PaymentsJournal

PaymentsJournal

Payments Content, Expert Insights and Timely News

  1. 1 day ago

    Why Fraudsters Look Trustworthy and Good Customers Look Suspicious

    Criminals are increasingly aware of the signals banks use to identify “good customers”—and they are using that knowledge to evade detection. At the same time, legitimate customers are adopting behaviors that were once considered tried-and-true risk signals. Data breaches and privacy concerns, for example, have spurred many consumers to use VPNs, a behavior that was once viewed as a reliable fraud red flag. The result is a growing inversion of traditional fraud signals: legitimate customers can look suspicious, while sophisticated criminals can appear trustworthy. In a recent PaymentsJournal podcast, Diarmuid Thoma, Head of Fraud and Data Strategy at AtData, Jose Pallares, Senior Director of Product Management at Experian, and Jennifer Pitt, Senior Fraud Management Analyst at Javelin Strategy & Research, discussed the convergence of these patterns and how they are reshaping the fraud landscape. This ambiguity has created an environment in which bad actors are thriving and consumers are losing confidence in financial institutions. To combat this threat, financial institutions must adopt methods that are both broader and more granular to accurately identify fraud. The Rise of Manufactured Trust Technology has accelerated this shift, but the underlying challenge is familiar. Whenever fraud systems learn to identify certain behaviors, criminals adapt to avoid them. “Back when I was doing fraud review 20 years ago, if somebody was on a mobile device or a mobile number, that was slightly riskier because landlines were safer statistically,” Thoma said. “Whereas now if you gave a landline, that’s kind of a weird thing. There’s a natural part to that, and people have to keep that in mind, there are these shifts and profiles evolve.” In the past, the prevailing fraud prevention philosophy was to build models capable of detecting abnormalities and inconsistencies. However, criminals are all too aware of this strategy, and it has instead become a blueprint for avoiding detection. Artificial intelligence has also allowed bad actors to deploy these tactics at scale. With a few prompts, even technologically unsophisticated criminals can generate multiple synthetic profiles and manage them at scale. They are also becoming more patient and strategic in how they carry out illicit activities. “Once they had an account, they used to run up the account quickly, do a bust-out, and then run away,” Pitt said. “They don’t do that as much anymore. What they do is they make the account look legitimate over time. To skirt the detection on the forefront, they’re building up that identity with non-financial accounts. They might open up an email account, and once that identity becomes legitimized and verified at one organization, other organizations see it as more legitimate. It’s building that credit profile.” These capabilities have allowed bad actors to manufacture trust at a time when it is more difficult than ever to discern an individual’s intentions. This is partly because consumers have also rapidly adopted technologies like AI and social media, especially among younger and more digitally native generations. “The behavior profile of a good consumer is completely different than it was even five years ago,” Pallares said. “Fraudsters now think or look like good consumers, and consumers—from a fraud systems angle—look completely messy and risky. So how do we level up our existing fraud systems to catch and look at those things differently?” The Compounding Effects of Misclassification Beyond potential fraud losses, gaps in fraud infrastructure often cause legitimate customer activity to be misclassified as fraudulent. As a result, the customer experience suffers. These errors often occur at a time when organizations’ relationships with customers are most tenuous. “There are a lot who from early account set up are coming in and they’re spending a lot,” Thoma said. “They’re doing exactly what you’d be worried about from a commercial point of view, somebody comes in and spends a lot very fast and that’s concerning.” This exemplifies one of the main drivers of false positives: verification often hinges on a single transaction, point in time, or identity element. This short-sighted view can create significant issues for all customers, particularly high-value users. Their behaviors may raise numerous flags, as they may travel frequently, use multiple devices, and leverage a variety of payment methods. “I’ve seen from a bank perspective that good customers were off-boarded because there were signals that they thought were fraud, and it was essentially a false positive where identity elements were flagged as fraud that really weren’t,” Pitt said. “And I’ve seen bad customers get on-boarded because of the same thing. Basically, the decision was wrong, and I’ve seen that a lot.” Left unaddressed, these issues can lead to friction, abandonment, and reduced lifetime value, creating a compounding effect on operations and, ultimately, revenue. This revenue drain can go unnoticed by financial institutions. While many institutions have processes in place to measure fraud, there is often no ready gauge for fraud misclassification. “I think it’s probably a lot bigger than what we think because we just can’t measure it with any degree of accuracy,” Pallares said. “To compound the problem, there are fraud models that are being fed data, and these edge cases that result in false positives don’t make it into the fraud models for behavior. What you’re being measured on doesn’t allow for these edge cases to reduce the risk on those types of consumers.” Trust Is Not Binary The answer is not to abandon fraud signals, but to put them in context. A single transaction, device, or identity element can raise a question, but it shouldn’t determine whether a customer is trustworthy. Financial institutions should take a longitudinal approach to fraud identification, looking at how a customer’s behavior develops over time. Consistent identity markers, such as a longtime email address, established device, or history of legitimate activity can provide valuable context that an isolated anomaly can’t. This also requires fraud models that can adapt as consumer behavior changes. A behavior that once indicated risk may become commonplace, while new patterns may emerge as technology and consumer habits evolve. “Trust is not binary, it’s built,” Pallares said. “You have to look across your different consumer touchpoints and what a consumer is doing, instead of saying, ‘I verify them at account opening, go wild.’ And trust can be revoked. Anytime something looks out of the ordinary and it’s not verified, there’s certain lightweight controls that people can put in place to make sure that once-verified is not always-verified.” That broader view can’t always be found with a single institution. Fraud, payments, and customers experience teams need to share data and intelligence so that decisions are based on a more complete understanding of the customer. Extending that approach across institutions can provide an even stronger defense, particularly as fraudsters move between organizations and manufacture identities across multiple accounts. “When we talk about siloes, it’s within organizations, but it’s also across organizations and across different industries that we need to be sharing,” Pitt said. “Have they been flagged before at another organization? Wouldn’t that help your organization to know if it’s been flagged before, because you wouldn’t onboard that identity? Right now, the exact same synthetic might be used at 100 different banks because fraudsters know that banks aren’t talking.” The challenge is determining which signals represent legitimate complexity and which indicate coordinated fraud. A consumer with little financial history may simple be new to the system, while someone who rapidly establishes connections across multiple organizations may warrant greater scrutiny. The goal, then, is not to find customers who look perfect on paper. It’s to identify customers whose identities and behaviors have been earned over time. Trust Has to Be Earned In a fraud environment where appearances can be manufactured, history becomes one of the most valuable indicators of trust. Financial institutions need the technology, data, and partners to uncover that history and distinguish between customers who look trustworthy and those whose identities and behaviors have earned that trust over time. “When you’re selecting them, it has to be an uncorruptible history because now AI can create history in certain fields,” Thoma said. “In your vendor selection, you look for stuff that can give you the history that is isolated from that, that cannot be replicated, that cannot be created within a week or two and generated. It’s earned history, and that’s really important.”

