In this GT Trends article, lawyers across our international Payments Group identify some of the key regional developments they anticipate for 2025.
United States
1. Regulatory Environment - Payment activities in the United States are regulated at the federal and state levels. This dual-layered regulatory framework may present challenges and opportunities for payment companies in 2025, particularly in areas where we expect to see increased regulatory oversight such as anti-money laundering (AML), consumer protection, fraud, and state-licensing. The increased use of artificial intelligence (AI) to automate compliance tasks for AML and fraud prevention purposes will be an area of regulatory focus and scrutiny. At the state level, payment companies working with cryptocurrencies should be prepared to experience increased regulatory oversight. With more states adopting the Money Transmission Modernization Act (MTMA) (or substantial provisions thereof), payment companies may experience increased licensing and regulatory uniformity among the states. However, we will see if the uniformity sought by the MTMA plays out as each state interprets and implements its provisions.
2. Administration Changes - The incoming Trump administration could reduce federal regulatory burdens, especially with changes in CFPB leadership, potentially fostering a more innovation-friendly environment. However, any federal leniency might be offset by heightened state-level scrutiny, particularly regarding consumer protection. This may renew calls for a federal payments licensing framework, which would be designed essentially to preempt state authority in the space.
3. Technology Advancements - The biggest opportunities for the fintech sector in the next 12 months will likely be shaped by technology innovations on the horizon, including:
a. The integration of AI and machine learning to enhance customer experience and operational efficiency.
b. Open banking and application programming interface (API) ecosystems that could facilitate more seamless, integrated financial services.
c. Blockchain innovations to drive the development of decentralized financial products.
4. Ongoing Challenges - Despite these opportunities, regulatory challenges, especially at the state level, will require careful attention. Cybersecurity risks and data privacy issues remain significant threats as fintech solutions proliferate. Moreover, competition from traditional financial institutions, which are increasingly adopting fintech innovations, could intensify.
5. Compliance and Risk Management - For payment companies navigating the U.S. payment landscape, strategic compliance and risk management will be essential for long-term operational success, including:
a. Assessing state licensing requirements, particularly in white-label arrangements.
b. Maintaining robust third-party risk management policies.
c. Structuring products to minimize compliance burdens.
d. Staying ahead of technological advancements, such as generative AI, to gain a competitive edge.
Europe
The regulatory landscape in Europe could face substantial transformation with the anticipated adoption of the Third Payment Services Directive (PSD3) and the Payment Services Regulation (PSR). Initially proposed by the European Commission in June 2023, these regulatory measures aim to modernize the EU’s payment services framework by enhancing competition, innovation, and security. As these proposals undergo rigorous debate among various EU stakeholders, they are likely to take effect in late 2026, following an 18-month transition period. Alongside these, the Digital Operational Resilience Act (DORA) will also impose new IT security obligations starting Jan. 17, 2025. Below are some trends that may be expected following the implementation of PSD3, PSR, and DORA.
1. Heightened Security and Authentication - PSD3 aims to enhance security by mandating stronger customer authentication (SCA) protocols. Payment Service Providers (PSPs) will be required to implement multi-factor authentication consistently across all online transactions, coupled with real-time monitoring to swiftly detect and respond to suspicious activities. Additionally, PSD3 refines the responsibilities of PSPs concerning unauthorized transactions to help ensure faster reimbursement times for consumers affected by fraud.
2. Enhanced Transparency and Reporting - Both PSD3 and PSR emphasize transparency in financial transactions. PSD3 introduces new reporting requirements for currency conversion costs and cross-border payment charges to improve the clarity of multi-currency transactions. Meanwhile, PSR aims to increase transparency obligations related to transaction fees and refund processes, to help consumers stay better informed about the costs involved in their financial activities.
3. Integration and Consistency in Financial Services - PSD3 seeks to integrate electronic money institutions (EMIs) into the broader payment services framework, to help ensure consistent supervision and alignment of regulatory obligations, such as safeguarding customer funds. This integration should harmonize the regulatory landscape across the 27 EU member states, promoting a more unified approach to payment services regulation.
