AI making its impact felt on commerce

Six consequential developments are rewriting the rules of commerce, according to the annual Commerce and Payment Trends Report by Global Payments. The 2025 report, based on in-depth discussions with industry experts and a survey of 600 payment decision-makers and decision influencers, reveals timely insights into the central role payment technologies are playing in business execution and customer experiences. For example, AI has moved from a theoretical game-changer to an actual impact-maker. GenAI is transforming client services and marketing, while AI continues to prove its value in important use cases such as fraud protection. And while enterprises are showing signs of caution around issues like data privacy, SMBs are more enthusiastic about potential AI applications.

As consumers do an increasing share of their shopping online, businesses are integrating their back-end operations into unified platforms that deliver seamless experiences regardless of where customers start or end their purchase journey. According to the survey, SMBs (67%) and mid-market (71%) companies are more likely to increase or significantly increase their investments in unified commerce platforms than enterprise-sized companies.

Another key finding is that embedded payments are making the B2B leap. The qualities that have made embedded payments attractive for consumers are equally powerful in B2B settings, driving the development of B2B transactions built into business processes and supply chains. Meanwhile, the growth of embedded finance in consumer settings is assured.

The growing sophistication of identity theft, fraudulent transactions, and AI-enabled fraud is causing organisations across the payments ecosystem to pursue biometrics, tokenisation and other advanced security measures. These investments are also providing better experiences for consumers and operational gains for companies.

Elsewhere, the survey finds that POS is emerging as a Place of Service. Increasingly, merchants can build a loyalty programme, design an email marketing campaign, customise their ordering platform and more in one POS package. When integrated with AI, POS systems will become a proactive partner in managing a business. Think of it as the “Place of Service” where the POS informs all other customer journey milestones, the report suggests.

Finally, the research shows that payment orchestration is maturing. While payment orchestration technologies are not new, their importance continues to grow as companies focus on operational efficiency. Surveyed business leaders cited benefits including improved customer experience, accessibility, security, fraud prevention and operational efficiency. 

 

ECB publishes second progress report on the digital euro preparation phase

The European Central Bank (ECB) has published its second progress report on the preparation phase of a digital euro, which was launched on 1 November 2023 and is laying the foundations for the potential issuance of a digital euro.

Since the publication of the first progress report, the ECB has updated its digital euro scheme rulebook, aimed at harmonising digital euro payments across the euro area. This followed an interim review carried out by members of the Rulebook Development Group, representing the views of consumers, retailers and payment service providers. The updated draft also includes input from seven new workstreams, launched in May 2024, to further develop key sections of the rulebook, including minimum user experience standards and risk management.

In parallel, the ECB has concluded a call for applications, launched in January, to select potential providers of digital euro components and related services. The ECB has invited selected bidders to tender. The outcome of this procedure will be published on the ECB’s website when it has been finalised in 2025.

At the same time, new user research and experimentation activities are now underway to gather insights into users’ preferences and to inform decision-making for a possible digital euro. Both quantitative and qualitative engagements are foreseen in the coming months, including online surveys and interviews. These will focus on special target groups, such as small merchants and vulnerable consumers. The findings will be published in mid-2025.

Following a call launched in November, the ECB will join with key stakeholders, including merchants, payment service providers, fintech companies and universities, to form innovation partnerships to test conditional payments (payments that are made automatically when predefined conditions are met) and explore other innovative use cases for a digital euro. An outcome report is expected to be published in July 2025.

In parallel, the ECB is working with experts from the national central banks of the Eurosystem and national competent authorities to develop a methodology for setting digital euro holding limits, balancing user experience with monetary policy and financial stability implications. This work will allow the ECB to determine the factors to be considered in the calibration and propose a methodology to calibrate the digital euro holding limits. It includes consultation with market participants through the European Retail Payments Board and also relies on granular bank data specifically collected for this purpose. The proposed method will be tested in a first analysis in the course of 2025.

 

Digital ID verification spend to exceed $26bn globally by 2029

Spending on digital identity verification checks will grow by 74%, from $15.2bn in 2024 to $26bn by 2029, according to a study from Juniper Research. This substantial growth will be attributable to new solutions that look to reduce the friction of digital identity verification checks. The study identified the rising usage of behavioural biometrics as a key technology that will enable digital identity verification vendors to achieve this by more efficiently detecting potential fraud.

The report predicts behavioural biometrics, in particular, will detect anomalous user behaviour for device inputs such as keystrokes and screen swipes to identify fraudsters. In turn, this enables digital identity verification vendors to detect fraudulent activity earlier and more efficiently.

In addition to behavioural biometrics, the study anticipates the integration of self-sovereign principles through blockchain will enhance the security and privacy of verification. This will be achieved in highly regulated sectors such as healthcare and financial services by gifting users control over what information is shared and with whom.

The ‘electronic Identification, Authentication, and trust Services’ (eIDAS2) regulation is ushering in massive change in the EU, with interoperable digital identity wallets being offered to all citizens by May 2026. The research recommends vendors adhere to digital identity standards by working with decentralised databases to maximise the security and privacy of user information.

