The 10 Most Pressing Issues

We know you’re not looking for problems. But they are looking for you. Herewith our annual catalog of the ones causing the most headaches.

Each year in the fall, as the grass turns brown and the trees shed their leaves, the editors of Digital Transactions start their deliberations over an equally gray and shadowy subject: what’s cramping the style of payments players these days? What obstacles are they confronting, and how? Which ones are pressing harder than the others, and why?

If adversity breeds strength, as the old saying goes, then payments professionals these days may have plenty of opportunity to develop their strategic and tactical biceps. The industry no sooner recovered from all the ill effects of the pandemic than it found itself enmeshed in a slew of other issues, some old and familiar but some others quite surprisingly fresh.

Herewith our annual catalog of the problems we think are most alarming for payments professionals right now, ranked in order of their impact—or potential impact—on the industry. “Impact,” of course, can be a matter of degree. Some of the matters ranked below, however, may be no less pressing for being still more or less in their larval stage.

So, what do we mean by “pressing”? The term refers to the sense of urgency the issue arouses in those it affects, not so much to the size of the market that must deal with it. Some issues, on the other hand, are pressing for a substantial segment of the industry.

Take our number-one issue this year, the Visa Acquirer Monitoring Program, or VAMP. This program, which Visa launched on April 1, consolidates into one all-important ratio several monitoring systems Visa has used over the years to control instances of fraud and disputes. The new regime applies to two key constituencies in the payments industry—acquirers and merchants—and enforcement began last month. If that’s not pressing, we don’t know what is.

Speaking of the ranking of issues, it was done by our staff editors, who cover this industry day by day. You may agree or disagree. Either way, let us know what you think the big issues in payments are, and we’ll take up the matter with our 20th annual ranking next year. Meanwhile, you can reach me with your comments at john@digitaltransactions.net.

1. VAMP
Merchant Risk Council, Visa wants to assess how many of a merchant’s transactions result in frauds or disputes, a limit now at 1.5% that will lower to 0.9% on Jan. 1. The other piece is what Visa calls enumeration, the percentage of transactions suspected to be card testing attempts. That is set at 20% currently. Enforcement began Oct. 1.

Visa’s introduction of VAMP stems from a need to update the system for identifying and stopping fraud, a Visa executive says in a YouTube video. With the advent of real-time payments, artificial intelligence, agentic commerce, and other new digital transaction types, a revision was necessary, Ami Patel, Visa vice president of ecosystem engagement and advocacy, says in the video. “And the pace of change has just accelerate to the point where incremental improvements and tweaking programs was just no longer going to be sufficient,” Patel says. “We knew we had to rebuild from the ground up and restructure the programs from the six the we had built over the last three decades.”

VAMP is designed for organizations that Visa says would be outliers in fraud activity. “The majority of our clients won’t be affected by the program at all,” Patel says. VAMP also has an early warning component should a merchant’s approach VAMP thresholds.

2. Use Cases for Real Time Payments

No doubt pertinent use cases for real-time payments are many, but proponents envision more of them for instant payments. Real-time payments got a big boost when Zelle launched in 2017 to enable bank-centric peer-to-peer payments in real time. That’s the same year The Clearing House Payments Co. LLC launched RTP. And in 2023, the Federal Reserve launched FedNow, its real-time payment service. For RTP and FedNow, numerous use cases were clear, such as instant payroll, payouts, auto loan disbursements, and digital wallet defunding (moving funds from a wallet to a bank account).

As with any payment service, the desire is for more volume and uses. Request for payment is a contender for wider adoption. With real-time processing backing it, the RfP option allows billers and merchants to receive nearly immediate payment by sending a request through a network to customers and clients who have received services. Able to be integrated into mobile and online environments, RfP could be used to instantly pay a utility bill and potentially eliminate delays and provide consumers with more control of their funds. Both FedNow and RTP charge 1 cent for a request for payment. Request for payment as the potential grow in the coming year, RTP says, with one possible adaption, enabling it for recurring payments, as another possibility, though that was still in development earlier this year.

RfP is gaining some ground. Open banking specialist Plaid Inc. was the first Cross River Bank client to enable the RfP function for real-time payments. Announced in June, the capability was activated for customers of automobile seller Carvana. A recent U.S. Faster Payments Council report found that earned wage access and loan payouts were strong climbers in use cases with online gaming payouts, wallet funding and defunding, and merchant settlement the top five use cases.

