Artificial intelligence (AI) has revolutionised financial services in recent years, and it is on track to radically transform the payments industry in the near future. Businesses utilise AI to develop efficiency and discover patterns that can improve decision making by quickly analysing huge amounts of data to draw key insights and information. The ordinary customer may not know how AI is already being utilised behind the scenes by the businesses they engage with on a daily basis, but as more people become more connected and dependant on digital technologies and procedures, its use is only going to grow.This can bring many benefits, such as helping the financial industry fight fraud, deliver better customer experiences and create new efficiencies and conveniences when it comes to payments.
AI In Banking
Artificial intelligence (AI) has already had a significant impact on the financial services industry. Many financial institutions, for example, are now employing AI to better detect and prevent fraud in digital banking channels. Due to the difficulty of fully validating and authenticating persons in digital channels, account takeover and identity fraud cost financial institutions $16.9 billion in 2019. Because so much personally identifiable information (PII) has been dumped into the dark web, fraudsters now have all of the information they need to open a new bank account or line of credit in someone else’s name, or to take over an existing account.
To combat this, several banks have lately begun to employ AI-powered advanced risk analytics and fraud detection technology. Banks can identify suspicious activity and estimate risk levels in real time using AI to evaluate data in real time, allowing them to spot fraud as it occurs. Banks could only look back at a transaction after it had occurred in the past. They’d mark it as fraudulent and deduct the loss. Banks may now employ AI to examine data streams from the user’s device, their behaviour during an online banking session, the transactions themselves, the channels and business applications that are accessed, and more – all in real time – to retarget their marketing efforts.
AI In Investing
AI is also being used by financial firms to make better investment decisions and manage people’s asset portfolios. In recent years, the popularity of robo-advisors — AI-powered financial planning services that don’t require human supervision — has exploded. According to one estimate, by 2022, fully automated AI financial advisors would be managing more than $4 trillion in assets for global clients. AI-powered robo-advisors consider a wide range of elements in addition to an algorithm-based approach to investing.To find the proper asset allocations or automatically rebalance portfolios, these factors include the customer’s personal financial goals, risk tolerance, financial position, budgeting and spending patterns, present and expected market conditions, time period, and more. Some can even handle more complicated tasks like tax loss harvesting and retirement planning, all in the name of keeping consumers on track to accomplish their financial objectives.
Though AI is gaining traction in the larger financial services market, it is only now making inroads into payments. I anticipate that the usage of AI in digital payments will continue to develop in the next years, to the point where any retail store or other venue where you would ordinarily meet a point-of-sale (POS) system would offer a completely frictionless, checkout-free experience.
Consider the few test cases of Amazon’s cashier-less stores; now imagine that experience being replicated across the board, without any ties to a certain vendor or brand. You will eventually be able to save your payment card information on file with any retail store for a checkout-free shopping experience by combining AI with other technologies like digital cash, digital wallets, and geofencing technology, which allows retailers to track when you enter and exit a store. When you walk inside the store, the retailer will recognise you based on your mobile device.Anything you buy in the store will be automatically deducted from your digital wallet or charged to your credit card on file, and you will simply walk out. The entire process will take place without human intervention, without the need for a checkout queue or the need of a POS system.
As AI becomes more widely used, it will become better at understanding our purchasing habits, and a neural network will be developed that intuitively knows how you want to spend your money even before you do. Retailers and merchants, for example, can use geofencing technology combined with AI to find patterns in not only your online browsing activities but also where you physically travel every day. AI can become eerily accurate at predicting what you want or need by sifting through enormous amounts of data from your smart gadgets, web sessions, and physical actions. Retailers can utilise this data to present you with hyper-relevant and tailored product offers at just the perfect time — for example, while you’re passing by a store or thinking about making a purchase. The smooth and convenient consumer experience created by combining the hyper-personalized ad with the option to autopay with the digital payment information on file is difficult to resist.
These are just a few instances of how artificial intelligence is revolutionising financial services and payments. In the coming years, as the globe gets more linked and digital, you’ll certainly see even more unique examples emerge. AI can generate efficiencies that businesses may leverage to give a better customer experience by analysing data in real time, uncovering insights, and recognising patterns that people cannot. AI has the potential to power the future of financial services, from fraud protection to asset management to smooth digital payments.