From Apple Pay and Google Pay to Click to Pay and PayPal, a new wave of wallet competition is redefining how we pay, who we trust, and what merchants need to prioritize. On Behind the Checkout, Gr4vy’s podcast, John Lunn, Founder and CEO of Gr4vy, talks to Steve Klebe, a veteran of CyberSource, Google and Stripe, now a board member and advisor to several payments companies, about what’s really driving the wallet wars and what they mean for merchants. The conversation below is lightly edited for clarity.

Key insights from the episode

• Wallet adoption is driven by both consumer preference and checkout placement. Steve Klebe says payment providers now surface and position the most relevant wallets, while many consumers stick with what they already use.
• The wallet wars are about disintermediation, not consumer need. Steve argues consumers already have more than enough choice; the battle is over who owns the customer experience and the data it generates.
• Defaults are taking choice away from consumers. Stored cookies and platform wallets like Link and Shop Pay can push shoppers straight into one option, which John Lunn warns can hand control to a more expensive payment method.
• Click to Pay won’t end the wallet wars. Every player has economic or strategic reasons to keep its own wallet, and Steve believes online-only wallets will struggle without in-store support.
• Consumers care more about convenience than security. In the US, where consumers rarely bear fraud losses, security matters less to them than avoiding typing card numbers.
• Super apps risk getting in the way of payment. Steve wants consumers to be able to opt out of extra offers, and sees wallet loyalty as wishful thinking for most players.
• Agentic wallets are more feature than company. Steve expects strong but convenient identity and authentication to be essential if agents are to shop for consumers.
• The best payment experience is the one you don’t notice. Steve points to Uber, where payment simply disappeared into the ride.

Steve Klebe has decades of experience driving innovation at companies including CyberSource, Google and Stripe, and is now a board member and advisor to several payments companies. He’s known as the Kevin Bacon of payments, because everywhere you go, someone is connected to him.

John Lunn is Founder and CEO of Gr4vy, the cloud-native payment orchestration platform.

What’s driving digital wallet adoption?

John Lunn: Steve, welcome to the show. It’s great to have you here.

Steve Klebe: Thanks, John. It’s a pleasure to be here, as always. This is such an interesting topic. You can’t wake up any morning and open one of the various newsletters or blogs without seeing something; just this morning there was a Click to Pay announcement out of Europe, which I’m sure confuses a lot of people. It’s a thrill to get the chance to talk about it. I was actually looking back, and my first experience with wallets was in 1993, at a company called CyberCash, 32 years ago. We had a wallet, but it was a thick wallet. The consumer had to get a floppy disk, if any of you remember those, and the alternative was downloading it over a 36k baud modem. It took about an hour and a half to install the wallet. Needless to say, that didn’t go anywhere.

John Lunn: One of the earliest ones I remember was the Britney Spears fan club. They were actually one of the first groups to issue an NFC reader: you could tap your Britney Spears fan club card against your USB NFC reader, get into the fan club and buy Britney Spears merchandise.

Steve Klebe: Well, I’m glad to say I missed the whole NFC craze. Or the NFT craze.

John Lunn: Very good. Let’s kick off. What’s really driving the surge in digital wallet adoption? Are we seeing true consumer preference, or just better tech placement at checkout?

Steve Klebe: I’d say a bit of both. Tech companies, whether Gr4vy, Stripe or whoever, have put a fair amount of work into intelligently surfacing the relevant wallets, and literally positioning them so the most appealing ones show up at the top of the list. At the same time, some consumers are set in their ways and have preferences. I have an Android phone, I worked on Google Pay, and my default is Google Pay. I like it because I can use it both at the physical point of sale and online, almost universally. But there’s a lot of competition now for the eyeballs and the clicks, so it’s a moving target and will continue to be for some time.

John Lunn: Is this a UX battle, or is it about what you happen to have in your pocket? Is it just convenience, or are customers actually loyal? You’re loyal to Google, but you worked there and you have a Google phone. PayPal has been around a long time, and it’s still used a lot because people are used to it. What’s driving this?

Steve Klebe: There are probably no simple answers to any of these questions, because for any given segment of the population, the answer will vary. Some of it is sheer inertia. Like you said, PayPal was the poster child for alternative payments, as we used to call them, before the sexier term became digital wallets. They owned the market, especially on desktop, and continued to. When Google Pay, Apple Pay and, to a slightly lesser extent, Samsung Pay came along and the battle pivoted, PayPal lost a bit of its mojo, but of course it’s been working very hard to get some of it back. Then, just as that happens, you have Link from Stripe, Shop Pay from Shopify, and this new thing, Paze, which Early Warning has built on behalf of the large issuing banks. So consumers are being given a plethora of choices.

In the early days of Google Wallet and Google Pay, we’d do deals with merchants to get people to adopt. I don’t see many of those happening today. When Visa and Mastercard were heavy in the wallet game, and I guess they still are with Click to Pay, although I heard recently that it’s pretty much been wound down in the US and is mainly a European play at this point, they’d spend millions of dollars, I’ll say, bribing merchants to do the integration work and feature the wallet. This isn’t a wallet comment, but the recent news was that Visa was going to pay Apple something like a billion dollars just to be the brand for the next generation of the Apple Card.

All the narratives talk about why this is so good for the consumer, but realistically, the consumer already has more than enough choices. This is really a battle about disintermediation: who owns the customer experience, what data can be extracted from the sequence of events, and how that data can be used. This battle is going to rage on long after I stop caring about it. It’s a never-ending quest to be the brand, similar to the whole top-of-wallet discussion.

“The consumer has more than enough choices already. This is really a battle about disintermediation and who owns the customer experience.”

Steve Klebe, payments board member and advisor

Think of the energy that goes into being top of wallet. Apple Pay and Google Pay make it really easy for consumers to switch their top-of-wallet card with one flick of a finger, and the card brands hate that, because they spend so much energy getting people to pick their card in the hope that inertia takes over once they’ve picked it. There’s a lot of money at stake, and whenever there’s a lot of money at stake, there’s going to be endless creativity to try to alter behavior.

