This is an excerpt from the Future of Payments 2025 report.
Will the future of payments be digital, instant and profitable? What is for certain in 2025 is that the payments industry will increasingly become complex and multi-faceted due to the sheer number of players entering the market. New rails will be leveraged
to settle a growing number of payments and new standards will be brought into play depending on the sector in which organisations are operating. In amongst all of this evolution, the real-time payments race is on.
However, an international payments network can only work efficiently with the right amount of friction – striking the balance between providing user friendly interfaces and preventing fraudsters from infiltrating processes is key.
For cash managers and treasurers worldwide, managing liquidity is first and foremost, so banks have remained sceptical about instant payments because of the higher relative levels of fraud that has been seen. To prevent this, banks and fintech firms should
work together with partners outside of the financial sector to reduce fraud by sharing data and through the development of instant payments. In 2025, we will see this virtuous circle come full circle.
When considering real-time payments, access to schemes are also a limiting factor because of the variety of governance and oversight coming to the fore. In April 2024, the EU’s Instant Payments Regulation entered into force, with European banks and payments
services providers (PSPs) having to comply with the first set of obligations by 9 January 2025. What this means is 2025 will be the first full year where all European banks and PSPs are mandated to offer instant euro transfers at the same cost as regular transfers,
and for banks to receive instant credit transfers.
Erwin Kulk, head of service development and management, EBA CLEARING, believes that instant payment volumes will indeed “increase significantly over the next few years, but only if customers experience instant payments as convenient and safe.” Moreover,
Daniel Hellmann, director, risk advisory, payments, Deloitte, concluded that in regards to the Instant Payment Regulation, challenges include:
- With IPR charges for SCT Inst will be capped to the charges for a SCT from 2025 onwards. SCT Inst will not be a premium service any more on which bank can earn, a cost-efficient operation of SCT Inst and SCT is a key challenge.
- SCT Inst as a commodity in retail and increasing adoption by corporates have an impact on liquidity management processes in banks. Banks need to learn to balance available funds for the processing of SCT Inst.
- Fraud is challenge. APPs scam are on the rise and banks need to ensure that payments are executed frictionlessly, ensuring proper customer security at the same time.
Another major challenge when attempting to implement instant payments, as Amelia Ruiz Heras, head of global solutions consulting, payments, Finastra, explained is the cost of maintaining real-time payment systems, especially for traditional banks that are
burdened with legacy infrastructure. Ruiz Heras said that “payments modernisation is a crucial prerequisite to ensure banks can effectively facilitate seamless, highly available transactions, and those not upgrading their capabilities to reduce total cost
of ownership and increase time to value may face significant challenges.”
Annalisa Ludwinski, head of correspondent network management, Investec, highlighted that “banks are already facing increasing regulatory demands, and the pressure for additional scheme access—especially in foreign jurisdictions— increases the need for governance
and controls. This can limit appetite to connect to all payment schemes, especially when there are domestic partners that provide excellent services offering almost real-time access at reasonable costs. Accessibility of schemes can also be an issue; not all
instant payment schemes are open to foreign players.”
Kevin Flood, director, FIS payments ecosystem strategy, corporate and international banking, FIS Global, added that part of the legacy technology challenge is that systems were built when batch and BACS payment methods were prevalent. This infrastructure
was “combined with the richness in data available with an MX ISO 20022 message, the challenge in trying to adapt these systems to be able to process 24/7/365 and within 10 seconds, is a heavy ask.
“Often we see that combined with legacy technology, these solutions are often at the heart of the bank and their processing, unpicking and replacing these elements is a complex and tricky operation, but one that can be done by taking the challenge and breaking
it down into the smallest part and start there – understanding and defining the outcome, allows for incremental steps to achieve it.”
Before 2025, financial institutions will need to ensure they are speed up their digitisation processes so that instant payments can be implemented, agility and time to value is increased, new business opportunities through value-added services and innovation
are pursued – at a reduced total cost of ownership.
