A reused password harvested in an unrelated breach enables a criminal to access a stored wallet and drain loyalty points.

Call them the twin engines of commerce’s breaking point: Authentication failure and credential-based fraud.

Conversion Pressure Meets Fraud Fatigue

PYMNTS reporting has noted that credential stuffing and phishing continue to exploit password reuse, creating operational and reputational damage for merchants and financial institutions.

High-income shoppers, who often maintain multiple digital accounts across retail, travel and financial services platforms, are especially sensitive to login friction. They are also attractive fraud targets because of higher balances and transaction values. The combination of elevated cart values and persistent credential-based attacks sharpens the business case for stronger, lower-friction authentication.

This is the context in which attention around passkeys is accelerating.

Signals From Platforms

Passkeys are passwordless login credentials based on public-key cryptography that are stored on a user’s device and unlocked locally with biometrics or a PIN, eliminating shared passwords and reducing exposure to phishing and credential theft.

PayPal and Stripe grabbed their fair share of attention this week amid rumored dealmaking, but no matter what the outcome of any corporate action, their own efforts in moving beyond the password has been notable. PayPal has expanded support for passkey-based login for consumer accounts in the United States and additional markets, positioning the feature as a way to reduce phishing risk while simplifying sign-in.

Stripe has published developer guidance encouraging merchants to implement passkeys through WebAuthn standards to improve login resilience and speed. Both companies sit at critical junctions of online checkout and wallet activity. When large platforms integrate a security model into widely used login flows, adoption may follow.

PYMNTS coverage of wallet competition has emphasized that conversion rates and security posture increasingly are valued by consumers, as evidenced by our continuing “How the World Does Digital” series.

If passkeys demonstrably reduce login friction and phishing exposure within major wallet ecosystems, merchants may view implementation as part of their near-term roadmaps.

Where Adoption Stands

Passkeys are built on standards developed by FIDO Alliance, which has promoted phishing-resistant authentication based on public-key cryptography. Major operating systems and browsers now support passkeys, enabling credentials to be stored on a device and unlocked locally through biometrics or a device PIN.

Financial institutions are testing passwordless authentication in limited deployments, often layering it alongside existing multifactor controls rather than replacing them outright.

Adoption remains uneven. Some merchants have integrated passkeys into account login flows. Others continue to rely on passwords and SMS one-time passcodes, citing integration costs, customer education hurdles and account recovery complexity.

From a regulatory standpoint, passkeys present both opportunity and scrutiny. Because biometric data typically remains on the user’s device rather than being stored centrally, the model may reduce exposure under state biometric privacy laws. However, institutions must still satisfy supervisory expectations around strong authentication and fraud mitigation.

Pain Points Addressed, Challenges Ahead

The commercial appeal is concrete. Passkeys eliminate password reuse, diminish phishing effectiveness and remove reliance on SMS codes that are vulnerable to SIM-swap fraud. They can shorten login time and reduce password reset support costs.

Enrollment requires consumer awareness and trust. Cross-device synchronization is improving but depends on platform ecosystems. Account recovery processes must be designed carefully to prevent lockouts without reintroducing weak fallback mechanisms.

In the meantime, merchants face measurable abandonment tied to authentication. Financial institutions face ongoing credential-based fraud. The trajectory of adoption will hinge on evidence as passkeys produce lower account takeover rates and improved conversion metrics within major wallet and checkout environments.

Retailers are under constant pressure to protect margins while still investing in growth. From rising costs and economic uncertainty to shifting consumer preferences, there’s very little room for wasted spend.

Payment processing may not be flashy, but it’s a lever worth pulling. Payment processing fees can add up, particularly if you handle a high volume of credit card transactions.

One way to lower payment processing fees is to explore non-traditional pricing models, such as membership-based pricing. Ideal for high-volume retailers, growing omnichannel businesses and brands with thin margins, it offers a more predictable way to manage costs.

Let’s look into it.

What is membership-based pricing for payment processing?

Membership-based pricing replaces percentage markups with a flat monthly fee. Instead of paying a processor a cut of every sale, retailers pay the true interchange and network costs, plus a predictable membership fee.

Here’s how it compares to other pricing modes.

Pricing model	How it works	Impact on retailers
Tiered pricing	Transactions are grouped into broad rate tiers like qualified, mid-qualified, and non-qualified. The processor sets the rates.	Hard to predict costs and easy to overpay. Retailers often don’t know which transactions fall into which tier, leading to higher effective rates.
Flat-rate pricing	A single percentage and per-transaction fee applies to all payments, regardless of card type or risk.	Simple to understand but expensive at scale. Retailers pay the same rate for low-cost and high-cost cards, which eats into margins as volume grows.
Interchange-plus pricing	Retailers pay the actual interchange fees plus a processor markup on each transaction.	More transparent than tiered pricing, but costs still rise as sales increase. The processor earns more as the retailer grows.
Membership-based pricing	Retailers pay a fixed membership fee and cover interchange and network fees without added per-transaction markups.	High-volume retailers can significantly reduce processing costs and gain more predictable monthly expenses.

How membership-style payment processing can save retailers money

Lower effective costs as volume grows

With traditional payment pricing, fees scale directly with revenue. More sales mean more fees, even if nothing about your operation changes. Membership-style pricing, which is offered at Stax, works differently. Retailers pay a flat monthly or annual fee and then process payments at wholesale interchange rates. As transaction volume increases, the effective cost per transaction goes down. For high-volume retailers, that shift alone can unlock meaningful savings.

