The payments industry is more than ready to adopt artificial intelligence. For some, that statement may seem a touch far-fetched, as the payments ecosystem is traditionally slow-moving. And yes, the sector is usually quite hesitant towards untested innovation. But several converging factors – advancements in tech, customer demand, the use of big data, regulatory support – have primed the industry for a rapid introduction of all things AI. Ready or not, intelligent machines are here. And they will likely usher in a new era for digital payments.
What you’ll discover in this article:Â
Despite its general hesitancy to tech, the payments industry history does paint a picture of gradual evolution. As technology advanced, different solutions offered novel updates to archaic payment processes. The following industry milestones set the foundation for the AI of today:
Together, each innovation helped create a complete digital system. Big data, digital services, and customer demands all converged to define a tech-based payment industry. From credit cards to present day cloud-banking, tech solutions laid the necessary groundwork for AI.
Today, the AI market is growing exponentially (an expected compound annual growth rate of 37 percent from now till 2030). With a strong data foundation and a newfound evolving mindset, organizations are rapidly moving toward AI solutions. And for good reason: AI delivers several clear advantages to the payments industry.
Intelligent systems can process transactions at a rate unmatched by general tech. That has immediate benefits for transaction scaling. Traditional tools must follow a predetermined path to route a payment, but AI systems can adapt from millions of data points (e.g. preference, reliability, speed) and choose better ways. And smart algorithms can learn, which offers dynamic resource allocation.
As a result, transaction execution can be far more efficient. IBM offers the z16 mainframe that can process 300 billion inference requests per day with just one millisecond of latency. Clearing and settlement drastically improve, all with resource energy savings of 75 percent, compared to other x86 servers. AI algorithms can also prepare for future transaction volumes from historical data—yet another way it can help you manage how and when to scale. Such payment efficiency reduces costs and maintains a seamless customer experience, regardless of volume.
Intelligent machines don’t just utilize basic pattern recognition. Instead, AI engages in adaptive modeling and deep learning. As new data becomes available (on multiple layers or “nodes”), smart tools evolve their own rules or parameters.
That type of “context-aware learning” has several applications in fraud detection. Dynamic data capture offers nuanced risk assessments. Extracted features can help decipher false positives. And unsupervised learning results in far more accurate anomaly detection. Simply put, AI can better adapt to the ever-changing tactics of the fraud economy.
A great example is the new Pay-By-Face algorithms. The intelligent payment method has an error rate of  0.08 percent, far better than the average of 4.1 percent For an industry with such strict compliance and security concerns, AI-powered fraud protection can enhance security.
Many technical solutions offer a fast and convenient service experience for customers. From social media to eCommerce apps, digital solutions have created a customer-centric industry.
But AI supercharges the customer experience. Intelligent machines are able to deliver unparalleled personalization. Not only can they process millions of customer behavior data points, but they can also respond to the consumer in a human-like manner. Natural Language Processing (NLP) replies with custom interactions, improves itself from customer feedback, and even predicts future service needs.
Such experience improvements even extend to adaptive dispute resolution. For example, Justt uses AI to empower human agents during a credit card payment dispute, a high-friction customer touchpoint. Cognitive computing can determine escalations, support agents in real time with problem adaptations, or improve first contact by automating tasks. And when necessary, AI can engage in smart evidence discovery and mediation support based on customized data analysis. The seamless integration of AI technology into your chargeback mitigation strategy enhances your support teams and helps deliver a positive customer experience.
AI has features that offer far more accurate predictions. First, cognitive machines can use diverse sources (transaction records, customer profiles, market trends, and external data feeds) to develop insights. But second, they can find non-linear relationships between that data. AI combines multiple forecasting models together to define information segments.
With that sort of insight, thinking computers augment human understanding. Your decision-making and business efficiency improve as you receive nuanced perspectives. AI can go so far as to predict market changes, sales trends, customer needs, and the weather.
A known success story for AI is Alibaba and its intelligent recommendations. Not only does the eCommerce company process 87 million transactions per second, but it uses PAI-Blade to optimize inferences. Such early adoption of predictive AI contributed to massive business growth over the past ten years.
Despite its benefits, there are still several obstacles that impede the widespread adoption of AI in the payments industry:
Inertia: Innovation often involves a slow rate of change. Minimal talent, entrenched traditional methods, and limited awareness can contribute to inertia. Delayed change management presents a large barrier to AI adoption in the payments industry.
Surpassing the barriers preventing AI adoption requires planning and execution. Luckily, you don’t need to revamp your entire business structure. Here are some simple steps that can guide an easy AI adoption strategy:
Collaborate with the experts: Numerous vendors offer tailor-made AI solutions. An expert technical partner can deliver higher-quality tools with an expedited adoption process.
Interest in generative AI has reached an all-time high. And experts expect the worldwide market size to increase twentyfold by 2030, from just under 100 billion in 2021 to nearly two trillion dollars. The AI revolution is here, and it will shape the payments industry moving forward. Innovators are constantly announcing new and future projects that will transform the industry, such as:
While the payments industry is usually more hesitant in the face of innovation, merchants are now eager for the benefits of intelligent machines. Visible early successes, customer demand, regulatory support, and simple integrations have encouraged rapid adoption. Artificial Intelligence will shape the future of payments.
Justt understand the importance of innovation—that's why we are building a superior chargeback dispute evidence & representment with AI.