Are wallet defaults taking choice away from consumers and merchants?

John Lunn: What’s different this time? I was heavily involved in what I’d call Wallet Wars 1.0: V.me, whatever the Mastercard one was called, PayPal, and then Google and Apple coming in a bit later. That was very much about buying preference on the merchant side. How did you persuade a merchant to put you on their website? The answer was to give them some money; that’s really what it came down to. When merchants ask me today what they should do, I say, first, put your hand out and see who gives you the best money, and after that, consider what your customers actually want, which should probably come first.

What’s very different for me in this version is that customer choice has kind of been taken away. If you go to a Shopify-based website and you’ve used Shop Pay, it instantly kicks you into the Shopify world, and off you go. I think Stripe does something similar, and frankly so does Click to Pay. You can go out of your way to force yourself back to the other options, but we’re all lazy, and we’ll do whatever’s quickest and easiest. That raises an interesting question for merchants: how do you participate? If you’ve added all of them to your website, which one takes over, and how do you control that? Ultimately, you don’t want to give control away to what could be a more expensive payment method.

“You don’t want to be giving control away to what could be a more expensive payment.”

John Lunn, Founder and CEO, Gr4vy

Steve Klebe: I actually had that happen just yesterday. I got an electronic invoice by text from my dentist, clicked through, and they were using Stripe, which I knew, though I don’t think most people would have noticed. Because I’ve used Link before and the cookie was on my phone, it just defaulted to Link. I didn’t even bother looking to see if there was another option, though I’m sure there was. Not so long ago, the very first option was to start filling out a checkout form. That’s where Chrome, Safari and Edge Autofill tried to intervene, but those experiences were never great; they never quite filled out the whole form. Usually, just below that, there’d be an array of icons to choose from.

When I was at Google, one of the things I did was work with companies like Stripe and Adyen to make Google Pay a default, so merchants didn’t have to opt in. They could opt out, but they didn’t have to opt in, and if the consumer was on an Android phone, Google Pay was not only automatically present, it became the primary option. Now that Stripe is pushing Link, Google Pay is still there, but it has taken on lesser stature. That just shows how important this is to everyone: Visa, Mastercard, Discover, the big card issuers, you name it, and PayPal. PayPal is obviously trying to compete too; I can’t remember the brand name for that experience, but you probably know it. That’s their attempt to compete with how natural and embedded the Apple Pay and Google Pay experiences are.

The experience I had with Link yesterday was interesting. Some of this is biased by my work experience and having been at this for 32 years, but I still would have preferred to just use Google Pay, because I had to wait. It didn’t take more than a nanosecond, but I had to wait for an OTP to arrive on my phone and then type it in manually; I don’t know if OTP autofill was there. The other big thing happening, which I think you’re going to get to later, is the whole passkey experience, which potentially has implications here as well.

Will Click to Pay kill the other wallets?

John Lunn: Let’s move on to that, particularly in the context of Click to Pay. Many people in the US won’t really know what Click to Pay is, but outside the US it’s getting huge traction, first in Australia, which was its launch market, and now in Europe. It’s becoming a new way to pay outside North America. From past experience, the US eventually bends after many years of resistance.

For those in the audience who don’t know, Click to Pay is a standard developed by the main card companies, and the real aim is to get rid of guest checkout. When you reach a checkout page, it recognizes you, and instead of asking you to type in your card number and expiry date, it shows you the last four or six digits of your cards, whether Amex, Visa or Mastercard. Then a passkey already installed on your device completes the payment. There’s no typing, it runs on your existing acquiring fees and deals, and it processes the payment completely seamlessly. So it’s not really a wallet, because no money is stored anywhere, but it’s an improved checkout experience running on the native rails. Compared with other wallets sitting on the same rails, you’d presume it makes sense economically, because there’s no extra party involved. Doesn’t this eventually kill the other wallets?

Steve Klebe: I think there’s so much motivation, whether direct economic motivation or ego, that people are never going to give up trying to carve out a portion of this market for themselves. If you’re Stripe, you want a lot of people using Link, because that helps you convince merchants to choose Stripe as their PSP, and that’s far more important to them than a lot of other things on their priority list. And if you’re Visa or Mastercard and someone uses Click to Pay instead of Apple Pay, the 15 basis points that get shaved off and sent to Apple don’t go there. Same with Link. Those 15 basis points have added up to some real money for our friends at Apple. Side note: Google never got to participate in that arrangement, so it doesn’t get anything, though of course everyone would say Google is using the data, so it’s getting something out of it.

A key point for me, and I try to remove myself and think about the general population, is wallets that are strictly online and don’t also support in-store. With enough promotion, forced placement and positioning, they can all get some traction. But I think these new wallets would struggle big time, not only to get ubiquitous acceptance even online, but to operate efficiently in store. The hill you have to climb to work in an NFC environment is extremely high and expensive. So I’m a big fan of the omnichannel experience, and some of these other wallets will carve out niches here and there.

During my time at Stripe, I was amazed. I personally wasn’t a big Link fan, but I knew that, just like Shop Pay, by the sheer mass of merchants on their platforms, they’d get some adoption, because at the end of the day the average consumer just doesn’t care. The only thing they care about is not having to type in their credit card number. Most consumers might say they care about security, but they care much more about convenience than security.

“They might say they care about security, but they care much more about convenience than they care about security.”

Steve Klebe, payments board member and advisor

Are wallets still more secure, or is that just a shiny wrapper?

John Lunn: I was going to bring that up next. The big selling point in the early days of PayPal was that it was more secure: it kept your details safe and didn’t share anything with people outside the environment. Where your data is and how safe it is: is that still true, or is this just wrapping risk in a different, shiny wrapper?

