PaymentsJournal

PaymentsJournal

Payments Content, Expert Insights and Timely News

  1. 16h ago

    How the Merchant of Record Became a Global Commerce Engine

    Picture the scene; a U.S. developer discovers that one of their fastest-growing markets is overseas. For many digital businesses, the first signs of international opportunity develop quickly. However, new local markets also mean new local complexities. Brazilian customers expect support for Pix. In India, UPI dominates the payments landscape. In Poland, BLIK accounts for as much as 70% of e-commerce transations annually. Across any market, local regulations, payment preferences, and fraud considerations can vary significantly. This is how an exciting growth opportunity becomes an operational challenge. These local complexities and risks have fueled the rise of the Merchant of Record (MoR) model, in which a third-party partner assumes liability for key functions such as tax obligations, regulatory compliance, and chargeback handling. While these platforms deliver benefits across all these areas, the evolution of cross-border commerce has transformed MoR solutions from a tax workaround into a critical component of international business operations. In a recent PaymentsJournal podcast, Bridger Bullock, Senior Business Development Manager at Nuvei, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the evolution of the Merchant of Record model, the criteria that differentiate these solutions, and how the operational advantages MoR platforms provide can equal—and potentially surpass—the tax and compliance benefits that originally drove their adoption. Far Beyond Orchestration One reason for MoR solutions rise in popularity over recent years is the landscape for international growth becoming exponentially more complex. “Just in the U.S., if you want to manage all of the sales tax collection, there are 13,000 different jurisdictions that you would have to adhere to in making sure that you are compliant,” Bullock said. “Outside of the U.S., you can only imagine how many different rules and jurisdictions you have to be compliant with, and that’s just from a tax perspective.” “There’s also fraud, which is getting much more complex depending on the region,” he said. “Lastly, there are so many different payment methods for each region that it’s critical that merchants offer those payment methods in those local regions so that there is a frictionless customer experience.” Along with domestic real-time payments systems like Pix and UPI, alternative payment methods (APMs) now include everything from stablecoins and buy now, pay later services to digital wallets. As these payment types have emerged, many merchants have sought to increase payment flexibility by leveraging payment orchestration systems that route transactions through the optimal payment rail. While these solutions offer clear value, payments are only one component of successful cross-border commerce. “Orchestration connects the dots from an authorization and a settlement perspective so you can transact globally fairly easily,” Apgar said. “But when you get into complexities such as local APMs, local fraud and risk tools that are available, local tax, and local banking, the complexity really multiplies. Being global today goes way beyond just orchestration.” Taking Gaming Global One of the industries that has been a trailblazer for the MoR model is gaming. Gaming platforms built for digital commerce often face relatively few barriers to expanding their products into new territories. In their zest for expansion, gaming companies have frequently taken a proactive approach to the operational realities of global expansion. “Forward-thinking companies like Roblox or Epic Games look at it holistically, so a local payment method in each region is critical to them,” Bullock said. “Say they want to be able to create the best customer experience in Korea. They need to make sure that GCash is set up as a payment method. Once the customer purchases, the sales tax is collected without Roblox or Epic having to deal with what that sales tax looks like in that region and what fraud looks like in Korea.” Addressing these challenges at a granular level is critical because many gaming platforms aspire to expand into dozens of countries and regions quickly to remain competitive. Effective MoR solutions, therefore, must pay careful attention not only to local payment preferences, but also to tax laws and regulatory requirements that are constantly changing. “Ideally for the merchant, they can do all of this through one API,” Bullock said. “They don’t have to go through several different PSPs, payment processors, and gateways to make sure that they can offer all these things. They just have one that can be this all-encompassing solution for them, which takes a huge burden off and makes it a frictionless customer experience during the checkout process.” The Architectural Differences that Matter MoR platforms can provide this level of comprehensive support, but not all solutions are created equal. For merchants and the institutions that serve them, selecting the right provider begins with the fundamentals: ensuring that tax liability and fraud risks are effectively managed. MoR platforms differentiate themselves in several ways: Their distinctly local approach to fraud prevention and compliance management across regions. The level of transparency they provide into the rules, controls, and decision-making processes used to manage risk. Local acquiring capabilities represent another importance differentiator and can often determine the success of an integration. “Let’s say that there’s a large merchant that has an entity in the U.S,” Bullock said. “Certainly, merchants want the highest authorization rates that they can get. If they have quite a presence of customers in APAC, it gets difficult for the issuers in that region to approve the majority of the transactions because they’re looking at those transactions as foreign transactions, as not from that region.” Merchant of Record solutions—on top of all their other benefits—frequently enable local acquiring in regions where merchants don’t have a legal entity. This can improve authorization rates while also delivering a range of operational benefits. “When you talk about local acquiring, you have to talk about local banking, too,” Apgar said. “If you have a local acquirer, they still have to pay the merchant somehow, and a local acquirer is going to pay in local funds, which means you need a local bank account, which then oftentimes you need to have a legal business entity present in that domain so that the bank can open an account for you.” “It’s not just the U.S., all countries have compliance requirements, so complexity quickly spirals,” he said. A Holistic Global Solution At their core, Merchant of Record solutions are designed to simplify the challenges of global commerce by assuming responsibility for many of its most complex operational requirements. This not only eliminates the need for merchants to build these capabilities internally, but also removes the burden of researching and managing the regulatory and tax nuances of every market they operate in. The result is a meaningful operational boost. Alongside the financial gains generated by higher approval rates, stronger fraud prevention, and customer-friendly payment options, merchants gain more time and resources to focus on growing their business. “For merchants, they want to focus on the customer experience, and they want to focus on delivering quality products,” Apgar said. “Being able to offload all this operational responsibility to a Merchant of Record construct is a huge savings operationally and from an opportunity cost and time perspective. It’s great that merchants can outsource this without completely relinquishing control over the fraud processes and the mechanics of how it’s executed—it’s the best of both worlds.” However, fully offloading these responsibilities requires a comprehensive solution that can address all of a merchant’s needs; and can adjust its parameters on the fly as merchants scale and global commerce shifts. It will also require business leaders to rethink how they view MoR solutions. Many still regard them primarily as a tax shortcut or a buffer against chargeback and fraud liability, when in reality they have become a foundational component of modern cross-border commerce. “It should be looked at as an all-inclusive solution to expand internationally,” Bullock said. “It can certainly offload some of the tax and compliance and it does, but it is much more than that. Looking at it from a holistic approach is going to allow the highest authorization rates for many reasons, it’s going to create a great customer experience for many reasons, and it’s going to offload my burden as a merchant to be compliant for many reasons.”

