While 2024 may not have delivered groundbreaking technological advances, existing tools and practices undoubtedly strengthened.
Despite the excitement surrounding artificial intelligence (AI), most companies are still figuring out its practical applications within the payment space. For example, though AI may eventually assist in optimising payment schedules or identifying cost efficiencies, it’s a vision stuck in the development stages for most organisations.
2024 and the rise of faster payments, Confirmation of Payee, and open banking
No longer confined to retail, immediate transactions have gained traction in B2B payments. With an impressive 18% growth year-on-year, faster payments have quickly become a favoured method, reducing the cost and delays associated with older systems like CHAPS.
Companies are increasingly seeing faster payments as more than a tool for efficiency but as a strategic advantage in the pursuit of enhanced customer experiences and operational responsiveness.
Another area of progress was the mainstream adoption of the Confirmation of Payee (CoP) system. CoP’s value lies in its ability to verify payment recipients, reducing errors significantly and providing an added defensive layer against fraud.
From real estate to insurance, businesses handling large sums now have a reliable way to ensure payments reach the correct accounts, diminishing the risks that once plagued large-value transfers.
CoP also plays a critical role in Direct Debit collections, checking payee names for regular recurring payments, having significant impact on the failure rate of collections for businesses handling large volumes of Direct Debits.
Elsewhere, open banking continued its forward march in 2024, making considerable headway in retail banking.
However, its utility for businesses remains limited. While retail customers benefit from seamless account viewing and payment options, businesses are still held back by integration challenges as well as the lack of depth and breadth of data available.
With most banks prioritising retail-oriented open banking solutions, true integration for businesses is still a work in progress.
2025: Innovation through partnership and strategic data usage
Looking to 2025, various trends indicate that significant shifts for financial operations are coming.
The first is the expected growth in faster payments as more businesses discover its potential for competitive differentiation. From refund processing to customer service enhancements, faster payments offer a fast and efficient way to meet customer expectations in real-time, and this will only become more entrenched next year.
The global adoption of CoP type systems is another likely trend. Countries like New Zealand and the EU have recently embraced CoP type systems as a standard, demonstrating its universal appeal in reducing errors and deterring fraud.
Expect even wider adoption in 2025, with more regions looking to replicate the success of CoP in the UK. An area where the UK’s innovation is leading the charge.
One of the more anticipated developments for 2025 is the growing trend of banks partnering with technology providers. Financial institutions have recognised the challenge of maintaining connectivity with the various back-office systems businesses rely on, including ERP and treasury systems.
These partnerships could solve integration challenges, offering businesses a faster, cheaper and risk-averse experience by linking their existing platforms directly to banking systems.
Finally, the arrival of the ISO 20022 standard promises a new level of data granularity. While this standard could open doors to enriched payment data, the challenge lies in consistent regulatory practices.
Without aligned guidelines on required data fields, the true potential of ISO 20022 could remain underutilised. For businesses to reap the benefits of this standard, banks and regulators will need to agree on a consistent approach to data inclusion and usage.
Preparing for the Year Ahead
As 2025 approaches, financial leaders are tasked with plotting a course through a financial terrain on which agility and collaboration remain central.
The rising prominence of faster payments, the global uptake of CoP type systems, and the need for effective bank-tech partnerships underscore a trend toward connectivity and efficiency.
In a world where technology shapes nearly every aspect of business, these developments point to a promising road ahead – provided industry stakeholders can work together to address ongoing challenges.
By embracing these developments, businesses and financial institutions alike can look forward to a year characterised by deeper innovation and increased security in their financial operations.
