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AI: Connecting the Global Payments Economy

September 19, 2022


The power of AI to secure the global payments landscape

AI is that piece of the payment industry’s puzzle that helps bind the digital economy. Its benefits range from analyzing consumer behavior to predicting new forms of cybercrime. Learn more about AI and its uses in Fintech here.

At a time when payments are more complex than ever, Artificial Intelligence is transforming the payments economy by improving customer experience and reducing fraud. Every day, millions of transactions—from buying groceries to paying rent, occur worldwide. These transactions rely on a vast network of infrastructure that includes mobile phones, smartphones, and PCs; businesses such as banks and payment processors; and even social media influencers who influence consumer behavior. This ecosystem must be able to handle billions of dollars each day while remaining secure from hackers. In order for AI/ML to truly transform how we pay for things, there needs to be a change across all these sectors in how they interact with one another.

Embedding Payments in Social Media

While social media has recently become a popular payment channel, it’s not just a way to send money. It has primarily been a way of connecting with people and forming relationships worldwide. These social platforms, although started as means of informal interactions, are now being leveraged significantly by businesses to communicate with their consumers. The general public loves to be a part of their favorite brand’s community as they feel valued through that association. This naturally helps attract prospective buyers to these communities.

As social circles have accepted businesses, the need to incorporate payments into these social platforms has become imperative. These social media networks have become marketplaces of all sorts by directly targeting customers and converting marketing campaigns into points of sale. As per Statista Market Outlook 2021, digital commerce contributed to 64% of digital payments in terms of value.

Data Transcends Various Real-World Limitations

A major cause of social media’s extensive contribution to payments is the fact that social media as a channel transcends linguistic barriers. With language translation tools, you can leverage the power of social networks to reach people who speak different languages and may not have access to traditional financial services. This could mean reaching new clients and earning through an online business venture or side hustle. For the customers, it means availing greater choice to spend their money. Social media platforms offer a channel that transcends geographical barriers. There are no necessary borders to the internet when it comes to sending money.

It’s widely known and accepted that data is the new oil and omnipotent. But data isn’t just abundant, it also comes in a variety of forms.

Some types of data can be manipulated directly by AI models without having to undergo any pre-processing (like an image). In contrast, other types of data must first be converted into something more usable (like text). Still, other types require additional steps before they can be used. For example, extracting key attributes from an invoice is necessary before feeding the invoice to an algorithm designed to predict fraud risk levels due to the structural demand for analysis.

AI in the Age of Fraud

AI can detect patterns in fraud that humans can’t, given the exponential computational power of systems. For example, a machine learning model might be able to identify risk factors of fraud and suggest strategies that help prevent it from happening in the first place. AI models are trained on historical data to analyze similarities in future data better. These types of algorithms have been used for years by insurance companies for claims processing purposes, but now they are being applied more broadly across other industries such as Fintech. Analyzing social media behavior is a significant application of AI in reducing discrepancies as the data availability is boundless and much more entrenched, making it highly insightful.

The financial sector has long been debilitated by fraud and discrepancies of all sorts. As the industry welcomes organizations of various categories into cyberspace, the need for security is at its peak. AI’s role in fraud management is crucial for reasons such as minimizing costs and human error while proactively monitoring for anomalous behavior. What’s interesting is that AI can deliver payment reports within 250 milliseconds. It gives a competitive advantage to businesses and helps build trust with customers considering the exposure of sensitive data.

Removing Barriers to Adoption

AI/ML has been used to develop new payment capabilities that enhance the user experience by customizing it to be more personalized. For example, Mastercard has been leading the pack in using AI for fraud detection.

But the advancements in technology tend to provide evolving use cases, like AI Express, which is a business consulting service for building custom ML models. Mastercard uses it to predict three months’ worth of transactional value for better preparedness.

In addition to leveraging technology using chatbots and voice commands as part of an omnichannel approach, ML also helps identify fraudulent behavior. The unique feature of this technology is that it has an immensely intuitive learning curve that allows it to detect discrepancies without explicitly programming it for the same. As per the Market and Markets report, the global market for fraud detection and prevention (FDP) is expected to grow at a CAGR of 21.5% by 2026, owing to the immense potential of ML.

AI can be a viable solution to a variety of problems in the payments industry, including:

  • Improving the customer experience
  • Reducing fraud and errors in payment processing
  • Increasing efficiency of payment processes through automation

The Future of Payments

The payments economy is at a turning point. The increasingly global and digital nature of our societies, combined with the fact that technology has enabled businesses to reach their customers wherever they are in the world, means more people are getting access to financial services. As we’ve seen here, AI is a popular way for new businesses to adapt their offerings and appease local needs while remaining competitive internationally. It’s also an area where machine learning algorithms can help automate some processes without sacrificing customer experience or security, both of which are essential factors when deciding in favor of financial providers.

Reach out to our payment experts to know how you can leverage the power of AI in payments.

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