    18 min

  2. 1d ago

    A Career in Payments: Insights from Three Decades at Nacha

    Few payments professionals have been able to observe and influence the industry as much as Jane Larimer, President and CEO of Nacha, who has helmed the organization that governs the ACH Network through challenging industry transitions and considerable organizational success. In her nearly 31 years at Nacha, Larimer has seen firsthand the shift away from paper checks to moving payments at the speed of modern life. During Larimer’s tenure, ACH has served as the national economic infrastructure. In 2025, the ACH Network processed $93 trillion. However, Nacha has not been content to coast on this success. Instead, the organization has continued to lead the payments conversation through innovation, education, and consensus-building. In a recent PaymentsJournal podcast, Larimer discussed the biggest accomplishments and hurdles in her storied career, the many new projects on Nacha’s docket, and why—after over three decades—she is still excited to be a part of the payments industry. The Accelerating Shift from Paper to Digital Although the financial services sector has undergone a widescale digital transformation, it didn’t happen overnight. “One of the first things that I think of among my accomplishments was there were still a ton of paper checks then, only maybe 50% of Americans got paid with Direct Deposit,” Larimer said. “There were billions of checks, so one of the first projects I did at Nacha was check conversion. What that meant was stripping the information off the MICR line of a paper check and then converting that into electronic payments—that was literally the first year.” Also early in her tenure was an electronic benefit transfer (EBT) initiative aimed at moving from paper-based to electronic solutions. The goal was to reduce reliance on paper food stamps, which were high-risk for fraud and carried social stigma. To address this issue, Nacha worked with networks, merchants, and financial institutions to shift the paper-based system to an interoperable state-issued card usable on debit card networks and at the point-of-sale. This effort ultimately led to the launch of the Quest Operating Rules and QUEST Service Mark. For years afterward, Larimer and Nacha worked to grow ACH payments to be more vital than ever. In 2016, Nacha introduced Same Day ACH, providing the capability to send and receive ACH debit and credit payments within hours on the same business day. “That was just a huge sea change in 2016,” Larimer said. “Everybody’s been saying this for a long time and we’re always talking about the pace of change. Back in 2000 and then 2015 we thought that things were changing quickly, but what we’re seeing is that pace of change has accelerated, and it’s always going to be accelerating.” A Momentous Year for Payments This momentum isn’t slowing down, as faster payments, digital assets, and artificial intelligence continue to reshape the industry. Nacha is advancing a series of initiatives aimed at expanding capability while bolstering trust in the payments space. One of the most significant developments is the planned increase of the Same Day ACH transaction cap from $1 million to $10 million—This enhancement is expected to broaden adoption by enabling a wider range of commercial use cases for what has already become a fast-growing payment method. At the same time, Nacha has approved new risk management rules taking effect this year, reflecting a parallel priority: addressing the rising threat and volume of credit-push fraud. Together, these changes underscore a dual focus on scaling payment capabilities while reinforcing system integrity. “We have a lot of irons in the fire,” she said. “We are working as hard as we can in conjunction with the industry to make the ACH as efficient as it possibly can be, and to meet the needs of the end users of the [ACH] Network and all the participants with the [ACH] Network—the financial institutions, our processors, our corporates, and consumers.” Beyond rulemaking and ACH Network enhancements, Nacha is also continuing to engage the industry through education and convening. One recent milestone was its Smarter Faster Payments conference in San Diego this spring, which brought together the ecosystem for more than 130 educational sessions spanning topics from stablecoins, AI and faster payments to compliance and risk. In an often fragmented and rapidly changing industry, conferences like this play a critical role in helping industry professionals synthesize emerging trends and translate them into practical strategies. “It’s trying to invest in the things that you think are going to go forward, because along with all the cool stuff, there’s a lot of noise,” Larimer said. “It’s using discernment to say these are things that are important to me, they’re important to the industry, and let me learn enough about them to be able to make that determination about where are we going with this. Could this be of use to my company?” “How much do we have to understand about this to be able to appropriately discern whether it is strategically lifted up as a priority or say: ‘Not right now. This bears watching, but this isn’t where we need to be placing our bets right now,’” she said. Relevant Education in a Fast-Moving Industry Alongside conferences, accreditations have become an increasingly important way to stay current in the payments industry. For newcomers, the challenge is not a lack of information, but an overabundance of it—where separating insight from noise can feel like a steep learning curve. Accreditations like Nacha’s Accredited Faster Payments Professional (AFPP) and Accredited ACH Professional (AAP) can serve as valuable tools for onboarding new employees and refreshing the knowledge of seasoned veterans. However, the benefits of these accreditations extend beyond education. They are also widely viewed as an industry-wide mark of credibility. “We were really happy to be working with the U.S. Faster Payments Council on the AFPP, because we’re believers in education at Nacha,” Larimer said. “Accreditation is a great way to not only learn the material, but then to be able to bring it back to your organization to help them, because I truly believe that people who understand their business are a lot better at it.” “They understand the nuts and the bolts, and having your AFPP or your AAP shows the world that you know it too,” she said. “It’s great for career-building and it’s a great benchmark.” An Outsized Impact on the Industry Despite the complexities of the payments space—and in many ways because of them—the industry remains one where careers like Larimer’s are possible. “I love this job, I love this industry, and I love payments,” Larimer said. “Things that I value deeply are the relationships in the payments business, where you’re out at a conference and you see people that you’ve built relationships with over the years. It’s the people you can give a call to if you have a question, or if you need something, or if there’s an issue.” “When I go to Smarter Faster Payments, there are people that I met my first year at Nacha who are still coming to it,” she said. “Then, there are people that I’ve just met this year that I’ve already had back and forth with because I’ve learned from them. It’s a relationship business and I’m a people person, so that makes me happy.” Along with professional relationships, the payments sector offers the promise of lifelong learning for those curious enough to explore and willing to grow. Together with networking and accreditation, there are also evolving industry-wide initiatives such as those led by Nacha’s Payments Innovation Alliance. The Alliance serves as an innovation consortium for the payments industry, with current work spanning pay-by-bank, AI, and quantum computing. Larimer also praised the Nacha staff as “outstanding, smart, and good-at-what-they-do folks.” “We’re small—we’re less than 80 people—but I think we have an outsized impact on the payments industry,” she said. “I couldn’t be prouder of the folks that I work with, and I just look forward to doing everything we can to make the ACH as strong and as effective as possible.” And as for what the future holds? “For right now, there is so much happening. I cannot imagine being bored,” said Larimer. “I think we have a lot in front of us and there’s a lot of exciting opportunities out there for the industry. And I just look forward to building it all with the industry.”

