What is the future of money in Europe?
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The following article is an excerpt from The Future of European Fintech 2025: A Money20/20 Europe Special Edition.
In the European payments space, emerging technologies are taking the lead to define what the next big thing will be in banking. Where is the future of payments leading, and how will it benefit the consumer and propel the industry forward? The answer is manifold, as new forms of AI, digital assets, and quantum computing are modernising banking.
What does the future of money look like?
As decentralised finance (DeFi) has become more prevalent, there has been calls for further supervision and regulation on DeFi activity. According to Reuters, DeFi protocols spiked to $7.3 billion in January 2024, the highest since 2023. Market capitalisation of DeFi rose to $77 billion from $72 billion in December 2023. DeFi is expected to grow at a CAGR of over 46% between 2024 and 2032, and was valued at $14.35 billion in 2023.
DeFi refers to financial activity facilitating by smart contracts and blockchain, without a centralised system to mediate asset custody. DeFi has major potential in revolutionising payments using blockchain capabilities, as due to the open nature of the accounts it allows for flexible liquidity. However, accounts do not need to be verified on DeFi transactions, meaning that payments and asset movements can remain anonymous. This leads to uncertainty and security risk, which is why guidelines and regulation are essential to keep DeFi in check.
Ahmed Badr, chief operating officer at GoCardless, commented: 'DeFi and the introduction of digital currencies has the potential to be transformative. CBDCs, in particular, may drive the next level of simplification, for example allowing for more transparent and efficient exchanges of value directly from one account to another.'
Julija Fescenko, head of marketing and communication at Magnetiq Bank, said that there is no doubt that 'the future of money in Europe is digital', furthering that progress being made on CBDCs in Europe is a stepping stone between traditional banking and DeFi.
Fescenko stated: 'DeFi and CBDCs are transforming the very foundation of money. While DeFi provides borderless and programmable financial services, it also brings concerns regarding security, compliance, and systemic risk.
In contrast, CBDCs could enhance the effectiveness of monetary policy and payment efficiency, but they must be designed to protect privacy and coexist with commercial bank money. Fintech companies will need to adapt to this dual landscape by investing in compliance technology, interoperability layers, and digital asset management solutions to stay competitive.'
Smart contracts are increasing in usage, utilised by retailers to manage supply chains and by individuals in trading. Smart contracts are digital contracts stored on blockchain, they automate the execution of a predetermined agreement. The actions that a smart contract can execute are numerous, from releasing funds to sending notifications. Like most DeFi tech, smart contracts do not require a third party to review the transaction, actions are carried out according to the agreement made by the two parties. The automated aspect of the transaction make it immediate, and therefore instant, and by operating on encrypted blockchain it ensures that the transaction is secure.
Another key innovation is crypto payments. According to the Payments Markets Report 2025, cryptocurrency payments has surpassed 560 million users in 2024, and 60% of those surveyed stated they were interested in using digital currencies for payments. Quantum computing is also on the horizon for becoming the next big trend. Quantum computing is expected to make waves in four key sectors: chemical, pharmaceutical/life sciences, financial services, and transportation/mobility, estimating a $2 trillion valuation by 2035. According to McKinsey, the quantum computing market could reach $173 million by 2040, having seen £42 billion in investment globally.
What is the role of predictive analytics and AI in the emerging payments space?
Predictive analytics and AI are drivers of the payments revolution, and can be implemented throughout the transaction process accomplishing a significant reduction of risk and enhanced customer experience.
Tom Moore, head of financial services at Moore Kingston Smith cited how AI be implemented in multiple areas of payments: 'When it comes to the user experience, AI can help optimise contactless payment processing by predicting peak transaction times and allocating resources accordingly, to ensure smooth and efficient operations. For digital wallets, analysing these spending patterns could enable companies to offer personalised offers and discounts or provide users with insights into their spending habits and future payments.'
As Moore illustrated, AI integration in personalisation and customisation can improve user experience. Furthermore, AI can be used to process large datasets to detect fraud, find fraudsters, and identify unusual spending patterns. AI monitoring of BNPL can analyse transaction and social media history of an applicant to determine credit-worthiness.
