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PaymentsJournal

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  1. 2일 전

    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

  2. 3일 전

    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

  3. 4일 전

    When AI Changes Fraud, Trust Becomes Everything

    Trust has always been the foundation of the credit union movement. Today, that trust is facing one of its greatest tests. Artificial intelligence is making fraud more convincing, more scalable and more difficult to detect. As AI becomes more embedded in commerce, credit unions face a difficult balancing act—embracing innovation while protecting members from evolving threats. In a recent PaymentsJournal podcast, Karen Postma, Senior Vice President of Risk Solutions at Velera and Suzanne Sando, Lead Fraud Management Analyst at Javelin Strategy and Research, discussed how AI-driven fraud, deepfakes and the emergence of agentic commerce could jeopardize the critical bond between members and credit unions. Not only has this made it imperative for institutions to implement robust technological safeguards, it has also highlighted the importance of effective education and communication in maintaining strong member relationships. Questioning the Source of Truth Criminals have forged ahead in the AI arms race, largely because they aren’t constrained by compliance, operational or ethical obligations. As concerning as this is for financial institutions, consumers have also become aware of the risks as well. Many have seen first hand how AI has made fraudulent communications more convincing through sophisticated scam texts, phishing emails and other impersonation attempts. And they understand these tactics are just the tip of the iceberg. “I don’t think this is an overreaction,” Sando said. “We have information overload when it comes to AI. From a consumer perspective, you’re hearing about it in the news all the time—the good, the bad and the ugly. You’re hearing about the ethical debates and the effects on the environment. We can’t get away from it, and that may play into some of the fears that consumers have with AI.” Consumer concerns have grown as deepfakes have demonstrated how convincingly AI can mimic a person’s voice or likeness in audio and video. These tools can be used to deceive friends and family, authorize fraudulent transactions or facilitate blackmail and other scams. However, deepfakes are also indicative of the double-edged nature of AI. While consumers worry about becoming victims of these attacks, technology is also lowering the barrier for individuals to commit first-party fraud. “That happens all the time, and then they’re disputing it or claiming some type of loss when in actuality that wasn’t the case,” Postma said. “Unfortunately, the accessibility of innovation in AI has made us question everything more, versus trusting in the consumer.” “That’s a weird position to be in. The member has always been our best source of truth, and unfortunately, I don’t know that we’re in that environment any longer,” she said. The Emergence of Agentic Commerce This dual nature of technology has also raised concerns about the emergence of agentic commerce, where consumers entrust AI agents to act as autonomous personal shoppers. Consumers already use AI to compare prices, research products and find the right item. However, fully autonomous agentic commerce is an entirely different proposition. “You’re trusting an agent to understand your intent, and you’re also trusting that agent to be able to execute in the way that you would want them to,” Postma said. “Such things as understanding intent from the initiation of the prompt, all the way through the transaction, all the way to a potential dispute process—and making sure that transparency is there. That’s going to be a critical avenue where the industry is going to have to adapt and figure out how to share that information.” Beyond the foundational challenges of building these systems, fraud prevention becomes more complex. Rather than authenticating a transaction, financial institutions will also need to verify the customer’s intent and ensure the AI agent is acting according to the customer’s wishes. Introducing