The Creative Destruction and Rebuild of the Payments Business Model

In 1878, Randolph McCoy accused Floyd Hatfield of stealing a pig. The trial ruled in favor of Hatfield. That pig became the spark that ignited one of America’s most infamous feuds.

For more than a century, the Hatfields of West Virginia and the McCoys of Kentucky fought. Courtroom battles reached all the way to the U.S. Supreme Court. Newspapers across the country covered every move. The feud became legendary as a symbol of stubborn, unending conflict.

Both families were caught in a cycle where every act demanded a tit-for-tat retaliation. Where the original cause, a stolen pig, was buried under decades of grievances. Where neither side could remember how to stop fighting, or in some cases, why they started fighting at all.

In 1891, the violence finally ended. But it would take another 85 years before, in 1976, both families shook hands. Then another 27 years before descendants gathered in Pikeville, Kentucky on June 14, 2003, to sign an official peace treaty. The truce declared “an official end to all hostilities, implied, inferred and real, between the families, now and forevermore.”

It took 140 years to move from a stolen pig verdict to a peaceful outcome.

While the legal teams on both sides were focused on the past, the future of commerce showed up.

Today, the families hold joint reunions and have turned their history into a story of reconciliation.

Both saw that clinging to century-old grievances was less valuable than building something new together.

After two decades of litigation, multiple rejected proposals and hundreds of millions in legal fees, the Visa-Mastercard merchant settlement is heading toward final court approval. Merchants fought for changes to interchange fees and card acceptance rules. They won concessions: lower interchange rates, modified acceptance requirements and expanded surcharge rights.

Soon, the courts are expected to close the book on a legal battle that began in 2005, before the iPhone existed, before digital wallets, before consumers could complete a transaction with their face or their thumbprint. Before tokenized credentials, one-click checkout and embedded payments inside of every app and software platform made payments invisible while making the infrastructure that powered them even more critical to igniting commerce in the U.S. and across the globe.

Hopefully, this lengthy chapter in the history of payments is finally over. (I say hopefully because the judge still has to agree with the settlement provisions, and the merchants have to agree as well.) And that leaves us with a new question: what does the payments ecosystem build now?

Because while the legal teams on both sides were focused on the past, the future of commerce showed up.

And it will require the ecosystem to work together to reimagine the role of payments, and the business models underpinning it, to scale and ignite a future that looks very different than it did in 2005.

A Commerce Future That’s Already Here

We are standing at the edge of the most significant transformation in commerce since the invention of the general-purpose credit card 67 years ago. Not a new channel, not a new device, not a new interface, but a fundamental rewiring of how consumers shop and buy.

I call it The Prompt Economy.

It’s a world where consumers and merchants are about to lose direct contact with each other as consumers, at the prompt, decide the what, the why and the how of their shopping and payment experiences.

Agentic commerce is coming. Not eventually but now, even though it’s very early days. Agents are being built by every major technology company and platform, designed to act as intermediaries between consumers and the merchants they shop. These agents will evaluate options, compare total costs, assess merchant reliability, analyze return policies, and complete purchases. All in milliseconds, all with minimal (maybe even without any) human intervention aside from the initial prompt.

Consumers are doing more than simply leaning in.

Consumers and merchants are about to lose direct contact with each other as consumers, at the prompt, decide the what, the why and the how of their shopping and payment experiences.

PYMNTS Intelligence data shows that nearly 70% of consumers are interested in using AI agents to simplify shopping tasks. Forty-one percent say they want an agent to find the best deal for every purchase. One in three say they would trust an agent to pick the merchant. Nearly half of Gen Z and millennials say they expect AI to make purchasing decisions for them within the next five years. Thirty million consumers are what we call “Pros” – consumers who use Gen AI and Agentic Commerce techniques to complete 45 of 75 everyday tasks that PYMNTS Intelligence studies now track monthly.

And that’s today, even as the agentic commerce experience itself is still clunky, still pretty laden with friction. But these figures foreshadow mainstream shifts in consumer intent.

When that happens, everything changes.

A sale will be made to an algorithm deciding, in milliseconds, which merchant best satisfies the consumer’s instructions. A brand that has spent decades building loyalty will compete, not for the consumer’s attention, but for the agent’s evaluation. Unless they are part of the prompt. The more complexity associated with a purchase, the more valuable the agent, and this experience, becomes for the consumer.

