Money Moves in Payments

Retailers and financial institutions are investing billions to modernize payments, digital disbursements are replacing checks, prepaid cards are booming, and mobile payments continue to rise—except among small merchants

Welcome to Today in Payments, I’m your host, Patti Murphy, here with your daily dose of payments notes.

Payments Modernization Takes Center Stage

A growing number of U.S. retailers and financial institutions are making major investments in modernizing payment systems, with billions being spent to enhance efficiency, improve customer experience, and drive long-term savings.

Retailers Invest in Payment Modernization

A staggering 86% of U.S. retailers are modernizing or planning to modernize their payment systems, according to a report by KPMG. On average, each retailer will spend $2.1 million on these projects and assign 22 employees to implement the upgrades.

Top three reasons for modernization:

• Improved customer experience (69%)

• Faster transaction processing (56%)

• Long-term cost savings (54%)

Overcoming modernization challenges will be critical, but for retailers that succeed, there are opportunities to personalize the customer experience and build stronger relationships with their customers.

Financial Institutions Embrace Modernization

The modernization wave isn’t limited to retailers—financial institutions (FIs) are also making major moves. KPMG reports that 94% of surveyed U.S. FIs have payments modernization programs either in progress or planned. The average projected investment is $19 million, with 34 employees assigned per project.

One of the biggest modernization drivers is ISO 20022, a universal financial messaging standard aimed at improving interoperability, efficiency, and richer data exchange across global transactions.

Additional drivers for modernization include:

• Long-term cost savings (62%)

• Faster transaction processing (54%)

• Improved customer experience (54%)

The report is based on a survey of 810 FIs and 690 retailers worldwide.

Digital Disbursements Overtake Checks

ACI Worldwide is partnering with Ingo Payments to launch ACI Speedway Digital Disbursements, a new solution designed to accelerate digital payment adoption. Offered as a value-added feature of the ACI Speedway platform, the solution will be particularly useful for applications like insurance payouts after natural disasters.

With this partnership, ACI’s biller clients will be able to offer a range of disbursement options, including:

• Real-time payments

• PayPal/Venmo

• Signature debit

• ACH

Despite the rise of digital payments, a surprising 40% of corporate disbursements are still made by check. Faster payments initiatives—like same-day ACH and instant payment networks—are making progress in reducing paper-based payments, and the ACI-Ingo partnership is another step in this transformation.

ACI Worldwide, one of the original fintech firms, provides electronic payment solutions to corporations, FIs, and merchants. Ingo Payments, originally known for prepaid banking solutions for the unbanked and underbanked, has since expanded into broader payment markets.

Prepaid Cards Chart Strong Growth

The prepaid card market is growing at a compound annual growth rate of 13.9%, according to a report from Research & Markets. The market is expected to approach $29 billion in 2024, up from just under $25 billion last year. By 2029, it is projected to exceed $46 billion.

Most of this growth is expected in the Asia-Pacific region, while Western Europe ranks as the second-largest market for prepaid card adoption.

Mobile Drives Digital Payments Growth—Except with Small Merchants

A separate report from Research & Markets reveals that 78% of online U.S. adults relied on digital and online payments in the past three months. However, small businesses remain slow to adopt digital payments, with fewer than 60% accepting digital wallets.

Consumers still prefer credit and debit cards, which accounted for over 70% of traditional payments in North America in 2023.

The report also tracked cryptocurrency ownership, finding that over 72 million Americans held crypto in 2023. However, despite its rising popularity, crypto usage for everyday payments remains limited.

Conclusion

That’s all for Today in Payments. Keep coming back every weekday for your daily dose of payments news.