Artificial intelligence (AI) has transformed financial services in recent years and is poised to completely revolutionize the world of payments in the near future. With the ability to quickly analyze massive quantities of data to derive important insights and information, AI is used by businesses to create efficiencies and recognize patterns that can improve decision making. The average consumer may not even realize the many ways AI is already being used behind the scenes by the businesses interacted with every day, but as many lives continue to become more connected and more reliant on digital technologies and processes, its use is likely to only increase. This can bring many benefits, such as helping the financial industry fight fraud, deliver better customer experiences and create new efficiencies and conveniences when it comes to payments.
AI In Banking
AI has already made a tremendous impact on financial services. For example, many financial institutions are now using AI to better detect and stop fraud in digital banking channels. Account takeover and identity fraud cost financial institutions $16.9 billion in 2019 alone, due to the difficulty of adequately verifying and authenticating people in digital channels. So many people’s personally identifiable information (PII) has been leaked onto the dark web that fraudsters have all the information they need to open a new bank account or line of credit under another person’s name or take over an existing account.
To fight this, many banks have recently begun to leverage advanced risk analytics and fraud detection technologies that are powered by AI. With the help of AI to analyze data in real time, banks are able to identify suspicious activity and predict risk levels in-the-moment, in order to detect fraud as it is happening. In the past, banks could only look retroactively at a transaction after it had happened. They would flag it as fraudulent and write off the loss. Now, banks can use AI to analyze data streams from the user’s device, their behavior during the online banking session, the transactions themselves, the channels and business applications being accessed and more – in real time – to recognize fraud as it is occurring and stop it in its tracks.
AI In Investing
Financial institutions are also using AI to make better investment decisions and manage peoples’ wealth portfolios. The popularity of robo-advisors — AI-powered financial planning services that require no human supervision — has been growing rapidly in recent years. One estimate shows that by 2022 these fully automated, AI wealth advisors will be managing more than $4 trillion in assets for consumers around the world. Much more than just an algorithm-based approach to investing, AI-powered robo-advisors take into account a wide range of factors. These include the customer’s personal financial goals, their risk tolerance, their financial standing, budgets and spending habits, the current and predicted state of the market, time frame and more to identify the right asset allocations or automatically rebalance portfolios. Some can even handle complex processes such as tax-loss harvesting and retirement planning, all to keep customers on track to meet their financial goals.
AI-Powered Payments
Though AI has been growing a strong foothold in the broader financial services industry, it is only just beginning to be used in payments. Over the next few years, I predict further growth in the use of AI in digital payments, to the point where there is an entirely frictionless, checkout-free experience at any retail store or other location where you would normally encounter a point-of-sale (POS) system.
Consider the few test cases of Amazon’s cashier-less stores, only imagine that experience expanded everywhere, without being tied to a particular vendor or brand. By combining AI with other technologies such as digital cash, digital wallets and geofencing technology, which enables retailers to track when you enter and exit a store, you will eventually have the option to save your payment card information on file with any retail store for a checkout-free shopping experience. When you enter the store, the retailer will automatically recognize you based on your smart device. Anything you decide to purchase in the store will be automatically debited from your digital wallet or charged to the card on file and you will simply walk out of the store. The entire process will happen automatically, without any human intervention and without waiting in a checkout line or using a POS system.
As the use of AI grows, it will eventually become so good at understanding our consumer behavior that eventually a neural network is created that intuitively knows how you want to spend your money even before you do. For example, using geofencing technology in combination with AI, retailers and merchants can identify patterns in not only your online browsing behaviors but also where you physically travel every day. Parsing through massive volumes of data from your smart devices, your online sessions and your physical activities, AI can become eerily accurate at predicting what you want or need. Retailers can use that information to present you with hyper-relevant and personalized product offers at exactly the right moment — when passing by a store or contemplating making a purchase, for example. Combining the hyper-personalized ad with the option to autopay with the digital payment information on file creates such a seamless and convenient customer experience that it’s hard to resist.
These are just a few examples of the ways AI is transforming financial services and payments. As the world becomes increasingly connected and digital, you will likely see even more innovative examples emerge in the next few years. By analyzing data in real time, unearthing insights and identifying patterns that humans cannot, AI can create efficiencies that businesses can use to deliver a better customer experience. From protection against fraud to wealth management, to seamless digital payments, AI has the potential to power the future of financial services.
This article originally appeared on Forbes.
