Digital payments have become commonplace in our daily lives. You probably have your digital payments wallet on your phone. It has made transactions quick, easy, and super convenient.
Naturally, digital payments have taken the world by storm. Reports predict that a massive 5.2 billion people will be using digital wallets by 2026. The number is up from 3.4 billion in 2022, pointing toward a staggering 53 per cent growth.
Over the years, this industry has seen several developments and innovations. The introduction and adoption of AI is one such innovation that has opened up a world of possibilities for the digital finance landscape.
The technology’s ability to manage and process large amounts of data, increase efficiency, and streamline operations presents massive development opportunities throughout the industry. Let’s dive in and explore this thought further.
With the volume of digital payments increasing every day, so are the probabilities – and instances – of cyber frauds, data leaks, and other problems related to payment security.
This is exactly where AI helps. With their multiple capabilities, AI tools find great applications in fraud detection and prevention. AI and ML algorithms are known to identify suspicious transactions and block all unauthorized payments.
Given the growing influx in the industry, AI tools are poised to serve as a great tool for enhancing security, bringing personalization, and increasing speed and efficiency at scale.
AI has vast and diverse applications within the digital payments industry. It holds the power to transform and serve as the driving force for future transactions. Let’s have a look at the top 4 potential impacts AI can have on digital payments:
Payments fraud is a massive threat in digital transactions. Around 71 per cent of organisations have reported being victims of payment fraud attacks. Besides the compromise of sensitive customer data, these attacks lead to large financial losses to companies and individuals alike.
Integration of AI tools can help analyze vast amounts of data, identify anomalies, and study behavioral patterns to detect and prevent frauds before they occur. Features like biometrics authentication and behavioral analytics can prevent unauthorized activities, creating a safe digital payment architecture.
We’re all hungry for convenience – and AI satisfies that want and how. AI tools help significantly improve the customer experience with personalisation using its analytical abilities and smart recommendation engine.
The tools can analyze your spending habits, preferences, and activities, using the data patterns to personalize your experience. It could recommend preferred payment options, automate routine tasks, and suggest offers.
For example, digital wallets integrated with AI can suggest a particular payment method based on your history and preferences. It can even recommend suitable options based on the purpose and details of your transaction.
Digital payments often have a set of routine tasks and operations. AI tools can help effectively automate these tasks and streamline complex operations for greater speed and efficiency.
Moreover, the technology’s multiple use cases around fraud monitoring, personalisation, and data processing, all lead to upgrades in system performance and managerial efficiency. For businesses, AI tools can help create quicker product mock-ups, leading to faster roll-outs and iterations based on real-time feedback mechanisms.
AI is known to analyze historical data, study patterns, and make accurate predictions based on that information.
For financial institutions, this can help predict payment trends and future payment behaviors, and thereby speed up processing times. Whereas the average user will be able to gain insights into their future spending trends and upcoming expenses, allowing them to budget accordingly.
Information on spending patterns and payment trends can also help credit card service providers develop new offerings, and personalize discounts and pricing structures. It could eventually help build an intelligent credit scoring system.
With billions of dollars worth of transactions taking place every day, the digital payments industry cannot function seamlessly without AI by its side. From preventing fraud to personalizing the user experience, AI tools help strengthen, accelerate, and upgrade digital transactions in various ways.
However, like any other technology, things can go wrong even when using AI. Thus, it’s important to stay up-to-date and well-informed about the latest developments, while promoting responsible usage of the right tools.
Photo: The problems related to cybersecurity will increase as AI grows.