  2. 2 days ago

    10 Years Running, Same Day ACH Continues to Break New Ground

    When Same Day ACH launched a decade ago, the primary use case was for exceptions—such as in emergency payroll transactions, time-sensitive bill payments, and other situations where traditional ACH settlement timelines were too restrictive. Those use cases remain relevant, but they represent only a fraction of how Same Day ACH is used today. As organizations have gained greater familiarity with the option and recognized the value of faster settlement, adoption has expanded dramatically. In a recent PaymentsJournal podcast, Devon Marsh, Managing Director of ACH Network Rules and Risk Management at Nacha, and Ben Danner, Senior Debit Analyst at Javelin Strategy & Research, discussed the evolution of Same Day ACH, the forces driving its growth, and the opportunities that could shape the next phase of faster payments. The broader lesson from the past decade is that payment speed is not simply a question of getting funds from one account to another as quickly as possible. For many transactions, the important consideration is finding the right balance among speed, predictability, risk management, and operational efficiency. Same Day ACH has emerged as an important part of that equation, providing faster settlement while preserving the reach and established processes of the ACH Network. A Microcosm of the ACH Network Same Day ACH began with transaction volumes in the millions. A decade later, it is used for nearly 1.5 billion transactions annually. In many respects, Same Day ACH has become a microcosm of the broader ACH Network. The average dollar value of a Same Day transaction is now nearly equivalent to the average value of transactions processed across the ACH Network overall. That convergence is significant: it suggests that Same Day ACH is no longer confined to a narrow set of specialized use cases, but it is increasingly being incorporated across the same range of payment activities served by traditional ACH. “In the decade since its launch, Same Day ACH has evolved from a credit-only transaction capped at $25,000 to a robust, mature fast rail transacting both debits and credits up to $1 million,” Marsh said. “Now, after the early introduction of debit transactions and after two increases to the per-transaction limit—with another slated for September of 2027—Same Day ACH serves every use case in the ACH Network except for international transactions.” The growth is equally striking from a dollar value perspective. Same Day ACH moved roughly $20 billion in its first year, compared with approximately $4 trillion in 2025, with the ACH Network on track to process even greater value this year. That evolution reflects more than simply increased adoption. The capabilities of Same Day ACH have expanded as well. The first phase supported credit-only transactions, while subsequent changes broadened functionality and increased transaction limits, giving organizations more flexibility in determining when faster ACH settlement makes sense. “The majority of the volume now is on debit, but the majority of the value is on ACH credit,” Danner said. “ACH credits are used for earned wage access, payroll, gig economy transfers and payouts, as well as business payments. So lots of use cases which have expanded beyond where it was initially. Thinking about debit, that’s where you’ve got the originator pulling the funds—bill payments, loan payment, subscriptions, and taxes—where all of that use has been growing as well.” Building on Existing Infrastructure One of the most important drivers of Same Day ACH adoption is something that can be easy to overlook in discussions about faster payments: the strength and ubiquity of the existing ACH infrastructure. Businesses, consumers and government agencies rely on ACH payments for payroll, bill payments, account funding, vendor payments, and other recurring or high-volume transactions. Organizations and consumers are familiar with the payment method, and financial institutions have established systems and processes for supporting it to scale. Same Day ACH builds on that foundation rather than requiring the market to adopt an entirely new payment rail. “Ease of adoption has driven the growth of Same Day ACH,” Marsh said. “Same day transactions are processed on existing infrastructure, they use existing formats, and they’re subject to the same familiar processes as future-dated ACH transactions. And they can reach virtually every deposit account in the U.S. with both debits and credits.” Danner added: “Both consumers and businesses want choice and flexibility.  Same Day is fine in many use cases or perhaps even the standard ACH transaction. The key is having that choice of speed and that flexibility to choose.” Finding the Right Speed for the Payment There are now more payment choices than ever, including instant or near-real-time options which have emerged in recent years. However, real-time payments also bring their share of considerations. Instant payments are often irrevocable and lack a debit capability. Both of these factors figure into one’s choice of payment. Although there are use cases where these payments make sense, Same Day ACH can often provide a balance of speed, efficiency, reach, and predictability—particularly for payments where immediate settlement is not essential. “We recognize that some payments travel faster than Same Day ACH, and some travel slower,” Marsh said. “Different payment scenarios have different needs based on the timing, the value, and the business processes involved.” “For a vast number of situations, we believe that Same Day ACH optimizes many of these considerations,” he said. “It provides the benefit of speed as well as the efficiency of batch processing. It enables businesses and consumers to complete payments in urgent situations.” One of the key aspects of this efficiency is that the structure and schedule of Same Day ACH transactions allow organizations time to plan and leverage these payments strategically, which can maximize the value of the payment for both payor and payee. From an accounts payable perspective, most businesses aim to hold on to funds as long as possible to optimize cash flow and liquidity. This also allows for greater accuracy within accounting metrics such as days payable outstanding and gives organizations more effective insights into their operations. Same Day ACH can provide these benefits while accelerating settlement, making it an important option between instant payments and traditional ACH. “Payments that benefit from that faster settlement time include payroll and contractor payments and transfers,” Danner said. “If you think about Same Day ACH credits, that is going to be primarily about accelerating disbursements, letting businesses get money into the account faster.” “If you think about ACH debits on the other side, it’s about accelerating the collections,” he said. “The benefit there is that the biller or that merchant can pull the funds sooner and reduce that time between the initial payment initiation and receiving those funds in their account, which has cash flow benefits.” The Next Phase of Growth From the early days of Same Day ACH, demand has been driven by a broader shift in expectations around payment speed, especially in commercial payments. That demand is likely to become even more consequential as the range of transactions eligible for Same Day ACH continues to expand. In September 2027, the Same Day ACH per-transaction limit is scheduled to increase to $10 million. The change represents one of the most significant expansions of the payment type since its introduction and could broaden the range of transactions for which Same Day ACH is economically and operationally viable. While transactions above the current $1 million per payment threshold represent a relatively small share of overall payment volume, they can represent substantial value and operational importance. Raising the limit has the potential to bring new categories of payments—and new groups of originators—into the Same Day ACH ecosystem. For some organizations, the higher threshold could also simplify payment operations by making Same Day ACH viable across a greater share of their ACH activity rather than requiring them to use different payment methods based on transaction size. “It’s about extending those capabilities and one of those being that per-payment limit, which is certainly going to expand use cases,” Danner said. “I’m thinking about use cases, and it’s things like high-value commercial real estate transactions or large enterprises needing to transfer money between accounts that need that speed. You could certainly cross that threshold into $10 million.” Commercial real estate provides one example of the opportunity. Although certain jurisdictions or transaction requirements may call for a wire transfer to execute a closing itself, Same Day ACH can potentially support other high-value activities surrounding the transaction, including commission payments and escrow funds. The first decade of Same Day ACH demonstrated that organizations value the ability to move money faster without abandoning the reach and infrastructure of ACH. The next decade could be defined by a broader question: not simply whether a payment can move faster, but how organizations can use different speeds and payment methods strategically across the operations. “Same Day ACH will continue to gain momentum as more receivers recognize its benefits,” Marsh said. “Businesses, in particular, that receive Same Day ACH transactions will begin to originate Same Day for their own payments. Originators will convert more future-dated activity to same day because their customers want it and because it’s easy to adopt.” “An increased dollar limit, demand, and ease of use will be the things that drive Same Day ACH growth in the comin

