The PaymentsJournal Podcast

The traditional model of biweekly or monthly physical check payouts is rapidly becoming a thing of the past. For businesses, moving away from checks results in lower processing costs and a reduced risk of check fraud.

While direct deposit offers clear benefits for employees, it’s not always their preferred method of receiving pay. In today’s competitive labor market, an organization’s compensation model can serve as a key differentiator.

In a recent PaymentsJournal podcast, Kristin Ridgway, Vice President of Treasury and Payment Solutions at U.S. Bank, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the changing compensation landscape and the growing role prepaid solutions play in attracting and retaining talent.

“When we think of prepaid it becomes about gift cards—giving money away—and self-use,” Hirschfield said. “The payroll card opens up a window of opportunity that can expand almost exponentially in terms of all those things you can do for yourself.”

The need for more flexible payroll options is increasing. Businesses often have teams composed of various types of employees, not just long-term, full-time staff. In many cases, the traditional check and direct deposit model can complicate payments to a workforce with high turnover or those consisting of a mix of full-time employees, contractors, and seasonal workers. 

“Prepaid payroll cards can reduce costs and administrative work by minimizing paper checks, and offer greater flexibility in delivering payments as needed,” Ridgway said. “Providing more payment options can improve the likelihood that workers will choose to continue working with that company.”

Building strong relationships is especially important with gig workers, who are often critical to an organization’s everyday operations.

The rise of digital payments has led consumers to increasingly expect flexibility—nowhere more so than in the growing gig economy. Most gig workers don’t work traditional hours or fixed schedules, so they don’t expect their payments to follow a traditional model either.

“If you think about a rideshare driver or an Instacart shopper, many want or need to have access to their pay as soon as they’ve finished their shift or the job,” Ridgway said. “With a traditional payroll system, they might not see those earnings for a week or more. With earned wage access and real-time payments to prepaid cards, they receive their money instantly by loading it to the card and could use it to buy gas or groceries or whatever that same day.”

Since many gig workers contract with multiple companies, prepaid accounts that support payouts from multiple sources are especially valuable. Similarly, a full-time worker who picks up gigs on the side can conveniently receive all their earnings on a single card.

Beyond the gig economy, full-time employees also have the option to direct a portion of their paycheck to a prepaid card. For example, a worker might allocate $100 from each pay period to save for the holidays, budget for dining out, or plan for a big-ticket purchase.

Even at companies with high direct deposit participation, a secondary prepaid account can offer added value and engagement. While an employee may initially use the prepaid card to save for a vacation or receive a gig payout, the card remains active and can support a range of future needs.

“There’s an interesting opportunity to have that worker who has multiple work opportunities—maybe one’s full-time and one’s a gig—to have funding onto a similar source,” Hirschfield said. “They want to be able to use that money exactly how the merchant, or wherever they’re going to spend it, is accepting it. Tying that in is really a critical need, not just a want in this environment.”

Paying employees in their preferred payment type is important as more consumers become well-versed in the digital economy.

A consumer who can split a check with friends in near real-time using a P2P service may be disheartened to find that the only way to receive their paycheck is through a scheduled direct deposit to a traditional bank account.

This highlights how alternative compensation models are becoming a critical factor in improving employee satisfaction and retention. As companies come to rely more on a shifting workforce—including seasonal, temporary, and contract workers—their goal should be to provide a consistent experience.

“You really want it to be a repeatable opportunity where you bring that employee back in season after season,” Hirschfield said. “There’s a lot of opportunity to use this type of environment down the line—both with your full-time employees and even with workers that come in occasionally—to make sure they have that positive experience, come back, and recommend your organization as a place to work.”

Outside of retention, reloadable card products are often more cost-effective, especially when compared to issuing paper checks.

Additionally, many prepaid solutions include a mobile app or website where cardholders can check balances and receive alerts. Users can also load funds onto the card themselves through cash or check deposits.

What’s more, prepaid often go beyond the card itself, offering features like interest-bearing savings accounts, cash-back rewards, and person-to-person transfers.

Prepaid cards can be instantly issued, allowing companies with frequent new hires or contractors to keep cards on hand. These can be used for immediate payouts, off-cycle payments, termination pay, or any situation where a payment to an individual is needed right away.

They can also help reduce certain regulatory burdens that businesses face.

“Something I’ve been hearing about more frequently in recent client conversations is escheatment,” Ridgway said. “This is a challenge for businesses that are issuing a lot of paper checks. U.S. Bank retains 100% responsibility for escheatment on our card programs, so this completely eliminates this burden from our clients for any abandoned funds. We follow escheatment rules according to the state where the individual lives.”

The benefits of prepaid in payroll suggest it’s poised to play a larger role in the compensation landscape—and may even help redefine it.

“I think we’re moving into a new generation of how terms are being used,” Hirschfield said. “I still refer to, ‘Oh, my paycheck was deposited.’ Well, I don’t actually get a check anymore, it’s direct deposited. I think you will see the same thing with prepaid cards. Prepaid cards are part of the function of a much bigger and more powerful set of tools where the card is just the centerpiece.”

These tools allow employees to access their earnings and make transactions in a modern way, which ultimately puts them in the driver’s seat.

“The bottom line is that when people have better access to their earnings, they’re more empowered, they’re more productive and they’re more loyal to those companies that offer those benefits and that faster pay,” Ridgway said. “That’s a win-win for employees and employers and it’s a really powerful differentiator in a competitive labor market.”

The post Taking the Check Out of Paycheck: The Role of Prepaid in Payroll appeared first on PaymentsJournal.

Community banks are the heart and soul of their localities, often providing the spark that helps small businesses achieve their goals. However, the emergence of new technologies in recent years means that more financial services companies are vying for a share of the smaller institutions’ markets.

In a recent PaymentsJournal podcast, Matthew Wilcox, Deputy Head of Financial Institutions Group and President of Digital Payments at Fiserv, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed how community banks can select and implement relevant technologies and utilize the banking-as-a-service (BaaS) model to deliver a unique experience.

In addition to heightened competition, financial institutions are now serving a tech-savvy customer base with elevated expectations. Features like digital wallets, faster payment methods like Zelle or Same Day ACH, and account aggregation are increasingly becoming table stakes for every institution.

For many community banks and credit unions, incorporating all of these features can be a daunting task. However, in most cases, they don’t have to be a one-stop shop for every financial service.

“Many of the institutions that we’re seeing in this banking-as-a-service movement—if I can call it a movement—are the community banks,” Wilcox said. “They’re singling out specific use cases that they could play a role in. They’re utilizing their infrastructure and their technology to be a part of that equation of banking-as-a-service. We’re seeing a definitive role for community banks in banking-as-a-service, given their ability to focus in on it.”

Organizations can zero in on niches thanks to the modular nature of the BaaS model. This allows smaller financial institutions to launch new financial products quickly, without requiring substantial capital investment or facing major regulatory hurdles.

A community bank, for example, could use this system to significantly diversify its product line. However, given the rapid pace of innovation in the market, community banks must never lose sight of the factors that make them unique when expanding their product offerings.

“Community banks are not trying to solve for everything, but for the right things,” Wilcox said. “They are focused in on solving for what type of innovation and technology is important to their communities. What are the partnerships and the adoption of technology that they need to be focused in on?”

Implementing new technologies will largely come to fruition through partnerships with financial technology firms. Through these fintech relationships, institutions can introduce features like contactless payments, real-time payments through FedNow or RTP, tokenization, and digital wallets.

