The payments landscape is undergoing a seismic shift, driven by rapid technological advancements and evolving consumer expectations. According to a recent survey by payabl., a leading European financial services provider, digital wallets and Open Banking are poised to dominate payments in 2025. With 82% of merchants anticipating a rise in digital wallet usage and 70% expecting Open Banking to gain momentum, the stage is set for a transformative era in the payments ecosystem.

The rise of Digital Wallets and Open Banking  

Digital wallets have been on an upward trajectory, spurred by their ability to provide seamless, secure transactions. "The convenience offered by digital wallets is reshaping consumer behavior," said Thekla Paschali, CTO of payabl. "We’re witnessing a shift where wallets are not just a payment tool but an integrated part of daily life, offering rewards, loyalty programs, and more."

Open Banking, another cornerstone of this transformation, empowers consumers by allowing them to share financial data securely and initiate instant bank transfers directly. As Paschali notes, "Open Banking represents a paradigm shift in how payments are conducted, enabling faster, more secure transactions while fostering innovation across the industry."

The survey also highlights other emerging payment methods. QR code payments (34%), Buy Now, Pay Later (BNPL) options (26%), cryptocurrencies (21%), and Central Bank Digital Currencies (CBDCs) (11%) are gaining traction as merchants adapt to an increasingly digital economy.

Driving forces behind innovation

The push for convenient and adaptable payment methods stems from consumer demand. According to the survey, 60% of merchants identified convenience as the primary driver of innovation, followed by technological advancements (53%) and regulatory changes (50%). "The payments industry is evolving to meet these demands, blending innovation with compliance to create user-friendly experiences," explained Paschali.

Strategic investments for future-proof payments  

To stay ahead, merchants are prioritizing investments in technology. A remarkable 66% plan to adopt artificial intelligence (AI) within the next year, leveraging it for fraud detection and payment optimization. Data analytics, embraced by 57% of respondents, offers valuable insights into consumer behavior, while 39% focus on API-based integrations to enhance payment system flexibility.

"AI and data analytics are becoming indispensable tools," Paschali said. "These technologies strengthen security and enable personalized, efficient payment experiences that build consumer trust."

Navigating industry challenges

Despite the optimism, significant challenges loom. Fraud prevention emerged as the top concern, cited by 66% of respondents, followed closely by regulatory compliance at 61%. Cybersecurity threats and the complexities of integrating new technologies like AI also pose hurdles.

"Merchants are navigating a complex landscape," Paschali commented. "The dual pressures of mitigating fraud and adhering to evolving regulations require robust strategies and collaboration across the industry."

The forthcoming SEPA Instant payment deadline on 9 January 2025 exemplifies these challenges. While instant payments promise to revolutionize the speed and efficiency of transactions, only 24% of respondents believe the industry will be fully prepared. "This underscores the urgency for all stakeholders to work together to ensure readiness," Paschali emphasized.

Emerging trends shaping the payments ecosystem

The survey identifies several key trends reshaping the industry. Instant payments lead the way, with 58% of respondents viewing them as the most transformational force. Regulatory changes, including PSD3 and anti-fraud measures, were highlighted by 52% as having a significant impact.

AI and machine learning continue to gain prominence, with 45% recognizing their role in driving innovation. Meanwhile, Open Banking (36%), BNPL (27%), and cross-border payments (25%) remain critical areas of focus. Emerging technologies like cryptocurrencies and digital assets (19%) are also beginning to influence the market.

"These trends reflect a dynamic industry at the crossroads of innovation and regulation," said Paschali. "Merchants must adapt quickly to remain competitive while embracing sustainable, secure practices."

Looking ahead: a collaborative future

As the payments landscape evolves, collaboration will be key. Paschali stressed the importance of partnerships among regulatory bodies, financial institutions, and merchants. "A unified approach is essential to navigate the complexities of modern payments and deliver innovative and compliant solutions."

Methodology and insights

The payabl. survey was conducted during MRC Amsterdam 2024, with input from 62 European merchants operating in the eCommerce space. Respondents ranged from C-level executives (15%) to technical specialists (13%), providing a comprehensive snapshot of industry perspectives.

These findings offer a roadmap for merchants and industry stakeholders to prepare for the future. By investing in technology, addressing regulatory challenges, and embracing emerging trends, the payments ecosystem is on the cusp of a transformative era. 

As Paschali aptly concluded, "The next few years will define the future of payments. Merchants prioritizing adaptability, security, and consumer-centric innovation will survive and thrive in this exciting new landscape."