POS Glitches, AI Takeover, and Surcharge Showdowns

In this week's episode of Today in Payments, Patti Murphy and James Shepherd go full crime reporter mode, breaking down a nationwide refund fraud scheme that exploited POS system vulnerabilities. They also cover major trends reshaping the payments space—from global revenue forecasts and real-time A2A growth to AI’s expanding role at Bank of America. Plus, a deep dive into surcharging laws across U.S. states and why dual pricing may be the more consumer-friendly path forward.

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

Five Indicted Over Refund Scheme Leveraging POS Glitch

It’s rare that I get to report on the intersection of payments and crime. But this week, I can.

A federal grand jury in Miami has returned a 22-count indictment charging five men in connection with a nationwide fraud scheme that exploited what appears to have been a glitch in the POS system at one or more unnamed retail chains—resulting in millions of dollars in bogus refunds.

Don Apgar, director of the merchant payments practice at Javelin Strategy & Research, speculated that it was an inside job likely affecting one or two retail chains using the same POS software. “It sounds like one of these guys had insider info on this glitch in the [stores’] POS software,” he told me. “Either they worked at the retail chain or for the software company.”

The indictment alleges the defendants used a “split-tender” method of payment, purchasing merchandise with two debit cards. They then returned the merchandise, securing a refund to the first card while deliberately stalling the refund process on the second card by presenting the wrong card, entering incorrect PINs, or pretending to call their bank. Keeping the refund transaction open gave them the opportunity to trigger duplicate refund signals, which led to multiple credits being issued to the first debit card.

After receiving multiple refund credits, the defendants would cancel the return, take the merchandise to another store location, and start the process all over again. In some cases, they generated tens of thousands of dollars in fraudulent credits from a single purchase.

“Normally, refunds wouldn’t hit a debit account until the following day,” explained Apgar. “But there are new technologies that enable real-time credits—for example, Visa Direct—so the crooks would have to know that the store they were targeting used newer payout rails, allowing them to grab the erroneous credits in real time before they were reversed.” He added that this was a unique scheme exploiting a very specific software vulnerability.

According to the charging documents, the alleged scheme was carried out at dozens of stores nationwide—including locations in Miami, Tampa, New York City, Chicago, Phoenix, and Southern California. Apgar said this further supports the theory that it involved just one or two large retailers with multiple locations. “They couldn’t just run this scam at every store in Miami because not every store had this particular vulnerability,” he noted.

Global Payments Revenue to Hit $2.4 Trillion by 2029

A new report from Boston Consulting Group projects that global payments revenue will reach $2.4 trillion by 2029. This represents a slowdown to about 4% annual growth over the next five years, following a robust 8.8% annual growth rate since 2019. In 2024, global payments revenue reached $1.9 trillion. Growth tied to transaction-based revenues remains strong, the report noted.

Payments-focused fintechs have attracted over $135 billion in equity funding over the past 25 years and now account for 45% of total fintech revenue.

Real-time account-to-account (A2A) payment volumes grew 40% globally in 2024. These transactions now represent about a quarter of all digital payments worldwide—closer to 50% in markets like Brazil and India.

BCG’s forecasts draw from data across 60 economies accounting for more than 90% of global GDP. The report also identifies major structural forces reshaping the payments industry, including agentic AI, digital currencies like stablecoins, fintech disruption, real-time A2A systems, and ongoing cost transformation.

“We're entering an era where growth and complexity go hand in hand,” said Markus Ampenberger, BCG managing director and partner. “The next winners in payments won't just be fast adopters of technology. They’ll be the firms that deeply integrate new capabilities into their business models, operating models, and customer value propositions.”

States Look Askance at Card Surcharging

Lawmakers in North Carolina are considering a bill to regulate credit card surcharging. While the bill is unlikely to pass during the current legislative session, it signals a growing willingness among lawmakers to address this contentious issue.

Surcharging is banned in two states—Massachusetts and Connecticut—as well as Puerto Rico. At least a dozen other states impose specific rules or caps on the practice. For example:

• Illinois caps surcharges at 1%

• Colorado caps them at 2%

• Nevada, New York, South Dakota, and New Jersey allow surcharges, but only up to the amount the business pays in processing fees

Other state-specific requirements include:

• Georgia requires merchants imposing surcharges to offer alternative payment options

• Kansas mandates that surcharges be built into listed product prices

• Michigan requires clear customer notifications, including signage at every entrance and point of sale in brick-and-mortar locations

BofA Harnesses AI to Reduce Time Spent Answering Customer Questions

AI has been dominating the news—and Bank of America just added to the buzz. This week, the bank announced it is using generative AI to transform how its Global Payment Solutions team supports business clients worldwide.

The new tool, called Ask Global Payment Solutions (AskGPS), was built in-house and trained on more than 3,200 internal documents, including product guides, term sheets, and FAQs. With AskGPS, employees can now submit simple or complex client questions and receive answers within seconds.

Previously, handling a complex inquiry might take an hour and involve multiple calls across time zones. AskGPS aims to change that.

AskGPS joins a growing suite of AI tools supporting BofA’s Global Payment Solutions team, including:

• CashPro Chat, a virtual assistant offering real-time account and transaction support

• CashPro Forecasting, which uses predictive analytics to project future cash positions

• Intelligent Receivables, which uses AI and advanced data capture to consolidate payment and remittance data from multiple channels

I’d expect more banks to follow BofA’s lead—and not just for cash management. A tool like AskGPS would likely be well received by merchant services clients too.

That’s all for Today in Payments. Stay tuned for your weekly dose of payments notes.