Navigating 2025: Key Regulatory Insights for Merchants in a Shifting Payments Landscape

As we step into 2025, the payments industry continues to evolve rapidly, with new regulations reshaping the landscape in the U.K., the EU, and beyond. To help merchants stay ahead, MAG's Director of Public Affairs, Leslie Crisp, joined the MAG’s International Leader, Paul Tunstall, to discuss what merchants need to know and how to prepare.

Leslie: Let’s start with the U.K. The payments landscape there is always dynamic. What should merchants know about the key regulators there?

Paul: The U.K. payments landscape is shaped by key regulators such as:

Financial Conduct Authority (FCA) oversees payments, enforcing Strong Customer Authentication (SCA), new Buy Now, Pay Later (BNPL) rules, and consumer protections.
Payments Systems Regulator (PSR) focuses on competition, open banking expansion, interchange fees, and Authorised Push Payment (APP) fraud protections affecting merchants, especially those operating in the eCommerce space.
Bank of England is exploring a Digital Pound (CBDC) which could reshape merchant payments and settlement processes.
Competition and Markets Authority (CMA) enforces competition in payments, particularly in open banking.

Merchants should watch for stricter fraud rules, evolving BNPL regulations, and more competitive open banking options.

Leslie: There’s been a lot of buzz around the U.K.'s National Payments Vision, unveiled last Autumn. What does this vision mean for merchants, and how do its three pillars—innovation, competition, and security—stand to shape the future of payments?

Paul: The National Payments Vision is a big deal for merchants because it’s all about making payments cheaper, faster, and safer.

Innovation means more real-time payments and account-to-account options, which could reduce merchant dependence on costly card networks.
Competition is driving open banking forward, giving merchants more choice and potentially lower fees as well as increasing alternatives to traditional payment methods.
Security brings tighter fraud protections, especially around APP fraud, meaning more liability shifts, however, merchants will need to stay on top of compliance requirements.

Leslie: The concept of a digital pound has garnered significant attention as discussions around Central Bank Digital Currencies (CBDCs) gain momentum globally. The MAG has recently partnered with the Digital Pound Foundation (DPF) to ensure the merchant voice is at the forefront of shaping the future of digital currency.

From your perspective, why is it critical to involve merchants and other stakeholders in developing the digital pound, and how can collaboration contribute to its success?

Paul: Merchants absolutely need a voice when it comes to shaping the digital pound because, at the end of the day, they’re the ones who will have to accept and process these payments. If a CBDC doesn’t work for merchants—if it’s too costly, complex, or slow to integrate—we simply won’t see widespread adoption across the industry.

By collaborating through organisations like the Digital Pound Foundation, we can ensure that merchant priorities—like low transaction costs, seamless integration, and strong fraud protections—are built into the design from the start. It’s also about preserving payment choice and ensuring that a digital pound enhances, rather than disrupts, the broader payments ecosystem.

Bringing merchants, banks, regulators, and tech providers together will help create a CBDC that’s practical, secure, and commercially viable—not just a theoretical policy tool.

Leslie: Moving to the EU, who are the primary regulators, and how do they impact merchants?

Paul: Each EU country has its own financial authority where rules are interpreted and enforced at a local level.

European Commission (EC) sets overarching payments policy, including updates to PSD3, which will refine open banking rules and strengthen fraud protections.
European Banking Authority (EBA) oversees implementation of financial regulations, including SCA and risk management for payment providers.
European Central Bank (ECB) leads the Digital Euro project, which could introduce a new payment method for merchants to consider.

Leslie: Shifting focus to Payment Service Directive (PSD), can you break down the differences between PSD2 and PSD3 and what merchants need to do to prepare?

Paul: PSD3 is still evolving, but merchants should stay engaged, assess risks, and explore new payment options as regulations take shape. PSD3 builds upon PSD2, but with key changes:

Stronger fraud protections: New rules for liability in APP fraud mean merchants may face stricter authentication and chargeback processes.
PSD3 aims to make bank payments more seamless, reducing friction for account-to-account payments (providing a potential alternative to traditional cards).
Tighter regulation of non-bank payment service providers (PSPs): Further oversight on payment providers could impact merchant relationships with acquirers and FinTechs.
Cash access rules: New obligations to ensure cash availability, which could affect merchants with brick and mortar stores.

Merchants should review fraud prevention strategies, as new liability rules may require SCA and chargeback handling. Evaluate open banking opportunities, since account-to-account payments could lower costs and reduce reliance on cards. Stay informed on PSP regulations and work closely with providers to ensure compliance. Most importantly engage with industry groups like the MAG to stay ahead of regulatory changes and advocate for merchant-friendly policies.

Leslie: SCA is also a hot topic. What changes can merchants expect in 2025?

Paul: In 2025, I believe merchants can expect stronger liability protections for APP fraud, potentially requiring enhanced verification measures. SCA processes will become more seamless, with regulators promoting biometric authentication and risk-based exemptions to reduce friction and cart abandonment. In addition, open banking payments will expand, with evolving SCA rules aimed at making account-to-account transactions smoother and more merchant-friendly.

To help stay ahead, merchants should work with their PSPs to optimise SCA flows, explore possibilities to implement biometric authentication, and engage with industry groups like the MAG to ensure their interests are represented in ongoing regulatory discussions.

Leslie: The Instant Payments Regulation has also been making waves. What opportunities does it bring for merchants and consumers?

Paul: The Instant Payments Regulation opens up exciting opportunities for both merchants and consumers by enabling real-time euro transactions across the EU. For merchants, this means faster cash flow, lower processing costs, and a potential alternative to expensive card networks. Consumers will benefit from instant settlement and improved checkout experiences, especially in e-commerce. As adoption grows, merchants who integrate instant payments early could gain a competitive edge with faster, cheaper, and more secure transactions combined with improved customer satisfaction and loyalty.

Leslie: With so much happening, what’s your advice for merchants looking to prepare for the future?

Paul: My advice to merchants is simple: stay informed, stay agile, and stay engaged. With regulations evolving rapidly, it’s critical to work closely with PSPs, explore open banking and instant payments, and strengthen fraud prevention strategies.

At the same time, engage with industry groups like the MAG to ensure your voice is heard in shaping policies that impact your business. The MAG hosts a bi-monthly International Committee Forum for merchants and SMEs to share market updates from a global perspective to better educate merchants about varying policies around the world, which assists in developing advocacy efforts for competitive and transparent payments systems.

The payments landscape is evolving rapidly, and those who adapt early will gain a competitive edge in cost, security, and customer experience.

Leslie: How does participation help merchants anticipate and adapt to global changes?

Paul: By staying engaged and participating in industry groups like the MAG, merchants gain early visibility into upcoming global changes. They gain insights into evolving regulations, new payment technologies, and best practices. It creates opportunities to collaborate with peers, regulators, and PSPs, ensuring merchants have a say in shaping policies rather than just reacting to them. Remaining engaged, merchants can anticipate shifts, adapt strategies early, and leverage emerging payment solutions to stay competitive in an increasingly complex landscape.