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Payments in 2026: When Innovation Outpaces the Regulatory Perimeter

The payments industry is entering a more complicated phase of evolution, with innovation no longer happening at the edges of the financial system, but rather reshaping its core. Stablecoins are edging closer to mainstream payment rails, artificial intelligence is beginning to initiate transactions on behalf of customers and personalisation is influencing not just what consumers buy, but how they pay.

Although much of the public debate focuses on developments in the United States, the underlying forces are global. UK and EU payment firms and banks face a practical question: are their risk and control frameworks ready for what’s coming?

The Regulatory Perimeter Is Shifting, Not Retreating

Across the UK and EU, regulators are not stepping back from payments innovation. Instead, they are redrawing the regulatory perimeter. Products that once sat outside traditional financial services, including stablecoins, embedded credit and AI-enabled payment initiation are increasingly being treated as part of the core payments ecosystem.

This shift matters because it changes supervisory expectations. Firms are no longer assessed purely on technical compliance with narrow rulebooks, but on whether their operating models deliver fair outcomes, manage systemic risk and remain resilient as they scale. This greater regulatory clarity does not mean lighter scrutiny, in practice it often comes with higher expectations around governance, accountability and control design.

Stablecoins: From Experiment to Infrastructure

We have seen this transition with stablecoins that for years, were discussed largely in the context of crypto markets. Today, regulators increasingly view them through a payments and settlement lens, particularly for cross-border transfers and near-instant settlement.

In the UK and EU, the focus is less on accelerating adoption and more on institutionalising use. Supervisors are concerned with reserve backing, redemption rights, safeguarding, operational resilience and financial crime controls. For banks and payment firms, the question has become practical: how do stablecoins fit within existing payments, treasury and risk frameworks?

Treating stablecoins as a standalone innovation risks underestimating the operational and regulatory complexity involved. Firms that integrate them into governance, liquidity management and control environments from the outset will have a clearer path forward as usage grows.

Agentic Commerce Challenges Core Assumptions

Artificial intelligence is no longer confined to fraud detection or customer service. Agentic commerce, where software agents initiate purchases and payments on behalf of users, challenges some of the assumptions that underpin today’s payments regulation.

Most frameworks assume a human decision-maker, a clear point of consent and a relatively straightforward allocation of liability. Agent-initiated payments blur all three. Questions quickly arise around authentication, authorisation, dispute handling and responsibility when something goes wrong.

For UK and EU firms, this has direct implications for strong customer authentication, liability models under payments legislation and expectations around explainability and fairness. This raises governance and conduct questions that regulators will examine closely as these models move from experimentation into production.

Personalisation Turns Payments Into a Conduct Question

Personalisation is also moving deeper into the payments stack. AI-driven checkouts can now suggest payment methods, credit options or instalment plans based on prior behaviour.

From a regulatory perspective, this turns “choice architecture” into a potential conduct risk. When firms influence how customers pay, not just what they buy, the payment method becomes part of the product. That brings with it questions around fairness, transparency, vulnerability and outcomes, all of which sit squarely within UK and EU supervisory priorities.

For firms offering buy now pay later (“BNPL”), embedded credit or dynamic routing, the challenge is ensuring personalisation genuinely supports customer interests rather than subtly steering behaviour in ways that may be difficult to justify under scrutiny.

Pressure on Payment Economics is Structural

Debates over interchange, scheme rules and pricing are not confined to any single market. Across jurisdictions, regulators and merchants are questioning whether existing payment economics remain appropriate in a world of instant payments, open finance and greater transparency.

For banks and payment firms, this pressure is structural rather than temporary. Margin compression driven by regulation forces hard choices about scale, efficiency and operating models. Those reliant on opaque or complex fee structures may find themselves increasingly exposed.

Fraud Remains the Constant Risk

As payments become faster, more automated and more interconnected, fraud continues to rise. Instant payments, open APIs and digital assets create opportunities for criminals that often outpace traditional controls.

Regulators increasingly expect firms to design fraud prevention into products from the outset, rather than relying on reimbursement or reactive monitoring. This is particularly acute where real-time payments and AI-enabled decisioning intersect.

What Firms Should Do Now

There are a number of practical actions that payment firms and banks should already be taking:

Re-map the regulatory perimeter: Identify where emerging products, such as stablecoins, agent-initiated payments or embedded credit, sit within regulated activities and where historic assumptions may no longer hold.
Embed innovation into core control frameworks: Avoid treating new payment models as bolt-ons. Align them with existing safeguarding, treasury, financial crime and operational resilience arrangements.
Stress test consent and liability models: Assess how authentication, authorisation and dispute handling work when payments are initiated by systems rather than individuals.
Review personalisation through a conduct lens: Challenge whether payment nudges and recommendations genuinely support good customer outcomes, particularly for vulnerable customers.
Design fraud prevention in from the start: Shift from reactive controls to preventative design, especially for real-time and AI-driven payment flows.
Strengthen cross-border governance: Ensure consistent oversight where products span the UK, EU and other markets, recognising differences in supervisory interpretation and enforcement.

The firms that navigate the next phase of payments innovation successfully will do so by aligning technology, regulation and control design early, rather than building governance structures retrospectively.