While Chat GPT has certainly sparked conversations about artificial intelligence (AI), there’s more. A vast and captivating realm exists beyond generative AI, waiting to be explored. Artificial intelligence and machine learning have been instrumental in modern technological advancements. Even in the fintech industry, AI and machine learning have been helping businesses manage economies of scale through automation and process improvements.
When applied to digital payment systems, all these aspects can help transform the way the exchange happens. AI in payments can facilitate a more secure, reliable channel for transactions. These technologies can help the digital payments industry truly deliver exemplary customer experiences and value by facilitating simpler transactions.
There are several other key roles that AI and machine learning play in the digital payment ecosystem.
So, let’s discuss the role of AI in payments and its benefits.
Why is AI necessary in the payments industry?
One of the major necessities that artificial intelligence has in digital payments is to simplify the payments chain. Intelligent AI and ML-based solutions that integrate with business ERPs enable data scientists and analysts to:
- Predict customer payment behaviour by analysing a customer’s preferred payment methods, frequency of use, credit card behaviour, etc. The AI-based payment solution can provide businesses with pivotal data to design new products and services.
- AI helps with card-linked marketing, which enables companies to cross-sell or upsell items.
- It helps prevent false declines since nearly 33% of consumers abandon a transaction after a false ‘card declined’.
Furthermore, AI has several other functions in the payments innovation industry:
According to survey results, these technologies help organisations with the following:
- Reducing costs (38%)
- Improving customer satisfaction (26%)
- Automation of processes (30%)
- Detecting fraud (27%)
- Improving the customer experience (34%).
AI aims to drive efficiencies higher for every payment process happening behind the scenes. It enables companies to legally gather consumer data while staying compliant with regulations.
Furthermore, by reducing problematic payment systems, AI can help reduce customer churn costs for a business.
What is the role of AI in payments?
Let’s delve into the four major roles through which AI in payments drives efficiencies and benefits businesses and their customers.
The first significance of AI in payments is that of enabling automation. If you observe the entire payments process keenly, there are countless customer touch points within an app wherein AI algorithms can speed up the authorisation and monitoring process.
The utility of mobile-based payment applications can be enhanced by allowing users to leverage AI-based tools for automated credit history assessments. This can be done using the payment histories stored natively on their apps.
It is also possible to automate card processing, payment authentication, and recurring payments to make it easier for consumers.
For businesses, AI-based automation in payments can help ensure more reliable revenue by automating notifications, alerts and reminders for the customers for recurring payments, dues, interests, penalties, and more.
The ruthless onslaught of cybercrimes has damaged the trustworthiness of digital payment systems. However, with AI and its capabilities to detect fraud in action, it is possible to make all modes of digital payments safer, verified, and more secure.
For example, the AI-based multi-factor authentication that requires a transaction PIN, a one-time password, or several other checks ensures that the transaction is genuine and not initiated by anyone except the card/account owner. Using machine learning, the algorithms can predict or identify the genuine user’s spending or usage patterns, helping to identify a fraudulent transaction well within time.
If the ML algorithm detects fraud, they automatically block the illegal access, which can be recovered only by the authentic user.
There are countless avenues where digital payments can leverage artificial intelligence to make the journey exceptional for consumers. For example, companies can make chatbots and automated customer support modules available inside the payments app to enable consumers to navigate their queries themselves. This helps to save time – both for the customer and the business.
Additionally, companies can leverage machine learning tools to understand users’ payments and app usage patterns. Not only does this help to personalise user journeys, but it also helps with enriching payment features like automated savings initiation or cross-selling other payment products.
Enabling better decision-making for organisations is by far the best use of artificial intelligence and machine learning in digital payment solutions. It helps companies with their pilot products:
- It helps collect user data from the payments app that tells companies which of their products are most used.
- AI helps analyse customer spending behaviour and generate insights that marketers can successfully use for customised advertising
- AI and machine learning, when applied to the backend, helps speed up the entire payments process through Robotic Process Automation, making it easier for the development team to identify bottlenecks and act on them with informed choices.
Artificial intelligence and machine learning are transformative technologies. Payment innovations using these technologies are bound to benefit users and businesses alike. Especially for businesses, AI in payments would make it easier for them to process copious amounts of data at once while reducing errors and bottlenecks in the process.
According to a report, 70% of fintech will experience some form of impact from artificial intelligence in the coming years. Until then, technology is currently innovating businesses’ payment operations in several ways.
If you’re looking for payment solutions for your business, reach out to us to get started.
Plural by Pine Labs has received an in-principle authorisation from the Reserve Bank of India (RBI) to operate as a Payment Aggregator.
Amrita Konaiagari is a Marketing Manager at Plural by Pine Labs and Editor of the Plural blog. She has over 10 years of marketing experience across Media & Tech industries and holds a Master’s degree in Communication and Journalism. She has a passion for home décor and is most definitely a dog person.