  3. 10 Sept

    Nacha’s Upcoming Rules Refresh Is All About Improving Clarity

    ACH may be one of the payments industry’s most established networks, but it’s far from standing still. With new Rules taking effect this September—and another significant change already slated for 2028—financial institutions are facing a steady stream of adjustments that could affect how they process transactions, make funds available, and manage compliance. Earlier this year, Nacha implemented Rules aimed at bolstering financial institutions’ automated push payment fraud protections and cultivating a risk-based approach to fraud detection. This September, additional changes are coming down the pike, geared toward optimizing rules for International ACH Transactions (IATs) and funds availability for non-Same Day ACH transactions. In a recent PaymentsJournal podcast, Devon Marsh. Managing Director of ACH Network Rules and Risk Management at Nacha, and Ben Danner, Senior Debit Analyst at Javelin Strategy & Research, discussed the reasoning behind the Rules and how financial institutions should adapt to new processes and strategies. Understanding these Rules is critical, not just to maintain compliance, but also to increase efficiency and prepare for the next evolution of ACH. Calibrating Cross-Border Payments When a payment crosses a border, even if only part of the transaction does, the Rules governing it can become considerably more complicated. That is part of what Nacha is addressing with its definition of an International ACH Transaction. One of the most significant imminent changes is that the definition of IATs will be recalibrated, not replaced. “When people hear there’s a new definition, they think the definition has changed,” Marsh said. “The revision sought to provide clarity, so there is really no conceptual change in what type of transaction should be called an International ACH Transaction. What changed in the definition was the way it was worded—hopefully, it’s a more accessible definition now and Originators can understand better what they need to code as an IAT when they create an ACH entry.” When approaching the new definition, the first step for any ACH Network participant that facilitates IAT entries—including Originators, Originating Depository Financial Institutions (ODFIs), and Receiving Depository Financial Institutions (RDFIs)—is to study the definition and compare it against the types of transactions they currently process. In this process, some organizations that currently create IATs may discover that transactions they have historically considered IATs will not fall under the updated definition. Others may find that transactions previously treated as domestic payments actually meet the definition of an IAT. Once institutions have ascertained how to appropriately apply the definition, the next step is to educate personnel and begin classifying transactions accordingly. This will make the process more streamlined and better suited to the growing global economy. “It’s about clarity, which determines the obligations attached to the transaction,” Danner said. “Clarifying definitions around International ACH helps for more accurate compliance screening. It’s better, more accurate data to assess risk for all institutions across the [ACH] Network.” “Part of a larger trend is that cross-border is growing,” he said. “According to Nacha data, over 121 million IATs were processed in 2024. This shift in thinking about screening and risk monitoring and definitional clarity is even more important as cross-border volume grows.” But classification is only one part of the equation. For customers, one of the most tangible effects of a Nacha Rule change is much simpler—when can they actually use their money? The Interest of Making Funds Available That question sits at the center of another important change this September. The updated Rules around funds availability for non-Same Day ACH credit entries will change when RDFIs must make funds available—and remove a condition that has been in place for years. For many years, the Nacha Rules have stated that an RDFI that receives next-day credit entries by 5 p.m. must make those entries available to receivers by 9 a.m. local time on the settlement date. One component of the updated Rules will remove the 5 p.m. condition. Beginning Sept. 18, funds must be made available by 9 a.m. on the settlement date, regardless of when the file was received. For example, if an RDFI receives a file in a 6 a.m. file distribution from its ACH Network Operator, the institution will be expected to make the credit entries with that settlement date available by 9 a.m. “Most RDFIs that we talked with in developing this Rule already did that as a matter of practice,” Marsh said. “That 5 p.m. condition was a requirement, but posting transactions received after that wasn’t a violation. It didn’t say if you receive after 5 p.m. you can’t post; it was saying if you receive before 5 p.m., you must post.” “Most RDFIs, in the interest of making funds available to their receivers, would receive files well after 5 p.m. and make those available by 9 a.m. on the settlement date,” he said. “So, most of the RDFIs probably didn’t have a change to implement, they just had to ensure they were complying with this new Rule.” At first glance, that may sound like a relatively narrow operational adjustment. But the change illustrates a broader point: even seemingly small changes to Nacha Rules can force institutions to rethink how their systems, teams, and processes work together. And Nacha has accounted for the fact that not every institution operates on the same clock. In exploring the removal of the 5 p.m. condition, Nacha considered that there are several financial institutions located significantly east of the Atlantic Time Zone and west of the international date line. For example, there are financial institutions in the U.S. territory Guam. These institutions may receive files that are not even available to them before 9 a.m. local time on the settlement date. This is why Nacha established an exception—a carve-out for institutions that are not logically or physically capable of complying with the Rule. While these changes may cause a short-term shift for financial institutions, they can have substantial impacts for customers, including potentially earlier access to payroll, benefits, refunds, and other ACH credits. “If you think about what non-Same Day ACH credits are used for, it’s things like payroll benefits, government benefits, refunds, and invoice payments,” Danner said. “Perhaps with this change in window, it could be those payments could be available earlier, which could improve cash flow or reduce wait times—all the benefits of receiving a faster payment, particularly for these time-sensitive payments.” Streamlining Return Codes By the time the new return reason code R90 takes effect in March 2028, institutions will have plenty of time to prepare. The question is whether they will use it. “The reason we developed the new code R90 is because R16 paired two return reasons that were not necessarily logically connected,” Marsh said. “There’s returning due to sanctions obligations that the new code will take on, and R16 will remain the return reason code for account frozen.” “The best explanation for why we need to separate those out is because once the ODFI and the Originator receive a return back, they may need to do different things based on what the actual reason was,” he said. Splitting these return reasons into two separate codes is designed both to provide clarity on the origination side and to offer the RDFI a discrete code for returns related specifically to sanctions compliance obligations. There is another important difference with R90: when the clock starts. Under the usual return process, institutions generally have two banking days to return an entry, with the clock tied to the settlement date. R90 works differently. The two-day window begins when an RDFI determines that the payment has triggered its sanctions compliance obligations. In practice, this gives institutions more time to investigate a payment before the return deadline begins. For example, an RDFI might initially accept an entry but flag it for further review. If that review later determines that the payment has triggered its sanctions obligation, the two-day window starts at that point—not when the payment originally settled. “This isn’t unprecedented,” Marsh said. “There is a return reason code R23 that is used when an RDFI is notified by a Receiver that the Receiver has declined a credit entry, and that’s when the clock starts. This is similar in that respect: the clock is still two banking days, but it starts at a specific point in time.” A Long Lead Time The R90 change exemplifies Nacha’s efforts to make the ACH Network more efficient and secure for banks and their customers—but banks must still do their share. That is precisely why 2028 may deserve attention now. “It’s back to the theme of providing more accurate data,” Danner said. “It gives Originators better, clear information about what actions they’re going to need to take when a payment’s returned. This can affect the screening workflows and exceptions handling and communication and compliance procedures for OFAC compliance and risk monitoring. It’s important for ACH Operators and FIs to prepare to implement this new code.” The temptation may be to focus on the September changes and worry about R90 later. But the institutions that wait until 2028 is around the corner may find that the hardest part was never the code itself; it was everything that had to change around it. “The reason they need to start paying attention to it now is that developing a new return reason code requires programming and it requires technical development—and that could have a long lead time,” Marsh sa

