The financial industry may not be the first to try the latest technological developments, but they are slowly trying to catch up. However, in a world plagued by cyberattacks and vulnerable electronic systems, financial institutions have no choice but to accelerate the process. According to the 2019 Global FinTech Adoption Index, 25% of small & medium businesses worldwide welcome the use of modern technology in banking, financing, and financial management.
Most retailers and financial institutions are trying to tackle difficult issues such as cybersecurity and document digitization, but they’re also looking for systems that can speed up payment processing, especially for companies that work with large volumes on a daily basis.
In fact, the uses of AI and machine learning (ML) in payment processing is part of the main fintech trends of 2020. But how exactly is this going to happen and what are the finance areas we need to keep an eye on?
Well, the integration of AI in financial systems is already happening and today we’ll talk about companies that use it for payment optimization. We’ll also touch on how these systems work and the way they make the life of both customers and company employees better.
Conversational AI for Payment Initiation
In 2017, one of the largest banks in Singapore (DBS Bank), launched a mobile-led bank in Indonesia. To make sure things will run smoothly, DBS employed the services of Kasisto, the company that developed KAI – the virtual assistant that humanizes digital experiences in the world of finances.
The platform uses AI algorithms to create a very human-like experience for customers who need details on their accounts and transactions. As such, the digibank remains paperless and uses biometrics for user authentication.
In addition, the system reduces the risk of human error, speeds up the processing (can pull up information, even for complicated operations, a lot faster), and allows users to improve their financial literacy by answering a series of questions on the topic. The system is so accurate and well-designed that many customers don’t realize they are talking to a bot and not a real person.
But DBS is not the only financial institution to make use of AI-powered virtual agents. The practice is quite common nowadays and customers can use natural language to initiate payments for various scenarios.
Fraud Detection via AI
Fraud detection is a major problem in the financial world as it slows down payment processing. Furthermore, it can be difficult to detect, using standard methods, in accounts with a large number of payments on a daily basis.
A good example of how AI is used in fraud detection comes from VISA, one of the largest digital payment processors in the world. They’ve been using AI systems for the last 25 years, which allowed the system to improve and learn as the technology got better.
Their artificial intelligence system for payment authorization and fraud detection learns user behavior and understands patterns. So, whenever an activity is not according to a user’s profile, it is being flagged as suspicious.
Once a transaction is considered suspicious, VISA’s AI connects with the bank that issued the card letting them know about the situation. From here, the bank will either block the transaction (based on the risk assessment made by VISA) or send a text message asking the account owner to confirm that he/she initiated the transaction.
Of course, VISA is not the only financial institution to uses such systems. Citigroup uses a similar AI system for fraud detection and so are other processors. The main purpose of these systems is to build a profile for each user and learn from their past transactions, so anything that stands out from the pattern can be easily recognized.
Not to mention, everything happens in a matter of seconds, and users aren’t even aware of everything that’s going on between the moment they swipe their card or click Buy Now and the moment their transaction is approved.
PayPal is a notorious platform that lets you send and receive payments online without too much fuss. The platform revolutionized more than just the financial market and improved the lives of many people across the world. But they didn’t start with millions of transactions firing their systems every hour of the day.
Nowadays they are quite mainstream, which means they had to get creative in order to process an increasing number of transactions. Currently, PayPal is using intelligent AI chatbots to provide useful information to customers and avoid overloading their customer service centers.
Furthermore, the company also claims to use ML and AI to prevent fraud and identify suspicious activities without asking for biometric data or extra passwords.
As you can see, learning artificial intelligence pays off in today’s day and age, especially if you plan a career in cybersecurity. The hardware is finally catching up with software that needs high processing power, which means that more institutions and organizations will be able to access AI and ML algorithms.
We can finally see a future where the human factor is only involved at a supervisory level and all the data processing is done by machines. This removes bias, errors, and mistakes from our systems and speeds up the processes without increasing the risk of fraud.