Digital payment trends to watch in 2025

Exploring how digital payment solutions are shaping the future of real-time transactions, fraud prevention, and consumer trust in 2025.

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From contactless payments to real-time transactions, and with fraud prevention and consumer trust becoming ever more critical, the digital payment landscape is evolving rapidly. For businesses aiming to optimise their payment systems and consumers seeking secure and seamless financial management, understanding these changes is crucial.

While many industry news outlets, payment providers, and companies have shared their predictions for the year ahead, we at Fire wanted to bring our perspective to the conversation. Drawing from our expertise in payments innovation, we’ve identified the key trends set to shape the payment landscape in Ireland and the UK in 2025.

This post will explore the digital payment solutions and trends that are redefining how businesses and consumers approach payments in the coming year.

Real-time payments (RTPs) and instant payments take centre stage

Digital payment solutions, like all digital services, are increasingly pressured to deliver greater speed and convenience to consumers. One key development gaining attention is the rise of real-time payments (RTPs).

Unlike traditional bank transfers, which can take several days to process, RTPs enable funds to be transferred instantly or nearly instantly between accounts, even across different financial institutions.

In the UK, the existing Faster Payments System continues to support rapid transfers, reinforcing the growth of real-time payment adoption.

Meanwhile, in the EU, the Instant Payments Regulation introduces significant changes. By January 2025, all Payment Service Providers (PSPs) must enable the receipt of instant payments, and by October 2025, they must support sending SEPA instant payments. These requirements will have a profound impact on the payments landscape, particularly in Ireland.

While the mandate currently applies only to major banks and will not extend to Payment Institutions and eMoney Issuers until 2027, Fire is committed to implementing SEPA Instant Credit Transfers in line with the earlier timelines. We believe offering real-time payment capabilities is essential for delivering a higher-quality service to our customers and maintaining a leading position in payment innovation.

Impact of real-time payments on businesses

The ability for businesses to receive account-based payments in real time is set to transform the payments landscape and redefine approaches to digital payment solutions. Real-time payments (RTPs) offer numerous advantages to businesses, including:

• Faster access to funds;
• Improved cash flow;
• Reduced reconciliation efforts;
• Enhanced customer experience, as consumers benefit from quicker settlements and a more seamless payment process.

This shift is particularly beneficial for smaller businesses or those with limited cash reserves, as they rely on rapid payments to maintain steady cash flow. It also benefits payment providers with disbursement models, such as tipping platforms or payroll service providers. These providers can now receive and pay out funds instantly, offering faster settlement and a higher quality of service to their customers.

Security innovations in digital payments

Enhanced fraud prevention

We believe that a multi-layered approach to fraud prevention will be the key theme extending from 2024 into 2025. This includes the need for cross-sector collaboration, as highlighted by both the UK’s National Payments Vision and Ireland’s National Payment Strategy. Early and effective fraud prevention requires a unified effort from telecommunications companies, financial institutions, online platforms, and regulatory bodies. A collaborative approach is essential to address the root causes of fraud and build a more secure payment ecosystem.

Another trend that will continue is the growth of account name checking services, which actively help prevent fraud. In 2024, Confirmation of Payee was mandated for all Payment Service Providers in the UK. This service checks the payee’s name against the actual name on the account and warns the payer if there is a mismatch. In 2025, the rollout of the EU’s Verification of Payee (VoP), a similar service, will be a crucial step in establishing a secure foundation for instant SEPA credit transfers.

Tokenisation and encryption

Digital payment solutions use tokenisation and encryption to keep sensitive payment data, such as a card number, secure. This is essential for data protection and enhanced fraud prevention.

How do these security solutions work?

• Tokenisation replaces the data with a unique token, avoiding exposure of sensitive data to bad actors.
• Encryption protects data while it is being transmitted so that an unauthorised party cannot read it.

The payments industry has improved security thanks to these capabilities. For instance, network tokenisation enables the use of virtual card representations without exposing sensitive card details. This approach has been proven to reduce fraud rates in ecommerce payments. Additionally, other forms of tokenisation and encryption are expected to become even more prevalent in digital payment solutions in the coming years.

Consumer confidence

Biometric authentication, such as fingerprint and facial recognition, is becoming increasingly popular. When it comes to payment authentication, it offers a powerful combination of security and convenience.

We expect biometric authentication to continue growing in popularity in 2025, further building consumer trust in digital payments. The ease of use, combined with strong security, makes biometrics a key driver for the wider adoption of digital payment solutions.