Steve Klebe: We know from all the effort that goes into PCI compliance and the like that the industry really cares about preventing fraud, and in the age of AI, the crooks are getting smarter and smarter, so these things really matter. Some consumers care about it. Again, the phenomenon in the US is different from outside the US. Here, the consumer has virtually no direct exposure, other than maybe being inconvenienced if their card number is stolen; they don’t typically take any losses. Whereas in many places in Europe, if you allow your card to be compromised, you’ll actually eat the loss. So it matters a lot more there, and that’s one reason the predecessor to Click to Pay got more traction in places like Australia and Europe, because people have more responsibility than they do here. As long as there are these 100% security guarantees, the average consumer doesn’t think about it much.

Personally, in the early days of the internet, if I was shopping at Macy’s, I’d just type my number in. But if I searched Google for something obscure, say a Statue of Liberty figurine from some random website, I’d use PayPal, because, as a standard consumer and knowing what I knew about what was going on in the industry, I felt much more confident using PayPal. The rhetoric and narratives continue to harp on that issue, but how much of it has sunk in, and how many consumers actually care? If you’ve had your card stolen, which plenty of people have, even if you didn’t take a hard loss, you’ve been inconvenienced by having it reissued, especially in this age of subscriptions. It’s a royal pain to change your card on file across 15 merchants. So I think it matters. But everyone in the space proclaims their system is secure, and whether one is slightly more secure because it uses full biometric authentication and provisioning, like Apple Pay and Google Pay, versus another, I’m not sure how many consumers can truly distinguish the nuances between those approaches.

Do wallets need to become super apps?

John Lunn: There’s a cost behind these things, a cost per transaction, and at least a perception in some places that PayPal, for example, is more expensive than going direct. Sometimes that’s true, sometimes not. But it’s becoming quite hard to differentiate between wallets, so we’re seeing wallets add more and more functionality. If you’ve logged into your PayPal account recently, it feels more like a Yahoo advertising platform than a wallet, full of adverts, promotions, vouchers and coupons. And PayPal and others are starting to add stablecoins or crypto to the wallet, as some of the recent Stripe announcements show. Do wallets have to change? Do they have to become super apps? They look jealously at the super apps in China. Is that happening, or is that where you think it’s heading?

Steve Klebe: I think it’s kind of happening, with different approaches. The question is whether that will actually be the winning strategy. I was also thinking about BNPL and how it’s being woven into the wallet experience, whether at Google, Apple, Stripe and so on. I’m a big believer in simplicity. PayPal, for example, has been through multiple phases of this. About a decade ago, they created an entire restaurant system featuring restaurants with 5% off deals and so on. Honestly, all it did for me was get in the way. I’d already decided what I wanted to buy; I just wanted to check out and get back to my life, and they were putting all this other stuff in my way.

So I think there’s a catch-22 with the concept of a super app. You should be allowed to opt in to those experiences, or at least be given the opportunity to opt out. One of my favorite sayings is that opting in is the killer of all good ideas, and by the way, you can quote me on that any time you want. But I do think people should be given the option of opting out. I don’t know how many would consciously opt out, and some people might really like having all these choices, benefits and promotions coming at them. We live in a very big, complicated, diverse world, and I don’t think there’s one answer.

“One of my favorite sayings is opting in is the killer of all good ideas.”

Steve Klebe, payments board member and advisor

To your point about what seems to have worked very well in Asia, those wallets are really like social networks. The wallet functionality was just one of the reasons to have the app on your device, and in many cases it became secondary. And if you look at why Google has spent tens, maybe over the years hundreds, of millions of dollars investing in Google Pay in all its iterations: most people pay for things once, twice, three or five times a day. It’s part of your everyday life, and Google has a motivation to be part of your everyday life. As long as companies like Apple and Google have their various vested reasons to keep engaging, many other wallets will keep picking at whatever segment they think they can. But loyalty to wallets, I think, is wishful thinking for most players.

“Loyalty to wallets, I think, is wishful thinking for most players.”

Steve Klebe, payments board member and advisor

John Lunn: Presumably that’s Elon’s plan with X and turning it into a bank. He has the social network, so maybe that’s the plan.

Steve Klebe: That’s another example. I won’t get into the politics, but by the sheer mass of X’s traffic, some people won’t give it a second thought and might use whatever X comes up with for its wallet. Look at Venmo’s history. They’re trying to monetize it a bit now: if you want a transfer to be immediate, you have to pay, but if you’re willing to let it go second day, you don’t. They’re also driving some merchant acceptance. But for years and years, it was a completely free service, because they knew that’s what it would take to build an audience, and that there would eventually be value in that audience. And one of the feathers in PayPal’s cap is that Venmo is built into its Braintree PSP offering, or whatever it’s called now.

As you know, the payments industry, from both the consumer and the service provider perspective, is so fragmented and so competitive, but also so massive, that people can carve out little pieces. At Google, we would always have wanted more, but in some mobile-first apps we had around 30% share of wallet, while on desktop we struggled to get 1%, because PayPal still had the mojo on desktop. That wasn’t as important to us, because thinking about the future, we mostly cared about people living their lives on their mobile phones; desktop was less of a priority. That’s why, like I said earlier, you wake up every morning to someone announcing a new wallet, and I don’t think that’s going to change anytime soon.

The future of wallets: agentic, identity and invisibility

John Lunn: That brings us to the last question: the future of wallets. I’ve been spending a lot of time on agentic commerce over the last couple of weeks, and we have a separate podcast on that coming. One trend is that I’ve seen three companies recently create agentic wallets, which feels a bit like PayPal 1.0 for agentic commerce, around convenience and keeping a firewall between agents and the rest. So maybe that’s one space where wallets are making a comeback. What is the future of wallets? Is it biometrics, AI and agentic, loyalty, or something completely different?

