2025 is shaping out to be a year for the trend of platformisation to take even further steps as fintech companies continue to merge with the retail industry, according to Mangopay UK Managing Director, James Butland.
Butland, writing for Payment Expert, deep dives into how businesses are now becoming more like marketplaces and goes in-depth on the fundamental impact Generative AI has and will have on the financial services industry throughout the year and beyond.
The platform economy has never been more competitive, with many racing to go to market at unprecedented speeds. As fast-growing businesses scale up their innovation efforts to stay ahead, they are unlocking new opportunities to expand services and improve the consumer experience.
However, this dynamic landscape brings with it notable trends and challenges. Generative AI is reshaping business models, AI-driven fraud is emerging as a critical threat, and the integration of different verticals is creating new possibilities for growth.
At the same time, the forthcoming PSD3 regulation will enhance security and transparency in financial services. Despite these complexities, platforms and marketplaces can thrive by adopting the right tools, strategies, and resilience to navigate the road ahead.
A new challenge that regulation alone can’t stop
In 2023, we predicted that Generative AI’s rollout and implementation would be a phenomenal moment for the world, paving the way for a new era of business and consumer products. That prediction is now a reality, and we’ve witnessed countless companies implement the technology into their tech stack and create new LLMs, as the technology has and will continue to transform the way we live and work.
However, all the buzz has come with manipulation of the technology for malicious means.
Low-skilled cybercriminals have used open-source models and Generative AI tools to create synthetic identities and use deepfakes as a social engineering method to steal financial information. However, their approach prioritises quantity over quality. These bad actors focus on overwhelming systems with numerous attempts, relying on the law of averages rather than employing sophisticated techniques.
Experienced fraudsters on the other hand are not only leveraging AI and other similar tools as part of their arsenal but innovating independently. Combining these technologies with their own expertise means they can execute highly sophisticated, targeted attacks that need constant watch.
To effectively counter both types of threats, industry players must adapt their systems and fast to mitigate against attacks from less skilled actors while staying vigilant against the nuanced, high-quality efforts of seasoned fraudsters.
While large language models (LLMs) and automation tools are unlikely to directly increase the sophistication of fraud, they will make fraudulent activities cheaper, more scalable and accessible, amplifying their impact. This presents a further challenge for regulators to keep up with.
The European Union’s AI Act is one of the first legislative efforts to address the ethical use of AI. While the Act is a step in the right direction, it doesn’t specifically target AI-driven fraud in the payments sector.
With an increase in AI-driven fraud, we’re likely to see new regulations aimed specifically at combating this threat. However, regulations alone cannot stop fraud. Fraudsters, by definition, operate outside of the law and continually evolve their methods to bypass new regulatory requirements.
Bridging industries for better customer services
Another trend we have witnessed is the increased integration between different verticals, such as fintech with retail and restaurant delivery services, and on-demand services with travel. This trend is expected to gain further momentum as these collaborations open an opportunity to offer a broader range of services to consumers while enhancing the overall user experience.
In parallel, there is a notable shift as individual merchants increasingly transition from traditional business models to becoming fully-fledged marketplaces. This transformation not only allows them to diversify their offerings but also broaden their market reach by tapping into a larger customer base.
Building on this trend and increasing number of merchants are also adopting marketplace models, following the lead in the footsteps of companies like Klarna, Affirm, or Afterpay. We expect to see more BNPL providers develop their own marketplaces, integrating financial solutions directly into the purchasing process.
Innovating for the future under PSD3 regulation
While we’re yet to see the full extent of the PSD3 requirements, as we prepare, discussions will centre around instant payment security and the evolution of open banking. PSD3 is expected to mandate stricter security measures and greater transparency for end-users, introducing changes that will particularly affect the business models of financial platforms.
These developments will likely drive an industry-wide emphasis on innovation, as businesses strive to adapt to the new regulatory framework while maintaining a competitive edge. I anticipate a surge in investments targeting infrastructure upgrades, cybersecurity improvements, and customer-centric solutions to align with the directive.
This period of transformation will not only raise the bar for compliance but also foster greater innovation, reshaping the financial services landscape and the way businesses engage with their customers.
Trends are always changing; that goes without saying. But there are permanent transformations that the platform economy should be prepared to embrace to stay relevant and competitive. These shifts and emerging trends will open up more opportunities to succeed in the times ahead.