Fewer hidden markups baked into every transaction

Many pricing models quietly include processor markups in every swipe, tap or online checkout. These markups are often hard to spot and even harder to calculate. When you partner with a provider that uses the membership pricing model, you pay true interchange without an extra percentage added on top. The result is clearer billing and fewer surprises when reviewing statements.

Predictable monthly expenses

Payment fees are one of the most unpredictable line items for retailers. A busy sales month can be great for revenue but painful when fees spike. Membership-style pricing introduces consistency. While interchange still varies slightly by card type, the pricing structure itself stays stable. This makes it easier to forecast costs and budget accurately.

Savings that reward growth instead of penalizing it

Traditional pricing models unintentionally punish success. As sales climb, fees climb right along with them. A membership-based payment pricing model flips that dynamic. The more volume a retailer processes, the more value they get from the flat fee. This makes the model especially attractive for retailers focused on scaling, expanding locations or growing ecommerce and omnichannel sales.

Better alignment with modern retail operations

Retail today is rarely single-channel. Between in-store, online, mobile and subscription-style purchases, payment volume adds up fast. As such, you should opt for a payment solution that can handle that complexity without multiplying costs across channels. Retailers can process more transactions without worrying that each new sales stream will erode margins through higher processing fees.

Clearer insight into where money is going

When pricing is simpler, reporting becomes more useful. Membership-style pricing makes it easier to separate interchange costs from processor fees, helping retailers understand exactly what they’re paying and why. That visibility supports better financial decisions, whether you’re negotiating contracts, comparing providers or evaluating new sales channels.

Types of merchants that benefit most from membership-style payment processing (and who it’s less ideal for)

Membership-style payment processing isn’t a one-size-fits-all solution. Merchants who see the biggest upside include:

• High-volume retailers that process a lot of credit card transactions regularly
• Omnichannel and multi-location businesses that need to keep costs predictable and consistent across sales channels
• Retailers with thin margins

On the flip side, the following types of merchants may not benefit as much from membership-based payment processing:

• Low-volume or early-stage retailers that process a small number of transactions per month
• Businesses with inconsistent processing volume
• Cash-heavy operations

Final words

Membership-style payment processing won’t solve every retail challenge, but it can make a real dent in one of the most persistent costs. For retailers processing steady volume, the model offers a fairer way to pay for payments—one that rewards growth instead of taxing it. The key is understanding your transaction profile and choosing a pricing structure that actually works in your favor.

If tighter purse strings have you worried about holiday revenue, take heart. This year’s shopping season is shaping up to be big. According to a 2025 Intuit QuickBooks survey, consumers plan to spend 25% more this holiday season – an estimated $263 billion. That’s welcome news for local retailers and small businesses, with 93% saying holiday sales are vital to their success. 

Whether you’re a bakery, a boutique or a local service business, now’s the time to fine-tune your digital sales strategy for two crucial shopping days: Black Friday and Small Business Saturday. 

Now, more than ever, small businesses are tapping into tools like social media, e-commerce, mobile checkout, and even AI to snag more holiday sales. 

What holiday shoppers want on Black Friday vs. Small Business Saturday 

Same weekend, different vibes. Black Friday is a consumer-oriented race for the best deals, while Small Business Saturday is a celebration of community. Get to know the nuances of both events to fine-tune your digital strategy for success. 

Black Friday is about the best deals 

Black Friday is dominated by online and mobile shopping, yet many consumers still plan to shop in-store. Across channels, transactions are driven by urgency and fear of missing out (FOMO). People shop to take advantage of special discounts (80%) and to buy items they’ve been wanting at a lower price (67%). 

The bottom line: Black Friday shoppers are in deal-hunting mode. They expect fast checkout, clear discounts, and a seamless experience. Make sure your website, ads and checkout process can keep up. 

Small Business Saturday is about community connection 

Small Business Saturday is on the rise. This year, 41% of total consumer spending is expected to go toward shopping small, a 44% increase year-over-year. 

Unlike Black Friday’s rush for deals, Small Business Saturday is about community – turning holiday sales into lasting relationships. Millennials and Gen Z are especially eager to participate and support local brands aligned with their values. 

The bottom line: For Small Business Saturday shoppers, festive feelings come from connection and not necessarily deep discounts. Authentic stories will likely make a greater impact than deals, so be sure to highlight your local roots and make every interaction feel personal. 

Your digital strategy for the holiday rush 

The holidays can feel like one big rush to the finish line. Yet each shopping event calls for its own thoughtful approach. Use the checklist below to refine your digital strategy, and get ready to attract new customers, engage loyal ones, and make the most of the season’s momentum. 

Black Friday: Focus on timely offers and effortless checkout 

On Black Friday, it’s all about catching people in the perfect moment – when they’re ready to buy or looking for that hot deal. Shoppers make decisions fast, so get your best offers ready. 

• Set up texts: Send quick texts for “one-day-only” deals or flash sales. With 84% of U.S. consumers signed up for SMS, it’s an easy way to stand out amid national promotions. 

