How the payments landscape is changing

The Swedish buy now, pay later company Klarna Group will unseat Affirm Holdings as the exclusive provider of installment loans at Walmart. 

Those installment loans will be offered through OnePay, a digital payments app that Walmart shoppers can use at checkout online and in the store, Klarna said in a news release. OnePay is a service provided by One, the fintech established by Walmart and venture capital firm Ribbit Capital in 2021 that is majority owned by the retailer.

Affirm first partnered with Walmart in 2019. 

The change will be made gradually, a Klarna spokesperson said in an email. OnePay will start integrating Klarna installment loan options into Walmart’s checkout in the coming weeks and those options “will be scaled to all Walmart channels by the holiday season,” the spokesperson said.

Klarna products available to Walmart customers include loans ranging from three months to 36 months, the spokesperson said.

The move gives Klarna access to a Walmart customer base that spends hundreds of billions of dollars every year. Walmart is the largest retailer in the United States, based on 2023 sales according to the National Retail Federation. Walmart reported $681 billion in revenue for the fiscal year that ended on Jan. 31, according to an earnings report.

“We will continue our long-term strategy of competing on our products and entering into sustainable partnerships,” an Affirm spokesperson said in an emailed statement that did not address the Walmart news.

Affirm installment loans are still available as an option at Walmart’s checkout at this point, the company said in an SEC filing. The BNPL provider noted that sales through Walmart were about 5% of its gross merchandise volume for the second half of last year. They also represented about 2% of its adjusted operating income.

“Although the loss of a significant retail partner, especially one as important as Walmart, is impossible to spin positively, in our opinion, there is a key reason why Klarna’s reported contract is not one that Affirm would favor,” William Blair analysts wrote in a note to investors.

Affirm prefers to control the user experience, and would not have wanted to cede control over that experience to OnePay, the analysts wrote.

Sodexo, a campus foodservice company, announced that it plans to open nearly 100 “Food Hive” campus convenience stores through 2026. 

The stores are modular and can incorporate Mashgin’s AI-powered, self-checkout technology, a company spokesperson confirmed. Payment options can be customized to each campus and can include not only traditional forms of payment but also campus cards. 

The company plans to debut 30 of the modular, scalable locations during the 2024 to 2025 academic year.

Sodexo’s announcement comes as Amazon is expanding the use of its frictionless Just Walk Out technology on campuses, underscoring the fact that schools have become attractive locations for tech-focused c-stores. 

Sodexo in-house research found that 70% of Gen Z college students shop at campus convenience stores at least a few times a month. The same report noted that 57% of those surveyed prioritize variety and 47% look for availability of healthy options.

Catering to these tendencies, the Food Hive locations will feature products from local companies and minority- and women-owned businesses, according to the announcement. 

The modular sites can encompass everything from small stores with a limited assortment to larger footprints that include prepared foods and groceries, according to Sodexo’s website. Roughly half of the stores are expected to incorporate Mashgin’s frictionless checkout technology, a company spokesperson said.

Some of the earliest schools with Food Hive locations are Morehouse College, University of Illinois Chicago, Northern Arizona University, Texas Christian University and Hamlin University.

“This innovative c-store will not only provide our students with a diverse selection of hot and cold food options but also meet their personal and grocery needs,” said Rose Wilson, district manager for Sodexo at Northern Arizona University. “The modern flow of the store, including self-checkout, will enhance efficiency and convenience for everyone.”

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By Zip

Buy now, pay later (BNPL) has transformed e-commerce, giving millions of consumers the flexibility they need to make purchases with confidence. Yet, despite its rapid adoption online, BNPL remains an untapped opportunity in brick-and-mortar retail.

The same benefits that make flexible payments a game-changer for online merchants — higher conversion rates, larger basket sizes and greater accessibility — are just as powerful in-store. With the right approach to BNPL, retailers can capture sales and drive repeat business. But driving awareness of BNPL availability is a critical step to achieving the best results.

“Retailers can use BNPL to open doors to many customers that may not have had the opportunity to transact at their stores, or may not have been able to buy as much as they would like to at those stores,” says Mallory Burstein, Senior Merchant Development Manager at Zip. “We work with retailers on the right in-store signage and marketing placements to achieve specific objectives for each store.”

