2025 Predictions for the Payments and Banking Space

Cross-border payments will continue to dominate the payment space

We will continue to see growth in cross-border payments as international trade for both B2B and B2C continues to thrive. However, given the increased number of providers in the space and reduced growth rates, competition will intensify, putting prices and margins under pressure.

We’ll start to see more investment and innovation around B2B cross-border payments as providers of services start to address speed, cost and the opaqueness of such cross-border business payments. We will see transaction banking start to mimic consumer experiences and expectations.

Consumers expect instant payments in 2025

The focus on instant and real-time payments will continue to resonate with consumers’ expectations globally. This expectation must be met with the corresponding infrastructure across regions trying to keep pace. Cross-border commerce will also drive the demand for real-time payments with many people believing it is a key consumer requirement and product differentiator. Care must be taken regarding the expectations and level of investment made for B2B in this area, given that real-time payment rails were generally developed around consumer low transaction tickets – and for many companies their operational readiness is just not there. I predict we are at least 3-5 years out from this being a reality for B2B payments. Instead, optionality, redundancy, transparency, reliability, and value will resonate in B2B payments.

Real-time payments drive up cost of fraud

Although the advancement of technologies like data analytics and AI have and will enhance the whole payment ecosystem - from client experience to credit underwriting and ultimately, cost to serve -this technology is also being leveraged by global fraudsters. We have, and will continue to see, fraud increasing globally as the use of real-time payments continue. This cost will become a key topic for payment companies and banks alike because today, the client experience and product differentiation come from those entities that absorb the value on behalf of the impacted consumer. However, this is becoming financially challenging given margin.

Wallets will continue to gain traction in the consumer space and break into B2B

Wallets will continue to gain traction, and embedded functionality is set to increase. For example, built in BNPL, loyalty, cross-currencies accounts including bit- and stablecoins. Wallets in certain emerging markets, as well as for certain consumer groups, will become substitutes for bank accounts and given that many non-banking wallets have gained more traction this will be a challenge for many consumer banks – who I expect will be on the lookout to acquire successful wallets rich in functionality and with consumer traction.

These wallets, historically consumer proposition, will start to gain traction in the B2B space, initially focused on SMBs but migrating to medium businesses quickly. Given the lack of innovation and market distribution in B2B payments, I expect in ’25 to see some movement from both an investment perspective as well as a number of existing and new Fintechs entering the space.

Majority of central banks considering Central Bank Digital Currency (CBDC)

Finally, more than 90% of central banks are pursuing or considering CBDC projects – with 30 central banks having rolled out pilots in Australia, Brazil and France. Banks have yet to be disintermediated by these, but CBDC do provide additional benefits for consumers, who seem to be considering them as just another wallet and we will see them serve as an alternative to large but often opaque private sector stablecoins. An exciting space to watch or play a role in.

For further information, please contact: Claire.Gates@crownagentsbank.com