalty scheme, they may want to offer membership subscriptions, and no matter the interface, they want to have a really coherent experience with the customer. So that’s how we think about unified commerce.” 

Through unified commerce, merchants can gather and connect all the essential data points as well as customer interactions, revealing a comprehensive view of their customers. Hussain, a Stripe client, explained it this way: “Unified commerce is about bringing all the data, all the information, all the kind of personalization that a customer may have remotely or on-site in a retail or a restaurant environment and bringing them together.” 

There is a distinction between omnichannel and unified commerce, but they’re often used interchangeably. Whereas omnichannel speaks to consistent experiences across siloed channels, unified commerce speaks to consolidating systems and data into a single integrated platform.

“Unified commerce allows you to do much more,” said analyst Daniel Keyes. “It connects data, it connects experiences, it connects backend processes, these things that are really important and really do transform the experience much more than just the ability to be in-store and order a product shipped to your home.” 

Unified commerce aims to offer a seamless, efficient, and consistent customer experience across all channels and touchpoints, including transactions made on mobile devices, in-store, and online. As the demand for frictionless commerce increases, adopting a unified commerce strategy can deliver on that front.

“We start from the premise that customers will choose experiences that are convenient, secure, and intuitive,” Kirby said. “And if you don’t have a unified commerce experience that delights the customer, then they’re going to go elsewhere.”

Hussain explained: “If you’re thinking about what’s so powerful about unified commerce, it’s a quick win in my opinion. If you’re thinking about the different ways that you can try and make the customers’ experience better—across any channel and within any industry—then you need to create something that’s unified, something that feels like the customer is being remembered, regardless of how they engage with the business. That is just a very surefire, quick way to delight them. And it’s not that hard if you think about it, with the rails and the platforms available to you now.”

Amid the proliferation of personalized customer experiences, businesses can’t afford not to have a unified commerce strategy. Not having one puts them at risk of disappointing their customers. It’s no longer a “nice to have” strategy. Rather, it should be regarded as “should be done.”

Dines reported simplified back-of-the-house operations with unified reconciliation and reporting across mobile and in-person payments, saving up to 40 hours a week on administrative duties and boosting staff satisfaction. Additionally, after introducing a solution from Stripe, Dines has seen a 150% increase in revenues per venue.

“It’s becoming closer to table stakes,” Keyes said. “And that means if you don’t have them, you’re losing sales as much as you might be gaining sales by having these experiences. So it really does need to be a priority to build this sort of experience with unified commerce.” 

Connecting the online and in-person experiences, Kirby explained, comes down to the business’s mindset. A business must ask itself how it views every transaction. Is it simply a purchase that is disconnected from other transactions? Or is it a critical touchpoint that a business can leverage to develop a long, meaningful customer relationship? By adopting unified commerce, businesses simultaneously adopt the consumer’s mindset and perspective. 

“It’s the data that underpins a truly composable architecture so that your business applications work seamlessly together,” Kirby said. “A prerequisite for unified commerce is having a unified view of the customer. Can you recognize an existing customer when they walk into a store? If you’ve visited a store, do you recognize them online? Is your inventory database unified? If someone buys something in the store, does that mean you’re now sold out for an online customer?”

In speaking to merchants, Stripe has found that many have in-store systems complete with point-of-sale terminals that are completely siloed from their online system. In essence, they’re running two businesses. The aim of unified commerce is to merge systems, consolidating them into one business.

The benefits are clear: businesses with unified commerce strategies stand to remove unnecessary overhead, implement a unified tech stack for online and in-person payments, and run more efficiently, all while elevating the customer experience.