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Smart payments: The robot returns – Who is getting AI right?

RS2 SMART-paymentsSome payments industry commentators have described Artificial Intelligence (AI) as “the fourth industrial revolution”, after the steam engine, electricity and computing – and there’s no doubt that AI has significant potential for payments, as for many other industries.

But who’s making the most of AI in today’s payments industry? What are the best use cases – and what are the pitfalls? Here are some of our thoughts:

  1. It’s great for fighting fraud. According to BI Intelligence, fraud cost the global payments industry more than US$13 billion in 2014 – and that number has only grown since. As criminals become adept at circumventing security measures and governments demand higher standards of fraud protection, AI’s power to analyse huge amounts of data quickly is proving indispensable in fighting fraud. Companies like Feedzai are using real-time payments data to produce a map of how, when and where fraud attacks take place around the world. By establishing patterns in fraud, it’s easier to predict and combat fraud attacks. These same data management techniques can also be applied to AML and KYC compliance work.
  2. It shows potential for marketing. AI can analyse the huge customer data arrays created by electronic transactions. In the US, Loop recently announced a partnership with retailer Kenneth Cole to identify personalised offers for regular customers. Diebold Nixdorf has also worked with Google and Mastercard to create personalised offers for customers based on their purchasing history and geo-location data. However, despite great enthusiasm from companies for this application of AI, it’s not clear that consumers are receptive…
  3. Consumers are not always keen. Following the Facebook and Cambridge Analytica scandals, and the implementation of General Data Protection Regulations (GDPR) in many parts of the world, there’s evidence of growing consumer reluctance to give up their data. A recent survey from NTT revealed only 41% of US consumers think the application of AI to consumer payments is a good idea. Compare this to the 90% of corporate executives who think it’s fine, and it’s clear that your deployment of AI has to consider consumer sensitivities – and where your customers might simply prefer better (and more human) customer service.
  1. Regulation is coming. Given the scandals mentioned above, and growing consumer reluctance, we can expect 2019 to be a watershed year where governments take action against the illicit harvesting and use of data. While the US does not yet have Federal GDPR legislation, laws have already been passed in California and are underway in other states. Some have spoken of consumers being paid to surrender their data for AI purposes – though the exact nature of future arrangements remains to be seen. Whatever emerges, it’s clear that companies should not assume the current low-regulation environment will remain for much longer.

Email me: Patrick Clarke – Chief Technology Officer, RS2 Software – patrick.clarke@rs2.com to arrange a call to discuss how you can get the most out of AI in your payments strategy.

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