    15 min

  3. 6d ago

    Preparing for Quantum Day and the Risks to Modern Cryptography

    Quantum computing may still be years away from breaking cryptography, but powerful quantum computers are rapidly advancing, and their impact on cybersecurity is already unfolding. Unlike previous technological shifts, it has the potential to render some of today’s most trusted cryptographic protections obsolete—forcing organizations to rethink how they secure data long before the threat materializes.    This moment, commonly referred to as Quantum Day, represents the point at which a quantum computer can effectively compromise today’s unbreakable algorithms. In a PaymentsJournal Podcast, Antoine Kelman, NORAM Payment Services Chief Technology Officer at IDEMIA Secure Transactions, and Tracy Goldberg, Director of Cybersecurity at Javelin Strategy & Research, discussed how organizations should prepare for this eventuality. Getting an Early Start A few years ago, Quantum Day was estimated to occur sometime between 2030 and 2040. However, rapid progress—particularly in countries like Korea—suggests that this timeline may be compressing. Many regulators are now urging organizations to be fully prepared by 2030, which is only a few years away. Preparations are already underway. Regulators across multiple jurisdictions are requiring critical industries to assess their exposure and begin updating cryptographic protocols. National cybersecurity agencies are actively defining policies and advancing new standards. A key concern is the emergence of “harvest now, decrypt later” attacks. In this model, attackers collect encrypted data today—even if they cannot yet decrypt it—with the intention of unlocking it in the future once quantum capabilities become available. Online vs. Offline The payments ecosystem includes cards and terminals with long operational lifetimes. Without sufficient preparation, these devices could become vulnerable. To address this, it’s important to understand how current transactions and cryptographic methods function. There are two primary transaction types: online and offline. Offline transactions occur when the payment terminal can’t communicate with the issuing bank—whether due to connectivity issues, system outages, or practical constraints. Certain use cases, like mass transit, rely on offline processing because speed is critical. Both transaction types must be addressed in the context of Quantum Day. On the online side, quantum computers are not expected to significantly weaken symmetric cryptography. As a result, maintaining strong, up-to-date algorithms is generally sufficient for quantum resilience. Some networks mandate offline functionality for resilience purposes—for example, during large-scale cyber incidents that disrupt communications. “We know that we’ll have to rely on offline transactions and therefore we have to address the Quantum Day risk,” Goldberg said. “We constantly have these types of conversations every time there’s a pretty significant change or shift that is needed, but eventually everyone will get on board.” Identifying Additional Vulnerabilities Another challenge is the long lifecycle of payment cards. Due to extended deployment and replacement cycles, it can take more than a decade to fully refresh cards in the field. As a result, some devices in circulation may still be active when Quantum Day arrives. “With chip cards, we knew the risks for decades, and look how long it took us to make that migration,” Goldberg said. “If financial institutions, card issuers, acquirers, and merchants think that we’re going to be able to address Quantum Day concerns and we don’t get started now, they’re fooling themselves.” The broader challenges lies in the complexity of the payments ecosystem. Cryptographic keys are stored, distributed, and managed across multiple layers and components, creating a wide attack surface. “The first, most critical area to address in the payment business was the card itself,” said Kelman. “It continues to be our priority, because it embeds those secure elements that contain all the vital cryptographic assets that could be vulnerable to attacks.” Seeking Agility Any security measures implemented today will not be permanent. Crypto agility, the ability to rapidly and securely transition between cryptographic algorithms, will be key. Post-quantum cryptographic standards are still evolving, and flexibility will be important. Achieving this will require a cultural shift. The U.S. payments ecosystem has traditionally operated in silos, where agility has not been a core design principle. “It’s a very diverse ecosystem,” said Goldberg. “You have a lot of different players. You have a lot of different types of systems that have to connect to one another in agility. It just isn’t something that we thought about. But it’s going to be a necessity.” The long-term goal is to avoid large-scale card reissuance where cryptographic updates are needed. This was a major challenge during the transition from magnetic stripe cards to EMV chips. Instead, issuers, acquirers, and networks should focus on building systems that can evolve without requiring physical replacement.   Consumers are already accustomed to frequent updates on their mobile devices. A similar expectation may emerge for payment cards, where security updates can be applied without requiring physical replacement. Questions for Financial Institutions Financial institutions have to begin addressing several key questions. They need to understand whether they have fully assessed their cryptographic bill of materials, where and how encryption is performed across their systems, and what tools and algorithms are in use so that risk can be properly evaluated. For many organizations, these are new and complex challenges. In fact, some institutions lack a clear understanding of their current cryptographic risk exposure. Organizations should approach cryptographic risk assessment in the same way they evaluate broader cybersecurity risks—by identifying vulnerabilities, quantifying impact, and incorporating findings into a long-term strategy. “We can’t prepare for risks that we haven’t identified yet, and that’s the way we have to approach this,” Goldberg said. “Things are going to come up that we haven’t even contemplated. We have to have models in place that are agile and can change.” A way forward is to engage technology partners already building solutions that help financial institutions accelerate their transition to post-quantum cryptography readiness. IDEMIA Secure Transactions is one such partner and is already supporting this transition through consultation, and by providing the following: Chips that support post quantum cryptography Hardware Security Module (HSM) for secure keys and data management, that can support evolving cryptographic standards including post‑quantum algorithms, while preserving long-term upgrade flexibility. Robust and certified cryptographic libraries supporting classical and post-quantum algorithms, enabling banks and fintechs to build crypto-agile applications and payment systems Crypto-Agility Services, helping card issuers future-proof payment products through remote cryptographic updates, enabling rapid response to vulnerabilities, regulatory changes, and legacy cryptography deprecation. Final Takeaways At the end of the day, financial institutions should recognize that customers will be affected. Fraud risks may increase during the transition period, potentially snowballing into an overall poor user experience and broader ecosystem instability. “We need to start preparing to address this issue in particular by issuing cards that would run quantum ready algorithms, keeping in mind that the era in which we are entering into is very fluid,” said Kelman. “Our devices need to be crypto-agile and have these crypto agile solutions. What we’re saying is basically we need to prepare, now if not yesterday. We need to prepare for the worst, but maybe hope for the best.”

