• Ugne Buraciene, Group CEO; , Kristaps Zips, UK CEO; Thekla Paschali, CTO   at payabl.


• 16.12.2024 08:45 am
#InnovationInFinance #Compliance

Ugne Buraciene, Group CEO 

Consumer demand for convenience drives 2025 innovation 

Consumer demand for convenience will be the top driver of innovation in 2025, according to our end-of-year survey. This will accelerate the rise of digital wallets and account-to-account (A2A) payments, both of which prioritise seamless integration and ease of use for consumers. 

While payment methods like Buy Now, Pay Later (BNPL), QR codes, and crypto will continue to grow in popularity, digital wallets will solidify their position as the standout choice. This is why we’re increasingly seeing merchants integrate these options into their checkouts, ensuring a frictionless customer experience. 

Next year, we can expect businesses to invest heavily in AI and data analytics as the tools of choice to meet consumers' ever-evolving expectations. AI will continue to dominate the landscape in 2025—not as a flashy trend this time around but as a strategic tool to drive ROI through applications like fraud detection, personalised experiences, and operational efficiency. 

Instant payments will also take a leading role next year, with more than half of those we surveyed expecting it to have the biggest industry impact. Alarmingly, only one quarter of respondents believe that the industry will be ready for the SEPA Instant deadline coming in January.   

Fraud, of course, remains the biggest challenge for our industry to tackle. Many are betting on AI as the answer, but let me offer a word of caution: just as AI can strengthen business defences, it can also embolden fraudsters. Staying ahead will require more than just buying the latest tool available. 

Unlocking the potential of embedded finance 

Embedded finance will take centre stage in 2025 as its untapped potential remains vast. Beyond payments, we’re barely scraping the surface of the broader opportunities in embedded finance.  

Next year we can expect a surge in adoption across sectors like retail and hospitality, which have already started embedding services in previous years. However, even slow adopters like healthcare and construction will start seeing some traction in 2025. Platforms that develop tailored solutions for these sectors will stand out in the coming year. 

Access to capital will most likely be the fastest-growing segment of embedded finance. This is because small businesses, often excluded by traditional lenders, trust the platforms they already use. This creates an opportunity for embedded lending to provide flexible, personalised financing solutions, from short-term cash flow loans to long-term growth funding—something we started seeing already but that we can expect to fully take off next year as business owners from all demographics are becoming increasingly familiar with digital financial solutions.  

For platforms, embedded finance strengthens customer loyalty by solving real pain points while serving as a powerful revenue multiplier. 2025 will be a pivotal year for platforms that can deliver these solutions effectively. 

Kristaps Zips, UK CEO 

Another slow year for Open Banking  

In 2025, Open Banking adoption will remain sluggish, with progress continuing to be hampered by a lack of compelling, scalable use cases that resonate with consumers and businesses alike.   

There are glimmers of opportunity, particularly around Variable Recurring Payments (VRPs), for example, that could emerge as a breakthrough use case. Offering an efficient, secure, and flexible alternative to traditional payment methods, VRPs have the potential to demonstrate the real-world impact of Open Banking. As more businesses begin to explore its possibilities, VRPs might just pave the way for broader acceptance of Open Banking technologies, but whether this will be transformative enough to shift the needle industry-wide this year remains to be seen.   

Consumer hesitation, driven by ongoing concerns about privacy and security, will persist unless financial institutions and regulators double down on trust-building initiatives. Without greater collaboration and simplified implementation frameworks, many markets will likely see Open Banking relegated to niche applications, with broad adoption pushed further into the future.  

2025 will be a pivotal year for establishing the foundations of Open Banking's success or failure. We can expect greater investments in consumer education and targeted incentives but don’t anticipate a mass-market breakthrough, just yet.  

The vital role of financial literacy in preventing payments fraud  

Next year will bring increasing sophistication in fraud techniques, making financial literacy more crucial than ever in combating emerging threats like chargeback fraud. We expect that regulators and financial institutions will prioritise consumer education as a first line of defence, introducing tailored campaigns aimed at raising awareness around payment accountability and ethical behaviour.  