3. Checkout Friction

Checkout friction is a perpetual issue for online sellers, one that requires constant attention and development. How big a problem is it? An eMarketer report from April found that consumers expect a frictionless shopping experience “now that Amazon- and Shop Pay-style one-click checkouts have become the norm. But 35% of retailers says poor user experience at checkout is a top reason shoppers abandon their carts.”

In a September report, sponsored by FreedomPay and Stripe Inc., 74% of surveyed executive said consumers now expect faster, frictionless payments. It also found that 58% of merchants directly attributed lost sales and higher card abandonment rates to their current payment technology.

Payments companies have been paying and developing services they contend can help. PayPal Holdings Inc. last year launched its Fastlane checkout service, meant to speed up guest checkout in particular. Paze, the digital wallet launched by Early Warning Services LLC, is a bank-centered effort to make it easier to check out online. Processor Nuvei Corp. and Payfinia are among the latest to make Paze available to their merchants. Nuvei said Paze gives merchants another payment option to help them accept a consumer’s preferred payment choice.

In another development, Mastercard Inc. intends to tokenize card numbers for all online transactions globally by 2030, which could make online transactions faster, the card brand said. But it could also reduce checkout friction because a cardholder might not need to re-enter a card number if it’s securely stored as a token.

4. Agentic Commerce

Well, that didn’t take long, did it? No sooner did the payments industry buzz with excitement about the potential for artificial intelligence than players began working with agentic commerce—the sort of payments that stem from bits of code sent into cyberspace to shop and pay on behalf of humans and their bank accounts.

The action really heated up in October with Visa Inc.’s release of Trusted Agent, developed in collaboration with Cloudflare Inc., a cloud-computing company. The Trusted Agent protocol is meant to help merchants distinguish between legitimate agents acting on behalf of real customers, on the one hand, and bots acting on behalf of fraudsters, on the other.

That sounds promising for payments companies, merchants, and processors. But with players rushing to join in, the shape this technology will ultimately take is unknown, making it hard for companies to plan and commit development dollars.

In the meantime, with bits of code doing the shopping and spending, the need to distinguish between legitimate and malicious bots has never been greater. In August, the digital-security company Forter introduced a service intended to help digital merchants vet these AI agents throughout the shopping process, including payment.

That will become even more important as more fintechs get involved. A recent example arrived in September when OpenAI , the developer of ChatGPT, launched Instant Checkout, an agentic protocol it developed in tandem with Stripe. That development could draw even more consumers into agentic commerce as it opens AI shopping to ChatGPT Plus, Pro, and Free users in the United States.

5. Regulation

When Congress showed scant interest in regulating interchange, states decided to fill the void. Bills earlier this year were pending in Alaska,, Massachusetts, and New York that would exempt merchants from paying interchange on the sales-tax and tip portions of a transaction. These moves followed on the example of Illinois, where similar legislation went into effect in July.

These state actions brought some solace to merchants frustrated by years of falling short on interchange regulation at the federal level. Whether such regulation will prove effective in pleasing merchants while doing little or no damage to card economics remains to be seen, but so far it has done little to placate either side of the interchange debate. Merchants remain convinced interchange rates are too high, while banks and issuers have dug in on defending the status quo.

But interchange fees aren’t the only object of regulation. With payments players showing a growing interest in stablecoins, Congress passed the GENIUS Act, aimed at establishing a legal structure for stablecoins and setting up consumer protections for those using the cryptocurrency. The bill also establishes federal oversight of stablecoins on top of state supervision and requires 100% reserve backing for the digital currency, monthly disclosure of reserves, and annual audits for those defined as large users.

Now, the pressing issue isn’t so much whether stablecoins are legitimate. Few if any in the payments industry argue that they are. It’s whether traditional payments companies can act fast enough to take advantage of the opportunity. Already, major payments firms have started to make their moves. Last month, for example, Fiserv Inc. said it will work with Bank of North Dakota on a stablecoin called the Roughrider coin. In this case, Fiserv is undoubtedly looking for a smooth ride.

6. Chargebacks

“Chargebacks are the worst they’ve ever been for merchants,” declares Monica Eaton, founder and chief executive of Chargebacks 911, a firm that tracks the problem. Her firm’s research indicates chargebacks last year totaled $65.21 billion in the U.S. market. That comes to 5.7 claims per cardholder, at $76 per claim.

Much of this rise stems from the increasing popularity of e-commerce and card-not-present transactions, she says, but at the same time criminals are getting more sophisticated in how they game the chargeback system. And the fraud is being committed not so much by lone wolves any more, but rather by organized criminal gangs, she adds.

