As cliché as it sounds, transaction banking is in constant transition. In today’s era of continuous innovation, transaction banking still sticks out as the most dynamic and fast-changing area of banking, with big industry players and up-and-coming fintechs alike spearheading the transformation.

At the 2025 Sibos conference in Frankfurt, Trade Finance Global (TFG) spoke to Surath Sengupta, Head of Transaction Banking Products at Lloyds Bank, to hear about the most exciting recent developments in transaction banking, the industry’s biggest highlights in the past few years, and what’s to come. 

Transaction banking, now and beyond

Transaction banking, unsurprisingly, comprises all banking transactions that corporates do on a regular basis. This encompasses the full suite of payments, cash management, liquidity, and FX solutions, alongside trade, working capital and data products.

While the core of the industry – enabling money to go from one entity to another – has remained relatively unchanged, little else has. Technology has been transforming transaction banking, automating once-manual processes and increasing efficiency. 

The demand for real-time payments continues to grow, driven by corporate clients seeking speed, efficiency and transparency. But with speed comes risk, and banks must strike a careful balance between frictionless user experience and robust security. The new frontier in transaction banking – making international payments as real-time as domestic payments are – is being balanced with risk management, through a range of technologies.

ISO 20022, the global financial messaging standard for payment initiation that will fully come into force in November, is vastly increasing the amount of transaction data available to banks, which brings sanctions screening, reconciliation and working capital efficiencies. 

As technology integration becomes all-encompassing, customers increasingly want to connect more and more of their digital life into one ecosystem, which also increases transparency for banks. For example, customers are often looking to embed their enterprise resource planning (ERP) software in the banking world, and banks are investing in secure, monitored API gateways for payment initiation, FX Rate provision and event-driven notifications – as Lloyds have done with their embedded payments proposition.  

By fully embracing the range of technology capabilities, “real-time payments in a safe, secure manner are real and the possibility to extend to more currencies is becoming a reality,” said Sengupta.

The prism of regulation

While technology evolution is opening new horizons every day, equally rapid shifts in regulations that apply to clients of transaction banking can be much less beneficial. Increasing regulatory fragmentation and regular changes in standards and requirements mean corporates must adapt instantaneously to an ever-changing landscape. From the bank’s perspective, “it becomes even more important for us to be dynamic and be in tune with clients’ needs,” said Sengupta.

International corporates are well-equipped to deal with local regulation, but amid rising fragmentation, it is becoming hard to keep up with the different requirements set by each jurisdiction. Especially in areas with a growing body of regulation, like ESG and digital assets, “different countries and different jurisdictions are looking at the same issue with slightly different lenses,” said Sengupta. 

Even where the core idea is the same – such as in the case of the EU and UK carbon border adjustment mechanisms – regulatory nuances, reporting requirements, and timelines may vary, making it difficult for corporates to navigate change. The challenge increases tenfold for firms “working across various jurisdictions, having trading partners in those jurisdictions or having their own branches in sales offices in those jurisdictions” – who must grapple with the effect of new regulations across their supply chains and ensure that they are not caught between contradictory requirements.

These corporates are increasingly turning to banks for advice and support on how to navigate this. To cope with fragmentation, many of them are trying to simplify supply chains and bring inventory closer to home: in the EU, near-shoring grew by 18% in the first half of 2025, with similar numbers in the US as traders try to address the new tariffs. However, placing all their inventory on their balance sheet would put excessive strain on firms, leading them to look for innovative solutions. 

Transaction banking’s future

Despite challenges – or often in response to them – transaction banking will remain the most dynamic and innovative area of banking for years to come. As customers’ demands and expectations change, so do banks’ offerings, which will increasingly focus on integrating transaction banking with wider digital ecosystems. 

AI is becoming pervasive, shaping not only customers’ expectations, but also banks’ capability for automation and intelligent processing capabilities. “If you look at trade products, we are looking at how we embed AI into understanding customer needs and provide real-time financing options,” said Sengupta. AI provides a wider range of options for customers, speeding up manual processing, especially in complex areas like international payments and foreign exchange.

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Today’s world is in transition. Corporates can choose to hold on to outdated processes or turn some of the opportunities – like technology and ESG – into strengths, which is exactly what is happening in transaction banking.

“There is a lot of innovation that is happening [in transaction banking], and a lot of that is being driven by the technology that we are seeing in this space. I think the future of transaction banking, it’s embedded, it’s intelligent, and it’s sustainable,” said Sengupta.