Imagine a world where your financial assistant - powered by artificial intelligence - understands your spending habits, emotions, and life goals.
With the help of edge computing and generative AI, this assistant provides a comprehensive and nuanced view of your needs, processing visual, audio, and behavioural data to offer personalised advice and proactively initiate transactions that align with your values and aspirations.
In this world, payments are more than just mere transactions; they establish emotional connections with customers. Cognizant's Future of Payments report highlights the potential for payment providers to use generative AI to offer personalized advice and tailor recommendations and experiences for individual customers. This technology can also create personalised rewards and loyalty programs, driving engagement and loyalty.
However, the potential of generative AI in payments extends far beyond personal finance management. Soon, we will witness the proliferation of machine-to-machine payments, enabled by AI-powered systems that can autonomously initiate and execute transactions. Picture a manufacturing plant where machines can independently procure raw materials and pay suppliers based on real-time inventory data and production needs.
As we move into this exciting new era of AI-powered payments, the future belongs to those who can harness the power of generative AI. By combining cutting-edge technology with human ingenuity and a commitment to responsible innovation, payment providers can create a world where financial services are more efficient, accessible, personalised, and meaningful for everyone.
Make hyper-personalisation real
As the boundaries between financial services and other industries blur, payment is becoming more than just a transaction: it’s an experience that providers should own. Gen AI offers a unique opportunity to create an emotional connection with customers, whether it is the excitement of making a purchase or the satisfaction of reaching a financial goal. Therefore, from being just a transaction, this becomes a cherished personal memory.
Across the world, super apps like Alipay, YONO, WeChatpay, Grab, or the upcoming X are gaining traction. Some of these started as banking apps, and others as purpose-built apps. Now, they are offering a one-stop shop for all customer needs, from shopping and entertainment to financial services and, of course, payments. These apps use AI to analyse customer data, such as spend history, and provide tailored recommendations and experiences.
Gen AI also empowers organisations to create highly personalised interactions in the language one is most comfortable with. Any person can harmoniously engage with any channel, 24/7 irrespective of their IT literacy - uplifting trust in IT systems.
Another exciting area is using Gen AI to create personalised rewards and loyalty programmes. By analysing customer spending patterns and preferences, AI can help payment providers and merchants create targeted offers and incentives that resonate with individual customers, driving engagement and loyalty.
Beyond that, payment institutions now have the opportunity to create smart payment systems that contribute to the public good. For instance, using Gen AI to trace everything in your shopping basket back to its origin – sustainability-conscious customers will love that transparency.
Run safe and efficient operations
AI offers the opportunity to rewire conventional methods and improve the efficiency of existing payment operations. For instance, it can be used to nullify fraud attempts and minimise false positives, like Visa’s announcement of a generative AI-powered fraud solution or Mastercard using Gen AI to protect its customers' information from the dark web. This capability helps protect customers and businesses from financial losses and creates a sense of trust and security in the payment experience. A risk and compliance assistant can review documents to highlight compliance needs.
Another helpful example of AI in this space is the ongoing monitoring of customer and merchant accounts to provide early warnings and signals based on transaction data and external feeds. Similarly, generative AI can be effective in managing card disputes. A dispute assistant for card issuers can help summarise a large amount of information – customer letters, emails, transaction records, and so on – recommend appropriate reason codes and advise on the chances of victory or defeat. An acquirer dispute assistant can help acquirers manage and automate the interaction and documentation with the merchants.
Gen AI also drives hyper-automation of payment operations, eliminating human-intensive repetitive tasks. It enables intelligent search to help employees find relevant information. Another use case is automating Invoice-Based Payment Initiation and reconciliation. This involves extracting payment info from paper invoices and emails, eliminating manual data entry, reducing payment delays and errors, and improving the overall experience and satisfaction.
Moreover, a combination of generative AI and blockchain can increase transparency, traceability and “auditability” of customer data, facilitating more robust compliance with regulations like anti-money laundering (AML) and know-your-customer (KYC).
