Article 6 min

Overcoming challenges in digital payments

Overcoming Challenges in Digital Payments

Adoption of digital payments was growing before COVID-19, but the pandemic has accelerated the shift, driving dramatic increases in contactless and online payments. For example, U.S. retail stores saw consumers spend 30% more on online purchases in the first half of 2020 and in the Philippines e-payments have spiked more than 5,000% since the pandemic. For all organizations that rely on or are in the payment ecosystem, effective digital payments strategy and operations are fundamental.

Deploying and optimizing complex payment systems often involves syncing up multiple teams across the organization. With different focuses and requirements, creating a cohesive plan to effectively deal with multiple vendors in a variety of countries presents a significant challenge.

A relentless pace of change

Many organizations were prepared for this onslaught of new digital business, as they had effective digital payment systems in place before the pandemic. Unfortunately, others had to scramble, trying to get technologies and business processes in place to remain in business and be competitive. On a national level, according to an ACI Worldwide 2021 global payments report:

Countries with robust digital payments infrastructure already in place have coped better than those without when it comes to containing the economic impact of the pandemic.

For any organization trying to create a successful digital payment strategy, there’s a dizzying array of options to consider, including:

  • National standards (if they exist)
  • Channels to support
  • Banking partners
  • Gateway and processor vendors
  • Fraud prevention and security measures
  • Verification and authentication processes

On top of all that, new technologies and models are constantly emerging and regulations around payment security, privacy and financial crimes are always evolving. Consider FedNow, an instant payment service that U.S. Federal Reserve System is developing; its expected launch in 2023 will have a wide-ranging impact and many organizations are already planning for it.

There are serious cost considerations in adopting new payment technologies, especially if existing systems use legacy technologies. Any digital payments plan needs to implement technology cost-effectively now and have a forward-looking outlook on updating capabilities.

Gaining and maintaining consumer acceptance

Digital payments aren’t simply about technology. For consumers, digital payments adoption involves considerations like how they live their lives, how tech-savvy they are, and how comfortable they feel with transacting digitally/online.

In general, it does seem that consumers are becoming more accepting of emerging payment technologies. A New Payments Index study by Mastercard found that 93% of consumers are considering emerging payments technologies like biometrics, digital currencies and QR codes.

However, it’s important to note that different groups have very different attitudes towards going cashless. For example, German consumers are reluctant to adopt digital payment methods, with 49% loyal to cash. Many people are uncomfortable or don’t have access to the technology. Anne Boden, founder and chief executive of Starling Bank, notes:

For some vulnerable people, digital payments are not an option … cash is all some people know, perhaps all they have access to. People in society, like those on lower incomes and the elderly, are more likely to be negatively affected by a switch to a cashless society.

There are also considerations around reliability — if there’s a crisis, global consumers believe cash is the most reliable form of payment.

One area of potential concern that hasn’t got a lot of consumer attention yet is privacy. Various parties in the payment chain can easily track electronic purchases. The information is used for profiling and other marketing purposes and can even be shared with third parties. Susan Grant, the director of consumer protection and privacy at the Consumer Federation of America states:

“It’s just a mind-boggling tangle of information sharing that’s going on out there that consumers have no idea is happening.”

While individual privacy policies and contractual terms of service might limit these types of data gathering, often there are no legal restrictions. With a growing global trend towards data protection — like GDPR and CCPA — balancing commercial interests with consumer privacy is an area that digital payments organizations might proactively consider.

New markets, new risks and new opportunities


Every country has its unique payment environment with different players, technologies and consumer needs. However, business today is increasingly more global, with cross-border payments and commerce growing substantially.

It’s difficult enough to optimize performance for one payment system, but to create seamless digital payment systems that cross borders is a whole different level of complexity. But it is happening, on a corridor-by-corridor basis, with organizations creating multi-party partnerships to leverage various local strengths.

Consider the announcement of Google Pay, Western Union and Wise, who are teaming up to launch an international money transfer partnership. Customers in the U.S. can now transfer money through the app directly to customers in Singapore or India. The plan is to be able to send money to 200 countries by the end of 2021.

The future of sending money to anyone, instantly, from anywhere, doesn’t seem so far away anymore. However, if that becomes the market expectation, how can smaller operators implement systems that can meet those high requirements? Developing key partnerships and participating in networks that align with the customer base and business model will be crucial to effectively delivering global payments, keeping the industry competitive and ensuring access to multiple providers.


Another significant hurdle is the increased risk of payment fraud and cybercrime. One study predicts that retailers will lose around $130 billion to digital CNP fraud between 2018 and 2023. Fraudsters are always looking for security loopholes or lapses. Because online perpetrators can attempt their fraudulent acts from virtually anywhere at any time, every transaction and every part of the eCommerce system needs to be protected. Merchants need to implement the necessary tools and have a security mindset that permeates the entire company culture, from top-down.

ISO 20022

Open systems (like those suggested by open banking proponents) call for quickly updateable and highly scalable technologies. Specific standards, like ISO 20022 for payments messaging, are gaining widespread acceptance in the industry. Charles Bunnik, market infrastructures project manager at ABN AMRO, says, “Many market infrastructures adopt ISO 20022 and ensure adoption of, and adaptation to, the new features released by the richer standard.”

While the challenges in digital payments are considerable, the paths to ongoing success are becoming more apparent. As there are so many options and so many technologies, partnerships and customer considerations, adaptability is key to success. Digital payments should be adaptable systems, with teams that can quickly alter their processes. The only constant is change.