The PaymentsJournal Podcast

As the technology behind payments processing accelerates, it’s also reshaping how merchants need to think about the ways their customers pay. Increasingly, acquirers are discovering that by focusing on areas like reconciliation and streamlining the payments workflow, they can build stronger relationships—not only with their customers, but also with their employees.

In a PaymentsJournal podcast, Highnote’s Chief Revenue Officer, TJ Grissom, and James Wester, Co-Head of Payments at Javelin Strategy & Research, to explore how Highnote is helping drive the unification of the payments workflow and the benefits this trend is bringing to retailers and other payment acquirers.

Most merchants just want to run their business. They care a great deal about the business side of things, but not so much about the payment side. That can make it difficult for payment vendors to know which features to highlight, because at the end of the day, the acquirer is primarily concerned with simply being able to accept a payment.

Once they’re confident in that, merchants are more willing to explore which bells and whistles might be right for them. And when they take the time to learn more about the process, they often discover the many ways payment solutions can positively impact their bottom line.

“There’s been an awful lot in the press lately about what core payments really look like,” said Grissom. “The word ‘ledger’ has popped up in payments more in the last three years than it probably had in the previous 50. The core understanding of what true reconciliation looks like—being able to track a payment through its entire lifecycle—has just jumped off the page. We are seeing tremendous value in modern platforms—like what we’ve built at Highnote—that bring to bear a truly unified payment lifecycle.”

As a result, merchants are viewing payments not just as a mechanism to grow revenue, but also as a means to create stickiness—with their customer, their vendors, and even their own employees. They’re seeing payments as a way to bring cohesion to every step of their value chain.

“When we speak with merchants, we think they’re going to start by saying, ‘Let’s talk about core acquiring and the issues we want to resolve on that front,’” said Grissom. “It’s incredible how quickly it turns into, ‘I have a consumer issue that I want to target as well,’ or ‘I have an employee issue.’ By bringing a more unified platform to bear, the conversation quickly switches from money in to money out.”

Of course, the predominant concern remains cost, which varies for every customer. They each consider it from different angles and paradigms. But they all want two things. First, to reduce the core cost of payment acceptance. Second, to minimize the opportunity cost.

“If you’re not closing the payments loop rapidly enough or getting your money settled quickly enough, it’s costing you in many other areas,” said Grissom. “It’s not only costing you in core time to money, it’s costing you in experiences.”

Customers are starting to broaden their understanding of what that opportunity cost entails. There is a real loss in not having payments operate as efficiently as possible.

“We used to not be able to do a whole lot with the settlement—it was just cost,” said Wester. “Now vendors can do something to influence that. You begin to see different parties that might not have been at the table from an acquirer standpoint when they’re talking to a merchant. It’s no longer just an accounting function. It might be a treasury function, or a customer facing discussion.”

More merchants are viewing their acquired revenue stream as an asset that can help them address other challenges. They’re seeking opportunities to use payments to make the ecosystem work more efficiently.

“I love the example of restaurant ecosystem with its fully integrated vertical SaaS solutions,” said Grissom. “15 years ago, solution providers in this space were doing incredible work to acquire funds for you and give you lines of credit and working capital because they had direct insight into your business. We can do that in a really low-risk way.”

That was the first big step in the direction of seeing the payment process as a cohesive solution, which has since expanded to other use cases. One of the biggest problems in the restaurant space is retention of talent, especially servers. Now, they have found ways to use payment assets to create stickiness within their own employee base. It makes a difference when a restaurant can pay out tips in real time—directly onto an open-loop card that employees can use on their way home—enabled by embedded capabilities Highnote makes possible.

With modern platforms that can be built out, payments can be customized—not just for the hospitality industry or types of restaurants, but even tailored to the individual restaurant itself, based on what that particular owner wants to do with the point of sale.

The bottom line for merchants is clear: they no longer have to settle for limited payment options.