Friendly fraud, in particular, will remain a significant challenge. Merchants and financial institutions will ramp up efforts to implement fraud detection tools, but without stronger consumer engagement, the problem may intensify. In 2025, merchants will continue to face financial strain from unwarranted chargebacks, while consumers exploiting the system will further erode trust and increase costs for all parties.   

A unique challenge in the UK will be adapting to new APP (Authorised Push Payment) fraud rules. Under these regulations, payment firms must share the cost of reimbursing victims of APP scams, splitting the burden equally with the banks receiving the fraudulent funds. This shift could inspire a rethinking of the “faster payments” concept, potentially introducing delays in payment processing to allow time for suspicious transactions to be investigated. 

Ironically, the UK, a pioneer of real-time payments, may see a partial rollback of its Faster Payments System (FPS), which reduced interbank payment times from three working days to just seconds. Now, those three days, and potentially an additional day, could return as part of efforts to safeguard consumers and reduce the risk of APP fraud.

 Giving PSD3 the time it needs to thrive   

No regulation was implemented without delays and PSD3 won’t be any different. PSD3 development will encounter the inevitable delays that come with overhauling a complex regulatory framework. Key pain points—such as cross-border payments, data privacy, and integrating Central Bank Digital Currencies (CBDCs)—will slow progress, particularly for smaller players in the payments ecosystem.  

Stakeholders will need more time to iron out the technical and operational details, which means PSD3's development will likely be slower than expected this year. However, we predict a growing focus on collaboration between fintechs, banks, and regulators as they work to shape the future of payments.  

With that being said, by the end of 2025, we can expect significant strides in defining PSD3's role in fostering innovation and resilience across Europe’s payment systems. While the slow pace may frustrate some, next year will lay critical groundwork for long-term benefits that will ultimately transform the regulatory and operational landscape.  

Thekla Paschali, CTO   

Evolution, not revolution as technologies converge   

2025 will not be about chasing the next big thing but refining and enhancing the tools already in play. The year will be defined by the convergence of technologies like blockchain, AI, and mobile edge computing, working together to deliver smarter, faster, and more secure payment systems. For instance, decentralised identities powered by blockchain paired with AI-driven fraud detection are expected to gain traction, demonstrating how synergies can improve the customer experience while addressing compliance challenges.  

Central Bank Digital Currencies (CBDCs), such as the digital euro, will transition from theory to practice, becoming a central focus of payments innovation. However, their rise will underscore the importance of stronger security and compliance frameworks to ensure they are both effective and trusted.  

AI will continue to drive advancements such as instant onboarding through facial recognition, predictive fraud detection, and frictionless cross-border transactions. When combined with mobile edge computing, it could unlock transformative possibilities like real-time mobile authentication without centralised servers, delivering unprecedented speed and security.  

Yet these innovations come with risks. AI-generated fraud, deepfake scams, and increasingly sophisticated cyberattacks will test the resilience of even the most advanced systems.  

The year ahead will be defined by the interplay of convergence, improving the customer experience, and managing the challenges of compliance. Success will belong to those who master all three, using innovation not to disrupt but to refine and future-proof the payments landscape.  

Expect compliance congestion   

The regulatory landscape will grow even more complex in 2025, as overlapping mandates like PSD3, SEPA updates, and DORA converge. This "compliance congestion" will place immense pressure on providers to adapt quickly while maintaining seamless customer experiences.  

Phased rollouts or cooling-off periods from regulators may provide some relief, but the burden will remain significant. Companies that can manage this balancing act—integrating compliance into innovation will gain a competitive edge.  

Regulators themselves are on a learning curve, trying to keep pace with rapidly evolving technologies like AI and CBDCs. Businesses that lead by demonstrating proactive compliance solutions will influence the direction of regulation and stand out as leaders in the space.  

Shift diversity from tell to show   

The push for diversity in fintech will evolve in 2025, with a greater focus on showcasing tangible outcomes. Women and other underrepresented groups are stepping into leadership roles in high-impact areas. These leaders are setting examples and proving what’s possible in an industry historically dominated by one demographic.  

Showing rather than telling will take centre stage.   

Mentorship will remain crucial for empowering the next generation of fintech talent. Gen Z founders, for instance, are already challenging traditional barriers and bringing fresh perspectives to the table. With the right support and role models, this shift toward inclusion could accelerate meaningful, long-term change.