a third party into the traditional transaction model also creates new avenues for fraud. Both the agent and the customer will require authentication, potentially necessitating the development of Know Your Agent policies that mirror Know Your Customer requirements. This could include building profiles for AI agents that document aspects like behavioral patterns, permissions, and preferred merchants. These profiles could help identify when an agent has been compromised or manipulated. Alongside these infrastructure changes, the returns process—already a common target for fraud—will also need to evolve. “The number of disputes increases drastically—I’m using the word ‘dispute’ intentionally and not ‘fraud’—because in those cases, consumers forget that they empowered an agent to go purchase this for them,” Postma said. “They don’t recognize the transaction because they empowered that agent a couple weeks ago.” “Those kinds of things happen in that fully autonomous world, and we don’t necessarily have the infrastructure to mitigate those disputes at the moment,” she said. High Stakes and Tight Budgets As credit unions work to defend against AI-driven fraud while preparing for agentic commerce, many are developing strategies to modernize their fraud prevention programs. However, because these investments have far-reaching implications, institutions are often challenged to determine how best to allocate limited fraud prevention resources.   “Fraud is always at the bottom of budget prioritization, whether we like it or not,” Sando said. “It’s either compliance or regulation updates that take priority; it’s some enhancement that will benefit customers; it’s a new product that’s going to bring a new revenue. At the end of the day, it’s, ‘Whatever we have leftover, we’ll throw at the fraud problem.’ That’s never going to be enough if fraud doesn’t get the prioritization that it not only deserves, but it needs.” Given the high stakes and tight budgets, partnerships can provide credit unions and community banks with an effective way to balance speed to market with the need to adapt to a rapidly changing environment. “There are starting to be a number of providers in the marketplace, Velera being one of them, that allow for what we call an orchestration layer,” Postma said. “It allows the financial institution to integrate once on the back end, and it is powered by a number of different solutions. With such things as orchestrators to be able to leverage some of that technology, it becomes much more strategic and intentional around how we prevent fraud.” Education, Transparency and Trust Technology alone is not enough. Equally important are educating members and fostering transparency. Too often, banks and credit unions rely on generic fraud education that fails to resonate with customers. “You need to have real-world and contextual examples, things that are specific to someone’s demographic. Like saying: ‘We’re seeing a higher concentration of elders being targeted by a certain scam or people who are Gen Z or who use digital wallets,’” Sando said. “If you’re putting it into context, it helps put the threat into a space that doesn’t feel scary and insurmountable, but it does feel real.” As scam communications have become more convincing, many customers have begun ignoring all digital messages—including legitimate fraud alerts from their financial institution. This makes proactive, ongoing education essential. Credit unions should help members recognize common fraud tactics and understand how the institution communicates with them. Given the sophistication of today’s fraud landscape, that education must extend far beyond a handful of documents buried within an online banking website. “It’s education internally, it’s education to the consumer, and from a credit union perspective and the role that we play in communities, we have an opportunity to educate within schools and other community-based areas around what socially engineered scams are. Your member is your line of defense,” Postma said. “Educating and being transparent about what’s going on and playing a critical role, even outside of interactions that happen at the financial institution,” she said. “That becomes our most effective method.”

