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By Rob Anderson and Adam Hallquist
This year will be one of both transformation and preparation for the payments industry.
The momentum that propelled the sector in 2024 — including surging stock prices and noteworthy take-privates — is poised to continue this year, especially with promising IPOs on the horizon.
While the opportunities are immense, there are growing complexities that could challenge incumbents and startups alike. Below are the biggest developments we expect to see in the payments industry in 2025.
AI turbocharges vertical SaaS and embedded finance
We expect artificial intelligence to coexist with vertical SaaS and embedded finance platforms — each making the other better — pushing us into a golden age of automation and intelligence delivered through the unification of software, data and AI. This is especially relevant as vertical software and embedded finance platforms continue to become a standalone category.
Take Toast, which now has a $20 billion-plus market capitalization and serves more than 125,000 restaurants. Or Vagaro 1, which supports more than 100,000 salon, spa and fitness businesses. Their strong growth only reinforces the reality that vertical SaaS and embedded finance is here to stay. In 2025, these platforms will increasingly embed AI, giving rise to powerful new product capabilities, attracting greater market share from horizontal offerings and driving better customer outcomes.
Battle over loyalty goes hyper-personal
The battle over customer loyalty will come down to personalization, with institutions more aggressively tailoring their products to specific clients. This will help push customers deeper into a lender or payment provider’s ecosystem, making it easier to eventually move them to higher-margin products, such as specific credit cards or larger, longer-duration loans.
In this new age of hyper-personalization, financial institutions must be present at a consumer’s biggest life moments. For example, if a client just had a baby, the provider could offer a custom credit program to extend discounts on diapers or zero-interest rates for certain purchases, such as formula. But this is difficult for institutions with legacy infrastructure. The customer data needed to power these unique interactions is trapped in dozens of disparate IT systems often across various business lines.
This demand for greater personalization will drive an exciting replacement cycle of legacy systems that benefits next-generation financial technology infrastructure providers like LoanPro 2, an API-first lending and credit platform.
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