diff --git a/src/components/ButtonWithDropdownMenu/index.tsx b/src/components/ButtonWithDropdownMenu/index.tsx
index 094c26a2b387..d4ee3e10914a 100644
--- a/src/components/ButtonWithDropdownMenu/index.tsx
+++ b/src/components/ButtonWithDropdownMenu/index.tsx
@@ -31,6 +31,8 @@ function ButtonWithDropdownMenu<IValueType>({
     onPress,
     options,
     onOptionSelected,
+    onOptionsMenuShow,
+    onOptionsMenuHide,
     enterKeyEventListenerPriority = 0,
     wrapperStyle,
 }: ButtonWithDropdownMenuProps<IValueType>) {
@@ -136,7 +138,11 @@ function ButtonWithDropdownMenu<IValueType>({
             {(shouldAlwaysShowDropdownMenu || options.length > 1) && popoverAnchorPosition && (
                 <PopoverMenu
                     isVisible={isMenuVisible}
-                    onClose={() => setIsMenuVisible(false)}
+                    onClose={() => {
+                        setIsMenuVisible(false);
+                        onOptionsMenuHide?.();
+                    }}
+                    onModalShow={onOptionsMenuShow}
                     onItemSelected={() => setIsMenuVisible(false)}
                     anchorPosition={popoverAnchorPosition}
                     anchorRef={caretButton}
diff --git a/src/components/ButtonWithDropdownMenu/types.ts b/src/components/ButtonWithDropdownMenu/types.ts
index baac60190ce5..f20729380b60 100644
--- a/src/components/ButtonWithDropdownMenu/types.ts
+++ b/src/components/ButtonWithDropdownMenu/types.ts
@@ -45,6 +45,12 @@ type ButtonWithDropdownMenuProps<TValueType> = {
     /** Callback to execute when a dropdown option is selected */
     onOptionSelected?: (option: DropdownOption<TValueType>) => void;
 
+    /** Callback when the options popover is shown */
+    onOptionsMenuShow?: () => void;
+
+    /** Callback when the options popover is shown */
+    onOptionsMenuHide?: () => void;
+
     /** Call the onPress function on main button when Enter key is pressed */
     pressOnEnter?: boolean;
 
diff --git a/src/components/EmojiPicker/EmojiPicker.tsx b/src/components/EmojiPicker/EmojiPicker.tsx
index a1b496838529..777d77a2411b 100644
--- a/src/components/EmojiPicker/EmojiPicker.tsx
+++ b/src/components/EmojiPicker/EmojiPicker.tsx
@@ -41,7 +41,7 @@ function EmojiPicker({viewportOffsetTop}: EmojiPickerProps, ref: ForwardedRef<Em
         width: 0,
         height: 0,
     });
-    const onModalHide = useRef(() => {});
+    const onModalHide = useRef<OnModalHideValue>(() => {});
     const onEmojiSelected = useRef<OnEmojiSelected>(() => {});
     const activeEmoji = useRef<string | undefined>();
     const emojiSearchInput = useRef<BaseTextInputRef | null>();
@@ -112,13 +112,10 @@ function EmojiPicker({viewportOffsetTop}: EmojiPickerProps, ref: ForwardedRef<Em
      * Hide the emoji picker menu.
      */
     const hideEmojiPicker = (isNavigating?: boolean) => {
-        if (isNavigating) {
-            onModalHide.current = () => {};
-        }
         const currOnModalHide = onModalHide.current;
         onModalHide.current = () => {
             if (currOnModalHide) {
-                currOnModalHide();
+                currOnModalHide(!!isNavigating);
             }
             // eslint-disable-next-line react-compiler/react-compiler
             emojiPopoverAnchorRef.current = null;
diff --git a/src/components/PopoverMenu.tsx b/src/components/PopoverMenu.tsx
index bcec153491c9..066b7dea3a03 100644
--- a/src/components/PopoverMenu.tsx
+++ b/src/components/PopoverMenu.tsx
@@ -42,6 +42,9 @@ type PopoverMenuProps = Partial<PopoverModalProps> & {
     /** Callback method fired when the user requests to close the modal */
     onClose: () => void;
 
+    /** Callback method fired when the modal is shown */
+    onModalShow?: () => void;
+
     /** State that determines whether to display the modal or not */
     isVisible: boolean;
 
@@ -89,6 +92,7 @@ function PopoverMenu({
     anchorPosition,
     anchorRef,
     onClose,
+    onModalShow,
     headerText,
     fromSidebarMediumScreen,
     anchorAlignment = {
@@ -211,6 +215,7 @@ function PopoverMenu({
             }}
             isVisible={isVisible}
             onModalHide={onModalHide}
+            onModalShow={onModalShow}
             animationIn={animationIn}
             animationOut={animationOut}
             animationInTiming={animationInTiming}
diff --git a/src/components/ReportActionItem/ReportPreview.tsx b/src/components/ReportActionItem/ReportPreview.tsx
index 91b1d30ab51a..0618437a936d 100644
--- a/src/components/ReportActionItem/ReportPreview.tsx
+++ b/src/components/ReportActionItem/ReportPreview.tsx
@@ -84,6 +84,12 @@ type ReportPreviewProps = ReportPreviewOnyxProps & {
     /** Callback for updating context menu active state, used for showing context menu */
     checkIfContextMenuActive?: () => void;
 
