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

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

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

PaymentsJournalSimplifying Payment Processing? Payment Orchestration Can Help  PaymentsJournal Simplifying Payment Processing? Payment Orchestration Can Help  PaymentsJournaljQuery(document).ready(function ($){var settings_ap13833853 = { 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:"13833853",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_431758_29",settings_ap13833853); }catch(err){ console.warn("cannot init player", err); } });

Payment Processing Adds Complexity to Reconciliation Processes 

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

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

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

As Keyes pointed out, merchants aren’t payment experts. They don’t have a full command of everything available to them and don’t often understand everything they’re looking at.

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

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

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

PaymentsJournalWhy Businesses Can’t Thrive Without Digital TransformationPaymentsJournal Why Businesses Can’t Thrive Without Digital TransformationPaymentsJournaljQuery(document).ready(function ($){var settings_ap21541322 = { 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:"21541322",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_430043_29",settings_ap21541322); }catch(err){ console.warn("cannot init player", err); } });

Transforming Digitally

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

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

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

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

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

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

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

PaymentsJournalBusiness Email Compromise Scams Are Growing Threat to B2B OperationsPaymentsJournal Business Email Compromise Scams Are Growing Threat to B2B OperationsPaymentsJournaljQuery(document).ready(function ($){var settings_ap26991303 = { 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:"26991303",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_429985_29",settings_ap26991303); }catch(err){ console.warn("cannot init player", err); } });

B2B Companies Face Security Threats

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

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

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

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

BEC Scams Shoot for Larger Businesses

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

“My theory is that bad actors have pivoted to focus their efforts on larger organizations with more funds to potentially exploit as the risk-to-retu...

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

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

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

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A More Autonomous Outlook

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

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

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

Striking the Right Balance

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

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

“For the longest time, that was acceptable,” Wester said.

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

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

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

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

PaymentsJournalModernizing Reconciliations and Payments: The Urgent Need for AutomationPaymentsJournal Modernizing Reconciliations and Payments: The Urgent Need for AutomationPaymentsJournaljQuery(document).ready(function ($){var settings_ap10014073 = { 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:"10014073",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_429439_29",settings_ap10014073); }catch(err){ console.warn("cannot init player", err); } });

The State of Reconciliations and Reporting

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

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

“Approximately 25% of spreadsheets globally contain errors,” McCarthy said. “From a management perspective,

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

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

PaymentsJournalAs Banks and PSPs Look to Offer Instant Payments, Automation Will Be a Game-ChangerPaymentsJournal As Banks and PSPs Look to Offer Instant Payments, Automation Will Be a Game-ChangerPaymentsJournaljQuery(document).ready(function ($){var settings_ap20201555 = { 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:"20201555",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_428968_29",settings_ap20201555); }catch(err){ console.warn("cannot init player", err); } });

Providing FedNow Payments at Competitive Rates

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

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

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

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

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

Mitigating the Challenges of 24/7 Settlements  

Automation can be considered the golden ticket to ensuring that FedNow payments are leveraged to their highest potential. The use of automation ensures that payments are processed instantly, securely, and cost-efficiently—something that’s difficult to get from t...

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

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

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A More Sustainable Process

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

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

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

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

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

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

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

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FedNow Could Open New Angles for Credit Unions

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

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

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

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

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

“According to several studies, over 70% of consumers and businesses look to their primary financial institution—which certainly includes credit unions—to offer faster payments,

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

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

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

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P2P Expands Despite Growing Incidences of Fraud

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

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

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

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

What FIs Can Do to Quell Consumer Fear Amid Growing P2P Fraud

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

“FIs can do a lot to educate consumers that they don̵...

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

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

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

Real-Time Payments in U.S. and Australia

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

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

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

“Around 30% of the volume that was previously processed th...