BNPL benefits a large, high-intent shopper audience

All BNPL solutions offer consumers the ability to pay for purchases in installments, but many are designed to serve customers who already have access to credit and other traditional payment methods. Yet consumers financially underserved by credit represent a high-intent and growing shopper segment that can benefit greatly from flexible payments.

Offering and promoting flexible payment solutions to financially underserved consumers can drive measurable improvements in sales, average order values and customer retention for retailers with no technical lift required. In fact, many financially underserved consumers are already using Zip’s flexible payment solutions to make purchases in stores, without retailers even realizing it, because Zip can be used anywhere Visa is accepted.

“Retailers don't need a formal partnership for their customers to use it, and there’s no integration necessary to accept Zip,” says Burstein. “We just leverage existing POS systems with tap-to-pay on our virtual Visa card.”

Signage and collaboration drive BNPL awareness and use

Partnering to drive awareness of BNPL helps retailers activate shoppers who are already in their stores, but not spending.

“Customers go to stores to seek inspiration and check prices,” says Burstein. “BNPL gives them the opportunity to buy on the spot and take home the items they need while having the financial flexibility to pay over time.”

Yet shoppers won’t use BNPL in-store — or, in many cases, buy at all — if they don’t know BNPL is even available. That makes signage and store-associate education incredibly important.

Strategic signage at storefronts, checkout counters and key product areas like dressing-room mirrors educates customers and increases BNPL adoption, helping drive incremental revenue. Zip provides that signage, as well as comprehensive associate training and support and collaborates closely with retailers to customize in-store messaging.

“We ensure that our retailers are set up for success and that we're providing as much value as possible to them,” says Burstein.

Improve cross-channel consistency and support

Retailers’ in-store customers also expect a unified, omnichannel shopping experience. By working with a BNPL partner that supports all the places their customers shop — online, in-store and in-app — retailers can offer those customers a frictionless, consistent checkout experience across all channels.

“Offering flexible payments helps your customers feel supported,” says Burstein. “You want them to feel the same type of support and optionality that they experience online in your stores.”

And with flexible payments stretching across multiple sales channels, retailers can streamline reporting, reconciliation and customer service while providing seamless payment options wherever customers choose to shop.

Ultimately, BNPL is a natural evolution for in-store retail. Businesses that take advantage of the in-store BNPL opportunity now can gain a competitive edge by turning more shoppers into loyal return customers.

Learn more about the benefits of offering BNPL to in-store customers at here¹.

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¹Loans through Zip Pay Anywhere and Zip Web Checkout (including any "powered by Zip" loans) are originated by WebBank.

Sheetz is now accepting cryptocurrencies as payment for in-store purchases at all locations through a partnership with digital payment company Flexa.

Consumers can pay with popular cryptos like bitcoin, ether and litecoin, along with stablecoins such as USD Coin.

While the fervor around cryptocurrencies has faded since its heights in 2021, digital currencies are still making inroads into the convenience industry, both through deals like this as well as stores installing cryptocurrency ATMs.

After a trial run at select Sheetz Cafe stores that started in May 2021, according to a Flexa spokesperson, Sheetz has decided to expand this program across its whole footprint. 

With crypto being more popular among younger people according to data from crypto platform Bakkt, the ability to pay with digital currency could encourage these consumers to prioritize shopping at Sheetz. The technology integrates directly with Sheetz’s current point of sale system, according to the announcement.

Customers will need to download a separate app and load it with the cryptocurrency they want available to spend. To use the cryptocurrency at Sheetz, customers select it in the app, then scan the code it displays at checkout.

“We’ve always been committed to giving our customers more payment options,” said Sheetz executive vice president of Marketing and Supply Chain Ryan Sheetz. “We’re excited to make digital currency payments available at all our stores and to meet the growing interest in stablecoins among our customers.”

Customers who choose to pay with crypto can get $20 off their first purchase, according to the announcement. Flexa can also be used with the My Sheetz Rewards loyalty program.

While crypto payments are not common among c-stores, crypto ATMs, which allow customers to add various coins to their digital wallets, have cropped up at retailers like Jacksons Food Stores, Nouria, GetGo Cafe + Market and High’s.

