By: Velera

The banking and payments landscape in 2025 will likely be shaped by several transformative innovations, driven by changing consumer preferences, advancements in technology and regulatory developments. We talked about some of the same ideas in our 2024 and Beyond predictions, and here we expand upon many of those, as well as add some new notions as our market develops toward an inclusive, open finance ecosystem supported by technology advancements that will drive innovation, personalization and growth.

Similar to years past, in 2025, changing consumer preferences and expectations for seamless, intuitive digital experiences will drive payments innovation toward greater convenience, personalization, security and inclusivity. Consumers are increasingly demanding instant, frictionless payment options integrated directly into their everyday digital interactions, such as one-click purchases, voice-activated payments and embedded finance within the apps they use. These expectations are pushing financial institutions and fintechs alike to adopt technologies like instant payments, biometric and passkey authentication and AI-driven personalization. Additionally, consumers expect security and privacy from their primary financial institutions (FIs), driving further advancements in tokenization, encryption and even decentralized identity systems. Younger generations and digital-natives expect cross-platform compatibility and value-added services, such as loyalty rewards and financial insights within the banking and payment platforms they use. These expectations are accelerating the evolution of payment ecosystems, fostering innovations that prioritize user-centric design, speed and accessibility. – Daniel Herman, Product Experience Designer

Open banking and the connected financial ecosystem will continue gaining momentum in 2025. The Consumer Financial Protection Bureau (CFPB)’s Personal Financial Data Rights rule (Section 1033) has sparked increased awareness in the financial space, encouraging financial institutions to transition from screen scraping to secure API-based data sharing. Some financial institutions will fall into open banking by default through digital banking pre-set configurations, while others will calculatedly leverage APIs for insights to understand which external products and services their customers use, informing their own product roadmaps.

A significant development will be the expansion of open banking beyond data sharing (data providers) to the utilization of shared data (data recipients). Solutions like cash flow underwriting will address critical needs for both consumers and financial institutions. Consumers increasingly seek ways to present a more complete financial picture. According to the Harris Poll Fintech Effect 2023 Report, 63% of consumers feel their credit score fails to capture their repayment ability, and 60% believe sharing banking data could provide a more accurate representation. Lenders, especially those serving small businesses and thin-file or no-credit applicants, will increasingly use real-time transaction data enabled by open banking APIs for more precise risk management.

Embedded finance is also poised for significant growth. Bain & Company projects U.S. embedded finance transactions will more than double, from $2.6 trillion in 2023 to $7 trillion by 2026. This growth will rely on open APIs facilitating data and service sharing across financial institutions, technology providers and non-financial entities. Financial institutions will increasingly adopt embedded finance models to reach consumers where they are, extend beyond local markets and explore new revenue streams. 

The impact of the Trump administration on Section 1033 remains uncertain. However, the rule, whether directly or indirectly, will likely continue to drive advancements in open banking and collaboration across organizations to implement creative strategies to respond to emerging opportunities. This will solidify open banking as a transformative channel for financial institutions to augment their offerings and engage consumers more deeply. – Angelina Renaldo, Innovation Strategist

The expansion of instant payments (RTP) in 2025 is poised to significantly influence the payments and banking market by driving greater speed, efficiency and convenience in financial transactions. Instant payment systems, like FedNow in the U.S., enable instant settlement of funds 24/7/365, removing the delays traditionally associated with batch processing and bank operating hours. This innovation benefits both consumers and businesses, as consumers gain immediate access to funds, and companies can streamline cash flow management, reduce payment reconciliation challenges and improve liquidity. The FedNow service is expected to grow in adoption with many of the larger banks integrating the service to offer their customers access to FedNow rails, as well as the RTP rails.   

For financial institutions, instant payment expansion offers opportunities to innovate around value-added services, such as enhanced payment tracking, fraud detection and integrated cash management tools, all while allowing them to modernize legacy infrastructure. In the broader ecosystem, instant payments can enable new business models, such as pay-by-bank, gig economy payouts, real estate transactions and microloans, which rely on immediate fund transfers. With the growing popularity of instant payments, the ability to make instant bill payments such as utilities and insurance premiums will also increase in popularity. As consumer expectations shift toward seamless embedded experiences, the adoption of instant payments will be a critical factor in shaping customer loyalty and satisfaction. – Stacy Hockaday, Strategic Product Manager

Blockchain will move from a promising capability to a technology that is firmly embedded in the U.S. banking system. The reason for this prediction is the Trump administration’s nominees. The U.S. Securities and Exchange Commission (SEC), formerly led by Gary Gensler, has been aggressive with enforcement actions against blockchain technology companies, stifling innovation. Gensler stepped down before the inauguration, and Mark T. Uyeda was sworn into office as a Commissionor of the SEC.

Janet Yellen, the former Secretary of the Treasury, sees the role of crypto as being “to launder the profits of online drug traffickers.” Scott Bessent, an investor in blockchain startups and decentralized finance (DeFi) initiatives was confirmed as the new Secretary of the Treasury. Scott has stated that he wants to use blockchain technology to modernize the U.S. banking industry. In addition, David Sacks, former PayPal executive, was named as "AI and crypto czar,” a newly created position established to guide policy on these two relatively unregulated technologies. And of course, Elon Musk, noted crypto proponent, has a role guiding the new administration.  

