Mastercard’s six payment trends shaping 2026

Mastercard has published its latest outlook on how payment systems are expected to evolve over the coming year, highlighting six trends that reflect accelerating digital adoption, growing scrutiny around security, and the continued integration of traditional and emerging payment technologies. The trends are based on internal insight and market developments across consumers, merchants, banks and fintechs.

The research points to a continued shift in how money moves, with payments becoming more personalised, predictive and interoperable across platforms. The sector has been undergoing steady modernisation for several years, supported by enhanced infrastructure, new standards and cross-industry partnerships. Mastercard expects this foundation to drive further change in 2026.

Securing agentic commerce is the first major theme, reflecting growing commercial use cases for AI-driven agents that can manage payments or transactions on behalf of users. The technology is expected to gain traction next year, but Mastercard notes that the focus will increasingly be on building tighter controls around identity, authentication and risk, ensuring automated transactions can be monitored and validated. The need for clear intent capture and robust dispute processes remains central.

A second trend, Connecting crypto to fiat commerce, highlights the impact of greater regulatory clarity around stablecoins in the US and Europe. Mastercard expects collaboration between financial institutions and technology providers to increase, reducing barriers to using stablecoins for everyday payments, settlement and cross-border operations. The aim is to make digital assets easier and safer to use alongside traditional currency systems.

Growing concerns around fraud underpin a third development, Doubling down on digital identity. Recent research from the company found that 80% of global consumers were targeted by a scam attempt in the past year. Digital identity wallets and verified aliases are expected to play a larger role in easing access to services, tackling fraud and improving user confidence, including in developing markets.

A fourth area of change centres on sustainability, captured under Redefining consumption for the circular age. Consumer behaviour is shifting toward reuse, resale and repair models, supported by new payment loops that make returns, deposits and micro-transactions easier to manage. Retailers may also see benefits through lower packaging costs and greater loyalty.

Further personalisation in finance emerges under Personalising payments, benefits and risk. Advances in data analytics are expected to support more customised payment tools and credit decisions, aligned to spending habits and financial goals. Deeper insight into historic transactions could strengthen credit assessments, potentially widening access to borrowing for businesses and individuals with thin or fragmented files.

Finally, Enabling the instant economy for everyone, everywhere reflects ongoing momentum behind faster, real-time settlement models. Tokenisation, biometric checkout and same-day clearing are continuing to scale, reducing friction at checkout and freeing up working capital for merchants. Innovation in cross-border capabilities remains a priority as global payment flows expand and small businesses seek access to international markets.

Taken together, the six trends indicate a payments landscape that is evolving at pace, underpinned by tighter security, richer data and broader interoperability. As digital adoption continues, organisations across the ecosystem will face ongoing commercial opportunities as well as the operational and regulatory considerations that accompany them.

 

Volatile pound renews hedging focus for 2026

UK fund managers are preparing to increase their hedging activity next year as sterling volatility continues to affect performance and heighten exposure to currency risk. According to a report from MillTech, 48% of respondents plan to raise hedge ratios in 2026, while 46% intend to extend hedge lengths. Only 19% expect to reduce hedge ratios and just 7% plan shorter tenors. More than half of firms that do not currently hedge say they are now considering doing so.

Sterling has experienced sharp swings over the past 12 months. The currency reached a four-year high against the dollar in July before recording its weakest monthly performance since 2022. Those shifts were attributed to changing US trade policy and broader market uncertainty. Almost all managers surveyed (96%) said volatility had benefited their returns at some point this year, yet 95% reported losses from unhedged FX risk, despite 81% hedging at least part of their predictable exposure.

Eric Huttman, CEO of MillTech, said 2025 demonstrated why consistent hedging remains essential. “Record FX volumes reflected intense market swings that reshaped trading dynamics and tested even the most experienced managers. Rising costs have made hedging more difficult, but the market in 2025 has highlighted that staying unhedged is the bigger gamble.”

The MillTech UK Fund Manager CFO FX Report 2025 is based on a survey of more than 250 senior finance leaders across the UK. It highlights how funds are adapting their FX strategies in response to volatility, operational pressures and rising hedging costs, as well as the growing influence of digital platforms, automation and AI.

