Embedded payments have been a mainstay for consumers for several years due to the rise of digital payments via smartphones and mobile apps. As consumers continue to enjoy the speed, convenience, and security of such payments, the business-to-business (B2B) space has been lagging behind.

That is not to say that many businesses are content with this; on the contrary, more businesses would like to see embedded payments featured highly within the B2B payments space so they, too, can benefit from the speed, convenience, and cost efficiency.

During a recent PaymentsJournal podcast, Daniel Artin, VP of Strategic Partnerships at Boost Payment Solutions, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed what embedded payments look like within the B2B ecosystem, why they are growing, the market opportunities available, and how to select the right payments partner to begin incorporating embedded B2B payments.

PaymentsJournalEmbedded B2B Payments: A Forward-Thinking Strategy for Long-Term GrowthPaymentsJournal Embedded B2B Payments: A Forward-Thinking Strategy for Long-Term GrowthPaymentsJournaljQuery(document).ready(function ($){var settings_ap17628008 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"17628008",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_434650_28",settings_ap17628008); }catch(err){ console.warn("cannot init player", err); } });

Defining Embedded B2B Payments

Embedded payments originally centered on such use cases as consumers hailing a ride using the Uber app or ordering groceries via the Instacart app. Both platforms offer fast and convenient ways to pay for products and services with a simple tap on an iPhone, with no need for entering credit card information.Within the B2B payments arena, businesses are demanding the same perks that come from embedded payments, including enhancing the customer payment experience, automating the processing of payments, and providing protection against fraud.

“When you talk about embedded B2B payments, it’s always within the context of embedded finance, which as we know has become sort of the buzzword, the flavor of the month within the payments and finance sphere,” Artin said.

“So for those nascent audience members listening, we define embedded finance as the integration of financial services and tools primarily to non-financial software platforms. Think of this as incorporating banking, lending, sometimes even insurance into various (software-as-a-service) providers and platforms.

“I’ll be focusing on embedded payments, particularly in the context of B2B payments, which I believe is the edge case of embedded finance.”

Said Bodine: “I see in my research that embedded finance, open banking, it’s really going to be the major disruptor to the legacy banking system. Certainly,

The rapid improvements in the payments industry over the past decade have had the unfortunate side effect of making money laundering more of a challenge for institutions to detect and deter. With a greater number of methods for exchanging money and with most transactions happening digitally, it has become harder to chase after money launderers’ latest tactics. According to the UN’s Office on Drugs and Crime, more than $1 trillion is now laundered worldwide.

During a recent PaymentsJournal podcast, Amber Goodrich, Compliance Analyst at CSI,  a leader in the fintech, regtech, and cybersecurity solutions space, sat down with Kevin Libby, Fraud & Security Analyst at Javelin Strategy & Research, to discuss how money laundering has changed in recent years and what companies should be doing to deter it.

PaymentsJournalWhy Organizations Can’t Keep Up with Money Laundering PaymentsJournal Why Organizations Can’t Keep Up with Money Laundering PaymentsJournaljQuery(document).ready(function ($){var settings_ap21697655 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"21697655",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_434608_28",settings_ap21697655); }catch(err){ console.warn("cannot init player", err); } });

An Ever-Changing Backdrop

The world of exchanging assets has changed dramatically since the initial rules and regulations aimed at money laundering were put into place years ago. “You don’t know who you’re doing business with,” Goodrich said. “And we’re seeing many different types of currency coming into play.”

For one thing, the Anti-Money Laundering Act of 2020 has yet to be finalized, with new regulations still being proposed. New rules are being rolled out to increase penalties, and discussions are centering on imposing multipliers on individuals found to have committed repeat offenses. The subsequent uncertainty has made it harder for institutions to find their footing.

“The thing that we’ve seen the most guidance on is the beneficial ownership piece that’s set to go into effect early next year,” Goodrich said. “But even with that, there’s still a lot that hasn’t been defined yet.” 

Criminals are using social media to contact and enlist recruits, making it harder to detect laundering efforts. “Criminals are using money mules who have never been involved in the practice, so there’s no prior data to use to identify them as potential money laundering parties,” Libby said. “All of those things make it harder for financial institutions to meet those regulations at all, let alone not have repeat problems if they’re getting behind on alerts or having trouble making those connections.” 

One of the most frightening developments is that professional groups are being established specifically to launder money, which presents a distinct problem for financial institutions. It can be very difficult to identify connections between parties tha...

As financial fraud continues to become more intricate and more commonplace, and risk remains a deterrent for innovation, the inadequacies of “black box” solutions of third-party fraud vendors are coming to light. To effectively detect and mitigate fraud – and protect the FIs, their customers and their shareholders — banks need full transparency into the strategies, tactics and performance of their third-party fraud solutions.