  4. 9 Sept

    Why Haven’t More Financial Institutions Adopted Instant Payments?

    Instant payments have quickly shifted from an emerging capability to a competitive expectation. Yet many financial institutions still struggle to justify the investment required to support them. With implementation costs, operational changes, and fraud concerns to address, it’s fair to ask: Are instant payments simply a customer convenience, or can they deliver meaningful business value? In a PaymentsJournal Podcast, Shankar Jayaraman, Director of Product Management, Real-Time Payments at Fiserv, Rusiru Gunasena, Head of Business Development for Service Providers at The Clearing House, and Ben Danner, Senior Analyst of Debit at Javelin Strategy & Research, explored why that question may already have an answer. As consumers and commercial use cases continue to expand, the decision facing financial institutions is becoming less about whether to offer instant payments and more about how soon they can. Clearing the Concerns Despite the fact that more than 1,500 financial institutions now offer instant payments through either The Clearing House’s RTP network or the Federal Reserve’s FedNow Service, more than 8,000 still do not. For many of these organizations, the barriers to adoption remain significant. One key factor is the challenge of making a bank’s payments and processes available 24/7. In addition to meeting customer expectations for around-the-clock service, financial institutions must establish prefunding requirements and ensure the proper risk controls are in place. Since instant payments are generally irrevocable, fraud prevention is a critical concern that must be fully addressed before transactions begin. For legacy banks, older, multi-tier technology stacks may not be capable of supporting instant payments. Overhauling these systems can be daunting, especially when the same payment processes have been in place for decades. Fortunately, financial institutions don’t have to navigate the transition alone. Experienced third-party service providers can handle operations such as transaction monitoring, error handling, risk mitigation, and fraud prevention, serving as a critical first line of defense. “If you are the financial institution, you’re not the first one,” said Jayaraman. “There is already someone who has cracked the problem. And there are many solution providers out there who are there to help you solve the problem.” Benefits of Joining the Network Whatever the concerns about adopting instant payments, the benefits often outweigh the risks. Most financial institutions that implement instant payments find that the customer experience improves immediately. “When a financial institution goes live on RTP, their customers discover that they can go and pull their funds sitting in a digital wallet into the institution account immediately,” said Gunasena. “They were even willing to pay to get those funds, because now they have liquid funds in their financial institution.” Instant payments also help strengthen the customer relationship by bringing it back to the financial institution. In addition, they provide rich, structured data that supports analytics and more informed decision-making. Both sending and receiving financial institutions can gain better visibility into payment activity and can make more accurate risk assessments. Some banks have even identified new revenue opportunities by offering instant payment services. “U.S. Bank launched an enhanced payment service for small businesses,” said Danner. “They’re charging to send those instant payments at a reduced rate through a subscription model to their small business service. As an issuer, this is a value add and a potential transaction revenue stream as well.” The commercial banking sector stands to benefit as well. Corporate treasuries can receive guaranteed, liquid funds immediately, improving cash flow and financial flexibility. Key Use Cases Emerge New use cases continue to emerge. The federal government has begun using instant payments for services like tax refunds, emergency payments, and other disbursements. Gig economy workers can now receive their earnings the same day, enabling them to cover immediate expenses, such as fuel, and get back to work without delay. Major issuers such as TD Bank and U.S. Bank have also rolled out instant payment capabilities for their auto dealer clients. Also on the horizon is Request for Payment, which has the potential to be a game changer by putting customers in control of authorizing the payment. “Instead of ACH debit coming and swiping your funds out of the account, now the biller will send a Request for Payment through the secure banking channels,” said Jayaraman. “You are bringing your customer back into your digital banking experience, where the customer can validate that payment—who is requesting it, for how much, what’s the purpose. Then they can agree to or deny that payment.” Making the Decision Financial institutions that are still evaluating instant payments can ease into adoption by taking a phased approach. Start by identifying the most common and pressing customer pain points, then prioritize use cases based on those needs.   Many banks have found it effective to begin with receive-only payments. However, they shouldn’t stop there—customers will eventually expect to send instant payments as well. “We should not read receive-only as the finish line, because receive is really how you get started,” said Gunasena. “To differentiate the customer experience, that’s where send comes in.” Finally, choosing an experienced partner can help create a smooth path to implementation. There are many considerations that banks and credit unions may not anticipate, but a knowledgeable partner can help identify both potential challenges and new and opportunities. Instant payments are becoming an inevitability, not only because of the speed they offer, but also because of the certainty, transparency, and enhanced customer experience they provide. Both organizations and consumers are discovering compelling new use cases across the network, transforming instant payments from a differentiating feature into an expected capability. As adoption continues to grow, instant payments are rapidly becoming a competitive differentiator. “Your customers might not be asking for it, but it is a core capability you need to have as a financial institution to service your customers for their needs in your platform,” said Jayaraman. “Otherwise, they’re going to go somewhere else and get it done as well.”

