The PaymentsJournal Podcast

Financial institutions are exploring new ways to attract younger savers, and their payment habits are evolving in turn. Credit cards have now edged out debit cards as the preferred choice, even among younger generations. Additionally, digital wallets and peer-to-peer methods like Venmo and PayPal are gaining significant traction in this demographic.  

Velera’s Eye on Payments study, a comprehensive annual assessment of payment choices among credit union members and other financial institutions, examines how these trends shift over time. Now in its seventh year, the research delves into the factors shaping consumer choices across various payment methods, with a particular focus on how these preferences evolve at different life stages. 

In a recent PaymentsJournal podcast, Velera’s Tom Pierce, Chief Marketing & Communications Officer, and Norm Patrick, Vice President of Velera’s Advisors Plus, discussed the findings from this year’s survey with Brian Riley, Co-Head of Payments for Javelin Strategy & Research. They also explored how credit unions can leverage these insights to better serve their members.

After five years of debit cards dominating payment preferences, Velera’s research reveals a notable shift toward credit. This year, 37% of respondents indicated a preference for using credit at the point of sale, surpassing debit at 35%. Relatedly, 40% of credit union members reported applying for a credit card within the past year.

Source: Velera’s Eye on Payments 2024 report

Among younger demographics, the trend is even more pronounced. Half of both older and younger millennials, as well as Gen Z respondents, stated that they had applied for a credit card in the last 12 months. Velera’s findings show a 40% preference for credit as the primary payment method within these younger age groups.

“That generational flip is really important in the credit union industry because of the aging membership,” said Riley. “Being able to react and have the right offerings in place for the younger generations is something that’s essential for credit unions.”

Mobile wallet usage has seen a significant surge in recent years. The percentage of respondents using a mobile wallet at least a couple of times a month jumped from 27% in 2022 to 34% in 2023, and this year, that figure rose to 50%. Overall, about 60% of credit union members plan to implement mobile wallets within the next six months. Not surprisingly, the lion’s share of this activity is driven by younger consumers.

Source: Velera’s Eye on Payments 2024 report

This demographic also expresses strong concerns about fraud and identity theft, highlighting the importance of engaging with them to build trust and increase their comfort with the fraud prevention tools issuers offer.

Another payment method that has experienced a substantial increase is peer-to-peer (P2P) payments. Just 12% of respondents reported using P2P as a primary payment method in 2023, but that number more than doubled in 2024, rising to 25%.

“As we look at the younger generations, there are a lot more people who are using P2P as a primary method,” said Patrick. “It’s important that they be educated with the ins and outs of using those different solutions. When you have money sitting in your Venmo account, it is outside of the financial institution. It may not be insured, and it may not be a fraud check for losses.

“With the boomer generation, there isn’t a ton of interest in P2P,” he said. “In fact, 62% of those surveyed said they do not use P2P type of methods at all. But that means that there is some that do, and there could be some opportunity to encourage them to do more.”

Card design is also top-of-mind. In fact, more than half of credit union members said that card design influences what type of card they choose to use on a regular basis.

“That was up from 39% last year, and we were pretty amazed with the number last year,” said Pierce. “It seemingly has taken place overnight.”

These design preferences can include various factors, such as the material of the card, its overall design and whether it offers contactless payment capabilities. Is it made from sustainable materials? Is it sleek? Or perhaps an affinity card that showcases their favorite sports team?

Card design is an especially important consideration for younger consumers. Among Gen Z respondents, 82% indicated that the design of the card was a key factor in their decision-making.

“At the end of the day, it’s a billboard for the financial institution,” said Riley. “It’s important to have that card engineered properly with a good-looking design, and have all the features that you’d expect, such as chip and pin and the contactless tie-in.”

Given the growth in credit card usage, it’s an important time for credit unions to look at their card programs holistically. Credit unions are increasingly targeting younger generations, and more than half of this group said they applied for a credit card in the past 12 months.

“How easy is it at your credit union to apply for a new card?” asked Pierce. “You’ve got to look closely at that and make sure you have a quick and effective origination process. Offering a good reward structure and customizing that card so it appeals to a wide range of age groups is also essential. And certainly, tying back to the younger group is an urgent need across the board.”

The post Shifting Trends: Credit Cards and P2P Payments Take Center Stage appeared first on PaymentsJournal.

Over the past five years, the U.S. has experienced an average of $18 billion annually in natural disaster-related damages. Millions of individuals are impacted by natural disasters each year, facing financial challenges such as damage to homes, the need for temporary shelter, and the replacement of personal belongings and food.

With delays in funds distribution due to legacy payout methods and outdated processes, there has been a focus on the benefits of using prepaid cards for payouts.

One popular solution to help people recover is prepaid cards. In a recent PaymentsJournal podcast, Marchelle Becher, Business Development Executive with B4B Payments and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, spoke about how these cards have become an essential tool for addressing the needs of disaster victims.

The Federal Emergency Management Agency (FEMA) has been considering changes in the way it provides financial resources for victims of natural disasters. Given the frequency of disasters, aid programs and funders are becoming more proactive rather than reactive.

“We’ve seen this past year that while we’re reacting to Disaster A, Disaster B is hitting,” said Becher. “And when you look at what type of recovery aid is needed, there’s a gap between those who need immediate aid for basic necessities versus the need for long-term assistance.” Prepaid fills the critical gap to deliver funds immediately to those without bank accounts and to those who don’t have access to their bank cards due to disasters.

FEMA recognizes that prepaid cards are well suited to meet the distribution needs when disaster strikes. Traditional payment methods can be slow and costly, unlike prepaid cards that can be issued immediately, reloaded securely and simplify the reconciliation and reporting process. The flexibility of prepaid cards allows funders to set spend controls (closed-loop) for specific merchant purchases or (open-loop) allowing recipients to make purchases based on their individual family needs. Funders and recipients prefer the convenience and security of reloadable prepaid cards or virtual cards that can be used immediately for online purchases or loaded to a digital wallet. And the process is very streamlined.

Unfortunately, survivors of natural disasters are left to navigate complex bureaucratic processes and the painful task of putting their lives back together. Dealing with the loss of property, emotional trauma and potential change in employment is compounded when trying to navigate the complex financial aid paperwork leading to delays in aid disbursement,” said Becher.

