5 ways AI is changing the future for payments
Every time you receive a personalised recommendation on your favourite streaming platform, use Google maps to calculate the fastest route somewhere on the basis of traffic density or communicate with your digital ‘personal assistant’ you’re making use of Artificial Intelligence (AI).
Many of the items you order online will have been manufactured in facilities which make extensive use of AI to keep their production lines running seamlessly and the fact that you can enjoy next day delivery is thanks to AI-driven logistics platforms which have transformed ecommerce in the way that Uber and Airbnb have transformed taxi hire and holiday lets, respectively.
The retail sector has invested more heavily in the AI revolution than any other. According to Mordor Intelligence, AI in the retail sector was worth $1.80 billion in 2020 and is expected to rise to $10.90 billion by 2026. This is a compound annual growth rate (CAGR) of a stunning 35%.
The drive to invest in AI is driven, more than anything else, by a desire to improve the customer experience. This is coupled with the potential which AI has to improve efficiency and drive down costs.
According to a study undertaken by IBM, 85% of retail companies plan to have incorporated AI into their supply chain planning by 2021, while 79% will be using it to enhance customer intelligence.
One aspect of retail which is bound to be impacted by the ever-more pervasive influence of AI is the delivery of payments.
As experts in delivering payment systems for our clients we take great pride in remaining aware of all and any trends within the industry and ensuring that our clients and their businesses keep up with the demands of their customers.
We’ve written in the past about the need for merchants to remain fully aware of changes such as the switch to Payment Services Directive 2 (PSD2). While the influence of AI is something which may be slightly more nebulous in nature, it is still going to have a huge impact on the way merchants deal with payments.
These are just a few of the ways in which AI is changing the landscape:
AI can be used to gather specific detail on the payment history of each and every customer. This data, once gathered, can be used to personalise the experience of the customer as they work through the sales funnel of a business.
The most obvious use of this data will involve suggesting future purchases on their existing shopping history, but it can go further. AI might, for example, be used to suggest alternative payment methods at the checkout stage, targeting users with cards which offer a better interest rate, for example, or platforms which are running promotional campaigns involving price cuts.
AI will be able to transform the act of paying itself from a simple transaction into an opportunity to pull together a range of omnichannel platforms, and assets such as the Internet of Things and open banking in order to deliver the ultimate customer experience.
One issue which all retailers will recognise is the negative impact which an overly complex payment platform can have on their sales figures. Complicated checkout processes – such as having to register with a merchant before being allowed to move through to the actual payment – are responsible for huge numbers of abandoned carts as shoppers decide to go elsewhere and make the same purchase from a merchant who enables simplified payments.
AI will play a part in creating software which embeds payments within the shopping process at the touch of a button, with security built in via the data being gathered at every step of the process.
Multiple Payment Channels
AI will enable the creation of multiple payment channels across the whole range of a shopper’s devices and locations. The latest smart cars, for example, have systems which enable drivers to make payments for things such as fuel, parking and drive through purchases without leaving the vehicle or having to interact with the merchant directly.
This demonstrates how the Internet of Things will come to play an increasing role when payment channels are being designed and integrated within a business, but the development also includes a role for social media.
Platforms such as Facebook and Instagram now have checkout buttons which enable users to make purchases or send money, for example, and the next few years are likely to see major banks rapidly expanding the number of payment options they work with.
Choices customers will come to expect will include Pay By Text, virtual payments and interactive voice response, and merchants will have to ensure that their payment provider is up to the challenge.
The trend for digital wallets is fuelled by two things. Firstly, the fact that virtually every potential customer now carries a smartphone capable of performing the role of their bank account in their hand, and secondly the convenience of not having to fish around in a wallet or purse for a small plastic rectangle whenever a payment is asked for.
The tech giants are keenly aware of the potential for growth in this area and Google, Amazon and Apple have all set up their own digital wallets. AI plays the key role of ensuring that payments made using these methods are as secure as any made using cash or technology such as chip and pin were, and payment giants like Visa and Mastercard now also enable seamless contactless payments.
The global economy is one which is based on the ease with which consumers in one country can trade with merchants in another.
In the past, this was a slow and cumbersome process, held back by issues such as the use of hard currency, differing regulatory regimes and, in many cases, the need to have a physical bank account in both territories.
The latest payment methods have streamlined this process and made shopping globally every bit as simple as shopping locally. In the future, the growth of blockchain, which creates a highly secure record of each transaction which can’t be altered in retrospect, will make the creation of more virtual currencies extremely likely. Any merchant wishing to stay on top of global payment trends will have to be aware of the growth of virtual currencies and of the fact that more and more customers are likely to want to take advantage of their security, flexibility and privacy, particularly for cross-border purchases.
The impact of AI on the future of payments is likely to be huge, and will prove to be massively damaging to any business which isn’t able to keep up with the pace of change. Customers who see how AI is transforming aspects of their life such as how they drive or access entertainment will expect the same levels of choice, flexibility and ease of use when they make a purchase. Even if customers are not consciously aware of the role that AI might be playing on their purchasing journey, they will expect your business to deliver. The good news for those businesses which work with NOIRE is that we can make sure that happens.
NOIRE Looks to the Future
At NOIRE, we know what’s coming around the corner so that you can deliver the best possible experience for your customers. If you would like to know more about the developing world of payment technology and get ahead of your competitors, then get in touch with us today.