  4. 8월 10일

    The Use Cases Propelling the FedNow® Service’s Growth—and Shaping Its Future

    Customers no longer measure service in days or even hours—they measure it in seconds. Whether they’re paying employees, closing on a home, moving money between accounts, or covering an unexpected expense, they expect funds to be available immediately. That demand for speed is fueling the rapid growth of real-time payments, particularly those enabled by the Federal Reserve’s FedNow Service. In a PaymentsJournal Podcast, Bernadette Ksepka, SVP, Deputy Head of Product Management for the FedNow Service; Shankar Jayaraman, Director of NOW Network at Fiserv; and Ben Danner, Senior Analyst of Debit at Javelin Strategy and Research, discussed the use cases driving the service’s momentum and how financial institutions that have yet to join the network can position themselves to meet evolving customer expectations. Breaking Records Every Day As more use cases for FedNow go live and more institutions participate, adoption continues to accelerate. Every week, the FedNow Service is breaking its own records. It recently surpassed 1,776 financial institutions on board, which according to Ksepka is an appropriate number for a U.S. payment system to celebrate. Fifty service providers support FedNow connectivity, and new banks are joining the network almost daily. The service now reaches all 50 states and includes seven of the top U.S. banks. “And 95% of our participants are community banks and credit unions,” said Ksepka. “They’re offering instant payments alongside some of the nation’s largest institutions. This isn’t just large banks chasing new technology. A credit union in rural Montana wants the same real-time tools that a major bank in New York City wants.” Finding New Avenues for Growth FedNow’s growth is being fueled by a combination of expanding participation and an increasing number of real-world use cases. One of the fastest-growing areas is earned wage access and off-cycle payroll. Workers no longer want to wait two weeks for a paycheck, and employers are using the FedNow Service to provide access to earned wages or pay employees at the end of a shift. For many families, that can mean the difference between paying rent on time and falling behind. The service is also reshaping major life events. Homebuyers can send escrow payments instantly, while car buyers can complete financing and drive off the lot immediately—even on weekends. Digital wallet funding and defunding has emerged as another significant use case, enabling money to move seamlessly in and out of brokerage accounts, payment apps and other digital platforms. Businesses are finding value in real-time payments as well. Major fintechs are partnering with FedNow to deliver new capabilities to their customers, while small businesses are using the service to pay suppliers faster, improve cash flow, and reduce reliance on checks. For financial institutions, account-to-account transfers remain a significant opportunity. Many consumers maintain multiple accounts and increasingly expect to move money instantly between them, whether within the same institution or across different banks. Behind this growth are several structural advantages. The expanding number of participating financial institutions continues to increase the network’s reach, while FedNow’s direct participation model allows banks to settle transactions through their Fed master accounts. Another catalyst came last year with the introduction of instant government payouts, demonstrating the potential of real-time payments at scale. “FEMA was the first agency to make disbursements over FedNow through Treasury’s digital payout program,” said Ksepka. “When families are dealing with a crisis, getting those funds immediately instead of waiting days for a check to arrive and clear is not just more convenient, it’s critical. Other agencies are now using the service, with more expected to join in the near term.” Tracking Payment Numbers The growing use of the FedNow Service for larger-value transactions is evident in the numbers. As the financial institutions serving businesses use the network for everything from vendor payments and disbursements to corporate transfers and brokerage-related transactions, the average payment value has climbed well beyond that of other real-time payment networks. In 2025, according to Danner’s research, the average FedNow transaction exceeded $100,000, compared with approximately $4,000 on The Clearing House’s RTP network as of June 2025. “Adopters of FedNow are seeing more high-value B2B payments, while something like RTP is going to be more consumer-focused,” said Danner. “That being said, average value per payment has actually declined on FedNow despite the overall volume growth. That suggests broadening use cases beyond the historical high value corporate transactions. Ksepka added: “That’s the beauty of the platform. We are use-case agnostic, and it’s a platform for innovation that allows for any types of use cases.” Overcoming Concerns Financial institutions still face several obstacles when it comes to adopting instant payments. Three concerns come up repeatedly, starting with core system readiness: Is the institution prepared to process 24/7/365 real-time transactions? The second is liquidity management. How do institutions keep accounts funded when they are sending money? Is there a risk of running a negative balance? “Most of the financial institutions who are sending today have solved that by taking baby steps,” Jaramayan said. “Come in on the network. Participate in the network. Receive first. Your ability to receive payments gives you a perspective of how things are in that space. All the rest then falls in line right after, one after the other.” The third is internal prioritization. Many financial institutions approach instant payments as a technology initiative when, in reality, it’s a product decision. Every institution has competing priorities and long project backlogs, but instant payments are increasingly becoming table stakes, and customers are coming to expect these capabilities. “For late adopters, my biggest advice is don’t overthink it,” said Ksepka. “Start simple. You don’t need 10 use cases on day one. Pick one meaningful opportunity for your customers, maybe weekend auto loans or faster B2B payments. You learn from there.” FedNow Into the Future As it moves forward, the FedNow Service is focused on three goals: unlocking more innovation, strengthening security and risk mitigation, and preparing for the next wave of instant payment capabilities. That includes features such as Request for Payment and, eventually, cross-border payments. “We’re super excited about a group of innovative early adopters coming together to work with us to test these new flows, explore new features, and really help shape what 24/7 international payments look like,” Ksepka said. One of the newest tool provides sender institutions with receiver account signals to help assess risk before a payment is sent over the network. FedNow is also exploring ways to make payee name verification easier through a real-time API, giving institutions another layer of assurance before payments are made from their customers’ accounts. “The biggest message is don’t get left behind and don’t give your customers a reason to look elsewhere for financial services,” said Jarayaman. “Now is the time to adopt if you haven’t. The financial institutions who ultimately win will be the ones who treat real-time as an infrastructure, not as a feature.”