Two of the most powerful technologies in recent years have been artificial intelligence and cloud computing. A community bank might partner with a provider offering AI-driven fraud detection solutions or adopt cloud service to better organize and secure customer data.

“It’s about finding a solution for a community, not trying to be all things to all people, but focusing in on what is most critical, whether it’s their geography or the banking space that they’re serving,” Wilcox said. “It’s about community financial institutions using their relationships to their strength.”

While external partners will play a critical role in most banks’ strategies, a shift in mindset will also be necessary when it comes to building and empowering internal teams.

“Community banks are tremendous when it comes to financial acumen, but they are going to need technology evangelists within those community banks to focus specifically on the things that they need to innovate on,” Wilcox said. “The talent that a community bank is going to have to start recruiting is going to be different than the type of people they recruited five to 10 years ago.”

Once community banks have assembled their partners and team, they must consider their target customer base. Many community banks may already have established relationships with local industries.

However, one segment that is often overlooked is small business. This is unfortunate, as community banks are often best equipped to understand and meet the needs of local organizations.

“If you think about the small business, I think the community bank does a good job of getting that DDA (Demand Deposit Account) open for that small business,” Wilcox said. “Then they do a good job of getting them either a small business loan or some other form of capital for that small business to start their business, but then they let them be serviced by the retail channel or the commercial channel.”

Developing relationships with local merchants offers smaller banks a powerful way to deepen their roots in the community, where small businesses often play a central role.

“There’s the old saying that no business is small to the person who owns it,” Wester said. “It’s their entire life and they don’t need to be financial experts, that’s not what they do. They are running a small business, so the idea that you can have a community bank that can be your adjunct when it comes to financial services—when it comes to not just that DDA, but access to capital, access to loans—that is so important.”

“It’s one of those areas that I’ve always found to be unfortunately underserved, but there’s so much opportunity,” he said.

While there are many avenues for innovation, smaller financial institutions will face obstacles as they transition to this new paradigm. Internally, a bank’s geographic location may limit access to top talent, or fierce competition for financial professionals may drive wages too high.

Externally, engaging third-party vendors always introduces risk. Therefore, it’s critical for institutions to understand how their fintech partners operate to ensure all regulatory and compliance requirements are met.

“In the past two or three years, there have been some occasions where vendors have had issues, and I think it’s important for us to go in with our eyes open anytime we’re talking about banking-as-a-service,” Wester said.

“But I don’t think it’s any different now than it has always been in financial services in terms of winning and succeeding,” he said. “Know your business, know it well, and do it well. Pay attention to the blocking and tackling, risk and compliance. Banks that are the winners in this space are the ones that are just well-run banks.”

Though there are risks to consider, the potential of the banking-as-a-service model could not only put community banks on par with larger institutions, but also helps them step out of their counterparts’ shadows.

“For a long time, it was always assumed that smaller institutions would be followers, that there were going to be gaps that a smaller institution would have when dealing with different businesses,” Wester said. “What’s interesting is that community banks are positioned now to be leaders. The financial technology that’s available to community banks does put them at par with some of the other banks that we would think would be innovative.”

Banks that view these innovations as a critical milestone—and approach them with a methodical and disciplined strategy—will have a significant opportunity not only to better serve their communities but also expand their reach.

“They know their communities better than the larger institutions do because they’re immersed in those communities,” Wilcox said. “They can find the right mix of that strength with technology innovation, if they don’t get away from the core principles that have made them such a tremendous institution to date. It’s a very winning hand they have.”

The post Remodeling Main Street: How Community Banks Can Leverage the Banking-as-a-Service Paradigm appeared first on PaymentsJournal.

Consumers are inundated with accounts, apps, and subscriptions—often to the point where they lose track of what they’ve signed up for. This can be costly for consumers, but it also prevents financial institutions from gaining a clear view of a customer’s overall financial picture, limiting their ability to offer tailored services.

In a recent PaymentsJournal podcast, Kevin Hughes, Director of Product Management, Aggregation and Information Services at Fiserv, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed how personal financial management (PFM) tools can help consumers stay on top of their accounts—and position financial institutions as the central hub for their customers’ financial lives.

With a PFM tool, a customer could visit a dashboard and see their mortgage account balance, recurring payments, and total transaction volume all in one place—saving them the hassle of logging into dozens of apps or websites.

Although all this data is available to the user across various platforms, a unified visual representation can be far more impactful.

“We talk a lot about subscriptions, where customers don’t really have the visibility or, let’s say, the sensitivity to it until they see it all in one place,” Hughes said. “That’s one of the things that is getting a lot of traction these days. I can suddenly see that I have 10 places that I make recurring payments to, and it gives me the opportunity to ask the question: ‘Do I need these?’”

Additionally, a PFM tool gives users another layer of protection. For example, a customer might overlook a suspicious transaction on an account they rarely use, but they could easily spot red flags within a centralized resource.

To make monitoring more effective, notifications play a key role in PFM platforms. For instance, a customer could get a notification if they make a transaction over a certain amount, approach their credit limit, or have a recent withdrawal exceeding a certain amount.

The flexibility to create personalized notifications and interactions helps customers be more proactive about their finances, which could add up over time.

“When you look at all of those subscriptions across a 12-month period of time, it’s amazing how much that means in terms of real money,” Wester said. “A $10, $20, $50 subscription that you don’t think about because it’s maybe over in this account, or you may not use it that much, suddenly you start putting those together and it’s now $500, $600, $1,200 a year that you can save.”

Because consumers increasingly maintain multiple financial services accounts, it makes sense to centralize the personal financial management tool at the user’s primary financial institution, where most of their transactions originate and settle.

During the initial setup, the consumer will need to add their account and subscription information into the PFM. This creates an opportunity for financial institutions to position themselves as the central hub for their consumers in a highly competitive landscape.

“It creates an environment where the consumer—from the bank’s perspective—becomes a little bit stickier to that relationship,” Hughes said. “When you see that trusted relationship at the core of all of your financial relationships, in that one place that you go, it does create the opportunity I think for a higher rate of retention for those customers and the opportunity for some cross-sell.”

Additionally, PFM tools can supercharge an organization’s marketing efforts because they provide the bank with data elements that weren’t previously available. Based on this data, the bank or credit union can then personalize their outreach to the customer.

Even if cross-selling isn’t an institution’s top priority, a PFM’s insights can be invaluable, as they give the bank an accurate view of their customers’ behaviors and financial picture.

“They can make better decisions on pricing, on risk, on scoring, on what products to serve to someone, and I think that’s all good stuff,” Wester said. “It’s good for the bank because they’re able to both grow that relationship, but also make decisions that protect the bank. When you use this data it helps a customer with their financial health, but it also helps the bank operate more efficiently.”

Sharing customers’ financial data with other financial services companies is a central tenet of the open banking model, which ultimately aims to give consumers greater freedom and access to better products.

The bar has already been raised. Modern consumers are now accustomed to choosing niche products and downloading multiple applications to meet their financial needs. As these accounts and relationships multiply, they will increasingly rely on PFM platforms to help them navigate this new paradigm.

“With the ability to have those multiple relationships, it’s become more important to have that central anchor, if you will, to be able to keep that stuff in sight and keep it in control,” Hughes said. “We all have people in our lives that we probably see that engage with a lot of different applications and it’s easy to lose sight of them. With the opportunity for more data sharing, it underscores the importance of having a tool like a PFM tool available for customers to keep them grounded.”

Although the open banking model is still relatively nascent in the U.S., it may follow a familiar playbook.

