Changes, Challenges, and the Future of Payments

Here’s a snapshot of the industry today and best next steps to prepare for the future.


Change is the norm for the payments space. However, those changes have accelerated since 2020. Payment thought leaders, Penny Townsend, CPO and founding member of Qualpay, Jim Luff, corporate communications manager at Aurora Payments,  Kyle Ouzts, director of strategic partnerships at PayJunction, and Tim Harris, CEO of FuturePay, share their perspectives on where those changes are taking the industry, the challenges that solutions providers and merchants face, and predictions for the future.

Changes in Payments

Townsend comments,  “The COVID-19 pandemic upended the payments industry, accelerating trends and behaviors that were in motion well before its onset. We saw businesses reprioritize ambitions, change their structure, and incorporate new technology. The pandemic forced businesses to think contactless and allow not only the business to process payments more seamlessly but also provide their customers a clean and effective experience.”

Luff adds, “The most dramatic impact can be seen in cash usage, which plummeted by 15 percent in 2020. As physical stores reopened in 2021, the cash rebound expected did not materialize.”

Ouzts says the COVID-19 pandemic resulted in some positive changes, especially the rapid evolution of the payments stack. “We saw consumer and vertical industry use cases progress through development and deployed in-market in record release time. The results of this progressive deployment yielded a blanket approach to omni-commerce, truly meeting the consumer where they are in their individualized payments journey.”

Harris, however, sees the impact of the pandemic as both a positive and a negative on buy now, pay later (BNPL). At first, adoption skyrocketed. Then, as the pandemic receded and interest rates climbed, it became difficult to offer zero interest. “So BNPL changed from pay in four to longer-term installments loans with interest associated with them. As a result, alternatives to BNPL have emerged,” he comments.

Ouzts adds another change to the payments landscape has been merger and acquisition activity. “Not only did the 800-pound gorillas get bigger and more complex, but the trend rolled into vertical-specific markets where consolidation of software solutions began to impact the competitive landscape,” he says.

Industry Challenges

The rapid evolution in the payments space has also brought new challenges for payment companies, solutions providers, and consumers. Townsend points to the pressures to transform and re-evaluate legacy payment processes to keep pace with competitors and the evolving payments landscape. “Determining where to invest dollars, specifically as it relates to payments innovation, is an ongoing challenge. Additionally, operational efficiencies will be driving key decisions,” she says.

Luff adds that “increasing regulatory measures, increased fraud activity, particularly for those involved in e-commerce, and rising expectations from both merchants and consumers” as adding to the difficulties for the payments industry.

Ouzts says, “Something we could be doing better to service the merchant ecosystem would be to grow our solution stack, collectively. In a horizontal view across the industry, you see a wide array of diversity in the solutions that are available to merchants. From a feature stack perspective, merchants want to meet their customers where they are in the payments journey, and that is not always at the point of purchase.  Merchants require a variety of revenue capture lanes into their reconciliation process, be it invoicing, account-to-account, real-time payments, and card-on-file.”

He adds that the process has to be clean and scalable for providers and merchants. “We need to hand-hold merchants with care in how we service the movement of their money. They need customer service that delivers to their needs and portals that give them the self-service tools to manage the flow of their money. With the reliance on the payments industry to manage the largest segment of cash flow (i.e., electronic payments), merchants need to be able to get a human on the phone in real-time.”

Solutions Providers Can Prepare for the Future Now

The breadth of change and challenges begs the question of what lies ahead. Luff says it’s important to focus on younger consumers approaching peak earning years. “To remain competitive, merchant service providers must concentrate on bringing to market the solutions that Gen X and Z embrace. This means investing heavily in social media-driven marketing and digitally forward solutions such as peer-to-peer payment apps, BNPL, and quick payment links,” he says.

Townsend also says to focus on the consumer. “The transition to digital payments is not slowing down, and solutions providers should look to better understand how to meet their customers where they are,” she advises.  “Customer experience will always be a key differentiator.  Providers can only offer curated solutions and customized processes if they know where their customers are. Customer service no longer relies solely on the availability of 24/7 chatbot support but on industry expertise and innovative technology that can effectively address their issues. It’s crucial for payments solutions providers to work alongside the customer as they navigate challenges to not only improve the overall experience but also increase customer retention.”

Ouzts says diversification and nimbleness are buffers against change, with tributaries feeding into the revenue stream offering growth potential. The flexibility to pivot with new partnerships or new features helps sustain evolution to ensure that your business meets revenue needs and delivers what merchants need.

Harris advises a change in mindset. Payment solutions until now have focused on single, distinct interactions with merchants. However, merchants will get more value from solutions that focus on building relationships. “Provide solutions that drive repeat business, help provide good customer experiences, and increase customer lifetime value (CLTV),” he says.

Kelly Allred

Kelly Allred is a contributing editor for DevPro Journal.

Datacap - We Solve Payment Problems
Kelly Allred
Kelly Allred is a contributing editor for DevPro Journal.