The traditional methods of banking transaction have been taken over by more agile, hassle-free digital transactions. According to a world payment report by Capgemini/RBS, global non-cash transactions reached a staggering 482.6 billion during 2015-2016, and it is expected to record a CAGR of 12.7 percent during 2016-2021. This significant growth in the volumes of transactions requires banks to adopt innovative and efficient methods for smooth and error-free operations.
Artificial intelligence (AI) technology has become one of the most sought after technology by industries for its ability to enhance the business processes and applications. AI technology can also be a viable option for banks, as it enables customers to buy goods and services through services such as digital assistants or recommendation engines that run on machine learning (ML) technology.
The exponential increase in the number of digital transactions has resulted in some unavoidable risks, making way for cybercriminals to attempt digital-payment frauds. The current processes of fraud prevention and know your customer (KYC) is not sufficient to handle the volume of digital payments expected in the near future. Cybercriminals pounce on the smallest of a loophole in the security of banks.
The present fraud detection system of financial companies rely mainly on rule-based and manual methods to spot criminal activities by monitoring a range of variables, such as geographical location, type of merchant, and the amount being spent. For example, banks can flag an activity as a fraudulent transaction if a customer spends more than usual amount with an unfamiliar merchant at a location which is never visited by them. This creates problems as sometimes people tend to spend more if they are on holiday. AI tools can help the payment processing industry by reducing risks, offering customized services based on the requirement of a customer, and most importantly in fraud detection and prevention. AI tools can also spot connections and behaviors as part of the KYC process, allowing banks to process larger volumes of data efficiently in real-time.
Check out: Top Artificial Intelligence Companies.