Real-time payments, known for their speed and immediacy, have faced adoption hurdles primarily due to perceptions about security. As financial institutions (FIs) and payments providers grapple with balancing rapid transaction processing with stringent security measures, artificial intelligence (AI) emerges as a crucial tool in overcoming these obstacles.
A recent PYMNTS Intelligence report, “Instant Impact: AI’s Role in Advancing Real-Time Payments,” in collaboration with The Clearing House, explores the evolving landscape of real-time payments and the critical role of AI in addressing associated challenges. It explores how AI technologies are integrated to streamline fraud detection, enhance customer experiences and accelerate the broader acceptance of real-time payment systems.
Real-time payments offer significant benefits, such as instant transaction completion and user authorization, but their adoption is impeded by perceived security risks. One concern is a heightened vulnerability to fraud, given the immediacy and irreversibility of these transactions.
According to a recent survey, 44% of organizations list increased fraud risk as a major obstacle, just behind system development issues. Manual anti-money laundering (AML) checks exacerbate this challenge, with 75% of financial institutions relying on outdated, labor-intensive processes. This reliance contributes to delays and perceived risks. There is growing recognition, however, that integrating AI could alleviate these issues, making real-time payments more secure and efficient.
Balancing rapid transaction processing with effective security is a significant challenge for payments providers, but AI is emerging as a key solution in this area. By automating identity verification and fraud detection, AI can reduce onboarding times, from more than 11 minutes to less than 8 minutes by 2028, translating to a 30% reduction. This efficiency not only improves customer satisfaction but enhances security by detecting fraudulent activities more accurately.
AI-powered algorithms analyze transaction patterns, identify anomalies and reduce false positives, leading to more accurate fraud detection and a smoother customer experience. PYMNTS Intelligence found that FIs are optimistic about AI’s role in managing these trade-offs effectively.
FIs are increasingly turning to AI to enhance their fraud detection capabilities. The adoption of AI and machine learning (ML) technologies is transforming how transactions are monitored and secured. A significant 94% of payments professionals view AI primarily as a tool for improving fraud detection. AI’s predictive analytics capabilities help identify potential fraud by analyzing user behavior patterns and transaction anomalies.
Beyond fraud detection, AI is used for personalized customer service and operational efficiencies. A 2023 FICO survey found that 77% of customers expect FIs to leverage AI for better fraud prevention, underscoring the growing demand for advanced security measures. AI’s ability to provide real-time alerts about suspicious activities further 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. As AI technology evolves, it promises to further enhance both the efficiency and safety of financial transactions.
