What does artificial intelligence mean for the payments industry?
As a payments provider we’re naturally keen to keep up with everything going on within the industry, and one of the buzzwords on everyone’s lips at the moment is artificial intelligence (AI).
AI isn’t a passing fad though, it really is the future. And while much of the media focus is more ‘space age’ developments such as driverless cars and robo-doctors, it has a huge role to play in the fintech sector. Investment in this space is growing every year, and the payments industry is one where there is huge potential for this technology to be adopted.
Understanding artificial intelligence
Let’s bring it back to basics first, what exactly is AI? Well the Oxford Dictionary defines it as: “The theory and development of computer systems able to perform tasks normally requiring human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.” Or to put it even more simply, creating a machine capable of imitating human behaviour.
While for some this might sound like the stuff of futuristic nightmares, or the plot of a bad sci-fi movie (we’re looking at you Will Smith), it actually has some very practical applications for the industry, most specifically in the area of fraud detection and prevention.
Using AI to combat fraud
Fraud is a big problem for both face-to-face and online transactions. Traditionally prevention strategies have relied on teams of actual human beings manually screening transactions looking to recognise suspicious patterns. With thousands, or even millions of transactions to review in a day though, it doesn’t take a super computer to realise this is a hugely expensive and time consuming way to detect fraud.
AI technology allows companies to sift through this data much more efficiently, and also identify patterns too subtle for the human brain to detect. The feedback loop inherent in payments – bad transactions at an issuer level being reported back to the network for example – also plays a significant role in the ability of algorithms to learn and adjust. The end result being a reduction in both costs and the time taken to respond to fraud threats.
Additionally, by leveraging the power of big data, organisations can use AI to make more effective decision making around identity verification, payment authorisation, checkout scoring and merchant underwriting.
The future of AI in the payments industry
The general consensus of many in the industry is that along with combatting fraud, AI has the potential to help address many of the remaining inefficiencies in the payments industry, especially those relating to routing and investigations. It’s still early days for some of these new technologies, but it’s certainly an exciting time for the industry, and over the coming years we can expect to see a raft of innovations that will ultimately make payments more streamlined and, most importantly, more secure than ever before.