+    /** Callback when the payment options popover is shown */
+    onPaymentOptionsShow?: () => void;
+
+    /** Callback when the payment options popover is closed */
+    onPaymentOptionsHide?: () => void;
+
     /** Whether a message is a whisper */
     isWhisper?: boolean;
 
@@ -106,6 +112,8 @@ function ReportPreview({
     isHovered = false,
     isWhisper = false,
     checkIfContextMenuActive = () => {},
+    onPaymentOptionsShow,
+    onPaymentOptionsHide,
     userWallet,
 }: ReportPreviewProps) {
     const theme = useTheme();
@@ -432,6 +440,8 @@ function ReportPreview({
                                         chatReportID={chatReportID}
                                         iouReport={iouReport}
                                         onPress={confirmPayment}
+                                        onPaymentOptionsShow={onPaymentOptionsShow}
+                                        onPaymentOptionsHide={onPaymentOptionsHide}
                                         confirmApproval={confirmApproval}
                                         enablePaymentsRoute={ROUTES.ENABLE_PAYMENTS}
                                         addBankAccountRoute={bankAccountRoute}
diff --git a/src/components/SettlementButton.tsx b/src/components/SettlementButton.tsx
index 7c3c021a08eb..d1803f403469 100644
--- a/src/components/SettlementButton.tsx
+++ b/src/components/SettlementButton.tsx
@@ -43,6 +43,12 @@ type SettlementButtonProps = SettlementButtonOnyxProps & {
     /** Callback to execute when this button is pressed. Receives a single payment type argument. */
     onPress: (paymentType?: PaymentMethodType) => void;
 
+    /** Callback when the payment options popover is shown */
+    onPaymentOptionsShow?: () => void;
+
+    /** Callback when the payment options popover is closed */
+    onPaymentOptionsHide?: () => void;
+
     /** The route to redirect if user does not have a payment method setup */
     enablePaymentsRoute: EnablePaymentsRoute;
 
@@ -140,6 +146,8 @@ function SettlementButton({
     enterKeyEventListenerPriority = 0,
     confirmApproval,
     policy,
+    onPaymentOptionsShow,
+    onPaymentOptionsHide,
 }: SettlementButtonProps) {
     const {translate} = useLocalize();
     const {isOffline} = useNetwork();
@@ -273,6 +281,8 @@ function SettlementButton({
             {(triggerKYCFlow, buttonRef) => (
                 <ButtonWithDropdownMenu<PaymentType>
                     success
+                    onOptionsMenuShow={onPaymentOptionsShow}
+                    onOptionsMenuHide={onPaymentOptionsHide}
                     buttonRef={buttonRef}
                     shouldAlwaysShowDropdownMenu={isInvoiceReport}
                     customText={isInvoiceReport ? translate('iou.settlePayment', {formattedAmount}) : undefined}
diff --git a/src/libs/actions/EmojiPickerAction.ts b/src/libs/actions/EmojiPickerAction.ts
index 787f105e4939..e6123733b0e8 100644
--- a/src/libs/actions/EmojiPickerAction.ts
+++ b/src/libs/actions/EmojiPickerAction.ts
@@ -16,7 +16,7 @@ type EmojiPopoverAnchor = MutableRefObject<View | HTMLDivElement | TextInput | n
 
 type OnWillShowPicker = (callback?: CloseContextMenuCallback) => void;
 
-type OnModalHideValue = () => void;
+type OnModalHideValue = (isNavigating?: boolean) => void;
 
 type EmojiPickerRef = {
     showEmojiPicker: (
diff --git a/src/pages/home/report/ReportActionCompose/ReportActionCompose.tsx b/src/pages/home/report/ReportActionCompose/ReportActionCompose.tsx
index 6ff163f6ec37..47b318fd61cb 100644
--- a/src/pages/home/report/ReportActionCompose/ReportActionCompose.tsx
+++ b/src/pages/home/report/ReportActionCompose/ReportActionCompose.tsx
@@ -482,7 +482,12 @@ function ReportActionCompose({
                         {DeviceCapabilities.canUseTouchScreen() && isMediumScreenWidth ? null : (
                             <EmojiPickerButton
                                 isDisabled={isBlockedFromConcierge || disabled}
-                                onModalHide={focus}
+                                onModalHide={(isNavigating) => {
+                                    if (isNavigating) {
+                                        return;
+                                    }
+                                    focus();
+                                }}
                                 onEmojiSelected={(...args) => composerRef.current?.replaceSelectionWithText(...args)}
                                 emojiPickerID={report?.reportID}
                                 shiftVertical={emojiShiftVertical}
diff --git a/src/pages/home/report/ReportActionItem.tsx b/src/pages/home/report/ReportActionItem.tsx
index 0cd9329da9d6..8c876bb7e241 100644
--- a/src/pages/home/report/ReportActionItem.tsx
+++ b/src/pages/home/report/ReportActionItem.tsx
@@ -90,9 +90,6 @@ const getDraftMessage = (drafts: OnyxCollection<OnyxTypes.ReportActionsDrafts>,
 };
 