    27 min

  4. Jun 11

    Serving a Segment of One: The Race to Stay Top of Wallet

    Artificial intelligence has raised consumer expectations. Today, people can create a personalized event invitation, social media post, or digital experience in seconds, so why does the payment card they use every day still feel generic? That question is driving renewed interest in payment card innovation, including personalization, premium materials, digital integration, and stronger security features which continue to influence what consumers want from the cards in their wallets. In a recent PaymentsJournal podcast, Brent Bowen, Senior Vice President and Head of Sales for Financial Services Solutions at Giesecke+Devrient, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discussed the evolution of card design, the impact of the digital landscape, and the role technology is playing in the future of card innovation. The overarching message: cards remain the cornerstone of financial services product lineups, but staying top of wallet is increasingly challenging. Pushing the Unboxing Envelope This workhorse role of payment cards has long offered a branding opportunity for banks and credit unions, as well as digital-first firms and fintechs whose card offerings may be one of their few tangible links to customers. This opportunity is only likely to increase, as data from Nilson found that purchase volume on the leading card brands rose 6.4% last year, despite continued inflation and economic pressures. “The card will never go away, no matter how things expand in the digital space,” Riley said. “It becomes the way that a financial institution—whether it’s a fintech, a Wall Street bank, or a Main Street bank—can present themselves to their customer. It goes in their wallet every day and it’s an important part of the relationship. When you start building the value proposition for a credit card, the card itself comes into play.” A focus on individual lifestyles has fueled demand for special cards, although premium in cards doesn’t always mean gold-plated. A strong consumer segment is drawn to eco-conscious cards made from wood or recycled plastics. Others may prefer ceramic or similarly distinctive materials t while opening the door to more innovative designs. The popularity of premium cards has even turned receiving them into a social media moment, with many consumers sharing the unboxing experience online. “Many fintechs have pushed the envelope, no pun intended, with that unboxing experience, and that has created some unique opportunities to differentiate themselves from a branding perspective,” Bowen said. “These products and services reflect the consumers’ personalities and values. They want that cardholder experience to be delivered the way they want it and in the shape that they expect it to be.” “Whether it’s maximizing reward points or travel points, whether it’s lowering fees and interest, or even security and convenience and speed—those are all things that consumers are looking for in their payment products today,” he said. “Card products help differentiate that in the marketplace.” Digital and Physical Convergence Although physical cards retain strong tactile appeal, delivering a robust digital experience is equally important. This is no small feat, as e-commerce, AI, and social media have raised expectations for communication and product delivery. The convergence of physical and digital products is another key trend transforming payment cards. For example, a consumer attracted to a metal card as a status symbol also expects the convenience of loading the card into a digital wallet for e-commerce transactions. This digital optionality is critical not only for convenience, but also for driving customer engagement. As a result, speed to market has become critical for issuers seeking a return on investment. It also aligns with another growing consumer preference: constant innovation and access to the “next big thing.” AI is helping drive these expectations by giving users immediate feedback and personalized experiences in seconds. At the same time, the technology could prove to be a gamechanger for issuers. “One of the big things that is coming into our market is this AI world,” Bowen said. “G+D has a AI card design tool, so you as a consumer can use this AI generation and say, ‘I want a puppy dog sitting on a beach drinking a cool drink’, or apply images that have special value for you, and it will show you your card right there. The Influence of Security Alongside these expectations for speed and customization comes an equally strong expectation of security. As the digital economy has expanded, so too have vulnerabilities to fraud. These threats are accelerating the integration of advanced security standards into payment card technology. For example, the Fast IDentity Online (FIDO) standards are passkeys bound to a device to help mitigate password vulnerabilities and resist phishing attempts. When paired with EMV (Europay, Mastercard, and Visa) standards and near-field communication (NFC) contactless payment technology, authentication can be significantly enhanced. “That security is going to drive not necessarily the design of cards, but the way the cards are used in the marketplace,” Bowen said. “If I am a consumer of a bank or a fintech and want to make a transaction, one best way to make sure that I am talking to who I’m talking to is to verify the phone credentials.” “If it’s a high-dollar transaction, I might want to verify the person using that phone and ask them to tap their payment device against the phone to authenticate or verify that they are who they say they are,” he said. Biometric authentication is another major security trend. The widespread use of fingerprint and facial recognition on smartphones has prompted pilots in additional use cases, most notably payments, where the security benefits are clear. While a growing segment of consumers is security-conscious and would welcome this added layer of protection, mass adoption of biometric cards is likely still years away. Still, for certain segments and use cases, biometric cards could hold substantial appeal. After all, security is one of the main reasons card payments have become a dominant payment method. “That’s what is core to the card business, the irrefutability of transactions,” Riley said. “Without that level of confidence, there would be no card business. We’ve got to be able to ascertain not only is there value associated with the open credit line, but is it the customer making the transaction or the authorized user?” The Fight to Stay Top of Wallet All these trends—stronger security, hyper-personalization, and the convergence of digital and physical experiences—will continue to keep payment cards in consumers’ wallets for years to come. Even so, differentiating in a highly competitive market and staying top of wallet remains a challenge for issuers. For organizations looking to acquire customers more efficiently and drive card usage, the answers may not come easily. One place to start is with the customer. “It’s this granular marketing mentality of being able to hyper-personalize that card product into the consumer’s hands, so that it feels like it’s coming specifically to me, Brent Bowen, and I’m not just one of the masses,” Bowen said. “These advanced personalization strategies, in my estimation, can increase revenues 15% to 20%.” “There’s also the ability to reduce the acquisition costs for these card programs,” He adds: “Personalization can drive that cardholder experience.” This evolution underscores how cards have become critical ambassadors for financial services brands. More than ever, organizations now have the tools to maximize the value of these offerings. “It’s personalization and customization of individual packaging and a marketing-to-a-segment-of-one mentality,” Bowen said. “We’re moving to a world where the consumer wants their card to be unique, instantly issued, and personalized, almost in real time.” “AI can help drive all of those things, either in the back office or on the front end from a design perspective,” he said. “It can help provide an experience that a consumer is expecting of today’s world. Where is my card, when am I going to get it, and what’s it going to look like?”

