At its heart, money is an intellectual construct, as demonstrated through its continual shape-shifting over the ages. Since most money today exists in digital form, technology has an outsized impact on advancing innovations, especially in the most mundane corners of finance. Payments—the transmission and receipt of money in commercial transactions—have been an especially fertile area for innovations that speed up processes and drive down the costs of doing business. ISG Research asserts that by 2029, one-half of all buying will involve payments made on high-efficiency platforms, reducing frictions and overhead to speed purchases and cut costs. The payments landscape is undergoing rapid transformation, driven by technological innovation, evolving consumer expectations and shifting regulatory dynamics. Differences in payment practices and norms between countries continue to exist because of cultural, legal and regulatory legacies, but these are narrowing. The rapidly evolving payments landscape is having an impact on how enterprises manage core processes such as procure-to-pay (P2P) and order-to-cash (O2C), as well as how software providers incorporate technology in their applications that manage these functions.
Five important forces will drive the evolution of payment practices over the next five years. First, artificial intelligence (AI) and agentic AI will continue to play a foundational role in supporting advances in how payments are handled. 
From streamlining transaction processing and reducing the need for human intervention to enhancing fraud detection, AI tools are helping financial institutions and enterprises to reduce transactions costs, errors and fraud while improving security. Some analysts estimate that money centers and large regional banks in the U.S. will be able to cut their workforces by 20% within five years through agentic automation. AI-supported systems are being deployed to identify anomalous behavior in real time, creating defensive barriers to increasingly sophisticated fraud schemes.
Second, changing regulatory environments are removing barriers to tokenization, the process of replacing blocks of payment information such as credit card numbers with unique, secure, digital identifiers called tokens. Tokens are meaningless outside the context of a specific transaction or system, so they can reduce the risk of fraud or data breaches. They are highly versatile and useful across heterogeneous platforms and systems, including mobile wallets, virtual cards and recurring billing systems. This is transforming both consumer and commercial transactions. The shift from card-based payments to dynamic, credential-based systems reduces transaction-execution costs and can enhance personalization and security through embedded identity and enriched digital data sets.
Third, tokenization is just one element supporting the growth in real-time payments (RTP) across both domestic and cross-border use cases. Decades ago, the U.S. Federal Reserve Bank eliminated the requirement that physical checks be returned to the issuing financial institution, a practice rooted in ancient civilizations with clay tablets. Along with this came the requirement that banks substantially shorten their settlement times, so payment processing would be completed sooner. Globalization of commerce has also put a premium on substantially reducing lags in payment processes. In addition, governments wanting to speed up value-added tax (VAT) receipts and reduce tax fraud has led to proliferating requirements for digital payment processes. Today, businesses and consumers increasingly expect funds to move instantly, and financial institutions are responding by upgrading infrastructure to support immediate or near-immediate settlement. This ideal is still far from universal and remains a challenge for financial institutions.
Embedded finance, a fourth important trend, integrates financial services directly into non-financial platforms. Payments and financial services are now woven into enterprise software, mobile apps and digital systems. For example, ride-sharing applications offer instant payouts to drivers, e-commerce platforms supply transaction finance and payment processing, and financial management systems offer integrated invoicing and collection features. As a result, payments are evolving beyond a standalone function to a potentially differentiated capability that supports broader strategies for customer engagement and retention, as well as a source of revenue for speed and convenience.
Finally, because money is a regulated state monopoly, evolving legal frameworks affecting payments are changing the competitive landscape. Non-traditional fintech entities are threatening existing financial institutions, but some behemoths are also capturing the advantages of new technology and have scale, which is increasingly important when capital costs are no longer zero or negative. Moreover, AI and agents also offer local and regional banks and financial institutions the means to reduce their costs, especially those related to regulation. Globally, regulations that impose greater transparency and interoperability in cross-border payments are gaining favor as a way to reduce the costs of doing business.
In business and finance, the convergence of payments, data and AI offers new ways to optimize liquidity, enhance customer experience, reduce costs and limit operational risk. 
On the sell-side, ISG Research asserts that through 2028, almost all enterprises will adopt a digital-payments-first approach to differentiate their customer experience and to increase revenues and market share. They will use software to support this strategic approach. Ongoing advances in payments technology also will have an impact on the design and use of P2P software, driving greater efficiency, security and strategic value. Real-time payments are accelerating invoice settlement and improving supplier relationships, while embedded payment capabilities within P2P systems are streamlining workflows by eliminating the need to switch between platforms. AI can detect fraud and ensure compliance more reliably and at a lower cost. Tokenization is securing sensitive supplier data, reducing exposure to breaches. Technology offers the means to facilitate cross-border and multi-currency payment capabilities, which simplifies global procurement. Innovations in payment practices and systems enable treasury and finance teams to optimize cash flow, enhance visibility in liquidity and strengthen supplier engagement within a more secure and agile procurement environment. I recommend that finance executives, especially those in corporate treasury and purchasing, regularly evaluate how technology can enable their organization to improve corporate performance and profitability to increase their sustainable competitiveness.
Regards,
Robert Kugel
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