Several retailers, including 7-Eleven, QuikTrip and Wawa, have dipped their toes into non-fungible tokens. These digital collectibles are secured on the same blockchain technology that powers cryptocurrencies.

Altoona, Pennsylvania-based Sheetz operates over 750 store locations throughout Pennsylvania, West Virginia, Virginia, Maryland, Ohio and North Carolina. 

Stitch Fix is integrating Affirm’s buy now, pay later services as a payment option. 

At checkout, Stitch Fix shoppers will go through a real-time eligibility check. If approved, shoppers can stretch their purchases across monthly payments without late fees, the company said. 

The service is now available on Stitch Fix’s website and mobile app. Stitch Fix’s new Affirm integration follows the company’s efforts to add new features and bolster its business.

“Stitch Fix’s personal styling service has long been known for helping its clients discover the styles they love, and we’re excited to work with Stitch Fix to offer those clients more flexibility and control over how they pay for their purchases,” Pat Suh, senior vice president of revenue at Affirm, said in a statement. 

In addition to adding a new payment option for customers, Stitch Fix has been highlighting its stylist talent. Last year, the company began testing stylist profiles with information about their interests, work portfolios and expertise. Then it introduced the feature incrementally with more details about their stylists, such as fun facts, client testimonials and specialties. 

As the company introduces new payment and stylist features for customers, it has been orchestrating a turnaround. Last September, Stitch Fix CEO Matt Baer said the company will begin growing again by the end of fiscal year 2026. Over the past few years the company has laid off some of its employees, closed its U.K. business and shuttered some distribution centers.

In its Q1 earnings, the company reported a 12.6% decline in net revenue year over year to $318.8 million. Stitch Fix also said its number of active clients dropped 18.6% from the previous year. However, its net losses narrowed from $35.5 million in the year-ago period to $6.2 million.

“Our clients are responding to the newness we have brought to our assortment as well as the improvements we’ve made to our client experience,” Baer said in a statement at the time. “This progress is a testament to the Stitch Fix team’s ongoing execution of our transformation strategy, and we continue to expect to return to revenue growth by the end of FY26.”

The Amazon One app launched on the App Store and Google Play Store, allowing customers to sign up for the retailer’s contactless palm recognition service anywhere. 

Amazon’s latest innovative tool can be used to enter various locations, identify individuals, pay for items and access loyalty rewards with the help of generative AI. Previously, shoppers could only sign up for the service by hovering their hand over an Amazon One device in-store.

When a customer signs up for the service with the app and hovers their palm over the Amazon One device for the first time, artificial intelligence tech is powered to compare and match the vein imagery with their camera phone photo. 

The service can be found at over 500 Whole Foods Markets, several Amazon stores and third-party locations like stadiums, airports, gyms and convenience stores. Over 80% of shoppers who use Amazon One at Amazon and Whole Foods Market stores choose to use the service repeatedly, according to the company.

“Amazon One was developed using generative AI to create synthetic palm images, which were critical in training our machine learning models,” the company said in the news post. “AI also powers our latest innovation — the ability to match a camera phone photo with near-infrared imagery from an Amazon One device — while still maintaining a highly accurate and secure service.”

First-time users on the app won’t need to factor in additional time for sign up during checkout, ensuring “faster lines and a more frictionless in-store experience,” per the company. Customers can create their profile with the app by logging into their Amazon account, taking a photo of their palm or both palms and adding a payment method.

Images of palms taken with the app are encrypted and sent to a secure Amazon One domain in the Amazon Web Service cloud. The photos also cannot be downloaded to maintain customer privacy and data security, the company said.

To create a palm signature, Amazon One synthesizes both the palm and vein structure, which is used to create a unique numerical vector representation.

The retail giant first announced the service in 2020, acknowledging its plans to offer Amazon One to third parties like retailers and office buildings. For its launch, the tech was first introduced at two Amazon Go Seattle stores. 

