What’s happening with payments in 2025?

Continuing the theme of payments in 2025 I really liked the view of McKinsey, who produced a really nice report to coincide with SIBOS last year. What did they say? In short “simpler interfaces, complex reality”. What does that mean? It means that “payments are becoming disconnected from accounts, and the number of players is proliferating, fragmenting the value chain, increasing complexity, and endangering the vision”. They then cite six key trends that will define the forward map of payments:

• The decline of cash will continue unevenly
• Instant payments will continue to displace other payment methods
• Growing adoption of digital public infrastructures will catalyse digital payments
• Intermediaries will continue to take share from incumbents
• Transaction banking will mimic consumer experiences
• CBDCs will set the baseline for digital currencies

All of this makes sense but it’s not very radical … where’s pay-by-ass, as invented by Money 20/20?

https://www.youtube.com/watch?v=U2brZQocmMc

Talking of which, what does Money20/20 think? Well, they are pretty conflicted tbh. For example Scarlett Sieber, Money20/20’s Chief Growth and Strategy Officer, says that banks are taking slow but steady steps toward embracing embedded finance.

“While I predicted last year that big banks would dive into this space, 2024 has shown me that when they do, the impact doesn’t feel as massive as expected due to the slow, gradual process of change. So, in 2025, I foresee banks taking significant strides, but not a game-changing leap just yet—more like incremental steps towards a much bigger transformation in the future.”

Meanwhile, Micky Tesfaye: Money20/20 Content Lead Europe, says that embedded finance is dead!

“Embedded finance, as we know it, has collapsed, and its failure was inevitable. The implosions of companies like Synapse and Evolve revealed that renting banking licenses couldn’t reshape finance, especially with thin margins and lacklustre value propositions. Similarly, while open banking has been touted as a revolution for years, it’s delivered little more than gradual evolution, with limited disruption. However, the U.S. is finally making strides in its own distinctive manner, bringing new promises of open finance that integrate payments, investments, and insurance. This shift, alongside advancements in AI, is paving the way for Embedded Finance 2.0. By 2025, we can expect financial services that are predictive, proactive, and adaptive—powered by AI agents managing cash flow, overdrafts, and transactions. We're moving beyond merely accessing solutions to embedding intelligence into the very fabric of money, enabling it to act on our behalf when needed.”

No wonder Zach Andersson Pettet: VP of Fintech Strategy at Money20/20 says who the *F* knows what will happen in 2025.

“We're living in the most mind-bending and fascinating time that has ever existed in the world. Technology is moving at a breakneck pace, regulation is sprinting to keep up, and our international political system has never been more volatile or candidly fascinating to watch. Who the F knows is the punchline, but there's a lot of really, really fun nuance to watch unfold inside of that from the macroeconomy to global policy.”

Another angle was sent to me by Scott Dawson, CEO of DECTA, who reckons that open banking is quite popular ... as long as you don’t call it open banking ... and notes that open banking came out of the last Payment Services Directive (PSD2) from the European Union, and that the next Directive – PSD3 – is going to arrive in 2026. What will PSD3 bring? Scott thinks that PSD3 will be a continuation of PSD2 with further streamlining of authentication for Open Banking, extended IBAN checks that will make credit transfers safer and a clearer framework for e-money. Ideally, fraud countermeasures will do something about APP fraud too although, he notes, this may not fall into the remit of the directive.

There’s also the PSR, Payment Services Regulation. A directive is a guide and not a rule; a regulation is rule. Nordea notes that, from a consumer viewpoint, the most important things in PSD3 and PSR are:

• Enhanced Strong Customer Authentication (SCA) – which will contribute to safer buying experiences
• Stricter rules on access to customers' payments and account information
• Stronger protection of consumers' rights and personal information
• A permission dashboard for customers to see which open banking permits they have granted
• Increased competition in the payments industry – which will result in new and better products and services for consumers

Sounds like a plan.

The thing is that these drivers are all focused upon increasing the ease of access to payments, particularly through mobile. Tom Lenihan, Director of Marketing at MuchBetter, thinks that we are just on the cusp of massive wearable Innovations in this context.

“2024 marked a turning point for contactless payments as wearable technology took centre stage, redefining convenience and style. This year saw innovative strides in wearable payment solutions from sleek, fashion-forward rings to versatile smart bands, offering consumers a seamless way to pay on the go, whether at coffee shops, festivals, or during their commute. These devices, designed for simplicity and security, eliminated the need for wallets or smartphones, placing unparalleled convenience at customers’ fingertips.”

Meanwhile there are other areas of payments that should be touched upon, such as issuing, acquiring, authentication technologies and more. Edvards Margevics, Co-Partner at Concryt, believes that “we can expect to see the growth of advanced security features like tokenisation, which gives consumers the peace of mind that the risk of fraud is low and their payment details are protected at every step of their payment journey” in 2025. In addition, he is betting on “biometric authentication methods, such as fingerprint recognition, facial recognition, and iris scanning … and drive worldwide mobile payment revenue to hit $12.06 trillion by 2027.”

Thomas Gillan, CEO of BR-DGE, believes that merchants are leading a greater adoption of orchestration platforms, led by acquirers and PSPs, which means that the acquiring landscape will see further unbundling.

“In 2024, we witnessed a fundamental shift in the acceptance of payment orchestration at the enterprise merchant level. What started with early adopters has now evolved as these pioneers have become category leaders in verticals such as ecommerce, gaming and gambling. This momentum is extending into other industries like travel, particularly airline travel, driving significant growth. For the first time, payment providers and merchants are saying: ‘I don’t want everything, I just want this, and later, I might want that’. This flexibility is the promise of orchestration, and the API-first approach continues to embed itself deeper into the payment ecosystem.”

Aaron Holmes, CEO of Kani Payments, sees a new era for reconciliation in payments coming:

“The reconciliation software market is set to grow from USD$1.72 billion in 2023 to USD$6.49 billion by 2032. This growth isn’t just about technology adoption—it’s a response to the mounting complexity of financial operations. The problem is particularly acute in the payments industry, where businesses today face challenges rooted in fragmented systems, manual workflows, and an overwhelming need to scale. For example, [our] recent industry survey revealed that 56% of the UK payments industry still relies on spreadsheets to reconcile data – tools that, while familiar, are ill-suited for today’s demands. The result? An astonishing 700 hours are spent on data preparation annually, and 82% of businesses struggle to meet reporting deadlines. Such complexity hinders innovation, tying teams up in routine tasks rather than strategic growth.”

Wow! All of this and I haven’t even mentioned crypto. More on that tomorrow.