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For a while artificial intelligence (AI) continued to be seen as something quite distant, abstract and difficult to comprehend. However, the modifications that the payments technology industry has been subject to prove that the future is closer than is seems. When it comes to payments tech, AI is mainly employed to innovate analytical technology, which is the most powerful tool to improve the payments ecosystem for banks, payments processors, merchants and consumers. An analysis by the International Data Corporation (IDC) suggests that in 2020, financial services companies will spend USD 11 billion on AI research and development efforts. This is more than the projected investment in AI of any other industry. PwC takes on the discussion by estimating that the returns on such investment will be quite promising. In Norh America, AI is expected to contribute to a 10% GDP growth by 2030, through increases in productivity and consumption.
Payments is most likely of all the banking sector to feel the impact of AI. Already I 2017, circa 84% of payments divisions were successfully applying AI to optimize daily operations, leaving behind the IT and finance & accounting sectors. There are various opportunities to leverage for banks, payment and tech companies, retailers etc.
This year the AI market is expected to achieve outstanding growth of more than 150 percent, and this figure is expected to be increasing yearly up to 127 percent by 2025.
So, in what ways can AI actually upgrade the experience of merchants and consumers across industries? How can it be effective in solving the problems of payments technology companies and financial institutions?
Counter fraud measures
Fraud has been a serious issue in the payments industry ecosystem for years now. Protection and security are among the priority concerns of customers that are looking for a convenient way to execute their payments. Consumers are never the ones to bear liability for becoming a victim of fraud while making payments, which means that it is in the best interest of companies to find an effective way to prevent fraud and minimize losses. This is the reason why anti-fraud measures have been the focus of the payments sector, causing actors to constantly invest into generating new solutions. Machine learning and AI have quickly showed their utility in solving this type of problems, particularly in making electronic transactions more secure.
AI algorithms and machine learning methods help service providers to analyze bigger amounts of consumer transaction data to detect unusual patterns and stop fraudulent activity. Systems can then learn from each transaction, which ensures constant improvement of the mechanisms in place.
According to Juniper Research, fraud poses a USD 130 billion threat in the industry. This implies that the amount of investment to develop sophisticated prevention and detection technologies will continue to grow.
There is another important benefit. As AI solutions or fraud are on the back end, industry’s customers can enjoy a convenient, secure and hassle-free experience.
Bringing customer service to a new level
AI has found an extensive application for improving customer experience in payment services providers and financial institutions. The first one that comes to mind is chatbots, which are simply AI agents, built on natural language processing algorithms, that are able to maintain a conversation with the client. These programs have disrupted previously existent customer support mechanisms through eliminating the need for human interaction and providing a personalized service in an entirely automated way. Analytics suggest that the integration of chatbots is saving billions of dollars (USD 7.3 billion) in operation costs and hundreds of millions of workforce hours (862 million hours) when it comes to taking care of customer service issues and dispute resolution.
Besides, AI solutions have found an effective application streamlining the client onboarding process, as well as resolving chargeback inquiries.
Financial services and retail sectors have been subject to increased digitalization in the recent years. For instance, most smartphones are now powered with an AI-powered virtual assistant and have become an important instrument for daily financial operations. With the popularization of mobile banking apps, consumers all over the world started executing their payments through their smartphones for greater convenience. The virtual assistants, at the same time, help streamline the navigation process through voice commands and inquiries. The estimates of the industry suggest that voice commerce is expected to pursue a double-digit growth pace, allowing companies to develop new digital touchpoints for making convenient and secure purchases with the help of AI.
AI solutions also help merchants deal with vast amounts of transaction data, analyzing patterns, predicting the behavior of consumers and planning business operation.
In a nutshell, AI is a strong and promising asset for payments technology companies, affecting the value of the offering, increasing security of the ecosystem and providing innovative digital opportunities to consumers and merchants worldwide.