Payment Tools Surge, Industry Consolidation Imminent
The payment industry is repeating the streaming playbook: an explosion of options that leaves consumers more confused. From digital wallets to BNPL, from direct bank connections to cryptocurrencies, fragmentation is intensifying. But history shows consolidation is inevitable—the winners will be those companies that make payments invisible.
Editor's Note:Justin Grooms is the CEO of Bolt, a San Francisco-based checkout technology company that serves retailers in the U.S. and other countries. He is based in New York.
Remember when streaming was supposed to be our salvation from cable? We thought we'd never face a bloated bill again, free to pick and choose the shows we wanted. Yet by 2024, we're paying more than ever, juggling a dozen subscriptions, and spending our evenings trying to remember which platform has the show we want to watch.
The payments industry is racing down the same track. What began as a simple choice between cash or credit card has exploded into a dizzying array of options: digital wallets, buy-now-pay-later services, bank payments, peer-to-peer transfers, and cryptocurrency. Each one promises to make our financial lives simpler. Individually, each might succeed. But together, they're building a payment maze that's increasingly difficult to navigate.
The data tells the story. Urban Outfitters recently announced that bank payments now account for about 1% of its transaction volume. Starbucks has been pushing customers to fund their cards by connecting directly to their bank accounts. Walmart is developing its own wallet. Nearly every major retailer is building its own payment ecosystem, each believing it can be the breakthrough.
But here's the thing: consumers never asked for this complexity. They just want to pay reliably and efficiently. The proliferation of payment options isn't solving a consumer problem—it's solving a business problem. Retailers are eager to escape the 3% to 4% fees charged by credit card networks, while payment startups are hungry for a slice of this trillion-dollar payments market.
The result? We're building what could be called a "digital keychain of gatekeepers"—a different payment method for every scenario. Splitting a dinner bill? Use Venmo. Buying furniture? Use a buy-now-pay-later service. Buying coffee? Use the store's exclusive app. Shopping online? Face a row of payment logos displayed like racing stripes, take your pick.
This fragmentation is unsustainable. Just as the streaming wars are heading toward inevitable consolidation (see the merger of Paramount+ and Showtime), the payments industry will have its own reckoning. The signs are already there: payment companies are talking about building "networks of networks"; large retailers are exploring unified payment platforms; the Federal Reserve has launched FedNow to standardize real-time payments.
But there's a deeper story here about how industries evolve. Innovation typically follows a pattern: first fragmentation, as entrepreneurs rush in with new solutions; then consolidation, as customers tire of complexity and crave simplification. We've seen this in 19th-century railroads, 20th-century radio, and today's streaming.
What's different about the payments industry is the enormity of what's at stake. We're not just talking about entertainment or transportation—this is the infrastructure of commerce. How we pay shapes everything from retail strategy to financial inclusion to monetary policy.
The winners in this consolidation won't necessarily be the biggest players. They'll be the ones who understand that consumers don't want more payment options—they want better ones. They want payments that are as invisible as electricity: just flip the switch and everything works.
That's why tech giants like Apple and Google are making headway in payments, and why retailers are scrambling to build their own solutions. They understand that the future of payments isn't about adding more choices—it's about eliminating the need for choice altogether.
The irony is that we might end up right back where we started, with a few dominant payment methods used by everyone. The difference is that instead of physical cards issued by banks, we'll have smarter, faster, more secure digital payment systems. The complexity will still exist, but it will be hidden behind the scenes—where it belongs.
For now, though, we're stuck in the messy middle. Retailers are building wallets nobody asked for, startups are inventing new payment methods, and consumers are forced to manage an ever-growing collection of payment apps and passwords.
But if history is any guide, this too shall pass. The great payments consolidation is coming. The only question is: who will lead it—and will they learn from other industries that complexity isn't a feature, it's a bug.
The companies that figure this out first—realizing that the goal isn't to add another payment option but to make payments disappear entirely—will thrive in the next phase of commerce. Everyone else will be left holding a keychain of digital keys to doors nobody wants to open.