9 ways AI is transforming the payments industry

April 15, 2024 12:02 PM

From the freshest entry-level employee all the way up to the C-suite, AI is changing the way people in the payments industry approach their jobs.

Generative AI is helping people communicate internally and speeding up product development. It's crunching large amounts of data to improve the supply chain. It's also helping retailers cut shrinkage and pitch the right products.

But AI also has the potential to eliminate certain roles, depriving companies of a crucial part of their talent pipeline. Here's how several payment companies and retailers are adopting AI to transform the way they do business.

From left: Cathy Beardsley, president and CEO of Segpay; Carolyn Homberger, president of the Americas for Featurespace; and Katie Whalen, head of North America issuer processing for Fiserv.

Marcy Vanegas

A career booster or a career buster?

Many companies are working to implement generative AI in ways that take over tasks typically handled by entry-level employees. Some of those workers might see this as a threat, but they could also become the technology's strongest supporters.

Rather than issue a top-down directive to adopt AI, managers can instead seek the buy-in of the very people who are most likely to be affected by the addition of AI, said Katie Whalen, head of North America issuer processing at Fiserv.

Of the 60 people whose role it is to service Fiserv's largest clients, the bank technology giant chose four to five individuals to pilot new uses for AI, Whalen said. Instead of seeing AI as a threat, these people came to "almost serve as evangelists within the broader organization," she said.

Whalen, one of American Banker's Most Influential Women in Payments for 2024, spoke with other honorees at this year's Payments Forum on the topic of AI in the workplace.

Fiserv's evangelists either raised their own hands for the role, or were nominated by their peers for their leadership skills and their enthusiasm for working with new AI tools, Whalen said.

"Getting those evangelists to … [become] early adopters and then kind of teach other people is really important because of the narrative that is around AI" automating or replacing jobs, she said.

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JHVEPhoto - stock.adobe.com

A mental-health aid for the call center

Discover Financial Services is using generative artificial intelligence from Google to simplify the way agents research and address customer queries in its contact center.

Using Google Cloud's AI development platform, Vertex AI, Discover summarizes policies and procedures for agents so they can quickly return answers to customers while on the phone, and enable real-time search for documents using natural language.

One major goal is to alleviate the mental load on agents so they can better focus on the customer. As digital banking has progressed, "The calls that customer service agents are getting today are the most difficult calls," Szabolcs Paldy, senior vice-president of operations at Riverwoods, Illinois-based Discover, said in an interview. "You don't call for your balance or to sign up for an offer."

In a separate use of AI in the call center, First Horizon is taking things a step further by using AI to intervene when it detects that the employee is under too much stress.

A well-designed algorithm could detect the signs that a call center rep is losing it and do something about it, such as send the rep a relaxing video montage of photos of their family set to music, the bank said.

First Horizon is using artificial intelligence and such video "resets" to bring a state of calm and well-being to the people who talk to customers on the phone all day. Down the road, it also plans to use a large language model to automatically summarize calls, a use case Ally Bank and KeyBank have adopted.

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Hollie Adams/Bloomberg

Doing more with less

Klarna, the Swedish buy now/pay later company, has been particularly outspoken about its intentions to let AI take over the work of human employees.

Klarna's CEO, Sebastian Siemiatkowski, has gone so far as to say the company would no longer hire staff outside of its engineering department because he feels that certain tasks outside of engineering can be done faster and more efficiently by AI.

One of those tasks? Customer service. In February, Klarna said its AI chatbot was doing work equivalent to 700 people — in a single month, the bot performed 2.3 million conversations, or 66% of Klarna's customer service engagements, the company said. It is on par with human agents in terms of customer satisfaction scoring, and has led to a 25% drop in repeat queries, which Klarna says makes the chatbot more accurate in query resolution.

The bot hasn't actually replaced 700 people, or even one, at Klarna, but that doesn't mean there isn't a human toll. Klarna works with several customer-service partners that collectively have more than 650,000 employees, and one of those — Teleperformance SE, a French call-center provider — saw a 29% drop in its share price when Klarna announced these figures.

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Giving workers a co-pilot

One of the easiest ways to implement generative AI is to use a so-called co-pilot, which handles the sort of tasks that would normally be delegated to a personal assistant.