Amazon’s quest for innovative payment methods doesn’t stop there. The company introduced its Just Walk Out tech at Amazon Go stores in 2016. But just this week, the retail giant announced it would drop the tech at some grocery stores as part of a chain-wide revamp. In stores, Amazon will instead offer its smart shopping carts with a digital surface allowing customers to pay using the card associated with their Amazon account. The company on Wednesday also confirmed that it is cutting hundreds of jobs in its AWS unit, including “a few hundred” in its Physical Stores Technology team. Those layoffs were in part due to its decision to scale back its Just Walk Out tech.

Continuing its U.S. expansion, Afterpay has expanded its merchant partners, adding its installment payment services to Diane von Furstenberg, HanesBrands, Kendra Scott, Shop Premium Outlets and multiple other retail businesses, the company announced Wednesday. 

BNPL users aren’t just spending on beauty and fashion. In 2023, the top Afterpay categories for Gen Z and millennial users were arts, travel and entertainment, home and garden, hardware, health and beauty, and electronics, according to the company’s analysis of its customer data. 

To that end, some of Afterpay’s new merchant partners operate outside the apparel space, including Made In Cookware and Poly & Bark.

The new partnerships mark Afterpay’s continued growth since it entered the U.S. in 2018.

As of last year, Afterpay had 4.2 million U.S. monthly active users, surpassing competitors like Affirm (3.3 million), Klarna (3.3 million) and Zip (755,000), according to Bank of America Securities data. Klarna said in an email to Retail Dive that it currently has 7 million U.S. monthly active users.

In Afterpay’s announcement, the company noted that its new installment payment partnerships come at a time when younger consumers are looking for alternative money management tools to navigate inflation. 

“Younger consumers have faced many financial challenges over the past few years, fueling the growth of alternative payments like Afterpay,” Alex Fisher, head of revenue at Afterpay and Cash App, said in a statement. “Our goal is to not only offer more transparent payment options, but to also promote a healthy and responsible customer base.”

Amid ongoing inflation woes, consumers have turned to installment payment providers when their budgets are squeezed. According to a report from the Federal Reserve Bank of New York this year, 60% of financially fragile consumers have used BNPL services five or more times in the previous year, a higher share than the roughly 20% of financially stable consumers who do the same. During the 2023 holiday season, shoppers spent $16.6 billion online via buy now, pay later companies, up 14% from the previous year, Adobe Analytics found.

As digital payments become more mainstream for consumers, retailers are trying to keep up with the payment methods they accept. Retailers need to make significant investments to navigate legacy systems, data security and privacy concerns, KPMG found. 

Over half of retailers completed a major payments modernization program within the past year, a KPMG modernizing payments report found. For most retailers, the work is not over: 4 in 5 will once again update their payments infrastructure or plan to do so.

Almost 3 in 5 retailers in North America report changing customer expectations as the top factor triggering payment modernizations.

The findings are based on a survey by KPMG International of 810 financial institutions and 690 retailers.

A seamless payment experience is critical to customer satisfaction, according to a statement from Duleep Rodrigo, national sector leader of consumer and retail at KPMG U.S. The right delivery can improve operational efficiency and help provide insights into customer behavior, Rodrigo said.

When modernizing their payments, 3 in 5 retailers are working to upgrade and implement digital payments, KPMG found. Nearly the same number are working to add new payment options. 

“Implementing and integrating new payments platforms can be complex and time-consuming,”  Courtney Trimble, lead of global payments at KPMG, said in the report. “Despite these challenges, executives recognize the benefits of payment modernization as a catalyst for growth and innovation.” 

One of the biggest roadblocks is cost. Nearly two-thirds of respondents said the top challenge when creating a modern payments program for retail is the cost of implementing new technologies. For over half of respondents, training staff from old to new systems is also a challenge.

Rodrigo said that younger generations of consumers increasingly gravitate to contactless payments, mobile wallets and other digital solutions compared to cash and credit cards.  In support of digital efforts, three-fifths of retailers surveyed already offer an app or plan to launch one.

Though Gen Z in particular enjoys in-person shopping, their preferred methods of payment lean digital.

However, frictionless payments come with its pros and cons. While contactless methods of paying can cut transaction times, improve data security and boost customer satisfaction, they are still more vulnerable to certain privacy risks. Bad actors can exploit consumer behavior information for purposes like unauthorized purchases.

