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          How Generative AI Is Transforming Digital Payments

          Digital Payments Economy

          Written by: Tom Barker, CAIA

          Published: 28 July 2023

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          Key takeaways

          Generative AI has emerged as a transformative force in the digital payments landscape driving innovation, enhancing security and improving customer experiences.

          With $USD 9.5 trillion worth of transactions expected this year, there is a vast amount of data from which AI can extract valuable information and detect patterns.

          Digital payments companies are using AI to gain a competitive edge in areas such as expense management, customer onboarding, fraud detection and customer service.

          Generative Artificial Intelligence (AI) has stolen the limelight in 2023.

          AI technologies encompass various advancements, such as cognitive reasoning that mimics human judgment, deep learning that can recognise complex patterns and natural language processing that can mimic human language using algorithms. When combined with process automation, these innovative technologies become even more potent. The range of potential applications is enormous but the digital payments sector is particularly well suited for AI advancements. It is estimated there will be around $USD 9.51 trillion worth of transactions this year. That is a vast amount of data from which AI can extract valuable information and detect patterns, ultimately driving innovation, enhancing security and improving customer experiences.

          Let’s examine each of these in more detail and look at companies gaining a competitive edge through the implementation of AI into their business models.

          Driving Innovation

          By leveraging advanced algorithms and machine learning, financial institutions and fintech companies can develop cutting-edge payment solutions. Generative AI enables the creation of personalised and adaptive payment interfaces, streamlining transactions and simplification of the overall payment process. Moreover, AI-powered chatbots and virtual assistants can provide real-time customer support, ensuring seamless user experiences.

          Global payment platform Flywire uses AI to play a crucial role in its operations. One notable application is in predicting and managing foreign exchange rates. By leveraging AI, Flywire can analyse market trends and make informed decisions regarding currency exchange, optimising the process for all parties involved. Another application involves the healthcare vertical, where AI is used to identify patients who may face challenges in paying their treatment bills. This proactive approach enables Flywire to engage with patients earlier in the payment process enabling it to offer personalised payment plans based on each patient’s financial ability. By tailoring payment options to individual circumstances, Flywire reduces the number of outstanding receivables that require collection. This benefits both the healthcare provider, as they receive payments in a more timely manner and the patients, who experience reduced stress due to manageable payment plans.2

          Enhancing Security and Fraud Protection

          Security is a critical concern in digital payments and generative AI offers solutions than can mitigate risks. The beauty of AI lies in its ability to self-learn, which brings flexibility and greater accuracy compared to traditional rule-based fraud detection systems. AI algorithms can analyse vast amounts of data to detect patterns, identify anomalies and proactively prevent fraudulent activities.

          Card Payment Network Visa invests significantly in AI and data analytics to predict and prevent fraud. It uses natural language processing and AI-enabled solutions to identify threats, vulnerabilities and fraudulent transactions. Visa’s Advanced Authorisation technology analyses hundreds of risk factors in real time, preventing billions of dollars in fraud. Ethical hacking is also employed through the Visa Payment Threat Lab, allowing for the identification of vulnerabilities and weaknesses before they result in real-world fraud losses. With a robust dataset and advanced cybersecurity measures, Visa strives to proactively combat fraud and protect consumers and merchants.3

          Improving Customer Experiences

          Generative AI has the potential to truly revolutionise customer experiences in digital payments. AI-powered chatbots and virtual assistants can provide personalised recommendations, answer queries, and assist customers in real-time. This not only enhances customer satisfaction but also reduces the burden on customer service teams. Customer data can also be analysed to tailor promotions and discounts, improving customer engagement and loyalty. This ability to understand user preferences and behavior patterns allows for a far more intuitive and personalised payment experience.

          The range of applications for AI in enhancing customer service is broad as evidenced by the number of references to AI in 2023 Q1 earnings calls. Fiserv discussed an expense management solution for businesses that leverages AI capabilities. Similarly, Payoneer highlighted use of AI to streamline customer onboarding processes. Many companies also emphasised the role of AI in enhancing customer service. Paysafe, for instance, discussed their implementation of machine learning and natural language processing to efficiently handle customer inquiries. Flywire specifically mentioned the advantages of their AI chatbot in providing customer support.4

          Generative AI has emerged as a transformative force in the digital payments landscape. Its potential to drive innovation, enhance security, and improve customer experiences positions it as a game-changer for financial institutions and fintech companies. Embracing generative AI technology can unlock a plethora of opportunities and promote a more efficient, secure, and customer-centric digital payments ecosystem.

          References

          1

          Statista, available at: https://www.statista.com/outlook/dmo/fintech/digital-payments/worldwide

          2

          GlobalFintechSeries Interview with Ryan Frere, EVP of Payments at Flywire. Available at: https://globalfintechseries.com/interviews/globalfintechseries-interview-with-ryan-frere-evp-of-payments-at-flywire/

          3

          CRO Paul Fabara shares how Visa is using AI to counter cyberattacks, March 2023. Available at: https://venturebeat.com/games/xsolla-announces-drops-for-campaign-based-community-engagement/

          4

          How are payment companies thinking about artificial intelligence?, May 2023. Available at: https://www.fxcintel.com/research/reports/how-are-payment-companies-thinking-about-artificial-intelligence#forgot-pw

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