The rise of contactless payments

Contactless payments have become a staple for everyday transactions, particularly for smaller, routine purchases. Both the UK and Ireland boast some of the highest contactless payment adoption rates in Europe.

Although their popularity was already steadily increasing before COVID-19 – driven by convenience and faster transaction times – health and safety concerns during the outbreak significantly accelerated adoption. This shift in consumer behaviour appears to be permanent, with countries like the UK and Ireland leading the way in contactless adoption across Europe.

Higher spending limits, such as the £100 cap in the UK, have contributed to the growth of contactless payments. The recent announcement by the Financial Conduct Authority (FCA), planning to remove this limit entirely will likely further accelerate this trend. This decision aims to align regulations with the evolving digital landscape, where digital wallets with enhanced security features like biometric authentication already operate without fixed spending limits. This move is expected to provide greater flexibility for both consumers and businesses, fostering a more seamless and convenient payment experience.

Mobile wallet adoption

Mobile wallets allow consumers to store payment information such as credit and debit card details, loyalty cards, and digital documents like boarding passes. Using Near Field Communication (NFC) technology, digital payment solutions like Google Pay and Apple Pay enable users to make contactless payments directly from their mobile devices.

Mobile wallets provide peace of mind through enhanced security features, including encryption, tokenisation, and biometric authentication. They also offer a convenient and organised way for digital consumers to access their payment methods, loyalty cards, and important documents – all from their mobile phone.

Studies show a significant shift towards mobile wallet usage for contactless payments, with mobile wallets surpassing card payments for the first time in Ireland in June 2024. This trend is expected to continue in 2025, driven by the convenience and security offered by mobile wallets.

Why contactless payments remain a top choice

While the pandemic is behind us, the numerous benefits of contactless payments ensure they remain a preferred choice for consumers and businesses alike.

• Speed: Contactless payments save valuable time compared to chip-and-PIN or cash transactions, making them ideal for fast-paced environments.
• Convenience: The seamless “tap-and-go” functionality provides a quick and efficient digital payment solution, helping businesses boost conversion rates by reducing friction at checkout.
• Security: Encryption and tokenisation protect transaction data, resulting in relatively low fraud rates compared to other payment methods.
• Mobile wallets: Contactless technology powers mobile wallets like Apple Pay and Google Pay, offering enhanced security features such as biometric authentication for added protection.
• Hygiene: Minimising physical contact with payment terminals continues to be a key advantage, especially valued in a post-pandemic world.

Adoption of contactless payments across industries

Contactless payments have seamlessly integrated into a wide range of industries, enhancing convenience and efficiency.

• Retail: From supermarkets and independent shops to high-street chains, contactless payments have achieved widespread acceptance, transforming everyday shopping experiences.
• Transport: Streamlined travel is now the norm, with contactless payments enabling quick and convenient access to public transport systems like London’s Underground.
• Hospitality: Restaurants, cafes, and pubs have embraced contactless payments, catering to customer preferences for speed and simplicity.
• Small businesses and vendors: Market vendors and independent traders can now easily accept contactless payments, thanks to affordable payment terminals and mobile point-of-sale (mPOS) solutions.

The future of contactless payments in 2025

Near-universal acceptance

Contactless payments are set to maintain their strong growth trajectory in 2025, with broader adoption across industries. This will further solidify contactless as the preferred method for in-person transactions, offering speed and convenience for both consumers and businesses.

Focus on accessibility

Efforts will continue to ensure that contactless payments are accessible to all demographics, including elderly and vulnerable populations, reducing barriers and promoting financial inclusion.

Rise of mobile wallets

According to data from the Banking & Payments Federation Ireland (BPFI), mobile wallets are becoming an increasingly popular choice for contactless transactions. This trend is expected to accelerate in 2025, driven by convenience and enhanced security features.

Strengthened security measures

Advancements in fraud detection, particularly through AI-powered solutions, and the growing use of biometric authentication will play a key role in protecting businesses and consumers from fraud, further boosting trust in digital payment solutions like contactless payments.

Open banking and API integration

What is open banking?

Open banking is a framework that enables third-party providers of payment and financial services to securely access and share account details, with the customer’s explicit consent and authorisation. It supports the development of innovative financial solutions, such as open banking payments, which allow businesses to receive payments by initiating a bank transfer directly from the customer’s chosen account provider.