“It can be months to years before funds are ever in the hands of those that need them. Most recently we’ve seen it with Maui, where over a year after those fires hit, there are still people who haven’t received any funds.”

Another benefit of prepaid cards is the ability to track how the funds are being used. These programs receive funds from many different organizations, and often, the funders want to determine how the money should be spent. With a prepaid program, they can restrict those funds to be used solely for food and housing, or make them inaccessible via ATM.

At the same time, the ability to track spending gives funders insight into the needs of those affected. They can see how much is being spent in each category, as well as how quickly the funds are being used—whether that’s within the first couple days or over a longer period of time. Features like dynamic spend control and just-in-time funding help organizations improve cash flow and reduce fraud risk.

“Accountability by both the recipients of the funds and also those who are in charge of distribution of funds is extremely important,” said Becher. “This information will help in the coming months and years as we continue to deal with natural disasters and build humanitarian aid programs to help. Based on the configurability of a program, the reporting and analytics can show that funds were distributed and used as intended.”

It’s important that the entities behind these humanitarian efforts do their research and speak to various payment providers. Having multiple payout methods is key, whether it’s cash from a cardless ATM or a prepaid card. It could even be an ACH payment into someone’s existing bank account, although in the wake of a disaster, even those who are employed may not have access to their bank account or phone.

“I would much rather be providing a digital or physical card that has protection as opposed to giving somebody cash,” said Becher. “We’ve seen that in desperate times people will harm someone for very little financial gain.”

Another advantage of physical prepaid cards is that they can be pre-ordered and handed out to individuals in need, or at locations where food, water, and medical assistance is being provided.

“The beauty of prepaid programs is that for the most part, you don’t incur any expense until you actually start issuing cards,” said Hirschfield. “You can have a stack of cards that essentially have no value on them, and they’re valueless until you actually load and activate the card. What that means is that you’re not sitting on liability of cards for months at a time waiting for a disaster. You’re ready to act quickly and put these programs into place, because you have that setup work already done.”

While there’s a great deal of regulatory oversight in funding and distributing these cards, it’s even more important to be prepared and ensure that everyone is following the rules, collecting the information needed, and making sure the programs are compliant. Organizations providing aid to disaster victims should address all of these concerns in order to do the most possible good for those in need.

“No one’s bringing these disasters on themselves,” said Becher. “We can’t lose people when there are solutions out there that can help bridge the gap, get them back into the workplace and continue rebuilding their lives.”

The post Prepaid Cards: A Vital Aid for Disaster Relief appeared first on PaymentsJournal.

The payments industry has seen such rapid growth and dramatic technological advancements in recent years that conferences have become a crucial way to stay connected to the pulse of the space. There are few bigger industry events than Nacha’s Smarter Faster Payments 2025, which will kick off in New Orleans next spring.

In a recent PaymentsJournal podcast, Peter Tapling, Managing Director of PTap Advisory and a member of the Conference Planning Committee, Ashley Mustico, Director of Education and Accreditation at Nacha, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the topics on tap for next year’s conference, the exhibitor experience, and the multitude of ways that payments professionals can make new connections.

Nacha might be most associated with the ACH network it governs, but the Smarter Faster Payments conference encompasses the entire payments ecosystem. Last year, the conference drew over 2,200 attendees, including professionals from financial institutions, fintechs, and organizations that serve as end users of payments services.

“It’s like the prom of the payments industry,” Tapling said. “You’ll run into a lot of people who support the ecosystem, everything from consultants and service providers to regulators, not just the staff who write the rules around the ACH.”

Smarter Faster Payments also differs from other conferences because the speakers and leaders aren’t whisked away once their talk is complete. Attendees will get the chance to meet and engage with the speakers, exchange business cards, connect on LinkedIn, and carry the conversation forward.

“The attendees come because they know that the conference offers unmatched access to first class payments education,” Mustico said. “People know that when they come here, they’re going to walk away with fresh ideas, brand new partnerships, the exchange of business cards, and practical, tangible solutions to everyday concerns that they’re facing at their organizations.”

There will be 10 main topics, or tracks, that the educational sessions will cover. Many of these sessions will provide different solutions to the same central question—how do organizations provide the innovation that their customers deserve and the frictionless experience that they crave, while staying compliant and keeping them safe at the same time?

The tracks were selected to cover the full spectrum of the payments industry, highlighting innovations across various payment rails, evolving regulations shaping the industry, and strategies for mitigating fraud and risk.

One of the innovations being implemented in every facet of the payments industry is artificial intelligence. Organizations are using AI to detect fraud, enhance security, and drive efficiency, and that is why there is a new track at the Smarter Faster Payments conference that is dedicated to AI.

“We’re going to see a lot of Rule 1033 content, which came out of the CFPB quite recently,” Tapling said. “The conference planning committee had hundreds of session submissions, and it’s always a tough effort to read those, understand those, and make sure we have a great mix of content and speakers and not too much overlap.”

In addition to the informational content, there will be recognition for those professionals who have been selected by the 15 under 40 program. The program is for under-40 professionals who have made significant impacts on the payments ecosystem.

“I would be remiss if I didn’t mention our awesome keynotes this year,” Mustico said. “We have Mike Massimino, who’s coming to talk about the importance of cohesive teamwork, which he knows just a little bit about from his time as a NASA astronaut, where he worked on the Hubble Telescope. Then we have Kyle Sheely, who’s an author and an influencer, and he’s going to be talking about nurturing ideas that can lead to more innovation.”

There will also be plenty of networking opportunities. There are openings to connect during breaks, in the exhibit hall, and plenty of chances to meet over breakfast or dinner.

“I throw in preparation, preparation, preparation,” Tapling said. “That means that once you get registered, if you go to the app you can see the attendee list and identify the people that you want to meet with. But you want as much as possible to not overlap the education sessions with meetings.”

To eliminate potential overlap with the sessions, there are dedicated networking events built into the conference schedule. Some of the events will be tailored to various audiences, such as a gathering for lawyers in the industry, and a reception for professionals that hold a Nacha accreditation.

There are also activities that are available to all registered attendees, such as the exhibit hall networking event on Monday. The event occurs in the exhibit hall after all the educational sessions are over, so attendees don’t have to miss an educational session to meet the vendors and see the innovations. The conference has historically had over 90 exhibitors.

