The future of fintech: Key predictions for 2025 – Part 1
Fintech is entering a new era, where innovation must not only dazzle but deliver—meeting the demands of a connected, regulated world while solving real financial challenges with purpose and precision.
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Marina Mouka
- December 13, 2024
- 5 minutes
Fintech is entering a phase of refinement and resilience. The rapid experimentation of the past decade has given way to a more deliberate approach, where innovation is shaped by practical needs and the realities of regulation. In 2025, the industry will focus on integrating emerging technologies with financial systems that are already deeply embedded in daily life.
Key trends point to a more interconnected ecosystem, with solutions designed to solve real-world problems, from cross-border payment inefficiencies to managing the risks of decentralised finance. At the same time, the sector faces pressure to deliver sustainable growth while maintaining trust in an era of increasing scrutiny.
The next year will be defined by shifts that blend technological ambition with economic pragmatism, setting the tone for the future of financial services.
1. Generative AI becomes a core financial tool
Generative AI is transitioning from an experimental technology to an integral part of financial operations. Financial institutions are deploying AI-driven systems to automate reporting, enhance customer service, and optimise decision-making processes. For instance, JPMorgan Chase’s AI-based Contract Intelligence (COIN) system has saved approximately 360,000 hours of legal work annually by processing complex legal documents in seconds, highlighting the operational efficiencies AI can deliver.
Fraud detection is another key area of AI application. HSBC’s collaboration with Google Cloud has significantly improved fraud identification rates while reducing false positives by 60%. Generative AI also powers personal financial management tools, allowing users to receive tailored advice and forecasts based on real-time data.
However, these advancements bring challenges. Ethical concerns around biased algorithms, data privacy, and governance remain critical. Gartner predicts that organisations failing to address these issues could face significant reputational risks by 2028.
2. Real-time cross-border payments take centre stage
SWIFT’s Global Payments Innovation (GPI) initiative has significantly improved the speed and transparency of cross-border payments. As of October 2024, 90% of cross-border payments made over the SWIFT network reach the destination bank within an hour. However, the time taken for funds to be credited to the end customer’s account can vary due to factors such as regulatory controls and domestic processing times.
Blockchain-based solutions like RippleNet have further accelerated settlement times. RippleNet enables real-time global payments, with transactions settling in seconds. This technology allows financial institutions to bypass traditional correspondent banking networks, reducing both time and cost associated with cross-border transactions.
The global adoption of ISO 20022 messaging standards is also enhancing interoperability and transparency in international payments. Over 80% of high-value payment systems are expected to migrate to ISO 20022 by the end of 2025, facilitating more efficient and data-rich transactions. However, challenges remain, including regulatory alignment across jurisdictions and the integration of legacy systems with these emerging technologies.
3. Embedded finance expands beyond banking
By 2025, embedded finance is expected to extend beyond traditional sectors, embedding financial services into retail, healthcare, and transportation, thereby enhancing customer experiences and creating new revenue streams.
For instance, ride-hailing companies like Uber have implemented embedded payment systems that allow for seamless transactions within their apps, eliminating the need for external payment processes. Similarly, retailers are offering point-of-sale financing options directly on their platforms, enabling customers to access credit without engaging with traditional banks.
The embedded finance market is projected to grow significantly, with estimates suggesting it could reach $700.1 billion by 2033, up from $80.85 billion in 2023, reflecting a compound annual growth rate (CAGR) of 24.1%. This growth is driven by technological advancements and changing consumer expectations for integrated financial services.
4. ESG fintech solutions gain momentum
Environmental, Social, and Governance (ESG) considerations are increasingly influencing financial decision-making. Fintech companies are developing solutions to assist firms in measuring and reporting their ESG performance, aligning with regulatory requirements and investor expectations. For example, platforms like Sugi enable retail investors to assess the carbon impact of their portfolios, promoting more sustainable investment choices.
The European Union’s Sustainable Finance Disclosure Regulation (SFDR) has been a significant driver in this area. Implemented to enhance transparency in sustainable investments, the SFDR requires financial market participants to disclose how they integrate ESG factors into their decision-making processes. A 2024 report by the European Supervisory Authorities noted significant improvements in firms’ disclosures of principal adverse impacts under the SFDR, indicating progress in compliance and transparency.
However, challenges persist. The complexity of ESG data collection and reporting can be burdensome, particularly for smaller firms. Additionally, the risk of greenwashing—misrepresenting products as more sustainable than they are—remains a concern. To address these issues, the EU is considering simplifying its ESG fund categories to reduce confusion and enhance clarity for investors.
5. DeFi edges towards mainstream
Decentralised Finance (DeFi) is evolving from a niche segment to a significant component of the financial ecosystem. By 2025, increased institutional adoption is anticipated, driven by technological advancements and a clearer regulatory framework.
Technological innovations, such as Layer 2 solutions, are addressing scalability issues and reducing transaction costs, making DeFi more accessible to institutional investors.
The European Union’s Markets in Crypto-Assets (MiCA) regulation, adopted in May 2023, aims to provide legal clarity for crypto-assets, including aspects related to DeFi. While MiCA primarily focuses on centralised entities, it acknowledges the unique nature of DeFi protocols and suggests that fully decentralised platforms may fall outside its direct scope.
However, the decentralised nature of DeFi complicates regulatory oversight, raising concerns about consumer protection and financial stability. Additionally, the integration of DeFi into traditional financial systems requires robust security measures and compliance with anti-money laundering (AML) standards.
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