This news has sent the price of bitcoin over $100,000 for the first time. However, the longer-term impact has yet to be seen. The first two sweeping changes will be the establishment of a crypto regulatory framework, followed by the end of debunking blockchain companies, which has kept the crypto industry from accessing banking services that businesses need, such as deposit accounts and lending. When that happens, we’ll see the third major change, using blockchain for money movement. The use case that is in most need of evolution is cross-border money movement. The 50-year-old SWIFT network is slow and expensive – Bankrate estimates that fees extracted by the combination of correspondent banks and gateways amounts to 6.74% of the total amount. And it takes several days for the funds to be made available to the recipient. Blockchain has always been a potential improvement, but the lack of access to U.S. banks has hindered blockchain development in this area — until now. The fourth predicted change will evolve a little slower, but will have a long-term impact — we’ll start to see blockchain being used to track ownership of real-world-assets, such as auto titles and property. Individuals will be able to carry their auto title in their MetaMask wallet.  – Lou Grilli, Manager, Innovation

AI-driven personalization and fraud prevention are transformative forces in the banking and payments industry and will reshape customer engagement and security in 2025. Through advanced machine learning (ML) algorithms, financial institutions can analyze vast amounts of data in real time, gaining deep insights into individual consumer behaviors, preferences and financial habits. This enables hyper-personalized experiences, such as tailored product recommendations, predictive financial advice and dynamic credit scoring. For example, AI can identify when a consumer might benefit from a savings product or detect when they are likely to miss a payment, prompting timely interventions that enhance satisfaction and loyalty, turning consumer engagements into proactive banking experiences.

Simultaneously, AI is revolutionizing fraud prevention by continuously monitoring transactions and user activities to identify anomalies indicative of fraud. Unlike rule-based systems, AI models learn from patterns in real-time data, adapting to ever-evolving fraud tactics such as synthetic identities, account takeovers and insider threats. Techniques like behavioral biometrics and network analysis allow AI to detect subtle deviations, such as unusual keystroke dynamics or changes in login locations, without inconveniencing legitimate users. By proactively blocking high-risk transactions while minimizing false positives, AI not only strengthens security but also preserves the frictionless experiences modern consumers expect. Together, AI-driven personalization and fraud prevention enable banks to deliver superior value and security, addressing the dual priorities of consumer engagement and risk management. – Vlad Jovanovic, VP, Innovation

In 2025, passkeys, coupled once again with AI, are revolutionizing authentication by making it more secure, seamless and user-friendly. Passkeys replace traditional passwords and leverage cryptographic key pairs and biometrics (like facial recognition or fingerprints) for authentication. Stored securely on devices, they eliminate the risks of password reuse, phishing attacks and breaches of centralized credential databases. Passkeys integrate effortlessly across devices and platforms, offering a frictionless user experience while significantly enhancing security.

Technological sophistication among bad actors has rendered passwords, security questions and one-time passcodes outdated and vulnerable to account takeovers. As the cat-and-mouse game between security bolstering and fraudulent activity escalates, behavioral biometrics will become a more critical strategy by industry leaders to slow the rate of fraud committed via end-user-facing applications.

AI further elevates authentication by enabling dynamic, context-aware security mechanisms. AI uses behavioral biometrics and device characteristics, as well as environmental and other device factors to continuously validate identities in real time, flagging or blocking suspicious activities automatically. These capabilities allow for adaptive authentication, where security measures adjust based on the assessed risk level. Together, passkeys and AI contribute to a more resilient and intuitive authentication ecosystem, delivering better user experiences across consumer touchpoints while reducing fraud. – Rob Arold, Innovation Strategist

The expansion of fintech collaborations is reshaping the financial landscape in 2025, enabling traditional financial institutions to innovate and stay competitive in a rapidly evolving market. By partnering with fintechs, established FIs can access cutting-edge technologies like artificial intelligence, blockchain and advanced analytics without having to build them in-house. These collaborations are often mutually beneficial: FIs gain agility and innovative capabilities, while fintechs leverage the trust, regulatory expertise and expansive customer bases of their partners. Some of the key areas of collaboration will include streamlining payment processes, automating lending decisions, enhancing cybersecurity and developing personalized digital banking experiences. Such partnerships not only accelerate digital transformation, but also allow financial institutions to adapt to shifting consumer expectations, ensuring relevance in an increasingly tech-driven world. For credit unions, these alliances can be instrumental in offering members modern solutions while maintaining the personalized service they value. – Vlad Jovanovic, VP, Innovation

Spurred by the renewed push in open banking, the evolution of digital wallets is set to be a major innovation in 2025. Digital wallets represent the convergence of convenience, security and expanded functionality within personal finance, and they are already widely used and adopted by consumers. Initially focused on payments, digital wallets are rapidly evolving into comprehensive financial management tools as open banking, driven by standardized APIs, becomes more widely adopted in the U.S. market. By integrating features like savings accounts, investment and trading platforms, loyalty rewards and even lending options, these wallets can serve as an all-in-one hub for managing money. This expanded functionality aligns with consumer demand for seamless, integrated financial experiences, particularly among the younger, more tech-savvy generations. – Vlad Jovanovic, VP, Innovation

These are the top innovation trends of 2025 and beyond. What do you think of our innovation experts’ predictions? Email us at marketing@velera.com to share your thoughts and if you have any predictions that didn’t make our list.