Attendees can also check out the George Throckmorton Innovation Center, which is sponsored by the London Stock Exchange Group. The Innovation Center will have an array of fintech demos so professionals can see the new technology solutions coming down the pipeline.

And finally, there’s the Nacha accreditation awareness center, where attendees can consider one of the organization’s accreditation programs and learn about the scope of the exam and how to successfully prepare for it.

“My favorite event every year is the Tuesday Night Out, which is a fantastic opportunity to let loose with your new contacts,” Mustico said. “There’s usually dancing, there’s great food, and it’s just a great way to put an end cap on a fantastic event.”

In the thriving payments industry, conferences are one of the most important ways to learn about trends and make contacts with other professionals. Nacha’s Smarter Faster Payments 2025 is a unique opportunity to learn, connect, and grow, and it takes place from April 27-30 in New Orleans.

“As an attendee, it’s important in New Orleans not to get hung up going for beignets at Cafe du Monde,” Riley said. “There’s a real purpose to this conference and the educational tracks are a big deal. Nacha has a prime name in the payments industry, and it sounds like the place to be. “

With so much going on, a booth in the exhibit hall is a great anchor where organizations can meet with customers and colleagues.

“If you’re thinking that you want to get in on the action of the exhibit hall, there’s still time to secure a booth at Smarter Faster Payments 2025, but our booth rates are going up after January 1,” Mustico said.

The post Nacha’s Smarter Faster Payments Conference Is an Industry Who’s Who appeared first on PaymentsJournal.

Money 20/20, one of the largest financial conferences in the world, has become a must-attend for payments, fintech, and banking professionals. This year, hot topics included instant payments, cross-border payments, and the integration of AI into fintech. However, the acceleration of payments innovations has also caused a decided shift in the show’s tone.

In a recent PaymentsJournal podcast, Oscar Munoz, Vice President of Sales at Euronet Worldwide, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, discussed their experiences at Money 20/20, their insights on the payments industry, and the factors driving payments modernization.

Thousands of companies at Money 20/20 showcased innovations spanning everything from cards to account-to-account payments. Alongside these advancements, there was just as much emphasis on fraud prevention and risk management.

As payments continue to accelerate, security has become a pressing priority. One of the most talked-about topics discussed at Money 20/20 was the incredible growth of instant payments. The rising adoption of real-time payments has driven a demand for modernized platforms capable of supporting them.

At past conferences, financial services firms often adopted a “wait-and-see” approach, observing how innovations might impact the industry before diving in themselves. However, that mindset has shifted. The industry is already embracing next-generation payment solutions, including instant payments, cross-border payments, and stablecoins.

“There’s no more waiting and seeing, because to take advantage of any of those payment options for your customers, you must have a modernized payment infrastructure,” Wester said. “The assumption is you’ve used the last decade to modernize your payment infrastructure. If you haven’t, you had better get going, because everything that’s going to happen from here requires that you have gotten to that point.”

McKinsey conducted a recent study about the costs of delaying a payments modernization project, which found that keeping and maintaining legacy systems was draining roughly 70% of organizations’ IT budgets, and it would only become more expensive as time goes by.

“Many have thought that modernization projects are something for the next guy to do,” Munoz said. “When you see what is happening today, which is you have 30-year-old code that was great and built for purpose, but then that updates are coming out twice a year, minimum. People are realizing that you have to go through (payments modernization). It’s no longer the next guy, you are the next guy.”

Despite the various alternative payment methods available, cards are expected to maintain their dominance. The card market is projected to grow at a compound annual growth rate of 7.9% from 2023 to 2028, driven by an increasingly digital landscape. In three years, Euronet estimates that 95% of card payments in developed markets will be contactless, while virtual cards continue to gain traction. 

While cards remain a staple, instant payments are experiencing impressive growth, especially in markets outside the U.S. For example, instant payments are growing at a CAGR of 30% to 40% in countries like India and Brazil. However, the appeal of instant payments extends beyond speed—they also play a pivotal role in accelerating financial inclusion by reducing costs and expanding access for underbanked populations. 

As the array of payment options proliferates, payment orchestration is becoming essential. Recent studies show that 60% of enterprises with revenues exceeding $500 million are considering payments orchestration platforms. These platforms can improve rates by up to 20% while increasing security and scalability.

“It’s all about that optionality for businesses and consumers,” Wester said. “You have to support all those options, but then you have to be able to support them across the scale. You also have to think about risk and compliance across that scale, because there are no oopsies in payments. You have to be able to do it correctly from day one.”

The increasing number of options might be one of the factors that have some institutions on the sidelines. For instance, there are two instant payments rails in the U.S.—RTP and FedNow—and both are growing rapidly.

“Organizations might be waiting to see which one is going to win, but both are going to continue to grow,” Munoz said. “It’s important that you’ve got to have a foot on both rails. If you look ahead, at some point the ecosystem is going to converge in a way that it won’t matter if I pay from my bank account or if I pay from a card, I’m the same consumer no matter which form of payment I use.”

As the payments infrastructure converges, consumers expect real-time information and access wherever they are in the world.

“When you ask a consumer what they want in terms of payments, oftentimes they can’t tell you what they want, but they know they want it,” Wester said. “What’s interesting is how quickly things become expectations, where consumers didn’t even know what they wanted until they experienced it. Once they experience, say, tap-to-pay, now they want it every time.”

Organizations that build payments products will have to anticipate customer expectations and design products with that in mind. To meet these demands, solutions should be cloud-native to maximize the flexibility and usability. They should also leverage modular microservices, with 100% API availability, enabling seamless integration and scalability.

Additionally, the platform must incorporate a distributed architecture to guarantee uninterrupted operations and ensure the organization remains always on.

“To make the switch, a lot of institutions are doing a phased approach,” Munoz said. “How do you do modernize when you have real traffic? A company can’t go from the ground to the cloud by flicking a switch, they need a platform to ensure their business today is taken care of. Then they are creating this day one, day two, day three path to innovation, without putting their current business at risk.”

The risks to institutions have been well-documented, and they are one of the main reasons that lawmakers have begun to implement a regulatory framework around fintechs.