    15 min

  5. Jun 9

    The Future of KYC Is Layered—and Data-Driven

    Know Your Customer rules were designed to stop financial crime, but in practice, they are increasingly being bypassed by both human error and machine-generated deception. Last year, Barclays was fined £42 million (roughly $56.9 million) for failing to properly vet clients for money laundering risks. In this case, the UK lender had access to all the information required to flag the offending clients but failed to follow through. More broadly, similar issues persist across the banking sector. In many instances, institutions conduct perfunctory KYC checks during onboarding but fail to maintain ongoing monitoring. It is often only after the fact that they discover their “verified” customers had been bribed or coerced into becoming money mules. Meanwhile, the threat landscape itself is also evolving. In a growing number of recent cases, cybercriminals have used technologies such as artificial intelligence to generate convincing fake documents and synthetic identities capable of bypassing financial institutions’ verification protocols. Taken together, these challenges are driving a broader assessment of the KYC model. In a recent PaymentsJournal podcast, Jon Jones, Chief Commercial Officer at Data Zoo, and Jennifer Pitt, Senior Fraud Analyst at Javelin Strategy & Research, discussed how these risks are accelerating the evolution of identity verification, and how trusted data within a layered approach has become essential to identifying and addressing modern fraud threats. Establishing Trusted Registries Although the pandemic is often credited with accelerating the shift toward digital identity proofing, the change had already been underway for years. One key driver has been the growthof the digital economy, which has helped organizations build substantial datasets on users’ biometric information, behavioral analytics, and device intelligence. While this data can be a powerful tool for identity verification, it is of limited value if it is inaccurate. “The role of data in KYC is becoming increasingly important and it comes down to one word: trust,” Jones said. “The advancement of AI has resulted in single-layered solutions becoming somewhat compromised and institutions increasingly need to leverage authoritative data. For example, checks through government or credit-based authorities have become table stakes going forward.” “If you look at fake images and documents, it’s very easy to have them created now,” he said. “Creating a synthetic identity from an image or a document is not that hard, but maintaining the presence and consistency across government records or credit bureaus is much harder. It requires the need for trusted registries in some form of the process.” Synthetic identities pose a particular challenge because they are created by blending real and fabricated data into a new entity. This means there is no direct victim to report fraudulent activity, and often no clear red flags for organizations at onboarding.   This is just one of the reasons why changes to the current KYC model have become paramount. “When I was in banking, I saw that KYC was treated as a onetime check and the KYC team would just look at static identity data,” Pitt said. “Once that matched, they would move on, and KYC wasn’t being done after that initial check. What we need is the idea of perpetual or continuous KYC, where we’re using automated tools to look at KYC or identity verification processes in the background.” The Three Levels In addition to ongoing customer checks, there must be protocols in place to continuously validate data. Data has become the lifeblood of an effective KYC process, and the potential for corruption through fraudulent or erroneous information makes stringent verification essential. “We typically look at trust from three levels,” Jones said. “The first one is the authoritative nature of the data, meaning does it come from a real-time primary source like a government record or an M&O with clear privacy policy guidance? This is essential. The second one is looking at transparency. Organizations need to see what data sources were checked, what attribute levels were matched, and what level they were matched.” “The third one is basic coverage,” he said. “From an identity verification perspective, we work in a global world. It’s not just a U.S.-based or UK-based solution, where data is prevalent. It’s looking to make sure that we are catering for all geographies and all demographics, and that isn’t easy.” One of the most challenging demographics to evaluate is the thin-file population, often composed of young adults or immigrants with limited or no credit history. Due to this reduced digital footprint, it can be difficult to verify their identities, yet this group now comprises roughly 76 million people in the U.S., or about a third of all adults. Another challenge in maintaining accurate data is that customer profiles are constantly changing as individuals open new accounts or update addresses. This fluidity makes it critical to implement mechanisms that can constantly check and cross-check information. “One of the things organizations often miss is there are two parts of identity verification,” Pitt said. “There’s the identity verification itself, is the information being presented that of a real person? That addresses things like synthetics, deepfakes, information that is not that of a real person.” “The other piece is identity proofing. Is that identity that’s being presented the actual identity of the person that’s presenting it?” she said. “We need to make sure we have both of those pieces and not just one.” Data Confirms Identity Evolving toward a more effective KYC model will require a layered identity verification approach. This model evaluates multiple factors, including known identity data, biometrics, behavioral and contextual signals, device interaction patterns, and shared threat intelligence. It is critical to take all these inputs so that no single data point is given undue weight. “Trusted data sits within the verification workflow as a foundational layer and asks the question, does this identity actually exist in the real world?” Jones said. “Capabilities such as document verification are extremely powerful. I’ve worked for some of the leading vendors in the world, and they asked the question as to whether the person presenting a document is real and matches the ID, whereas trusted data helps confirm that the identity itself exists and is consistent across multiple records.” “Biometrics confirms the person and data confirms the identity, and you need both,” he said. Alongside improved fraud detection, one of the biggest advantages of a layered verification approach is that it can strengthen security without increasing customer friction. For example, if an organization begins with document verification as the first step in the onboarding workflow, it can extract most of the data required for trusted validation from these documents. This includes information such as name, address, national ID, and date of birth—all of which can be captured using optical character recognition (OCR) technology. “When we talk about identity verification, we often talk about this from the fraud detection lens, but identity verification can help with other things,” Pitt said. “It does reduce customer friction for people that aren’t fraudsters, and it improves the customer experience because of that. It helps with compliance issues, and it also enables institutions to apply more risk-based verification to determine where and when additional data checks need to be invoked.” Defense in Depth The benefits of adopting a layered identity verification approach are spurring the metamorphosis of Know Your Customer, Know Your Business, and anti-money laundering processes. “I like to think of it as defense in depth, which is what cybersecurity professionals tend to call it,” Pitt said. “The idea that one fraud detection method might be thwarted by fraudsters and then there is another defense that might help. We’re going to start to see a shift more towards this perpetual or ongoing KYC. For any good-sized business, we need to be able to vet the customers and vet who is actually doing business with us.” As identity verification tools evolve, there will likely be a continued shift towards secure, portable digital identity schemes that enable online verification of consumers. For example, Australia’s ConnectID is a program which allows users to verify their identity with businesses or government agencies using information already verified by their financial institution. The objective is to simplify online verification and reduce unnecessary data sharing. Some of the primary use cases for such programs include age verification, which has become a pressing need in many online environments. This includes both safeguards to protect children and requirements to ensure adults meet age thresholds of 18 or 21, depending on jurisdiction. Alongside these developments, the overarching driver behind the need for stronger identity verification models is the rapid proliferation of sophisticated technologies. “We’re going to continue to see a shift to a data-first model, which from AI perspective is driving the element of trust to the forefront,” Jones said. “To do that, you need to be 100% reliant on direct real-time validation against trusted assets and you need to do that globally. Increased adoption is going to come by using data as a layer within orchestration workflows.”