• Use AI chat assistants: Nearly three-quarters of small businesses will use AI this holiday season – a 147% year-over-year jump, according to Adobe Analytics. Try using chat assistants to answer quick questions about availability, pickup or sizing. 

Small Business Saturday: Focus on relationships and loyalty 

At its heart, Small Business Saturday is about buying local. Yet shoppers still want an experience that feels special. To capture attention, showcase what makes your store stand out. Make visiting feel like an event in itself – a chance to browse, discover and soak in the local holiday spirit. 

• Connect on social: Use social media to highlight your staff, loyal customers or local partnerships. Short, authentic videos or carousel posts can build trust and attract visitors. 

• Run feel-good email campaigns: Send warm emails to thank your community, spotlight local causes, or feature special stories. 

Is your business internet ready for the holiday surge? 

All those digital touchpoints – emails, mobile checkouts, livestreams and social posts – rely on one thing working flawlessly in the background: reliable business-ready internet. But not every internet connection is created equal, and some can let you down when you need it most. 

Cable internet could trip up your holiday sales 

Many small businesses still run on cable internet, even though it can struggle when demand spikes. Heavier web traffic, online orders and livestreaming can slow things down just when customers expect instant updates and seamless checkouts. 

Fiber internet solves those pain points with faster speeds, steadier bandwidth, and equal upload and download capacity. That means your digital strategies stay smooth, even during the busiest shopping days of the year. 

Good news – it’s not too late to upgrade 

Kinetic offers fast fiber installation in eligible areas, helping local retailers, restaurants, boutiques and small businesses: 

• Offer customers free, secure Wi-Fi – important since a recent Kinetic study found that consumers highly value privacy, but only 17% feel safe using public or business Wi-Fi networks. 

Don’t wait – get Kinetic fiber installed before the holiday rush begins.

Or those clever enough to master the Graffiti script that made it work. I never really did. HotSync made a handful of apps that were as real-time as real time got in 1996.

For a few years, the Palm Pilot was indispensable. The initial release sold one million copies in 18 months.  Hip and happening executives carried it everywhere. Developers built more and apps. Amazon was one of its early commerce touchpoints. It defined a moment.

That, at the time, seemed to define the future.

Then along came Blackberry with a real keyboard that made it easier to use and more attractive to more users, though not so much to developers. Then the iPhone after that ditched keyboards for a touchscreen, an App Store and lots of apps.  In 2009 Uber wrote its app for iOS, a milestone that got most hardcore Blackberry users (like me) to finally make the switch. Blackberry slowly bit the dust.

The Palm Pilot, in just 11 short years, became a historical artifact. Or maybe, more appropriately, the bridge to a different way of accessing real-time content, finding and transacting with businesses, and communicating in new ways. Not the be-all-and-end-all, but an important stop along the way.

It’s an outcome that even Palm Pilot’s developer knew was likely. The smartphone as we know today, he remarked, was his real vision and intention.

As shopping moves from online and apps to agents and agentic commerce, digital wallets could become the Palm Pilot of payments.

Not the endpoint, but an important bridge to connect commerce to secure credentials in an always-on, always-connected world.

A waypoint along the journey to a new era that will redefine the shopping and payment experience for consumers and businesses.

As AI and agents deliver a sea change in how consumers search for and find what they want to buy. And most importantly, how they want to pay.

The Digital Wallet’s Identity Crisis

Digital wallets earned their stripes by solving for fear and friction as eCommerce scaled. Early on, consumers were reluctant to type card numbers into unfamiliar sites. Digital wallets also accelerated payment to sellers. PayPal’s most notable achievement when it was launched in 1998 was eliminating the need for eBay buyers and sellers to wait, quite literally, for the check to clear before a transaction could settle and goods would ship.

Wallets became the “buy button” that sat between the consumer, her credentials and the merchant. They made checkout feel safer. PayPal more or less cornered the market for the better half of two-plus decades.

As the web matured, the wallet value proposition shifted from safety to speed as wallet providers sought merchant acceptance. PYMNTS Intelligence measured checkout conversion for 5 years, from 2016 to 2020. We learned that buy buttons improved conversion by reducing tens of  keystrokes on the way to checkout and payment to a few, even one. More consumers who wanted to pay that way caused more merchants to want to add them to their checkout pages.

 

Wallet issuers used higher conversion as their raison d’être. Soon, checkout pages became Nascar-ized with buy buttons galore.

Yet, even today, some 27 years after the launch of PayPal, and 11 after the launch of Apple Pay, wallets remain a small fraction of volume on merchant sites and apps. Even less in the store. Merchant acceptance took longer and cards on file and guest checkout got easier. Outside of Amazon’s massive, closed-loop ecosystem, where stored credentials are king and queen, wallets still represent a small fraction of digital transactions.

According to PYMNTS Intelligence, in May 2025, 9.6% of consumers used wallets to pay online.  However, they used debit four times more frequently (36%) and they used credit 3.3 times more frequently (32%).

When considering that Amazon accounts for around half of online retail sales, and stored credentials are the method of payment on that marketplace, the total addressable market for wallets in 2025 and projected in 2026 and beyond is roughly $78 billion. Sort of a drop in the bucket, all things considered, based on current projections of wallet usage and adoption online.

Today, digital wallets are still a thing because online checkout has remained largely unchanged, just snazzier and faster, for nearly three decades. When traditional checkout disappears, the wallet’s center of gravity will go with it.

