AI and machine learning have revolutionized the payments industry, giving customers more alternatives on how to complete their transactions. As customers become more acclimated to using automated payment systems, let's take a look at where we're headed in the quickly evolving payment environment.
Digital payment options such as chip-and-PIN and online transactions were booming even before the fear of COVID-19 made consumers reluctant to use banknotes. Increased online buying has wreaked havoc on traditional currencies too, and even though the world has opened up, the numbers are still falling.
Companies must integrate digital payments and related services to keep up with changing dynamics. As a result, CFOs’ top priorities today include digitizing payments as well as B2B payments automation.
The Decline of Traditional Payment Methods
Physical money’s role is gradually declining, allowing everyone to adjust accordingly. Traditional payment methods like credit cards and cash-on-delivery are estimated to account for less than a third of the total worldwide E-commerce transaction value by 2025. In fact, cash is expected to shrink from 17.9% ($8.3 trillion) of global POS transaction value in 2021 to 9.8% ($5.8 trillion) by 2025.
Financial technology businesses are capitalizing on this shift by devising ever-more inventive ways to assist organizations in doing business via digital payment solutions. Automation is at the center of this tremendous transition, from voice recognition biometrics to blockchain technology and seamless Amazon store payments.
Technology Drivers in Payment Automation
The advancement of automation in PayTech is heavily reliant on AI and machine learning. It can handle requests at scale and speed when used for transaction monitoring and screening, and it is more efficient than other methods at significantly decreasing error.
It has also sped up how companies can acquire customers by onboarding them in under two minutes. FinTechs can verify, process, and conduct client risk assessments in real-time using KYC providers, specialized screening, and geolocation technologies.
FinTechs’ way of connecting to payment networks has also been aided by automation. FinTechs may plug in and play with various APIs inside one automated, secure process — all thanks to open banking. Information is communicated in real-time between multiple financial providers and intermediaries, allowing the user to benefit from various advantages, notably fast and secure payments.
By delivering hyper-personalized credit scores as well as offers, AI in the payments business can improve customer service. It can also lead to new types of transactions — we’ve already seen retail outlets without cashiers where customers can simply ‘grab and go’.
It’s also responsible for significant advancements in payment orchestration, billing optimization, and the customer identification and verification process that uses different data sources. Fraud detection, payment optimization, credit scoring, monitoring, and alerting are all areas where AI can help.
Simplifying Business Buying Processes
The logical solution to what is otherwise a labor-intensive and time-consuming procedure is to automate payments. As we move to more “ambient” kinds of commerce, such as the recent rise of till-less grocery stores, payments could become increasingly invisible. By 2030, this will have progressed to where no cards or payment devices will be used.
Instead, a person’s biometric data, along with the item they’re buying, would be collected by cameras and sent straight to their bank. Facial recognition plus AI-based decision-making will be used in future versions of ambient commerce. Experts feel that given how rapidly Uber and other such services have become the standard, convenience will win people over. In fact, 51% of the consumers surveyed said they would consider utilizing contactless microchip implantation to make payments.
What Does the Payment Landscape Look Like in the Future?
As opposed to just a decade earlier, the world of payments has already become unrecognizable. Future innovations will be driven chiefly by necessity instead of innovation for the sake of innovation.
With growing cross-border trade, especially when supply chain concerns arise, the PayTech space will be flooded with new technologies than what there are now. Suppliers will have to be paid faster and electronically, with greater transparency.
Payments must be made quickly to minimize problems with currency changes and to relieve suppliers’ concerns about protracted settlement timeframes.
The concept of automation would be outdated since processes would be fundamentally efficient. Blockchain and open finance initiatives will become mainstream, serving as conduits for data analytics to improve the act and security of the transaction.
As per a recent survey by Marqueta, the manner in which we pay our bills and buy all of the things we need will be very different in a decade’s time. The survey found that 31% of 18–24-year-old respondents had no problem with AI making automatic judgments on their behalf to find the most ethical manner to pay. Debit and credit cards along with handy mobile payment apps will almost definitely become outdated in the near future.
Given the number of transactions that payment processors deal with nowadays, manual processing is no longer a viable alternative. This shift was unavoidable, even though the pandemic hastened it.