Fragmented Payment Stacks Push Merchants to Reclaim Control of Digital Identity

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

For many merchants, this identity layer is scattered across providers, partly outsourced and often invisible. Each processor, fraud tool and tokenization service may build its own version of the customer and the merchant.

Over time, that creates a quiet but growing problem. The business loses control over how it is recognized in the ecosystem — and how its customers are too.

Individually, these identity assets can seem minor. A token here, a vault record there. But together, they form what can be thought of as a digital identity portfolio. Like any portfolio, its structure, ownership and management determine whether it creates value or slowly erodes it.

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

Rethinking Who Owns Identity in the Payments Stack

The payments industry has long focused on approval rates, fraud reduction and speed. But beneath those metrics lies a reliance on recognition. Issuers approve transactions based not just on available funds, but on confidence in the merchant, the transaction pattern and the consistency of identity signals.

These identity elements link buyers, sellers, issuers and networks in milliseconds. When identity is scattered, that consistency can break. A customer who has transacted with a merchant dozens of times may suddenly appear new if a different tokenization provider is used or a new MID is introduced. A processor switch can erase historical linkage entirely.

Merchants across multiple regions or brands often maintain separate MIDs, each with its own performance history. That weakens their overall profile across the network.

When identity assets live inside third-party systems, those providers control how the merchant appears to the broader network. That is why some organizations are starting to treat identity not as a byproduct of transactions, but as a managed asset.

In that model, every MID, token and customer profile has a role in a broader portfolio. Questions that once seemed secondary become central: Who owns this data? How portable is it? Does it support 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.

For many organizations, identity problems rarely appear as a single urgent issue. Instead, they show up as small inefficiencies — slightly lower approval rates, occasional data mismatches, rising integration costs. Fixing them one at a time leads to small gains but rarely lasting change.

Read more: How Will AI Change Identity 2026

Identity Management as the Next Layer of Commerce Infrastructure

A portfolio approach to digital identity means treating identity management as a strategic function. That requires coordination across payments, fraud, data and engineering teams. It also means revisiting assumptions about vendor relationships and system design.

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

A well-managed identity portfolio supports compatibility across systems. Identity assets can move or extend without losing consistency. That reduces reliance on any single provider and enables faster testing of new approaches.

It also opens the door to more advanced capabilities. Unified customer profiles can span online and offline activity. Cross-channel fraud detection can draw on consistent identity signals across every touchpoint.

Commerce is growing more dynamic. New payment methods emerge, processors change and customer journeys cross multiple channels and devices. The ability to adapt quickly is a real advantage.

By treating identity elements as a portfolio, merchants can make better decisions about when to consolidate, when to segment and how to maintain consistency. The result is not just small improvements, but an approval profile that holds up better as conditions change.