  5. 8월 6일

    The Rise of Programmatic Payments and the New Compliance Challenge

    A payment used to begin with a person making a decision: swiping a card, approving a transfer, or authorizing a purchase. Increasingly, that decision is being embedded into software. As programmatic payments become more common—and as agentic AI expands their reach—financial institutions must adapt to a landscape where transactions may be initiated by systems acting on behalf of businesses and consumers. The opportunity is significant, but so is the challenge of ensuring those systems behave as intended.   In a PaymentsJournal Podcast, FinScan’s Kieran Holland, Global Head of Solutions Engineering, and Chris Ostrowski, Head of Product Management, as well as James Wester, Co-Head of Payments at Javelin Strategy and Research, explored the present and future of programmatic payments—from the rise of automated transactions to the new demands they create for fraud prevention, compliance, and oversight. A World of Multiple Payments One reason programmatic payments have become increasingly important is that financial activity is becoming more continuous and embedded into everyday processes. Instead of a handful of large, manually initiated payments, businesses and consumers are relying on a steady stream of smaller, automated transactions triggered by specific events, behaviors, or needs. “We all want to pay our Netflix subscriptions,” said Holland. “We all want Alexa to go out and buy groceries when we say, ‘Hey Alexa, I’m running low on mangos.’ Programmatic payments is just the background technology that’s driving a more transactional world.” Digital platforms have also normalized recurring and event-driven payments. Consumers are more comfortable authorizing transactions that occur automatically under specific conditions—whether that means renewing a subscription, purchasing additional credits for an AI platform after reaching a usage threshold, or completing a payment triggered by a predefined event. These experiences have changed consumer expectations around when and how payments can happen, making automated transactions feel like a natural part of everyday digital interactions. “You have that ability to trigger searches and purchases when that TV you’ve been waiting forever to buy hits that right price point,” said Ostrowski. “It’s similar to the concept within the stock market where you’re waiting for stocks take a certain price and then it executes. That’s very much similar what you’re doing to these programmatic payments in a 24/7/365 economy.” Moving at Machine Speed Especially for larger organizations, payments are no longer just financial events. They are increasingly embedded directly into digital platforms and operational systems. When programmatic payments are triggered by events such as a completed transaction or a supply chain milestone, companies can maintain control while automating workflows and allowing money to move at machine speed. These changes are happening at the consumer level as well. For example, parking apps have become a common frustration for drivers visiting new locations. Many parking lots now require downloading a separate app before a payment can be made. “I used to have to type my credit card information into each and every single one of these parking apps depending on where I was parking,” said Holland. “I went to the coast and this new parking app said, ‘Do you want to log in with Google?’ Yes. ‘Do you want to authorize a payment through Google Pay?’ Yes, I do.” “Four hours later, it prompted me: ‘Hey, you’re running low on parking time. Do you want to add some more?’ Yes, done. That’s a really tangible advantage, where I can just delegate it through Google Pay or Apple Pay,” he said. Fighting Financial Crime & Fraud Because these payments are completed so quickly—and because many involve relatively small dollar amounts—existing fraud detection and security systems must evolve to identify and mitigate emerging risks. “Your systems really have to be fine-tuned to detect those risks as they are happening,” said Ostrowski. “You can’t rely on the analysts coming in at 8:00 AM. You have to have the right technology in place, the right monitoring place 24 hours a day, seven days a week to make sure that you are properly evaluating those payments as they flow through.” Strong guardrails will be essential as these payments evolve. In the traditional payments environment, a consumer whose card information was compromised could typically cancel the card and resolve the issue. Programmatic payments introduce a more complex challenge because transactions may be authorized through automated systems, predefined rules, or software agents acting on a user’s behalf. “You’ve got an infrastructure where we’re enabling 40 or 50 different vendors to connect and automate things out of your account,” said Holland. “Do we want to use that large hammer to crack a very small nut that one of those 50 vendors is nefariously overcharging you? We’re probably going to be in a situation where there’s a bit of a human learning curve to go through.” The behavior of AI models differs from the human behavior that fraud detection systems have traditionally been designed to monitor. Those systems will need to learn what normal activity looks like in a world increasingly driven by machine-initiated transactions. “You have to figure out what the agents are going to do,” said Wester. “The agents aren’t necessarily going to behave in ways that we think are sort of logical or the right way. They’re going to follow patterns that are recognized and all sorts of data and decisions.” The results of these efforts also need to be auditable. Regulators must be confident that automated decisions are being made in appropriate, transparent, and accountable ways. What are the implications when AI doesn’t behave as intended? “I’ve run out of toilet tissue twice in the last three weeks,” said Holland. “When I ask the AI agent to order me some new toilet roll from Amazon, it’s ordered me 500 rolls because it tries to be smart. It taken it quite literally that I run out too quick.” Key Takeaways Since programmatic payments occur in real time, the tools that support them must operate in real time as well. Whether it’s fraud screening or the onboarding of a newly introduced third-party agent, these capabilities must function at the same speed and scale as the business processes they support. It’s also vital to understand the underlying data involved and ensure it’s accurate, reliable, and aligned with the organization’s objectives. “When you take a look at some of the studies that have been done about major corporate AI roll outs, a lot of the time, it’s not that the AI was bad, or that the ultimate business aim was bad,” said Holland. “It’s the data that went into it wasn’t sufficient to give them the outcome they needed.” Finally, there is a human element to consider. Programmatic payment systems will not operate at their full potential without people who can oversee their performance, provide guidance, and step in when human judgement is required. “If you’re finding the desired success, you can bring in the people to be able to support it, so you’re not trying to play catch up or having a number of regulatory findings as your examiners come in for the first for the first time,” Ostrowski said.   Holland added: “You want to avoid the AI equivalent of throwing a spaghetti at the wall and seeing what sticks.”

