The future evolution of conditional payments: unlocking new possibilities

Reimagining conditional payments in a digital era

Imagine a financial ecosystem where payments are executed automatically – as soon as (and only if) specific, pre-agreed conditions are met. This is no longer a distant vision, but a rapidly emerging reality shaped by the evolution of conditional payments. Traditionally reliant on paper-based contracts and trusted intermediaries, these transactions are being transformed by digitalisation, automation, and advanced data connectivity.

As this transformation unfolds, a fundamental question arises for payment practitioners across Europe and beyond: in a digital environment, where does trust reside?

Shifting trust models in conditional payments

Historically, conditional payments have depended on institutional trust. Banks, notaries, and escrow services have played essential roles in ensuring that transactions are secure and compliant. For example, in real estate transactions, funds are typically held in escrow until legal ownership is transferred. In trade finance, letters of credit issued by banks guarantee payment upon delivery, based on the terms agreed between the parties.

These mechanisms, while effective, can introduce delays, inefficiencies and excessive costs – especially if reliant on manual processes and paper-based documentation.

Today, digital technologies enable new models. Smart contracts and programmable money allow payments to be triggered automatically when predefined conditions are fulfilled – such as delivery confirmation via GPS or sensor data. In these systems, trust is placed in technological infrastructure – potentially increasing speed, transparency, and efficiency.

However, this shift is not absolute. Many organisations are adopting hybrid trust models, combining automation with human oversight. For example, a smart contract might initiate a payment based on sensor data but still require a manual approval for high-value transactions. This approach supports flexibility and ensures alignment with regulatory requirements and operational needs.

The role of agentic AI and IoT

Looking ahead, the integration of Agentic Artificial Intelligence (AI) and the Internet of Things (IoT) is expected to further enhance conditional payment capabilities.

AI agents can monitor, negotiate, and initiate payments in real time, adapting to changing conditions. IoT devices connect physical events with digital systems – for example, enabling automated machine-initiated micro-payments between devices, or insurance premiums calculated individually based on sensor data.

These technologies offer new opportunities for responsiveness and transparency. At the same time, they introduce challenges related to interoperability, legal frameworks, and system complexity.

Insights from the EBA community

In a recent survey conducted among members of the EBA’s Digital Currencies & Smart Payments Working Group, 86% of respondents indicated that they expect conditional payments to grow over the next years. This growth is expected to be driven by factors such as the increasing number of connected devices, advances in smart automation, and the emergence of distributed ledger technologies (DLT).

At the same time, respondents identified challenges that may impact adoption, including a lack of common standards, legal uncertainties, and the complexity of integrating new systems into existing infrastructures.

Towards a pan-European perspective

The convergence of Agentic AI and IoT is set to transform conditional payments –bringing greater responsiveness, transparency, and trust. While challenges regarding security and legal clarity remain, the potential benefits are substantial.

To seize these opportunities, collaboration and standardisation are imperative – and in fact a pre-requisite for payment innovations to truly scale across Europe.

To learn more, EBA Members can download “The future evolution of conditional payments – An insight note by the Euro Banking Association” from our Member Portal.