Hedging costs increased by an average of 69% over the past year, with nearly one in five funds reporting that their costs have more than doubled. Cost transparency (41%) and cost reduction (38%) ranked among the top concerns. Despite this, funds are adjusting rather than retreating, with a shift towards more measured hedge ratios and slightly longer tenors. The average hedge ratio fell to 46%, its lowest since before 2023, while hedge lengths rose slightly to 5.5 months, though still below 2023 levels.

Manual execution remains a defining operational challenge. Email (47%) and phone (45%) are the two most common instruction methods, both higher than last year, underscoring the need for improved digital workflows. Nearly one-third of respondents said the ideal solution would be a multi-bank digital platform with embedded automation to streamline execution, reporting and reconciliation.

FX options are also gaining traction as volatility persists. Ninety-one percent of funds have increased their use of options this year, while 41% are significantly expanding usage.

Policy uncertainty remains a major concern, with US tariff developments shaping sentiment. Respondents cited the impact on currency values (37%), increased market volatility (37%) and reluctance to make major strategic decisions (35%) as the most prominent effects.

Automation and AI are now becoming central to operational planning. Forty-two percent of respondents said the automation of manual processes is their main priority for 2026, followed by reporting, price discovery and execution. One quarter already use AI in FX workflows and a further 30% are actively evaluating adoption.

Outsourcing continues to gain traction as funds seek scale, efficiency and tighter control over risk and compliance. The most common reasons are flexibility (41%), focus on core activities (38%) and improved oversight (32%).

Huttman expects the operating model for FX to evolve rapidly next year. “Looking ahead to 2026, the future of FX management will be defined by intelligent systems that automate the routine and empower managers to act with clarity, speed and conviction,” he said.

 

Lloyds completes first India-UK digital LC on WaveBL

Lloyds Bank has completed its first India-UK digital letter of credit (LC) using WaveBL, a blockchain-based platform for trade documentation. The transaction, completed for West Yorkshire laboratory equipment supplier Labtex in partnership with a major Indian bank, was executed entirely through the WaveBL system and demonstrates how digital trade finance is moving toward real-time processing.

Traditionally, LCs rely on paper documentation, courier services and sequential handling, often adding days or weeks to a transaction. By moving to a fully digital process, documents were presented, reviewed and amended instantly, reducing friction and increasing visibility for all parties.

The ability to transmit and resubmit documents electronically did not remove the banks’ examination processes, but it eliminated one of the slowest components of trade finance: physical document handling. The transaction highlights a wider shift in global trade toward digital channels that match the expectations of modern commerce, where users assume instant movement of information and transparent visibility.

According to Lloyds, digital LC processing supports the goals of the India-UK Comprehensive Economic and Trade Agreement by reducing administrative friction between counterparties, helping to deepen bilateral trade and enabling businesses to move goods and secure financing more efficiently.

Surath Sengupta, Head of Transaction Banking Products at Lloyds, said digital processing can accelerate access to finance when timing is critical: “By enabling documents to be presented instantly, this technology removes delays and accelerates access to finance. In this case, the speed of digital presentation supported a financing opportunity that would have been impossible using traditional paper processes, given the short payment term.”

The digital workflow delivered several operational benefits for both sides of the transaction, including real-time document review, full audit visibility, cost savings from reduced courier dependence and compliance with international trade standards. These gains point to a longer-term evolution in trade finance automation, especially as more banks and corporates pursue paperless channels to improve control and reduce processing overhead.

WaveBL’s blockchain infrastructure enables each participant in the LC workflow to view documents and track their status securely. Ofer Ein Bar, VP Financial Institutions at WaveBL, said the shift mirrors wider digital payments innovation: “The waiting and manual steps are giving way to instant, transparent and connected digital flows - and this transaction is proof of that evolution.”

For Labtex, the process translated into shorter timelines and lower costs. Sherida Hepplestone, Admin Manager at Labtex, said the digital LC demonstrated an immediate operational step forward: “Presenting the documents this way reduced the transaction time and eliminated any courier fees, making the transaction more cost-effective and efficient. From electronic presentation to receipt of funds into our account was four days.”