Klarna has partnered with Adobe Commerce to let merchants offer its buy now, pay later services, according to a Tuesday press release. 

The deal will extend Klarna’s installment payment services to more customers buying from sellers on Adobe Commerce, the release said. 

“Consumers are embracing the flexibility that buy now, pay later services can provide, with Adobe Analytics data showing over 11 percent growth this year,” Jason Knell, senior director of content and commerce partners at Adobe, said in a statement.

Klarna’s partnership with Adobe Commerce builds upon the buy now, pay later platform’s previous efforts to draw more customers amid a challenging economic climate. Earlier this year, the company introduced a subscription service that would allow customers to pay a monthly charge to avoid service fees while receiving rewards points and access to promotional offers through partner retailers. Now, the Adobe Commerce deal allows more sellers to offer Klarna’s services. 

“Our relationship with Adobe Commerce offers thousands of merchants a flexible, seamless, and smooth way to accept payments,” Erin Jaeger, head of North America at Klarna, said in a statement. “This enhances the shopping experience for consumers and boosts the operational capacities of merchants.”

Eeke de Milliano, Stripe’s head of global product, said in a recent interview with sister publication Payments Dive that BNPL volume spiked 172% in the past year. However, de Milliano noted that “buy now, pay later options are priced at a premium and merchants are still trying to understand the value.” Meanwhile, last month Apple shuttered its BNPL service. Instead the company will offer users of its digital wallet installment loans through debit and credit cards and other lenders starting later this year when they check out with Apple Pay.  

Though BNPL usage appears to be on the rise, research suggests that many consumers employing the service are trying to relieve pressure on their tight budgets. Half of BNPL customers used the payment option to spread their cash flow, according to a YouGov and Bankrate survey released in March. Nearly 30% of BNPL users said they spent too much money through the option. Additionally, “financially fragile” consumers use buy now, pay later services and “appear to have embraced BNPL as a regular payment option,” according to research from the Federal Reserve Bank of New York. 

A third of small businesses in the U.S. are now adding surcharges to credit card transactions, according to a recent J.D. Power survey.

The data analytics firm surveyed 3,841 U.S. small businesses and found that 34% said they added a surcharge when a customer paid with a card. This was the first J.D. Power survey that included a question about surcharges and credit cards.

The results of the annual survey carry possible implications for credit card networks, said John Cabell, managing director of payments intelligence for J.D. Power.

Card networks charge merchants interchange fees — also called swipe fees — on credit card transactions. Those fees typically amount to between 2% and 4% of the total value of the transaction, according to the National Retail Federation.

“A lot of consumers are saying that [surcharges] are influencing their payment decision,” Cabell said.

Financial advice website LendingTree surveyed 1,555 credit card holders in August 2023 and found that 73% said they would use credit cards less if they had to regularly pay surcharges when they use those cards.

Consumer satisfaction was also marginally lower for merchants that assessed these surcharges, J.D. Power found in its survey, which was released Jan. 14. Satisfaction rates were 24 points lower (on a 1,000 point scale) for businesses that add credit card surcharges to a customer’s bill, compared with those that don’t, the survey found.

“The 24 point difference in cost of processing satisfaction is based on scores of 628 for those merchants who levy surcharges and 652 for those merchants who do not,” a J.D. Power spokesperson said in an email.

While the data firm did not ask about surcharges in previous surveys, Cabell said the extra costs do seem to have become more prevalent recently.

“We have seen in the last few years service fees and convenience fees crop up at various types of businesses,” he said. “I think that merchants increasingly are passing on costs to consumers in a more explicit fashion.”

Interchange fees became a political lightning rod in recent years as state and federal lawmakers put credit card networks in the spotlight over whether the extra costs charged to merchants should be permitted or not. 

State legislatures, for example, have passed laws limiting such fees. One of those states is Illinois, which sparked controversy when it passed a law saying that the fees couldn’t be imposed on taxes and tips.

Congressional panels have also grilled card network executives over the fees, suggesting that Visa and Mastercard have a monopoly in the market that allows them to charge excessive fees. 

Banks that issue the cards and the major card networks are fighting back.

