Beyond Cash and Cards: Rise of AI-Powered Payment

What was once as straightforward as using cash, credit cards, or transferring money has evolved into a complex system with advanced payment methods. Today, technology has introduced various new ways to handle transactions, making the process more intricate—yet simpler—a contradiction in terms. Let me explain…

Wiring money—that is electronically transferring funds from one person or institution to another, often through banks or specialized services, such as GPay, or UPI—is a fast and reliable way to send money across distances. National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS) are both methods of wiring money in India.

Over the past three years, traditional payment methods—cash, credit cards and bank transfers—have undergone significant changes, mostly driven by advancements in other technologies. These conventional ways of making payments are now evolving alongside newer, more innovative systems, such as mobile wallets and online banking, making it easier and faster for people to complete transactions.

These improvements are significantly increasing the speed of transactions and enhancing security measures. At the same time, they are changing how businesses and consumers handle financial transactions around the world. And one of the most significant changes in this area has been the introduction of payment systems that use artificial intelligence (AI) tools. These systems are making the payment process smarter and more efficient.

AI & the Payment Industry

AI technologies are transforming the payment industry by automating processes, making anti-fraud methods more effective and enhancing customer interactions. These advancements help make payments faster, safer and more personalized. For organizations, AI-powered tools improve efficiency, reduce human errors and help make real-time, data-driven decisions.

These AI-based systems allow businesses to operate more smoothly and effectively. This is crucial because organizations aim to improve payment methods by focusing on quality, efficiency and security, ensuring customer satisfaction. Along with boosting productivity, AI plays a key role in making transactions more secure.

How It Improves Security

Modern machine learning algorithms are better at detecting fraudulent transactions compared to older methods. They do this by analysing user behaviour and monitoring their activities more effectively. Besides stopping fraud, AI-powered payment systems can reduce the risk of fraud before it happens and strengthen the security of sensitive information. These systems use AI tools to provide better protection for users.

For instance, AI-powered payment systems can detect unusual spending patterns, such as a sudden large purchase at a different location and immediately flag it for review, or even block the transaction. This helps reduce the risk of fraud and protects the user’s sensitive information. Moreover, the use of AI is leading to new and improved solutions for customer service. AI helps businesses provide better, and faster, support to their customers.

AI enhances the payment process in many ways—offering personalized options, enabling voice payments and using predictive analytics to recommend the best actions based on a consumer’s behaviour. These tools help make payments more efficient and tailored to individual needs. For instance, if a customer regularly buys groceries online, an AI-powered payment system might suggest using a specific payment method that offers a discount, or a faster checkout based on the user’s previous choices. This makes the payment process easier and more personalized.

Enabling Voice Payments

Enabling voice payments means allowing users to make payments by speaking to a device, such as a smart-phone or a smart speaker. For instance, a person can say, “Pay my electricity bill,” or “Send $50 to Ravi,” using voice commands, and the payment system will process the transaction without needing to manually enter details. This makes the payment process faster and more convenient.

These innovations are helping companies stay competitive in a world where the Internet is more dominant than ever and consumers now expect faster, more convenient and safer services than ever before.

During a recent conference in Tel-Aviv, Money TLV AI Payments MeetUp experts discussed these topics, as reported by the Jerusalem Post. Most chargeback automation tools—these help businesses handle disputes when customers challenge a charge on their credit cards and aim to reduce financial losses by managing these disputes efficiently—explains the Post, use predetermined templates. But Money TLV has developed a better solution by using AI and machine learning (ML), which exploits the full potential of smart automation, according to Ben Herut, risk director at Chargeflow, a startup focussed on managing chargebacks and preventing friendly fraud.

Michal Ohana, partner-head of the financial regulation department at Shibolet, was quoted by the Post as highlighting the importance of regulators providing tools for financial institutions for using AI. At the same time, she emphasised the need for a well-structured and secure risk management system to protect customers from potential risks and exposures.

Zack Levine, vice-president at Checkout.com, a digital payments platform based in Tel-Aviv which has raised $1 billion in funding and is serving such large companies as Playstation, UberEats and Alibaba, who was present at the conference, said their merchants were highly focussed on boosting their online conversion and acceptance rates. It directly helped them increase their revenue, Levine explained, and their main intelligent acceptance system had been using large language models for a while, which were continuously upgrading over time.

Keren Aviasaf-Migdal, CEO, PaymentsOp, stated that their goal in organizing the event and hosting a panel on AI in payment systems showed there was still plenty of opportunities for new and creative solutions. These innovations could enhance user experience, improve acceptance rates, refine fee models and provide better support for merchants.

(The author of this article is a Defence, Aerospace & Political Analyst based in Bengaluru. He is also Director of ADD Engineering Components, India, Pvt. Ltd, a subsidiary of ADD Engineering GmbH, Germany. You can reach him at: girishlinganna@gmail.com)

(Disclaimer: The views expressed above are the author's own and do not reflect those of DNA)