**London**: A new report highlights the challenges merchants face in optimising payment processes due to increasing complexities in technology, the emergence of fintech, and the role of artificial intelligence. Experts caution that while seeking cost savings, many may incur higher expenses instead.
Recent advancements in technology have significantly expanded payment optimisation options for merchants. However, the growing complexity in this landscape poses challenges in identifying value and creating opportunities while maintaining optimal expenses, according to a report from Javelin Strategy & Research titled “2025 Merchant Payment Trends”. The report’s authors, Don Apgar, Director of Merchant Payments, and James Wester, Co-Head of Payments, outline three emerging trends that are influencing the merchant experience: artificial intelligence, the evolving fintech sector, and a shift towards value over cost.
In the current climate, merchants are increasingly focused on enhancing their payment performance in order to minimise costs. They meticulously monitor their organisations’ payment metrics and often employ dedicated personnel or third-party vendors to oversee payments activities. To lower expenditure, many merchants are turning to payment orchestration platforms. However, Apgar warns that the costs associated with these solutions can, in certain instances, exceed the anticipated savings.
“If you’re running on a payment-orchestrated platform and you’ve got two or three processors, you may have somebody on the finance team whose job title is analyst, but in reality, they spend 100% of their time working on payments-related reconciliation and cost allocation,” Apgar stated. “Also, you may have added a vendor who does loyalty or risk reduction or some other ancillary process that only applies when a transaction has certain characteristics.” This proliferation of processors and vendors complicates the process for merchants attempting to ascertain the actual costs of payment processes.
Apgar further illustrated this confusion, noting, “It’s the old adage: ‘I saved a dime, but it cost me a dollar to do it.’” He elaborated that although optimising authorisation and increasing sales can lead to additional revenue, it can also incur significant costs, urging merchants to closely investigate the real costs involved in their payment operations.
The report also delves into the implications of the burgeoning fintech market. Apgar expressed concerns over the sustainability of many fintech companies, comparing the current landscape to the dotcom bubble of the early 2000s. “I think we’re seeing another fintech bubble,” he remarked. “History is repeating itself… We have so many business plans that don’t have a navigable path to positive revenue, but it’s being obscured by all the headlines and the buzz.” The collapse of Synapse, a fintech firm that left clients unable to access $85 million due to documentation issues, exemplifies the potential pitfalls of reliance on fintech partnerships.
With regulators scrutinising the role of fintech in the financial system more closely than ever, Apgar stated, “We’ve seen a blizzard… of compliance fines come down from the Federal Trade Commission, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Commission.” This increased oversight puts pressure on fintech firms with weaker value propositions, potentially leading to consolidations, acquisitions, or complete shutdowns.
Artificial intelligence also remains a focal point in the evolution of the financial sector, despite its current limitations. Apgar pointed out that while AI can streamline operations, its imperfections must be considered. Google, for example, faced backlash after its Gemini AI engine provided inconsistent results. The implications are significant, particularly when financial institutions consider employing AI for regulatory compliance purposes. Should AI fail to identify issues, the institution remains liable for compliance failures.
“There’s another old adage: ‘You can spot the pioneers—they’re the ones with the arrows in their backs,’” Apgar noted, suggesting that businesses in a rush to implement AI might face setbacks. He predicts a ‘second-mover advantage’ for those who take a more measured approach, allowing time for AI technologies to mature before fully integrating them. He states, “It’s certainly not too early to start mapping out how a highly functioning model could create efficiencies and potential savings,” indicating that having a plan in place will better position organisations for future benefits as the technology becomes more reliable.
In conclusion, as the payments landscape continues to evolve with emerging technologies and increasing complexities, merchants will need to navigate these changes cautiously while incorporating cost-effective and value-based strategies in their payment processes.
Source: Noah Wire Services
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