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How Is A.I. Changing The Payments Industry?

Like many industries, the payments industry is going through a world-wide disruption thanks to digital transformation and the advent of AI.

And that’s for the better. New technologies have transformed the payments market drastically. Just think back to 20 years ago, when ATMs were a must if you wanted to pay for something and you only had money on your card.

Nowadays, you don’t even need the card. Just tap a few clicks on your smartphone and you’re set.

But AI does so much more for the payments industry. Let’s analyze how AI is changing payment processing.

How AI works

AI (Artificial Intelligence) is a term thrown around quite loosely today, but it’s important to understand what it means. In general, it means “intelligence demonstrated by machines”. More specifically, it refers to complex algorithms that can analyze huge chunks of data and draw conclusions that would take humans decades to get to.

Think about your Spam folder for example. Your email provider decides what goes into “Spam” based on billions of emails sent from and to billions of email addresses to decide what could be considered Spam or important.

With Google, it’s a bit more advanced. It uses a similar system to separate between important or unimportant emails, or even between Spam, Promotions and Offers.

On top, it analyzes the text in emails for keywords that show common internet scam particularities, flagging them appropriately. It’s a well oiled machine, and it’s only one example of AI put to use in our digital world. Let’s see how that affects payment processing.

AI and payment processing

AI-powered algorithms are present all over the payment processing world. Visa alone analyzes billions of transactions and accounts every day, so when you draw the line there are a lot of good uses for AI. There are also a lot of possible applications for it in the future.

Let’s talk about some of those.

Fraud Detection

We’ve already covered that AI payment processing systems track transactions. They crunch data about the history of millions (and even billions) of accounts and draw conclusions based on that.

That’s how they’re able to detect cases of possible fraud. For example, if you suddenly made a purchase from a merchant you don’t really frequent from an industry you’ve never been active in before, chances are that you’ll receive an SMS code to confirm the transaction.

That’s how payment processors make sure that your account can’t be used by someone else, even if it’s been compromised.

On top, if the transaction is extremely strange – for example when it’s made from a country you’ve never been to, to a merchant with a lot of fiscal issues on their record – payment processing systems may even freeze your account to make sure you’re protected.

All of that is happening automatically, behind the scenes, with the help of AI.

Fast Payment Authorization

The opposite is true as well. If your transactions fit the profile AI algorithms have sketched for you, payments will be approved quickly, allowing you to enjoy products and services without hassle.

But AI helps with a lot more. Complex algorithms can recognize and keep track of things like facial and vocal particularities. In the future we can expect self-sufficient facial and voice recognition systems that let you approve payments digitally, without needing your ID confirmed by another human being.

Just like they keep a payment profile, AI systems can keep a profile of you and other millions of people based on your facial and vocal traits, which adds a layer of security to your transactions, and allows for faster payment authorization.

Better Customer Experience

Just like all industries use AI to power-up their customer experience, payment processing does too. For example, personalization plays a big role in how the industry is changing (and will continue to change into the 2020s)

AI can profile your transactions to figure out if it’s you using your card. It can also use the same technology to profile your general preferences and online behaviour, all to deliver better payment offers to potential or existing customers.

But it goes even deeper than that.

Chatbots are a wonder of modern AI systems, because they can crunch data from millions of conversations with clients and figure out what a disgruntled customer needs, and solve their problem, without the intervention of a human being.

The chatbot analyzes the message received from a customer, runs it against a database of existing conversations, and delivers back a quick fix to what the customer needs.

Sure, human intervention is still needed in a lot of cases, but the gap between what chatbots can do now, and what we need them to do, is getting smaller by the day.

And that’s a key takeaway to remember about AI systems. They’re constantly evolving. That new conversation with a chatbot is added to the already existing database. The algorithm studies more, and gets better, every day.

Valuable Market Insights

Lastly, payment processing can benefit from the biggest advantage of AI systems. AI-powered algorithms do well with big data, so they can analyze market trends, shifts in demand, the seasonality of services, and a lot more aspects of business in the payment processing world.

This is not a customer-facing solution. It’s something that goes on in the backend. But it’s a clear way AI is changing the payment processing world, as much as it’s changing all industries.

And remember…

You might not afford to invest in an AI algorithm to manage your customer support tickets. That doesn’t mean AI isn’t changing your life everyday.

All of these changes are happening in the payment processing world, with big players like Stripe, Visa, Mastercard or PayPal constantly investing in AI.

So while you may not implement them yourself yet… These changes are still important, and we hope we shed some light on how AI is changing payment processing.

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