    13 min

  6. Jun 4

    Separating Hype from Reality in Emerging Payment Trends

    Despite near-constant industry buzz, the days when artificial intelligence agents dominate e-commerce—and consumers widely complete in-store purchases with a palm swipe—have not yet arrived. This is not to say they will never arrive, but if the rollout of prior tech trends like biometric authentication and embedded finance is any indication, there is still substantial runway before this financial future becomes reality. In a recent PaymentsJournal podcast, Javelin Strategy & Research’s Don Apgar, Director of Merchant Payments, and Christopher Miller, Lead Emerging Payments Analyst, cut through the noise surrounding recent payment innovations to assess the true progress of financial trends this year. What they found is that all these still face challenges. Most notably, an increasingly sophisticated retail landscape only amplifies the questions merchants and financial services firms must answer as they adopt new innovations. A Road Test for Agentic Commerce No discussion of trends would be complete without artificial intelligence, and debate about AI’s role in financial services has intensified as models have become increasingly capable. This has led many experts to project the imminent rise of agentic commerce, where AI agents shop and make purchases with limited user direction. Last year saw a wave of announcements around agentic AI, including new commerce platforms from Visa and Mastercard, as well as a Google-developed agentic protocol intended to serve as a framework for this new shift. Despite these unveilings, very little true agentic commerce materialized in practice. “The prediction was that this year we were going to see things live for the first time,” Miller said. “These products—the ideas, the concepts, and the workflows—were all going to get road tested for the first time. My suggestion was that things might not go as smoothly as all the announcements suggested they would, and, frankly, that turned out to be the case.” These kinds of false starts are not unusual with new technologies, where it takes time to test edge cases and build the underlying infrastructure. In agentic commerce, that infrastructure would need to cover everything from how consumers input an initial prompt to which AI agent is ultimately authorized to complete a purchase. While many of these components are now being addressed, significant unanswered questions remain about what the finished system will ultimately look like. “We’re getting to questions of who will use this and what will they use it for?” Apgar said. “How will we resolve trust issues? How do we resolve authority issues? How do we know that the action mirrors the intent, and the result mirrors the instruction? From a prediction perspective, as much of the buzz that we’ve seen about agentic commerce, 2026 is still going to pan out to be a building year.” Agentic Search Versus Commerce While agentic commerce may still be a work in progress, AI has already become firmly rooted in the consumer experience this year, especially as a tool for product discovery and comparison. “One of the things that AI does well is digest large amounts of data efficiently,” Apgar said. “If you are searching for a bookcase that’s less than 26 inches tall and less than 38 inches wide, I’m sure you’ve gone through web searches where you’re muddling through product pages and you have to find the details of the specifications and you have to drill down to find the measurements—only to back out and do it again on another web page. And there are how many bookcases?” AI can rapidly narrow search results, often producing answers and recommendations that consumers would not easily find through conventional search methods. While these tools are a game changer for consumers, they are also changing merchant business models. Instead of relying on search engine optimization to surface in Google results, merchants are now competing to be visible within AI-generated recommendations. At the same time, as AI increasingly becomes the buffer between merchants and customers, many retailers worry about declining website traffic. This shift could weaken brand identity and, in some cases, reduce businesses to little more than fulfillment engines operating behind AI interfaces. On the other hand, merchants who do surface prominently in AI-driven discovery stand to reach new audiences and bolster their brand visibility. These complexities are already beginning to impact merchants, and the sophistication is likely to deepen as agentic commerce evolves. “If we had this vision that agentic commerce was a single-provider solution that a consumer might use from end-to-end and somehow it would just layer over the existing framework of e-commerce, that’s proven to be false,” Miller said. “Just layering OpenAI on top of the internet as it exists is not going to work for anybody.” “In a sense, the internet—and more precisely the e-commerce version of the internet—will have to be reengineered for everybody’s benefit, in enabling things like software agents to do any of this work,” he said. “That’s where the building is going to be, it’s in that infrastructure layer.” The Path to Biometric Authentication A trend that appeared closer to mainstream adoption this year was biometric authentication at the point of sale. The benefits are well established, including stronger security and reduced friction at checkout. Unlike agentic commerce, biometric technologies have existed for years and have been piloted globally across a range of use cases. Given this, it might have been expected that this year would mark a clear inflection point in adoption. So far, however, progress has been limited to continued trials, including the launch of additional Biometric-Authentication-as-a-Service platforms that integrate biometrics into existing payments stacks. There has also been movement toward cross-experience, unified identity solutions. In many cases, when customers create a biometric profile with a company, their in-store purchase and loyalty data remain disconnected from their online profiles. Cross-experience identity solutions can connect these dots. Still, these platforms are far from widespread adoption, which appears to reflect the current state of the biometric authentication market this year. “I suggested that new products would come to market and we’d start to see some more launches, but I will say that it’s been a little bit light in terms of news on that front,” Miller said. “There is a path to market, but that doesn’t mean that any merchants have said, ‘We’re going to turn that on,’ and it doesn’t mean that the capability is ready to light up today.” “We might be a little slower than what I thought, but we continue to see development in the marketplace, the creating of the business plans and of the go-to markets so that these products and capabilities are going to be available to be chosen,” he said. “That wasn’t true two years ago in a widespread way, so that’s a significant advance, even as we continue to wait on its arrival.” The Boiling Embedded Finance Pot There are notable parallels between the gradual rollout of biometric authentication and the evolution of embedded payments and finance. One of key challenges in embedded finance, however, is that banks and fintechs are often operating at cross-purposes. Many fintechs have developed strong vertical Software-as-a-Service (SaaS) platforms that address a wide range of merchant needs, but these systems don’t always balance ease of use with financial services expertise. For example, some fintechs may present a seasonal merchant with an interest-bearing deposit offer during the offseason, when cash flow is tight. Conversely, they may extend credit during peak season, when liquidity is already strong. Financial institutions with deep experience in these products often struggle to integrate with newer merchant platforms. They may offer a SaaS-based point-of-sale system but lack the capability to fully leverage the data these platforms generate. “The pot is still boiling, with the fintechs struggling to figure out banking and the banks struggling to figure out data,” Apgar said. “Everybody thought based on how fast the market was moving and the many partnership announcements that this would be a lot further along, and that one or two companies would have come out on top and stick the flag in the top of the mountain that says, ‘We’re the embedded finance leader.’ But we’re not there yet.” The Difficulties of Implementation Although this year’s trends continue to face adoption challenges, the overall trajectory of these innovations is still largely on track, albeit at a slower pace than many anticipated. For financial services firms, this slower rollout may even be beneficial, providing additional time to build the infrastructure needed to adapt. However, it should not become a reason to delay initiatives in areas like biometrics and agentic commerce. Instead, merchants and financial institutions should continue experimenting with how these innovations can be integrated into their offerings, because—if this year is any indication—the path to adoption may be longer and more complex than expected. “Implementation is hard,” Miller said. “If I could write one prediction for 2027, it would be that implementation will continue to be hard no matter what new tool comes out.”