  5. 31 Aug

    How BNPL Is Helping Credit Unions Strengthen Member Relationships

    Every payment tells a story about a member’s financial life. The challenge for credit unions is that more of those stories are now being told somewhere else. Buy now, pay later (BNPL) has transformed from a checkout convenience into a growing part of how consumers manage cash flow, budget, and make purchasing decisions. While these installment options create flexibility for members, they also create new relationship opportunities for the financial providers that offer them—opportunities many credit unions have yet to capture. In a recent PaymentsJournal podcast, Adam Hodz, Managing Vice President of Payment and Channel Solutions at Velera, and Ben Danner, Senior Debit Analyst at Javelin Strategy and Research, discussed the evolution of BNPL usage and how credit unions can differentiate themselves by integrating BNPL  capabilities into their offerings. At its core, BNPL is about giving consumers more choice. That makes it more critical for credit unions to deliver a comprehensive suite of solutions that keeps them at the center of members’ financial lives. From Financing to Money Management In its early stages, many viewed BNPL as a modern form of layaway, allowing consumers to split larger purchases into manageable installments. While that use case still applies, today’s BNPL landscape has evolved beyond that original concept. “It’s an evolution from a financing option for large purchases into everyday money management,” Hodz said. “The buy now, pay later conversation is shifting from, ‘Can consumers finance and purchase?’ to consumers expecting flexibility in all transactional situations. Whether it’s online or in-store, they want that flexibility.” Mounting evidence shows that a significant portion of BNPL transactions are used for everyday purchases under $30, and some consumers rely on these products on a weekly basis. As installment payments become a common tool for budgeting and cash flow management, credit unions that offer only traditional card products risk falling behind evolving member expectations. “Smoothing out routine expenses, managing short-term cash flow, and helping to create a little more predictability in their budgets. If those options are available only through fintechs or merchant-driven providers, credit unions are going to risk being on the outside looking in,” Hodz said. “It’s incredibly important to offer those flexible payment channels that consumers and members are looking for to help manage their money.” Payments Are Relationship Moments One of the key reasons BNPL has become essential is that it allows credit unions to maintain a more complete view of member behavior. Today, many BNPL experiences occur outside the credit union ecosystem through fintechs and merchants. This not only limits visibility into member activity but also creates risk that members will build stronger relationships with external financial services providers. As more transactions move beyond a credit union’s reach, institutions lose opportunities to engage members through loyalty programs, personalized offers, and targeted promotions. These touchpoints are essential ways for credit unions to strengthen relationships and position their digital banking experience as the preferred destination for financial activities. The risk for credit unions is not simply losing a handful of transactions to BNPL providers—it is losing relevance during moments when members are making critical payment and financing decisions. When credit unions are absent from those moments, they also miss opportunities to capture valuable behavioral and financial insights, including emerging payment preferences and retail trends. These factors are especially important as competition across financial services continues to intensify. While fintechs may have initially focused on niche use cases, many now offer deposit accounts, debit cards, and other products that directly compete with traditional banking services. “This is especially important because payment moments are relationship moments,” Hodz said. “Every time a member chooses how to pay, finance, or manage a purchase, they are also choosing which provider they trust to help navigate that need.” “When a fintech or merchant-owned buy now, pay later provider owns that interaction, it gains visibility into member behavior, captures engagement, and builds habits that can gradually shift the financial relationship away from the credit union,” he said. Within the Sphere of Trust Despite this competitive market, credit unions have a unique opportunity to differentiate themselves from other financial services providers: the trust they have already established with members. A recent study by Velera found that nearly half of credit union members already use BNPL via providers outside their financial institution, while 38% said they would be likely to use a BNPL solution offered by their credit union. This gap represents a substantial opportunity. “Unlike fintechs or merchant providers, credit unions are not starting from a purely transactional relationship,” Hodz said. “They already have that relationship, and the credit union philosophy is driven by trust and service and financial well-being—and that the credit union is going to help build a relationship for where you’re at and meet their members where they need. That creates an advantage.” The most effective way for credit unions to capitalize on this opportunity is by embedding installment options directly into the digital and payment experiences members already trust and use every day. Doing so positions BNPL not as an external financing product, but as a natural extension of the credit union relationship. A digital-first approach gives credit unions greater control over how installment options are presented and enables them to surface relevant offers within online and mobile banking experiences. Institutions can also define qualification standards, available terms, and repayment structures that align with the broader member experience. These capabilities are particularly valuable as consumers face increasing financial pressures, including elevated interest rates, rising credit card debt, scams, and predatory lending practices. In this environment, consumers value transparency, guidance, and trusted financial partners. Additionally, as more borrowers use multiple BNPL loans, it can become difficult for consumers to track payment schedules, outstanding balances, and remaining installments. By bringing BNPL into the digital banking experience, credit unions can provide members with guidance and transparency. “It’s a way to be there at the point-of-sale with an option that your customers are looking for, but it’s also this unified banking experience with your own branding,” Danner said. “Financial institutions have built up these relationships over many years and they’ve developed a strong sense of trust with their customers, particularly credit unions.” “It’s a way to offer something new and innovative within that sphere of trust to your cardholders, meeting customers with an option of something they prefer to use,” he said. Present at the Point of Decision One approach gaining traction is debit-based BNPL. Debit cards have become a cornerstone of everyday financial activity, and extending these programs with BNPL capabilities can help credit unions expand their role in members’ purchasing decisions. “It provides access to lending solutions for your customers that also might not qualify for credit products and opens the door for them, or perhaps for those customers that don’t want to sign up for yet another credit card,” Danner said. “That gives them a point of view to financing options.” “Buy now, pay later is also something that’s attractive to the next generation of cardholders—your younger generations and your Gen Z—and pretty much all of the data shows that,” he said. “These tend to also be very debit-heavy populations. They’re going to be using their debit card and now have access to this buy now, pay later solution.” Solutions like Velera’s BNPL suite enable credit unions to offer debit flex payments, allowing them to personalize installment options in real time. On the credit side, Velera offers flex payment capabilities through Apple Pay’s pay with installments feature, bringing financing options directly into the checkout experience at more than 90% of U.S. retailers. Members can view and select installment options during an Apple Pay transaction before completing their purchase, creating a seamless point-of-sale experience. This allows credit unions to move beyond traditional post-purchase installment options. Through the digital banking experience, credit unions can establish loan qualification standards, repayment terms, and underwriting parameters. Ultimately, Velera’s platform is designed to help credit unions compete more effectively by providing a modern payment experience that meets members where they are and supports their evolving financial needs. “The significance of the expanded suite is that it gives credit unions a more complete way to participate in installment payments across both sides of the card relationship for the members who prefer to manage spending from their deposit count, as well as those using credit at checkout,” Hodz said. “That changes the game because credit unions can move from reacting after purchase to being present at the point of decision,” he said.

