Real-time paymentsknown for their speed and immediacy, face implementation hurdles, primarily due to security concerns. Financial institutions (FIs) and Payment providers Find the balance between fast transaction processing and strict security measures, artificial intelligence (AI) proves to be a crucial tool in overcoming these obstacles.
A recent PYMNTS Intelligence Report, “Immediate impact: The role of AI in advancing real-time payments”, in collaboration with The Clearinghouseexamines the evolving landscape of real-time payments and the critical role of AI in addressing the challenges it presents. It explores how AI technologies are being integrated to optimize fraud detection, improve the customer experience, and accelerate the wider adoption of real-time payment systems.
Real-time payments face challenges
Real-time payments offer significant benefits, such as instant transaction processing and user authorization, but their adoption is hampered by perceived security risks. One concern is the increased vulnerability to fraud given the immediacy and irreversibility of these transactions.
According to a recent survey, 44% of organizations cite increased risk of fraud as the biggest obstacle, just behind system development issues. Anti-money laundering (AML) controls exacerbate this challenge, with 75% of financial institutions relying on outdated, labor-intensive processes. This reliance contributes to delays and perceived risks. However, there is increasing recognition that integrating AI could alleviate these problems and make real-time payments safer and more efficient.
AI creates a balance between speed and security in payments
Balancing fast transaction processing and effective security is a major challenge for payment providers, but AI is proving to be a key solution in this area. By automating Identity verification And Fraud detectionAI can reduce onboarding times from more than 11 minutes to less than 8 minutes by 2028, a 30% reduction. This efficiency not only improves customer satisfaction but also increases security by more accurately detecting fraudulent activity.
AI-powered algorithms analyze transaction patterns, identify anomalies, and reduce false positives, resulting in more accurate fraud detection and a smoother customer experience. PYMNTS Intelligence found that FIs are optimistic about AI’s role in effectively addressing these trade-offs.
Financial institutions use AI to detect fraud faster
Financial institutions are increasingly using AI to improve their fraud detection capabilities. The use of AI and machine learning (ML) technologies is changing the way transactions are monitored and secured. A remarkable 94% of payment professionals view AI primarily as a tool to improve fraud detection. AI’s predictive analytics capabilities help identify potential fraud cases by analyzing user behavior patterns and transaction anomalies.
Beyond fraud detection, AI is being used for personalized customer service and operational efficiency. A 2023 FICO survey found that 77% of customers expect financial institutions to use AI to better prevent fraud, underscoring the growing demand for advanced security measures. AI’s ability to provide real-time alerts about suspicious activity underscores its critical role in the future of secure and efficient payments.
AI is transforming real-time payments by improving transaction speed and accuracy while addressing security and fraud concerns. This advancement paves the way for wider adoption of real-time payment systems. The advancement of AI technology promises to further improve both the efficiency and security of financial transactions.