“The first generation of fintech was more tech than financial,” Wester said. “There was that sense of move fast and break things, and that’s the way you come at a technology problem, but that idea doesn’t work in financial services. Tech is great, innovation is great, but when a customer goes into a store, they want to pay, the merchant wants to receive, and everybody wants to be whole at the end. That is a financial services arrangement, not a technology relationship.”

To modernize to today’s standards, an organization needs a platform that can speak the language of financial services. They also need a platform that can be a single technology stack for the myriad of payment types. However, just as important as the technology is the expertise of the company that provides it.

“Experience makes all the difference,” Munoz said. “It’s extremely important to be able to (modernize) with a company like Euronet. We have the robust, established organization to be able to manage these projects, not just at the rhythm we choose, but at a rhythm where we can dance with the client that is doing the modernization project.”

The post Payments Modernization Can’t Be Delayed Anymore appeared first on PaymentsJournal.

Organizations seeking more flexibility and sophistication in devising transaction fee and commission structures are increasingly turning to rules-based fees engines.  Billing systems are designed to handle invoicing and collect payments, but they are limited in their ability to help companies create new fees and commissions.

Rules-based fees engines allow payment processors to stay competitive and profitable, enabling them to offer new value-added services, develop creative incentive programs, create new revenue streams, and respond quickly to market shifts. In a recent PaymentsJournal podcast, BHMI’s Chief Technology Officer Mike Meeks and Senior Program Director Cheryl Fitzgarrald spoke with James Wester, Co-Head of Payments at Javelin Strategy & Research, about the advantages of rules-based fees engines and who benefits from them.

Rules-based engines allow fees and commissions to be configured from any combination of attributes, such as the payment method used, the amount, the merchant category, and the time of day the transaction occurs. Unlike traditional billing systems, a rules-based fees engine provides the ability to measure and test the financial viability of new fees and commissions before they are implemented.

“Back in 2004, we were approached by one of the country’s largest debit networks, which was not able to introduce new products or new pricing strategies without long software development cycles,” said Meeks. “All of their rules for how they price things were embedded in code, which made it very slow and costly to roll out new structures and to respond to what their sales teams were asking them to do in a timely manner.”

“They needed a solution that was flexible and could meet unforeseen future requirements,” he said. “That’s what drove us to the concept of a rules-based engine and the kind of open-ended capabilities it would provide. For more than 20 years now, we’ve been implementing these solutions for companies all over the world.”

This solution gives companies the ability to be creative and innovative, supporting any business opportunity, client relationship, or product offering that marketing and sales bring to the table. It also speeds up time to market, as new fee and commission structures can be quickly configured and implemented.

“Research is showing that there is a requirement now in payments for companies to be able to pivot quickly, to be able to bring products to market quickly and to not necessarily be held hostage by those development cycles,” Wester said.

A modern rules-based fees engine should have the flexibility to create any type of fee or commission on any type of payment transaction. This includes card-based transactions as well as account-to-account and real-time payments. It should also have no limitations on the types of fees or commissions that can be configured and should allow for additions and modifications without requiring software changes or downtime. 

Another important factor is that the system must be able to access payments data in real time, applying the appropriate fees or commissions while the transaction is still in flight. Finally, rules-based fees engines should provide companies with a real-time view of fee revenues, enabling them to analyze the financial impact of those revenues and easily determine if adjustments are needed.

A rules-based fees engine integrates data from multiple sources. The most common way to access data from these sources is real-time APIs, but in some cases, automated file-based mechanisms are required, depending on what is supported by the originating data source.

“The typical sources that we see are credit and debit card transactions that an authorization system is writing to a transaction log file, a clearing system that creates a clearing file for POS dual message systems, and a card network that creates a settlement reconciliation file,” said Meeks. “A modern rules-based fees engine can use data from any and all of those sources to assess fees and commissions as a transaction is being processed.”

Once that data is collected, companies have discovered a wide variety of use cases for the technology. “The possibilities are unlimited,” said Fitzgarrald. “Some common use cases would include things like calculation of gateway fees, processing and service fees, and recurring fees. They are also used to calculate many different types of commissions. If you think about it, a commission is just like a fee, but the money goes the opposite way.”

Rules-based fees engines have allowed companies to be more creative with their services and pricing structures. Fees can vary based on time sensitivity, such as higher fees during peak business hours and lower ones during off-hours. Companies can also introduce fee models tied to loyalty programs or specific merchant partnerships, incentivizing behaviors that increase transaction volumes or customer loyalty.

Once a company implements a rules-based fees engine, the infrastructure allows them to better analyze and address important questions like which fees bring in the most revenue, which commissions provide the most incentive, and whether a particular service can be expanded or rolled out to other customers.

“One of the amazing parts of this is the approach to testing,” said Wester. “Testing is very difficult and time consuming. The idea that you can test a product or a fee, and pull it back if it doesn’t work, gives you a tremendous amount of flexibility.”

Any company that processes transactions and has a need to calculate fees and commissions can benefit from this technology.  “Probably the single most important reason that I’ve heard for people adopting rules-based fee engines is that they are money makers,” said Fitzgarrald. “They allow the company to rapidly configure creative fee and commission models and let them pivot quickly in response to changing market conditions. All of this Is done without the cost and delay of code changes.”

The post How Rules-Based Fees Engines Drive Innovation appeared first on PaymentsJournal.

As the world hurtles headlong toward real-time payments, speed and efficiency have often been prioritized over security. However, with faster payments comes faster fraud, and just as organizations deploy technology to streamline their systems, criminals are deploying complex schemes on a global scale.

In a recent PaymentsJournal podcast, Dal Sahota, Director of Trusted Payments at LSEG Risk Intelligence, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the prevalence of fraud, the challenges it presents as payments accelerate, and the ways organizations can defend themselves.

Criminals seize upon any weakness they can exploit. They might imitate genuine companies or individuals using deepfake IDV profiling and attempt to manipulate organizations, or use authorized push payment scams to defraud vulnerable individuals.

“Is there ever a day where I don’t hear a new anecdote about fraud, or new evidence of fraudsters’ sophistication?” Sahota said. “The sophistication is at a scale we’ve never seen before, and it’s across the globe. It’s not one or two individuals, its highly sophisticated networks that are creating a dramatic impact and financial consequences across the ecosystem.”

