New Research Finds Government Digital Transformation Entering Next Phase, but Adoption and Legacy Systems Threaten Progress

PayIt’s annual report shares findings from survey of 600+ government leaders across the United States

KANSAS CITY, Mo.--(BUSINESS WIRE)--State and local governments have largely succeeded in bringing services online — but new research from PayIt reveals that the next phase of digital transformation will be defined by a more difficult challenge: turning digital availability into adoption, and modernization into measurable efficiency gains.

The 2026 Government Payments Experience Index, based on a survey of more than 600 public sector leaders across the United States, finds that while digital payment capabilities are now widely available, governments are grappling with how to drive usage, integrate legacy systems, and prepare their data infrastructure for the next wave of innovation, including artificial intelligence (AI).

“Government agencies have made real progress in digitizing services, but simply offering online options is no longer enough,” said Kelly Davis-Felner, chief marketing officer at PayIt. “The next challenges are driving digital adoption, unifying fragmented systems that create duplicative work, and preparing for AI. The agencies that invest in data consolidation and readiness today will be the ones that can fully capitalize on the coming phases of modernization.”

The report revealed key insights, including:

• Offering digital channels is no longer the challenge — adoption is. While 78% of agencies now offer online payments, fewer than half of transactions (49.5%) are completed digitally on average, limiting efficiency gains and keeping operating costs high.
• Legacy systems are slowing progress. Integration with outdated back-end systems was cited as the top barrier to modernization, creating operational inefficiencies, reconciliation challenges, and increased compliance risk.
• Even as digital payment offerings increase, efficiency gains lag. The race to offer digital payments has exposed deeper operational cracks. Fragmented payment systems and channels are creating more reconciliation friction, causing government leaders to prioritize improvements in speed and accuracy above all other business outcomes.
• AI adoption is accelerating, but unevenly. While 72% of agencies plan to expand AI use in the next 12-18 months, most current applications remain limited to back-office automation, with data readiness and legacy infrastructure constraining broader impact.

Explore these insights further, including quotes from respondents and full breakdowns of responses, in PayIt’s 2026 Digital Government Adoption Index.

The survey was conducted in January 2026 by The Harris Poll on behalf of PayIt, with 609 respondents, including IT and line-of-business leaders from state and local government organizations across the United States.

About PayIt

PayIt enables state and local government agencies to deliver a great resident payments experience that accelerates the shift to digital. Agencies choose PayIt to better achieve their mission through improved operational efficiency, customer support, and resident satisfaction. Our solutions span property tax, courts, utilities, DMV, outdoors, and more. PayIt provides a single resident profile across agencies and jurisdictions, integrates into back-office and adjacent systems, and our team helps clients drive adoption of digital channels. Serving more than 150 million residents in North America, we have received awards from Fast Company and StateScoop, and have been listed in the GovTech 100 for 10 years and counting.

PayIt: Smarter for government. Easier for everyone.