The No-Checkout Checkout

And that’s the big headline and digital shopping paradigm shift: the rise of agents and Zero Checkout.

Here’s what that may look like.

In a world where agents shop and pay, they will not fill out forms. Consumers will not go to a checkout page. Agents will interpret prompts, orchestrate product and payments options, and execute end to end.

The consumer will specify outcomes and constraints. Price points and delivery windows. Preference for sustainable materials. Sizes and colors. Favorite brands. Desire to redeem points or apply store or loyalty credits. Options for shorter- and longer-term payback periods or installments at certain thresholds.

The agent will translate those instructions into a sequence of machine calls across sellers, apply loyalty and financing logic, and return a confirmed order with a short explanation of the tradeoffs and the decision that drove the outcome.

In that world, the consumer prompt replaces the not-that-always-relevant guesswork that wallets once called personalization.

The consumer and her instructions are the personalization engine. Her wish is the agent’s command.

That makes the big decision in the agentic commerce world how to pay. Not where to pay at checkout on a page. One-Click will become Zero-Click.

Over time the consumer’s agent will get smarter and learn because it will see how the consumer engages across all the businesses they shop and the payments options that are most appealing. The consumer will gain more trust. The agent will learn when to conserve cash and pay later, when to redeem rewards instead of earning more, when to split a payment, and when to lean on a specific card to trigger a reward or cashback tier. The action moves beneath the surface, and it will happen in milliseconds.

Like the Palm Pilot in 1996 as the first PDA, digital wallets introduced people to a better and more secure way of paying for things as eCommerce took hold.

But in a world where agents are the deciders, the infrastructure that matters most is the quality and security of the credentials they can use.

That is where networks and issuers may already have a decisive lead.

Tokenized Credentials and the Digital Wallet Watershed

Over the last decade Visa, Mastercard, Amex and issuing banks built an invisible tokenization layer that spans merchants, wallets, subscriptions and account-on-file ecosystems. Today, the Visa network has issued 13.7 billion tokens which accounts for nearly 50% of eCommerce transactions globally. Meanwhile Mastercard says that more than 30% of their transactions are tokenized.

Tokens are not static substitutes for plastic. They are dynamic, updating when cards are replaced, adaptable to security and rewards, and embedded into recurring payments and installments.

Networks and issuers are layering intelligence on top of tokens so the right credential can be chosen for each transaction, with the right terms at the right moment. Flexible or dynamic credentials are a single account that simplifies payment options from multiple cards to one, with multiple ways to settle that transaction. Buy and pay now. Buy and pay a little later. Buy and pay a lot later.

That is the foundation for agentic commerce. A pool of smart, tokenized accounts that agents can use to deliver the consumer’s outcome each time they make a purchase.

In lockstep is the effort to make credentials carry more than payment authority.

A smarter credential can transport verified identity, risk/reward preferences, and attributes that improve acceptance and the shopping experience: age or business status for restricted goods, address trust and delivery preferences, dispute history and claims behavior, verified KYB for B2B transactions.

When identity travels with the credential in a privacy-preserving way, agents encounter fewer roadblocks and sellers accept them with greater confidence. The value migrates from the container called a wallet with multiple options to a single credential that can pay, authenticate and present the right payment options at the right time.

Enter Google and PayPal

Google and PayPal’s multiyear partnership, announced last week, reflects the scramble happening across many platforms as each tries to jump on the agentic commerce bandwagon. PayPal’s infrastructure will be embedded deeper into Google’s products. Google Cloud will become PayPal’s AI backbone. Together they say they’ll “revolutionize” agent-driven shopping. So they say.

It will be one of several experiments taking place with agentic commerce. In truth, it is very early days. Perplexity partnered with PayPal for commerce in AI search. OpenAI is working with Shopify to connect prompts to merchant catalogs. firmly connects Perplexity to millions of merchants for app checkout.

PayPal’s approach centers on bringing wallets and accounts to AI models. The theory: Consumers interact with agents through payment platforms, making wallets the bridge between intent and transaction.

The distinction matters because it shows how the wallet-centric worldview is already being challenged by infrastructure that doesn’t need wallets at all. And how those with a vested interest in them are already doubling down.

The Account Base Illusion

The Google/PayPal partnership logic assumes, in part, that PayPal’s hundreds of millions of accounts matter in agentic commerce. You know what they say when you assume. Consumers don’t start shopping on payment sites. They start with discovery. Amazon became a commerce force by capturing that beginning and making discovery and checkout one-click without leaving that ecosystem. Today more than half (54%) of product searches start on Amazon.

Google sees a come-from-behind opportunity. It has billions of users across Gmail, YouTube, Chrome and Android. If Google can capture product searches before they migrate elsewhere, Google believes it can finally monetize commerce at scale.

But they may be betting on the wrong horse.

PayPal logins don’t create intent. What matters is where consumers begin their journey. Increasingly, PYMNTS Intelligence finds that conversational AI platforms can orchestrate complex transactions that go beyond keyword searches without routing through wallet infrastructure at all.

In an agentic world, the advantage goes to whoever owns the intent signal. Google’s challenge isn’t building a wallet.  It’s defending the starting point before Gen AI-native platforms pull it away.