Transparency between parties is the key to successful fraud mitigation, and during a  recent PaymentsJournal podcast, Matt Raile, SVP of Fraud & Bill Pay Operations at BillGO, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, delved into the importance of choosing the right third-party vendors to mitigate fraud, the red flags FIs should look out for, and why transparency is the linchpin in the battle against financial fraud.

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Identifying Red Flags with Third-Party Vendors

When vendors approach financial institutions, it’s common practice for them to proverbially beat their chest and announce just how many transactions they have processed, along with other success stories. Although this information may sound impressive, it does little to demonstrate what they can do for a particular organization.

“There [needs to be a] hard conversation with these vendors,” Raile said. “That’s great what they’re advertising for other portfolios, but what are they going to do for your portfolio? How transparent are they going to be with you on the performance of your specific portfolio? And how they are managing your portfolio?”

According to Wester, the right technology partners will offer a more customized solution, not just something out of a box. It’s a partnership, and an important one.

“A key point that really resonates in terms of the research that we’re doing when it comes to vendor management is that idea of the cookie-cutter model versus what a vendor is actually providing—either more personalized or actually being a partner and knowing what a financial institution is really looking for,” Wester said. “That takes time. It takes effort.”

Transparency Overrides Everything Else

A true partnership between a financial institution and a third-party vendor involves sharing goals and pooling resources and information to meet those goals. Above all else, there needs to be trust.

Although artificial intelligence has been one of the hot topics of the past year, it has been around for a very long time, dating to the 1940s. Over the past 20 to 30 years, there have been many permutations of what is often called traditional AI—and not just in the world of finance. Now, we’re living through a new boom of the technology in the form of generative AI.

Billtrust, a B2B order-to-cash and digital payments software leader based in New Jersey, has been at the forefront of these emerging AI solutions for all types of companies. In a recent PaymentsJournal podcast, Ahsan Shah, Senior Vice President of Data Analytics at Billtrust, sat down with Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research, to talk about where AI is making the most significant impact on businesses, now and into the future.

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What’s New in Generative AI

Industries have been using AI tools like anomaly detection and classification for decades. But the new wave of generative AI uses language models as a fundamentally different approach, which can then be combined with traditional AI to solve business problems. That has resulted in a lot of excitement but also a lot of confusion about what is and what is not AI.

Generative AI is a language-based capability, offering an interface that nobody expected to happen this quickly in the AI evolution. In the past, when individuals spoke in a common language, it required a great deal of modeling and training data. But with open AI, these foundational models can translate language to code, to an action language, or to SQL. “It doesn’t circumvent what could be done with traditional AI,” Shah said, “but now you have a different toolkit in the box to be able to use language in capabilities, and fundamentally all of our customers speak in certain languages. And so this offers almost a new door of possibilities and features across the stack, across the industries, across various domains.” 

Miller added: “What you’re saying is we shouldn’t really talk about artificial intelligence, but maybe about artificial intelligences. The ways that we would use these different flavors of artificial intelligence really vary from one another. The types of problems or business applications that are right for generative AI might not be right for a strictly deep learning approach.” 

Where generative AI may be most helpful is in the interface layer with customer service,

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

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

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Challenges SMB Owners Face During the Holiday Rush

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

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

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

* 91% of SMBs cited finding new customers as a key problem.

* Attracting new customers is expensive, with some merchants spending as much as 30% of their product or sales cost to acquire new customers.

* SMBs are unable to bundle products or get the same kind of scale as their larger counterparts, making their products 37% more expensive.

* SMBs don’t have the knowledge to acquire the right logistics partner to create a seamless end-to-end experience.

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

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

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

PaymentsJournalFighting APP Fraud with AI and Collaboration: A Two-Pronged Strategy for FIsPaymentsJournal Fighting APP Fraud with AI and Collaboration: A Two-Pronged Strategy for FIsPaymentsJournaljQuery(document).ready(function ($){var settings_ap40036317 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"40036317",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_433935_29",settings_ap40036317); }catch(err){ console.warn("cannot init player", err); } });

Banks Battle to Stay Ahead of APP Fraud

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

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

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

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

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

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

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

“These are authorized push payments,

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

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

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Moving Away from Batch Processing

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

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

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

The Components of Real-Time Banking

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

“As more systems process transactions in real time, it’ll be increasingly important for the legacy core systems to be able to clear and settle in real time,” Tavilla said. “Otherwise, the lag and the complexities where the different types of payments and transactions aren’t aligned in terms of the actual movement and settlement tim...

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

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

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The Overarching Challenges in Play

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

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

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

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

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

Harnessing the Power of AI

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

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

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

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

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

* The current state of the economy and how it’s affecting holiday shopping

* The increasing role of digital and physical gift cards

* What retailers should focus on to make the most of this holiday season and beyond.

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‘Tis the Season for Deals

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

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

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

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

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

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All Eyes on Gen Z

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

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

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

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

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

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

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