With bilateral trade between India and the UK targeted to reach US$120bn by 2030, digital LC processing is expected to support greater participation by small and mid-sized exporters and improve the efficiency of working capital cycles. The Lloyds–WaveBL transaction signals growing confidence in digital documentation for cross-border trade, as banks, corporates and technology providers continue to integrate blockchain-enabled workflows into mainstream financial processes.

 

Outlook for 2026 Fed cuts still uncertain - Goldman Sachs

The Federal Reserve looks increasingly likely to deliver a rate cut in December, although the policy direction for 2026 remains uncertain, according to the latest analysis from Goldman Sachs Research. Jan Hatzius, chief economist at Goldman Sachs, argues that while a near-term cut appears firmly on track, next year’s trajectory will depend heavily on how quickly economic growth reaccelerates and whether labour market weakness becomes more entrenched.

The delayed September employment data showed signs of cooling and “may have sealed a 25-basis-point cut at next month’s meeting of the Federal Open Market Committee (FOMC),” Hatzius wrote in the firm’s latest Global Views report. With the next employment report due on 16 December and new consumer inflation numbers scheduled for 18 December, “there is little on the calendar to derail a cut on December 10.”

Goldman Sachs Research expects US economic growth to accelerate to around 2-2.5% in 2026, supported by reduced tariff pressures, tax adjustments and easier financial conditions. These factors are expected to stabilise the unemployment rate slightly above the 4.4% level recorded in September. Against this backdrop, Hatzius believes the Fed will pause its cutting cycle in January before delivering additional cuts in March and June, bringing the funds rate down to between 3% and 3.25%, from 3.75-4% today.

The inflation outlook poses limited risk to that forecast. Year-on-year core personal consumption expenditures inflation stood at 2.8% in September, based on Fed staff estimates, despite tariff-driven cost increases and some effects from equity market gains. Hatzius wrote that this implies underlying inflation has already fallen to “around 2%” and that actual core inflation should recede once tariff pass-through effects end by mid-2026. That assumes “there are no large second-round effects from tariffs - of which there are no signs - and that equity markets are stable.”

The larger downside risk is weakening employment momentum. While headline nonfarm payrolls rose by 119,000 in September, Goldman Sachs Research estimates underlying job creation at around 39,000, with alternative indicators showing renewed job losses in October. Layoff tracker components have risen notably in recent months, raising concerns that labour market softness may be becoming persistent rather than cyclical. “This could mean that the weakness in the labour market is becoming too entrenched to be checked by a modest cyclical growth acceleration,” Hatzius wrote.

The trend is especially visible among college-educated workers, whose unemployment rates have risen substantially from their 2022 lows. Continued deterioration among this group “could have a disproportionate negative impact on consumer spending and prompt further rate cuts over time,” Hatzius added.

 

FCA proposes stronger oversight for ESG ratings

The Financial Conduct Authority has set out new proposals aimed at making environmental, social and governance (ESG) ratings more transparent, comparable and reliable. The framework would bring ESG rating providers formally within the regulator’s remit for the first time, following government legislation published in October 2025.

ESG ratings are increasingly used to assess investment risk, inform portfolio decisions and support regulatory disclosures. Spending on ESG data, including ratings, is forecast to reach US$2.2bn in 2025. However, the FCA’s research indicates that users remain concerned about how ratings are constructed and how transparent they are, with 55% worried about methodology and 48% uncertain about the clarity of disclosures.

The consultation outlines four areas of focus for rating providers: greater transparency to support comparability; improved governance, systems and controls; stronger management of conflicts of interest; and clearer expectations for stakeholder engagement and complaints handling. Existing FCA rules would also apply to providers entering the regulatory perimeter, with proportionality based on business size and risk.

The proposals are aligned with international recommendations from IOSCO and build on the industry’s voluntary ICMA Code of Conduct. According to the FCA, strengthening oversight should increase confidence in ESG ratings and reduce concerns around inconsistent methodologies. The cost-benefit analysis published alongside the paper estimates around £500m in net benefits over the next decade.

The regulator said clearer standards will help maintain the UK’s position in sustainable finance and provide a more predictable environment for users of ESG data. The consultation is open until 31 March 2026, with final rules expected in the fourth quarter of 2026. The regime is due to take effect from June 2028, and the FCA said it will support providers seeking authorisation under the new framework.