Traditionally, payment systems had built-in delay payment processing, particularly to provide a buffer for merchants, customers, and institutions. The added time gave all parties an opportunity to ensure that the transaction was legitimate and authorized.

As technology has accelerated payment processing, the objective has shifted to delivering funds to recipients in real time. However, this eliminates the longstanding safety net, as instant payments are often irrevocable.

“A good example is credit cards, which traditionally took three days to reconcile,” Riley said. “It was practical because the business model was built in the 60s and 70s and that delay was inherent. Now even debit card payments, or a clearance on a check, they happen in a snap. It’s important to have controls on the front end of the process rather than on the back-end settlement.”

Guardrails are even more critical as cross-border payments gain traction. Fraud is more difficult to catch when payments are sent across different jurisdictions, and criminals know that.

“It’s a payments perfect storm where on one side you have faster payments, which create a lot of benefits across the marketplace,” Sahota said. “But at the same time, on the right-hand side of that storm, the deep clouds of fraud are exposing vulnerabilities due to the speed at which payments can move today.”

Faster cross-border payments face issues on several levels. Some countries have fraud controls built into their financial infrastructure that make it simpler to conduct bank account verification, and to identify and share data on fraudulent accounts and cards.

“Banks are typically linked through the central bank, so there’s an easier flow in countries like the U.S. or Canada,” Riley said. “Without that link, there’s no universal banking rule for fraud mitigation or vetting payments. You have that complexity where it’s going faster, it’s crossing borders, and countries have different standards for fraud management throughout.”

Fraud vulnerability is especially pronounced in industries that are less regulated or lag behind in adopting digital payment processing. These organizations are more likely to rely on paper-based or email-based communications, which create exploitable weaknesses for criminals.

Authorized push payment fraud, where criminals send phony invoices or pose as vendors, has become a rampant threat. Criminals know it can be difficult for larger organizations that receive invoices from multiple supply chains and multiple vendors to keep tabs on each invoice.

“When an update comes through from a vendor that their bank details have been updated, there aren’t effective ways for companies to carry out verification on all those types of invoices and all the updates coming through,” Sahota said. “That creates high exposure on the side of corporates, who might not have the anti-money laundering or fraud controls to mitigate that exposure.”

Within the payments infrastructure, there is often an assumption that companies will establish their own frameworks to manage risk. In contrast, regulators typically assume that consumers lack the knowledge or the resources to protect themselves. While consumers protection is crucial, the risks faced by organizations can be equally damaging.

“Instead of consumer payments where you’re moving high-volume, low-value payments in the thousands of dollars, corporates are moving low-volume, high-value payments in the millions, or tens of millions of dollars,” Riley said. “If you picture a multinational company where invoices are coming in, It’s a great environment for fraud.”

Because criminals are constantly probing for weaknesses, organizations require multiple layers of defense. Protections should be in place at every critical touchpoint: during customer onboarding, when users make account changes, and as transactions occur.

“It’s not one defense, it’s multiple defenses,” Sahota said. “At any touch point where a customer—or a potential fraudster—is engaging with your business, you want controls and defenses in place. Continue to update them on a cyclical basis because as criminals get smarter, they’ll find ways to sophisticate and infiltrate an enterprise. “

One of the reasons why it is so critical to have ongoing fraud prevention initiatives is because, in many large companies, there can be delays in implementing new solutions and procedures. On the other hand, criminals don’t need meetings and approvals to shift course.

“How do we get in front of the problem and get ahead of the fraudsters, when they seem to be somewhat ahead, if not way ahead, of the market?” Sahota said. “The agility of the fraudster means not all these problems can be solved by one mechanism.”

In discussions about innovation, faster payments, and new fraud prevention solutions, the impact of fraud can sometimes be dismissed.

“We should not lose sight of the emotional impact fraud creates,” Sahota said. “It could be for anybody—brothers, sisters, moms, dads, grandparents—there’s no immunity here. At the corporate level there can be reputational impacts, but there are also impacts to employees. If an accounts payable member pushes out a payment to a fraudulent vendor, they may have the fear of being fired or facing repercussions.”

Fraud has such far-reaching impacts on both a corporate and individual level that it should always be top of mind for organizations. That is especially true as faster payments continue to gain traction.

To combat that threat, many companies are turning to solutions like LSEG Risk Intelligence’s Global Account Verification platform. The platform was specifically designed to combat authorized push payment fraud—it is a global account verification product which allows customers to input key data elements and verify a recipient before a payment is issued.

“It provides greater certainty that you’re not getting duped out of funds, that you’re not getting scammed,” Sahota said. “There is greater certainty at the point of payment initiation, so an organization knows that the money is going to land in the right hands, and not the wrong hands.”

The post As Payments Speed Up, Slowing Down Fraud Is More Critical appeared first on PaymentsJournal.

Prepaid cards are in the midst of a dramatic transformation. With the incorporation of digital wallets, contactless payments, and artificial intelligence, prepaid cards have quickly become one of the most popular payment tools.

In a recent PaymentsJournal podcast, Mani Farhang, Vice President of Product at Fiserv Gift Solutions, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the key innovations occurring in the prepaid space and the ways merchants can leverage them to drive customer engagement.

The prepaid card market was once dominated by financial giants like Visa and Mastercard, but PayPal and Apple have emerged in the industry. And it’s no coincidence that these two companies also offer two of the leading digital wallets.  

“The themes in the industry are the broader shift to digital payments and increasing integration into first-party and third-party wallets,” said Farhang. “Our research indicates that 70% of consumers have downloaded a merchant app to store gift cards and fulfill loyalty rewards. This is driven by a generational shift—millennials and Gen Z are more likely to use digital gifting and take advantage of stored value in loyalty programs.”

In the prepaid industry, Starbucks has been the beacon for other brands to follow due to its success with end-to-end loyalty programs. One important aspect of Starbucks’ prepaid program is how it bridges between physical and digital gift cards.

For many consumers, a physical gift card is their introduction to a brand. Organizations who follow Starbucks’ lead and offer customers the means to digitize their cards into a stored-value wallet can use the initial interaction to introduce consumers to their loyalty and reward program.