“I liken it to the way we look at healthcare,” Wester said. “I may go see a lot of specialists for lots of things, but I have my family doctor that’s ultimately the place where I go that knows me, knows my health, knows all of the things that all of those specialists are doing. They’re the place that ultimately, I go to hear what should I be doing from a health standpoint.”

“Same thing with PFM,” he said. “It’s for financial health, and I really do think that financial institutions positioning themselves in that same place as a primary care physician, where you have now options through open banking, you have all sorts of places where you can share your data. You can do all sorts of things, but ultimately, if all of that money is coming from that demand deposit account that you keep for paying bills—that is the center of your financial life.”

There has often been a misconception that PFM tools are only for high-net-worth individuals, those with complex investments, or people looking for a robust account monitoring solution. However, financial health management is a universal need.

“Everybody can benefit from having that full picture,” Wester said. “If we go back to that idea of subscriptions—everybody has subscriptions. Everybody has a lot of subscriptions, especially now as we start unbundling things like cable and cell service and everything else. Being able to use a tool like that, it does benefit pretty much every consumer.”

There are also significant benefits for financial institutions. As consumer expectations continue to rise, users will expect more customizable and far-reaching oversight of their financial situation.

This means that banks and credit unions adopting PFM tools now will be better positioned to serve their customers in the future.

“We’re going to see less of a one-size-fits-all model and more of a configuration model as we go forward,” Hughes said. “As we move into a standardized model of data and a lot more use of APIs and that interaction, the data set becomes broader and the data itself becomes more reliable.”

“That’s one of the things that as we look at the evolution of data connectivity, those types of things that come out of those different types of models that will lead to just an easier connection, a more reliable connection, and ultimately the insight that can be derived from that—but with the whole-picture insight, not just a part of it at that time,” he said.

The post How FIs Are Cutting Through Subscription Clutter with PFM Tools appeared first on PaymentsJournal.

Although child identity theft has received increasing attention in recent years, most parents don’t discover it—let alone take action—until after experiencing a financial loss. Among families who reported a financial loss due to identity theft, roughly 96% did not have their children included in a family protection plan until after the breach had occurred.

For the past four years, Javelin Strategy & Research has focused on the issue of child identity theft and the risks that threaten children. In a PaymentsJournal podcast, Tracy Goldberg, Director of Cybersecurity at Javelin, and Eva Velasquez, CEO of the Identity Theft Resource Center, discussed the dangers children face on social media and the steps parents can take to protect them.

The risks associated with social media are extremely concerning when it comes to child identity theft—and for fairly simple reasons. Nearly every child over the age of 10 has some form of social media presence. This might include school-based platforms, mainstream social media platforms like YouTube, Facebook, or Instagram, and even online gaming platforms like Fortnite or Minecraft.

Having grown up in a digital age where social media has always existed, children are naturally comfortable interacting with others online. They’re also more inclined to share personal information. This makes them particularly vulnerable, as they may engage with individuals they don’t know in real life.

Social media is, by nature, a network. Information spreads rapidly depending on who you’re connected with—and who they’re connected with. If you’re sharing personal details publicly, or interacting with strangers on gaming platforms, you’re exposing yourself to serious risks.

“When I was a child, we were taught to be leery of people you don’t know,” said Goldberg. “Children don’t feel that same kind of concern when it comes to interacting online. The dark web was a powerful place for cybercriminals to hide what they were doing and buy and sell and trade information. But cybercriminals don’t even need the dark web anymore. They can use social platforms to trade information, steal information, sell information, buy information, anything they want right out in the open.”

Even though children have access to many devices and may seem even more tech-savvy than their parents, they don’t always have the critical reasoning skills needed to navigate them safely. Add to that the fact that they are battling criminal enterprises using sophisticated social engineering tactics, and it can be hard for adults to fully appreciate what they’re struggling with.

Parents also put their kids at risk by sharing too much on social media—tagging their kids in pictures or posting when they go on vacation. There’s a lot of education needed across all age groups.

Many parents still hold the notion that when kids are home, they’re safe. That used to be true, but it’s no longer the case. If children have access to a device, particularly one with internet connection, parents can’t assume they are safe. They need a heightened level of concern, just as they would if their kids were playing at a park.

“At Javelin we’ve advised our clients about steps they can take to help educate their customers about provisions that can be taken to help enhance their security,” said Goldberg. “We’ve also suggested that financial institutions or even wealth managers offer identity theft protection or ancillary services that could help make their customers’ accounts more secure. We see opportunities through employee benefits programs, because if your employees and their children are exposed to cyber risk, it ultimately exposes your company to risk.”

It’s a win-win situation for employers to provide security provisions that not only secure corporate-issued mobile device and laptops, but also extend to VPNs for the home network. Since the pandemic, more people have been working in a hybrid environment and are doing work on personal devices. More than likely, if that employee has children at home, they are using the same Wi-Fi connection—and potentially even the same personal devices their parents occasionally use to conduct business.

Another direction the industry should pursue, according to Goldberg, is pushing social media companies to take on a greater role. It took time for the industry to recognize the need to secure e-mail transactions interactions, as phishing became increasingly prevalent. Socially engineered attacks—whether delivered through SMS text messages or direct messages on social media—follow the same pattern.

“What can we do within the realm of DNS blocking or spam filtering that would help prevent these types of interactions from reaching the children to begin with?” Velasquez said. “That’s the direction that we need to move in as an industry. There’s a role for ISPs, mobile carriers, and—importantly—social media platforms to play.”

Social media companies could respond to account takeovers more quickly and thoroughly. Once an account is taken over, it’s no longer under the control of the true account holder.

“Even if their parents are monitoring and doing all the things that they have to do in today’s climate, that scammer is going to bypass all of that because the kids think they’re talking to a trusted adult,” said Velasquez. “They think it’s their auntie or their teacher. Because these accounts are allowed to stay online and active under the control of the scammer for long periods of time, they’re doing a lot of damage.”

Until the industry takes more steps to combat child identity theft, parents will have to remain on the front lines. They should consider not only the financial damage but also the emotional damage and reputational damage that can come from these types of attacks, particularly on social media. The image that teens project to their circle is very important to them.

“Kids who are dealing with this issue sometimes resort to self-harm and even suicide,” said Velasquez. “Please realize how important this is. It’s not just a minor inconvenience or one of those life things you can have to deal with. It can be life altering.”

Communication is key. An important step for parents is learning to recognize the behaviors their child might exhibit if they were being cyberbullied or manipulated in some way. It’s also essential to keep the lines of communication open with the child’s educators. 

“If parents were more in tune with the warning signs, we could address a lot of these things before the consequences become so dire,” Goldberg said.

The post Stranger Danger: Protecting Your Children from Identity Theft appeared first on PaymentsJournal.

Although generative artificial intelligence has powerful proficiencies, its limitations have become more apparent as the technology is deployed at scale. Now, however, Visa and Mastercard have unveiled platforms aimed at giving AI an even more prominent role—AI agents will soon be able to shop and make purchases with minimal consumer input.

In a recent PaymentsJournal podcast, Christopher Miller, Lead Emerging Payments Analyst, Suzanne Sando, Lead Fraud Management Analyst, Don Apgar, Director of Merchant Payments, Jordan Hirschfield, Director of Prepaid, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the barriers to agentic commerce, potential use cases for the emerging technology, and the broader future of AI.

In both Mastercard’s Agent Pay and Visa’s Intelligent Commerce platforms, AI agents are effectively taking on the role of personal shopper.