 

Budget uncertainty drives record equity-fund outflows

UK investors withdrew £3.02bn from equity funds in November, marking the second-worst month for redemptions on record, according to the latest Fund Flow Index from Calastone. The figures extend an unbroken six-month period of selling that has now reached £10.39bn, the largest and longest spell of withdrawals since Calastone began tracking the data.

Daily trading patterns show that outflows continued throughout November until Budget Day on 26 November, when selling abruptly stopped and inflows resumed. Every trading day earlier in the month, bar one, recorded net redemptions.

North American and UK-focused equity funds suffered the heaviest selling pressure. UK funds saw withdrawals of £847m, while North American funds shed a record £812m. Global funds, which are heavily weighted toward US equities, recorded £747m of net outflows, marking a sixth month of consecutive selling across the sector. Europe-focused funds were the only equity category to attract inflows, totalling £78m.

Edward Glyn, head of global markets at Calastone, said the recent political backdrop has caused significant investor unease. “The political narrative has played havoc with UK savers in recent months. Never have we seen such consistent or large-scale selling before.” He added that the sudden halt in withdrawals once the Budget was delivered indicates that many investors had acted pre-emptively. “The stop in outflows is clear evidence that investors were selling holdings as concerns rose at the possible curtailment of pension lump sum withdrawals, or of further capital gains tax hikes.”

Risk aversion has also intensified. Safe-haven money-market funds attracted record inflows of £1.25bn, surpassing the previous high of £955m in October. Fixed income funds continued to draw steady interest, with £643m in net inflows, supported mainly by corporate and high-yield bond allocations. Investors remained cautious on sovereign debt.

Market sentiment improved toward the end of the month, buoyed by strong US earnings and renewed expectations of near-term interest-rate cuts. However, Glyn noted that sentiment remains fragile. “It’s hard to disentangle Budget jitters from nerves about equity valuations, but the inflows to safe-haven money-market funds do indicate rising risk aversion.”

 

Barmag digitalises trade finance with Surecomp

Barmag, part of the Swiss-based Oerlikon Group, has selected Surecomp’s RIVO platform to streamline its trade finance operations and reduce manual processing. The move replaces reliance on spreadsheets and email for handling export letters of credit, guarantees and group guarantees across a large global subsidiary network.

The decision reflects the growing shift toward digital processing in trade finance, where corporates seek greater control, visibility and real-time connectivity with banking partners. Barmag’s transition to a centralised system is designed to improve accuracy, reduce processing lead times and enhance auditability for international trade documentation.

Through RIVO, Barmag will gain API-based connectivity and the ability to collaborate digitally with multiple banks. The platform also incorporates emerging AI capabilities, which the company intends to apply to tasks such as guarantee text validation, application processing and documentary checking. Automating these activities can help treasury teams improve workflow efficiency while reducing operational risk.

Martin Tomala, Barmag’s head of treasury, said the business sees digitisation as a core operational priority. “With RIVO, we are empowering our treasury team to work seamlessly with our banks, to accelerate response times and help drive better trade relations with our global customers and partners. The platform’s AI potential makes it an ideal partner for our future.”

The company’s adoption of a digital platform reflects a wider market trend, as corporates seek to modernise trade finance practices that have historically required extensive manual handling. Digital collaboration between corporates and banks can reduce the need for document resubmissions, improve data quality and support more timely funding and risk management decisions.

As Barmag encourages its banking partners to participate in the same digital network, the initiative is expected to support more efficient LC and guarantee processing across counterparties. Treasury teams will benefit from faster document turnaround, improved traceability and stronger integration with back-office systems.

The deployment marks another sign of corporates elevating digital trade connectivity as a means to improve control over global trade flows, reduce the administrative burden of documentation and reinforce supply chain relationships.

 

BMO rolls out North American payment APIs

BMO has introduced a suite of North American payment APIs designed to let commercial clients initiate and manage payments directly from their existing business systems. The launch enables companies to embed BMO payment capabilities into their enterprise resource planning tools, treasury platforms or customer-facing applications, reducing manual effort and eliminating the need to switch between banking interfaces.