Building the Modern Payments Ecosystem

A sale will be made to an algorithm deciding, in milliseconds, which merchant best satisfies the consumer’s instructions. A brand that has spent decades building loyalty will compete, not for the consumer’s attention, but for the agent’s evaluation. Unless they are part of the prompt. The more complexity associated with a purchase, the more valuable the agent, and this experience, becomes for the consumer.

That idea took shape in 1958 when Bank Americard introduced the general-purpose credit card. Eight years later, this turned into the four-party network model now called Visa. Over the last sixty-plus years, that new credit card for bank customers in California has scaled into an infrastructure that moves trillions of dollars annually in the United States alone and connects consumers and merchants across every commerce channel.

But as those of us in payments know, what looks deceptively effortless at checkout is anything but. It requires coordination among institutions with different incentives, massive ongoing investment in security and fraud controls, global interoperability and the instant authorization, clearing and settlement of billions of payment transactions. Interchange emerged as the mechanism that aligned those incentives and funded the rewards, protections and capabilities that made credit cards the payment method many consumers prefer and merchants accepted to complete their purchases.

Consumers will rely increasingly on virtual assistants to strip out friction and surface the best combination of convenience, price, payments choice and value every time they buy.

The model worked because every stakeholder received value from participating. And importantly, because merchants wanted to eliminate any friction that would prevent them from making a sale.

Over time, the way consumers shop and buy has changed. The path to purchase no longer begins in a store or even on a merchant’s website. It unfolds across ecosystems, platforms, apps, embedded experiences. And now, algorithmic recommendations. PYMNTS Intelligence data shows that 83% of consumers shop digitally across at least four channels each month, and more than half begin product discovery inside platforms merchants do not control. More than half (58%) expect purchases to be seamless across devices without reentering information.

Now, the payments ecosystem that has supported commerce for decades has to evolve for a world where consumers will rely increasingly on virtual assistants to strip out friction and surface the best combination of convenience, price, payments choice and value every time they buy.

The Shift From Merchant-Designed to Consumer-Directed Acceptance

For nearly seven decades, one principle has defined the relationship between merchants and consumers. Merchants support the methods of payment that a critical mass of their customers want to use. They do that because it is good for business.

If a consumer walked into a store or put items in a cart online and their preferred payment method was accepted, the sale happened. If it was not, the consumer would make a choice. Depending on how badly she wanted the item or how much she liked the merchant, or how many other payment options she had access to, she either pulled out a different card or abandoned the purchase. Or bought but never came back to that store again.

The dynamics of acceptance will shift in a way that is both subtle and profound.

Every new payment method has lived through the slog of that ultimate chicken-and-egg dynamic. Merchant acceptance is the holy grail. Without it, driving sales and margin and scale are nearly impossible. Acceptance has always been the oxygen that allows any payment method to breathe.

In the age of AI and agentic commerce, acceptance will still matter. But the dynamics of acceptance will shift in a way that is both subtle and profound.

Consumers will still care about paying with the method they prefer, but instead of deciding at checkout, they will specify their preferences once, through the agent acting on their behalf at the prompt. In the Prompt Economy, those instructions then become the rules that govern which merchants an agent considers. If a merchant does not accept the credential the consumer has directed their agent to use, the agent simply moves on to another merchant who does accept it. Merchants may not ever know the sales they missed as a result.

Consumers are already demonstrating how intensely payment preference shapes behavior. PYMNTS Intelligence finds that 72% of cardholders say rewards influence their payment choice. More than half (58%) choose cards strategically to maximize those rewards. One in four rotates between cards to extract the highest possible value in each category. Consumers are scripting their payment behavior today. Soon, they will literally script it through their agents.

This shift has implications for everyone. Consumers gain more control with less friction. They will not manually navigate checkout flows or toggle between wallets. Payment disappears into the background even more than it has today.

For merchants, the stakes change. Friction is no longer a point of irritation. It is a filter that determines their visibility. A merchant who limits acceptance or introduces fees may not have a chance to nudge consumers toward cheaper payment methods. On the other hand, merchants who support a consumer’s directed preferences, regardless of where or how the agent interacts, position themselves to be chosen more often.

For issuers, the expectation becomes one of flexibility and intelligence. Consumers want credentials that work everywhere, carry rules across all contexts and adapt to their liquidity needs. Two in three consumers say that matching payment to cash flow is more important than the size of the reward. That demand is highest among high-income consumers who have the most payment options.

Where New Business Models Are Emerging

What makes the proposed merchant settlement so consequential is not what is ending, but what has the opportunity to start.