The Infrastructure That Actually Matters

While platforms experiment with partnerships, networks and issuers have built something more fundamental over the last decade: intelligent credentials that make payment decisions autonomously. These tokenized accounts don’t just substitute for plastic cards. They update dynamically and embed into any system that needs payment capabilities.

When a consumer prompts an AI about what to buy, personalization happens in the prompt and merchant response. When that consumer needs to pay, the decision shifts to how to pay. Which credential maximizes rewards? Which card hits a spending threshold? Which account optimizes cash flow?

Issuers are trying their hand. BNPL providers provide a single credential that offers multiple ways for consumers to settle transactions that are also linked to offers and promotional financing. Global technology providers enable connectivity between existing debit cards and those flexible credentials. Credit card issuers are adapting existing credit lines into shorter- and longer-term installments. Others are turning debit into credit options to offer payment flexibility using a single card credential. Each have their own incentives to explore options outside of digital wallets, even as they all provision their cards to make them work inside of them.

In all cases, the aim is to build  the foundation for credentials smart enough to make those decisions without human intervention and without toggling between multiple card options. Payment choice becomes automated based on rules the consumer sets once, not selections they have to make and think about at checkout every time.

This is the foundation for agentic commerce. Agents that don’t need wallets when tokenized credentials offer the same payment optionality without the acceptance hassle.

Playing the Short Game

For PayPal, partnerships like Google read as a bid to stay relevant. PayPal was the default when merchant checkout felt risky. That advantage eroded as Apple Pay, Amazon one-click, Shopify with Shop Pay, and embedded payments scaled. PayPal’s online checkout share has eroded over the last five years from 9.9% in 2021 to its May 2025 value of 7.2%.

The wallet market got crowded while networks and issuers invested billions in tokenization that made them indispensable. At the physical point of sale, cards still dominate, even as just about everyone with a smartphone has a wallet to use if they wanted to. And just about every merchant has a point-of-sale device capable of enabling a wallet transaction.

Google offers PayPal distribution. PayPal gives Google payment capabilities for commerce experiments and probably a pretty good deal on payment processing. Both can buy time to understand how agent-driven transactions develop. But they’re building on the assumption that wallets can remain central when agents shop.

That assumption looks increasingly outdated.

Google’s Real Game: Monetizing Agentic Commerce

Here’s what’s actually interesting about Google. It’s not clear that Google wants to be in the wallet business, despite more than a decade of attempts to create one that people use. Its DNA is advertising. In Q2 2025, Alphabet reported $96.5 billion in ad revenue. That was about 75% of its revenue, with Cloud representing most of the rest. Commerce has always been Google’s weak link. Consumers may search for what products to buy on Google, but they buy on Amazon.

That gap has haunted Google for two decades. It started Google Checkout in 2006, and then discontinued it in 2013. It rebranded Google Wallet to Google Pay in 2018 and then back again in 2022. Funny enough, it eliminated the ability for PayPal wallets to be connected to Google Wallet in June of 2025. But none of these efforts  dented Amazon’s dominance as the product discovery/buy search alternative. Google captures the query, then hands consumers off to complete purchases elsewhere.

But Google’s real advantage is intent. Billions of times daily, people tell Google what they want, when and where. That’s why their ad business is so profitable. Google monetizes intent by essentially auctioning access to it.

With agents, that moment of intent becomes transactional.

With agentic commerce, Google believes it finally has a way to close that gap. When consumers tell AI systems what to buy, that intent signal can trigger orchestrated transactions across merchants, payment methods and fulfillment. Google doesn’t need to have a wallet, it has stored GPay credentials in its browser, or connects to PayPal’s, to finally monetize commerce at scale.  They do need a great agent and payment agent protocol. Something they also announced last week.

The Faster Disruption

Digital wallets spent nearly three decades trying to scale. The problem isn’t lack of user access; it is a lack of use and adoption.

Now wallets are being challenged by something moving much faster and, seemingly, of much greater interest to consumers: AI agents that personalize through prompts and execute through intelligent credentials.

Consumers become the DIY personalization engines by stating exactly what they do and do not want, in a conversational style with the agent, until they perfect the prompt. Agents become smart sales assistants that deliver those outcomes. Smart flexible credentials become the payment foundation.

The Google-PayPal partnership, like similar deals, reads more like experimentation than strategy. Useful for learning, probably not the one big thing that will drive change. In agentic commerce, the critical shift is from what to buy to how to pay. The real differentiation comes in payment optimization. The credential that maximizes rewards, preserves cash flow, leverages installments most effectively, redeems points at the right moment.

The future of payments in an agentic world isn’t a faster button or smarter wallet. It’s no button at all. Zero Checkout. Intelligent credentials making optimal payment decisions invisible to consumers. Agents shopping on their behalf and executing exactly what the consumer wanted without them having to think about it.

Digital wallets, like the Palm Pilot, proved the concept. They may not survive the transition to what comes next. And it might not take 11 years.

What do you think?

Until NEXT time.

Join the more than 17,000 subscribers who’ve already said yes to what’s NEXT.

When a shopper whips out their credit card to buy something online, they can feel a lingering worry: Will my card number get stolen by hackers or otherwise misused?

That’s why tokenization, a process that hides your 16-digit number from a merchant and instead uses a separate computer-generated number saved on your mobile phone or smartwatch or stored with a retailer, is the next frontier of ensuring security when paying. 