“In this vision, the agent is everywhere,” Miller said. “It’s making your life easier; it’s saving you time; it’s relieving you of the burdens of your side of any transaction. It can find items for you to purchase, it can choose merchants for you to purchase from, and it can select which form of payment you wish to use at any given point in time. There’s a lot behind that vision, and many technical aspects will have to be addressed for a system like that to operate.”

Beyond concerns about security or accuracy, one of the main barriers to agentic commerce is the need for active customer participation. Until now, organizations have largely implemented AI initiatives behind the scenes.  

Persuading consumers to entrust their payment data to an AI agent will likely require a deeper understanding of AI than many users currently have.

“In the product discussion that Visa had when they did their product launch talking about agentic, one of the things that resonated with me was it was one of the products where people said, ‘We are going to have to pull consumers along,’” Wester said. “’We are going to have to show them and educate them on the magic of agentic commerce.’”

In addition to the awareness obstacle, there is growing skepticism about the accuracy of AI-produced information. While many concerns about artificial intelligence are unfounded, there are documented limitations that could cause consumers to be wary of agentic commerce.

“If you’ve used AI, the answers that it returns are just as often wrong as they are right,” Apgar said. “When you give a shopping agent a test to go find something and buy it for me, it’s not the buying part that worries me, it’s the finding the right thing. In today’s environment, you’ve also got AI hallucinations. It’s not everybody’s worst fear, but if you get a message that says, ‘Hey, I’ve bought this for you’ it’s like, ‘Wait, who asked for that?’”

Along with concerns that an AI agent could make a costly mistake, it is inevitable that bad actors will attempt to exploit or manipulate these systems.

On one hand, fraud prevention has been a standout use case for AI, as it can detect suspicious activity across vast amounts of data. On the other hand, the emergence of a new technology connecting consumers, merchants, and financial institutions introduces risks that must be addressed.

“There’s obviously a major need for continuous authentication throughout the entire life cycle of the agent interaction,” Sando said. “At this point, we’re thinking data points, what behavioral analytics can I use to continuously authenticate the consumer to the agent? This is just like any other identity verification and continuous auth scenario.”

“It doesn’t matter what the channel is, whether it’s your digital wallet or you’re going straight to a merchant or you’re using the actual agent, even down to when you’re planning for situations where social engineering is suspected,” she said. “The best scam detection solutions are looking for those real-time clues where social engineering is taking place where a criminal is convincing a consumer to make a certain purchase.”

Many organizations use behavioral analytics to identify such clues—for example, when a user makes a purchase that is out of character or from a significantly different location.

However, if it’s unclear to a retailer whether a purchase is made by an AI agent or a human, it can be difficult for the business to distinguish fraudulent activity. In this scenario, merchants must rely on the agent service to have conducted proper due diligence in detecting illegitimate or unauthorized behavior before initiating the purchase.

Additionally, the services themselves present a potential avenue for cybercriminals exploitation.

“We should be expecting situations where criminals are creating fake websites and apps that offer a similar service,” Sando said. “They’re going to try and convince consumers to sign up for what they think is a legitimate agent service and then in turn, they will be giving up a whole host of PII and payment information and data for this particular scam.”

“On top of that, we should be expecting a surge in text and email scams from fraudsters that are impersonating legitimate agent services,” she said. “Not only do we have to worry about fake services, but now we’re worried about the use of generative AI that has already made impersonation scams easy for criminals to commit. I don’t think it’s at all far-fetched to assume that agentic commerce will be affected as well.”

While significant concerns surround agentic commerce, there are also powerful benefits. Many consumers struggle to fully leverage loyalty points, gift cards, and other rewards. In these split-tender scenarios, an AI agent could dramatically impact the customer experience.

“If you can split-tender, I can get the most value for my money by saying it’s going to understand how it can redeem reward points in a stored value account,” Hirschfield said. “How can I benefit if it’s earning more reward points through a particular card that it’s going to use? How does it pick and choose how to split up a payment to buy something that most benefits the consumer, so they get the most value for their money?”

Loyalty and rewards have become integral to prepaid accounts, which may also serve as the bridge connecting consumers to agentic commerce.

“Prepaid can be the training wheels,” Hirschfield said. “Obviously, you need to train the models and you need to train the consumer. With prepaid, consumers are already used to turning money over to prepaid accounts and stored value accounts.”

“Part of the issue is how do I trust a third party—be it the retailer themselves with a stored value account or an agent—with my money,” he said. “If I limit how much I give them and I’m giving them a pot of money, this is a more direct way to program that money.”

Agentic AI could also offer potential benefits for merchants. If a retailer can recognize that an AI agent is making a purchase, it may open the door to a new dynamic in commerce.

“Can the merchant now offer agent incentives to buy at their store versus somebody else’s store?” Apgar said. “If Target and Walmart have the same item and Target is now paying a sales performance incentive fund to the agent to make that purchase at Target versus making it at Walmart, now the merchant has the ability to apply leverage to the automated shopping process.”

While the impacts on consumers and merchants are yet to be determined, the promise of agentic AI suggests that an entire industry may emerge to power this new paradigm.

“At the end of the day, to the extent that this vision comes to pass, it is the providers of the agents themselves who are most likely to insert themselves as a new layer of the commerce stack and extract some form of value,” Miller said. “We’ve seen this play out repeatedly, so I’m going to suspect that’s who will benefit the most. Whether other participants benefit or not, I think is a TBD.”

Although many questions remain about the trajectory of agentic commerce, there is little doubt that it is gaining momentum. The launches of Visa and Mastercard’s platforms are imminent, and they are likely just the first of many agentic AI-powered initiatives.

“Skepticism is warranted, but this is happening,” Wester said. “If we are saying, ‘I can’t imagine why somebody would do something,’ that shows the limits of our imagination, not the limits of where this is going to go.”

“Approaching this with an open mind and understanding that there is going to be an entire industry of developers, systems integrators, and folks that are going to be aimed at this (is important),” he said. “It’s understanding that this is bigger and important, and we need to understand that in the context of our entire industry, as opposed to just saying this seems like a lot of hype.”

The post The Agentic Advent: How the Next Iteration of AI is Shaping Commerce appeared first on PaymentsJournal.

For mid-sized companies striving to compete with multinational giants, Vertical SaaS has become a game-changer, helping them bridge the gap in their software needs. One of the key factors driving this shift is outbound payments—empowering even the smallest businesses to process payments in real time, leveling the playing field.

Vertical SaaS seamlessly integrates a range of essential functions, like payments, and tailors them to the unique language and regulations of each industry. By offering a suite of interconnected services designed specifically for one vertical, Vertical SaaS has become the go-to solutions for businesses looking to scale and thrive.

In a PaymentsJournal Podcast, Lori Breitzke, Head of U.S. Strategy at B4B Payments, and Hugh Thomas, Lead Analyst of Commercial Payments at Javelin Strategy & Research, discussed the rapid growth of Vertical SaaS and the many benefits these programs are bringing to medium-sized businesses—particularly in the area of payments.

Vertical SaaS has taken off in recent years as companies have realized that vertical selling is more effective than horizontal selling. Vertical SaaS offers finance, workflow management, workforce management, and payment services—streamlining operations for its clients, boosting their profitability, and helping them become stronger, more efficient organizations.

Initially, with early players like SAP and Oracle, these solutions were largely one-size-fits-all. They essentially delivered a “relational database in a box” to large corporations, leaving it up to the tech teams to figure out what needed to be measured, how to measure it, and what reports to generate.

