Payment industry 2025 predictions - what lies ahead?

As we look ahead to 2025, the payments industry finds itself at a pivotal juncture, shaped by the challenges and triumphs of the past 12 months.

Over the last year, the sector has grappled with geopolitical instability, economic pressures, and rapid technological advancements, all of which have left their mark on businesses, consumers, and regulators alike.

Despite these hurdles, the payments ecosystem has demonstrated resilience, embracing innovation and adaptability to meet the evolving needs of a global market.

Ecommpay's payments experts share their insights on the key trends and challenges likely to define the year ahead in this post. From regulatory developments and technological breakthroughs to shifts in consumer behaviour and market dynamics, their perspectives offer a roadmap for navigating an increasingly complex and interconnected landscape.

As anticipated, 2024 has been a challenging year geopolitically. The ongoing cost-of-living crisis has continued to tighten household budgets and place significant strain on businesses.

Open banking, Buy Now, Pay Later (BNPL), and marketplaces have all maintained momentum this year. Crypto has made slow but steady progress toward mainstream acceptance, while payment orchestration remains most relevant to larger merchants.

Looking ahead, 2025 is likely to bring more of the same, though we may begin to feel the winds of change.

One of the most exciting trends is the continued rise of globalisation, as merchants increasingly extend their reach beyond domestic borders. Demand for UK merchants is growing in regions outside Europe, particularly in the Middle East and, more recently, Africa.

Despite some optimistic forecasts, consumer demand is unlikely to recover in the coming year. The financial strain of 2024, particularly for mortgage holders as high interest rates squeezed already stretched finances, coupled with increased National Insurance contributions for businesses, is expected to lead to salary and recruitment freezes. This will continue to impact household budgets. Encouragingly, there are signs of gradual economic improvement, though a lag of around 18 months is expected before consumer spending rebounds.

Twelve months ago, I would have predicted fewer new entrants in 2024 - and I would have been wrong. This year has seen an influx of players in the orchestration space, leaving the market overcrowded. Smaller providers have already been quietly acquired or shuttered, and this trend is likely to accelerate in 2025 as the market consolidates.

A noticeable trend in 2024 has been the replacement of entrepreneurial disruptors with seasoned, revenue-focused leaders at the helm of payments companies. This shift, driven by the need for sustainable profitability, is expected to continue in 2025 as businesses and investors adapt to challenging conditions.

Technological advancements are simplifying, streamlining, and securing e-commerce payments. One-click payment options are becoming more widespread, offered by e-commerce platforms and Payment Service Providers (PSPs). Mastercard’s commitment to tokenizing all card payments by 2027, alongside its promotion of the Click-to-Pay system, complements digital wallets like Google Pay, Apple Pay, and PayPal. These solutions improve security, reliability, and convenience for consumers, leading to higher conversion rates.

While the broader payments landscape remains stable, certain segments are heating up. Open banking continues to grow despite challenges with pricing and profitability. BNPL and point-of-sale financing, once accelerated by the pandemic, are evolving into long-term, responsible financial solutions.

Marketplaces are also gaining momentum, with even major providers rolling out solutions tailored to this underserved segment. Payment orchestration remains a growing space, though consolidation is expected as orchestration tools are integrated into broader platforms to deliver more value.

Merchants increasingly recognise the advantages of working with full-stack providers, like Ecommpay. By consolidating payment solutions into a single partnership, merchants can achieve cost and resource efficiencies, simplify global expansion, and enhance the customer experience.

The crypto market has had a difficult couple of years. However, progress on Central Bank Digital Currencies (CBDCs) could accelerate development and acceptance. Despite this, it’s more likely that crypto’s trajectory will remain slow and steady, with no dramatic shifts expected in the near future.

As we approach 2025, the regulatory focus in the UK and EU payments landscape will centre on fostering trust, bolstering security, and reinforcing reliability in payment ecosystems.

With technological advancements and the growing demand for seamless payment experiences, regulators are honing in on critical areas to protect the financial system’s integrity.

The Confirmation of Payee (CoP) system, widely successful in the UK for reducing fraud and misdirected payments, is poised for broader implementation across the EU. This protocol adds a verification step by confirming the recipient’s name during transactions.

While effective, its EU rollout faces challenges such as ensuring compatibility among diverse banking systems and managing potential transaction delays. This initiative underscores a commitment to enhancing consumer confidence in digital payments and minimising fraud risks.

In the UK, mandatory reimbursement rules for victims of push payment fraud mark a significant shift, holding financial institutions accountable for losses. These rules are expected to drive advancements in fraud detection while balancing user experience and managing liquidity exposure due to high claim limits.

The rules may also impact the push for real-time payments, introducing delays for suspected fraudulent transactions - a step backwards in consumer expectations for seamless payments. Meanwhile, open banking and embedded finance systems will face the challenge of blending user-friendly design with robust fraud prevention, requiring enhanced data-sharing protocols to ensure security without hindering innovation.

Artificial Intelligence (AI) is revolutionising the payments space, particularly in fraud prevention, data analytics, and system resilience. However, upcoming regulations, such as the EU AI Act and the anticipated AI Code of Practice (2025), will impose stricter accountability for AI applications in payments.

Key regulatory focus areas include:

These measures aim to strike a balance between leveraging AI's benefits and maintaining ethical standards.

Crypto assets, especially stablecoins, are becoming increasingly relevant for streamlining settlement processes in payment systems. The EU’s Markets in Crypto-Assets (MiCA) Regulation, along with parallel initiatives in the UK, will introduce clear guidelines for stablecoin issuance, governance, and integration with traditional payment networks.

Challenges include mitigating volatility risks, ensuring transparency in asset backing, and aligning crypto operations with anti-money laundering (AML) and counter-terrorist financing (CTF) requirements. Successfully integrating stablecoins into mainstream systems will demand careful navigation of these risks to maintain financial stability. Crypto assets, especially stablecoins, are becoming increasingly relevant for streamlining settlement processes in payment systems. The EU’s Markets in Crypto-Assets (MiCA) Regulation, along with parallel initiatives in the UK, will introduce clear guidelines for stablecoin issuance, governance, and integration with traditional payment networks.

Regulatory bodies in the UK and EU are prioritising the safeguarding of client funds and enhancing consumer protection. Updated frameworks will focus on:

The payments industry in 2025 is poised for transformation, driven by the interplay of innovation, regulatory evolution, and shifting market dynamics. While challenges such as economic pressures and fraud risks persist, the resilience and adaptability of the ecosystem shine through.

As merchants, providers, and regulators continue to adapt to this dynamic landscape, success in 2025 will hinge on collaboration, strategic foresight, and a relentless focus on enhancing the customer experience. With opportunities expanding globally and technology breaking barriers, the payments ecosystem is not just weathering the storm but setting the stage for a brighter, more interconnected future.

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