Payabl. Executives Outline Payments Challenges for 2025

The payments industry faces significant change in 2025 as digital wallets emerge as the dominant payment method and embedded finance expands beyond retail, according to executives at payabl., the European payment solutions provider.

Consumer convenience is reshaping payment innovation, with merchants integrating digital wallets into checkout systems alongside Buy Now, Pay Later (BNPL) services and QR code payments.

“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,” says Ugne Buraciene, Group CEO at payabl. 

“Just as AI can strengthen business defences, it can also embolden fraudsters. Staying ahead will require more than just buying the latest tool available.”

The shift towards instant payments presents both opportunities and challenges. More than half of payment firms expect instant payments to create significant industry impact, yet only a quarter believe the sector will be prepared for the SEPA Instant deadline in January (SEPA Instant enables real-time transfers between European bank accounts). 

Embedded finance expansion

The potential for embedded finance remains largely untapped, particularly beyond payment services. 

The sector is poised for growth in retail and hospitality, where businesses have already begun integrating financial services into their platforms. The healthcare and construction sectors are expected to follow in 2025.

Access to capital through embedded finance platforms is emerging as a growth area. Small businesses, often excluded from traditional lending, are increasingly turning to trusted digital platforms for financing solutions. These range from short-term cash flow support to long-term growth funding.

For platforms offering these services, embedded finance strengthens customer loyalty by solving real pain points while serving as a powerful revenue multiplier. 

The success of these initiatives depends on the effective delivery and integration of financial services into existing business operations.

Regulatory and security challenges

The implementation of PSD3, the European Union's third Payment Services Directive, faces delays as stakeholders grapple with cross-border payments, data privacy requirements and integration of Central Bank Digital Currencies (CBDCs). 

Businesses that lead by demonstrating proactive compliance solutions will influence the direction of regulation as authorities navigate rapidly evolving technologies.

“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,” says Kristaps Zips, UK CEO at payabl. 

“Offering an efficient, secure, and flexible alternative to traditional payment methods, VRPs have the potential to demonstrate the real-world impact of Open Banking.”

In the UK, new Authorised Push Payment fraud rules require payment firms to split victim reimbursement costs with receiving banks. 

The UK's Faster Payments System, which reduced interbank payment times from three working days to just seconds, may see additional delays introduced as part of efforts to safeguard consumers and reduce fraud risk.

In 2025, financial literacy will become increasingly crucial in combating emerging threats like chargeback fraud, where consumers dispute legitimate transactions. Merchants face financial strain from unwarranted chargebacks, which erode trust and increase costs for all parties.

Technology and innovation

“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,” says Thekla Paschali, CTO at payabl. 

“Central Bank Digital Currencies, such as the digital euro, will transition from theory to practice, becoming a central focus of payments innovation.”

Decentralised identities powered by blockchain paired with AI-driven fraud detection are expected to gain traction. 

AI advances will enable instant onboarding through facial recognition, predictive fraud detection, and frictionless cross-border transactions when combined with mobile edge computing. 

Yet these innovations come with risks, as AI-generated fraud, deepfake scams, and sophisticated cyberattacks will test system resilience.

The regulatory landscape is becoming more complex as overlapping mandates converge. PSD3, SEPA updates, and the Digital Operational Resilience Act (DORA), which sets cybersecurity requirements for financial firms, will create pressure on providers to adapt while maintaining service quality. 

Regulators may introduce phased rollouts or cooling-off periods to ease implementation pressures.

Industry diversity

The push for diversity in fintech will evolve in 2025, with women and other underrepresented groups stepping into leadership roles, proving what's possible in an industry historically dominated by one demographic. Showing rather than telling will take centre stage.

What’s more, mentorship will remain crucial for empowering the next generation of fintech talent. Gen Z founders are expected to challenge traditional barriers and bring fresh perspectives to the sector.

“The year ahead will be defined by the interplay of convergence, improving the customer experience, and managing the challenges of compliance,” says Thekla. 

“Success will belong to those who master all three, using innovation to refine and future-proof the payments landscape.”

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