Artificial Intelligence In Digital Payment
Digital payment is the fastest moving and most dynamic sector of financial services. The thriving growth of digital payments is matched by the pace of technological advancements in the sector which is faster than ever. Affordable internet, smart phone penetration, payment apps, booming e-commerce, and hassle-free online payments have all collectively contributed to the exponential rise of digital payments.
We are living in a transformational era of human history where Artificial Intelligence (AI) forms a central part of this transformation. AI has a key role in digital transformation, especially in financial services sector. Accenture highlights how the voice enabled solutions (such as Alexa) powered by natural language processing are becoming an emerging trend. Advanced analytical technology has huge potential to improve the payments ecosystem for merchants, customers, payment processors and banks.
According to an analysis by International Data Corporation (IDC), financial services companies will spend US$11 billion on AI in 2020, more than any other industry cited. As per PWC estimates, these companies will make nice returns on their investments as well, for instance, in North America alone, AI is projected to increase the GDP of the financial services industry as much as 10 percent by 2030. The AI market worldwide is expected to achieve 127% growth year over year by 2025.
Let’s explore the type of problems AI and other technologies can help to solve in payments technology companies and financial services sector.
1. Fighting Fraud Intelligently
The key challenge for the payments industry is the protection and security of ecosystem from criminals who intend to cause financial harm through fraudulent activities. According to Juniper Research, digital payments industry will invest more in advanced fraud detection and prevention technologies in the coming years than any other industry.
As more and more retailers are switching to e-commerce, it is consequently increasing the chances
Most significantly, AI can enable the systems to learn from each transaction, thereby, constantly improving and becoming more effective and efficient. With AI, payments companies can look at transaction data in new and efficient way sand increase the number of successful legitimate transactions.
AI solutions for fraud have a huge potential to make payment experiences frictionless, convenient and theft free for consumers and merchants.
AI has the potential to improve customer experience for digital payments industries and financial institutions to a level, otherwise impossible
2. Better Customer Experience
AI has the potential to improve customer experience for digital payments industries and financial institutions to a level, otherwise impossible.
AI enabled chatbots that use natural language processing technologies to conduct a conversation, can disrupt many service industries by offering a personalised service in a highly automated way.
According to Juniper Research analysis, these chatbot programmes, if in place for customer service and dispute resolution, can save banks billions of dollars and hundreds of millions of workforce hours. The analysis puts the figure at $7.3 billion globally by 2023.
3. Driving Digital Transformation
Digital transformation of our economy has fundamentally affected the payments industry among many others. As the retailers and financial services providers are increasingly switching to digital environments such as online banking, mobile payments, AI will play a key role in driving digital interaction for customers.
According to Juniper Research chatbot study, mobile banking is projected to be the dominant channel for chatbot integration, accounting for 79 percent of successful integrations in 2023.
For instance, Bank of America’s smart assistant “Erica” served 1 million users in just 3 months after its launch in 2018. It’s effective use of AI to let users navigate their transactions easily, engage in customer service inquiries and manage their personal finances have been the key reasons for its popularity. In addition to this, there are other voice activated smart devices which are gaining momentum, such as Alexa by Amazon and Siri by Apple.
Taken as a whole, AI has the potential to provide more powerful payments products by giving digital commerce opportunities to consumers and merchants and also, a safer and secure ecosystem.
Digital Payment is an upward trend with stiff competition. Global giants irrespective of their primary industry such as Walmart and Apple are entering the sector with Walmart Pay and Apple Pay respectively. Banking giants such as Goldman Sachs are taking initiatives such as “Visa Everywhere Initiative” that tasks start ups with a motive to solve payment challenges of tomorrow. It is evident that AI can play a humongous role in payments industry.
There is no doubt in the fact that there is still a long way to go before AI based tools and algorithms start controlling our financial systems but also, we cannot ignore the fact that fintech sector is already using the technologies in diverse and creative ways. It will be interesting to see how AI transforms the payments system and what innovations it unfolds in the future.