As the market evolved and everything shifted online, it became easier to offer out-of-the-box, specialized solutions. This shift was driven in part by the fact that different industries have vastly different software needs. For example, the metrics an accounting firm tracks are very different from those of oil and gas company or a manufacturer. Modern solutions are better equipped to handle industry-specific complexities—like presorting requirements—that not only vary widely across sectors but are also becoming more intricate by the day.

“Vertical SaaS companies are speaking in the language of that vertical,” said Breitzke. “Oil and gas is going to speak differently from healthcare. By using those terms and using that language, it’s making for a much better user experience.”

Take, for example, companies in the construction industry, which face challenges unique to their field. Managing payments to multiple subcontractors and suppliers often requires waiting on invoice approvals, leading to delays and operational slowdowns. Relying on checks or manual invoicing further slows disbursements. As a result, contractors wait an average of 54 days to get paid, with 83% resorting to liens due to these delays.

“We’re still seeing a lot of checks and a lot of ACH,” said Breitzke. “The numbers from NACHA on same-day ACH are going through the roof because people really need their money now. Automating payments and getting away from those traditional payment methods will help suppliers get paid faster. Certain suppliers will give discounts to businesses if they get paid faster, so that’s going to improve their cash flow as well.”

“If you’re waiting that long to get paid, your credit could get bad,” she said. “You’re missing out on making other payments that you need to make because you don’t have that cash flow. Embedding outbound payments is one of the critical features of a Vertical SaaS platform, reducing the administrative workload.”

One key goal for Vertical SaaS is to squeeze as much non-productive capital out of the flows as possible. A check in the payment flow could result in a one- to three-day delay between invoice, receipt and approval—and when the actual payment finally lands in the hands of the suppliers. Whenever companies can move away from these slower payment processes, suppliers stand to benefit.

Checks are an increasingly antiquated system, with use cases dwindling by the day. The more a system can be built to anticipate the sunsetting of checks, the better off the process will be.

Globally, there’s a shift from a regulatory perspective toward reducing slack in the payments space. In particular, governments are looking to curb balance sheet building by large buyers at the expense of small suppliers. While regulatory mandates around specific payment timeline have not yet been introduced, there have been moves aimed at accelerating the system. This includes a push toward real-time payments, improved reporting, and greater transparency—allowing suppliers to highlight when certain buyers are consistently slower to pay.

Small businesses may be the backbone of the U.S. economy, but they’re often strapped when it comes to working capital. Whenever there’s an opportunity to shift more payment responsibility from large buyers to their small suppliers, it’s a net positive for the economy.

The emergence of the gig economy has also brought solutions like this to the forefront. A business may have a large but atomized base of small suppliers to pay, and they want to settle those payments as quickly as possible. The ability to push a payment through an option like a virtual card solution—as soon as goods or services are rendered—is almost a must in the gig economy.

“You want to be looking for a partner who understands the space in terms of ability to write credit for it and to monitor and manage risk such that they are making sufficient risk-adjusted returns on capital as a bank,” said Thomas. “Expertise in the space is absolutely key from a risk writing perspective, but also from a process perspective too. Having your financial partner understand the unique process needs is absolutely key in succeeding with something like this.”

Compliance is another critical factor, especially in highly regulated industries like oil and gas or healthcare. It’s crucial to receive proper reports confirming that the partner company is compliant and has appropriate anti-money laundering controls in place.

The true strength of Vertical SaaS is its ability to accommodate all of these industry-specific challenges by connecting disparate but related concerns—like compliance and payments—under one solution.

“That’s something that I would recommend companies look at when they’re looking for a partner,” said Breitzke. “They’ve got their own vertical industry compliance needs to worry about, so they don’t want to have to deal with that. Let us worry about those payment compliant things.”

The post From Underdogs to Industry Leaders: How Vertical SaaS Powers Mid-Sized Firms appeared first on PaymentsJournal.

As digital connections have fostered a global community, the demand for cross-border payments has surged. And yet, the cross-border payments paradigm—where correspondent and intermediary banks work with originating banks to process payments—has remained largely unchanged for the past 50 years.

In a recent PaymentsJournal podcast, Gary Palmer, President and CEO of Payall Payment Systems, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the limitations of global payments systems, the emerging solutions to cross-border payment challenges, and the potential impacts on the global payment landscape.

The current model for cross-border payments relies on a patchwork of banks. One of the main issues is that many of the core banking systems these institutions depend on have been in place for decades.

Another issue is that many banks operating in the cross-border space have a limited scope. They tend to focus solely on the specific products they are licensed to offer in a given area—such as bank accounts, car loans, or mortgages.

The combination of outdated technology and narrow focus has made an already complex process even more daunting, leading many institutions to hesitate before entering the market.

“I have coined a phrase—that cross-border payments and correspondent banking for cross-border payments are governed by fear and friction,” Palmer said. “When you introduce the concept of cross-border payments, now you’re dealing with multi-jurisdictional issues, you’re dealing with multiple currencies, you’re dealing with Know Your Transaction complexities that change all the time. You’re dealing with sanctions checks that extend beyond your border.”

“It’s a whole area of subject matter expertise that the core banking systems and the usual players in this technology have never addressed,” he said. “It’s the elephant in the room of why there’s fear and friction.”

Adding to the friction, over the last decade there has been a 25% reduction in the number of correspondent banks. Even as cross-border trade has grown—and is likely to continue growing—the entities that facilitate it have declined.

This puts even more pressure on the existing correspondent banks, which are already struggling under the weight of manual processes. For example, a correspondent bank looking to onboard an originating bank must verify that it is a legitimate entity—a process includes a 100- to 300-question due diligence Excel worksheet and extensive document requests.

“They make sure they have good AML policies, they complete the Wolfsberg Questionnaire, they go through critical infrastructure,” Palmer said. “Then they say, ‘OK, Mr. Bank, we trust that you’re not going to do bad things or lie or that your customers do bad things when you send money around the world.”

“That’s generally how the system works, it’s manual” he said. “The whole relationship is built on an inefficient relationship of manual documents, manual checks, and manual revisits of that relationship. The counterparty risk of a manual system like that is the foundation of why there’s fear and friction.”

In addition to inefficiencies, there is a lack of transparency. For instance, an originating institution might make a payment through a correspondent bank to an intermediate bank, ultimately reaching a final financial institution.

The bank at the last leg of the process has limited visibility into how effectively the originating institution executed their Know Your Customer, Anti-Money Laundering, and other compliance checks.

“It is amazing to me how little people understand correspondent banking,” Wester said. “When they need to send a payment overseas or over a border into another country, how little they get what’s going on in the background. The fact that it has been so resistant to change, given how much everything else has changed around the world in technology and in financial services specifically, means cross-border remains this sort of opaque and mysterious world.”

Even though many institutions want to dispel the opacity around cross-border payments, there are three conditions that prevent banks from having the capital and the resources to innovate.

“One, it’s protecting their systems and their data from the bad actors all around the world,” Palmer said. “Two, some banks have hundreds, others have thousands of third-party and home-grown systems, and these systems have to be fed and maintained with updates and patches and reboots, and that sucks a lot of resources away. The third thing is the bank’s existing core products are constantly facing regulatory changes.”

Many financial institutions are also resistant to change. As a result, cross-border payments under the current framework tend to be expensive, the service is often inadequate, delivery times are slow, and there is a pervasive lack of transparency.