    22 min

  7. Jun 3

    Searching for Trust in Agentic Commerce

    When an AI agent buys the wrong product—or makes a purchase no one explicitly approved—the fallout isn’t just a customer service issue. It’s a liability problem the payments ecosystem isn’t fully prepared to handle. In a PaymentsJournal Podcast, Jill Willard, CTO at IXOPAY, Rory Herriman, CTO and COO at Zip Co, and Christopher Miller, Lead Analyst of Emerging Payments at Javelin Strategy & Research, explored how liability may evolve as AI agents take on more responsibility in transactions. A Multidimensional Problem That question of liability quickly becomes a technical one: how do you even evaluate trust in an agent that isn’t human? The first challenge is determining how to calculate a trust score for an AI agent that lacks a traditional human behavioral footprint. Any viable framework must extend beyond identity to include intent—and how that intent translates into behavior. This isn’t just an engineering challenge; it’s also a cognitive one. Professionals in this space must rethink how they evaluate risk, developing new instincts that help them focus on the right signals. “We have certain models, frameworks, and even language that professionals use to describe the vectors of risk,” Miller said. “As we think about the replacement of human actors with agentic actors, we lack instinct. The mere notion blocking bot traffic as a way of defending against fraudulent behavior stops being useful. It becomes anticommercial.” Herriman added: “We have to approach it as a multidimensional problem. “It’s not just ‘Is this actor good?’ Even if the actor is good, there are other dimensions on top of the binary switches, a complexity that never disappears.” Assigning Liability in a New Context In the world of AI, merchants are steadily losing control over the checkout experience. Decision-making has shifted upstream. A consumer can now instruct agent not only to buy “blue shoes,” but to purchase them from a specific merchant. This shift brings a corresponding liability. If an agent buys light blue shoes instead of dark blue, who is at fault? Today, that burden often falls on the merchant. “We’ve seen some card brands, such as Amex, say that they’re going to accept liability for agentic transactions, which is an awesome development,” said Herriman. “But even if the liability fully shifts and the card brands take on more of that liability, there’s still a cost to shipping the wrong goods out. That can be the hard cost of the shipping fees or the operational cost to get the goods out the door, but it can also be at the cost of customer relationships.” Liability will become a central issue for issuers, providers, and merchants in the coming years. Existing frameworks address stolen cards or unauthorized use of payment credentials. But when a consumer is dissatisfied with what an agent selected on their behalf, responsibility becomes far less clear. A similar cycle emerged in early e-commerce. Merchants drove growth by offering generous return policies and absorbing the associated risk. Over time, return rates skyrocketed, leaving businesses with inventory that couldn’t be resold at full value. Eventually, that broad assumption of liability narrowed. Companies began analyzing customer behavior and limiting privileges for high return users—an early example of risk-based personalization. Responding to Complexity Payments have never had a single, unified approach, and agentic commerce is no exception. Agents will operate across multiple protocols and may express preferences for how transactions are executed—for example, specifying which rewards card to use. Orchestrators are working to simplify this complexity for merchants, who are primarily focused on selling products—not managing payments infrastructure. Meanwhile, agent developers are not necessarily optimizing for merchant interests. “Merchants have to figure out how to participate in an ecosystem where they aren’t necessarily the reason why the products have been developed in the first place,” said Miller. “It’s a common position for merchants to be in. It was the same thing with adding features like Apple Pay.” Enter the Unified Trust Layer Merchants will need partners to help them adapt to this shifting landscape. IXOPAY is working to involve merchants early in the Unified Trust Layer initiative, fostering a mindset that balances both merchant and consumer priorities. This approach helped drive Zip’s partnership with IXOPAY. “When we began talking about how agentic commerce and agentic payments were going to affect both of our businesses, it was fairly clear that those intersections were common,” said Herriman. “Throughout our network of 25,000-plus merchant partners, our focus is ensuring that in this new era of consumer payments, we’re able to show up with them with the same intentionality of protecting them and protecting fraud against them in the way that we do in the traditional shopping channels.” At its core is the concept of a pre-transaction authorization query, allowing merchants to evaluate the trust score of an agent before completing a sale. This moves decision-making beyond a simple binary of approve or decline. “With the trust score, you’ll be able to kind of get some insight into that agent within that particular transaction, and decide maybe to accept agentic transactions from this protocol, but not for this particular transaction,” said Willard. “It’s adding to that multidimensional layering that agentic commerce brings.” Ongoing Evolution The criteria for evaluating agents will evolve over time as new behavioral patterns—and new forms of fraud—emerge. Merchants and their technology partners will need to collaborate closely to build capabilities tailored to agentic commerce. With improved risk models, new technological tools, and the integration of agent trust scores into existing workflows, merchants can shift from a default “no” to more nuanced, conditional approvals. “It’s going to be a rocky road as the innovation continues to unfold and as a lot of these protocols come to life,” said Herriman. “But when we’re past those challenges, what does it really look for the merchant? A channel that opens up greater access to more customers through things like orchestrated shopping, which most merchants can’t participate in today.” These opportunities will require new safeguards, including frameworks like the Unified Trust Layer. One thing is clear: merchants that want to remain competitive won’t be able to ignore what’s coming. “They will end up needing to participate because it’s going to be such a big channel,” said Willard. “Regardless of if you open up to full agent bot shopping, you’re going to have to rethink your consumer experience on how they interact with you and your brand. It’s not a question of if they’re going to participate in agentic commerce. It’s by how much and when.”