A U.S. District Court judge partially halted the Illinois law that would have barred interchange fees on taxes and tips after a coalition of groups that represent banks and credit card networks — including the American Bankers Association — challenged it.

Judge Virginia Kendall imposed a partial preliminary injunction in December that said the law applied to state banks and credit unions, but prevented the state from applying it to national banks and federal savings associations.

Digital payments spending online and in-person has surged worldwide from $1.7 trillion in 2014 to $18.7 trillion in 2024.

Payment provider Worldpay attributes the growth of digital wallet use in the U.S. to the COVID-19 pandemic. In the near future, digital wallets will play a more significant role in both e-commerce and point-of-sale payments and will be funded primarily by credit and debit cards, the report predicts.

Spending via digital payment methods, including digital wallets, buy now, pay later services and account-to-account payments, are predicted to surpass $33.5 trillion by 2030, according to the report. However, U.S. consumers use mobile wallets for only about four in ten (39%) of their online purchases and 16% of in-person transaction value, a smaller share than the 81% of e-commerce payments and 59% of point-of-sale transaction value in the Asia-Pacific region.

About two-thirds (67%) of all U.S. consumer purchases online and at points-of-sale were transacted via credit, debit and prepaid cards. Cash use in the U.S. fell from 44% of in-store spending in 2014 to 15% in 2024, the report found.

By 2030, digital wallets are expected to comprise more than half (52%) of e-commerce transaction value and 30% of point-of-sale transaction value, according to the report. By contrast, the report predicts that credit cards will comprise only 22% of e-commerce transaction value and 32% of point-of-sale purchases in 2030, down from 40% of online purchases and 48% of point-of-sale purchases in 2014. 

As U.S. consumers increasingly adopt mobile wallets, cards remain a critical part of digital wallet usage in America and abroad. The report from Cincinnati, Ohio-based Worldpay notes that seven in ten digital wallets in the U.S. are funded by cards, tied with Australia (70%) and followed by the U.K. (67%), India (56%), Brazil (53%) and China (46%).

As for America’s attachment to cash, Worldpay’s report indicates that cash usage has been declining in the U.S. and will continue to drop in the coming years.

While a fifth of U.S. transaction value was cash-based in 2014, that share fell to 11% last year, according to Worldpay’s report. By 2030, U.S. consumers are predicted to use cash for only 9% of transaction value, per the report. Though the report categorized the U.S. as a medium-cash use country, other countries, such as Germany, Nigeria and Mexico, were categorized as high-cash use markets or low-cash use markets like South Korea, China, Sweden and Finland. 

“A confluence of factors — advancements in smartphone technology, the exponential growth of fintech, and supportive regulatory frameworks — combined with changing consumer expectations for ease and convenience, have fundamentally transformed the way we make payments,” Adam Coyle, chief strategy officer at Worldpay, said in a statement.

Other reports illustrate Americans’ cash use. Last June, the Federal Reserve’s annual cash use survey found that about a third (32%) of consumers used credit cards for their payments, followed by 30% who used debit cards and 16% who used cash. 

One possible driver of mobile wallet adoption in the U.S. is businesses integrating digital wallet capabilities. Large companies saw digital wallet usage spike from 48% in 2022 to almost two-thirds (64%) in 2023, according to a survey from the Federal Reserve’s financial services unit. Service businesses also saw their digital usage rise from 43% in 2022 to 61% in 2023, the survey found. 

Another factor in the growing adoption of mobile wallets is the perception that they are more secure than other payment methods.

A 2023 J.D. Power survey found that the proportion of consumers who use digital wallets rose from 12% in 2022 to 48% in 2023. While the survey found that consumers under 40 have been using digital wallets due to perceived security, cybersecurity experts say that the payment method still carries vulnerabilities.

Because digital wallets can contain far more personal data than consumers’ card information, they are an even more enticing target for fraudsters, Sunny Thakkar, head of fraud and disputes at Worldpay, said. 

Worldpay’s report also offered some insight into the dominant card issuers. Visa captured 63% of the card share in 2023, Mastercard was second at 25%, followed by American Express at 9%. Discover Financial Services— which is seeking to sell itself to Capital One for $35.3 billion — comprised only 1%, per the report. If approved, the larger Capital One could challenge Visa’s dominance.