However, not all of these aspects are necessarily seen as disadvantages—especially in the case of delayed settlement, which can sometimes be beneficial.

“People coming into the space might look at that and say, “Oh, that seems to be a big bug in the system,’” Wester said. “But when you’re coming at things from ‘my job as a financial institution is to mitigate all the risk on my side’, what you’ll find is that a lot of the folks don’t look at all of that as a bug. That’s a feature that’s protecting them.”

“They aren’t looking at it from the perspective of ‘Gary needs to send money overseas, let’s make it easy on Gary,’” he said. “They look at it from a money and a risk mitigation standpoint. It’s ‘I’m not really worried about Gary. He can’t go anywhere else, so he’s going to have to deal with the system the way it is.’”

While payment delays may give an institution the time it needs to conduct manual compliance and risk mitigation checks, they can cause substantial frustration for the sender. This frustration is only exacerbated by the efficiency of consumer payment systems where transactions are increasingly moving toward real-time, transparent settlement.

These heightened expectations, coupled with surging cross-border payments demand, are driving a shift in the paradigm.

“The topic that we’ve called opaque and filled with friction in the last 50 years has become a topic that every financial institution, every fintech, every financial technology vendor, everybody wants to talk about,” Wester said. “I think it’s just the sheer weight of everyone realizing that things have been broken, or at least weren’t delivered as well as they could have been.”

“Everybody’s now beginning to realize that cross-border transactions are the low-hanging fruit,” he said. “They are an opportunity.”

Two of the main organizations taking advantage of this opportunity are Mastercard and Visa. These credit card companies have built global cross-border payments empires based on three main assets.

First, in nearly every country where they operate, they are connected to local bank transfer systems. This allows them to pull money from a card issuer and send it to a card acquirer located elsewhere in the world.

Second, Mastercard and Visa maintain substantial global liquidity in every currency they trade. This enables them to pull money in the card issuer’s currency, convert it, and deliver it in the local currency of the country where the card was used—whether at an ATM or point of sale.

The third asset is their role as credit card companies managing roughly $2 trillion of foreign currency trade, which allows them to set foreign exchange rates.

“If we forget for a second that Visa and Mastercard have a card business and just think about those three assets—bank transfer connectivity, massive FX trading efficiency, volume and foreign liquidity capacity—these three assets are extraordinary,” Palmer said. “When you combine that together, it looks like the coolest, biggest, most powerful correspondent bank on the planet.”

These cross-border networks have advanced to the point where credit card companies have given them their own brands: Visa Direct and Mastercard Move. For banks and credit unions, these systems can represent a significant upgrade from the traditional correspondent banking model.

This means a bank could contact Mastercard Move and specify the sender’s and recipient’s currencies and locations. The platform can then deliver the payment to a bank account, a mobile money account, a digital wallet, or even as cash. This functionality is available in roughly 60 countries, and most transactions are processed in real time.

Additionally, all parties will receive an email or text message confirming delivery. The platform can also specify the exact amount the recipient will receive, without FX volatility or foreign transaction fees charged by the receiving bank.

“Mastercard has developed a cross-border product and Payall makes it easy for financial institutions to get live with Mastercard whilst providing a host of other risk and compliance capabilities,” Palmer said. “Think of us as the cross-border processor into Mastercard Move to allow a bank to deliver a payment to 90% of the world’s population, whether they’re banked or unbanked. It’s nearly real-time and super-efficient, with great FX rates and confirmed delivery.”

“It’s all the things that a bank customer wants and needs, and it’s priced in a way that the smallest credit union to the strongest regional bank can still make good money on it,” he said. “This is a breakthrough. This is a new paradigm, a new alternative to correspondent banks, and it’s taking the market by storm.”

The post Fear and Friction in Cross-Border Payments: The Alternative to Correspondent Banking appeared first on PaymentsJournal.

For the 18th year running, gift cards topped wish lists as the most requested holiday present—solidifying their role as a cornerstone of seasonal giving1. With more occasions to gift than ever before, demand is surging, and retailers can’t afford to miss the opportunity.

Insights from the 2025 Best Digital Gift Card Programs, Consumer Experience Benchmark Report, conducted by NAPCO research in partnership with Blackhawk Network (BHN), look at the trends behind this booming market, exploring who’s buying and why, and the retailers that are staying ahead of the curve. In this PaymentsJournal Podcast, BHN’s Sarah Kositzke, Global Research Lead and Hilary Spidaliere, Director of Product Marketing, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research discussed what leading brands are doing to keep their gift cards front and center with consumers—and how they’re using them as a powerful growth engine for their businesses.

By 2028, the gift card market is projected to hit roughly $267.3 billion, with the digital gift card segment expected to soar to $115.3 billion. Clearly, gift cards have evolved far beyond a holiday-only trend. Consumers are now snapping them up year-round, taking advantage of promotions, loyalty points, and rewards. When brands create loyalty programs that benefit both the buyer and the user, they transform gift cards into a 365-day opportunity for customer engagement.

Kositzke shared that while nearly every type of buyer purchases gift cards, the buyer demographic tends to skew male, with a strong presence among Gen Z and millennials. The findings also show that gift card purchases are more common among married individuals, or individuals in a relationship, with children at home, as well as Gen Z and millennials.

Physical cards still account for the majority of purchases, but it’s worth noting that nearly half of consumers are also buying digital gift cards.  

Research from this past holiday season shows that consumers received an average of about three gift cards, with a total combined value of just over $200. When the recipient isn’t nearby, digital cards are often the preferred choice. The report also found that nearly half of all gift card buyers are opting for digital formats, which are increasingly popular for smaller purchases.

“We are seeing more of what you might call micro gifting,” Spidaliere said. “Especially as more people are remote or hybrid or have friends and family across the country, you may want to send $5 to say thinking of you or congratulating them.”

Thinking about where consumers are buying their gift cards, Physical retailers who sell multiple gift card brands remain the leading point of purchase, closely followed by the brand’s own physical stores. However, there is one generational exception: among the youngest respondents—particularly Gen Z and Gen Alpha—physical stores are the clear favorite.

When it comes to digital gift cards, “We’ve seen a lot of parents who would prefer that their kids didn’t overcharge their credit card,” added Kositzke. “That lends itself to a digital platform, because the kids just want to be able to use the card online, whether it’s gaming or shopping or whatever it might be.”

When shopping for others, the average buyer purchases around four gift cards—typically one of which is digital. However, when buying gift cards for themselves, consumers choose digital formats more frequently, with two out of four being digital.

“I think that’s a really good indicator of the progression of the market,” said Hirschfield. “It was 70% physical a couple years ago, but we’re converging on this long lasting 50/50 equilibrium between digital and physical.”

For the latest BHN survey, NAPCO research evaluated 100 U.S. merchants across 17 industries, including department stores, fashion, entertainment, home improvement, consumer electronics, and convenience stores. The study assessed more than 120 criteria, focusing on areas such as discoverability, purchaser flexibility, faceplate design options, and payment options.

Spidaliare noted that the research expanded to include the ability to send an e-gift card via messaging apps or text, in addition to evaluating the purchasing experience via email. While email remains the primary channel for driving engagement, shifting demographics suggest that may not last. Reaching audiences in the right format is becoming increasingly important, especially for those who are unlikely to open emails—or may not even use email at all. These consumers want to discover gifts quickly, whether they’re scrolling through text messages or browsing on social media.