  6. 7월 30일

    When Payment Choice Becomes the Expectation

    No one likes waiting for a check to arrive in the mail. Today’s consumers are accustomed to instant, digital experiences, and those expectations extend to payments. Whether they’re receiving a refund, reimbursement, or settlement, recipients expect fast, secure and flexible options. That shift is prompting organizations to rethink how they disburse funds, with prepaid cards emerging as a practical option for many use cases. By giving payees more direct ways to receive their money, organizations can reduce reliance on paper checks while improving access to funds for recipients. In a PaymentsJournal Podcast, U.S. Bank’s Ashley Downey, Treasury and Payment Solutions Senior Product Manager and Kristin Ridgway, Prepaid Payment Solutions Consultant, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed how modern payment hubs can help organizations reduce costs, improve security, and provide recipients with greater choice. By moving payments away from paper checks and toward prepaid cards, payors can simplify disbursements while improving the payment experience. Moving Away from Checks Despite the continued shift toward digital payments, many companies still reflexively turn to paper checks for disbursements. Paper checks remain an expensive and inefficient payment method. The cost per check can exceed $4, with some estimates reaching as high as $20. “Think about all that goes into printing checks—the postage, labor, manual approvals, stuffing envelopes, tracking lost mail,” said Ridgway. “Probably the most time-consuming and expensive is check fraud. As they move those payments to prepaid cards or other pay methods, all those issues are eliminated, especially the fraud.” Checks have become less convenient for payees as well. Consumers expect speed and convenience in nearly every aspect of their lives, making a trip to the mailbox and a stop at a check-cashing location feel outdated—especially when additional fees may be involved. Fortunately, organizations have a growing range of alternatives to paper checks, including prepaid cards, payroll cards, digital payments, and even peer-to-peer services like Zelle. “All of these things are part of the arsenal every recipient uses, and they need to get those funds where they need it and as quickly as they can,” said Downey. “Having that access is key to consumers’ ability to take hold of their own personal finances.” The Benefits of Prepaid For recipients who may not have a traditional bank account—or simply want immediate access to their funds—prepaid cards can offer a practical alternative to paper checks. “Why do people use prepaid cards for themselves?” said Hirschfield. “People feel like it’s a safer option versus checks or cash. But it also turns immediately into the ability to access the money. It’s much easier to use a card on an open loop rail, especially when you’re under banked, when you have poor credit and don’t qualify for a credit card.” There’s also compliance consideration. Uncashed checks must be tracked, reported, and remitted to the state, creating additional administrative burden and audit exposure. “When a payment is made to a prepaid card, we handle statement responsibility according to the state where the recipient resides,” said Ridgway. “We take that burden away from our clients when the payment is made to a prepaid card.” A Focus on Flexibility In most cases, payee preferences and payment use cases help determine the optimal payment method. What U.S. Bank has found works well for its clients is conducting an assessment of who they’re paying and why they’re making those payments. There may be situations where funds are urgently needed, such as providing food or services to victims of a natural disaster. Or a business might have a vendor on-site who needs payment in hand before leaving. The ways those individuals prefer to receive payment could be very different—and critical to their missions. Increasingly, customers are demanding not just faster payment methods but also more payment options. The challenge for many organizations is that they may not be prepared for that level of complexity. One emerging solution is a single disbursement platform connected to multiple services and tools, such as U.S. Bank’s Payee Choice. A decision engine can process each payment and determine the ideal outcome for both the payor and the recipient. “We simplify the process so the end recipient doesn’t have to fully know or understand all the options available to them,” said Downey. “We use what information we receive from the client to best identify what solutions or payment methods best fit that recipient. “A good example of that is Zelle,” she said. “We can identify if a person is already enrolled in the Zelle network using the aliases provided by the client. And we can suppress showing that option to individuals who aren’t already enrolled. If they are enrolled in Zelle, click this button, you’ll get the payment in minutes. That’s just a better experience.” Protection from Fraud As organizations evaluate their payment mix, security has become just as important as efficiency and consumer preference. Fraud continues to be a major concern in the payments space, with paper checks remaining a primary target for criminals. Providing alternative payment options can help reduce that exposure while giving recipients greater choice. “Any type of electronic and card payment gives a much deeper programmatic fraud management solution,” said Hirschfield. “There are many more steps needed to protect these programs.” Having multiple layers of fraud prevention built into the process minimizes the need for organizations to collect and store sensitive data, thereby reducing their exposure and risk. Payee Choice continuously monitors for fraudulent activity. “We’re validating that person is the rightful owner of the account that’s being linked for payment for ACH or an instant payment, for example,” said Downey. “For Zelle, we can do a name match as well. And we’re making sure we’re preventing any misguided payments.” Final Thoughts Paper checks are becoming increasingly disconnected from how recipients actually want to be paid today—particularly among younger consumers who have never used them.   “We live in this digitally-native society—especially younger generations,” said Hirschfield. “Having these options to have any kind of digital payment or electronic payment is critical.” Offering payment choice helps close that gap, reducing friction for recipients and operational complexity for organizations.   “It’s been really powerful to have our customers move away from issuing checks and manual processes to be freed up to work on other things at their business,” said Downey. “Helping those clients move from just thinking about a payment solution and being able to drive overall improvement for them has been really successful.”