“That incentivization makes for a more immersive experience for the consumer, not just in gifting but in self-use,” Hirschfield said. “There is also the opportunity to engage customers beyond the value of the initial card. For merchants, they don’t want the initial prepaid card to be the only interaction—they want it to become the start of a cyclical relationship.”

Merchants have an opportunity to expand their prepaid program by upgrading their payments terminals to support contactless payments. Contactless payment through near-field communication (NFC) technology has revolutionized the payments industry, and NFC has begun to gain traction in prepaid.

There has also been the emergence of omnichannel, multi-purse wallets, which are first-party wallets that act as stored-value containers for multiple funding types. These wallets give consumers multiple ways to fund their stored-value wallet, whether through gift cards, pay-by-bank, debit cards, or credit. For merchants, it’s another way to engage and reward loyal customers.

“Moving forward, there is the opportunity for brands to offer rebates and rewards, and even integrate third-party health and wellness programs into their digital ecosystem,” Farhang said. “The orchestration of disparate payment instruments into one ledger is advancing the integration with contactless payments.”

These instruments are frequently contained in digital wallets, which are increasingly becoming the primary option for consumers, even in brick-and-mortar transactions. Businesses should have a strategy to leverage digital wallets so they can reward consumers and pre-load funds into wallets, which is a key opportunity to offer discounts and create exclusivity.

Many mid-tier businesses utilize platforms that provide white-labeled apps and digital wallets that can be integrated with a merchant’s existing app, which allows them to merge loyalty points from multiple brands into a single source. Though first-party wallets are a powerful tool, third-party wallets like Apple Pay and Google Wallet should also be incorporated in an end-to-end loyalty program.

“The more you engage with a customer the more you remove them from the traditional transaction process and bring them into a lifetime value scenario,” Farhang said. “Acquisition costs will decline because the brand is driving higher engagement. It can be a powerful tool for merchants because prepaid cards can increase the amount of the average order and drive repeated transactions.”

Making prepaid transactions more secure is another way to increase customer satisfaction. Fraud is a hot-button issue within the prepaid space, but it’s also an area where another emerging technology—artificial intelligence—can make an impact. AI’s superior pattern recognition abilities make it an efficient tool for detecting fraudulent activities in real-time.

“AI can be implemented to understand if the behaviors of purchase match the existing behaviors of the customer we have engaged with and understand,” Hirschfield said. “The less anonymous the purchases, the more those technologies can identify when purchases seem suspicious. Fraud and scams won’t ever be eliminated, but the prepaid industry can take more steps to mitigate them.”

E-commerce merchants can use AI to vet both B2B and B2C accounts, because machine learning can collate signals from a range of business data and fraud detection programs in near real-time. This functionality can help merchants with decisioning and authorizations, which is often a convoluted and cumbersome process.

There are also ways to implement technology that can reduce fraud at physical locations. At a retailer, a cashier might get an alert if something about a purchase looks suspicious, and they could ask the customer a series of questions to ensure the purchase is legitimate.

Although fraud will always be a concern, it hasn’t slowed the rapid expansion of the prepaid market. Many businesses want to offer branded prepaid cards, but there are often barriers to entry. For this reason, third-party platforms have emerged to provide merchants with a way to get their prepaid products to market sooner.

Prepaid-as-a-service has been driven by the overall shift to digital payments, but it is also extremely effective in certain use cases. In the gig economy, for instance, prepaid cards are often used as a payment instrument for freelance contractors.

Many governments utilize prepaid cards to disburse payments to their citizens for various reasons. Corporations are also increasingly giving prepaid cards to their employees as incentives for loyalty or performance.

“Whether it’s a retailer or a government entity, their priority is serving their customers or citizens,” Hirschfield said. “The best practice is often for them to focus on providing their products or services and implement best-in-class back-end systems to run their prepaid programs.”

To achieve an optimized prepaid program, organizations will have to leverage new technologies, particularly platforms that facilitate personalization. Merchants have more customer information than ever, and AI can use that data to supercharge recommendation engines, making them more contextual and customized.

Artificial intelligence is also the engine used to create the artwork and messages that drive the personalized wrapping and unwrapping experiences that have become a popular part of digital gifting. “Digital gift cards are on the rise, and digital wallets will continue to be at the core of change as more of our lives become digitized,” Farhang said. “The move to digital will continue, and there will be a convergence with the physical in a single stored ledger. The ground is shifting rapidly in the prepaid space—though gift cards are one of the most common applications for prepaid.

The post Prepaid-Powered Loyalty Programs Drive Customer Engagement for Merchants appeared first on PaymentsJournal.

As fraudsters become more innovative in their schemes, Nacha is rolling out new rules to address emerging fraud risks, particularly scams involving business email compromise, vendor impersonation, and the increasing use of money mules.

These key changes, centered around the ACH rules, began rolling out in October and will continue through 2026.

In a recent PaymentsJournal podcast, Glenn Fratangelo, Head of Fraud Prevention Product Strategy and Marketing at NICE Actimize, and Suzanne Sando, Senior Analyst of Fraud and Security at Javelin Strategy & Research, discussed what financial institutions need to do to enhance their fraud detection programs to better protect both banks and customers.

There’s no doubt that authorized fraud is on the rise. Fraud threats have increased in both volume and complexity, especially as payment innovations evolve to keep up with advancements in technology, as well as consumer and business needs.

“Javelin has noted these increases over the last few years in terms of imposter scams, fraud, and other new activity,” said Sando. “Anecdotally, we’re hearing so much about imposter activity, which is becoming more sophisticated and convincing. It relies on that sense of urgency for the unsuspecting customer to act, and it’s not going to go away anytime soon. The digital and fast-paced nature of payments has really emphasized the importance of dealing with the problem.”

In the past, Receiving Depository Financial Institutions (RDFIs) managing ACH transactions on behalf of their customers could take a more reactive approach, handling each transaction as it came through. The responsibility for detecting fraud primarily rested with the originating institution, or ODFI. However, the new rules now hold RDFIs accountable for catching fraud in real time—or as close to real time as possible.

This shift means actively reviewing suspicious activity, flagging transactions that seem off, and taking the initiative in returning funds that do not belong in certain accounts. RDFIs can now return questionable transactions, and ODFIs have more leeway \to request returns when issues arise on their end. Starting in 2026, these monitoring requirements will become even more stringent.

