Payments have become the backbone of fintech. Once considered an unglamorous back-office function, they are now at the forefront of innovation and the breakout leader of the fintech sector.
In 2022, PayTechs were estimated to make up 25% of fintechs. Fast forward to 2024, and payments equate to 55%,
or $126 billion, of the $378 billion in global fintech revenues and this is only expected to increase.
From mobile wallets and Buy Now, Pay Later apps to business-to-business payment rails, many of the most well-known fintech companies are now in the payments space, from Stripe to PayPal.
There are many factors behind the rise of payments in fintech, from the surge in open banking to supportive sandboxes, which helped nurture innovative payment ideas to be tested in a controlled environment.
The UK’s FCA Regulatory Sandbox is a case in point. Launched in 2016, the sandbox allows firms to test their products live in the market with consumers and has been used by the likes of Revolut and Wise.
Regulations and infrastructure have also played their part. In Europe, PSD2 has encouraged innovation by regulating payment services across the EU. Further afield, India’s UPI has driven adoption by enabling instant, zero-cost transactions and easy access
for small businesses through QR codes.
However, most of the success of payment fintechs can be attributed to their client and solution-driven culture, which has enabled them to resolve many of the challenges within the payments space.
Where banks fall short, fintech steps in
Traditional banks have long dominated global finance, but their services often fall short for SMEs, especially when it comes to cross-border payments. These businesses require fast, affordable, and transparent solutions that legacy systems rarely provide.
When working with banks, SMEs often suffer from unfair pricing, slow execution speeds, limited payment reporting information and the threat of account closures with no warning.
It isn’t just SMEs that struggle. Many Payment Service Providers (PSPs), third-party companies that facilitate payments for businesses, also face difficulties when working with traditional banks, especially regarding account access and closures.
With a rising demand for agile, secure, and technology-driven solutions, many SMEs and PSPs are increasingly turning to fintech partners who offer faster onboarding, transparent fees, and enhanced fund security.
The pressure of instant payments
As well as helping to deal with the payment problems of the past, payment fintech companies are also looking to cope with the challenges of the future, where speed is non-negotiable.
In 2025, customers expect real-time, seamless, 24/7 payments as standard. This demand, combined with regulatory drivers like SWIFT’s ISO 20022 transition and the EU’s Instant Payment Regulations coming into force in October, has accelerated the shift to
instant payments. But this speed brings new challenges. Instant transactions require real-time processing and data handling that many legacy systems can’t support.
They also leave no room for delay in fraud detection. In traditional payment systems, banks and businesses had hours, even days, to analyse transactions, flag suspicious activity and intervene before money was transferred. With instant payments, that window
no longer exists as transactions are settled in seconds, leaving no time for traditional fraud prevention measures.
New challenges, new solutions
To meet the demands of instant payments, fintechs are turning to technologies like stablecoins and AI.
Digital assets, such as stablecoins, are emerging as a game-changer for payments, enabling rapid payments that keep up with instant payment directives. Unlike traditional currency payments, which can take up to five days to clear and require multiple intermediaries,
stablecoins can facilitate near-instantaneous transactions with significantly lower fees and no need for payment to a network gatekeeper.
Meanwhile, AI enables real-time fraud detection by flagging suspicious activity with speed and accuracy. It also supports broader functions such as cash flow forecasting, liquidity management, and automated compliance, making it an essential tool in the
shift to faster, smarter payments.
The future of payments is in fintech’s hands
Technologies that can help resolve many of the challenges around payments are available to all.
However, the reality is that payment fintechs are better positioned to integrate them into their solutions than traditional banks.
This is thanks to their agile approach, continually iterating, refining, and redefining their offerings. In comparison to legacy firms, which find it difficult to balance changing regulations and innovative new products against existing compliance structures,
internal politics and risk-averse models.
Payment fintechs are not weighed down by these regimented structures, enabling them nimbly to pivot, adapt and adjust in line with regulation shifts and technological innovation to claim leadership not just within the payment ecosystem, but the future of
fintech itself.