4. Increased Access and Competition - A major focus of PSR is to increase access rights to customer accounts for third-party payment service providers (TPPs). Banks and account servicing payment service providers (ASPSPs) will be required to provide reliable, high-quality access through enhanced APIs. This move is expected to encourage innovation and foster a more competitive market environment.
5. IT Security and Operational Resilience - Under DORA, PSPs, EMIs, and other financial institutions will face extensive new obligations to enhance IT security. DORA introduces harmonized Information and Communication Technology (ICT) risk management requirements, ensuring financial institutions can withstand and recover from ICT-related disruptions. Key mandates include implementing robust ICT risk management frameworks, reporting significant ICT incidents, conducting regular operational resilience testing, and establishing mandatory contractual terms with third-party ICT service providers.
United Kingdom
In a policy speech on Nov. 14, 2024, the UK Chancellor unveiled the National Payments Vision (NPV), a strategic initiative aimed at bolstering the UK’s payments sector by emphasizing innovation and competition and reducing regulatory burdens. Delivery of the NPV has been entrusted to a new committee comprising the Financial Conduct Authority (FCA), the Bank of England, and the Payment Systems Regulator, with recommendations expected in 2025.
1. Rejuvenation of Open Banking and Digital Currency Initiatives - A central component of the NPV is the revitalization of Open Banking, alongside ongoing efforts to explore a central bank digital currency. These initiatives are designed to foster innovation and maintain the UK’s leadership in financial technology, potentially setting a reform agenda for 2025 and beyond.
2. Reform of Customer Funds Safeguarding - The FCA is working towards a significant overhaul of customer funds safeguarding requirements to enhance consumer protection. By the end of 2025, interim rules are expected to be published, laying the groundwork for more substantial reforms. This new regime aims to align with existing client money rules, though it will likely increase the regulatory burden on payment firms.
3. Implementation of the Consumer Duty - The FCA will likely continue to push to embed the Consumer Duty across payments firms. This wide-ranging duty (in summary) requires that firms prioritize consumer interests in all operations, even if not directly consumer-facing. An FCA survey recently revealed inadequate implementation of the duty among many firms, potentially prompting the FCA to address this in supervisory interactions throughout 2025, with possible enforcement actions for non-compliance.
4. Navigating Post-Brexit Regulatory Alignment - The question of how the UK will respond to the European changes in PSD3 and the Payment Services Regulation (outlined above) remains unanswered. These EU reforms, effective in 2026 in Europe, amend the PSD2 framework in response to how payment services technologies and payments trends and security threats have changed between 2016 and 2018. In a post- Brexit world, it remains to be seen whether the UK will align closely with the PSD3 reforms or develop a bespoke response, both of which could impact operations for payment services firms operating in both the UK and Europe.
Japan
In September 2024, a “Working Group on Fund Settlement Services” was established under the Financial System Council of the Japan Financial Services Agency (JFSA) to explore potential regulations for cross-border “collection agency services” (shuno-daiko). These services, which include cash-on-delivery and e-commerce settlement services, handle payments on behalf of sellers and currently fall outside the scope of the Payment Services Act (PSA) licensing requirements. The working group aims to address the higher risks of money laundering and fraud associated with cross-border transactions, while also safeguarding consumer interests. Following are some outcomes from the working group’s discussions that will likely set the tone for regulatory developments in the year ahead:
1. Defining and Regulating Collection Agency Services - One key area of focus for the working group is the clear definition and potential regulation of collection agency services as Money Transfer Operators. By classifying these services under the existing licensing framework, the JFSA aims to bring them into compliance with anti-money laundering and counter-terrorism financing (AML/CFT) obligations. This move could significantly impact how these services operate, particularly those provided by innovative e-commerce and logistics companies.
