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Long an obsession of science fiction writers, “artificial intelligence” in the modern era of fast-paced technological innovation is a term that is as ubiquitous as it is nebulous. For the payments technology industry, however, the term describes advanced analytical technology that has an outsized potential to improve the payments ecosystem for banks, payments processors, merchants and consumers.
In fact, financial services companies will spend US$11 billion on AI in 2020, according to an analysis by IDC — more than any other industry cited.
They’ll stand to make a nice return on their investment as well, according to PwC estimates. In North America alone, AI is projected to increase the GDP of the financial and professional services industry as much as 10 percent by 2030, driven by increases in both productivity and consumption.
No industry realizes the impact of AI more than payments. Payments technology companies were the most likely of all the banking sectors surveyed, to be using AI technologies in their operations, Consultancy.uk reported in 2017. More than eight in 10 payments divisions — 84 percent — reported using AI in 2017. That was nearly 20 points higher the next most popular sector, IT, and 44 percent higher than the third most popular, finance and accounting.
The potential for growth in this sector — from payments companies and tech companies to banks, retailers, etc. — is staggering. The AI market worldwide is set to achieve year-over-year growth exceeding 150 percent through this year, and it will continue to grow, with projections forecasting 127 percent year-over-year by 2025.
With such high expectations for the technology in payments and in myriad other industries, what will AI actually mean for consumers and merchants? What types of problems do payments technology companies and financial institutions expect to solve by deploying AI and other similar technologies?
Fighting Fraud Intelligently
The eternal struggle of the payments industry is to protect and secure the ecosystem from criminals bent on causing financial harm through theft and fraudulent charges. No industry is as committed to the fight than payments companies. They’ll invest more in advanced fraud detection and prevention technologies in the coming years than any other industry, according to Juniper Research.
After all, consumers are never liable if they’re made the victim of fraud through their electronic payments, so it is in our industry’s best interests to be aggressive and vigilant in fighting fraud in order to reduce losses.
We’ve done just that. Following the rollout of EMV cards — the “chip card” as it’s commonly known — counterfeit card fraud at brick-and-mortar retailers has declined by 80 percent, according to Visa. The volume of overall card fraud on card-based payments worldwide also declined in 2018 over 2017.[…]