Commerce is moving into a phase where the value of a consumer and the value of a transaction can be monetized in ways that were not possible when payments were simply a means to make a sale for a merchant. As consumers move across digital ecosystems, as agents mediate decisions, and as transactions become the output of a much larger and richer behavioral context, the opportunity is to rethink how payment credentials anchor value for every participant across the payments ecosystem.

We are already seeing the early signs of this creative rebuild.

The opportunity is to rethink how payment credentials anchor value for every participant across the payments ecosystem.

The debit card, once a straightforward access point to funds on hand, is becoming a programmable financial tool. Consumers increasingly want credentials that adapt to their cash flow and their lives, not the other way around. PYMNTS Intelligence research shows that 14% of all consumers have used BNPL over the last three months. Adoption is highest among consumers earning more than one hundred thousand dollars a year, the same consumers who also maximize rewards, juggle multiple cards strategically and expect flexibility on their terms.

Retail media networks are another indicator of this shift. The moment of purchase is becoming the moment of value creation. Platforms such as Amazon, Walmart, Klarna, Affirm and Chase have demonstrated that merchants will invest in reaching high-intent consumers at the precise point of decision. Players like FIS with Smart Basket, Bilt with Banyan, SKUx and Lynx power retail media ecosystems that create new brand/merchant/consumer economics using personalized rewards and promotions funded by the brand. That creates immediate value for consumers, who receive targeted savings instead of delayed rewards. It creates measurable value for merchants, who can improve conversion and fund promotions from brands that want access to their customers. That, in turn, creates new revenue models for issuers and platforms that participate in this path to purchase.

At the same time, new ecosystems are forming around intelligent credentials. Banks and networks are experimenting with payment instruments that are far more dynamic than a static sixteen-digit number. These credentials can carry consumer preferences across contexts, apply rules automatically, authorize and route transactions dynamically, and deliver the transparency consumers increasingly expect. Item-level and category-level purchase data enable merchant-funded offers with surgical precision. These ecosystems are not dependent on traditional funding structures. They grow because they address consumer needs that legacy models were not designed to satisfy.

What ties these developments together is a new set of hypotheses and assumptions. That the next phase of commerce will reward participants who create value throughout the consumer journey, not just at the moment of payment. A smart credential becomes the connective tissue linking discovery, decisioning, fulfillment and loyalty. The sale becomes the strategic outcome of an ecosystem in which merchants, issuers, networks, platforms and now agents all play a role in shaping consumer value.

These new business models are not reactions to what came before. They are the natural evolution of a world where commerce becomes more autonomous, more dynamic and more contextual and personalized. They are the building blocks of a future where the economics of payments reflect the broader value consumers generate as they move through digital and agent-driven environments. They are the beginning of a much larger transformation in how payments create and capture value.

What we are seeing across these developments is a form of creative destruction in real time.

What we are seeing across these developments is a form of creative destruction in real time. The business models that sustained merchants, issuers and networks for decades are being unbundled and rebuilt under new economic assumptions. The subsidy structures that once supported rewards programs are shifting. Merchant acquisition models are changing as platforms and retail media networks influence discovery. Issuer economics are being pressured by new forms of competition for consumer preference. Even networks, long anchored by universal acceptance, are navigating a world where acceptance is not just a merchant decision, but a consumer directive executed by agents.

And that’s the opportunity for reinvention. The parts of the system that no longer fit the way consumers shop are stripped away, and the parts that still create value are becoming the foundation for what comes next.

What’s Next

The end of the Hatfields and McCoys’ century-long feud didn’t erase their history. It simply cleared the way for something new to take its place. The merchant settlement that hopefully concludes shortly offers the payments ecosystem a similar opportunity. The creative destruction already reshaping the business models of merchants, issuers and networks is part of a much larger transformation. As AI and agents change how consumers shop and how industries operate, the opportunity is to rethink how value will be created when discovery, choice and payment follow an entirely different logic. All players across the ecosystem have an incentive to rethink, reimagine and rebuild.

That broader transformation is the one of the areas of focus of PYMNTS’ first live event in eight years, CHNGNetwork on May 5–6 in New York. One of the topics of conversation is the extent to which AI and agents are reshaping business models, incentive systems and competitive dynamics across the economy at large, not just payments and commerce. These discussions across the most relevant pillars of the connected economy, including payments and commerce, will help define what comes next.

And what comes next is the start of a new era in commerce.

One that will be mediated by agents, shaped by algorithms and executed by systems that behave differently than people. The settlement will close the longest chapter in payments history. The next one will determine whether the ecosystem adapts to the world emerging around it or remains tethered to the one that is disappearing.

You might even say that now, the real work begins.

Until NEXT time.

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