Technological developments such as artificial intelligence and machine learning
have become widely available and versatile in their use. Over the last two decades
many people have become more aware of and accustomed to using this technology.
This has led to an increase in the adoption and investment in AI by many companies.
Since it has become more affordable and accessible in recent years, it’s no surprise
that AI is taking over the digital payment space. As companies and institutions gather
large amounts of data, numerous transactions have gone digital. Here is how the
digital payments landscape will be impacted by advances in AI.
1. A more personalised digital payments experience
Many companies are using AI to personalise the payment process for customers. AI
has the ability to analyse customer spending and can recommend a payment
instrument that best suits the customer’s purchase at the time of payment. This can
include a cashback method or a debit/credit card payment.
The emergence of chatbots has been one of the most exciting applications of AI in
the digital payments space. These are slowly replacing humans in the customer
service sector. They have the ability to solve customer queries and provide
recommendations, enhancing the overall customer service experience. Many
chatbots allow customers to make payments as well.
The most well-known form of AI is voice-assistants such as Amazon’s Alexa and Siri.
They can perform numerous functions such as order items on Amazon or make
payments on e-commerce sites.
2. Fraud detection
The most important feature of AI is fraud detection. AI has the ability to assess large
amounts of data and come up with commonalities in fraudulent and non-fraudulent
transactions. With regards to payments, artificial intelligence assesses a range of
factors and assigns a risk factor to each merchant. An unfamiliar IP address or
location will give a seller a higher risk score. After analysing numerous factors, a final
average score is used to determine if a merchant is fraudulent or not.
Financial institutions such as banks use AI to detect fraudulent transactions in real
time, something that would not be possible with a manual check. AI is always finding
new ways to differentiate between fake and real transactions and improve the
security of digital payments.
3. Greater customer engagement
Businesses can cooperate with digital payment companies to increase their
customer base based on recent purchases they have made. When a person makes
a purchase on an e-commerce website such as Amazon, artificial intelligence will
use an algorithm to suggest similar or complementary products customers can buy,
thereby increasing the company’s digital footprint. AI systems have the ability to
study customer past purchase trends to predict their behaviour.
AI also assist customers with their personal bank accounts to make the payment
process more efficient. If a customer’s debit balance is low AI will prompt the
customer to auto-transfer funds to their account. This ensures that there are
sufficient funds for purchases and bill payments.
4. Ability to make more informed decisions
Artificial intelligence aids in investor decision-making which is purely data-driven.
With the increase in the amount of data available, businesses and investors are
always on the lookout for techniques to process the data better and make more
informed decisions. AI along with big-data analytics has resulted in operational and
strategic efficiencies that have been incorporated in all verticals from finance to retail
and healthcare. Overall, AI has had helped reduce spending and risk and has used
consumer-centric tools to automate savings and benefit consumers in terms of
speed and cost savings.
5. More automation equals better insights
One of the key benefits of AI is that it helps improve the operational efficiency of a
company. This includes reducing human error through better processing as well as
providing the users with better insights. They are having an even greater impact on
the financial services industry. According to a research conducted by KPMG, AI is
set to replace 75% of outsourced financial services in 15 years which will allow these
companies to develop other areas of the business.
Artificial intelligence makes transactions more secure and convenient and is set to
take digital payments to the next level. The integration of AI and payment
applications will help transform the fintech industry. Financial institutions are working
with local governments to create an ecosystem that prevents fraudulent transactions
with the help of AI technology. Research has shown that by 2023 the digital
payments in India will reach $1 trillion. It is only a matter of time before AI captures a
significant portion of these transactions.