    26 min

  8. May 26

    The Instant Payments Shift Is Testing the Limits of Legacy Banking

    For decades, banks could afford to move slowly. Now, speed is table stakes. In a world of instant payments and real-time expectations, institutions built on legacy systems are being forced to confront a hard reality: modernizing is no longer optional. In a PaymentsJournal Podcast, George Malesky, Director of Partnership Development at Qualpay, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed what legacy banks are up against as instant payments become the norm. For institutions whose technology stacks need an overhaul, the options may not be ideal, but at least they exist. Focusing on the Big Picture When a bank tries to do everything at once, it typically ends up doing very little well. The first step toward modernization is defining a clear focus. Banks need to identify operational efficiencies and determine which upgrades will create the most leverage and opportunity. This isn’t just about driving growth. Strengthening compliance and risk management systems is equally critical. While improvements in sales and customer experience can attract new business, foundational operational enhancements are what makes that growth sustainable. “You’re not going to totally disrupt your core, or completely overhaul your system,” said Malesky. “But you can make things like onboarding and payments and servicing better by making sure they have updated technology.” Getting Ready for Instant Payments On top of existing challenges, banks must now prepare for a world of faster payments. Neither regulators nor customers are willing to accept institutions that can’t keep pace. Speed alone isn’t the solution. Banks need the right technology and the underlying architecture to support it. Just as important is adopting a forward-looking mindset—one that anticipates future demands, especially when competing with more agile fintechs. “You have to make sure everything works together, that the APIs and the middleware all talk together well,” said Malesky. “Sometimes it’s more about thinking of a way to work around your core rather than replacing it or going through it.” Too often, banks overestimate the strategic value of owning their payment infrastructure while underestimating its cost. The burden extends beyond upfront investment to include complexity, ongoing maintenance, regulatory requirements, scheme updates, fraud management, and continuous innovation. What’s critical here is treating payments as a strategic capability—not necessarily a fully owned asset. In-house solutions can offer control and customization, but they come with significant trade-offs in cost and operational burden. Looking for a Partner Some banks, with sufficient capital and internal resources, may choose to modernize their payment systems independently. However, many are finding success by partnering with providers that bring both experience and modern platforms. These partnerships can accelerate transformation timelines. “Everyone knows the old adage that every journey begins with a single step,” said Malesky. “But when it comes to siloed systems and fragmented tools, maybe it’s a handful of steps to get there at the forefront. There’s not necessarily a single bullet or a single provider that can do absolutely anything and everything that a bank will need, but you want to reduce vendor clutter and some of the complexities by having single source solutions.” Breaking Down Silos Partnering can speed up modernization, but it doesn’t eliminate one of the industry’s most persistent challenges—siloed systems. Embedded solutions can reduce distractions and minimize errors, but they don’t always integrate smoothly with adjacent systems. Both legacy and modern platforms must communicate effectively to deliver real value. Siloed systems create friction across the organization. Customers may struggle to navigate disconnected services, while banks face inefficiencies such as duplicated data and redundant processes. The impact is far-reaching. “When a bank is not operating as one holistic system, it loses opportunities to cross sell,” said Riley. “You’re losing a line of sight on the true risk of a customer, whether there’s loans or deposits involved. They don’t necessarily have to work together, but when they do, it’s a much better experience for everyone, especially the operational people and of course the customer.” One clear example is onboarding. Fintechs can onboard customers in minutes, while traditional banks may take up to seven days—and at two to three times the cost for  merchant accounts. “It’s really a challenge if you’re going to be that slow,” said Malesky. “When we used to text in the early stages of flip phones, we had to open up our phone and press the number 2 three times to get the letter C. It was a slow, monotonous process. But in those days, we didn’t know any different. We didn’t know what was coming with iPhones.” Fintechs are effectively delivering the “smartphone experience” of financial services. Once customers become accustomed to that level of speed and convenience, it’s difficult to revert. If banks can’t meet those expectations, customers will look elsewhere. Where Are Banks Heading? Modernizing a legacy banking system involves many moving parts. It’s not enough to address current needs, banks must also align their upgrades with long-term strategic goals. “Unless you’re ready for the future, you will not get through it,” said Riley. “It’s not just ‘Let’s get to it on a 10-year plan.’ It’s where you’re looking to go, and how quickly will you get there.” Malesky added: “Think ahead to how you can make the customer experience that much better because that translates into more customers, and more usage for existing customers. And that’s the goal for most banks.”

    12 min
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Payments Content, Expert Insights and Timely News

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  • Creator
    PaymentsJournal
  • Years Active
    2023 - 2026
  • Episodes
    283
  • Rating
    Clean
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    PaymentsJournal

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