Innovation Mobile Payment Technologies 2025: Opportunities and Challenges

Mobile payment technology in 2025 is developing at a healthy pace as it continues to absorb the AI revolution. Existing tools such as Two-Factor Authentication (2FA) are undergoing transformations to secure new digital payment technologies. Advances in biometric identification are now on the most basic smart phones and increasing security. Contactless payment is morphing into Tap-to-Pay and when tied to innovative payment solutions can change peer-to-peer and small business payments - and client expectations - forever. 

These new payment methods also breed new issues. From improper implementation to unforeseen exploits, the possibility of error or fraud is diminishing, but still non-zero. Innovative payment solutions still need proper implementation.   

• Artificial intelligence
• Biometric payments
• Buy Now, Pay Later (BNPL)
• CBDCs
• Tap-to-Pay

Online Payments Market Size and Tendencies

McKinsey emphasized in its 2024 global payment trends report that the adoption of relatively new payment methods such as mobile payments will spread unevenly around the world. In the card-centric U.S., the adoption of new payment technologies will be slower than in the EU, where ‘instant payments’ will grow by 50% CAGR for the foreseeable future, roughly from 3 billion transactions in 2024 to 30 billion in 2028. Again, the digital payments industry in the EU alone is expected to handle 30 billion transactions performed through some mobile ‘instant’ technology. 

The development and rollout of these technologies and markets is uneven, globally, but each of them is playing some role in the realization of new payment methods. We’ll look into that variation as it applies to some of the technologies listed above, but also in its own section.

#1 Artificial Intelligence and Know Your Client Even Better

AI stormed into the mobile world in 2024, with writing and photo editing functions taking the lead. It won’t be long before AI becomes a payments innovation on phones as well, and at the moment it seems that the first place where AI can help will be in payment security. 

AI is already used in KYC/AML and fraud detection. By processing user data on the phone, AI-powered payment innovations will help:

• Better understand consumer behavior and share this with merchants 
• Tailor payment opportunities to each user’s needs and flag unusual behavior  
• Improve payment security by detecting and preventing potentially fraudulent transactions in real-time 
• Automatically cut consumer costs by choosing which digital wallet to use for a purchase, especially if a currency exchange is required.

While device security is the realm of the manufacturer, app security is something that mobile payment platform creators must focus on. Modern payment processing will require bringing AI to bear on the issue. We’ll look at that further in the biometric section.

#2 Tap-to-Pay Tops Trends in Payments

If there is one technology that is currently changing the face of mobile payment trends globally, it would be tap-to-pay. Modern payment processing through apps such as Google Pay and Apple Pay has been around for some years now, but it’s only recently that we could receive payments directly with a mobile phone. Often a separate, dedicated device was needed to act as a terminal. Now, your phone can handle both sides of a transaction. 

Tap-to-pay is very useful under a lot of circumstances. This payments innovation is not a revolution, but an important evolution that is particularly good for:

• Small businesses
• Vendors at events such as fairs, where wired infrastructure might be lacking

The Tap-to-Pay market is forecast to undergo double-digit growth through 2030. McKenzie notes in its 2024 global payment report that in some markets, card-based mechanisms are still prevalent. Smart phone based use is expected to make inroads, however. Overall, industry players expect over 5 billion consumers to use digital wallets by 2026. Contactless payments, writ broadly to include non-phone devices such as cards as well, round out the trend beyond the smartphone Apple Pay functionality.

Another advantage of contactless payments is their security. Because the payment information is transmitted through an encrypted signal, there is less risk of fraud or theft than with traditional payment methods.

#3 Thumbs up for Biometric Payments

Biometric payments allow consumers to make transactions using unique physiological or behavioral characteristics. This includes:

• Fingerprints 
• Facial recognition
• Voice recognition 

The rise of biometric payments is often associated with contactless payments. One critical benefit of biometric payments is their high level of security. Because each user’s biometric data is unique and difficult to duplicate, it can provide a more secure authentication than traditional password-based methods. Because it is so much harder to break, this mobile payment innovation is destined to become a feature in many mobile payment platforms.

With a simple scan of a fingerprint, face, or voice, consumers can quickly and easily make payments, eliminating the need to remember passwords or carry physical payment cards. In addition to this, biometric payments also help tailor the payment experience to each user.

#4 Buy Now, Pay Later and More Digital Wallets

BNPL stands for buy-now-pay-later, which allows for a specific delay between when the buys and pays for a purchase.

BNPL might not be something you connect with mobile payments innovation. Prepare for that to change. In November 2024, Google Pay added BNPL providers Afterpay and Klarna for its 25 million U.S. users. Google’s move came a month after Apple Pay signed with Klarna for the U.S. and UK markets. Modern payment processing will include BNPL across the board, mobile included. 

According to Bloomberg, 75% of BNPL users find it helpful in managing expenditures. Uptake of this payments innovation is expected to rise in the U.S., as digital wallets such as Google Pay come into use by roughly half of consumers in America. 

There are concerns about BNPL services, though, as new payment methods bring new ways of gaming the system. Regulation is becoming an issue, as predatory lenders are now adopting this payments innovation. 

For example, the UK government plans to extend the scope of digital payment technologies regulations to capture those BNPL firms that aren’t under the rules yet, and FCA is warning BNPL companies about misleading advertising for their innovative payment solutions. The U.S. government has also issued a document that made clear their plans for tightening the regulation of BNPL companies.

BNPL Demographics

There is definitely a generational aspect to the adoption of BNPL payments innovations, as seen in the table below:

BNPL services have disrupted the traditional credit card market by offering a more transparent and user-friendly way to borrow money. Hence, consumers can often see the total cost of a purchase upfront and avoid hidden fees and interest charges that are common with credit cards. This has made BNPL an attractive option for budget-conscious consumers who want to avoid high-interest debt.