The creation of real-time currency corridors, cross-border
In discussion with Samarth Bansal, general manager, Asia Pacific, Wise Platform, he explored the challenges associated with real-time payment adoption. Bansal explained that while outdated infrastructure and complex regulatory requirements continue to be
problems to overcome, these are “even more pronounced when you think about cross-border payments.”
He continued: “Banks were built to focus primarily on domestic use-cases. Later, with increasing globalisation, these banks stitched together international payments on top of this infrastructure. This legacy infrastructure makes international payments slow,
difficult to track and expensive for customers. With the backdrop of changing customer expectations, evolving regulatory requirements and new innovations in the payment space, banks are faced with the need to allocate considerable resources to revamp this
infrastructure.”
Katja Lehr, managing director, EMEA payments solutions, J.P. Morgan Payments, had a similar view. While most “real-time payments systems are built for local transactions,” examples where the “market has proven that we can interlink real-time payments systems”
– such as between Singapore and India – prove that “local systems need to be harmonised in order to enable seamless cross-border real-time payments.”
While EU standards are in place, other regions are at different stages of their instant payments infrastructure, but where real-time is a reality, the benefits are evident. Bansal said: “There is a long road ahead before instant cross-border payments will
become the global standard. We can get there through cross-collaboration between banks and fintechs and by the industry aiming for achieving the same speed, costs, and convenience that domestic payments offer.”
Ruiz Heras foresaw that a lack of interoperability will become more of an issue in the near future. Connecting domestic and cross-border instant payment rails, while at the same time, ensuring multiple correspondent banking relationships, maintaining KYC
requirements, and reducing friction is a colossal task.
Heras stated: “Institutions face diverse regulatory environments, time-zone differences, slow processing times, a lack of visibility and transparency in bank service fees, inconsistent payouts due to foreign exchange fluctuations, and growing sophistication
in fraud practices, all adding to the operational complexity of cross-border payments. Banks must also align with regional and country-specific regulations to avoid penalties for compliance breaches. Inconsistencies in licensing requirements, poor adherence
to data privacy laws and consumer protection rights, lapses in AML compliance, weak sanction screening and fraud measures can all result in loss of reputation, financial impact, and erosion of customer trust.”
How can the cross-border instant payments challenge be resolved? Instant payments schemes such as the One Leg Out (OLO) Instant Credit Transfer (OCT Inst), dedicated to international instant credit transfers provides the practices needed to achieve interoperability
for the provision of the Euro leg agreed by PSP within SEPA.
A OLO transaction is:
- a transaction in any possible currency under the condition that at least one of the two legs is denominated in EUR (Euro leg);
- an incoming or outgoing account-to-account-based credit transfer; and
- processed instantly on a 24/7/365 basis in the Euro leg.
The role of confirmation of payee in fraud prevention
The increasing maturity of financial crime is also an ongoing obstacle that the entire world has to come to terms with, let alone the entire financial services industry. With the growth in the number of real-time payments in 2025, the sector can expect a
surge in fraudulent transactions and/or false positives, both of which can have substantial impact on an organisation. Alongside real-time payments, real-time methods of preventing anti-money laundering and AI-powered transaction monitoring will need to be
established so that the risks associated with instant payments can be mitigated.
PPI AG’s Rose doubled down on this point and beyond technology, said that another key factor for reducing fraud is prioritising “data quality and data quantity. For fraud prevention software to work properly, it is paramount that the payments engine delivers
all the relevant data to downstream systems and not just the records it needs to process a transaction. Routing data, for example, can prevent many false positives. Furthermore, ISO 20022 will make fraud prevention easier since it will be possible to add potential
findings to the transaction before it is passed on to the next bank in line.”
Ruiz Heras added that the UK’s Confirmation of Payee (CoP) and the equivalent EU’s SEPA Verification of Payee (VoP) can help to address this evolving issue by “confirming the identity of the recipient of the funds. By adding an extra layer of verification,
they not only enhance the efficiency of payment processing but also bolster customer confidence in the banking system.”
CoP and VoP proves to consumers and businesses that the funds they are sending are going to the right account by verifying the name on the recipient account is the same individual or business that they want to sent the funds to. In 2025, types of fraud such
as account takeover (ATO) and authorised push payment (APP) will continue to spike, and Ruiz Heras explored how advanced technology can take the future of digital payments one step further.
