Like a whirlwind, the first two months of 2025 seem to have disappeared into thin air, leaving barely any time to take in the gravity of the year so far. From Musk’s quest to slash government spending quelled, to supposed treaty talks between Russia and the US minus Ukraine, there have already some been significant global shifts.
On top of this, we hear considerations by the UK government to scrap the payments services regulator (PSR), while and it’s anyone’s guess what fresh hurdles March’s Spring forecast will bring with it.
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This unpredictability complicates any industry’s ability to forecast future developments. Nevertheless, it is necessary to have a glance at where payments technology is headed to be better prepared for tomorrow’s changing landscape.
Bulldozing regulations
Engaging with payments professionals about regulation can feel like describing water to a fish; it makes up the world we live in, so we don’t consider what it might be like should it ever disappear. That’s partly because the prospect of a world entirely devoid of regulatory frameworks seems implausible. Indeed, we have consistently observed an increase in both the quantity and intricacy of regulations—the forthcoming implementation of Payment Services Directive 3 (PSD3) and the prospective realignment of the existing safeguarding regime for customers both designed to feed into the bigger picture of the National Payments Vision.
Nevertheless, we may be on the brink of a shift in the prevailing regulatory terrain. The US government’s readiness to deploy tariffs as a means of exerting its influence worldwide, coupled with the Starmer administration’s attempts to navigate the delicate equilibrium between the US and the EU, may herald a loosening of regulatory constraints in the UK.
At present, Trump seems captivated by fleeting interests, such as questioning European preferences for non-American automobiles. However, it is entirely conceivable that his administration could redirect its focus onto more substantial matters, actively seeking to ease or eliminate regulations to favour US competitiveness.
Imagine a scenario in which Elon Musk introduces X as an all-encompassing ‘everything app,’ like China’s WeChat, in partnership with Visa to build an ‘app like a payments ecosystem’. Should this application conflict with existing EU and UK regulations, would Musk resign himself to the fact that 744 million potential users are inaccessible? More likely, he would capitalise on his substantial clout within the US government to advocate for alterations to European regulations. This situation prompts a vital question: under such pressures, will established companies continue to adhere to their regulatory commitments out of respect for their clientele, or will they abandon years of compliance to pursue cost savings?
Making way for Open Banking growth but giving it another name
This year has been designated as a ‘crucial turning point for Open Banking’, as noted by Open Banking Limited. With 11 million individuals engaging with Open Banking monthly in the UK, facilitating approximately 11.5 million transactions each month. The upcoming PSD3 is poised to refine Open Banking, potentially leading to a significant increase in user adoption.
But whatever happens in the Open Banking world, it won’t be called ‘Open Banking’. We have seen from our own research (the results of which will be published shortly) that the UK public, the end users of Open Banking, are quite ambivalent about Open Banking as a concept: only 5% say that being unable to use Open Banking payments negatively affects them while buying from UK businesses. We should see a much higher number if around 15% of the country is currently using Open Banking.
What explains the gap between enthusiasm and use? It’s simple: people are using Open Banking without knowing it – if these figures are right then it’s almost exactly two-thirds of Open Banking users. This means that Open Banking needs to remain an insiders-only term, something that we can use within the payments industry without making it public-facing.
Will digital wallets still reign in the future?
Currently, 20% of the British people regularly use their smartphone to pay for items in person, and 38% of online transactions were made with a mobile wallet. The industry consensus is that this number will grow, but let’s examine the assumptions here.
With 94% of all Britons owning a smartphone, many would argue there is a large potential market for mobile wallet apps – it has ‘space’ to more than triple in size. However, we’ve got to remember mobile wallets have been around for a decade, so it’s unlikely that the 74% of UK residents who own a smartphone but don’t use mobile payment apps haven’t heard of them.
The likely reason they’re not using them is security: it’s one thing to have access to your money on a plastic chip in your wallet, but quite another thing to have it on a device that’s always connected to the internet. Though digital wallet crime is rare, and very difficult to carry out without the wallet owner’s permission, people’s attitudes to their money’s safety is rarely fact-based and many people err on the side of caution.
What may move the needle on mobile wallet adoption is introducing more features to the apps than just payments. Whether this means a fully-featured super app (something that has been notoriously difficult to get off the ground outside of Asia) or something more minimalist, but still valuable such as airline-style points or discounts.
Take off for Account to Account (A2A) Payment
Account to Account, or A2A, is one of the places where Open Banking technology can find its way into the financial mainstream. Even though they don’t exclusively use Open Banking, A2A payments offer one of the key parts of Open Banking – direct push and pull payments from one account to another without existing card systems such as Mastercard or Visa.
There are currently a host of ways to make real-time payments, such as the transfer functionality in banking apps, but these are optimised for retail or online payments. Consumers don’t want to enter a shop’s account number and sort code when they’re making payments, so API hooks can be used to connect a customer’s account directly to the merchants.
What can we do to help with this take off? One of the few payments innovations that has really made a mark in recent years has been tap to pay, and it’s not hard to see why – everything you need to know is right there in the name and there’s no need for additional software or hardware to make it work. A2A may not be as simple – setting up a payment, particularly a subscription, could require two-factor identification or some other form of authentication, and if it requires apps to be downloaded then there will be even higher barrier for entry.
This brings us back to Elon Musk and X – since X Money Account is being developed in a US context, one of its key features is being able to send A2A payments, something that has always been difficult in the US, hence why there is an ecosystem of apps like Venmo and CashApp to do things that Europeans take for granted. He is partnering with Visa to deliver key functionality and, given that company’s reach and importance in the overall payments ecosystem, there is every reason to believe that these services will be available in Europe.
Finding the balance
Despite the current climate of rapid change and potential paradigm shifts, it’s a mistake to abandon the attempt to forecast future trends. Certain foundational elements remain consistent: the consumer’s desire for improved, uncomplicated functionality, the business’s pursuit of profit (often at the expense of regulatory burden), and the regulator’s commitment to consumer protection, even if it adds complexity. These core motivations will inevitably clash and converge, and by factoring in technological advancements and political currents, we can begin to forge forward.
Scott Dawson is CEO at DECTA