Steve Klebe: Not to sound too boring, but I think it’s all of the above. As an angel investor, I wouldn’t invest in a company bringing an agentic wallet to market, because I think it’s more of a feature than a company. But of course people are going to try, so the battle will rage on. Everything you just mentioned, stronger authentication balanced with even more convenience, is key. I don’t believe the super app concept will take over the world. And the other thing that always comes to mind is the different segments of the population, how long it takes to get anything to critical mass, and how much it costs to get broad acceptance. I know personally, because I built the program at Google to get over 200 PSPs globally to accept Google Pay. Every single one was a negotiation and a technical integration, and not many companies can afford that kind of effort.

“I wouldn’t invest in a company that was bringing an agentic wallet to market, because I think it’s more of a feature than a company.”

Steve Klebe, payments board member and advisor

You mentioned biometrics, but the other thing happening is identity in general, and that ties into agentic. Without extremely secure yet convenient consumer authentication built seamlessly into these things, we could end up with a real disaster on our hands. And I know my demographic won’t be the target audience for letting a bot go shopping and complete the transaction. Just as there was around crypto 10 years ago, there’ll be a craze. Right now every company launching has AI in its name, and the next phase is everyone having the word agentic in their name, and we’ll see whether it sticks.

These are all tools that will ultimately have some impact, but if they’re effective, they’ll have to blend into the background. I think we were all in awe when Uber launched, compared with the taxi experience. One of the most profound reasons I started taking Ubers, aside from how easy it was to get a ride from wherever I was in the city, was the payment experience: it was simply embedded, compared with what you go through in a taxi. So the more we can make these things disappear, which is always the biggest challenge, the better. The best UIs are the ones you don’t notice. That’s somewhat challenging for startups trying to convince the world they’re bringing something truly different, because “you won’t even notice we’re there” isn’t usually in the pitch to raise money.

“The best UI are the ones you don’t notice.”

Steve Klebe, payments board member and advisor

John Lunn: I had firsthand experience of that the other day, when I was in Barcelona for MRC and the country lost all its power. Uber doesn’t work anymore, by the way, without internet. Anyway, Steve, I really appreciate your time. Your insights, as usual, are highly valuable. You’ll see Steve everywhere you go in payments, and you probably know someone who knows Steve. Thanks again, Steve.

Steve Klebe: Take care, John. Good seeing you, as always.

Explore more from Behind the Checkout

Watch more conversations with payments leaders in the Behind the Checkout series. To see how a payment orchestration platform lets merchants offer every major wallet while keeping control over which ones appear and in what order, talk to the Gr4vy team.

In the first episode of Behind the Checkout, Gr4vy’s podcast, John Lunn, Founder and CEO of Gr4vy, sits down with payments strategist Dwayne Gefferie to ask the questions the industry discusses privately but rarely puts in a press release. They cover merchant headaches, BNPL, tariffs and local payment schemes, quantum computing, AI and why payment orchestration is having its moment. The conversation below is lightly edited for clarity.

Key insights from the episode

• Merchants face three main payment headaches: regulatory divergence (PSD2, PSD3 and 3D Secure in Europe, Durbin 2.0 in the US), increasingly sophisticated fraud enabled by generative AI, and technical debt at legacy PSPs that cannot keep pace with merchant roadmaps.
• Payment method selection should follow the target customer. A market may offer 25 local payment methods, but only those used by the merchant’s target demographic matter at launch.
• BNPL is here to stay, at a modest scale. Dwayne Gefferie expects Buy Now, Pay Later to remain below about 5% of global payment volume in the short term, with installments increasingly built into cards and other payment methods.
• De-globalization favors local schemes. Currency controls and data localization are pushing merchants toward multi-acquirer, multi-local-method strategies and local entities, particularly where national schemes such as mada in Saudi Arabia and UPI in India dominate.
• Payments is not a commodity. A payment audit on $1 billion in annual volume typically finds at least 1% in conversion gains or cost reduction, worth $10 million, and Dwayne has found up to 5%.
• The threshold for payment orchestration has fallen. Merchants once needed billions in volume to justify orchestration; Dwayne now sees merchants processing tens of millions across several regions adopting it to rebundle their payment stacks.
• The industry needs an open standard for payment data. Dwayne’s one fix would be a universal format, including raw acquirer responses, that every scheme, issuer, wallet and PSP must honor.

Dwayne Gefferie is a payments strategist with more than two decades in payments and data.

John Lunn is Founder and CEO of Gr4vy, the cloud-native payment orchestration platform.

John Lunn: Welcome to Behind the Checkout, a Gr4vy podcast. I’m John Lunn, the CEO and co-founder of Gr4vy, and today we have our special guest, Dwayne Gefferie, payment strategist, known to many of you around the world. Welcome, Dwayne.

Dwayne Gefferie: Thank you very much.

John Lunn: This is one of our first ever podcasts at Gr4vy, and we’re really interested in talking about what’s going on. What we’re trying to do with this podcast is ask the questions that everybody’s asking but is too scared to stick on a corporate press release, and really talk about what the hell is going on. We’ll take things that come out of this, expand on them in later podcasts and bring in other experts. We’re both payment geeks. I love payments, I love talking about payments and I learn new things every day about payments. So on that note, let’s kick off and start with the big picture.

Is payments moving forward, or just adding complexity?

John Lunn: How would you describe the state of payments around the world? Are we moving forward, or are we just adding complexity right now?

Dwayne Gefferie: I think the current state of payments has never been more exciting. I’ve been in payments for well over two decades, but I’ve also studied the history, and payments has been a slow burn in getting people to accept changes to the way they pay. We went from a cash society, cards were introduced, and adoption grew over time. I think this is probably the first year that cash is being overtaken by cards and digital wallets across the world. We’re now 50, probably 60 years into this card-based society, but that also means a lot of the underlying infrastructure is so legacy.

What I’m seeing right now is a whole new wave of technology, everything from cloud-native technologies to different APIs to the embeddification of payments. All of those things are creating so many different opportunities. You see ISVs and SaaS companies wanting to get a piece of payments. You see legacy payments players going around the world asking, who do we need to acquire to get that little bit of technology that’s going to keep us in the race?