“You can’t build what we’re talking about on legacy infrastructure, and you certainly can’t build it by trying to piece together four or five different providers across these different veins,” said Grissom. “Take a step back and ask: If you had your preference, how would this entire lifecycle work? What value could you bring? What operational inefficiencies could you get rid of by bringing more cohesive solutions to market?

“As the person acquiring those funds, you do have the power. You’re the one with the leverage and you should press to understand the value that your providers can bring to the table for you.”

Two decades ago, acquirers were primarily focused on reducing the total cost of payment acceptance. The main value-add was simplifying the process and proving transparency around fees-just knowing what you were paying was a win.

Today, however, the value equation has changed. Beyond just price, merchants can evaluate factors such as ease of acceptance, the type of equipment offered, settlement speed. and the range of payment rails available—including emerging ones that may become viable in the near future. “It makes the job a lot harder now, but the days of payments as a necessary evil should be behind us,” Grissom said.

The post Why More Merchants Are Centralizing Their Payments Infrastructure appeared first on PaymentsJournal.

A consumer purchases a product and receives exactly what was described. However, they experience buyer’s remorse and want to return it. Unsure if they’ll be refunded, they falsely report the transaction as fraudulent instead.

This kind of misuse may seem minor on its own, but it is part of consumer-engaged fraud—a category often mislabeled and misunderstood.

In a recent PaymentsJournal podcast, Nicole Reyes, Managing Vice President of Risk Operations at Velera, and Suzanne Sando, Lead Fraud Management Analyst at Javelin Strategy & Research, discussed how to differentiate types of consumer-engaged fraud, the emerging threats within the category, and the steps organizations can take to protect themselves.

As many businesses have strengthened their fraud defenses, criminals have shifted their focus to consumers. This shift has had an impact—consumer-engaged fraud has become one of the leading drivers of fraud losses in the industry for both financial institutions and merchants.

While there is broad consensus that consumer-engaged fraud is growing, there is still division over how to define it.

“It can be really hard to track and quantify this type of fraud for each financial institution, especially because of challenges such as mislabeling,” Reyes said. “Some people would consider first-party and scams together. Some would continue to keep first-party reported as fraud, and other financial institutions—once it’s determined it is first-party—they may move those into the collection bucket. So even from a settlement perspective, each financial institution can vary.”

Consumer-engaged fraud breaks down into two classifications: misuse and persuaded.

Misuse occurs when an authorized party reports a legitimate claim as fraud without any outside influence. This includes the traditional first-party fraud model, where a consumer orders an item with no intention of paying—knowingly exploiting a loophole in the system.

The persuaded form of consumer-engaged fraud happens when an authorized party acts under outside influence. Most scams fall into this category, such as when a criminal convinces a victim to pay upfront legal fees in exchange for a promised inheritance.

While there are just two overarching classifications of consumer-engaged fraud, a deeper look reveals a wide range of subclassifications.

“I think it’s kind of alarming when we lay out all of the various types of misuse and consumer-engaged fraud and the scams that there are out there,” Sando said. “It’s alarming to see all of the various ways that consumers are being targeted. But I think it also hammers home the importance of understanding the nuances of these types of fraud and that they each come with their own signals.”

Under the misuse umbrella is unintentional fraud, where a consumer reports a fraud claim in error.

“They thought that they were purchasing something from Nike, but the billing website had a different name,” Reyes said. “When they called and asked to validate this transaction, maybe they didn’t recognize it. Then later they call back and say, ‘Oh, I do recognize that is my charge.’ Or they provide their card to a friend or family member and don’t recognize exactly what was spent.”

There are also various forms of intentional misuse. For example, a person may order an item—typically a big-ticket or luxury product—and then file a false fraud claim. Other types of misuse include cases where a consumer claims an item was never delivered or reports it as damaged in transit.

There are perhaps even more instances of persuaded consumer-engaged fraud. These include the many variations of scams and phishing schemes.

“One of the big ones that we’re seeing lately is the imposter or the impersonation scams, where a fraudster may impersonate an employee or a financial institution and convince the consumer to complete an action that would result in a financial loss,” Reyes said.