  7. 7월 29일

    Why Crypto Will Be the New Standard for Global Payouts

    Many companies expect gig workers to deliver fast, reliable work—but the way they’re paid often tells a very different story. Behind the scenes, payouts can lag days or even weeks, get chipped away by fees, and disappear into layers of currency conversion and compliance hurdles that most contractors never see coming. This gap between real-time work and delayed compensation becomes even more pronounced in cross-border payments, where long-standing friction points persist: settlement delays, hidden costs, currency conversion, regional regulations, and limited visibility into where money actually is at any given moment. In a recent PaymentsJournal podcast, Kate Lifshits, CEO of NOWPayments, and James Wester, Director of Cryptocurrency at Javelin Strategy & Research, discussed the many ways in which leveraging digital assets for payouts can create a more effective solution. Not only can crypto payouts address operational challenges, but implementing efficient global payout systems can also be a key differentiator when it comes to attracting and retaining vital talent in a competitive market. The Operational Pain Points The issues with cross-border payments only intensify as organizations scale high-volume international payouts. Although cost is often the most visible concern, many of these expenses are not immediately obvious. “It’s not the payout itself that costs a lot, it’s the operational overhead that comes with this payout,” Lifshits said. “There are things like reconciliation, operational failures, and support tickets that come with failed payouts, and all kinds of manual operations are needed. If we’re talking about 100 payouts, it’s one fee. If we’re talking about 100,000 payouts, it’s another fee because at scale we’re talking about additional infrastructure.” Understanding fee structures is just one aspect of the broader operational complexity facing finance teams at global organizations. These teams must manage multiple banks and fiat currencies while continuously staying current on regional regulatory, tax, and compliance requirements. While this is challenging for organizations, payout inefficiencies can be even more detrimental for contractors. One of the biggest obstacles for small businesses—and especially freelancers, creators, and gig workers—is cash flow. Budgets are often stretched thin after covering supplies or subcontractors, and financial pressure can rapidly escalate when payouts are delayed, inaccurate, or subsumed by fees. Unfortunately, all of these issues are common in the current payment system. “The system itself was built by banks for banks, for their convenience and not for either end of the transaction,” Wester said. “It’s not built for the sender. Tthe sender has to figure out the complexity, they have to figure out where it’s going, and they have to figure out the cost. And the recipient, it’s definitely not designed for them because they have to wait. They are the ones where often the fees are built into whatever it is that they received.” Translating Speed into Trust These payment challenges don’t align with current customer expectations. When users can send peer-to-peer payments almost instantly with full visibility in a seamless digital experience, traditional cross-border payment systems can feel archaic. “They want settlement and they’re even beginning to understand the differences between when a payment is made and when a payment settles,” Wester said. “They are expecting that settlement to be immediate. Nobody wants to wait for a payment to clear anymore, you don’t want to hear that phrase. You just expect a payment to happen and the money to move and for it to be available in an account right away.” For their part, many organizations want similar clarity on the other side of the transaction, since understanding cash flow is essential to operations. However, the complexity of cross-border payments—combined with managing multiple platforms, freelancers, and contractors—makes it difficult to track cash flow accurately. This creates a difficult environment, because organizations that rely on gig workers and contractors at scale understand that speedy, reliable payouts are the lifeblood of their business model. “In this case, speed translates into trust and reputation and that in its turn