For me as a strategist, as somebody who’s enjoyed payments for so long, it’s the best time to be in payments right now, because there’s so much happening and so much opportunity. You can be an analytics person and you’re going to be great in payments. You can be a product person and you’re going to build some awesome products. You want to sell? This is the biggest market out there, because everybody’s going online and everybody is doing omnichannel. Not to mention the other things encroaching into the space, like crypto and AI.

“It’s the best time to be in payments right now, because there’s so much happening and so much opportunity.”

Dwayne Gefferie, payments strategist

John Lunn: I’m equally as excited. I saw a graph the other day showing the evolution of payments. We went from shells, which were not very inflation-proof, to coins, notes and checks, and there hadn’t really been any payment innovation for a long, long time after the invention of the check until the card came. Since then, it’s been growing exponentially. We have Moore’s law for computers; I think we need our own law, maybe a Gefferie law, for how quickly payments is evolving, because it seems to get faster every single year. And when things change, it creates a lot of uncertainty.

The payment headaches merchants are feeling right now

John Lunn: This is causing headaches, right? If you’re sitting here as a retailer, you’re thinking, what the hell am I supposed to do? What headaches are merchants feeling at the moment when it comes to payments? Is it fraud, tech debt, just keeping up with consumer preference?

Dwayne Gefferie: I think consumer preferences are not really a headache, much more of an opportunity. When you look at merchants and what they’re trying to do, they want to make sure every single customer who comes to their website or their door is able to pay as easily as possible. Everything from UX and UI technologies to conversion optimization, those things are all fine. Then comes that dreaded payment moment: what’s the authorization? That’s where the challenges are.

If you’re in Europe, we have PSD2, or pretty soon PSD3, where we’ve mandated things like 3DS, which create more friction within that process. People say, well, I don’t have that on me, or I don’t have my mobile phone, or I don’t have that code, so I’ll do it a little bit later. And merchants then need to implement that globally, where not everybody has adopted it. So I would say regulatory divergence is really that thing. In the US, you have things like Durbin 2.0 that are probably going to introduce a lot of that as well. You just get different friction, and all of that identity that comes in there.

The second big headache for a lot of merchants is the rising impact of fraud. We’ve always dealt with chargebacks and disputes, but in comes generative AI, and all of a sudden these attacks become much more sophisticated, much more orchestrated across different platforms and channels. A lot of the scammers and fraudsters are also much more patient, because if they find something they can exploit, they’re going to try to exploit it to the maximum. We see reports not just from Mastercard and Visa but across the world; I call it the $400 billion problem, where in the next decade you’re going to have massive losses from the fraud associated with payments. You can try to do anything on our side with AI and machine learning, but the fraudsters don’t have to play by the rules. The fraudsters don’t have a board that they need to approve it with before they can go on. So most of the time they’re ahead of the game.

“The fraudsters don’t have a board that they need to approve it with before they can go on. So most of the time they’re ahead of the game.”

Dwayne Gefferie, payments strategist

The last part, and we’ve seen it over the last decade or so, is technical debt at the PSPs, the legacy players. Innovation is actually happening outside the scope of payments. What merchants are saying is, hey, we want to move forward, but you’re not moving as fast as the industry is moving forward, or as we want to move forward. Some companies are really good at technical development and are doing extremely well, but the old legacy players are not adapting, so other players are coming in and filling those gaps. Those are some of the challenges merchants have to face and make decisions on.

How should merchants decide which payment methods to offer?

John Lunn: With payment methods popping up left, right and center, how the hell do you manage that as a merchant? Take Buy Now, Pay Later. We’ve all got our favorite BNPL provider, and there are quite a few of them. As a merchant, do you need to support all of them, or some of them? You go to a new country, pick Indonesia, and there are lots of different alternative payment types running there. Do you need to implement every single one, just in case? And how do you deal with your checkout? You’re going to end up looking like a casino with flashing lights everywhere. How do you make those decisions?

Dwayne Gefferie: Whenever I deal with enterprise merchants or scaling merchants going across the globe, I ask, what are you trying to achieve? Of course you want to go into a new market and capture as much market share as possible. But it’s really about identifying who you target. There could be 25 different payment methods, but if 24 of them are being used by a demographic that’s not even the one you’re targeting, you don’t have to worry about that.

“There could be 25 different payment methods, but if 24 of them are being used by a demographic that’s not even the one you’re targeting, you don’t have to worry about that.”

Dwayne Gefferie, payments strategist

So it’s understanding who you are as a business, what service you’re selling, and how people already behave with the product you’re selling. Take subscription-based businesses: cards are still a great way to process those transactions. But if you go into Europe or Asia, where it’s much more account-to-account, what is the best solution for that? And are you the type of merchant that can actually drive a consumer to make the decision you want them to make?

For fashion and retail, that’s why I think Buy Now, Pay Later did extremely well. There was a young, hungry demographic, fast fashion was all the rage, and people were trying things on without going to the shop. You were ordering five or ten pieces of clothing and could return them for free. That’s where BNPL was able to capitalize: let people order as much as possible, and when they return items, they only start paying for the things they hold on to. So it’s about understanding who you are as a company and who you’re targeting, playing into their preferences, getting as much of that audience to convert as possible, and then slowly but surely adding whatever needs to be added so you can get as close to 100% of the possibilities as you can.

John Lunn: I think that’s a really good point about which customers you’re trying to attract. I’m doing a talk at MRC in Barcelona with a company that deals with luxury retail, and they don’t want to add Buy Now, Pay Later, because their customers would find it offensive that you’re suggesting they can’t pay for it now. That’s a very different type of audience. To continue on BNPL: most major companies are trying to stop the order-ten-items-and-return-nine habit, because it’s killing them. So what does that mean for BNPL? If that stops, do people stop using it, or is it just too much of a habit now?