“Fake emails are another use of impersonation scams and one of the most successful ones—emails that appear to be from the authorized user’s financial institution asking them to click a link to update their information, which then leads to a malicious website design,” she said.

In addition to the many subclassifications of consumer-engaged fraud, consumers are now under attack through multiple avenues.

“Our research at Javelin shows that consumers are dealing with a huge range of consumer-engaged fraud, and all of that is coming from a variety of communication channels,” Sando said. “You’re getting emails, texts, social media, DMs, and phone calls are still happening. There are friend requests from people you don’t know.”

“There are all these different kinds of communication methods with their own set of tactics that are constantly evolving, and so it makes tracking and preventing this kind of suspicious activity really difficult,” she said.

Technology has enabled bad actors to exploit these channels at greater scale. For example, billions of phishing emails are sent each day—a feat increasingly accomplished with minimal effort.

Artificial intelligence has also made these communications more realistic. In the past, fraudulent messages were easier to detect due to obvious grammatical errors or phony domain names—flaws that are no longer as easy to spot.

Adding to the issue is the vast amount of personal data users willingly share online. Cybercriminals can tap into this information and use it against their targets.

“They’re getting more sophisticated, where now they’ll start hacking into the email addresses and they will target a specific user,” Reyes said. “They’ll say, ‘Nicole, I know that you have a Netflix subscription and maybe you’re on a promotion that’s coming up in a year, so the email that I’m going to send to Nicole is going to be more tailored around trying to entice her to click on this link because it’s Netflix-related. Or I’m going to ask her to extend this rewards promotion.’”

Because these communications are so sophisticated, organizations must place renewed focus on authentication.

“Any area or medium in which you allow consumers to engage with you—whether that’s via email, text message, over the phone, online banking—double-check the security of those, making sure you have advanced authentication measures in place, so that you truly know who the consumer is on the other end of the engagement,” Reyes said.

In addition to technology-based measures, financial institutions must ensure their education efforts are current, both internally and externally. This should go beyond simply sharing news about the latest scams. There should be interactive tools that help users become familiar with bad actors’ tactics.

Additionally, many financial institutions capture significant amounts of accountholder data that can be utilized to detect consumer-engaged fraud. For example, they could check purchases against past transactions and monitor for changes in IP addresses.

Although many organizations collect this data, they often can’t use it for fraud prevention because it is siloed in separate systems. To combat modern data-driven fraud, organizations will not only have to share data across departments but also collaborate with industry peers.

“One of my biggest key points here is to get out of the silo mindset,” Sando said. “We can’t make any progress if we don’t start somewhere. I feel like we’re just on the cusp—we’re so close to getting to this point where we can all start working together across financial institutions, across consumer advocacy groups. We just have to get past that siloed mindset of ‘I only know what’s happening in my own backyard.’”

As institutions look for ways to move forward, many remain uncertain about the best steps to combat consumer-engaged fraud. The first step is to define the problem appropriately.

“That lack of standardization and categorizing the incident is what’s making it so difficult to effectively track what’s actually happening,” Sando said. “When there’s no industry-wide standard or even a standard set at your financial institution, that means FIs are left to make the determinations on their own of how they should categorize this. That can create delays across the board when it comes to investigating the crime.”

In addition to investigative delays, the lack of standardization often results in inaccurate reporting. Employees are frequently left to handle these incidents through manual review, making accurate trend tracking difficult.

“Those are all reasons why we created a consumer-engaged fraud classification guide—starting within our Velera partnerships—on how can we start to streamline and talk about this the same way,” Reyes said. “Not only to classify it—that’s the first step—but then the next step is how can we systematically tag these types of cases, so that we can start to put some data around it.”

“Then we can start to not only gain insights into what the true volume of the problem is, but also to start to put in preventative measures to combat it,” she said. “We can start to understand how fraud trends are going to shift and  what tactics fraudsters may use in the future, so that we’re set up for success to not only better report it and understand it, but to better fight it.”

The post Sorting the Scams: The Many Faces of Consumer-Engaged Fraud appeared first on PaymentsJournal.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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