Furthermore, BNPL services have also made it easier for merchants to sell their products by offering customers a more attractive payment option. Merchants can increase their conversion rates and reduce cart abandonment by providing more payment flexibility.

However, there are some concerns about BNPL services. Critics argue that they encourage consumers to spend beyond their means and can lead to financial problems if not used responsibly. Some countries have also started to regulate BNPL services to protect consumers from predatory lending practices. For example, the UK government plans to extend the scope of regulations to capture those BNPL firms that aren’t under the rules yet, and FCA is warning BNPL companies about using misleading adverts. The United States, in turn, also issued a document that made clear their plans for increasing the regulation of BNPL companies.

Companies looking to add a BNPL option to their sales flow need to consider the following:

• The demographic and regional specifics of the target user
• Integration needs to include a broader scope of financial issues, including greater KYC
• Finding a partner who can help in selecting the best BNPL provider(s) for their market
• The reputation of the BNPL provider

#5 The CBDCs are Coming

Central bank digital currencies (CBDCs) are digital versions of currencies issued by the banks of governments. Central banks have been exploring the use of CBDCs to improve payments to citizens and between them, but not as a store of value or for investment purposes.

CBDCs have gained attention but their comparative advantage, especially in mobile payments, is generally unclear. The current fiat system works well enough to keep commerce moving, and the rise of mobile payment solutions is proof of that. 

This is one area where payment processing industry trends can be seen. China has taken the lead in mobile payments by CBDC. Its central bank has issued the digital Renminbi and a roll out is underway, but only for mobile payments within China. 

The digital Euro has been in testing as well. Given Europe’s long-standing concerns about privacy, why would they do this? 

• Response to China’s progress with CBDC
• The European Central Bank points out that all digital transactions in the Eurozone run through commercial entities. This presents a security risk
• Ensuring equal access to digital forms of money to everyone in Europe

The ECB will end Phase II of its CBDC trials in 2025 and make recommendations on if and how to roll out a digital euro.

Steps taken in America thus far have been minimal. Depending on your target market, CBDCs might or might not be available in your near future, but this innovation is on the horizon.

What the Future of Payment Technologies May Look Like 

Payments innovation today can streamline user security verification and provide cashless payment options in new situations. Payment processing industry trends will tend toward increased on-device automated options formulation and, depending on user settings, AI-driven decision making.  

From our vantage point, the near future of mobile payments looks something like this:

1. Go to the grocery store to get groceries. Cut through the line by using the self-serve check out and speed up further with Tap-to-Pay;
2. On your way to your car, get a text message from your microwave oven that it has stopped working; it’s time to buy the new one you were looking at;
3. Get in the car, find the microwave on the company’s site and order it over the phone; let AI choose the best BNPL option to smooth out cash flow, and biometrics to prove that you are making this purchase. 

Regional Opportunities for Introducing Payments Innovation

As I mentioned before, innovative technologies in mobile payments create new opportunities for businesses to automate and streamline their processes, provide users with personalized and secure experiences, and improve the speed of transactions. But remember, the introduction of these innovative payments methods does not happen simultaneously around the world.

Globally, international and regional trends are gathering steam. Businesses have more cross-border opportunities than ever. Cross-border payment flow grew by 5% annually and reached $156 trillion in 2022. 

FinTech Magazine points out that retailers such as Temu are pushing mobile-based shopping, but other use cases for mobile payments such as have been around and are still growing. More sophisticated transactions are also happening through mobile phones, and, surprisingly, there are regional differences.

The chart below shows the extent of this wide variation in the way payments processing is used. This leaves markets the world over open for companies willing to introduce payment innovations, but they will have to lay some of the groundwork themselves. 

Security Challenges of Mobile Payment Technologies

Many innovative technologies used in fintech focus on increasing security. Here, I’ll touch on a few of the security issues that digital payment technologies are tackling. These are 

• Phishing
• Weak passwords
• Human error

We focus on issues in mobile payment technology and modern payment processing in several posts in our blog.

Phishing

Phishing is a technique used by cybercriminals to trick users into sharing sensitive information, such as usernames, passwords, and credit card numbers.

AI and biometric data can foil phishing attacks by implementing multi-factor authentication (MFA) or more advanced versions of two-factor authentication (2FA). I expect AI-enhanced authentication to become both more sophisticated and in some ways simpler at the same time.

Weak Passwords

If a user chooses a weak password, hackers can easily crack it, giving them access to sensitive payment information.

Password-driven authentication can be improved, especially for mobile payments, where other forms of authentication are increasingly used.  

Human Error

Human error can also pose a security challenge in mobile payments. For example, a user may accidentally enter incorrect payment information. A payment innovation in this area not only saves time and money spent on correcting the error, but can be positioned as a user-friendly feature.

Most of the technologies in this article can be used to eliminate or detect human error as well as fraud. Contactless payments and now tap-to-pay are especially useful at the retail level, while biometrics and AI can eliminate error when it comes to identifying your client and recording needed data such as addresses. 

Final Word

Mobile payments innovation in 2025 will continue onboarding the mechanisms introduced over the past few years. New opportunities are opening for businesses based on demographics and geography and the demand for simple yet powerful payments solutions. Of course, all this needs experienced development providers to create these innovative payment solutions. 

At DashDevs, we specialize in high-impact refactoring with measurable outcomes. With over 500 successful projects, including 80 in fintech alone, 14 years of experience, and millions of customers relying on our optimized solutions, we help organizations improve performance, lower maintenance costs, and speed development. If you see a payments provision opportunity, let us discuss how DashDevs can turn it into a reality.

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