Mastercard said Tuesday (June 3) that nearly half of all its online transactions in Europe are now tokenized. The payment giant unveiled the milestone exactly one year after outlining its plan to phase out manual card entry and achieve 100% tokenization by 2030. The process lets consumers avoid exposing their sensitive account details, preventing a fraudster from using your credit card for nefarious purposes. 

Mastercard said that tokenized transactions in Europe, encompassing methods like Secure Card on File (SCOF), Click to Pay and digital wallets, have seen a one-third increase in the past year. The company’s strategy of driving the adoption of safer transactions is gaining ground as growing numbers of eCommerce marketplaces, food delivery services and financial institutions across the continent embrace new standards and solutions.

A major component of this growth is merchant tokenization, specifically known as Secure Card on File (SCOF). By replacing static card numbers stored by merchants with dynamic, merchant-specific tokens, SCOF helps to reduce fraud and improve approval rates. The result: Enhanced security for shoppers and fewer fraud-related losses for businesses.

Another tokenization method, Click to Pay, is also playing a crucial role in simplifying the online checkout experience. This service, now used in 26 European markets, allows consumers to make purchases online without manually entering their card details each time, often using pre-saved, tokenized credentials. Mastercard said that consumer signups for Click to Pay have more than doubled over the past year.

In other tokenization news, FinTech platform Adyen launched a collaboration with Japanese payment brand/credit card issuer JCB, PYMNTS reported in May.

This service aims to bolster the security of credit card transactions for eCommerce merchants.

“eCommerce transactions are growing rapidly, and alongside this growth, fraudulent transactions due to card information breaches are also increasing,” said Tac Watanabe, executive officer and head of brand infrastructure headquarters at JCB. “In response to this trend, it is important to reduce the risk associated with data breaches through COF tokenization and improve our customers’ payment experience by keeping card information up to date.”

payabl. has released a survey, questioning customers from the UK, Germany, and the Netherlands in regards to the importance of the online purchasing experience.

According to the findings based on the observations of customers across the UK, Germany, and the Netherlands, 43% of all shoppers would not return to a retailer if the online checkout process was a poor one. 

During the survey, the participants were asked about their reasons for abandoning their online shopping basket, and nearly half of UK shoppers (44%) invoked a cumbersome checkout process. The percentage for the other countries is significantly lower – Germany with 29% and the Netherlands with 36%.

The results of the research highlight the importance of a fast and convenient process of online shopping for UK customers, but also the areas in which shoppers are prepared to change or compromise their preferences to get the experience they desire.

The importance of security in online payments

The survey underlines that 25% of UK shoppers aim to deliver their payment details to any online retailer store if it makes the checkout experience easier. In Germany (15%) and the Netherlands (16%), customers are not prepared to let any retailer store their payment information. 

While most European customers (71%) consider that fraud protection is non-negotiable, a third (32%) of UK shoppers want the checkout process to be a faster one, even if they will have some online fraud protections removed. A quarter of them declared that they would even agree with removing the fraud protection checks completely to get a faster checkout process. On the other hand, the German (12%) and the Dutch (17%) customers are not prepared to compromise on the security process. 

In 2023, the UK experienced over GBP 1.17 billion in fraud losses, and a significant portion came from ecommerce. Over GBP 360.5 million were stolen by criminals through remote purchases, which acquire card details through data theft methods such as breaches, scam text messages, and phishing emails. 

The situation is a challenge for both merchants and ecommerce platforms in the UK that must balance the demands of shoppers for a fast and accessible checkout experience while ensuring that the payment details are safely secured and implementing robust checks before authorising payments. 

Officials from payabl. note that UK customers demand fast and effective payments for not abandoning purchases. This behaviour is changing the perception of shoppers when it comes to security measures and storing their payment details online. It is important to work with reliable payment providers to prevent fraud without adding unnecessary friction.

More information on the study

The information presented above is part of payabl’s upcoming whitepaper, whose focus is on European checkouts and customer expectations, including payment preferences and security aspects. 

The independent research company Coleman Parkes conducted an online survey on behalf of payabl. The survey involved 1400 customers from the UK, Germany, and the Netherlands who have made an online purchase and an in-store purchase in the past month.

The upcoming whitepaper will look in detail at the online checkout process in Europe, including aspects like online shopping habits, payment preferences, and the role of security in payments.

For more information about payabl., please check out their detailed profile in our dedicated, industry-specific Company Database.

As digital economies race to streamline the payment process, the checkout experience is at the forefront of change, with innovations around customer experience and security redefining how merchants and consumers engage with payment technologies.

Merchants, payment service providers (PSPs) and issuers must align their strategies to prioritize both security and user experience, and PYMNTS hears from Surin Fernando, senior vice president, customer solutions, Australasia at Mastercard, and Guida Sousa, senior vice president, product management at Mastercard, about why payments innovators should pay particular attention to Brazil and Australia.

“Brazil is a very digital-savvy market, and merchants are acutely aware that frictionless experiences drive sales,” Sousa said, noting that consumers demand immediacy, security and seamless experiences.

One of the core innovations in Brazil’s checkout transformation is network tokenization.

“We are replacing the traditional 16-digit card number with a token that is useless to fraudsters,” Sousa added. “This ensures both security and ease of checkout, which aligns with global trends.”

Moreover, Brazil is adopting biometric authentication.

