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Perspectives
Shaping the future of payments
Trends and insights for 2025
The payments industry is rapidly evolving, with a key focus on enhancing customer payment experiences for easier, safer transactions. Explore five key trends that are expected to further leverage the payments halo effect over the next year.
Five payment trends to follow
In Deloitte’s 2021 report, The evolution of the payments value model, we highlighted the payments “halo effect” and predicted that the payments ecosystem would shift to compete for value based on why and how consumers make a payment. Today, we’re starting to see this reality take form as businesses, including those in banking and capital markets, embed various payment options into their checkout experiences to build the future of banking.
The payments industry continues to experience rapid change, with new players emerging and aiming to enhance the customer payment experience by providing more options for easier, safer transactions. Over the next year, we expect five trends to contribute toward the ecosystem’s ability to take further advantage of the payments halo effect and help businesses bank on a prosperous future.
Popularity of digital payment options
Consumers are increasingly favoring digital payment options such as credit cards, peer-to-peer (P2P) transactions, and other digital options over traditional checks and cash. Check transactions are significantly decreasing, with major retailers like Target and Whole Foods moving toward a "check zero" future to reduce costs and mitigate fraud risks.
On the other hand, e-commerce volumes are surging, with global sales projected to reach $6.3 trillion by the end of 2024. Digital payment options, including credit and debit cards and P2P transactions, are becoming more prevalent: P2P payments app usage has increased by 12% since 2021, while cash and check P2P transactions have decreased.
At the business-to-business (B2B) level, the shift toward digital payments is accelerating due to consumer preferences, cost efficiencies, and technological innovations, signaling the eventual obsolescence of checks in consumer transactions. However, checks still hold importance in B2B transactions, though digital alternatives are being explored in an attempt to reduce costs.
Third-party partnerships
In 2024, banking regulators expanded their oversight, significantly impacting nonbank financial companies (NBFCs) in the payments sector. This increased supervision, driven by consumer protection channels, requires NBFCs to adjust their risk cultures and compliance frameworks. On top of that, this shift follows the Consumer Financial Protection Bureau’s (CFPB) proposed open banking rule in October 2023, aimed at enhancing competitive consumer offerings.
As financial regulators adapt their programs to better fit the evolving market, NBFCs and banks partnering with third parties must evaluate their capabilities. Banks are likely to exercise caution in partnerships, ensuring third parties meet supervisory demands. Third parties relying on banking partners will feel the downstream effects of formal enforcement actions, particularly regarding anti-money laundering and consumer protections.
The expanded regulation of payments players is a persistent theme, with regulators seeking greater clarity and refining their scope around NBFCs and innovative banking products. Providers must prepare for compliance costs and cultural shifts, as those with scale and diverse offerings are better equipped to handle these changes while others may exit the market.
Buy now, pay later
Even as US inflation rates decrease, they continue to pressure consumer spending habits, prompting many to seek new and innovative payment options for personal expenses, especially in nondiscretionary areas like transportation, housing, utilities, and groceries. To assist consumers with these rising costs, Buy Now, Pay Later (BNPL) firms are expanding into new sectors where most of the average household spending occurs. In turn, BNPL providers are now offering higher spending limits, such as Affirm's $20,000 and PayPal's $10,000 limits, enabling consumers to finance larger purchases at low interest rates.
Initially, BNPL flourished with minimal oversight due to its innovative nature, which did not fit traditional regulations. However, back in May, the CFPB's interpretive rule released new mandates that BNPL lenders offer the same protections as conventional credit cards, increasing operational costs for providers but also protecting consumers. This regulatory shift creates a strategic advantage for banks accustomed to regulatory scrutiny.
Given the demand for low-interest financing, a large consumer market, and the influx of banks offering BNPL, the use of Buy Now, Pay Later features is expected to grow. Financial institutions that do not already offer said products should consider introducing these payments capabilities, particularly in areas of nondiscretionary spending where consumers are still feeling the effects of inflation.
Integrated payment options
Small and midsize business (SMB) merchants are increasingly turning to Integrated Software Vendors (ISVs) for operational simplicity and pre-integrated payment solutions, including popular digital wallets. ISVs provide comprehensive, all-in-one solutions that streamline operations and enhance efficiency, differentiating from traditional point-of-sale solutions by offering a larger digital suite.
Consumers are also favoring digital wallets, and the popularity of such has increased competition among providers and pushed merchants to offer innovative payment options. With 70% of consumers indicating that their preferred payment option influences their choice of online stores, merchants are incentivized to integrate these options.
To succeed in the digital payments space, providers must innovate based on market conditions. For instance, a 2024 EU regulatory ruling allowed Apple to enable third-party developers to use its NFC technology for digital wallets, removing the requirement to use Apple Pay and Apple Wallet. Social media platforms like Meta are also capitalizing on digital payment trends, requiring US merchants to use Checkout on Facebook and Instagram for an integrated shopping experience.
Utilizing GenAI to minimize fraud
As AI adoption accelerates, its impact on the payments industry is particularly notable in fraud models. AI is used by both fraudsters looking to enhance scams and financial institutions for detection and prevention.
Financial institutions are leveraging AI, including Generative AI (GenAI), to develop faster detection models and gain insights into emerging fraud trends. Early adopters like Visa and Mastercard have seen significant success, and now 83% of financial institutions are considering GenAI for enhancing fraud-fighting capabilities, improving fraud detection, and minimizing false positives.
Given that a key component in AI-driven fraud detection is the integrity and accuracy of a customer’s digital identity, financial institutions are also enhancing personalized insights for customers, such as spending patterns and forecasts. For instance, Capital One’s virtual assistant "Eno" can flag potential errors on tips and alert customers to unusually high recurring payments. Wells Fargo integrates Google’s Dialogflow for chatbots that provide insights into spending patterns and unusual activity. These personalized insights aid in behavioral analysis within fraud models, helping determine the likelihood of a customer making a certain transaction.
The path forward
In setting future strategies, payments leaders must, at a minimum, focus on personalizing product design and the insights delivered, reinforcing their firm's core strengths in scale and security, and ensuring their payment services align with consumer spending preferences. The shifting market environment—encompassing regulatory, economic, and technological changes—will influence how consumers and merchants perceive payments.
Our Shaping the future of payments: Trends and insights for 2025 offers a closer look at the critical juncture in the competitive payments landscape, including insight into how payments leaders are working to differentiate themselves to both merchants and end consumers.
Get in touch
Zachary Aron Principal Deloitte Consulting LLP zaron@deloitte.com |
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John Graetz Principal Deloitte & Touche LLP jgraetz@deloitte.com |
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Ulrike Guigui Managing Director Deloitte Consulting LLP uguigui@deloitte.com |
Lauren Holohan Principal Deloitte Consulting LLP lholohan@deloitte.com |
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Satish Lalchand Principal Deloitte Transactions and Business Analytics LLP slalchand@deloitte.com |
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