Dwayne Gefferie: Even though I love Buy Now, Pay Later, and I think it’s a great evolution of what we have, consumer behavior basically getting its needs met, overall I don’t think its share of global volume in the short term is going to be more than 5%. Digital wallets and cards still dominate, and digital wallets supported by cards are still among the number one payment methods in the world. What we need to get our heads around is why people are using BNPL. Like I mentioned with fashion, it was much more of a let me try all of these things out, send some back, and then pay, either all at once or in installments.

Buy Now, Pay Later is definitely here to stay, but I think it’s going to be placed within different payment methods. In the UK, for instance, we already have cards where you can make a purchase and later decide to flex pay in installments. It’s like Brazilian installments, which have been there for decades, and now it’s catching on. Merchants will continue to adapt, and BNPL players themselves are already experimenting. Klarna has its own card, basically saying if a merchant doesn’t offer Klarna, you can still pay there and we’ll deal with everything on our side. Because that’s basically what it is: a flexible way for people to pay, wrapped in a nice payment method. Now they’re adapting and saying, we’re not going to be everywhere, but how can we make it more accessible to everybody else?

What tariffs and de-globalization mean for payments

John Lunn: I’m in the US, and every morning is a surprise when I wake up and watch the news. So we’ve got to talk about tariffs and de-globalization. A lot of the evolution in payments has been around globalization: helping nations that aren’t necessarily card-based come online, and bringing that to US retailers. But we’re going the other way right now. We’re becoming less globalized, and these tariffs are kicking in. The non-availability of cheap Chinese goods in the US is going to be interesting. But what is this going to do to payments? Is it a good thing or a bad thing?

Dwayne Gefferie: I think the more we get what I call these three blocs, and the more they harden, the more payment flows will follow within them. First, I think there are going to be a lot more hard currency controls. You see it in countries like Brazil and Nigeria, which are really adamant about their own currency. That suddenly needs to be something merchants address. You want to be in Nigeria? What are the methods you need to use? And what’s your strategy as the finance department, or as a payments provider in the middle? How do you get those currencies exchanged and settled? That might be an opening for stablecoins and other things to come in, but that’s probably another discussion.

I also think data localization clauses are going to start coming in. Look at India and Saudi Arabia, where national schemes are pushing Visa and Mastercard a little more into the background. I worked on Saudi Arabia payments back in 2018 with mada. We were working with Netflix, which really wanted to be in the Middle East, but everybody had extremely low authorization rates because they were submitting USD transactions on mada cards and getting hard declines. I think we’re going to see more of that, where local schemes say: if you want to do business in our country, first we need you to have an entity set up here, and you’re also going to have to work in our currency. It becomes much more about where you’re from, what your entity is, and whether you’re submitting in the currency they want, and then all of a sudden you see much better authorization rates.

For merchants, that means we’ll see more and more multi-acquiring strategies, because with all these rule changes they need to be extremely flexible. You will need people who are really going to dive deep into the data, because things will not be spelled out. You’ll have to find the issues and monitor them as they happen, so that whenever a new tariff comes in or a new data residency mandate lands, you can find solutions. That’s where orchestration and other things can play a big part. You’re going to see more and more merchants have to apply a multi-acquirer, multi-local-method type of strategy, and even have multiple entities, to make sure they maximize that.

“You’re going to see more and more merchants have to apply a multi-acquirer, multi-local-method type of strategy, and even have multiple entities.”

Dwayne Gefferie, payments strategist

John Lunn: People like to kick the big card companies; it’s a favorite hobby in payments. But the truth is, they’ve done a great job of gluing the world together. You can take your card and use it pretty much anywhere in the world. One of my friends traveled to India recently, got in a taxi, tried to pay, and realized the only accepted payment methods were local ones, available only to people based in India. He ended up having to borrow money to pay his taxi fare. It raises the question: you’ve got all these local payment methods, whether it’s Pix in Brazil or UPI in India, but they’re not interconnected in any way at all. As a consumer that’s difficult if you’re a traveler, but as a retailer it’s even more complicated, because you might have money going into one place that needs to go somewhere else to pay suppliers. I think there’s lots of opportunity in gluing this whole thing together, from both a settlement and an acceptance point of view.

Is quantum computing a threat to payment encryption?

John Lunn: One of the things that keeps me awake at night is quantum, actually. Weirdly, I studied quantum as part of my marine biology degree; I won’t explain why. And it seems to be happening faster than we thought it would. With all new technology, everybody goes straight to the doomsday scenario, but one of the real threats of quantum is encryption. It laughs at encryption openly. I think you could crack an RSA algorithm in about six seconds or something. All payments are basically based on these algorithms; that’s how security works. So any thoughts on whether quantum is going to eat our lunch, and what we’re going to do about it?

Dwayne Gefferie: It’s a challenging topic, absolutely, and I’m looking at it as well. If we take one step back, we’ve seen so many developments lately on encryption. Vaulting is something I’m diving really deep into, especially Network Tokens and using them with orchestration. If quantum computing comes in and is able to take network tokens, or whatever it is, and rig it, that’s going to be the challenge.

The counter aspect is that, for the first time in probably a good 20, maybe 30 years, payments companies will be forced to really look at their cybersecurity strategy. What are you actually doing? Every single year we still see so many card leaks. Of course, vaulting and network tokens are great developments, but imagine quantum attacks being able to break into your networks overnight, take all of that data and run with it, extracting as much money as possible. I have to dive a little deeper into quantum and how it will really affect us as an industry.

“For the first time in probably a good 20, maybe 30 years, payments companies will be forced to really look at their cybersecurity strategy.”

Dwayne Gefferie, payments strategist

But what I like about innovation and development is that for every reaction, there’s a counter reaction we have to come up with. When chargebacks came on the scene, we had to figure out new ways of dealing with them, and that created new companies. There was a time when chargebacks were just a nuisance and you couldn’t do anything about them. Nowadays you have alerts, scoring systems and fraud engines doing a phenomenal job, and that created a sub-niche within the industry that a lot of us data geeks went into. So quantum is one of those things we have to study a lot more, to understand how it will affect us. No doubt it will affect everything, and money and finance is probably one of the first things any scammer or fraudster who gets their hands on this technology will try. The reaction then becomes: what are we doing to prepare ourselves? How are we making payments more secure, and what cybersecurity strategies do we have in place to mitigate as much of that risk as possible?

