The financial realm is on the cusp of a significant transformation due to generative artificial intelligence (AI), says global payment leader Visa.
This advanced technology could bring about faster fraud detection and protection in the payment process, enhancing the dispute management process to provide a better user experience. It could also automate financial advisory services and offer intelligent financial assistance.
In addition to AI, interoperability and embedded finance are exciting future trends in the world of payments, according to Kunal Chatterjee, head of innovation for Asia-Pacific at Visa.
Mr Chatterjee highlighted Visa's mission to provide the best experiences for consumers, businesses and governments while striving to be the preferred payment network for everyone, everywhere.
He referenced the famous science fiction writer William Gibson's quote, "The future is already here, but it's not evenly distributed," to emphasise that futuristic trends and payment innovations are already emerging in some regions, like Asia, while other parts of the world have yet to adopt them due to various reasons and preferences.
To address these disparities, Mr Chatterjee emphasised the need for interoperability across networks to ensure efficient payments for consumers and businesses.
Billions invested in AI
Visa has been actively involved with AI since 1993, and it was the first network to deploy AI-based technology to conduct real-time payment authorisations and risk-assessments for fraudulent transaction.
"We've made significant investments in AI. Over the past 10 years, we've invested roughly US$3 billion in AI," Mr Chatterjee said.
AI also plays a pivotal role in safeguarding the financial system. Visa recently published a threat report revealing that almost 460 ransomware attacks occurred worldwide in March, marking a 91% increase from February and a 62% increase from the same period last year.
To combat fraud, banks are actively seeking solutions that help them make better decisions when approving transactions. Visa Advance Authorisation, a risk management tool that gives a real-time risk score that helps distinguish good and bad transactions on the Visa network, prevented $26 billion worth of fraud in 2021.
Transforming Payment
Generative AI possesses enormous potential to revolutionise payments by enhancing security and convenience. AI powered by smart, real-time, heuristic-based configurations will be key, according to Mr Chatterjee.
"Generative AI will introduce increased flexibility. It will have the ability to move away from single-source data points and instead continuously learn and optimise the user journey for end consumers," he said.
For instance, in dispute management, it can be laborious for consumers to fill out forms for the entire process.
"Imagine a world where transactions are detected as fraudulent in real-time, automatically triggering the bank and initiating refund processes in the back-end. This is where the greatest impact will be felt," said Mr Chatterjee.
Banks could automate the relationship management aspects of wealth management and financial advisory services using generative AI. For example, if a bank knows that a customer has $50,000 in their account, they might inquire whether the customer would like to invest in stocks and bonds.
Generative AI use cases include automating front-end consumer services, whether payment or investment-oriented. Mr Chatterjee stated: "I believe this will be one of the ways to offer personalised intelligent financial assistance.
"Detection and prevention of fraud are other areas where we'll likely see significant action attributed by generative AI."
The Dark Side
Generative AI, like any other emerging innovations, carries inherent risks, where challenges related to data quality and biases are prevalent. The issue of ownership of AI-generated content raises concerns about intellectual property.
Misuse of generative AI can lead to harmful activities, necessitating effective governance to distinguish between good and bad actors. Misuse ranges from generating deep fakes and massive scams to money laundering, which can be detrimental to society and economies.
The opacity of AI decision-making, often referred to as the "black box," also presents challenges. Understanding the AI process is crucial for responsible use, as blind reliance on AI can lead to problems. Addressing these issues requires vigilant monitoring and governance, according to Mr Chatterjee.
"Generative AI is something we are actively testing in our processes to enhance our understanding of rules, improve payment servicing efficiency, and enhance transparency with our clients," he said.
"In a nutshell, AI enables our company to work faster and increases our productivity in areas such as payment processing, performance, payment approvals, risk assessment, and fraud prevention."
Key Metrics
The key metrics for Visa revolve around three vectors: making the payment network safer, more convenient, and faster.
"Another critical aspect we always aim to maintain is interoperability, ensuring that it applies to all payment methods and can seamlessly connect with commerce, people, and businesses," said Mr Chatterjee.
Visa's innovation approach focuses on human-centred design, seeking to understand how customers, whether individuals, banks, fintech companies or merchants, interact with solutions and the problems these solutions solve for them.
By prioritising the human experience, Visa aims to address the challenges and experiences that people encounter in their payment journeys.
"The goal is to innovate and create processes and payment journeys that empower users and reduce friction in the payment process," said Mr Chatterjee.
One of Visa's innovative efforts is in the area of embedded finance, which involves integrating financial services into non-financial platforms. This approach has significant potential and could lead to transformative changes in the financial industry.
Embedded finance is expected to unlock $242 billion in revenue opportunities across Asia-Pacific by 2025, with top use cases including lending, deposits, and payments.