Blog: COMMENTARY: Artificial Intelligence Should Be the Next Big Payments Push – Digital Transactions
When we think about artificial intelligence (AI) and machine learning, the first image that comes to mind might be a chess-playing computer or a driverless car. In addition to such futuristic applications, these cutting-edge technologies are already changing and enhancing many aspects of our day-to-day lives, including how we make purchases and protect our valuable financial information.
Consumers today are increasingly demanding more flexible ways to pay when they buy goods and services, from groceries to car washes. As a result, card networks and financial institutions have made enormous investments in developing lightning-fast and secure ways for customers to pay for goods and services, many of which rely on machine learning and AI.
Numerous technologies have already hit the market, such as biometrics, two-factor authentication, and tokenization. Contactless-transaction technology, such as Apple Pay, already allow consumers to simply tap their phones and go.
These technologies are changing the payments industry and have created new opportunities for payments technology to advance, benefiting consumers and businesses alike. They provide valuable insight into payments systems, and create a safer, more secure payment process.
For example, card networks such as Visa have utilized machine learning and AI to protect consumers from fraud. Similarly, Mastercard has also used predictive analytics to catch billions of dollars’ worth of fraud.
Banks and financial institutions have been quick to adapt to this new landscape, and more innovative products are just around the corner. Bank of America announced a $3 billion innovation budget to analyze trends and explore new financial technology, including AI software. Citibank made strategic investments in Feedzai, a company that utilizes machine learning to prevent fraudulent activity.
But that’s not all. The seven leading commercial banks in the United States have all announced that they are making key investments in innovation and financial technology to improve security and the customer experience, such as AI-powered virtual assistants at Wells Fargo and Bank of America, and powerful analytics tools for reading contracts at JP Morgan Chase. U.S. Bank even went as far as to create a new managerial position: Artificial Intelligence Innovation Leader.
But, financial institutions are just one piece of the puzzle. To stem the tide of hacking and data breaches, all institutions need to be forward in their thinking. Banks have strict legal obligations to adhere to certain privacy standards. If everyone who interacts with consumers’ money faced similar privacy and security requirements, consumer data would be far better protected.
When a data breach occurs, such as wide reaching instances like Panera Bread or Saks Fifth Avenue, the burden is put on the consumer to straighten out any fraudulent charges, change passwords, and get new bank cards.
Financial institutions expend enormous customer service resources helping those affected recover from a data breach every year. AI and other new technologies can make transactions safer and more secure, and could help stop data breaches if all parties would welcome them into their consumer-protection strategies.
The last time such a shift in technology took place was when merchants began upgrading their point-of-sale systems to accept chip cards. Now that most merchants have upgraded their POS technologies, research has found that, since the transition to EMV-enabled transactions, counterfeit payment fraud has dropped 82% for merchants who use EMV. AI is the next wave of payment technology, and could cause fraud cases to shrink further.
All stakeholders should keep pace with the evolution, because just as quickly as the technology develops, bad actors find ways to hack it. The rest of the industry should look to financial institutions when it comes to protecting consumers, because of the nimble approach they have taken to adapt to the challenges we face from criminal enterprises who scam and steal. If it takes an act of Congress to make everyone play by the same rules, it would be a welcome development in the payments space.
—Jeff Tassey is the chairman of the board of the Electronic Payments Coalition, Washington, D.C.