“We see a lot of growth right now in SMS delivery and also direct into merchant app delivery, different ways of getting the gifts into their hands that are most accessible to that recipient,” said Hirschfield. “Some of that is about training the giver on how to get the card to the recipient in the best form factor. We’re seeing movement there, and I think it’s going to continue on a pretty rapid pace.”

Staples secured the top spot this year, followed by Amazon, while Best Buy, Sephora, and Target tied for third place. Staples expanded the reach of its B2B program and increased availability across several credit card rewards programs.

“Staples had great discoverability,” said Kositzke. “Across all different devices—on a desktop, in mobile apps and on the mobile web—we were able to find the Staples cards very easily. They had an excellent mobile experience and purchase flexibility, and just an enjoyable recipient experience.”

The top ten brands in the report generally ran more gift card promotions and explored new ways to amplify both brand and merchant visibility. One of the most notable areas of improvement was mobile web usage. Leading brands made it easier for consumers to find gift cards through their apps and provided multiple options for sending them.

“All of the top ten got high scores for their app experience,” said Spidaliere. “All ten had an app with their gift card program included there. Your most loyal customers are your app users, so it’s really important to make sure gift cards are prominently available there.”

The report focuses on specific details around how merchants can build and best leverage a digital gift card program for their brand. For merchants unsure of where to start—or how to grow their own gift card efforts—Spidaliere offered a few best practices to consider:

“We encourage merchants to conduct a benchmark of their own program, so we’d recommend you use the criteria from this year’s study as a framework,” Spidaliere said. “Go through your own purchase and recipient experience across all your devices, determine what’s working well and anything that you need to work on.”

1 NRF 2024 Holiday By the Numbers

The post The Gift Card Boom—and What’s Driving It appeared first on PaymentsJournal.

When a driver misplaces their fleet card or uses it to fuel a personal vehicle, the consequences can be significant for the organization. Shifting to digital payments can help alleviate these pain points, yet many fleet managers have been hesitant due to concerns about maintaining control.

In a recent PaymentsJournal podcast, Parker Pierce, Senior Product Manager at Highnote, and Ben Danner, Senior Credit and Commercial Payments Analyst at Javelin Strategy & Research, discussed the challenges fleet managers face with current payment systems, the benefits of emerging technologies, and strategies for modernizing fleet payments.

One of the main barriers keeping fleet managers from adopting mobile payments is that fuel cards operate differently from many other credit cards. They have purchase restrictions built into their EMV chips, which dictate whether the card can be used for fuel, maintenance, or other products.

These chips can also have built-in security prompts that require the driver to enter their driver ID or mileage before a purchase is approved.

In the past, when a fleet card was tokenized and added to a digital wallet like Apple Pay or Google Pay, these purchase restrictions and prompts were not carried over. This was a dealbreaker for many fleet managers, who didn’t want restricted products, such as a fuel-only card, to act like an open card when added to Apple Pay.

“That’s changing now, as we’re seeing support added from the payment networks and the issuers,” Pierce said. “Now, when you tokenize your card into Apple Pay, if it was a fuel-only card on the physical side, it’s going to act like a fuel-only card in the Apple Pay wallet, which is a huge innovation. All the advantages for digital payments carry over to fleet—without that added risk of losing those restrictions that you wanted.”

Digitizing fleet payments also allows managers to expand their control over transactions. With a physical card, security prompts are built into the EMV chip when the card is issued. If it is initially set to request a driver ID, it will prompt for this information on every transaction for the card’s lifetime.

With an application, the fleet manager can adjust these prompts as needed.

“For one driver, they may want to put in a driver ID,” Pierce said. “For another driver, they may want another type of question for security reasons or just for tracking different types of information. For some drivers, they may ask them one question, while for another driver, they might have three, based on their route or their risk profile. Beyond just the ease of use, there’s also added benefits of security and flexibility for these app-based solutions.”

Once the door to digital payments is opened, fleet managers can leverage a host of other innovations. For example, some companies offer apps that can connect a device to an automated fuel dispenser (AFD), allowing drivers to pull up to the pump and complete the transaction directly from the app, dramatically reducing friction.

Additionally, emerging technologies could accelerate this process even further.

“Looking towards the future, what I think is exciting are embedded devices, which are beyond even the phone and the physical card,” Pierce said. “It’s that same EMV chip that’s in a physical card but put into some other entity. For a driver, they could have a key fob that is enabled for payments.”

“It can get really exciting to start combining these technologies—to have a key fob mixed with an AirTag, all in one on the driver’s key chain,” he said. “Then they can just come up and tap-to-pay with their key fob and their location is being tracked as well. We’ve heard about this with clothing, bands, and watches. There are all sorts of exciting things coming down the line on the payment instrument front when we talk about embedded devices.”

Though there are real-world use cases for these emerging technologies, one thing is clear: physical cards aren’t going away anytime soon. Just as they continue to resonate with consumers, physical cards remain in demand for fleet operations for several reasons.

Some drivers may not be tech-savvy and lack the know-how to download and use a payment app effectively. Others may simply prefer the familiarity and reliability of physical cards.

On certain rural routes, drivers may not have reliable cell or Wi-Fi signals to complete a transaction. Additionally, some fueling stations may not yet support tap-to-pay.

For these reasons, most fleets won’t be able to fully phase out physical cards.

“As excited as I am for digital, there is still a place for physical cards,” Danner said. “The future will be more of what we’ve been calling a ‘strategic coexistence of different payments products together.’ It isn’t an all or nothing thing. You can have drivers with physical cards that want to bring them into the digital space, or you can continue to have physical cards in the mix.”

“You could have your physical card on you and still have that card embedded in your mobile device, and then it’s up to the driver to make that choice,” he said.

Fleet cards keep drivers on the road, so managers want options that make fuel and fleet maintenance purchases as frictionless as possible. However, they must constantly balance ease of use with risk and fraud considerations.

“At the same time, those same fleet managers need accessible tools so they can manage the spend for their drivers,” Pierce said. “They need to be able to analyze that spend after the fact to reduce fraud. Not just looking at a report of what happened, but being able to see things like real-time alerts when a transaction occurs that’s over a certain amount or maybe at a location that isn’t on a driver’s particular route.”

Additionally, fleet managers seek efficiency gains by minimizing manual processes, such as capturing receipts. They also aim to control costs by leveraging the powerful rebate and fuel discount programs offered by commercial cards.

Digital payments enhance these efforts. With smartphones and payment apps now ubiquitous, the learning curve is often shorter—and drivers are less likely to misplace a phone than a physical card.

The risk of device loss drops further when company-issued phones with location sharing are used. This data can also help organizations monitor transaction locations and reduce fraud.

Digital payments offer another key benefit: drivers don’t need to visit the office or wait for a card in the mail. Instead, they can receive a digital card, load it onto their phone, and begin using it right away.

Perhaps most significantly, digital payments accelerate transactions—delivering speed alongside convenience.

“There’s something to be said for digital payments and reducing friction at the point of sale,” Danner said. “All of this is controlled in a unified mobile experience without having to reach in your wallet and fumble and look around for that physical card. Everything is going into this digital world and that goes a long way toward reducing friction.”

While physical cards remain reliable, the benefits of digital payments suggest that fleet companies should consider a hybrid approach. However, the added complexity can leave many fleet managers uncertain about the best path forward.

“First and foremost, fleets need to consider what are their biggest pain points right now with payments,” Pierce said. “Is it lost physical cards? Are you having trouble with friendly fraud, like a driver letting someone borrow the card or using their card to fuel up their personal vehicle? Do you have a lot of remote fuel locations?”

