Use of Artificial Intelligence AI in Financial Transaction Processing and Payment Gateway Applications

The widespread availability of digital payment systems hastened the transition from traditional currency. In recent years, artificial intelligence (AI) has been a focal point for gateway solutions for online payments. Some of the most successful companies have found that using AI for payments may be beneficial. As a result, more and more payment processors are using AI in their practices to enhance learning, simplify transactions and fortify safety. 

A payment gateway is a software module that facilitates safe and secure financial transactions between a customer and a merchant. Among these include checking if a customer has sufficient cash in their account to complete a transaction and confirming their credit/debit/prepaid card information (this involves encrypting the card number to ensure the data is processed securely as per ISO standards in the payments industry). Most payment processors have begun utilizing AI and machine learning to process the high volume transactions and anticipate online payment frauds. Without AI, the payment sector would not be able to execute a high volume of transactions with minimal fraud or mistakes. So, let’s look at how AI influences the payment gateway market.

Increasing Volume and Fraud

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While overall retail spending has climbed by 4% over the previous five years, online retail transactions have grown at 12% annually. According to a renowned business specializing in market and consumer statistics, the total transaction value in the digital payments category is expected to reach US$6,752,388 million in 2021. Also, by 2025, this market is projected to rise by as much as 12.24% in terms of the transaction value. The massive number of digital transactions has benefits and drawbacks for detecting fraud. With so many online transactions, it is essential to have a sophisticated fraud detection system in place.

Credit card fraud has skyrocketed alongside digital payment methods, growing by 35% in the United States and reaching around $7 billion. The proliferation of E-Commerce transactions also called “Card Not Present” transactions is to blame for the uptick in fraudulent activity. Most payment processors have begun utilizing AI and machine learning to anticipate online payment fraud because of the many signs that may identify fraud. Data leaks, breaches in payment processing security, and fraudulent incidents are all on the rise as the number of online transactions continues to grow exponentially. Therein lies the value of artificial intelligence in the payment gateway sector.

The ability of modern technology to detect and prevent fraudulent transactions is constantly improving. Using ML and AI in the financial sector can drastically reduce the time spent detecting fraudulent transactions. Artificial intelligence can sift through more data and find irregularities in it. Using AI, a bank or a payment processing business may handle transactions instantly. Therefore, thanks to AI, the payment gateway business can execute many transactions with precision and fewer mistakes.

Reduced downtime and updated content

Artificial intelligence is used to maintain new content with fewer efforts and reduce downtime. Using geolocation technology, AI may direct users to the physically closest to them, preventing any server from overloading. AI can also assist with system updates. Artificial intelligence’s significance in this area is immense. The monetary system’s electronic payment infrastructure requires constant upkeep and revision. Especially during working hours, there should be no downtime. Companies likely lose clients if they need help making purchases on the site every time they want to make a payment. The company will lose money if the payment processor continues to report unexpected disruptions. By ensuring regular content updates and few interruptions in service, AI can aid in resolving these challenges.

Increased Automation for Deeper Understanding

Artificial intelligence (AI) has profoundly affected the payment ecosystem, influencing everything from how individuals invest their money to the degree to which operations are automated. Artificial intelligence helps the payments industry become more efficient, which is a significant plus. Time spent processing credit card payments may be reduced by increasing automation and access to more and better data. This demonstrates how AI is assisting companies in rethinking and reorganizing their procedures. It helps firms process massive amounts of data, provide insightful financial reports, and meet regulatory compliance standards.

Enhanced Customer Support

Better customer service is possible with the help of AI-powered payment gateways. Using AI, businesses may use chatbots, which deliver faster responses to frequently asked inquiries. Additionally, they enhance the quality of customer service when a live agent is not required since they can devote more time to providing the requested assistance. On top of that, AI has made it simpler for CSRs to locate relevant information for their consumers.

Enhanced User Interface and Experience

The final checkout page is one of the most crucial stages in any online sale. The site’s users must be able to make payments quickly and conveniently without having to click through many pages. It is also essential that the entire shopping and checking-out procedure runs smoothly and efficiently. Many companies are looking to switch to a more dependable alternative if the payment processor provides an inconvenient or antiquated method of processing payments. With the advent of AI, several payment processors have begun incorporating it into their user interfaces and experiences. Using AI to determine elements like a user’s location, past interactions with the site, and even the time of day may significantly improve the user experience.

Security

Artificial intelligence (AI) aids financial services in balancing user-friendliness and safety. Both consumers and business owners are interested in a user-friendly payment system that can attract a large audience. They must take several steps to verify the customer’s identity and complete the transaction. Here, the difficulty arises from the fact that biometrics may be hacked. Dual-factor authentication has been the best option up to this point. However, with the help of AI, banking institutions may discover the norm for their clients. There is little danger of losing a customer if the transaction is carried out in accordance with their preferences.

Quick and Hassle-free Payments

Thanks to advancements in speech recognition technology, banks can increasingly accept payments initiated by voice, whether the initiator has used a smartphone, smart speaker, or any other device. Artificial intelligence (AI) may be used to streamline the payment procedure by minimizing the requirement for human intervention. By automating workflows, giving decision assistance, and applying image recognition to documents, AI can enable the straight-through processing of payments, such as when a company pays a basic invoice to its bank.

Easy KYC with the help of AI

When banks use AI to manage the massive amounts of paperwork needed for Know Your Customer (KYC) reasons, onboarding new corporate clients may be streamlined. Using natural language processing, machines can read papers, understand them, and provide their results to humans for decision-making. They can also check the documents against third-party databases like Companies House. The outcome should be an improved onboarding experience that benefits both banks and customers.

AI Payment Processing

Computing vision is being used by artificial intelligence in place of paper money and plastic credit cards. Customer’s billing and transaction history are recorded digitally, and they utilize their mobile devices as payment (i.e., Google Pay, Apple Wallet, etc.). The financial industry also uses computer vision to enable online account opening, a growing trend away from the physical bank branch.

Providing data for smarter decision-making

In the realm of finance, both AI and Machine Learning are assisting with data-driven investment decisions. In recent years, major market participants have shown a marked uptick in their adoption of quantitative methodologies and innovative methods for analyzing extensive data. Investors’ efforts to use data analysis to make better judgments will be influenced in the future by the increasing volume and ease of access to data.

The convergence of AI and finance is occurring at a time when AI is generating consumer-disruptive technology. The fintech industry is beginning to deploy AI-based tools and algorithms in novel ways, but there is quite a long way to go before these technologies govern our financial systems. A significant opportunity for enhancing the customer experience through the use of AI services lies in the realm of digital transactions and payment processing. Customers may benefit from the revolutionary transformation if significant participants in the payment sector become involved with AI.

References:

  • https://becominghuman.ai/how-artificial-intelligence-is-changing-the-payment-gateway-industry-13727057d0d9
  • https://www.smartdatacollective.com/reasons-to-use-payment-gateway-with-sophisticated-ai-infrastructure/
  • https://d3.harvard.edu/platform-digit/submission/how-a-fast-growing-payment-processor-uses-ai-to-prevent-payment-fraud/
  • https://blog.mobikwik.com/how-artificial-intelligence-is-changing-the-payment-gateway-industry/
  • https://www.virtusa.com/digital-themes/ai-in-payment-processing
  • https://www.barclayscorporate.com/insights/innovation/ai-payments-revolution/#aiandkyc

Dhanshree Shenwai is a Computer Science Engineer and has a good experience in FinTech companies covering Financial, Cards & Payments and Banking domain with keen interest in applications of AI. She is enthusiastic about exploring new technologies and advancements in today’s evolving world making everyone's life easy.