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The Evolving Payments Ecosystem’s Conflicting Pressures



From the customers who make the transactions to the merchants, payment service providers, and card issuers who facilitate those transactions, the payments ecosystem is made up of a number of distinct players with individual needs.

This has always been the case. But as the payments ecosystem evolves through the addition of new technologies, more sophisticated fraud attacks, and increasingly complex regulations, stakeholders are under a new layer of conflicting pressures.


The customer is king, right? This age-old business adage could apply to both the increasing consumer desire for fast and seamless transactions, and to the regulatory drive toward data protection, privacy, and security.
At first glance, these opposing forces seem to contradict. After all, how is it possible to provide consumers with a friction-free shopping experience without opening the door for fraudsters and data breaches?


Merchants are caught between trying to compete by meeting the needs and expectations of customers, while also working within the confines of regulations that mandate robust security and privacy. As the face of the payments chain, merchants also bear the brunt of customer dissatisfaction with friction in the process.

To top it all off, merchants have many other issues on their plates besides keeping up to date with changing compliance issues.

Payment Service Providers (PSPs)

Open banking offers more choice to customers and merchants by allowing customers to pay for goods directly to the merchant via their bank. The result is that the merchant effectively becomes a PSP, cutting out companies that have historically played that role.

PSPs must embrace technology and evolve their own roles to retain market share. They will thrive when they partner with merchants to prevent fraud, to provide a good customer experience, and to improve the overall security of the ecosystem. The PSP must differentiate on value vs. just processing fees.


Issuers are under immense pressure to innovate new products and keep up with the latest technology. In fact 37% of bank customers would switch banks if they were not offered the latest technology. Banks and issuers also must contend with their customers’ desire for more seamless transactions.

Open banking regulations provide a number of opportunities for banks to innovate new products and build customer relationships. However, it also opens doors for fraudsters.

Meeting the Challenges of the Evolving Payments Ecosystem

The pressures facing consumers, merchants, PSPs, and issuers are unlikely to decrease, but there are ways to help balance the needs of stakeholders.

Using machine learning and data to add more robust identity authentication during the pre-authorization stage of the transaction boosts security, decreases friction, and increases compliance for all players in the payments ecosystem.

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