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How AI and Machine Learning are Changing the Payments Landscape

28/06/2019

Payrailz has committed to bringing faster payments capabilities to its bank and credit union clients through the RTP network developed by The Clearing House (TCH). With the RTP network, and as a third party service provider (TPSP), Payrailz will enable financial institutions’ consumers and businesses to send, clear, and settle payments immediately while also providing for advanced messaging capabilities.

Mickey Goldwasser, VP of Marketing at Payrailz talks with InstaPay on the role AI and Machine Learning can play in payments.

Let’s face it: in today’s fast-paced world, people are busier than ever before, and more and more are turning to technology solutions to simplify their daily lives.

Technology has helped consumers young and old to automate their lives whether it be ordering food or groceries with a few clicks within an app on their mobile device or rerouting their commutes to avoid traffic or controlling the temperature of their homes hour by hour through the use of smart thermostats.

The same type of thinking holds true within the financial industry. Today’s consumers are demanding similar ways to automate and make managing their finances easier, faster and more efficient. This presents financial institutions with a unique opportunity to leverage new technologies like AI and machine learning to address this changing landscape.

Today’s “Do It For Me” Culture

Saving time has become more important than ever and consumers have come to value technology that addresses their inherent desire to eliminate routine tasks.

People have developed a “Do It For Me” attitude, in which they value the concept of having aspects of everyday life taken care of for them. Whether it be vacuuming, making reservations, driving, shopping, answering the door remotely or even delivering clothing or skincare through subscription services.

Moreover, the growing popularity and acceptance of smart devices and the services associated with them are a prime indicator of this trend, in which consumers are increasingly turning to technology to add value, by simplifying their lives. In short, they want someone, or something to do tasks for them.

Alexa and Payments

Smart digital assistants like Amazon Alexa or Google Home are one prime example of how people have adopted convenient technology to automate routine household tasks. Nearly half of Americans use voice assistants and adoption is growing. People clearly find value in these assistants because of their capabilities to easily complete tasks for the user, completely hands-free, allowing them to multitask. A family can nearly simultaneously play music, fact check a school paper, have a cooking timer running, turn on their lights and inquire about the weather using these popular devices.

These devices truly make our lives easier and this is can be especially true when it comes to managing one’s finances.  With this in mind, financial institutions need to consider carefully how their strategy for innovation incorporates these smart devices, particularly when it comes to making payments. Combining FIs’ use of security and fraud prevention and AI-based technology along with the digital assistants already in consumers’ homes will enable the financial institutions to offer smart payment solutions in a way that is more convenient than ever. By offering a balance of ensuring security and ease of use banks and credit unions have an opportunity to extend the reach of their services to their consumers while at the same time providing a great experience.

Using AI and Machine Learning to Build a Better Personal Banker

While there are many definitions of AI and it’s a broad conceptartificial intelligence can be loosely interpreted to mean incorporating human intelligence into technology solutions. In other words, AI can be used to simulate intelligent behavior to perform tasks that normally require human intelligence such as decision making or automating tasks. Machine Learning is a subset of AI and as the name suggests it can be loosely interpreted to mean empowering technology solutions with the ability to learn using provided data and then making accurate predictions.

 Through the use of AI and machine learning to meet real consumer demand, banks and credit unions can deliver a smarter, more predictive and engaging experience. An experience that consumers will value and make use of.

Since data drives AI and machine learning, and banks and credit unions have a wealth of data, they are well positioned to capitalize on the use of AI and machine learning in providing more automated and personalized service. With this being said, in order to improve the value of their service to consumers, financial institutions should look to AI and machine learning to enable them to provide a more intuitive, personalized and automated experience to their customers or members.

Financial institutions have long provided the services of personal bankers to high net worth clients. These personal bankers handled investments, paid bills, managed accounts and generally simplified the banking process. In essence they provided a “Do It For Me” type of experience.

Today, through the power of AI, financial institutions have an opportunity with the permission of the consumer to provide digital personalized banking services to any consumer, regardless of their net worth. Furthermore, these digital assistants do not go on vacation or keep specific business hours.

To create this personal banker type of experience, financial institutions can leverage the data that they have to take advantage of advances in AI to provide for a smarter holistic experience.  This technology bases its recommendations and interactions with the consumer on individual payment habits, patterns, recurring bills and, in essence, does the hard work for them.  AI can make recommendations in real-time to help users pay their bills or make other payments proactively as well as recommend how much they should save once their bills are paid.

A Better Smarter Payment Experience

When it comes to payments smart does make the difference. With all the changes in technology today, financial institutions are in a unique position to take advantage of new payment offerings, devices and user knowledge in order to provide a superior, more engaging payments experience. This experience should help consumers overcome common challenges and make financially wise decisions.

AI and machine learning can be used to analyze spending patterns, offer recommendations, automate payment plans and better manage the payment of bills.

As an example, AI and machine learning can offer smart recommendations based on the consumers’ behavior over time. Suggesting savings programs with higher interest rates following a bonus or tax return deposit, or offering a breakdown of monthly expenses, with notes indicating which expenses exceeded previous months’ budgets help improve consumers’ financial health over time. In doing so, they can attract new business and win consumers back from third-party payments tools and create deeper relationships with them.

In an environment where people rely on technology to make everything faster and easier, financial institutions have a golden opportunity.  And, with increased competition from fintech companies and other third-party payments providers, such as Venmo, PayPal and more, financial institutions can leverage AI and machine learning to help them to better compete with these players in order to retain deposits and consumers’ loyalty. Using technology like AI and machine learning to help users make smart and proactive decisions about A2A, P2P and bill pay and complete those transactions on the spot will enable financial institutions to better compete and meet the market’s needs of today and tomorrow.

Payrailz is a digital payments company offering advanced bill payment and money transfer solutions to banks and credit unions. An article on RTP adoption by Payrailz will be coming to InstaPay soon.

 Mickey Goldwasser is the VP of Marketing for Payrailz, a digital payments company offering secure, smarter more engaging and predictive payment solutions to banks and credit unions. For more information, please visit www.payrailz.com.

 

Author: Lauren Jones