What can merchants do? Eaton recommends several steps: monitor such indicators as the refund rate, repeat refund requests, and refund amounts as a percentage of sales; review return policies and thresholds; and act earlier to resolve disputes before they can turn into chargebacks. She also advises harnessing AI to detect patterns they may indicate a future chargeback.

In a world where crime attacks at the most vulnerable points, there’s no substitute for vigilance—and more vigilance.

7. Stablecoins/Cryptocurrency

Efforts to make stablecoins a mainstream payment option received a huge boost with passage of the GENIUS Act earlier this year. That action, signed into law July 18, signaled the digital currency is maturing into a viable payments and finance tool. Before, state and federal guidelines around stablecoins were fragmented.

With the Genius Act, “the rules of the road are clearer than ever,” says Alex Wilson, head of crypto for Shift 4 Payments Inc.

As a result, payments use cases for stablecoins graduated chat room debates to action in board room, payments experts say.

“The GENIUS Act set the regulatory framework that was lagging, which helps create comfort in pursuing stablecoin initiatives,” says Dean Nolan, head of product strategy for Finzly, a finetch that supports stablecoins and tokenized deposits. “This gives credence [to the idea that] stablecoins can be part of the payments tool kit.”

Another factor making stablecoins an attractive payment option is that they can be exchanged over the Internet as opposed to traditional payment rails, which lowers acceptance costs. That makes them attractive to merchants and poses a potential competitive threat to the credit card networks, argues Enrico Camerinelli, a strategic advisor for Datos Insights.

8. Commodification of Payment Processing

Market saturation, standardized core services, access to faster networks, and the rise of low-cost payment options that create pricing pressure. These are some of the most potent factors commoditizing payment processing, and in turn squeezing processors’ margins.

“The market is so flooded with [processing] options that businesses can jump to a different [processor] for any reason, including cost,” says Erika Baumann, director, commercial banking and payments, at Datos Insights. “This commoditization has also created less differentiation, so it is much harder for providers to set themselves apart from each other.”

For processors to differentiate themselves from the competition and “avoid becoming obsolete,” they should invest in technologies that deliver a value-added proposition to merchants, Baumann says. One such technology is analytics. Another option is bundling services to create all-in-one processing solutions that shift merchants’ focus away from acceptance costs. The use of artificial intelligence to detect fraud, along with improving operational efficiencies, are other ways processors can offer added value and avoid becoming commodities.

“There has to be something that keeps the business in place, a stickiness so to speak, through bundled services and embedded banking,” Baumann says. “In this environment, it is becoming easier and easier to change [processors].”

9. Legacy Platforms

The reasons that explain why processors hang on to legacy platforms vary from case to case. There’s the high replacement cost, which can make maintenance appear to be a more manageable expense. There’s the disruption installing a new platform brings to operations, plus the concerns about data loss or data corruption during the transition to a new platform.

Eventually, there comes a point when a processor must bite the bullet and replace a legacy system to meet the demands of the modern payments ecosystem.

“Legacy systems were not built for the capabilities and demands of today. This can lead to compliance issues and even data breaches,” says Erika Baumann, director, commercial banking and payments for Datos Insights. “It is also more difficult to move away from batch processing and to have real-time data. This is absolutely a competitive disadvantage.”

To transition away from legacy systems while minimizing headaches, payment experts say, processors should develop a migration plan that emphasizes secure data transfer, rigorous testing and compliance, and clear communications during implementation across the entire organization.

“Legacy infrastructure with redundancies and inefficiencies [is] not sustainable,” Baumann says. “[Legacy] platforms impede progress to payments modernization…making it nearly impossible to keep up with competitive threats and even compliance mandates.”

10. Open Banking

As banks, merchants, and the card networks rethink how money moves, open banking is attracting a lot of attention. The technology’s appeal is its ability to empower consumers with control over who accesses their financial data and for what reason. As a result, open banking is transforming the financial landscape with use cases that provide more personalized financial products and services, such as enabling account-to-account payments.

In addition, the technology is fueling other new payment options, such as pay by bank, variable recurring payments, and dynamic payment routing. The result is a more competitive landscape that allows for increased automation, fast data transfer, and fewer manual processes.

“Open banking is unlocking a new wave of payment innovation. When data and payment capabilities connect securely across banks and platforms, businesses can create financial experiences that were impossible before—real-time account-to-account payments, embedded finance, automated cash management, and intelligent payment orchestration,” says Dwolla Inc. chief executive Dave Glaser.

But the real innovation that open banking brings lies in the flexibility it provides in building on modern, secure infrastructure rather than being constrained by legacy rails. “That’s how companies move faster and deliver more value to their customers,” Glaser says.