Will Generative AI in payments accelerate financial institutions on their path to increased revenue and cost optimisation?

The zero-humility ChatGPT says yes and offers multiple proofs from McKinsey, Forbes, EY, and other analysts.

Even more reassuring, 54% of FSIs surveyed in EMEA, USA, and APAC are already embedding AI into their offerings or expanding their initiatives, and 61% plan to use Gen AI in 2024.

Artificial intelligence has been a notable driver in many industries for over a decade.

OpenWay, a provider of digital payments technology to banks, processors, national payment switches, and mobile wallet operators, found that clients are recognising the benefits of AI.

The rise of Generative AI in payments is transforming the sector significantly.

For instance, Nexi, the pan-European acquirer serving two million merchants, launched a project in 2021 to integrate machine learning into its infrastructure, enhancing its risk management, marketing, and operations.

Similarly, Enfuce, the fastest-growing CaaS provider in the Nordics, has highlighted AI-based scoring as a significant disruptor in consumer and SME lending.

Additionally, Network International, the leading processor in the MEA region, is enhancing its fraud prevention services with Mastercard’s AI-powered Brighterion platform.

This year, Gen AI in payments is among the hottest topics. For OpenWay’s client LOTTE, a consumer finance brand in Southeast Asia, Gen AI is one of the investment priorities for 2024.

Notably, Nexi predicts that in 2024, Gen AI will “create hyper-personalised solutions that will enhance the shopper experience.”

Removing the barriers to leveraging Gen AI’s full potential in Payments

Gen AI embedded into a digital payments infrastructure is like a high-performance computer in a racing car. To optimise acceleration, it needs data from multiple sensors.

To ensure an optimal trajectory, the wheels must respond predictably to its commands. But financial institutions name “data quality and access” and “too much complex infrastructure” as top barriers to delivering more value from Gen AI.

To overcome those barriers, Gen AI needs a payment processing platform with powerful data management and a 24/7 online front- and back-office.

This is the exact architecture of the Way4 software platform, top-rated by Datos Insights, Juniper, and Gartner.

Way4 instantly analyses customer and transaction details, both incoming and historical, and streams the consolidated data to AI in real time.

Moreover, when Gen AI proposes enhancements to a product, risk rule, or customer service scenario, Way4 can implement these requests instantly.

Instead of hard coding, Gen AI can configure new payment offerings using flexible parameters.

Approximately 95% of product features in Way4 are parameterisable, compared to just 30-40% offered in competing systems.

Combining Generative AI and innovative payments engine – 4 promising use cases

Based on its clients’ best practices, OpenWay has identified four areas where the combination of Gen AI and an advanced payment processing platform delivers maximum benefits.

1. Rapid creation and easy testing of new products

Product managers use the flexible rules in Way4 to create unique payments products in the areas of issuing, acquiring, switching, wallets, BNPL, digital currencies, and more.

Trained by the manager in a co-pilot mode, Gen AI can automate many steps in product configuration and enhance pricing, loyalty programs, value-added services, and other elements.

2. Optimising costs of customer service

When a customer makes a request, a Gen AI chatbot begins exchanging rich data with Way4. It enables Gen AI to quickly resolve the reported issue and even offer new personalized products or services to the customer, requesting Way4 to create the new contract instantly.

For instance, if a customer is going on a trip abroad, Gen AI can make Way4 transfer funds between bank accounts in different currencies or issue a virtual multi-currency prepaid card.

3. Enhanced risk management

During transaction monitoring, Gen AI analyses vast amounts of customer and transaction data from multiple systems.

By continuously learning from new data, it improves its detection algorithms and reduces false positives.

After receiving a newly calculated risk score from Gen AI, Way4 adjusts its authorisation scenarios in real-time.

4. Discovering strategic opportunities

Gen AI can identify new revenue opportunities for the payments business by leveraging the rich data in Way4, including Level 2 and 3 data.

Way4 captures information such as shopping cart contents and applies various purchase restrictions and incentives instantly. Gen AI can identify which government agencies or non-profits may be interested in this functionality and generate targeted proposals.

Additionally, Gen AI can also analyse customer feedback, spending patterns, and emerging lifestyle trends to suggest improvements to the existing products.

For example, if a new travel destination becomes popular, Gen AI can prompt Way4 to add another currency account to an existing card.

This highlight how Gen AI in payments can transform various aspects of the financial industry.

The Future of Generative AI in Payments

If these and other potential use cases were fully implemented in the banking industry, Gen AI could deliver value equal to an additional US$200 billion to US$340 billion annually, according to McKinsey.

By partnering with OpenWay on Gen AI-enhanced payment projects, organisations can position themselves to capture a share of this lucrative market and secure early-innovator revenue streams.

Read more about OpenWay’s Gen AI digital payments use cases here. 

Featured image credit: Edited from Freepik