John Lunn: I think it’s less likely to be an individual, or even a group; it’s more likely to be a state, given the price of a quantum machine.

The biggest misconception in payments: that it’s a commodity

John Lunn: Misconceptions in payments: what is the one misconception that winds you up, annoys you, and you wish would go away?

Dwayne Gefferie: I probably have a few, but the one I’d pick is a spiral we’ve gone down, and I’ve said it myself: the commoditization of payments, the idea that everything is the same thing. The biggest misconception is that payments is a commodity, just something you do, and that’s it.

Whenever I talk to companies and merchants and try to make them understand why I’m so excited about payments, it’s because I believe it’s really a way for companies to control a lot more of their margins, and they can use it as a growth engine if they truly optimize it. Yes, you can accept payments, but if you really understand consumer behavior, it’s not just the payment that matters. From the moment shoppers see the logo of Mastercard, Visa, Amex, PayPal or their favorite BNPL provider, that can already be a trigger for them. Payments is where we end up, but oftentimes people are already subconsciously deciding: I want to buy something, I might not be able to afford it right now, but wait a second, they have that BNPL method. Or wait, I do have my credit card around here somewhere. It’s all about brand recognition. If merchants use it well, they can grow their business a lot quicker.

They can also control a lot more of their margins. On a global scale, understanding that payments is not the same everywhere lets you control your margins across the world. From the US, what’s your strategy for Europe, for Asia, for Latin America? That’s really the misconception a lot of people, especially on the merchant side, need to get out of their heads. It’s not all the same, it can add a lot of benefit, and it helps if you understand what you’re doing with it.

John Lunn: In my years of experience, I’ve often been on projects where payments is the last thing people think about. They build the amazing e-commerce website, get to the end and go, okay, we need to do payments now, and then find it doesn’t work like that. And then people say, I’ve implemented payments, I’m done. That’s another misconception that drives me up the wall. You plugged in a PSP seven years ago and everything’s great, and I’m like, no, you are leaving money on the table. It’s not turn it on and then leave it.

“You plugged in a PSP seven years ago and everything’s great, and I’m like, no, you are leaving money on the table.”

John Lunn, Founder and CEO of Gr4vy

Dwayne Gefferie: No. I don’t do it anymore, but I’ve run a couple of consultancy companies, and when we were figuring out how to make revenue, payments audits were always the easiest thing for me. I’d find a company doing a billion dollars that was focused on building a product and going to market, and had set and forgotten its payments provider. I’d knock on the door and ask, what are you using right now? We integrated company X. When did you do it? About seven years ago. And you’ve never looked at it? I’d say, if I do an audit on a billion dollars, I’m pretty sure I can find you optimizations, either in conversion or in reduction of costs, of at least 1%. On a billion dollars, I can either save you or make you $10 million, just like that. Give me all the data and I’ll do it, only if I can prove it.

John Lunn: At least. Honestly, we see eye to eye on that.

Dwayne Gefferie: I’ve done two, three, four, 5% in either revenue uplift or cost reduction. Companies keep doing it, especially now with all these AI companies that come in, plug in whoever has three lines of code and just go at it, which is great and fantastic that you can do. But all of a sudden you’re at 800 million users and you tend to pay a lot for it, instead of taking two steps back and saying, we can actually use this for a lot more.

John Lunn: It’s a very quick way to get ahead at work, especially in this environment. You actually start giving money back to your business rather than asking for money. It’s a great way to get the promotion you need.

Where AI will change payments beyond fraud

John Lunn: Let’s talk about AI a little bit. Every conference you go to now, at least half the talk tracks are about AI. When it comes to payments, we’ve been using machine learning, however you want to classify that, for years. Lots of people are misclassifying AI at the moment. I’ve been there since the first fraud models built at CyberSource back in ’97, ’98. Machine learning has been well used in fraud, just not branded as AI. So where else is AI going to affect payments?

Dwayne Gefferie: I always say there are three main ways AI can impact a business. First, everybody needs to take their preconceived notions and leave them at the door. For reference, I’ve worked within payments and with data for the entirety of my career. I also went back to university and got a bachelor’s and a master’s degree in information sciences, before we called it data science, and restarted my career as a data scientist over a decade ago, at [Adyen, to confirm] as their first data scientist. I’ve had every data role since: head of data, VP of data science and analytics, and I ran a data science and analytics consultancy. Through that whole period, I had to beg everybody to just put everything in a data warehouse so we could build amazing things with it.

If you want to use AI in a payments company or any other company, the first level is productivity. In the news over the last couple of weeks, I think it was Shopify saying, basically, if you’re not using AI, what are you doing at this company? It can do great wonders for productivity. If you’re writing an email, do you really need to spend an hour on a single email? Or can you brain-dump your thoughts into ChatGPT or something similar, send 20 or 30 emails in that hour, and spend your time thinking at a higher level instead of booking the next call or responding to a basic email?

The second level, which a lot of companies in payments are already using, is code. We write a lot of code: front end, back end, services. Generative AI capabilities are getting better and better. I’m not saying go all in with something like Cursor, which I love by the way, but start using Copilot, start looking at Codex. If you have multiple developers heads-down coding their next feature, how are you improving those techniques? Can you train the AI on the way you write code internally? Can you use it to do better audits? Doing that can make a 1x developer, maybe not a 10x developer, but definitely a 5x developer, so they can crank out more code and you can release a lot more features. The best payments companies are not the ones doing one or two features a year, but the ones releasing something every single week or every sprint and testing new things.

“The best payments companies are not the ones doing one or two features a year, but the ones releasing something every single week or every sprint.”

