In many ways, 2024 is ending with lots of unfinished business for the payments industry, with many issues remaining unresolved.
With several hot-button issues on the table — including open banking, fraud-mitigation and regulatory uncertainty — the stakes will be high for banks and their payments businesses in 2025.
Here are a few of the issues payments professionals expect to be top of mind for banks in the coming year:
AI-driven fraud
Phishing is getting more sophisticated as AI tools continue to improve. "I think we're really just at the tip of seeing what this technology is capable of," said Aaron McPherson, principal at AFM Consulting. The potential for deepfakes where scammers can capture someone's voice to solicit money from unsuspecting victims is upping the ante for banks, making it even more of a business imperative to invest in up-to-date fraud tools, McPherson said.
Earlier this year, The Financial Crimes Enforcement Network
The ability of a human to detect deepfakes is limited because the technology is so good, said Andrew Newell, chief scientific officer at iProov, which helps financial institutions and other entities combat identity fraud, account takeover and cybercrime.
In the past, banks may have been able to update threat-mitigation tools every six months, but, given the ever-moving threat landscape, weekly action is ideal, Newell said. While some forward-thinking banks are on top of this, many are still adjusting to the sea change. "It's simply not possible to build something in advance that can stop every type of deepfake," he said.
Faster payments
McPherson expects to see more merchants push for their banks to send faster payments. About a thousand banks are using
More businesses are likely to demand this capability in 2025 and "banks will feel the competitive pressure," he said.
Deborah Baxley, a member of the U.S. Payments Forum Steering Committee and partner at PayGility Advisors, also expects to see a continued expansion of pay-by-bank.
Regulatory developments
The incoming Trump administration means there's a lot in flux from a regulatory perspective that could impact banks, fintechs and the payments business collectively. "It's a fluid environment," said Brian Tate, president and chief executive of the Innovative Payments Association.
This includes appointments to head various agencies, including the
President-elect Donald Trump and congressional Republicans are also reportedly considering sweeping changes to the Consumer Financial Protection Bureau, as reported by the Washington Post. Sources told the Post that Trump transition team aides have started to consider candidates to lead the agency who would pare back its oversight.
"Everything is tied by a string. There are a lot of creative ideas that are waiting in the wings, but there's a lot of regulatory uncertainty out there," Tate said.
Open banking
Beyond the fate of the CFPB itself, some of its proposed rules are also in limbo. That includes a rule the agency finalized in October that gives consumers the right to instruct their banks to transfer their financial data to other institutions. That rule is being challenged by The Bank Policy Institute and Kentucky Bankers Association who claim the CFPB overstepped its authority.
Even if the rule stands, questions persist about liability in data-sharing situations, said Eric Grover, a principal at Intrepid Ventures, a corporate development and strategy consultancy advising payment issuers, networks and processors and other payments companies. It's not clear in the rule who would be responsible in the event of a data breach at the fintech the bank shares the information with at the customer's request. More guidance is needed to ensure banks aren't subject to large lawsuits where they don't have control of the data that's been shared at the customer's request, Grover said.
Supervision of nonbanks
The fate of another CFPB initiative also hangs in the balance. In November, the CFPB finalized a rule to supervise the largest nonbank companies offering digital funds transfer and payment wallet apps. This means some of the largest, well-known names in technology are subject to greater scrutiny at the federal level.
In their comments to the bureau,
Credit card interest rate caps
There are a wide range of interest rate caps for credit cards at the state level, but some lawmakers from both political parties have been calling for a federal cap on interest rates, ranging from 10% to 36%, Grover said. "We're in a curious place where we have people on both sides of the aisle calling for caps," he said.
It sounds great and consumer-friendly on its face, but it will have a chilling effect if enacted, Grover said. The industry should be aggressive about getting its point across that if rates are reduced dramatically, consumers will have less access to credit, he said. "I don't think banks and bank lobbying organizations can afford to be complacent."
Crypto and stablecoins
There's a lack of regulatory clarity around crypto and stablecoins and the
PayPal, Stripe, Ripple, Circle and J.P. Morgan Chase are among payment players that have made bets in this area. In October, Visa said it is launching a platform for banks to issue fiat-backed tokens such as stablecoins and tokenized deposits.
Credit Card Competition Act
A bill that would require credit cards to have
For banks, however, this would not be positive news. The measure would reduce banks' interchange revenue and make credit cards less competitive because banks wouldn't be able to afford costly rewards; in the European Union and Australia, banks had to come up with new approaches and it curtailed competition for bank-offered rewards, Baxley said.