• Payment initiation services (PISPs): These services, enabled by open banking, allow third-party providers to initiate payments directly from a customer’s bank account with their explicit consent.
• Account information services (AISPs): These services allow third-party providers to access a customer’s account information (with consent) to provide services like account aggregation, financial management tools, and personalised financial advice.

API-driven payments

APIs are the technical backbone of open banking. They enable secure and standardised communication between third-party providers that allow us to share customer data, with their explicit consent, and use it to provide services.

How open banking is changing payments

Open banking payments offer a compelling digital payment solution for both merchants and consumers in the right situations. They enhance the user experience and control that have been missing from traditionally cumbersome bank transfers, are considered cost-effective for merchants, and allow consumers to authenticate payments using Strong Customer Authentication (SCA) through their own account provider – all without the need to input or store card details with third parties.

Emerging use cases for single open banking payments have already seen sectors such as e-commerce, iGaming, charities, and more successfully adopt open banking as an innovative way to receive payments.

The future of open banking in 2025

Commercial Variable Recurring Payments (cVRPs) will unlock new sectors and use cases in 2025, enabling merchants to set up mandates for automated recurring payments from customers’ chosen account providers, with consent and within agreed parameters. While these innovations are on the horizon, sweeping VRPs are already making an impact through use cases like automating credit card repayments, demonstrating their potential to simplify financial management for customers.

We anticipate the first phase of use cases to launch in the UK in early 2025, with additional use cases rolled out throughout the year. While cVRPs are unlikely to replace existing alternatives such as direct debits or recurring card payments, they offer distinct benefits that could capture a significant share of the recurring payments market.

The expansion of digital currencies

What are digital currencies?

Digital currencies are forms of currency that exist electronically. They can be decentralised and privately issued – like cryptocurrency – or centralised and regulated.

A Central Bank Digital Currency (CBDC) is a specific type of digital currency issued and regulated by a central bank. It holds the same legal tender status as physical cash and is backed by the government.

Unlike other types of digital currency, such as cryptocurrency, a CBDC is regulated, always considered legal tender, and backed by the government. These characteristics make CBDCs more stable than often unregulated, unbacked, and volatile cryptocurrencies, which are determined by market forces.

CBDCs have been launched in a handful of countries to date, such as the Bahamas Sand Dollar, Bakong Cambodia, and Eastern Caribbean DCash. Most use cases are driven by a desire to improve financial inclusion, digitise economies, and enhance innovation and competition in payments by offering more choice.

Digital euro

The European Central Bank (ECB) is exploring the possibility of introducing a digital euro which would provide a secure, electronic wallet-based digital payment solution for euro payments.

This Central Bank Digital Currency (CBDC), envisioned as a digital equivalent to cash, would complement rather than replace existing payment methods.

This initiative aims to ensure continued access to trusted and widely accepted payment methods in the digital age, offering consumers greater choice in how they pay for various transactions, including P2P transfers, in-store and online purchases, and payments to public authorities.

Digital pound

The Bank of England (BoE) is also exploring the possibility of introducing a digital pound. We can expect continued progress in 2025 on designing the technology and policy requirements for the digital pound, as well as assessments of the operation of the new digital currency.

The BoE has stated that they will not reach a final decision before 2025, but have not confirmed when we can expect a decision. Although it is unclear what the target dates for next steps are, we are guaranteed further public consultation and a vote in Parliament if BoE decide to proceed with launching a digital pound.

The future of CBDCs

The way people pay is changing, and the need to offer diverse digital payment solutions is constantly emerging. As cash becomes less prevalent, CBDCs offer a viable, stable, and robust alternative for digitising economies while promoting competition and innovation.

The European Central Bank has an additional incentive: a digital euro would provide a unified and seamless payment experience across the Eurozone.

In 2025, we can expect a decision from the ECB on whether to launch a digital euro. We may also see further progress from the BoE in their investigation of a digital pound, although a concrete decision may not be reached in 2025.

Transform your digital payments

The trends we’ve discussed – from real-time payments and fraud-prevention initiatives to the growth of contactless payments and the exploration of cVRPs and CBDCs – are all shaping a future where digital payments are faster, more secure, and seamlessly integrated into everyday life.

By staying ahead of these changes and embracing innovative payment solutions, your business can empower customers with greater convenience, security, and choice. Fire is here to support you in delivering the tools and expertise to meet evolving expectations and enhance your customer experience.

We provide a range of digital payment solutions to busineses who want to get paid, pay out and integrate payments services. To learn more about how Fire can support your business and streamline your payments, contact our team today.