 type ReportActionItemOnyxProps = {
-    /** Get modal status */
-    modal: OnyxEntry<OnyxTypes.Modal>;
-
     /** IOU report for this action, if any */
     iouReport: OnyxEntry<OnyxTypes.Report>;
 
@@ -161,7 +158,6 @@ type ReportActionItemProps = {
 } & ReportActionItemOnyxProps;
 
 function ReportActionItem({
-    modal,
     action,
     report,
     transactionThreadReport,
@@ -195,6 +191,7 @@ function ReportActionItem({
     const personalDetails = usePersonalDetails() || CONST.EMPTY_OBJECT;
     const [isContextMenuActive, setIsContextMenuActive] = useState(() => ReportActionContextMenu.isActiveReportAction(action.reportActionID));
     const [isEmojiPickerActive, setIsEmojiPickerActive] = useState<boolean | undefined>();
+    const [isPaymentMethodPopoverActive, setIsPaymentMethodPopoverActive] = useState<boolean | undefined>();
 
     const [isHidden, setIsHidden] = useState(false);
     const [moderationDecision, setModerationDecision] = useState<OnyxTypes.DecisionName>(CONST.MODERATION.MODERATOR_DECISION_APPROVED);
@@ -566,6 +563,8 @@ function ReportActionItem({
                     isHovered={hovered}
                     contextMenuAnchor={popoverAnchorRef.current}
                     checkIfContextMenuActive={toggleContextMenuFromActiveReportAction}
+                    onPaymentOptionsShow={() => setIsPaymentMethodPopoverActive(true)}
+                    onPaymentOptionsHide={() => setIsPaymentMethodPopoverActive(false)}
                     isWhisper={isWhisper}
                 />
             );
@@ -901,7 +900,6 @@ function ReportActionItem({
             accessible
         >
             <Hoverable
-                shouldFreezeCapture={modal?.willAlertModalBecomeVisible}
                 shouldHandleScroll
                 isDisabled={draftMessage !== undefined}
             >
@@ -926,7 +924,7 @@ function ReportActionItem({
                         )}
                         <View
                             style={StyleUtils.getReportActionItemStyle(
-                                hovered || isWhisper || isContextMenuActive || !!isEmojiPickerActive || draftMessage !== undefined,
+                                hovered || isWhisper || isContextMenuActive || !!isEmojiPickerActive || draftMessage !== undefined || isPaymentMethodPopoverActive,
                                 draftMessage === undefined && !!onPress,
                             )}
                         >
@@ -998,15 +996,11 @@ export default withOnyx<ReportActionItemProps, ReportActionItemOnyxProps>({
             `${ONYXKEYS.COLLECTION.TRANSACTION}${ReportActionsUtils.isMoneyRequestAction(action) ? ReportActionsUtils.getOriginalMessage(action)?.IOUTransactionID ?? -1 : -1}`,
         selector: (transaction: OnyxEntry<OnyxTypes.Transaction>) => transaction?.errorFields?.route ?? null,
     },
-    modal: {
-        key: ONYXKEYS.MODAL,
-    },
 })(
     memo(ReportActionItem, (prevProps, nextProps) => {
         const prevParentReportAction = prevProps.parentReportAction;
         const nextParentReportAction = nextProps.parentReportAction;
         return (
-            prevProps.modal?.willAlertModalBecomeVisible === nextProps.modal?.willAlertModalBecomeVisible &&
             prevProps.displayAsGroup === nextProps.displayAsGroup &&
             prevProps.isMostRecentIOUReportAction === nextProps.isMostRecentIOUReportAction &&
             prevProps.shouldDisplayNewMarker === nextProps.shouldDisplayNewMarker &&
@@ -1035,8 +1029,7 @@ export default withOnyx<ReportActionItemProps, ReportActionItemOnyxProps>({
             lodashIsEqual(prevProps.transactionThreadReport, nextProps.transactionThreadReport) &&
             lodashIsEqual(prevProps.reportActions, nextProps.reportActions) &&
             lodashIsEqual(prevProps.linkedTransactionRouteError, nextProps.linkedTransactionRouteError) &&
-            lodashIsEqual(prevParentReportAction, nextParentReportAction) &&
-            prevProps.modal?.willAlertModalBecomeVisible === nextProps.modal?.willAlertModalBecomeVisible
+            lodashIsEqual(prevParentReportAction, nextParentReportAction)
         );
     }),
 );