Dwayne Gefferie, payments strategist

The third level is where you want to become an AI-driven company. It’s not just about productivity or writing code, but asking how machine learning and generative AI can make the whole company better. Can we take our customer service and, instead of shooting tickets back and forth, create a product that takes a lot of the weight off customer service, so we can hire people to focus on the difficult problems? Once you can say that around customer service, sales, marketing, product and everything you do, you’re truly AI-driven and not shying away from it. That’s where I see a lot of payments companies making huge steps.

To leave you with a statistic: I think it was Deloitte that had a report saying that out of all financial companies, including payments companies, probably 80% of C-level executives were talking about AI, but only 2% or 3% were actually implementing it, even basic things like having ChatGPT available. There are a lot of preconceived notions about it, but we need to move past them and find ways to use it. You don’t have to use a proprietary model. You can use an open-source one internally and build from there. That’s where we need to get to.

John Lunn: Agreed. I think we’re going to do a feature on agentic AI in one of these podcasts, and how that’s going to change everything, so I’m looking forward to that.

Why payment orchestration is having its moment

John Lunn: We have to talk about orchestration, because that’s what we do here at Gr4vy. There have been orchestration companies around for a while, and there’s a new generation, which I’m proud to say we’re part of, but it’s certainly having a moment. Every RFP and RFI going out now talks about orchestration. What changed?

Dwayne Gefferie: I think orchestration is the antidote to fragmentation. It abstracts everything: your acquiring, your APMs, your fraud tools, all of those components. I like to talk about the unbundling of financial services and the unbundling of payments. What really changed is that the bigger companies, the Googles and Facebooks of the world, were already taking all those components and building them out themselves probably over a decade ago. They were the original orchestrators, dedicated to optimizing all of that. Then we had a whole wave of orchestrators being built, but merchants weren’t there yet.

“I think orchestration is the antidote to fragmentation.”

Dwayne Gefferie, payments strategist

We’ve now reached the point where merchants understand the power of payments, and they understand they’re now in charge of rebundling the payment stack into the ideal setup that works specifically for them. That’s where orchestration really fits in. It’s a company saying, I’m taking control. I don’t need to own everything, but I want to have the control and I want to put the components together. I want to put the Lego blocks together to create my ideal payment stack, one that optimizes and works for me.

We’re also seeing the threshold being lowered. The volume you needed to even think about orchestration used to be high, because the added cost was so significant. Now there are many players in the market with their own unique perspectives. I remember it used to be in the billions, then in the hundreds of millions, and now I’ve even seen companies at tens of millions thinking, we need to orchestrate because we’re global. Maybe we’re doing $10 million or $20 million, but we’re operating from Australia all the way to the US: three or four million in Australia, a couple of million in Europe, a couple of million in the US, and there’s not necessarily one party that can give me everything I’m looking for across the board. A lot of them are trying, but sometimes you just need an orchestrator so you can have it the way you want, because you have a slightly different model, or a provider isn’t willing to take on your merchant category code and work with you on that.

John Lunn: From my perspective, the uncertainty in the market, whether it’s tariffs or recession, means merchants need to be able to move quickly right now. If something changes and you’ve got an 18-year-old legacy platform sitting there, you could be dead by the time you fix it. That’s what happened in the last recession: some companies realized they couldn’t move quickly enough, and they just weren’t going to make it. So having a flexible platform right now that allows you to move quickly with changes is almost a necessity, and actually you’re at risk if you don’t. I don’t know what’s going to happen tomorrow, frankly. I wake up, watch the news, and think, here we go. If you can’t move, can’t change and can’t be flexible, you’re going to end up in trouble.

One fix for payments: a universal open standard for payment data

John Lunn: Last one. If you had a magic wand and could fix anything in payments around the world, what would you fix?

Dwayne Gefferie: That’s a challenge. I’m going to bring it back to my data roots. I would create a universal open standard that every scheme, issuer, wallet and PSP must honor. We have all these proprietary formats, and at the end of the day they only benefit the companies that own them. But as we work with orchestration and data sharing, where we want to benchmark and do all those other things, we need to finally let merchants treat all of their payment data as an asset and not as a liability, shackled to whoever issued the original card or processed the transaction. I want to see openness and a standard, so that if I’m working with five different players because I choose to, I can just put everything in one place, run a dashboard, run a benchmark analysis, and get to the results or make the decisions I want to make.

That would be an ideal dream. I’ve had this conversation over the last couple of weeks, with people asking me why the standards differ so much. I think it’s because everybody has their own interpretation. It would be great even if it just started with the card schemes, so that companies aren’t turning a decline reason into some magic mumbo jumbo. I love the raw acquirer response. I need the log data so I can reconstruct what happened, and I wish all the providers would just give me that. Nowadays, with AI and everything we have, we could probably come up with a format that becomes an open standard for all of us, so we can all improve, all share and all become better.

Because at the end of the day, only when a transaction succeeds do we all succeed. The issuer succeeds, the acquirer succeeds, the merchant succeeds, the customer succeeds, the orchestrator succeeds. Everybody wins when that transaction goes through. But even when it doesn’t go through, everybody wins, because the last thing you want is a transaction going through that shouldn’t have. So if we have those standards and can use them, I think that would be a great thing. That’s what I would use my magic wand for.

“Only when a transaction succeeds do we all succeed.”

Dwayne Gefferie, payments strategist

John Lunn: Hopefully a bit of Gr4vy fairy dust can help with that one. I really appreciate your time today, Dwayne, and we’d love to have you back once we’ve done a few of these, to give your opinion on what we’ve been talking about with other people. Payments is constantly moving, and I’m sure people will bump into you at payment conferences around the world. Thank you.

Dwayne Gefferie: Thank you, John. It was a great pleasure.

Explore more from Behind the Checkout

Watch more conversations with payments leaders in the Behind the Checkout series. To see how a payment orchestration platform gives merchants control over providers, routing and payment data through a single integration, talk to the Gr4vy team.