The new APIs support real-time status updates, automated processing and a more streamlined workflow for high-volume payments. Developers can access BMO’s portal to build and test integrations using a secure sandbox environment, with technical documentation designed to accelerate implementation. The bank says this will help corporates bring new services to market faster and unlock more efficient cross-border payment options.

For corporate treasury teams, embedded payment connectivity reflects a broader shift toward automation, centralisation and tighter data control. API-based payment initiation helps reduce reconciliation effort, improve accuracy and enhance visibility across accounts and currencies. When paired with multi-bank reporting tools, these capabilities support more consistent liquidity monitoring and stronger risk controls.

The use of real-time payment status information also offers operational advantages, helping firms reduce delays, improve exception handling and strengthen supplier relationships. In a cross-border context, embedded connectivity can support more predictable settlement and lower reliance on manual handoffs.

BMO’s announcement follows a wider industry trend toward cloud-native payment rails and API connectivity, as banks seek to align with digital treasury requirements and simplify corporate onboarding. As adoption grows, corporates with complex payment flows are likely to benefit from faster execution, reduced operational costs and a more seamless user experience across the financial supply chain.

 

Treasury Prime unveils AI marketplace for bank–fintech collaboration

Treasury Prime has launched an AI-powered marketplace designed to simplify how banks and fintechs identify and form strategic partnerships. The platform uses large language models and machine learning to analyse thousands of fintech opportunities and match banks with partners based on criteria such as industry sector, risk appetite, funding stage and business objectives.

The marketplace provides access to a curated network of more than 3,600 fintechs, giving banks a more efficient way to source partners that can support deposit growth, fee-generating services or expansion into new product lines. By using AI to screen providers and structure onboarding, the platform reduces manual assessment work and helps banks prioritise opportunities that fit their compliance requirements.

Banks can filter opportunities across 13 industry verticals, ranging from B2B payments and real estate to healthcare, investment services and higher-risk sectors. This segmentation provides a more targeted way for institutions to grow within areas that align with their experience, regulatory obligations and commercial aims.

The development reflects an industry-wide shift toward automated go-to-market tools and embedded financial ecosystems. As digital collaboration between banks and fintechs expands, AI-based matchmaking is becoming more important for due diligence, risk evaluation and faster onboarding.

For fintechs, increased visibility within the platform supports quicker access to qualified banking partners and compliant infrastructure. The marketplace is structured so that vetted fintechs integrate directly with participating banks, reducing onboarding friction and improving time to market.

Treasury Prime plans a series of further feature upgrades over the next year, intended to deepen automation and strengthen risk controls as embedded finance models continue to mature.

 

Smartstream introduces agentic AI to automate exception-heavy reconciliations

Smartstream has unveiled a new AI-powered capability, Smart Agents for Investigations, aimed at transforming exception handling across reconciliations and back-office financial operations. The technology applies domain-trained autonomous agents to triage and resolve breaks, gather missing information, and document every step of the investigation. It adds an intelligence layer on top of Smartstream’s existing reconciliations and exceptions platforms, helping financial firms reduce manual effort and accelerate time to resolution.

Exception handling remains one of the most labour-intensive processes in financial operations. Breaks in reconciliations, cash movements, settlements or custody flows frequently require manual investigation across multiple systems and external parties. These processes introduce operational cost, knowledge silos, settlement delays and limited scalability during volume spikes. Slow resolution can also affect SLAs, compliance risk, and the accuracy of cash positions used in working capital and funding decisions.

By combining agentic AI, workflow orchestration and embedded controls, Smart Agents can analyse context, follow customer playbooks, request missing details, and surface all investigation steps for audit. The automation aims to shift analysts toward higher-value oversight roles rather than routine exception processing, while improving consistency and control.

For corporate treasury teams, this development signals a broader shift in exception-heavy financial workflows. Faster break resolution and stronger auditability can support more accurate cash visibility, reduce manual reconciliations, and improve confidence in liquidity forecasts. As banks and service providers embed AI into their operations, corporates may benefit indirectly through improved settlement certainty, fewer delays and smoother working capital planning.

Smartstream expects agentic automation to help financial institutions and enterprises manage operational risk more effectively and build resilience as transaction volumes increase.