translates into bigger volumes, because speed means that the users will trust this provider or this business—whichever is sending the payouts—and that in its turn will bring in more usage,” Lifshits said. “It all goes together.” Improving the Economics of Global Payouts As merchants increasingly recognize the importance of efficient payouts, many also acknowledge that current cross-border payment systems fall short of expectations. Digital assets can provide near real-time payment and greater transparency, while often reducing currency conversion friction and regulatory overhead. Perhaps most importantly, crypto payments can help reduce the spiraling costs of global payouts. “It’s different with crypto payment gateways because they can help scale without ballooning the fees. The fees stay the same even with a big scaling,” Lifshits said. “All the pain points could be dealt with in this traditional infrastructure, but it will cost very, very much. But if it’s a crypto payout infrastructure, the fees will be what they are supposed to be in a world that makes sense.” At the center of this infrastructure is the crypto gateway, which bridges payments processors and merchants. While early crypto gateways were little more than a “Pay with Crypto” button at checkout, modern systems have evolved into sophisticated payment orchestration platforms that optimize routing while maintaining compliance. Crypto gateways have become essential for managing the many components of the digital asset ecosystem, including cryptocurrencies, wallets, integrations, and infrastructure layers. This is transformative for organizations that are drawn to the cost and efficiency benefits of digital assets but hesitant about operational complexity. These gateways also address one of the most significant barriers to adoption: volatility. Crypto gateways allow merchants to choose how actively they manage digital assets, from fully automated conversion to more hands-on control. All these advantages make crypto payouts as user-friendly as other payment tools in a merchant’s stack. “Crypto is not something now that a business needs to look at and think that is different from the standard way of doing things,” Wester said. “It has become a standard for business-to-business payments, and it is not something that is strange or foreign or weird or exotic. It’s a standard tool for making payments and has become so very quickly.” Changing Business Economics Crypto has been adopted rapidly in part because it often offers a more efficient alternative to many traditional payment methods. However, the benefits of using digital assets for payouts extend beyond cost reduction. “If you think about gig economy marketplaces or about any time there has to be a payout, when you think about making that payment better, faster, and cheaper, it becomes something that those businesses can now use as a competitive advantage,” Wester said. While crypto gateways are powerful tools, they were not entirely fee-free—until now. NOWPayments recently introduced zero-fee payouts with near-instant processing for wallets within its ecosystem. This solution is designed for high-volume global operations and delivers meaningful improvements in efficiency and scalability. Beyond reducing costs, NOWPayments introduces a new value proposition for partners: the ability to generate additional revenue when their users engage with ChangeNOW PRO. This makes NOWPayments the first crypto payment gateway to enable partners not only to accept payments, but also to participate in and benefit from the broader ecosystem. Along with settlement times of roughly a second, zero-fee payouts and new revenue opportunities present a compelling alternative—even compared to already low-cost crypto gateways. “The problem here is that every fee looks small until you scale it and multiply it by millions or billions of transactions,” Lifshits said. “The small businesses that are scaling to become big businesses, they will face issues even if the fee is $0.01.” “That is why our zero-fee instant payouts are meant to change business economics, because they’re free, they are available to everyone, and they’re instant. And that means lower operational costs and a far better user experience,” she said. “It’s not even about reducing costs or saving money; it’s about enabling new business models and new revenue streams.”