Foster inclusion and expand stakeholder value
Financial inclusion is another area where generative AI could have a profound impact. By leveraging AI to analyse alternative data sources like mobile phone usage and social media activity, payment providers could extend financial services to the unbanked and underbanked populations, helping bridge the global economic divide.
Notably, generative AI will enable payment providers to help merchants deliver state–of–the–art solutions to their customers, especially smaller enterprises with limited expertise and resources. By leveraging AI-powered tools and platforms offered by payment providers, merchants can create highly personalised and engaging customer experiences without requiring extensive in-house AI capabilities. Consider how Stripe recently launched Sigma for merchants using generative AI.
This democratisation of AI will level the playing field, allowing small businesses to compete with larger enterprises in terms of customer experience and innovation.
Get ready for machine-to-machine payments
Machine-to-Machine (M2M) payments will usher in a new era for payment institutions as these systems will use AI to initiate transactions based on pre-defined parameters autonomously.
Imagine a future where your home seamlessly manages itself. On-device AI will allow devices to make intelligent decisions about resource usage. Based on peak/trough resource usage, machines select the best energy service provider (based on rates & other criteria), autonomously (after human consent) create agreements with machines in energy service providers and then trigger secure micropayments to save on interest costs.
M2M payments, powered by generative AI, will revolutionise supply chain management, streamline business processes, and create new opportunities for automation and efficiency. As more devices connect through the Internet of Things (IoT), the potential for AI-driven M2M payments will only grow, transforming industries from retail and logistics to healthcare and beyond.
Looking ahead, from autonomous financial advisors to intelligent fraud detection systems, AI has the potential to transform every aspect of the payment experience. As technologies like blockchain and IoT continue to mature, the opportunities for AI-driven innovation will only grow.
Steps to a generative AI-powered payments future
To thrive in the age of AI-powered payments, payment providers must embrace generative AI and develop strategies to harness its potential. Achieving this involves investing in the right data and technology infrastructure, building AI strategy and capabilities within the organisation, and fostering a culture of innovation driven by data and AI literacy.
One key challenge is – building trust in AI – ensuring AI’s responsible and ethical use, particularly regarding data privacy and security. Payment providers must implement robust governance frameworks and ensure that AI systems are transparent, explainable, and free from bias. This includes implementing strict data protection measures, regularly auditing AI systems for fairness and accuracy, and being transparent with customers about their data use. While some of these systems can be self-monitoring, a level of human intervention is required to ensure trustworthiness.
Another critical factor for success is collaboration and co-creation. Realising the full potential of generative AI in payments will require close partnerships between payment providers, merchants, and AI experts like Cognizant. By working together to identify the most promising use cases and ensuring that AI initiatives are aligned with business objectives and customer needs, organisations can drive meaningful innovation and create value for all stakeholders.
Gen AI talent: The missing piece in the AI puzzle
Technology is only part of the Gen AI equation. As AI transforms the payments landscape, organisations must also invest in training and upskilling their workforce to become AI-ready. This process includes technical skills, human science skills and a deep understanding of responsible AI practices, and ethical considerations. By fostering a continuous learning and innovation culture, payment providers can empower their employees to thrive in the age of AI.
As we move into this exciting new era of AI-powered payments, it’s clear that the future belongs to those who can harness the power of generative AI. By combining cutting-edge technology with human ingenuity and a commitment to responsible innovation, payment providers can create a world where financial services are more efficient, accessible, personalised, and meaningful for everyone.
Experiment to stay-ahead
Let us dare to imagine a world where payments are invisible and intelligently woven into the fabric of our daily lives, where financial services are genuinely personalised, accessible, and empowering for all.
By embracing generative AI, payment providers can adapt to the industry’s changing landscape and shape its future. As AI evolves and matures, we can expect to see even more innovative and transformative use cases emerge, from autonomous financial advisors to intelligent fraud detection systems. The key for payment providers is to start their AI journeys now, experimenting with different use cases and building the capabilities and infrastructure needed to scale AI across the organisation.
