Rise of the Paybots
When payment processing meets AI
Like all industries, the payments industry is being disrupted by digital transformation and the advent of AI.
New technologies have transformed the payments market drastically, meaning more consumer choice. 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, so let’s analyze how AI is changing payment processing.
AI, defined
AI (Artificial Intelligence) is a term thrown around a lot these days, but it’s important to understand what it means. In general, it refers to machine learning, the ability of complex algorithms to analyze large data-sets and draw conclusions that would take humans decades to get to.
Think about your Spam folder for example.
Your email provider doesn’t manually screen each individual email. Rather, the algorithms decide what is “Spam” and what isn’t based upon analysis of billions of previous emails and user responses to those emails. Based upon this data, the machine can spot tell-tale signs of spam email, and screen them in response.
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 of this however, Google also On top, it analyzes the text in emails for keywords that show features common to scam emails.
It’s a well oiled machine, and it’s only one example of AI is put to use in the digital world.
How can this technology be applied to payment processing however?
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 looked at how 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’ne never used before, in a sector you’ve never been active in, chances are that you’ll receive an SMS code asking you 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 of this, if the transaction is strange — for example it’s coming from a country you’ve never been to or being paid to a merchant with red flags on their record — payment processing systems may even freeze your account to make sure you’re protected.
This entire process is automatic, behind the scenes and enabled by AI.
Fast Payment Authorization
The opposite is also true.
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 as they keep a payment profile, AI systems can keep a profile of you and millions of other 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 as other industries use AI to power-up their customer experience, payment processing does too. Personalization has a growing role to plays in finance, and AI is a game changer here.
By building a profile of your general preferences and online behaviour, AI will enable payment processors 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 solution.
Sure, human intervention is still needed in more complex cases, but the gap between what chatbots can do now, and what we need them to do, is narrowing 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.
Conclusion
With big players like Stripe, Visa, Mastercard or PayPal constantly investing in AI, the direction of travel for the payments industry is clear. From analyzing market trends, to streamlining customer service, the rise of the paybots will be central to the future of paytech.
