How Artificial Intelligence is Changing the Payment Gateway Industry

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We are living in an exciting time where artificial intelligence is slowly taking over our daily lives.Alexa and Siri are slowly replacing personal assistants.

Artificial Intelligence is Changing the Payment Gateway Industry

We have AI-powered cameras at our workplaces, AI-powered robots to do our tasks, AI-powered automotive, and what not! So, it’s no surprise that AI and digital transformation have encompassed all industries, and the payment industry is no exception.

The proliferation of digital payment methods is pushing us towards cashless alternatives. With a massive volume of transactions being done online, there is a greater risk of data leaks, breaches of payment processing security, and fraudulent cases. This is where AI in the payment gateway industry plays its role!

Without AI, there is no other way that the payment industry could process a large number of transactions while keeping fraud or errors down to a minimum. Clearly, the industry will rely on this cutting-edge technology in the coming years. Let’s have a look at how AI is changing and reshaping the payment gateway industry.

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Why Is AI Necessary In the Payment Industry?

According to Statista, the total transaction value in the digital payment segment is projected to hit US$6,752,388 million in 2021. And, this transaction value is expected to grow up to 12.24% by 2025. Such a massive number of payments done online requires an intelligent fraud detection system. Also, such a huge volume of digital transactions both helps and obstructs fraud spotting.

It provides the AI developers with important data required to train the algorithms. The conventional fraud-detection system would consider variables, like the amount being spent, location, merchant, etc. If a user is found spending more than usual, or a new location or an unfamiliar merchant is detected, all these activities will be suspected as fraudulent transactions.

But there is a problem with this model; it could not cope with the increased transaction volume. Furthermore, it would give inaccurate information to determine if an anomalistic activity could be fraudulent. Given that the volume of digital transactions will spike in the coming years, payment gateway industries can’t afford to rely on a manual review process.

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So How Can AI Be Used In Payments?

Artificial intelligence and machine learning in the payment industry can reduce fraud detection significantly. An AI-powered payment gateway looks at a range of factors and provides a risk score. For example, suppose a merchant has a good record. It will be assigned a low-risk score. But, a time zone, location, or IP address that is previously not known will get a higher risk score.

Several other factors are taken into account. Then, it is determined if the transaction is fraudulent. This way, it becomes easier to analyze data in a better way. AI can go through a larger volume of data and detect even unexpected anomalies.

A financial institution or payment industry using AI can process real-time transactions. Technology is continually evolving; it is finding new advanced ways to differentiate between fraudulent and real transactions. Thus, AI provides the payment gateway industry with the ability to process a vast number of transactions with accuracy and lower error rates.

How Is AI Changing The Payment Industry Beyond Fraud Detection?

AI is more important than ever in fraud detection. The same mechanism is also used for identifying worrying connections or behavior patterns as a part of the KYC process. By using AI this way, payment industries can leverage quantities of data from multiple sources, like customers’ accounts, etc.

Below are a few more ways AI is making in-roads into payment-

Increased Automation For Better Insights

From the way people invest their money to automating the processes, AI has made a huge impact in the payment landscape. One significant benefit of AI is that it helps payment industries improve efficiency. For example, decreasing the credit card processing time, increasing automation, providing better insights, etc.

This shows that AI is helping businesses to rethink and restructure their processes. It supports businesses in breaking down large chunks of data, generating valuable financial reports, and fulfilling compliance requirements.

Enables Informed Decisions

Nowadays, quantitative techniques of analyzing data are being adopted. Financial institutions have the potential to achieve efficiencies by incorporating AI and ML. Investors are expediting the lending process using these technologies and Big Data Analytics. This innovative technique will likely replace the statistical modeling approaches in the coming years.

Authentication and Security

Finding the balance between security and ease of use is a challenge that AI helps the payment industry to overcome. Customers and merchants alike want a payment system that is easy to use so that the widest customer base can use it.

The customer has to perform multiple actions to authenticate themselves and complete a transaction. Here the challenge is that biometrics can be compromised. Until now, dual-factor authentication was the solution. However, with AI, payment providers can find what is normal for customers. When the transaction complies with what a customer prefers, there is low risk.

Improves Customer Experience

Implementing AI into the digital payment sector is not a new thing. Banks and financial institutions have already created chatbots to eliminate the need to stand in long queues and improve customer service. AI helps payment gateways reach out to new customers by capturing their historical data and predicting their behavior.

Besides, credit scoring is an area where the industry is using AI. Again, there is a challenge to analyze a lot of data to spot fraudulent patterns.

To Sum Up

The payment gateway industry is taking on AI to manage billions of digital transactions, and for good reasons. AI has reduced payment processing times, handles a vast amount of data, and ensures that the regulatory compliance requirements are fulfilled. It promises efficiency while coping with a boost in payment volumes that are expected in the future.

Moreover, there is less room for human errors. Financial technology has started using these technologies in innovative ways. Algorithms are regularly tested to avoid any potential scams in the industry. You can expect to see more influence of AI in the payment industry.

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