  6. 25 Aug

    Despite Rapid Change, ACH Still Anchors the Payments Industry

    Even as agentic commerce, open banking, and stablecoins have captured much of the payments industry’s attention, one of the ecosystem’s most established networks continues to prove its relevance. The ACH Network processed 5.5% more volume year-over-year through Q2 2026, reinforcing its position as a foundational rail for the next generation of digital payments. Equally notable is that this momentum was driven across all sectors and segments, including commercial, government, and consumer payments. In a recent PaymentsJournal podcast, Michael Herd, Executive Vice President of Network Administration at Nacha, and Ben Danner, Senior Debit Analyst at Javelin Strategy & Research, discussed the drivers behind growth in both ACH and Same Day ACH volume, as well as the fraud rules recently implemented to help secure transactions. Looking ahead, the ACH Network’s role may become even more significant, as scale, reach, and reliability position it to support the next generation of payment experiences. Growing Through Digitization One of the strongest drivers of the ACH Network’s growth has been B2B payments and transfers, with payment volume from this sector increasing nearly 10% through the first half of the year. This growth is partly attributable to the continued digitization of payments that were previously dominated by paper checks, including supplier payments and contractor payouts. A similar trend continues in the government sector. “A change from last year at this time is that the federal government’s payment volume is back to modest growth, it’s a bit over 3%,” Herd said. “The government has been issuing tariff refunds, depositing seed funds for the new tax-free newborn accounts, and of course, they are working on efforts to eliminate check disbursements in favor of electronic payments.” “Whereas a year ago federal government volume was flat, this year it’s back into a modest growth posture,” he said. Another growth driver has been consumer online payments and transfers, which increased approximately 6.5% through the first half of 2026. This growth has been fueled by a surge in new account-to-account (A2A) use cases and broader acceptance. “A2A payments are becoming more mainstream, these are things like your P2P and digital wallets which are growing with consumers and also use the ACH Network for disbursements,” Danner said. “There’s adoption by large merchants as well, things like pay-by-bank. The other thing is customers broadly turning towards digital ways to pay bills instead of paper checks or cash payments, moving into these wallet apps using traditional ACH.” The Same Day ACH Surge As successful as conventional ACH has been, Same Day ACH has achieved even more impressive results, with volume up more than 26% compared with the same period last year. “It is interesting that the growth drivers are the same sectors as overall ACH growth, though in different proportions,” Herd said. “It’s consumer online payments and transfers that are the strongest driver of Same Day ACH growth. We saw more than a 50% year-over-year increase in Same Day ACH payments for consumers.” “We see strong use cases for the types of transfers with A2A or wallets, but also with some types of bill payments, too,” he said. “I’m thinking about credit card bill payments. You use your card, get your bill, and make your payment from your bank account, and credit card issuers are looking to collect those funds more quickly using a Same Day ACH transfer.” B2B Same Day ACH activity has also accelerated, with volume increasing roughly 30% year-over-year. Business use cases include cash concentration, merchant settlements, tax payments and withholding remittances. However, many corporate treasurers have implemented exception processes for Same Day ACH because transactions have been capped at $1 million. These processes will likely no longer be required starting Sept. 17, 2027, when the Same Day ACH transaction cap is lifted to $10 million. This should broaden business adoption of Same Day ACH—not only because of the payment type’s speed, but also because improved visibility into payment settlement allows treasurers to better optimize liquidity and cash flow. “Same Day ACH is another tool in the treasurer’s toolkit to make business payments,” Danner said. “Think of the limit increase as being useful in terms of things like big supplier payments or commercial real estate deals, brokerage investment account funding, and insurance claims, which will now be able to move up to that $10 million limit on Same Day ACH rails. It’s about increasing the flexibilities for those making money movement decisions.” Keeping the ACH Network Secure As the volume and value moving across the ACH Network have increased, protecting transactions from the growing threat of fraud has become critical. This is why Nacha members adopted transaction monitoring rules that establish participants’ responsibilities for identifying and attempting to prevent fraudulent activity.            For scams such as business email compromise, every party in the payment chain—from the business originator initiating the payment to the financial institution receiving funds into a specific account—should have monitoring processes and procedures in place. For businesses, this can include measures such as account validation, particularly when payment account information is being used for the first time or when existing account details are changed. “That’s something that any business payment originator can utilize, which is to not trust, but to verify and validate requests to change payment information,” Herd said. “For receiving institutions, these procedures can include things like identifying deposit anomalies such as a large-dollar business payment to a consumer account. That’s one of the characteristics of a successful business email compromise that receiving institutions can attempt to identify and hopefully interdict.” “As we move forward now that these rules are in place, we’ll be looking to receive and share success stories from the field and how those successes were achieved,” he said. The Open Banking Transformation The ACH Network will likely continue to benefit as the open banking model gains traction. Many consumers already use open banking technologies or processes to provision routing and account information for ACH payments. Younger consumers, in particular, are more comfortable connecting their bank accounts to third parties to make and receive payments. A recent Nacha study found that approximately 89% of consumers under the age of 34 are comfortable linking their bank accounts to services, wallets, and apps. This contrasts sharply with older consumers, many of whom still rely on both paper checks and ACH payments to meet their financial needs. Another key difference is that older users may use a checkbook to obtain routing and account information for ACH transactions, while younger consumers may not have a checkbook at all. As a result, linking accounts through open banking services is likely to accelerate until it becomes the predominant mechanism consumers use to enroll in services and make payments. “Open banking and pay-by-bank are things that are going to grow for the younger consumer and the next-generation consumer,” Danner said. “I don’t think they will even think of it as an ACH payment anymore, it’ll be just logging into my bank account and making a bank payment.” The Future of ACH Although open banking is already here, emerging forces could alter the future of ACH payments and help sustain the ACH Network’s momentum. “ACH is going to be a common method to move U.S. dollars into and out of stablecoin and token exchange networks, and this will take place through digital wallets,” Herd said. “Digital wallets are already well-established in the ACH ecosystem today for the A2A types of transfers and to do things like investments or even things like sports gambling that run on a digital wallet model.” “There’s probably a vanguard of people that use wallets to move dollars into and out of stablecoins or other kinds of cryptos, but I think in the future it would be more commonplace to move dollars into and out of stablecoin or digitized token exchange networks that are becoming more commonplace to the general population,” he said. Along with open banking and digital assets, the future of the ACH Network, and payments more broadly, will likely involve AI agents. However, many considerations must still be ironed out before full-scale agentic commerce becomes mainstream. “I think it’s going to include authorizing and initiating ACH payments for just about all the ACH use cases,” Herd said. “There will be industry discussions around both tools and standards to enable the use of AI agents and payments, and there are also going to be conversations about what guardrails are needed around issues such as payment authorization, and also identity, authentication, and trust around the use of those AI agents.”

