2025 Promises an Exciting Year Ahead for the Payments Sector
2025 is shaping up to be a pivotal year for the payments industry, with a myriad of regulatory changes, technological advancements, and strategic initiatives on the horizon. As the landscape becomes increasingly complex, businesses are gearing up to navigate the challenges and opportunities that lie ahead. In our Payments Outlook 2025, we delve into the key developments set to shape the future of the EU and UK payments industries.
Payment Services Regulation
The European Commission is set to debate a revised Payment Services Directive and new Payment Services Regulation later this year. Simultaneously, firms are racing against the clock to meet the EU Accessibility Act deadline, ensuring broad access to their payment services.
Banks in the eurozone are gearing up for the implementation of the Instant Payments Regulation. By October 9, 2025, they must be prepared to send and receive instant payment credit transfers in euro, along with conducting verification of payee for these transactions.
Managing Operational Incidents
Operational resilience is taking center stage, with new standards being embedded across payment firms. In the EU, compliance with the Digital Operational Resilience Act (DORA) is mandatory, necessitating updates to contracts with ICT providers and adherence to new incident reporting and data-sharing requirements.
In the UK, firms must stay within impact tolerances during severe disruptions starting from March 31, 2025. Regulators are working on developing an incident regime and new rules for reporting a register of material third-party arrangements.
The Future of Retail Payments
The landscape of retail payments in the UK and EU is evolving rapidly, with a diverse array of payment methods vying for dominance. While the UK’s National Payments Vision is championing account-to-account payments via Open Banking, the EU is leveraging regulations like the Instant Payments Regulation to drive innovation.
Both regions are adapting their regulatory frameworks to accommodate stablecoins, with the EU progressing with the Markets in Crypto-Assets Regulation (MICAR) and the UK planning its own cryptoasset regulation. Concurrently, central banks are exploring central bank digital currencies (CBDCs) to balance innovation with financial stability.
A North Star for UK Payments
The UK Government’s National Payments Vision outlines a bold future for the country’s payments ecosystem, underpinned by cutting-edge technology. The vision aims to modernize payments infrastructure, streamline regulations, unlock the potential of Open Banking, and fortify defenses against fraud.
A newly established Payments Vision Delivery Committee will propose enhancements to the Faster Payments System, with the Financial Conduct Authority (FCA) spearheading initiatives related to Open Banking and fraud prevention.
Rewriting the UK Safeguarding Regime
The FCA is set to introduce stringent safeguarding rules to elevate the standards for handling customer money by payment firms. Interim rules, expected to come into effect in autumn 2025, will introduce measures like reconciliations, external audits, and monthly regulatory returns, eventually evolving into a more prescriptive regime.
These rules will mandate that customer money be held on trust in designated accounts, with further consultations planned to refine the proposed safeguarding regime. Additionally, a review of the special administration regime for payments is underway.
Tackling Authorized Push Payment Scams
Authorized push payment fraud remains a pressing issue in the UK, prompting payment service providers to reimburse victims in specific circumstances. The Payment Systems Regulator (PSR) is gearing up to review this policy in 2025, while the FCA plans to evaluate how firms leverage new powers to delay suspicious payments. Concurrently, the UK government is urging tech and telecom providers to demonstrate efforts in reducing fraud levels.
Improving Consumer Duty Compliance
The FCA’s Consumer Duty, operational since 2024, aims to fortify consumer protection in UK financial services. As firms continue to integrate the Duty into their daily operations, FCA supervision will focus on enhancing transparency in FX pricing, among other areas.
In a recent assessment, the FCA found that only half of payment firms are satisfactorily compliant with the Duty. As the regulatory landscape evolves, firms must prioritize data quality, compliance reporting, and governance at the board level.
Explore our Payments Outlook 2025
Conclusion
In conclusion, 2025 holds immense promise and challenges for the payments sector. As businesses navigate the intricate web of regulatory changes, technological innovations, and customer expectations, staying ahead of the curve will be paramount. By embracing the evolving landscape, fostering innovation, and prioritizing consumer protection, the payments industry is poised for a transformative journey ahead.
Frequently Asked Questions
- What are the key regulatory developments shaping the payments industry in the EU and UK in 2025?
- The EU and UK are witnessing a slew of regulatory changes, including revisions to the Payment Services Directive, implementation of the Instant Payments Regulation, and updates to safeguarding rules.
- How are payment firms preparing for operational incidents in the EU and UK?
- Payment firms are embedding new operational resilience standards, complying with the Digital Operational Resilience Act (DORA) in the EU, and adhering to impact tolerances during disruptions in the UK.
- What initiatives are driving the future of retail payments in the UK and EU?
- The UK’s National Payments Vision is promoting account-to-account payments via Open Banking, while the EU is leveraging regulations like the Instant Payments Regulation to foster innovation.
- What safeguards are being put in place to combat authorized push payment scams in the UK?
- Payment service providers are required to reimburse victims in specific scenarios, with regulatory bodies conducting reviews to enhance fraud prevention measures and urging tech providers to bolster anti-fraud efforts.
- How is the FCA’s Consumer Duty enhancing consumer protection in UK financial services?
- The Consumer Duty mandates firms to improve data quality, evidence compliance, and demonstrate governance at the board level, with a focus on transparency in FX pricing.
- What are the implications of the UK Government’s Payments Vision for the country’s payments ecosystem?
- The Payments Vision aims to modernize infrastructure, streamline regulations, unlock Open Banking’s potential, and fortify defenses against fraud to establish a trusted, world-leading payments ecosystem.
- How are central banks in the UK and EU exploring the realm of central bank digital currencies (CBDCs)?
- The Bank of England and the European Central Bank are delving into CBDCs to balance innovation with financial stability, alongside regulatory efforts to accommodate stablecoins.
- How will the FCA’s new safeguarding rules impact payment firms in the UK?
- The FCA’s stringent safeguarding rules will elevate standards for handling customer money, with measures like reconciliations, external audits, and monthly regulatory returns, evolving into a more prescriptive regime.
- What measures are in place to ensure compliance with the EU Accessibility Act in the payments sector?
- Firms are working towards ensuring wide access to their payment services to comply with the EU Accessibility Act, as regulators gear up to debate a revised Payment Services Directive and new Payment Services Regulation.
- What steps are being taken to address operational incidents and disruptions in the payments sector in the UK and EU?
- Payment firms are upgrading their operational resilience standards, complying with regulatory acts like the Digital Operational Resilience Act (DORA) in the EU, and staying within impact tolerances during disruptions in the UK.