 

EU’s slowing trend growth could diminish economic strength

Several European policymakers have warned of impending economic decline in the EU without significant reforms to revive GDP growth, a report from Moody’s has highlighted. The ratings agency expects a significant decline over the next decade, driven by an ageing population and potentially hurting the bloc's economic strength. 

Moody’s long-term forecasts take into account future trends in demographics, immigration, participation rates, working time and productivity, including the effect of Next Generation EU's (NGEU) investment and structural reforms. Without policy action, Moody’s warns that the slowdown in trend growth could lower its view of countries' economic strength, a key credit consideration.

EU trend real GDP growth will slow to 1.2% in 2033 from around 1.8% currently, with significant differences between countries, the report states. In the three largest economies, trend growth will slow below 1%. It will also fall below 1% in Finland (Aa1 stable) and Belgium (Aa3 negative). The largest decline compared to current trend growth will be in Ireland (Aa3 positive) and Malta (A2 stable), although the rate will remain above 3% in both countries. In Romania (Baa3 stable) and Bulgaria (Baa1 stable), trend growth will slow but remain above 2.5%.

The slowdown in trend growth would have medium-term credit implications if left unaddressed. Taking onboard its long-term projections of trend growth, without any other change, Moody’s assessment regarding economic strength would be one notch lower for 10 EU countries and two for Croatia (A3 stable) and Cyprus (A3 stable).

Immigration and higher participation can only partly offset adverse demographics, the report states. In the short term, an increase in skilled worker migration is likely to mitigate the effect of adverse demographic trends. In the long term, higher immigration and rising participation rates can help soften the effect of ageing populations. However, significant domestic reforms to boost labour market participation would be needed to prevent the steady shrinking of the labour force.

The report highlights that productivity-enhancing reforms could provide benefits, bringing substantial economic strength and resilience to negative demographic trends. These include reforms expected to yield positive results in the near-to-medium term, such as cutting bureaucracy, targeting more effective EU funds, and investing in additional infrastructure. In the medium-to-long term, it will help sectoral shifts toward more productive industries, support research and development, and increase and enhance the efficiency of education spending. However, the prospect of and commitment to implementing comprehensive reforms are still unclear at this stage, the report finds.

 

MAS fines JPMorgan Chase $2.4m for relationship managers’ misconduct

The Monetary Authority of Singapore (MAS) has imposed a civil penalty of $2.4m on JPMorgan Chase Bank, N.A. (JPM), for failing to prevent and detect misconduct committed by its relationship managers (RMs). In 24 over-the-counter (OTC) bond transactions, the RMs had made inaccurate or incomplete disclosures to clients, resulting in the clients being charged spreads that were above the bilaterally agreed rates.

This enforcement action on JPM follows MAS’ review of pricing and disclosure practices in the private banking industry. Investigations found that for OTC bond transactions, JPM’s practice was to charge clients a spread over the interbank prices. As the interbank prices were not available to clients, they had to rely on the RMs’ representations to them regarding the interbank prices and spreads. 

A statement from MAS noted that JPM did not establish adequate processes and controls to ensure that its RMs adhered to pre-agreed spreads with clients when executing OTC bond transactions on their behalf. MAS sampled OTC bond transactions conducted by JPM’s RMs and found that in the 24 transactions, RMs had either misrepresented the price components or omitted material information that the spreads charged were above the agreed rates, in contravention of sections 201(c) and 201(d) of the Securities and Futures Act (SFA). 

JPM has admitted liability under section 236C of the SFA for its failure to prevent or detect misconduct by its RMs and has paid MAS the civil penalty. The bank has refunded the overcharged fees to affected clients. The bank has also enhanced its pricing frameworks and internal controls to prevent the recurrence of such misconduct. Separate reviews into the individual RMs involved in the misconduct are ongoing.

 

CHIPS smashes payments record on Black Friday

The CHIPS high-value clearing and settlement system, operated by The Clearing House, set a new record for transaction volume on Black Friday by clearing and settling 1,083,550 payments valued at $2.63 trillion.

There are several factors that contributed to Black Friday's record volume. The CHIPS network is a USD clearing and settlement system for international payment activity, with 95% of CHIPS payments being the US dollar leg of a funds transfer that begins or ends in another country. Many transactions on Friday, 29 November, originated from foreign banks that do not observe the US Thanksgiving holiday. These transactions could not be sent through wire systems in the US on Thanksgiving and, thus, were part of the extra volume on Friday. The CHIPS network also tends to see higher volumes on the last business day of a month.

Another contributing factor is increased volume since the CHIPS network adopted the ISO 20022 message format in April, making it the first high-value payment system in the US to adopt the format. The successful migration to messages using the ISO 20022 standard means that CHIPS messages now align with message formats used by other global high-value payment systems, substantially enhancing the efficiency and information content of cross-border payments for CHIPS participants and their end-user customers.