Artificial intelligence can change the paths of payment and commerce.
Literally.
“There are many spaces [within financial services] that AI and machine learning can influence,” Andy McHale, senior director of product and market strategy at Spreedly, told PYMNTS.
Generally speaking, he said that machine learning and AI could speed through calculations and find patterns and strategies that a human — or teams of humans — simply cannot do on their own.
“We just can’t get there, or the scale does not exist,” he said.
Most immediately, he said that the benefits of these advanced technologies would be seen in the more “passive” sides of finance rather than active consumer-led activities. He pointed to fraud prevention, where there’s a need to boost security amid the rise of open data and open banking.
“There are opportunities on the backend for AI to be able to support secure commerce and secure data transfer,” said McHale, “but also to keep the friction low for consumers, upfront, so that they don’t have to go through several authentication steps, or extra steps during their shopping journeys.”
AI, he said, also will wind up being a boon for payments orchestration as payment providers. Financial institutions (FIs) and acquirers seek the best ways to route transactions — using smart logic.
“Optimizing acceptance rates, fraud rates — and costs tied to fees,” said McHale, “are prime use cases for AI.”
The real-time analysis and smarter routing of transactions will be able to steer fund flows toward backup systems should a network go down. That would be an improvement over the procedures and processes in place today, where written rules typically govern routing, drop-down menus and workflow engines that merchants must manage within their platforms.
“As we go forward,” he said, with AI in the mix, payments and orchestration platforms will offer those merchants the ability to automate those functions.
Asked by PYMNTS about where limitations or concerns surrounding might be AI’s use in payments might lie, McHale said that when dealing with sophisticated modeling, “the solutions are perceived as a ‘black box.’”
The decisions made might not be clearly articulated to customers or merchants. He offered an analogy: The experience of swiping your card at the grocer’s kiosk only to be declined — with no knowledge as to why, and a text from the bank only deepens the mystery. In the age of faster and smarter payments, he said, “when a transaction is routed to a given gateway or something happens across an orchestration platform, transparency is going to need to be there … everyone needs context.”
Over the next few years, McHale said embedded finance would see a tailwind from AI as consumers, merchants and financial institutions (FIs) share data across open networks. AI and automation will help the financial services ecosystem navigate regulations and compliance issues that differ from region to region and between countries. Ultimately, commerce will be seamless for consumers.
“If they’re interacting with a merchant’s checkout page, consumers won’t have to know which of six buttons to click,” he said. “They can start to enter their payment method and the system can seamlessly identify what system their banking information sits on, route that accordingly and process the payments. Low friction and high conversions will also wind up being positive for merchants too.”
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