For instance, phonetic fingerprinting “which leverages advanced phonetics and computational linguistics to match names, even when they’re misspelled, formatted differently, or in multiple languages,” Ruiz Heras explained. In turn, technology such as AI and
even generative AI also helps financial institutions to manage fraud attempts. AI models also “consider factors like transaction history, behavioural patterns, and contextual information, and can learn from user behaviour patterns, identifying deviations that
could indicate potential fraud.”
Bansal spoke about other AI subsets such as machine learning in addition to large language models (LLMs) and their “crucial role in the industry’s ability to scale efficiently and tackle fraud and other forms of financial crime. This is crucial as anti-fraud
measures need to align with evolving consumer behaviour, so the use of technology for effective detection and prevention helps.”
He continued: “Around a third of our global team, and nearly 25% of what we spend to run the company, is dedicated to fighting financial crime. This has been achieved by continuously enhancing our products and systems, particularly our ML models, to better
detect fraudulent activity. Our models learn on an ongoing basis, and this technology will be vital in the ongoing fight against fraud.”
However, as Kulk said, VoP is “not a silver bullet. It is one important element of the broader fraud-fighting toolset. In combination with other tools, including powerful individual anti-fraud capabilities and network-based insights on fraud pattern and
anomalies, Verification of Payee can help PSPs take their fight against fraud to the next level and get ready for the new instant payments reality.”
In Rose’s view, one of the biggest issues with the payments sector pre-2024 was the fact that there was no “central service available that solves the 1:n problem, meaning that each bank must be able to confirm every payee with every bank in the EU. Another
hurdle is the specification of the EU-specific confirmation of payee service, which is still not finalised. Despite being obliged to verify payees from 2025, banks and software providers are in risk of running out of time. Some technical details for bulk payments
also need to be clarified.”
According to Ludwinski, CoP is a crucial risk management tool for instant payments. “Asking the payee to cross-check the details and alert them to mismatches is positive, as it minimises the risk of errors and highlights potential fraud.” However, as Ludwinski
continued, the implementation can be complex.
“The rollout across the UK occurred in a phased manner, and a lack of public education caused some issues for smaller banks that were not involved in the initial launch, as consumers raised questions about why CoP couldn’t be facilitated due to different
and sometimes misleading communications from the CoP community. As SEPA VoP rolls out next year, standardising communications where a check cannot be completed due to not all banks being VoP compliant at the initial launch would be very beneficial, so as not
to cause consumer concerns or confusion.”
The real-time road to 2025: what’s next?
Rose summarised the events of 2024 and stated that the G20, in prioritising cross-border payments, has ensured that three initiatives are supercharged to spearhead an instant payments revolution:
- Payment system interoperability and extension
- Legal, regulatory, and supervisory frameworks, and
- Cross-border exchange and message standards.
She went on to say that: “Anything that contributes to the automation of payment processes in the future will make global real-time payments more attractive. Banks need to further develop their knowledge of how their customer base operates and how they can
provide value-added services. For example, banks can leverage the data they collect in payments transactions to act as an asset broker for customer identification and authorisation.”
The future, as Rose clarified, is in Request to Pay (RtP), which involves a payee initiating a request for a specific transaction from a payer. Rose said: “With RtP, it is possible to link invoices and payment transactions on the bank account which in turn
allows for easier reconciliation or additional financial offerings such as Supply Chain Finance or Buy Now, Pay Later.”
If payments are able to be interoperable, adhere to regulation and leverage digital cross-border message standards like ISO 20022, financial institutions will truly be able to keep pace with innovation, fraud prevention and customer service. Ruiz Heras explained
that “having a common language and more structured, richer data, facilitates interoperability and ensures seamless transactions between banks and corporates globally. Many cross-border instant payments schemes are utilising ISO 20022, and we can expect more
innovation and use cases to come, such as around overlay services like SEPA Request-toPay (SRTP) in Europe or Request for Payment (RFP) in the US.”