Deloitte: Shaping the Future of Payments

The payments industry is evolving rapidly, propelled by technological advancements, shifting consumer preferences, and regulatory changes. Deloitte’s 2024 report, Shaping the Future of Payments: Trends and Insights for 2025, identifies five pivotal trends shaping the future of payments.

Deloitte’s Key Findings

1. Cash Finds Its Floor

   The decline in cash usage persists as digital payments dominate. Data from the Federal Reserve shows a 7.4% year-on-year reduction in cheque transactions in Q1 2024. Consumers are increasingly adopting credit cards, peer-to-peer (P2P) payments, and Automated Clearing House (ACH) transfers, signalling a broader shift to digital payment methods.

2. Regulators Bring Nonbanks Into the Fold

   Regulatory authorities are expanding their oversight to include nonbank financial companies (NBFCs). The Consumer Financial Protection Bureau (CFPB) has proposed new rules to strengthen consumer protection and privacy. This move is prompting NBFCs to invest in compliance frameworks to remain competitive, while some may exit the market due to increased regulatory demands.

3. Buy Now, Pay Later (BNPL) Expands Across Sectors

   BNPL services are extending into essential sectors such as housing, utilities, groceries, and travel, fuelled by inflationary pressures and a demand for flexible payment options. Financial institutions are leveraging their expertise in regulatory compliance to capitalise on this growing market.

4. Integrated Software Vendors (ISVs) Strengthen Their Grip on SMEs

   Small and medium-sized enterprises (SMEs) are increasingly relying on ISVs for integrated solutions that streamline operations and improve payment capabilities. ISVs offer pre-integrated payment systems, including popular digital wallets, aligning with consumer preferences and helping businesses stay competitive.

5. AI Drives Fraud Prevention to New Heights

   Artificial intelligence (AI) is transforming fraud detection and prevention within the payments ecosystem. By deploying AI-driven models, financial institutions are analysing consumer behaviour, identifying fraud patterns, and reducing false positives. These innovations enhance security while maintaining a seamless payment experience for users.

How Compliance and Risk Teams Must Adapt

To succeed in this dynamic landscape, financial institutions should:

• Invest in Advanced Fraud Prevention
  Leverage AI-driven solutions to proactively detect and mitigate fraud, ensuring robust security measures are in place.
• Adopt Global Payment Standards
  Embrace standards like ISO 20022 to improve data quality, operational efficiency, and interoperability in payment systems.
• Harness Emerging Technologies
  Utilise innovations such as AI and digital wallets to enhance operational efficiency, meet consumer expectations, and maintain competitive advantage.