Exploring the Impact of AI on International Payments

Posted on the 17th February 2023 by Hamish Anderson in Business, Founders' blog, Founder Insights

Interest in artificial intelligence (AI) has stepped up a notch in the last few months as ChatGPT has burst onto the scene. The natural language processing tool created by OpenAI has done what flying cars and hoverboards haven’t (yet). It’s here, it’s usable, and it’s poised to replace a large portion of the workforce. So I decided to take a look at how AI has already become an integral part of the global financial system and what the future holds. As the world becomes increasingly connected, the impact of AI on making international payments, managing fraud, and detecting money laundering will be significant. 

Improved Speed and Accuracy

One of the primary benefits of AI in international payments is its ability to process payments faster and more accurately. With traditional payment processing systems, transactions can take days to complete, and errors can occur due to manual data entry. AI, however, can quickly process large amounts of data and automate the payment process, reducing the risk of errors and increasing the speed of transactions.

AI-powered payment systems can also use predictive analytics to detect potential issues before they occur, such as insufficient funds, incorrect account information, or potential fraud attempts. These measures help to avoid payment delays and ensure that payments are made accurately and on time.

Reduced Fraud and Cybercrime

Given the complexity of cross-border transactions and the number of parties involved, international payments can be vulnerable to fraud and cybercrime. AI can assist firms detect and prevent fraud in many ways, including:

• Identifying suspicious transaction patterns: AI can analyse vast amounts of data to identify patterns that may indicate fraudulent activity, such as unusual transaction amounts or frequencies.
• Predictive analytics: AI can also use predictive analytics to identify potential fraud risks before they occur by examining historical data and identifying patterns of fraudulent activity.
• Behavioural biometrics: AI may even use behavioural biometrics to verify the identity of the person making the transaction, such as analysing keystrokes, mouse movements, and other human patterns.

These technologies can help to reduce the risk of fraud and cybercrime, making international payments even more secure for customers and the provider alike.

Improved Compliance

International payments are subject to strict controls and regulatory requirements, including anti-money laundering (AML) and know-your-customer (KYC) rules. AI is already used to improve the compliance process by automating transaction screening against AML and KYC regulations and by flagging breaches and exceptional transactions for human review.

In the future, AI will be leveraged to streamline compliance by automating the collection and verification of customer data, reducing the risk of human error and ensuring that required data is collected accurately and consistently.

Improved Customer Support

Relatively unsophisticated chat bots, which draw from a limited, curated pool of data and resources to simulate a basic conversation with human users, are already in use with many financial services businesses. Most of us will have encountered one when trying to access customer support on a banking web application, for example. In their current state of development, these are little more than automated FAQs and all but the most simple interactions terminate in referral to human customer support.

Using ChatGPT, with a significantly more sophisticated language model and access to banking systems and a much wider pool of data, there would be little or no need for recourse to human customer support.

The Future

As AI continues to evolve, we are likely to see even more innovative applications in cross-border payments. For example, AI could be used to automate currency conversions and optimise exchange rates, improving the speed and accuracy of international payments even further.

We may also see the development of new AI-powered payment methods, such as voice-activated payments or biometric payments, which could provide even greater convenience and security for international transactions.

In conclusion, the impact of AI on international payments is significant and continues to evolve. From faster and more accurate payments to improved fraud detection and compliance, AI is transforming the way we make cross-border transactions. As AI continues to advance, we can expect to see even more innovative applications in the field of international payments, further improving the speed, security, and convenience of global transactions.