  7. 19 Aug

    Embedded Finance: Banks’ New Growth Channel

    In the past, a community bank in Connecticut could attract customers through physical branches and marketing efforts, but expanding beyond its geographic footprint was cumbersome. Today, that same bank can partner with a single independent software vendor (ISV) and unlock a channel to thousands of customers across the U.S. who were previously unreachable. In a recent PaymentsJournal podcast, George Malesky, Director of Partnership Development at Qualpay, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed how ISVs’ growing role in embedded finance is creating a new distribution strategy for financial institutions. The evolution of this model has also fundamentally shifted the role of banks. Rather than simply offering accounts and payment rails, more institutions are becoming embedded finance enablers—a strategy that can position community and regional banks as integral financial services providers. The Four-Legged Table Consumers may not ask for embedded finance by name, but they expect to pay within the apps and websites they already use—not through a separate banking portal. That expectation has carried into the business environment, where merchants across industries want payment capabilities built directly into the software they use to run their businesses. Embedded finance has emerged to meet this demand, and its success depends on four interconnected participants: sponsor banks, Banking-as-a-Service (BaaS) providers, ISVs, and end customers. At the foundation is the sponsor bank, which provides regulated financial services such as holding deposits, issuing accounts, and facilitating access to payment networks. The sponsor bank is responsible for regulatory compliance, anti-money laundering (AML) and Know Your Customer (KYC) oversight, and financial risk management. BaaS firms provide the technology and operational infrastructure that makes embedded finance possible. They build the APIs that support functions such as digital onboarding, payment orchestration, underwriting automation, compliance workflows, settlement and reconciliation, and white-label capabilities. ISVa bring those capabilities directly to the businesses that need them. They are responsible for customer support and product adoption, both of which are critical to the success of an embedded finance offering. In the process, they maintain one of the model’s most valuable assets: the customer relationship. That relationship gives ISVs access to vast amounts of data about business behavior and industry-specific pain points—insight that can inform both the products they offer and the financial services layered into them. “Banks don’t naturally have these workflows,” Malesky said. “An accounting software knows exactly when a business sends invoices; a healthcare platform knows when patients are going to make payments; a property management platform knows when rent’s going to be collected. They have a more intimate knowledge, and that context allows financial services to appear exactly when and where they are needed.” The final participant in the end customer, who validates and powers the entire system. Each party plays a distinct role, and the model depends on their ability to work together. Remove one piece, and the broader embedded finance ecosystem quickly begins to break down. “Without the bank, you’d have no regulatory banking products,” Malesky said. “Without the platform, no scalable APIs or automation. Without the ISVs, there would be no customer distribution, and without the customer, there’s no adoption of revenue.” “You can think of it as a four-legged table. Take out one leg and make it wobbly,” he said. “There’s no independence here, each one of those legs makes it all come together and makes it work.” A Workflow, Not a Destination While all four participants are essential, ISVs occupy a particularly important position because they sit closest to the end customer. That position has created meaningful financial, strategic, and competitive advantages for software providers. The most obvious is a new source of revenue. Instead of relying solely on subscription fees, ISVs can participate in payment processing revenue and generate additional income from banking and financial services. These opportunities can include treasury services, lending, referrals, and deposit programs. The value extends beyond revenue. Embedded finance can bolster customer retention by bringing payments, banking, invoicing, reconciliation, and financing together within a single platform. For merchants, the convenience of managing these functions in one place can make a software platform much harder to replace. “Once that software is wrapped into the business, it’s very hard for a business owner to change software platforms,” Apgar said. “They basically have to start over, not just with their menu if they’re a restaurant, but with all of their suppliers, recipes and inventory levels. Unless the software is flat-out not working, there’s very little incentive. There’s a high barrier to change on the business owner’s part.” “When you’re a bank providing embedded finance and going along for the ride, you’ve acquired not just a customer, but a very sticky and stable customer,” he said. There is an experience advantage, too. Embedded finance allows business owners to access financial services through the same intuitive, consumer-grade digital experiences they have come to expect elsewhere. For merchants accustomed to navigating fragmented and complex financial workflows, that can represent a shift. “If you think about a restaurant owner, at 2:30 or 3:00 in the afternoon between shifts in the past, they might say, ‘I have to go out now and run to the bank,’” Malesky said. “Instead, they should be thinking about ‘I need to pay my suppliers’ and then taking 20 to 30 steps into the back office.” “Banking simply happens in the background of everything else they do, that’s where embedded financial services create additional value,” he said. “The software becomes a more complete and holistic operating system for the business, and it’s a workflow instead of a destination.” Becoming an Embedded Finance Enabler Taken together, these benefits have pushed ISVs to the forefront of embedded finance, and that shift is changing what banks need to provide. Historically, many banks viewed their role as complete once they facilitated services such as opening deposit accounts, processing ACH transfers, issuing cards, or conducting wire transfers. But as these individual services have become more commoditized, the opportunity for banks has moved upstream. Rather than providing financial products, institutions can provide the infrastructure that allows those products to become part of a broader software experience.   “Think of it as an acquirer-in-a-box, giving an ISV, PayFac, or fintech everything they need to launch financial services quickly, without building that additional infrastructure themselves,” Malesky said. “The platforms typically include API-first architecture, modern APIs that allow the ISVs to integrate banking directly into their software without expensive custom development and additional work. They want it to function just like any other cloud service.” That means delivering digital onboarding experiences through which customers can open accounts, complete KYB and KYC requirements, apply for merchant services accounts, receive underwriting decisions, and begin processing payments. Compliance is another critical piece of the equation. Banks need to provide the oversight and controls required to support embedded financial services while giving ISV partners the infrastructure to manage those obligations effectively.   “I always talk about compliance being the heaviest lift because anyone outside the industry—especially ISVs—when you come into payments and banking, you don’t quite realize everything that’s involved,” Malesky said. “That includes AML, OFAC, KYB, transaction monitoring, risk scoring, and the list goes on and on. It is an expansive requirement, for good reason, that outside of banks becomes a difficult and expensive challenge.” The customer experience matters just as much. Embedded finance platforms should offer white-label capabilities so financial services can appear seamlessly within an ISV’s platform and carry its branding. Customers should not feel as though they are being redirected to a third-party or an external website. Banks can extend this value further through merchant portfolio management. Rather than limiting reporting and risk monitoring tools to their own internal teams, they can give ISV partners visibility into merchant performance, portfolio health, and risk. The commercial model matters as well. Establishing clear revenue-sharing arrangements gives banks and ISVs a share incentive to grow the relationship and deepen the financial services offered through the platform. Finally, banks should establish mechanisms to capture and use the data generated through these partnerships. One of the most powerful advantages of embedded finance is the visibility it provides into business transactions and cash flow. That information can help banks underwrite more accurately, offer appropriate working capital, reduce credit risk, and ultimately improve customer outcomes. Shifting the Distribution Strategy All of these capabilities point to a shift in how banks can approach distribution. The institutions that provide embedded finance infrastructure are positioning themselves for a financial services landscape that won’t be defined by the largest branch network or the broadest product catalog. Instead, it will be shaped by institutions that can deliver banking services wherever businesses choose to work. For community and regional banks, that shift may seem d