Carl Slabicki, executive platform owner, treasury services at BNY Mellon noted: 'In contactless payments, AI can help detect and prevent fraud in near-real-time through enhanced anomaly detection techniques. For Buy Now, Pay Later (BNPL) services, AI could be used to help assess credit worthiness more accurately and predict repayment behaviors, which could in turn lead to more inclusive lending and reducing default rates. Overall, AI and predictive analytics may make payments more secure, efficient, and tailored to individual needs.'
Vibhor Narang, executive director of structured solutions cash management and transaction banking at Standard Chartered Europe, mentioned that corporate payments will be transformed by the integration of AI, in allowing treasurers to forecast cash flow, liquidity planning, proactive risk management. Narang highlighted that AI can analyse diverse data sets to predict market shifts and how to navigate economic volatility.
Narang detailed: 'Algorithmic models are redefining FX trading and crossborder payment execution. Adaptive FX algo strategies manage currency exposures and optimise trade execution, cutting costs and operational friction. Adoption of enriched data standards like ISO 20022 amplifies AI's impact by providing richer, structured payment data, fuelling deeper insights and automation across the payments value chain. In this new era, the future of corporate payments belongs to those who transform predictive intelligence into strategic foresight-turning treasury and payments functions from cost centres into engines of competitive advantage.'
Wendy Reedshaw, chief digital information officer at NatWest Group, commented on how NatWest is employing AI: 'GenAI tools are helping reduce the number of times a colleague needs to intervene in a transaction. As these tools mature, we expect they will underpin smarter, safer, and more seamless payment innovations, delivering simpler, more personalised services at even greater scale.'
How can FIs navigate the regulatory complexities that accompany innovation?
'It's important to ensure that these innovations align with national and European financial regulations. Lawmakers and regulatory bodies play a crucial role in this journey, thoughtfully creating legal frameworks that prioritise security and compliance.
By doing so, we can truly unlock the full potential of AI while safeguarding personal data and ensuring financial security,' postulated Fescenko.
The European regulatory landscape is defined by age-defining regulations such as DORA, MiCA, and PSD3 that create a foundation for growth in a controlled environment, that outlines the risk involved. These frameworks are designed to provide clarity where before there was confusion, and to provide step-by-step guidance on adoption for financial organisations seeking to integrate new technologies.
European governments are taking the lead in driving growth, as seen as the adoption of CBDC pilots for the Digital Euro and Digital Pound, and push for digital finance to be held up by governments.
Conor McNamara, EMEA CRO at Stripe, commented: 'Compared to other parts of the world, the EU offers diverse local payment methods, and it's a great example of how regulation can boost entrepreneurship. We've seen this first-hand with PSD2—a regulation that enabled many global leaders in fintech, built from Europe. That said, this isn't a time for complacency. Digitalisation will change money movement drastically in the coming decade. And we generally support more choice and competition in the market and a variety of payment methods. Stablecoins are one of them, and a digital euro could potentially be another. The one thing we'd say is that speed matters— stablecoins are being used every single day by businesses across the globe, so if Europe is serious about the digital euro, turning it into a real thing soon will be key.'
Narang explained that regulatory guidelines are essential in shaping how innovation moves in the industry: 'DeFi's rapid evolution demands a balanced regulatory response: mitigating risks like smart contract vulnerabilities and financial crime, while preserving its potential to democratise access to finance. At the same time, the development of a digital euro and expansion of regulatory sandboxes across Europe are enabling both fintechs and established institutions to experiment, collaborate, and innovate within a clear, supervised framework. Adoption of harmonised data standards, such as ISO 20022, will further empower AI-driven analytics and seamless cross-border payments.
'As I see it, Europe's leadership in fintech will be defined by its ability to build trust, foster responsible innovation, and create a regulatory environment where bold ideas become reality-without compromising security or stability. By harmonising oversight, incentivising public-private collaboration, and embedding ethical guardrails, regulators can ensure Europe remains the global benchmark for responsible and transformative fintech innovation.'
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