“Beyond that, how do you manage your cards—is it per driver or is it per vehicle?” he said. “Do you provide company issued phones or not? Lastly, how tech-savvy are your drivers? Fleet managers need to consider all those things and then decide: do we want to go fully physical cards, fully digital or most likely, are we going to have some mix of both that best fits our situation?”

The post Driving Into Digital: How Modernized Payments Platforms Impact Fleet Management appeared first on PaymentsJournal.

Financial institutions have traditionally been risk-averse, relying on tried-and-tested products and services. However, transformative innovations—such as real-time payment rails, artificial intelligence (AI), ISO 20022 adoption, and increasing demands for cybersecurity and fraud management—along with a constantly shifting regulatory backdrop—are making it critical for organizations to adopt new technologies.

In a recent Payments Journal podcast, Radha Suvarna, Chief Product Officer for Payments at Finastra, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the trends shaping the financial services industry and how organizations can seek new opportunities while keeping security and compliance top of mind.

One of the main trends impacting the financial industry is the growing expectation—among customers, partners, and regulators—of what a bank should be.

“Let me call it resilience,” Suvarna said. “Given the growth of real-time payments globally and the criticality of payment infrastructure to the local economies in many countries, we are seeing a lot of regulators who are starting to expect more from banks, both in terms of platform availability as well as disaster recovery requirements. In turn, expectations around 24/7 service and responsiveness have increased.” 

Finastra has developed our Global Payments Framework (GPF) to underpin the modernization approach for our suite of payments and financial messaging products (see below).

Many small to mid-tier banks are unprepared for new payment formats coming down the road, such as ISO 20022. This makes speed to market increasingly important, allowing these banks to comply with the new specifications before they become mandatory.

Another trend impacting the industry is the move to combine multiple rails into a single payment hub. This approach centralizes a financial institution’s payment processing, simplifying the technology stack, streamlining operational processes, and enabling innovative use cases.

At a broader level, organizations across industries are adopting cloud-based solutions. In the financial sector, banks and credit unions of all sizes are leveraging these platforms to move away from costly data centers. Instead, a technology vendor can manage the payments orchestration end to end.

Another overarching trend is the adoption of generative AI in various forms. For example, Agentic AI solutions are both enhancing the customer experience and improving operational efficiency.

Whilst the potential of these trends is clear, navigating the path to adoption can be extremely challenging.

“There’s so much complication on the business side, and now the technology departments are being told you need to be ready to do all of this. Also, can you anticipate everything that’s going to happen in the future?” Wester said. “With things like Gen AI, do we really know exactly what’s going to happen with that? No, we don’t. You now have to future proof against a future that used to be somewhat predictable, but now is completely unpredictable.”

Though these emerging payments technologies may seem daunting, they are ultimately just tools that financial institutions can use to fulfill one of their most fundamental functions: moving money from one account to another.

With this mindset, organizations can begin to break down the elements of payments modernization that will have the greatest impact on them.

“In my mind, the business case and the business value around modernization should be seen in two lenses—I would call them offense and defense,” Suvarna said. “On the offense side,  modernization should drive product innovation and enhance the customer experience, whether it’s faster and immediate funds availability for cross-border payments, greater transparency, or a reduction in cost.”

An example of playing offense would be embedding payment initiation within a customer’s ERP system. In the past, users may have had to upload files with batches of payments to the bank’s website. If customers were able to integrate payment initiation directly inside their ERP systems, it could be a game changer in many use cases. Also, a highly configurable solution means banks can avoid risky and expensive customizations, allowing them to introduce new rails, features, and process payments around the clock without upgrading the entire payments system.

Another way to play offense is by incorporating intelligent payments routing, or smart routing. When multiple payment mechanisms are available—such as a real-time payments or wire transfers—smart routing can help determine the best option based on a wide range of criteria such as speed and cost.

This same principle can be applied to cross-border transactions, which have traditionally been a pain point in payments. Smart routing technologies could evaluate options like Swift, Visa Direct or Mastercard Move to determine the best way to send the payment.

Another offensive maneuver could be streamlining the payment reconciliation process. For instance, ISO 20022 has a flexible and XML-based structure where the invoice amount, invoice number, and other data can form part of the transaction payload. This additional information can make it much more efficient to reconcile payments and invoices; or automate the process completely.

“The next stage is how do we leverage the specification to drive incremental value to the customers, and go after the customers that the banks don’t have today?” Suvarna said. “All of that is possible through modern technology and architecture. That’s all offense—to drive incremental market share and incremental customer and business value.”

Though it is critical to be proactive to stay competitive, financial services organizations can’t forget their foundations.

“At the end of the day, financial institutions are about compliance,” Wester said. “They are about risk management, governance, security, and all those things have reasserted themselves. We want to bring in new clients and deliver them delightful products, but still—as a financial institution—you need to be paying attention to those things.”

Defending against the downside means that financial institutions must stay abreast of new regulations, which are constantly changing. For example, as real-time payments become more prevalent, they will likely be governed by a more stringent set of rules than those that apply to other payment types.

This is because when an instant payment is sent, it is irrevocable. In contrast, the delays inherent in ACH transactions allow for payment to be reversed in cases of error or fraud.

Fraud, scams, and the increasing sophistication of cybercrime are critical threats to all organizations, but especially to financial institutions. That’s why building and maintaining strong fraud prevention capabilities is an essential part of playing defense.

“That’s the number one topic that we hear from both financial institutions and vendors now is that discussion on risk, compliance, governance, security, and they’re all changing very quickly,” Wester said. “Those same macro trends and micro trends apply to what bad guys are doing and how they can do what they’re doing, and the risks that are in the market.”

These risks, coupled with an uncertain future, have kept many financial institutions on the sidelines, waiting for a moment when it might be more convenient or less expensive to modernize their payments stack. However, institutions that delay modernization now will be even less prepared for what comes next.

“It’s exciting times, but it means that this is one of those things where I like to say, ‘There is no destination, it’s all journey,’” Wester said. “You’re never going to get to the point where you can say, ‘OK, we’re modernized, we don’t have to deal with this anymore.’ Understand that everything is changing, is going to continue to change, and over the horizon there are going to be more changes.”

In this shifting landscape, the first step in the payments modernization process is to embrace the change, get comfortable with it, and adapt the mindset to deliver value around the unique business and customer needs that a modern, agile solution can address.

“There is no one-size-fits-all solution in my view, but customers want scalability that is hosted by the vendor,” Suvarna said. “It’s more modern, resilient, and multitenant, which makes it a bit more cost effective for them. We need to adapt the modernization agenda, an objective that is number one.”

Once these needs are clear, financial institutions should explore how they can leverage partnerships and third-party solutions. For example, a cloud-based platform like Finastra’s Payments To Go, hosted on Microsoft Azure and designed for mid-tier banks, can serve as a plug-and-play solution, offering institutions scalable, secure, and around-the-clock functionality.

Partnering with a robust payments modernization provider can take the heavy lifting off financial institutions, allowing them to refocus on what they do best.

“Above all, it is critical to maintain a maniacal focus on delivering customer  and business value, whether it is internal stakeholders or external stakeholders, and avoid distractions from the next shiny object,” Suvarna said. “Having a deliberate strategy, sticking with it, and keeping the eye on the ball is going to be critical. That approach ensures the best modernization outcomes for the institution and the customers we serve.”

The post Playing Offense and Defense: Why Now Is the Time for Payments Modernization appeared first on PaymentsJournal.