2. Addressing Industry Feedback and Concerns - The proposed regulatory framework has faced scrutiny for lacking clarity and coherence, particularly regarding its focus on cross-border services. The working group plans to release a report by early 2026 that will incorporate expert discussions and feedback from market participants. This collaborative approach aims to refine the proposed regulations, ensuring they are both effective and practical for the industry. The report will be an important reference point for all those interested in the region’s payments sector.
3. Strengthening Anti-Money Laundering Measures - The JFSA’s efforts to combat money laundering continue to evolve, as evidenced by recent amendments to the PSA and the Act on Prevention of Transfer of Criminal Proceeds (APTCP). These amendments now extend AML/CFT obligations to issuers of prepaid products, reflecting a broader regulatory trend towards tightening controls on financial transactions to prevent illicit activities.
About the Authors
United States
Marina Olman-Pal is a co-chair of the firm’s Financial Regulatory & Compliance Practice. She advises foreign and U.S. financial institutions on a broad range of U.S. federal and state regulatory matters including licensing/chartering, acquisitions, mergers, divestitures, third-party risk management and oversight issues, BaaS and other bank/fintech-related matters, compliance with Bank Secrecy Act (BSA)/anti-money laundering (AML) laws and regulations, and compliance with fair access law matters.
Shane Foster is a shareholder with deep financial regulatory experience in areas such as banking, money transmission, lending, and fintech, among others. Serving in a high-level capacity as Chief Deputy Director at the Arizona Department of Insurance and Financial Institutions (DIFI), he oversaw the agency’s enforcement, depository, non-depository, consumer affairs, and insurance market conduct divisions.
Lisa Lanham focuses her practice on state licensing and regulatory compliance obligations for a wide array of consumer financial services companies. Her role encompasses work with a diverse range of clients, including residential and commercial mortgage brokers, lenders, servicers, loan fulfilment providers, student, consumer, and solar loan lenders and servicers, marketplace lenders, and entities offering retail installment contracts for consumer goods. Moreover, she advises investors engaged in secondary market activities, and extends her support to emerging fintech firms, helping them to comply with necessary state licensing requirements and develop products in these realms while keeping regulatory demands in check.
Europe
Carsten Kociok is a partner in the Technology, Financial Services and Data Privacy Practice in Berlin and co-head of Greenberg Traurig’s global FinTech Group. He advises national and international clients across all industries, including financial services, information technology, ecommerce, media, health care, telecoms, retail, and real estate, on a wide variety of complex commercial and regulatory matters.
United Kingdom
Matt Hancock is a member of the Litigation Practice in Greenberg Traurig's London office. He is focused on contentious regulation with a particular concentration on clients’ interactions with the UK Financial Conduct Authority (FCA) and Prudential Regulatory Authority (PRA). He has considerable experience defending individuals and corporates against regulatory Enforcement action and in helping regulated corporates and individuals pre-empt and manage other forms of regulatory scrutiny. He is also very experienced in the interaction between UK regulation and employment law, with a strong background in the UK Senior Managers and Certification Regime.
Tim Dolan is a shareholder in GT’s London office, recognized for his work on UK and European financial services matters. With background from international financial services regulators, Tim focuses on whether institutions and fund structures are subject to UK and European regulation and on advising on the interpretation of the Financial Conduct Authority’s and the Prudential Regulatory Authority’s rule books. Tim advises on the Financial Conduct Authority and Prudential Regulatory Authority rules, assists clients—primarily fund managers, investment firms, banks, and payment firms—with regulatory engagements (including breaches, change of control, and waivers), and prepares them for regulatory changes. Increasingly Tim is also advising fund managers and institutions on the impact of ESG regulation.
Japan
Makoto Koinuma is a shareholder in GT’s Tokyo office, where he focuses his practice on corporate law, mergers and acquisitions (M&A), and financial services. He has extensive experience in fund formation and management, licensing, and regulatory matters. Makoto advises a diverse range of clients, including fund managers, broker-dealers, financial institutions, and fintech companies involved in money transfers, crypto asset exchanges, online brokerage, cash management services, and reward point programs, among others.