Fragmented Payment Stacks Push Merchants to Reclaim Control of Digital Identity

Identity is fast becoming one of the most valuable assets a business possesses. Not brand identity or customer sentiment, but the underlying digital identifiers that enable transactions to occur: merchant IDs (MIDs), payment tokens, processor vault records, device fingerprints and customer profiles.

It’s also, increasingly, one of the least understood. For many merchants, the identity layer can be fragmented across providers, partially outsourced and often invisible. Each processor relationship, fraud tool and tokenization service may create its own version of the customer and the merchant.

Over time, this may lead to a subtle but compounding problem: the business no longer fully controls how it is recognized in the ecosystem, or how its customers are.

Individually, these identity assets may seem operationally insignificant. A token here, a vault record there. But collectively, they form what can be thought of as a digital identity portfolio. And like any portfolio, its structure, ownership and management strategy determine whether it creates value or quietly erodes it.

See also: Mobile Identity Is Flipping the Infrastructure of Cross-Border Payments

Rethinking Ownership in the Payments Stack

The payments industry has long optimized for authorization rates, fraud reduction and speed. But beneath these metrics lies a dependency on recognition. Issuers approve transactions not just based on available funds, but on confidence in the merchant, in the transaction pattern and in the continuity of identity signals.

These identity elements form the connective tissue of commerce, linking buyers, sellers, issuers and networks in milliseconds. But when identity is fragmented, that continuity can break. A customer who has successfully transacted with a merchant dozens of times may suddenly appear “new” if a different tokenization provider is used, if a new MID is introduced or if a processor switch disrupts historical linkage. Similarly, merchants operating across multiple regions or brands often maintain separate MIDs, each with its own performance history, diluting the strength of their overall profile.

When identity assets reside primarily within third-party systems, those providers effectively control how the merchant is represented to the broader network. That’s why forward-looking organizations are beginning to treat identity not as a byproduct of transactions, but as a managed asset class.

In this model, every MID, token and customer profile is evaluated not just for its immediate utility, but for its role within a broader portfolio. Questions that once seemed peripheral become central: Who owns this data? How portable is it? How does it contribute to consistent recognition across channels and providers?

“The challenge is really instrumenting the full lifecycle of the customer with strong identity and authentication. When all of that data lives together, you can think in terms of thousands or tens of thousands of signals. That’s a completely different game,” Veriff Chief Technology Officer Hubert Behaghel told PYMNTS.

The challenge for many organizations is that identity issues rarely present themselves as a single, urgent problem. Instead, they manifest as a series of small inefficiencies — slightly lower approval rates, occasional data mismatches, incremental integration costs. Addressing them piecemeal can lead to incremental improvements, but rarely to structural change.

Read more: How Will AI Change Identity 2026

The Next Frontier of Commerce Infrastructure

Adopting a portfolio approach to digital identity requires elevating identity management to a strategic discipline. This may involve cross-functional coordination between payments, fraud, data and engineering teams, as well as a willingness to revisit long-standing assumptions about vendor relationships and system architecture.

Findings in the report “Identity at Scale: Where KYC/KYB Touchpoints Create (or Contain) Agent Risk,” a collaboration between PYMNTS Intelligence and Trulioo, reveal that firms deploy digital identity in 4.4 workflows on average, meaning verification now spans multiple core functions and operates as a cross-workflow control system.

A well-managed portfolio helps provide a foundation for interoperability. Identity assets can be mapped, transferred or extended without losing continuity. This enables faster experimentation and reduces dependency on any single provider. It also opens the door to more advanced capabilities, such as unified customer profiles that span online and offline interactions, or cross-channel fraud detection that leverages consistent identity signals.

After all, commerce is becoming more dynamic. New payment methods emerge, processors evolve, and customer journeys span multiple channels and devices. In this context, the ability to adapt quickly is a competitive differentiator.

By viewing identity elements collectively, merchants can make more informed decisions about when to consolidate, when to segment and how to preserve continuity. The payoff is not just incremental improvements, but a more resilient approval profile that performs better under changing conditions.