In terms of operational burden, RDFIs will now bear greater responsibility for real-time fraud detection and case management to effectively identify and prevent fraud.

“Traditionally, that fell under the purview of the ODFI, but with the shift RDFIs will have to dedicate resources to monitor suspicious transactions and potentially fraudulent activity that is incoming, something they previously did not have to do,” said Fratangelo. “That’s going to create increased workloads for an already stretched operations team, which will now be required to flag and investigate suspicious incoming transactions in real-time.”

Larger financial institutions will need to implement new machine learning models, which will require additional governance time and introduce another layer of complexity to their existing fraud detection systems.

“Larger institutions may have the capacity and ability to scale their teams, but we all know quality investigators are hard to find,” Fratangelo said. That’s why there’s a ramp up period to train analysts and investigators and get them up to speed.”

Smaller institutions will face even more difficulty, as they often lack effective automation. As their transaction volumes grow and new alerts are added, scaling up their workforce can be cost-prohibitive. These costs are sometimes passed on to customers in the form of lower interest rates or higher fees.

Generative AI and deep fakes are making this situation even worse, exposing corporations to business email comprise and account takeovers. Previously, the RDFI took a passive approach to matching account numbers, but now it’s not just the account number that needs to match—the individual must also be verified, and the organization needs to ensure the recipient is not a bad actor.

“It can become more difficult to maintain business as usual if you’re a smaller institution, like a community bank or credit union,” said Sando. “With operational shifts like these, there are often also impacts to the customer experience for the customer, particularly when financial institutions personnel are now faced with spending significantly more time manually reviewing suspicious transactions instead of spending time with their everyday customer needs.”

For financial institutions, fighting these threats involves more than just securing incoming funds. They need to focus on the accounts and applications they receive, ensuring that they aren’t being created with synthetic or fraudulent identities.

“Fraud is all interconnected,” said Fratangelo. “It’s not just a singular fraud typology that’s coming through. But we have to follow the breadcrumbs, as we’re seeing more responsibility shift to receiving banks to address the current issues. Ultimately, it’s about protecting customers, and we need to ensure protections are in place to protect those customers. Bad actors can’t have access to these funds.”

The post How FIs Can Get Ready for Nacha’s Upcoming New Rule appeared first on PaymentsJournal.

 The holiday season is here, bringing with it a host of celebrations. From office parties to family gatherings, shoppers are navigating an evolving landscape of gift-giving traditions. In our latest podcast episode, we dive into how consumer trends, new technologies, and the timeless appeal of gift cards are shaping the way people are gifting this season.

In a recent PaymentsJournal podcast, Sarah Kositzke, Director of Research, and Jonathan Soffin, VP of Global Brand & Product Marketing at Blackhawk Network (BHN), chatted with Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. They discussed the results of BHN’s Holiday 2024 Shopper and Gift Card Insights, the trends driving holiday gift card purchasing, and the accelerating momentum of the prepaid industry.

One of the most notable trends in recent years is that consumers are no longer buying gifts for just a single occasion. Instead, they’re shopping for multiple events throughout the holiday season, including school occasions, office parties, and get-togethers with friends and extended family.

“There are all these great moments of celebration throughout the holiday season that often require gifts,” Kositzke said. “One of the things that we’ve been tracking is how consumers determine what the right gift is for different people across different events. How are they going to figure out what’s the right thing to bring for grandma, their daughter, or a co-worker?”

According to BHN’s research, roughly half of consumers will directly ask recipients what they want, while others will source ideas from family and friends. Some shoppers even check social media to see the products or services the recipient has liked on Instagram or Pinterest.

An emerging tool for holiday shopping this year is artificial intelligence, with about half of younger consumers planning to use it for their gift shopping. The ways they’re leveraging AI range from finding deals to generating unique gift ideas.

 “I have twin teenage boys, and when it comes to Christmas presents, they want to make sure one doesn’t get a better gift than the other,” Soffin said. “I asked ChatGPT which gift I should get them, and it came back with fashion tech gadget [recommendations] like wireless earbuds, gaming accessories, and sports gear. At the top of the list was a gift card to a gaming platform or a streaming service. If I’m not sure what specific brand of tech or fashion they want, a gift card to their favorite store is a great option.”

Holiday shoppers are starting earlier than ever to find the perfect gifts for everyone on their list. Budgets are now spread across a longer period, beginning even before September and extending through December. However, only about a quarter of consumers’ holiday budgets are spent at the start of this period, with the remainder concentrated from Black Friday through the end of the season.

Younger consumers, in particular, are motivated by promotions and sales events. The BHN report found that Gen Z encounters more seasonal sales events than older generations, which drives many to wait for Black Friday and Cyber Monday promotions. What’s more, many Gen Z consumers have tighter budgets, as they may be recently out of school or in their first jobs.

“For all ages, what gets people out of bed are the sales and deals and promotions,” Kositzke said. “There are still concerns about the economy and inflation, coupled with the sheer number of people that consumers want to buy gifts for. Sales and deals have become an important factor in holiday budgets.”

Another consideration is there are five fewer days in the holiday season this year. The condensed holiday season is driving many retailers to push early holiday promotions to bolster sales.

“The shorter timeline could also impact the transition to digital formats,” Hirschfield said. “Many last-minute shoppers might not have time to mail a physical card, or maybe it’s just a consumer is concerned about misrouting or mail theft. Gift cards are shifting towards digital delivery in general, because it offers consumers the ability to send their gift quickly and confidently.”

Given the growing digital preference among consumers, some retailers may be unsure whether their promotional funds are best spent online or in-store. However, all indications show that shoppers will use every avenue that’s available to them, shopping both in-store and online.

“The short answer is that it’s really a blend of both,” said Soffin. “Customers still prefer doing their holiday shopping in store, but online is closing the gap. Today, 85% of all consumers plan to shop in-store. When we ask consumers why they shop for physical cards, they say the convenience of already being at the store and completing their shopping all in one trip is the top reason.”

When dialing down on where consumers purchase gift cards, Javelin’s data indicates that the number one choice is a gift card mall at a retail store. The malls at grocery stores or drug stores give consumers a place to browse for the right gift card and pick up cards for various recipients at once.

