2025 is a year that promises to spark new possibilities and bring a fresh buzz to the payments services industry. Driven by a concoction of regulatory advancements and technological innovations, industry experts predict that the sector will undergo a significant transformation, as new directives and developments reshape the way payments are processed, secured and integrated across various industries. Here are the key trends to watch:

Instant payments

2025 is expected to mark the full-scale adoption of instant payments across the EU. The first deadline for payment service providers (PSPs) to enable the receipt of instant payments is set for January, with a second deadline in October requiring providers to also offer the ability to send instant payments. In addition, PSPs will be mandated to provide payment service users (PSUs) with a verification of payee service to enhance the security and reliability of instant transactions. These changes will make instant payments a standard offering throughout Europe, benefiting both consumers and businesses.

PSD3 and PSR

One of the key regulatory changes is the revised payment services directive (PSD3), which will modify how payment service providers are licensed and supervised. While many provisions from PSD2 are expected to remain in place, PSD3 will put more emphasis on the relationship between PSPs and supervisory authorities. Some requirements will change, but the most impactful elements of PSD2, such as those related to security and consumer protection, are expected to be more directly addressed under the new payment services regulation (PSR). Unlike PSD3, which focuses on the licensing and supervision of PSPs, the PSR will address the broader operational framework. The European Commission has described the PSR as an “evolution” rather than a “revolution,” but it will introduce important changes, particularly new liability rules in cases of fraud and enhanced open banking obligations. These changes aim to improve the security, transparency and efficiency of the payments ecosystem.

Furthermore, the PSR will impact access to payment systems by non-bank entities. By improving the accessibility and affordability of payment services, the PSR will open the door for more non-bank players to enter the payments market, encouraging greater competition and innovation, especially in the fintech sector.

Cross-border payments

As regulatory frameworks evolve, enhancing the efficiency of cross-border payments remains a key priority. Numerous initiatives are currently underway to reduce both the cost and time associated with cross-border transactions within the EU. Luxembourg, with its established reputation as a leading financial hub, is particularly well-positioned to benefit from innovations designed to streamline these transactions. As the EU continues to focus on accelerating payment processes and reducing associated costs, Luxembourg’s strategic role in the financial sector places it at the forefront of these developments.

Virtual Ibans

As cross-border payments are expected to become ubiquitous in the future, virtual international bank account numbers would gain traction as businesses seek more flexible solutions for international transactions. Virtual Ibans would enable companies to conduct cross-border payments without the need for physical bank accounts in foreign jurisdictions, offering greater operational flexibility and efficiency. This would be especially beneficial as global trade and commerce continue to digitalise and businesses increasingly demand faster, more streamlined payment methods.

Embedded finance and payments

Payments are becoming an integral part of many other applications, with the rise of embedded finance. Payment solutions are now seamlessly integrated into e-commerce platforms and fintech applications, creating a frictionless experience for consumers. The development of API-based payments and enhanced connectivity between financial and non-financial players is making embedded finance the new norm. This shift is expected to accelerate, driven by increasing consumer demand for seamless, integrated payment experiences.

Open banking

Open banking is set to see substantial growth, especially with the implementation of the revised interchange payment regulation (IPR) and the PSR, forecast the experts. These regulatory frameworks will allow open banking payments to reach their full potential by improving security, transparency and reducing fees. Additionally, the upcoming financial data access framework, expected to be adopted in the coming year, will pave the way for the shift from open banking to open finance, granting consumers access to a broader range of financial data and enabling more informed financial decisions.

Fraud prevention and cybersecurity

As the payments ecosystem becomes more digital, the need for advanced fraud prevention and cybersecurity measures has never been greater. Artificial intelligence and machine learning technologies are expected to play a significant role in detecting and preventing payment fraud. AI-driven solutions will be crucial in combating evolving threats, while new EU cybersecurity directives will impose stricter compliance requirements to ensure greater protection for digital transactions.

Digital euro / CBDC

Though the digital euro, a central bank digital currency (CBDC) backed by the European Central Bank, will not be available for public use in 2025, it is already undergoing testing for wholesale settlements to assess its operational viability. Experts predict that the rollout of the digital euro will be accompanied by comprehensive integration strategies and regulatory frameworks to ensure smooth adoption. This initiative is expected to lay the groundwork for the broader adoption of CBDCs across the EU, with Luxembourg playing a pivotal role in the transition.

Crypto payments and stablecoins

Unlike CBDCs, which are recognised as equivalent to legal currencies issued by central banks, cryptocurrencies (digital or virtual currencies that use cryptography for security) and stablecoins (cryptocurrencies pegged to stable assets like fiat currencies) are gaining traction for payments. Their adoption is expected to grow as regulatory frameworks evolve, particularly with the EU’s markets in crypto-assets (Mica) framework, which provides clearer guidelines for digital assets. Mica aims to regulate and legitimise the use of cryptocurrencies and stablecoins, experts say, offering businesses and consumers greater confidence in adopting crypto payments. As regulatory clarity increases and the digital asset market matures, the use of cryptocurrencies for everyday transactions is likely to rise, especially in regions like Luxembourg and across Europe.

AI and machine learning in payments

Finally, the use of AI and machine learning in payment systems is expected to continue evolving, unlocking new opportunities for personalisation, fraud detection and operational efficiency. AI technologies are already being deployed to tailor payment solutions to individual customer needs, and their role in enhancing the security and speed of payments will only grow. As these technologies mature, their integration into payment systems will become increasingly widespread, leading to a more secure, efficient and personalised payments experience.