Banks and payment companies will have no shortage of chances to expand their businesses, or risk losing ground to rivals in the coming year.
The industry faces rapid change on multiple fronts, including new political leadership in the U.S., emerging security risks, fast-changing product development methods, and the rapid maturation of innovation that was experimental as recently as last year.
Many of these challenges
New brains
Much of the work facing payment executives involves how to harness new forms of machine learning, which is evolving from experiments and testing to more formal deployments. Generative AI startups drew more than $25 billion in 2023 and were on pace to pass $40 billion in 2024, according to research from
"Looking ahead to 2025, we'll see AI play a pivotal role in product development and pricing by working as a co-pilot for financial institutions," said Bentzi Aviv, global head of fintech solutions at Amdocs. "By analyzing market trends and customer behavior, AI will enable managers to make more informed decisions and offer more personalized recommendations that better meet customer needs."
For fintechs, AI startups can provide a fast solution for banks looking to improve workflows while reducing IT deployment costs and time.
"Emerging trends like open banking and embedded finance will further integrate AI to create seamless, personalized financial services," said Pete Chapman, chief technology officer of challenger bank Grasshopper, adding bank/fintech partnerships will be key in driving this AI innovation, enabling banks to rapidly adopt cutting-edge solutions and stay competitive.
"I think more banks will partner with tech firms for AI than trying to develop their own large language models. Automation efficiency will drastically accelerate due to tools like AI, and I think you will see gaps grow in different banks' capabilities based on this," Chapman said. "We could look back in five years and see old-school community banks left even further behind."
Invisible payments
The race to capture corporate and consumer clients resides in the user experience, or making the point of sale and checkout seamless, or similar to
Embedded payments are financial products that are integrated into software or a platform, enabling customers to complete transactions without leaving an app or website.
As embedded payments continue to mature, new software will focus on additional fintech services like lending, invoicing, insurance, and cash-flow management, said Robert Anderson, a partner at FTV Capital. "Expect to see more specific solutions created to meet the exact needs of businesses utilizing real-time data and behavioral insights to drive adoption, increase customer loyalty and increase revenues," Anderson said.
Some of the more attractive areas with businesses that integrate directly into customers' accounting and business management systems to provide a seamless payment acceptance and back-office finance process, said Spencer Hurst, principal at LMP, a fintech investor.
"Businesses have shown a great deal of resilience and growth across different economic backdrops in the last four years, proving how mission-critical and sticky their offerings truly are," Hurst said.
Instant payments
Adoption of The Clearing House's RTP network and FedNow has been one of the biggest stories in the payments industry and promises to continue for at least the next few years.
While countries with government mandates such as Brazil and India outpace the U.S., there are signs that real-time payments are picking up steam here.
"In the U.S., we have made a lot of progress around instant payments and have seen significant growth, which we expect to continue into the new year," said Sal Karakaplan, chief strategy officer at TCH. TCH notes increasing use cases around account-to-account (A2A) and person-to-person (P2P) transfers, such as digital wallets, disbursement-based use cases related to insurance, and instant payment transaction volume associated with real-time wage access.
A few emerging use cases include merchant settlement, which allows small businesses to settle payments much faster, and instant loan settlement, which benefits end customers, Karakaplan said. For example, when purchasing a vehicle using instant loan settlement, purchasers can immediately receive loans from their bank to pay their car dealer. In early December, TCH also announced an increase to a
"The evolution of instant payments is essential as it provides ease of use for end customers and increases the efficiency of the businesses that leverage them by streamlining the payment process to have fewer returns and less work on the back end," Karakaplan said.
Data sharing
Open banking, or the use of data sharing to enable users to access third parties through their bank relationships, has been the subject of controversy as regulations around open banking remain fluid.
Work necessary to follow the Consumer Financial Protection Bureau's
"Open banking has been driven by market forces in this economy for a while, and now, we will see further adoption of open banking as banks provide tools for aggregators and data recipients," he said.
Many parties touch end users' credentials that are provided by banks through application programming interfaces, so security is still an issue, Karakaplan said.
"When open banking and security come together, there will be an increased demand for tokenizing account information," he said, referring to the practice of replacing card numbers with substitutes that are unusable if stolen. "Once tokenized, these accounts are much safer. As we continue to see the trend of tokenization of card credentials, we will start seeing it in the tokenization of DDA credentials."
Bringing it all together
"Payments orchestration not only addresses these demands but also lays the groundwork for leveraging advanced AI capabilities," Grisham said. "With artificial intelligence integrated into orchestration platforms, businesses can analyze patterns, predict payee preferences, and streamline payouts, enabling personalized, real-time disbursements to millions worldwide."
Sharing economy
About half of U.S. workers earn income through contract, freelance or other forms of "gig economy" work, according to MBO Partners. The evolution toward smart payment routing, which is part of payments orchestration, is vital as the global workforce undergoes a seismic shift, according to Grisham.
"On-demand work requires on-demand pay," Grisham said. "Speed, flexibility, and reliability in payouts increasingly influence how gig workers choose jobs and where they remain loyal. Payments orchestration provides businesses with the tools to adapt to this reality, future-proofing their payouts infrastructure for a workforce that demands speed and personalization."
Digital assets
With its boom-and-bust cycles, crypto is always a moving target, though the incoming Trump administration's
"In 2025, we will see a heavy emphasis on crypto and tokenization," said Adrian Mendoza, a fintech investor. "We will see financial institutions trying to play catch up as more coins and tokens come to market and banks try to find a way to monetize these efforts, such as offering crypto products, be crypto custodians, and decide which platforms they can acquire to offer services," he said.
This will create hype that will overshadow AI efforts as banks try to catch up to the crypto wave, according to Mendoza.
Friends or foes?
Bank/fintech partnerships have been a challenge, as firms on both sides decide on how much of their proprietary posture to cede and how to manage third-party risk and compliance in the name of speed to market.
"Over the past year, stricter regulations drove financial institutions to view fintech in a different light. Some looked to fintechs to solve various pain points, especially around compliance," said Deniz Johnson, chief operating officer of Stratyfy, a financial technology company.
In 2025 and beyond, Johnson expects community banks to lean on fintech partnerships to keep pace with the larger institutions that have the resources and manpower to innovate in-house.
"With its proliferation across more industries than ever, AI adoption will be fundamental for financial institutions to stay relevant and create new openings for greater innovation. However, financial institutions will also need to adopt their own strategies for developing and implementing AI to ensure proper guardrails and protect against risk," Johnson said.
Security
While the rates of
The growing sophistication of AI tools is also enabling scammers and fraudsters to exploit the weakest link in cybersecurity — humans — by targeting evolving payment trends, posing significant challenges for the financial industry, according to Galia Beer-Gabel, a partner at Team8, a fintech investor.
The increasing adoption of account-to-account payments and the broader use of real-time payments demonstrate customers' demand for fast, low-friction payment experiences, according to Beer-Gabel. However, these trends also expose a critical vulnerability: victims of financial scams often have little recourse to reverse instant payments once they are transferred to fraudsters.
"In 2025, this represents a critical vulnerability that current solutions fail to adequately address. The combination of insufficient protection, the ever-growing sophistication of fraudsters, and the emergence of advanced AI tools creates a prime opportunity for innovation and disruption," she said.