The second most popular place to purchase gift cards is at a retailer’s physical store. Consumers may already be shopping for other gifts and decide to pick up a gift card while checking out. A retailer’s website ranks as the third most popular venue for buying gift cards.

It might be tempting for merchants to focus on in-store sales, but 49% of consumers also plan to buy a gift card online. There is a growing cohort of consumers who prefer online because it’s easier than fighting the crowds. The speed of ordering without leaving the house is almost second nature to younger generations, and many consumers still have health concerns about physical stores that are lingering from the pandemic.

Regardless of where consumers buy gift cards, they plan to keep buying them. Data from the National Retail Federation found that gift cards are the number one requested gift for the 18th year in a row.

BHN’s research found that the average holiday spend will be $760, and consumers said they will spend roughly half of that budget on gift cards. Younger generations are leading the way, and they expect to spend 54% of their budget on gift cards.  

Consumers were left wanting more gift cards after last year’s holiday season, and 84% of consumers say they will buy an average of 17 gift cards. The accelerating adoption should put gift cards at the forefront of a positive holiday season.

“With gift cards, the buyer doesn’t have to worry about the right color, the right size, or the right fit,” Kositzke said. “They don’t have to worry about their gift being returned. Maybe the recipient wants a bigger-ticket item that the buyer can’t afford, but they can give a gift card that can go toward the larger purchase. All those reasons are why people say gift cards are a reliable bet.”

The post During a Hectic Holiday Season, Gift Cards Continue to Be a Reliable Bet appeared first on PaymentsJournal.

Artificial intelligence is fueling a major transformation in the financial fraud landscape. AI has democratized criminal sophistication and fraud at a very low cost of conducting business, generating more malignant actors that financial institutions have to fight against.

What can these institutions do to mitigate increasingly sophisticated frauds and scams? In a recent PaymentsJournal podcast, Kannan Srinivasan, Vice President for Risk Management, Digital Payment Solutions at Fiserv, and Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy and Research, discussed how fraudsters are using generative AI to hone social engineering and bypass authentication, and how we can fight back.

Driven by AI, deep fakes represent a new frontier in fraud. There has been a 3000% increase in deep fake fraud over the last year and 1200% increase in phishing emails since ChatGPT was launched.

Synthetic voices have been around for decades. They used to sound like a hollow robot, but recent advances in technology have allowed voices to be cloned from just a few seconds of audio. They are so realistic that fraudsters were able to use a deep-fake voice of a company executive to fool a bank manager into transferring $35 million to them.

“In banking, especially at the wire desk, talking to the customer is always considered the gold standard of verification,” said Apgar. “So if somebody sends an e-mail and says I want to initiate a wire, they’ll actually have to talk to a banker. But now, if the voice can be cloned, how do bankers know if it’s real or not?”

In business applications, single-channel communication should not be accepted, said Srinivasan. “If you get a voice call from somebody to do a certain thing, don’t just act on that,” he said. “Send an email or a text to confirm that you heard it from that person. Or hang up the phone and confirm through another channel that this is exactly what they wanted.

“We hear stories about a phone call coming in and saying your son has met with an accident and they’re in a hospital, you need to send $8000 for an emergency procedure. They prey on human emotions. We have to make sure that we step back, think about what’s happening, then call your family or friend to make sure that the news is accurate.”

Imposter scams have also exploded recently across other use cases. Large language models can take a phishing email, customize the content and iterate it until the scamster gets a successful response from the victim.

Sophisticated criminals are creating packages for less-sophisticated criminals to buy. For $100 a month, a would-be hacker can purchase a bot-as-a-service turnkey application. To conduct a fraud operation, they just need to upload the victim’s information, such as their phone number and the impersonating business name and phone.

The bot will automatically call the victim and impersonate the business, often requesting that they read out the one-time password. Once the criminal gets the OTP, they can do whatever they want with it, including logging into the institution under attack, authenticating transactions, and changing passwords.

The entry barrier to committing fraud has come down significantly. “There’s almost a multiplier effect on the attack vectors end,” said Apgar, “because AI is not only making it easier to crank out more and more phishing emails more efficiently, but it also makes them more realistic.”

Machine learning models have allowed us to identify pockets of fraud and scam so that we can detect and stop them. Auto machine-learning tools have allowed Fiserv to perform this function at scale.

Srinivasan said that Fiserv is also deploying self-learning models, which will generate models at a more automated pace. Since the models can be generated much more frequently, they can more effectively detect any change in fraud patterns.

“We use more than 500 risk signals to identify any emerging trend and deploy preventative measures against them,” said Srinivasan.

For a financial institution initiating a strategy against AI fraud, the first step is to make an inventory of all the touch points they have and conduct a vulnerability assessment. Determine all the possible risk areas that could be subject to a fraud attempt, such as the new account opening processes or login controls. Don’t forget about money movement, changes in user behavior, and brand-new patterns of usage.

Two other back-end processes are critical for assessment too. The first is customer education on scam awareness. Reach out to consumers via multiple channels to make sure they are aware of the nature of these new scams. When they are targeted by a scam artist, they should alert the bank to what is happening.

The second is to educate employees and frontline representatives on the techniques used in fraud, to ensure that they are not social engineered by fraudster when they are reviewing a transaction or removing a hold. Then, when a user calls, they can educate the consumer on potential scam activity to make sure that they are not falling into one.

The most successful fraud mitigation outcomes result from adopting a hybrid approach. Machine learning has to work in conjunction with an intelligent human to ensure a contextual application of the response being deployed. Make sure that the organization has absolute good governance and oversights on whatever results it’s giving, so there is no bias in the strategy.

“Having a variety of mitigation options offered to the client or the financial institution helps a lot,” said Srinivasan. “Pick and choose or deploy all of them, so that we can keep the consumer safe.”

While fraud attempts will always be an issue, Fiserv and financial institutions are working toward solutions that mitigate fraud while improving the customer experience. Working together, we should be able to manage fraud losses to very low levels. By combining layered security strategies, the industry can foster a more robust difference against both existing and new fraud payment threats.

The post Taking On the AI-Assisted Fraudsters appeared first on PaymentsJournal.