The Future of Payments: A Comprehensive Review of AI, ML, and Cloud Technologies in Finance

Abstract

The financial industry continues to evolve, specifically in payment processing. Payment processing is at the forefront of technological advancements, significant growth, and constant change. Companies desiring to grow their consumer base must remain current with trends and developments in payment processing. Payment processing has entered a new era of technology advancements inspired by AI, ML, and cloud computing, impacting operations and transforming businesses in today’s marketplace. The banking industry faces fierce competition from agile Fintech players that leverage technology to deliver services and new offerings faster and cheaper. Significant public sector funding catalyzed the growth of open and responsive payments ecosystems. Innovative combination models like Buy now, pay later (BNPL) and crypto-currency are springing forth, shifting risks from the lenders as well as intermediaries to the consumers, end-users, and providers. In blue-ocean areas such as e-Commerce, instant, cross-border payments, and digital assets, competition is not only intense, but the playing field is constantly growing and redefining itself. Vendors in on-and-off line electronic payments across different ecosystem parameters—service provider, regulation, traffic, payment format—have the latitude to partner or compete with each other, creating a complex environment defined by misaligned incentives on legacy systems, incomplete data, and bureaucratic inertia. On the other hand, irrespective of the payment type, frauds are nearing pre-global-financial-crisis levels, and direct losses are growing exponentially. Payment vulnerabilities translating into cyber risks and data breaches loom large, and hacking the supply chain has become a top concern for enterprises.

Federated Financial Institutions, Private Sector Players, Financial Data Exchanges, and RegTech will need to collaborate and invest in differentiated technology capabilities to secure their pieces of a slim pie. It would require immediate injections of cash upfront, time To Income (TTI) on legacy IT assets, acquisitions of technology providers, setting up scalable and proactive test environments, and a radical shift in the approach to assessing partners and vendors. Growing customer expectations for payments to flow instantly are forcing banks to intensify their innovation programs and invest in real-time payment systems. There are dedicated task forces at supervisors and regulators worldwide Engineering Distributed-control and Self-governed Payment Systems; Global Consensus Standardization of Payment Internet Protocols; and morphing payment systems into programmable platforms. Banks are even incentivized to capture new geographies and market segments by embracing Public Open Payment Protocols, Distributed-ledger Technology, and Edge-based Devices for Processing Payment Signals with control residing at the edge.