“Merchants are embracing technologies that offer both security and frictionless experiences,” Sousa said. “We’re seeing initiatives like payment passkeys gaining traction, and merchants are keen to implement them after witnessing their benefits.”

Still, she added that many Brazilian merchants feel as they are unable to request technical features from their PSPs, which indicates a significant gap in communication. Despite this gap, over 50% of merchants proactively requested technical upgrades, signaling that larger retailers with deeper knowledge of the payments ecosystem are pushing for innovations.

Mastercard is stepping in to bridge the gap between merchants and PSPs, ensuring that the demand for seamless checkout experiences is met with responsive solutions.

The Role of PSPs and Industry Collaboration

While it exists in a separate hemisphere, Australia mirrors Brazil in its push for digital payment advancements but faces its own unique challenges, particularly around security.

Fernando said the country has one of the highest rates of contactless payments globally, with 99% of transactions being contactless and 70% happening on mobile devices. However, the online checkout experience remains inconsistent, creating friction for both consumers and merchants.

“Our online experience is still broken in many ways,” Fernando said. “We’re seeing high demand for one-click checkout, but what really surprised me was the growing interest in biometric authentication. With only 1 in 10 transactions authenticated in Australia, we have a billion-dollar card fraud problem that needs urgent attention.”

He emphasized the role of PSPs in solving this issue.

“While more than 52% of merchants didn’t engage with their PSPs on technology requests, it’s clear that those who did saw significant improvements in approval rates and fraud mitigation,” he said. “We need to create a system where merchants feel empowered to ask for these capabilities.”

One of the major advancements in Australia is the integration of Click to Pay, a streamlined checkout experience that eliminates the need for manual entry and increases conversion rates.

“We’ve been working with issuers to auto-enable customers into Click to Pay, which dramatically improves adoption,” Fernando said. “This, combined with network tokenization and biometric authentication, forms the holy trinity of secure, seamless checkout.”

Looking Ahead to the Future of Checkout Innovation

Both Sousa and Fernando agreed that PSPs play a crucial role in the adoption of new payment technologies, but they need better education on their value.

“We need to articulate the ‘why’ — why network tokenization reduces fraud, why Click to Pay increases conversion, and why biometric authentication is the future,” said Fernando. “Our vision is clear: 100% tokenized transactions, 100% authentication and the elimination of manual card entry by 2030.”

“The industry has to come together to make this happen,” Sousa said. “Just as we collectively deployed contactless technology a few years ago, we must now rally around one-click checkout, tokenization and passkeys.”

As consumer expectations continue to evolve, merchants, PSPs and issuers must align their strategies to prioritize both security and user experience. Ultimately, whether in Brazil, Australia or elsewhere, the future of checkout is fast, frictionless and fortified against fraud. And if Mastercard’s latest initiatives are any indication, the payments industry is well on its way to achieving that future.

Checkout is the last mile in commerce, representing the critical moments of decision-making that can make or break a sale — and by extension, merchants’ fortunes.

Joint research from PYMNTS Intelligence and Mastercard in the “Online Merchant Checkout Innovation Report” found that more companies encounter trouble with their checkout processes than with payments processing. It’s a global issue, illustrated in the pain points experienced by merchants in the United States and four other markets surveyed by PYMNTS Intelligence, including Australia, Brazil, the United Arab Emirates and the United Kingdom. Six in 10 middle-market firms said they struggled with the user experience during checkout online.

Mastercard’s Jennifer Macrae, senior vice president of global digital channel enablement, and Sukhmani Dev, senior vice president of North America digital product management, said the problem is acute enough that more than three-quarters of merchants are looking for ways to streamline checkout to boost sales conversions.

“The user experience is critical … friction is directly correlated with loss of sales’ conversion rates and therefore the merchants’ bottom lines,” Macrae said.

More than ever, there are various high-tech tools and solutions, including artificial intelligence and biometrics, to help modernize checkout.

However, as Macrae and Dev told PYMNTS, it takes a village. Mastercard is working with issuing partners and other stakeholders to eliminate passwords, beef up security and keep checkout simple when consumers decide to complete a purchase.

A Collaborative Effort

“Collaboration is the key word,” said Dev, who added that “we’ve been able to bring an ecosystem together to make mobile wallets and tap to pay more secure.”

Consumers using a Mastercard product in a mobile wallet are using network tokens that improve authorization rates and push fraud rates lower. Tokenization allows merchants to replace sensitive card-related information with a unique identifier, which also improves payment processing, Dev said. In the U.S. alone, 1 in 3 eCommerce transactions already use the technology, and approval rates see a 3 to 6 percentage point increase, along with several points of fraud reduction.

“In fact, globally, this technology is responsible for delivering $2 billion in incremental sales for merchants each month,” said Dev, adding that “the scale is important, and the value is tremendous.”

More recently, the company introduced its checkout services platform for merchants. The platform is built on the EMV SRC standard, enabling merchants to implement one-click checkout solutions including Click to Pay and Secure Card on File solutions.

“It’s all about driving value through choice and transparency,” said Macrae, adding that the same principles that have improved in-store commerce (through tap to pay) have driven the move to create a standard click-through experience online, which means that consumers no longer must struggle to input their card details online.

Macrae and Dev said Click to Pay is reducing friction at checkout so significantly that checkout times are cut in half when measured against entering card-specific details manually. The feature is available in over 50 countries and integrated with more than 95 channel partners.