  8. 18 Aug

    How Leading Brands Are Building Better Digital Gift Card Experiences

    The gap between good and great gift card programs is widening. While most brands offer some form of gift card, the leaders are distinguishing themselves through more sophisticated direct digital experiences. Sometimes referred to as first-party or owned gift cards, direct digital gift cards are purchased through a merchant’s own website or app. As NAPCO Research uncovered in its 2026 Best Direct Digital Gift Cards Benchmark Report, conducted in partnership with BHN, direct digital gift cards represent an unoptimized revenue stream for organizations. In a recent PaymentsJournal podcast, Sarah Kositzke, Global Insights Director at Blackhawk Network (BHN), Joe Keenan, Editor-in-Chief, Total Retail, aNAPCO Media brand, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the report’s findings, what they reveal about the evolving gift card landscape, and the strategies separating top performing brands from the rest. Why Gift Cards? The strongest gift card programs begin with a simple premise: gift cards are no longer a peripheral offering, but a key driver of revenue and customer engagement. That opportunity is only becoming more significant. NAPCO projects the U.S. and Canadian gift card market will reach $547 billion by 2030, with digital gift cards accounting for roughly $216 billion. This rapid growth is driven by consumers finding more reasons to buy gift cards and having more purchasing options than ever before. “Consumers are buying about nine cards across the entirety of the year, and birthdays are a great example. But it works for the holidays and it works for teacher appreciation. There’s just so many different occasions where people are looking for that right gift,” Kositzke said. “They might be like, ‘I think that so-and-so might like this brand’ and then you’ve got your multi-brand cards that help suffice for multiple things that somebody might be interested in, all the way to your open-loop cards like Visa and Mastercard,” she said. Another growth catalyst is the increasing number of gift cards purchased through loyalty and rewards programs, reflecting the broader trend toward self-use. At the same time, consumers are giving gift cards for a wider range of occasions, including appreciation, condolences, or simply to surprise and delight recipients. Even in categories where physical gifts have traditionally been the norm, gift cards are gaining traction. This is due in part to ongoing macroeconomic pressures, with many consumers operating under tighter budgets. In cases where a buyer can’t afford an entire gift, a gift card can still help the recipient put it toward a larger purchase. “Wedding gifts can be big and expensive, and maybe they just want an experience,” Hirschfield said. “It’s buying a gift card to add to that versus back in the old days when I got married and you got one piece of china. Literally, people bought me a bowl. I don’t want that anymore, and the younger generation definitely doesn’t want that, so buying that gift card is a key thing.” A Comprehensive Benchmark Report Amid this surge in prepaid popularity, NAPCO Research evaluated the state of direct digital gift card offerings. In the ninth edition of its annual report, the firm assessed 120 North American brands—110 based in the U.S., and new this year,10 in Canada. The evaluations were conducted using a secret shopper methodology, with assessors reviewing both the purchase and recipient experience and scoring each program against 147 unique criteria. These criteria encompassed the entire purchaser and recipient journey across desktop, mobile web, and mobile app platforms. “We’re looking at categories including discoverability, offering flexibility, the checkout and post-purchase experience, the recipient experience, marketing of gift cards, customer service, B2B programs, and credit card rewards,” Keenan said.  The company expanded its research to include 20 different product verticals, adding four new categories in 2026 — automotive and auto parts, discount and dollar stores, on-demand delivery services, and pet supplies. In addition to expanding its evaluation segments, NAPCO introduced new criteria this year, including AI search, group gifting, animated cards, delivery notifications, and purchase flow integrity. The report’s objective is not only to gauge the state of the gift card industry, but also to provide actionable insights. It also outlines best practices brands can use to strengthen their gift card programs, improve performance, and drive ROI. “To help them do that, we’ve created this benchmark,” Keenan said. “We have year-over-year data, and then you can look at it and take a slice of it for the 2026 year and look at how your gift card program compares to those top performers—measuring yourself against your competitors and the retail industry at large.” “It can be that learning tool to help accelerate growth within their own gift card programs,” he said. How the Top Performers Invest Overall, brands’ scores improved this year, but the average score of 67% indicates there is still room for improvement. It is perhaps no surprise that this year’s top U.S. performers were some of the country’s largest retailers: Best Buy, Amazon, and Staples. The top Canadian brands were Lululemon and The Home Depot.  “What sets these top performers apart from some of the others?” Kositzke asked. “That high score was driven by discoverability. Are we able to find your brand’s gift card within that site [or app] easily? Are you promoting that card on your site, but also on other channels as well?” “Are you offering that flexible delivery option, being able to meet that consumer where they are, being able to communicate to friends and family and colleagues exactly how you communicate with them today, but through the niceness of delivering a gift card?” she said. Another common trait among the top performers is their investment in mobile experiences. This is intentional, as mobile commerce has begun to significantly outpace desktop-driven e-commerce. As a result, brands should optimize the mobile shopping experience for both gift card buyers and recipients. For example, recipients should be able to easily redeem cards, check balances, and reload gift cards from their mobile devices. Along with delivering a digital-first experience, leading gift card programs give customers more choice. Shoppers should be able to purchase both physical and digital cards.. That same flexibility should extend to delivery. While email remains a reliable option, customers increasingly expect to send and receive gift cards through their preferred channels. “When looking at the data for this year, SMS delivery was a differentiating feature between top performers versus some of the merchants that were further down in the rankings,” Keenan said. “That’s something that organizations should think about incorporating into their own gift card program is that SMS delivery. It speaks to the growing popularity of mobile shopping.” Areas of Opportunity Despite overall improvements and a number of innovative features introduced this year, two areas continue to lag: marketing and customer service. “We check for marketing a couple of times throughout the assessment,” Kositzke said. “Especially during that holiday time frame, are you marketing your gift card program to allow people to know that you have one, and here is the best solution for gifting?” “Then also customer service, so being able to address issues and questions quickly,” she said. “Consumers are often in that mindset of, ‘Why can’t I have an answer now versus having to wait 48 hours or a week or seven days to get back to me on a question that I might have?’” One key best practice is to regularly audit the entire gift card program by completing the full purchaser and recipient journey and identifying friction points throughout the process. This step is critical because even minor points of friction can have significant downstream consequences. “You want to build a checkout experience that works every time,” Keenan said. “It seems simple and self-explanatory, but you’d be surprised at how often there are snags in the gift card purchase process. And if that process doesn’t go through the first time, chances are you’re going to lose that customer. They’re not going to come back and try it a second or third time. It needs to work  right the first time.” Much More to Uncover The brands that recognize this opportunity—and continue evolving their gift card experiences—will be the ones best positioned to turn a simple purchase into a lasting customer connection. By combining seamless mobile experiences, flexible options, and stronger promotion, organizations can unlock the full potential of gift cards as a strategic engagement channel.   That said, organizations must also remain agile as the preferences and expectations of younger consumers continue to evolve. “Younger shoppers, primarily millennials and Gen Z, are increasingly turning to gift cards for affordability issues,” Keenan said. “They’re thinking about budgeting and how they can use gift cards for their own self-use or for gifting to others.” Another force to monitor is technology, which—like every industry—has the potential to rapidly reshape the prepaid landscape. “AI is a hot topic across every industry,” Kositzke said. “This past year, we included a couple of key assessment points around AI and being able to find gift cards. But to be honest, when we did the report for our partners, one of the key questions that kept coming up was, ‘What about this with AI and what about that with AI?’” “When we think about those criteria for 2027, how do we level up some of the things around AI and how are we going to assess thos

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  • Creator
    PaymentsJournal
  • Years Active
    2023 - 2026
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    283
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