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Top trends and challenges for issuers

Tuesday, January 14, 2025

4 Minute Read

Predictions for 2025 in card payments and a look back at 2024

Emerging fraud threats. Regulatory changes. Shifts in consumer buying habits. These were just some of the issues that the payments industry faced this past year. And for card issuers, it meant having to continuously adapt to the ever evolving landscape.

What innovation drove your business forward in 2024? What trends do you think will present the greatest challenges and opportunities in 2025? Here are some areas that may help you set expectations and determine priorities.

AI takes center stage in 2024

AI was the main attraction last year, just as the Global Payments “2024 Commerce and Payment Trends Report” predicted. It began to shape how businesses automate processes, enhance customer support, improve efficiencies and ultimately create a path to lower operational costs. Without a proven ROI, it’s largely driven by use cases to show potential value.

Banks use AI internally to improve how data is managed and streamlined, particularly with fraud detection and identity verification. The technology can also unlock new analysis and insights into customers.

Our buying behaviors change with more frequency today, than at any other point in history. AI makes it possible for technology enabling cardholder alerts for fraud, balance or limit updates, or even rewards to be more personalized and contextual—essentially they’re one way our industry can ensure the technology we deploy keeps pace with how, where and when consumers make purchases and payments. - Dondi Black, EVP, Chief Product Officer, TSYSOur buying behaviors change with more frequency today, than at any other point in history. AI makes it possible for technology enabling cardholder alerts for fraud, balance or limit updates, or even rewards to be more personalized and contextual—essentially they’re one way our industry can ensure the technology we deploy keeps pace with how, where and when consumers make purchases and payments. - Dondi Black, EVP, Chief Product Officer, TSYS

Personalization becomes a priority

That personalized approach is what many financial institutions (FIs) are banking on to drive sales, product engagement and loyalty. Just like with AI, it starts with data.

Driven by transactional data, FIs can better understand account holders and build customized digital experiences to engage them. Using patterns in one’s spending habits, they see what’s happening in a person’s life then provide personalized experiences and offers that drive loyalty. These experiences can continuously adapt to the cardholders’ growing needs and expectations.

The demand for more customized and responsive experiences is not just from FIs but also from the cardholders. Roughly two-thirds of consumers are comfortable with their FI using their data to offer relevant personalized services.

The takeaway is that it’s become essential to reach cardholders at the right place and time, way before the buyer decisioning stage, because they want a great digital shopping experience. The question is, how will issuers take advantage?

The rise of instant payments

Fast, seamless transactions without the friction. It’s a dream that’s becoming a reality for issuers with instant or real-time payments (RTPs) thanks to increased demand, adoption and the innovative technology behind it.

Many countries that have historically been “cash heavy” have embraced these payment methods. Most notably Brazil and India, which have millions of users and nearly 100 billion combined transactions.

This falls in line with what Forrester predicts: RTPs and account-to-account payments will displace cash in Europe and Latin America, leading to cash use decreasing 40% globally.

With infrastructures in place in nearly every major market, time will tell how it influences card-centric markets such as the United States. RTP rails are in place there, and 68% of businesses plan to adopt instant payments via RTP or FedNow in the next two years. However, questions remain around cost and fraud.

What’s ahead for 2025?

Fraud prevention: The shift to biometric authentication

Nearly 30% of bank customers and 22% of credit card customers experienced fraud on their accounts in the past year. Stronger authentication tools are needed against fraudsters, and passwords alone are no longer good enough.

That’s why nearly 90% of financial organizations understand that as cybercrime evolves, passwordless authentication is essential to reach a higher level of security and ensure user satisfaction.

Banks are turning to biometric authentication, including fingerprint scans, and facial and voice recognition. Such technology may also help reduce friction at the point of account login and enhance protection against account takeover (ATO) attacks.

Adding behavioral biometrics, such as analyzing someone’s typing and swiping patterns on a device, provides additional protection. This security helps identify who uses an account and if they use it in a typical way.

Biometric authentication is the leading authentication method for preventing ATO in banking. Usage of this technology by decision makers of financial institutions outpaces other security measures in the shift to passwordless authentication:

  • 88% use biometric authentication
  • 80% use SMS one-time passcodes
  • 64% use app-based authentication
  • 52% use email-based OTPs

It’s also the preferred method for securing online accounts and devices, based on research from Statista.

According to the Global Payments “2025 Commerce and Payment Trends Report,” 31% of companies surveyed said they already invest in biometrics to improve security. Of those who had adopted biometrics, 94% reported a very high or high positive impact. Companies also said biometrics lead to improved customer experiences (85% said it has a very high/high impact) and operational efficiencies (93% very high/high impact).

One projection from all the investments: Biometrics will authenticate more than $3 trillion of payment transactions in 2025. That’s an increase of $404 billion in the last 4 years.

“Traditional methods of authentication are becoming absolute. Biometrics, along with push authentication, are easier to use, safe and cost effective. We’ve seen European nations and APAC-based markets embrace these newer methods of authentication, and it’s coming to other regions around the world,” said Kasey Boyd, Head of Fraud, TSYS.

85% of companies that adopted biometrics said it has had a very high/high impact with improving customer experiences

Growth potential for embedded payments and virtual cards with B2B

Physical payments have long been a key component in the B2B space. Credit cards and checks are often used as the primary payment method, but fraud and late or lost payments via traditional mail services are among the recurring challenges.

Led by the prospect of greater security, more visibility and control of expenses, as well as replacing manual steps with automated processes, virtual card transactions are projected to overtake cash or checks for the first time in terms of all B2B payment value.

How do you convince the 75% of companies that use legacy, paper-based payment methods to adopt new technology? It’s not easy. But chances are they’re one of nearly 3 in 5 businesses in the U.S. that have dealt with late B2B payments, or they may be among the 65% of organizations that have dealt with check fraud. The technology to fight those problems is here, so it may just be a matter of when and not if businesses adopt it.

The same could be said of embedded payments. Issuers are capturing more volume year over year by enabling embedded B2B workflows. And now they appear ripe to fully embrace the technology.

Embedded finance allows businesses to better manage cash flow, improve working capital and reconcile payments in real time. From a broader perspective in B2B, it provides an avenue for flexible and seamless solutions that can keep up with digital businesses. It can also create greater efficiency and continuity by moving manual business tasks — including invoicing and payment processing — onto platforms that they also use to manage things like sales. As more applications evolve to support various business and commerce needs, embedded payments have the potential to expand and become a key part of those related efficiencies.

Industry experts believe emerging digital payments — virtual accounts, tokenized commercial cards and RTPs — will drive the future growth of embedded payments.

“What makes embedded payments so appealing is the ability to tailor and better integrate experiences for the cardholder,” said Todd King, Vice President of B2B solutions, TSYS. “Issuers and businesses will continue to look for ways to improve the user experience while driving efficiency and revenue. Embedded finance provides a path to empower financial institutions to support their commercial clients.”

Looking ahead

As we move forward, much of the focus in the payments industry will remain on transactions: How the latest technology modernizes payment systems, creates less friction and reduces the time to confirm a cardholder’s identity. Solving these challenges means leveraging data-driven solutions that balance convenience, cost and security.

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