“The time’s been right to declare our ambition of creating a future where physical card numbers that are needed for purchases are a thing of the past, and one-time passcodes become obsolete” with the embrace of passkeys and biometrics, Macrae said. “We’re aiming to make sure that every transaction is tokenized and authenticated.”

Added Dev: “Partnership and collaboration are key, and Mastercard is locking hands with our issuing partners, digital partners and one-click solutions providers to help capitalize on the momentum.”

As consumers rely more on online shopping, the importance of optimizing the payment process has never been more evident. With peak shopping periods like the holidays driving even higher consumer demand, retailers are focusing on pre-purchase testing and offering flexible payment options to ensure smooth transactions, according to Quantum Metric VP of Banking, Financial Services and Insurance Mike Hanson.

Payment Testing: A Critical Component for Success

The rise of payment testing among consumers is reshaping the retail landscape, Hanson noted.

“Payment testing has become mission critical for any retailer that wants to drive an impact on customer experience and brand loyalty,” Hanson said in an interview with PYMNTS, adding the average consumer now visits a page two to three times before making a purchase. “Retailers who ensure that their checkout pages are optimized ahead of peak sales will see the best conversion rates and customer satisfaction scores.”

Pre-purchase testing also builds trust by offering customers the certainty that transactions will proceed smoothly, Hanson said, especially during the holiday season.

Indeed, consumers will abandon carts if their preferred method of payment isn’t offered. In fact, a PYMNTS Intelligence survey of 3,521 U.S. consumers showed 70% of shoppers decide where they shop online based largely on the payment options offered.

Increased Demand for Flexible Payment Options

The surge in demand for buy now, pay later (BNPL) services highlights a change in consumer preferences regarding payment flexibility, Hanson said.

“The growing demand for BNPL services reflects a fundamental shift in consumer payment preferences,” he said. “Partnering with established BNPL providers, integrating multiple payment solutions, and clearly communicating payment terms can help businesses cater to this growing demand. The most successful businesses will be those offering both traditional and BNPL services to maximize satisfaction across different customer demographics. This flexibility has and will continue to become a key differentiator in the competitive retail landscape.”

Addressing Friction Points in Online Payments

Despite the demand for flexible payment solutions, the online payment process still presents challenges for many retailers, Hanson said. Common pain points include complex checkout forms, limited payment options, slow loading times and unclear error messages. Additionally, bandwidth issues can arise during peak shopping periods when businesses experience a high influx of customers. Retailers need to streamline their payment processes to reduce friction.

“Retailers can significantly improve the customer experience by implementing one-click checkout options that do not require customers to type in lots of personal information,” Hanson said.

He also stressed the importance of simplifying error messages, ensuring that users aren’t overwhelmed with unnecessary alerts, adding, “brands should also make sure this payment optimization is replicated across mobile channels and apps.”

Ensuring Year-Round Checkout Excellence

Retailers must go beyond preparing for a single busy shopping day and create a consistent, frictionless checkout experience year-round, Hanson said.

“Most retailers should strive for checkout excellence year in and year out,” Hanson said. “This can be achieved by keeping a continuous view of payment friction points year-round through real-time customer insights and digital analytics.”

Tools such as session replays, end-user segmentation, anomaly detection intelligence and data visualization are helpful for identifying areas that require optimization, Hanson said. This approach helps businesses implement the necessary changes quickly, ensuring that the checkout experience remains smooth regardless of the season.

The Intersection of Retail and Financial Services

The preference for BNPL services from credit card providers reveals a convergence between retail and financial services, Hanson said, indicating consumers value integrated financial experiences.

This highlights the opportunity for brands to meet such demand with payment offerings, Hanson suggested. “BNPL is undergoing a significant marketing push by banks and credit card issuers — especially ahead of and during peak shopping seasons,” he said. “This often includes ‘extended pay’ options direct from the bank, enabling institutions to serve their customers directly rather than creating a market for third parties.”

Via existing customer relationships, financial institutions can offer payment solutions that combine security and convenience for an integrated shopping experience, he said. “This convergence of services reflects a broader trend, as financial institutions, retailers, and other industries compete to own more aspects of the customer’s overarching journey.”

Optimizing Payment Systems for Digital-First Shoppers

Looking toward the future, Hanson stressed the importance of optimizing payment systems to cater to the growing number of online shoppers.

“Performance, such as responsiveness and speed, is paramount to the conversion and checkout experience,” Hanson said. “This is because any hesitation or delay in system response, including those caused by third-party integrations, negatively impacts the shopper’s journey. For optimized payment systems, retailers must prioritize streamlining both web and mobile app journeys to ensure all-around outstanding experiences. Success in the digital-first environment also requires transparent customer support systems for any payment issues. Combined, these factors will create a foundation for successful online retail operations that can scale with growing demand and changing shopping behavior.”

In this FinextraTV interview, Mark Barnett, President Europe, Mastercard and Alexa von Bismarck, President EMEA, Adyen, explain how the payments industry must strike a balance between providing an efficient consumer experience and a secure experience. From Chip and PIN to Tap and Pay to using a device to pay to purchasing online now – where most of the security issues sit – the pair discuss how tokenisation could be a solution for mitigating the moving target of fraud and friction.