  8. 7월 28일

    What Happens When a Credit Union Outgrows Its Accounting System

    As financial institutions merge and evolve, the pressure on back-office operations grows just as quickly as it does on member-facing services. Accounting teams that once relied on manual processes and patchwork systems are now expected to deliver greater accuracy, faster reporting, and the flexibility to support future growth. As a result, many banks and credit unions are reevaluating whether their current accounting platforms can keep pace—and looking for partners that can support both today’s demands and tomorrow’s challenges. In a PaymentsJournal Podcast, Kellie Rychwalski, Chief Financial Officer at Del-One Federal Credit Union, Kandra Person, Senior Solution Consultant at Fiserv, and James Wester, Co-Head of Payments at Javelin Research and Strategy, discussed the accounting solutions available to financial teams today. Newer platforms have made significant advances compared to the way things were handled in the past. “I was just looking for efficiencies,” said Rychwalski. “Simply being able to attach a PDF of an invoice to an accounts payable or fixed asset transaction instead of filing is a huge time saver.”   Seeking a Platform with Greater Functionality When Rychwalski joined Del One in 2012 as the Director of Accounting, she found an integrated general ledger (GL) system that lacked much of the functionality the credit union needed. “We were looking for something that was core agnostic,” said Rychwalski. “We knew that we would be changing data processors or core systems at some point, and didn’t want to have to continuously move the GL.” Del-One eventually selected Fiserv’s financial accounting and finance operations platform, Prologue, in a hosted environment. The credit union would receive full support from Fiserv, and if they changed core systems in the future, they wouldn’t need to replace the entire GL again. When the credit union merged with Louviers Federal Credit Union and migrated its GL into Prologue, the transition was easy for the team to absorb. From day one, they were able to produce consolidated financials without waiting for the operational merge date. “We could still balance to the different core processors of their different outside vendors, but we could bring our financial statements together as one consolidated financial statement,” Rychwalski said. “For the person who spent two months manually combining them, that was a really big deal.” Streamlining Approvals The sheer volume of AP that flows through a thriving credit union can be daunting. Prologue helps alleviate the burden by assigning approval limits, connecting the appropriate invoices to each transaction, and routing everything through the approval workflow automatically. It eliminates the need for staff to chase down approvals manually. “The system knows that anything over $100,000 has to go to my supervisor, so it’ll come and get my approval and then it’ll send it over to my supervisor,” Rychwalski said. “Nobody is running around trying to make sure they got all the signatures, and the actual transaction has the invoice and approval history attached to it.” Prologue allows Del-One to establish policy limits that determine who can approve transactions and at what amounts. If an amount requires a second approval, the workflow automatically routes it to the appropriate person. Instead of tracking down signatures on paper invoices, approvals are connected digitally from the start. “Many of the prior processes were ad hoc processes that solved the problem when they were first developed, then they just became standard operating procedures,” said Wester. “Having a system that can automate that and make people more efficient gives you more time to do other things that are more important to the business.” Moving Beyond a Patchwork System Many legacy systems exist only in the minds of long-time employees. Rychwalski explained that previous budgets were prepared through an elaborate network of spreadsheets—a process that was not only unsustainable, but also difficult to transfer to others. “I needed something that would calculate interest income and expense that would allow me to project based on rates,” Rychwalski said. “And that’s what Vantage brought to us. I’m able to project that if the rates go up, this is the way it’s going to look. I can build formulas.” The previous spreadsheet process consumed a tremendous amount of time, both in maintaining the files and in training others. It also created accuracy issues, since manual processes inevitably introduce human error. “The accuracy also increases because Vantage brings in the account level detail, the instrument level detail from those cores,” Person said. “With it being core agnostic, it’s bringing in all that detail to calculate all the cash flows for those specific investments, loans, shares, and deposits.” Ready for the Future Organizations investing time and money into these products must understand that proper mapping is critical. Teams need to understand how the GL is structured, what accounts are grouped together, and how to maintain consistency while still leaving room for future changes and growth. “You’re going to create products that you haven’t thought about yet,” said Rychwalski. “You have to be able to understand how to update new products, create new products, and change the ones that you have.”

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