How AI Will Chart the Future of Mobile Payments

by Tim Sloane 0

AI has already changed how we interact with mobile devices. Now we ask for directions and get answers to random questions. A large number of consumers ask our phones to buy and ship items to our house. Focusing on how AI can reduce fraud misses the real opportunities which Mercator identified here, here, and here. This article barely scratches the surface:

“Still, even with the likes of PayPal, Wal-Mart, Target, and other big players coming into the field, only about 22% of merchants accept mobile wallets as a means of payment. For many of these merchants, the mobile payments industry is still in its infancy, with issues such as security, information privacy, and other evolving elements standing in the way of adoption.

With artificial intelligence (AI), however, mobile payment platforms might soon feature among the top payment options for merchants and their customers.

AI has been the disruptive force behind many tech innovations within the fintech industry. The ability to process massive amounts of data and deliver insightful feedback has enabled fintech startups and other industry players to come up with solutions aimed at bringing down the barriers that have slowed the growth of mobile payment platforms.

Here are two major ways that illustrate how AI is leading the mobile payments revolution.

Reducing the fallout from high-risk mobile payment platforms

Fraud and the increasing number of chargebacks are among the leading reasons why most businesses and merchants often shy away from mobile payment platforms. Merchants, payment providers, and customers lose billions of dollars every year to online fraud. For instance, according to one LexisNexis report, retailers lost around $32 billion to fraud, with nearly half of all fraud attempts overpowering existing anti-fraud measures in 2014.

For AI and machine learning, this is one of the many areas where AI-based technologies show their potential. AI-powered fraud detection models can be used by mobile payment providers to sift through tons of transactional data, flagging suspicious transactions that match a predetermined fraud model.

Additionally, as the system collects more data, the machine learning algorithms can “learn” new patterns and help mitigate future risk with little input from human operators.

Many of these machine learning systems are already in use around the globe. For instance, there’s the Adaptive 3-D Secure platform from Simility that creates rule-based models for real-time transaction evaluations, enabling service providers to flag high-risk transactions, mitigate fraud, and reduce chargebacks.

There’s also Braintree, PayPal’s fraud-prevention tool that can authenticate high volumes of credit card transactions in milliseconds.

Better P2P Payment Platforms

In addition to fraud vulnerability, traditional payment systems have often been characterized by complicated processes that ensured most of the perks of online payment only benefited tech-savvy individuals. Like traditional banking and financial institution, payment providers also struggled to provide any semblance of customer service.

And then AI bots happened. Using advanced algorithms built around machine learning and natural language processing, AI bots are gradually disrupting the fintech industry, including mobile payment providers. At the basic level, AI bots are effective communication tools that enable customers to interact more efficiently with websites and mobile applications.

However, it’s when AI bots are coupled with traditional mobile payment platforms that the real magic happens. For instance, PayPal’s payments bot, released earlier this year, integrates seamlessly with Slack, Siri, and even Facebook Messenger, making it easy to make payments without leaving the app.

AI bots are also being used to make payments via text, which is hands-down the most accurate definition of mobile payments. For instance, you can use the AI-powered platform, Mypoolin in India to receive or send payments by simply using text messaging on your mobile device.

Bottom Line

There’s still a long way to go before we let AI-powered tools and algorithms control our financial systems. That said, AI is playing a huge role in transforming the mobile payments industry. Luckily for consumers, AI has received the attention of major players in the mobile payments industry, including the likes of Amazon, PayPal, MasterCard, and Google, whose involvement in this transformation may have a positive ripple effect throughout the industry.”

Overview by Tim Sloane, VP, Payments Innovation and Director of the Emerging Technologies Advisory Service at Mercator Advisory Group

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