By Robert Anderson And Adam Hallquist
This year will be both a year of transformation and preparation for the payments industry.
The momentum that propelled the sector into 2024, including soaring stock prices And remarkable private catches — should continue this year, notably with promising IPOs on the horizon.
While the opportunities are immense, there are growing complexities that could challenge incumbents and startups. Below are the key developments we expect to see in the payments industry in 2025.
AI is boosting vertical SaaS and integrated finance
We expect AI to coexist with vertical SaaS and integrated financial platforms – each enhancing the other – pushing us towards a golden age of automation and intelligence through unifying software, data and AI. This is particularly relevant as vertical software and integrated financial platforms continue to become a standalone category.
Take Grillwhich now has a market capitalization of over $20 billion and serves over 125,000 restaurants. Or Vagaro 1which supports over 100,000 salon, spa and fitness businesses. Their strong growth only reinforces the reality that vertical SaaS and embedded finance are here to stay. In 2025, these platforms will increasingly integrate AI, giving rise to powerful new product capabilities, attracting greater market share through horizontal offerings, and driving better outcomes for customers.
The battle for loyalty becomes hyper-personal
The battle for customer loyalty will come down to personalization, with institutions more aggressively tailoring their products to specific customers. This will help push customers deeper into a lender or payment provider’s ecosystem, potentially making it easier for them to move into higher-margin products, such as specific credit cards or larger loans and longer lasting.
In this new era of hyperpersonalization, financial institutions must be present at the biggest moments in consumers’ lives. For example, if a customer just had a baby, the supplier could offer a personalized credit program to extend discounts on diapers or zero interest rates for certain purchases, like formula. But this is difficult for institutions with existing infrastructure. The customer data needed for these unique interactions is trapped in dozens of disparate IT systems, often across different industries.
This demand for greater customization will drive an exciting cycle of replacing legacy systems that will benefit next-generation fintech infrastructure providers like LoanPro 2an API-based lending and credit platform.
Real-time payments are real, but the US will lag behind
International markets continue to lead the way in real-time payments, with Pix as the model child of success in 2024.
The instant payment system developed by Central Bank of BrazilPix processes approximately 42 billion payments per yearan increase of 74% compared to the previous year, and represents more than 30% of payment transactions in the country. Many international institutions and governments are examining whether this is a model they can replicate – and what it means for debit and credit cards.
But don’t expect to see the United States take a leading role in real-time payments in 2025. With thousands of banks, credit unions, and financial institutions all using different systems and infrastructure, the financial landscape American is very fragmented. This makes it difficult to create a universal, interoperable payment system like Pix. Additionally, it is extremely unlikely that the U.S. government would require companies to standardize on specific infrastructure, which would likely significantly expand the deployment and adoption of instant payment solutions.
However, we still believe in the long-term potential of real-time payments in the United States. As businesses experiment with instant, low-cost transactions, emerging successes such as TabaPay will help shape this trend in North America.
CFPB Rule 1033 Becomes an Agent of Change
In October, the Biden administration published a final version of Rule 1033requiring banks and credit unions to make it easier for customers to access their financial data and compare providers to get the best rates. In 2025, banks and credit unions will invest significantly, with over $1 billion in assets, in new digital banking capabilities to modernize their infrastructure for compliance.
To comply, institutions will likely “downsize,” thereby becoming less dependent on existing core banking systems. Instead, the focus will be on systems and applications that improve user experience and operational workflows, forcing many banks and credit unions to abandon point solutions and invest in platforms unified systems capable of managing all of customers’ lending and payment needs.
Robert Anderson has been a growth stock investor at Capital FTV for over 13 years and leading investments in technology and financial services. Before joining FTV, he was an investment banking associate in the financial institutions group at Bank of America Merrill Lynchwhere he focused on mergers and acquisitions, recapitalizations and capital raising transactions for fintech companies. In 2021 and 2022, he was named one of the Top 40 Growth Investors Under 40 by Growth cap. In 2022, he was named one of the top 25 software investors by GrowthCap. In 2023, Anderson was appointed International private equity’s Future 40 list in the dealmakers category.
Adam Hallquist has been a growth equity investor at FTV Capital for over nine years and currently has investment responsibilities in technology and financial services. Before joining FTV, he was an investment banking analyst at Fintech Partnerswhere he focused on mergers and acquisitions, working on several transactions in the areas of payments, securities and software. Hallquist began his career at Fortress Group Inc., an investment bank focused on the private placement of private equity funds.
Illustration: Dom Guzman
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