The payment company Stax uses AI to create meeting transcripts and summarize key takeaways or to-do lists for those who either missed the meeting or were unable to take notes. "This removes barriers some may face when attending meetings about extremely technical subjects and facilitates a quicker understanding of company objectives," said Mark Sundt, Stax's chief technology officer.

"We have found that it increases productivity while saving time on day-to-day workflows and mindless tasks," Sundt said.

Separately, the digital payment company Tipalti embedded OpenAI's GPT-4 technology to bolster its AI capabilities for several activities. Auto coding analyzes the context of a purchase order, an invoice and a ledger tied to a payment to avoid manual coding. Another product, an AI-powered chat feature, also analyzes data to enable what the company refers to as an "intelligent assistant."

Sarah Spoja, Tipalti's CFO, likened it to the introduction of Excel in the mid-1990s, noting that many CFOs were resistant at first, but now every financial office runs on Excel.

"It can save time and find gaps," Spoja said. "There are a number of ways that this can be used."

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Fast-tracking development

New forms of artificial intelligence have raised the stakes in an already fierce battle between legacy payment companies and fintechs, placing pressure on IT teams to shorten development time.

To address this, Worldline, which is based in France and operates in more than 40 countries including the U.S., entered a strategic partnership with Google Cloud. The collaboration is designed to speed the next phase of Worldline's two-year-old "Go to Cloud" automation strategy, which includes spotting new uses for artificial intelligence.

"Tech development needs to be faster," said Marc-Henri Desportes, deputy CEO of Worldline.

Worldline will access Google Cloud's data analytics and AI to improve insights from Worldline's existing data to build new payment products, merchant services, streamline customer engagement and boost the use of low-carbon technology to expedite green strategies for clients.

Depending on the scenario, a year-long project time can be cut by six months by using cloud-hosted technology alongside AI and machine learning, contends Anthony Cirot, vice president of the EMEA South (Europe, the Middle East and Africa) for Google Cloud.

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Finding focus

As PayPal looks to recover from what CEO Alex Chriss characterized as a "lack of focus," the payment company is applying advanced data analysis and artificial intelligence to improve how merchants and consumers engage with one another.

The payment company introduced several new products for PayPal and Venmo in January. PayPal faces competition from other payment companies that are increasingly using generative AI and other advanced forms of AI for product development, marketing and customer service.

And like most financial technology companies, PayPal is charting a comeback following a two-year correction.

The products released in January include Fastlane by PayPal, an online checkout system that enables consumers to pay with a one-time passcode in a few taps. The checkout feature draws on consumers' past payment choices to recommend a payment option — acting as a payment facilitator. Materials provided by PayPal's public relations office and BigCommerce — which piloted Fastlane — show that e-commerce checkout conversion rate increased to 70%, up from a range of 40% to 45%, for BigCommerce's online seller clients.

"This will change how people shop and how merchants engage with them," said Chriss, during a video presentation. The updates are the largest to PayPal's app in about a decade, Chriss said.

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Reinventing retail

When Amazon began testing its Just Walk Out cashierless store internally in 2016 — then called "Amazon Go" — it needed to train the cameras and sensors to detect automatically when shoppers picked up an item and left the store with the intent to pay. But the concept was so new that it had no data to train with.

While the final design relies on machine learning — a different type of artificial intelligence than the generative AI popularized by ChatGPT — gen AI played a crucial role in the store's early development.

"What does it look like when a person takes an item off the shelf?" asked Jon Jenkins, vice president of Just Walk Out technology for Amazon Web Services, in an interview at the National Retail Federation's Big Show in January. "We used generative AI to create videos to feed into [a separate] AI system to train it to detect when people are taking things."

Amazon's checkout-free technology has since expanded greatly, and now has years worth of data to better train its systems. Changes based on real-world findings include the switch in some stores from asking shoppers to scan a payment card or Amazon app as they enter to asking them to scan when they leave with an item. "We don't want to require you to provide us payment credentials when you walk in, if you're just there to browse," Jenkins said.

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An AI shopping assistant

Walmart, a retail powerhouse that offers its own suite of financial services, already has experience with conversational AI through Ask Sam, a voice assistant developed for employees of its Sam's Club warehouses to help them navigate stores, look up prices, locate products and receive information such as COVID-19 updates. Office workers have access to a separate generative AI tool, called My Assistant, through the company's Me@Campus app.

The next step could be to make this AI technology customer-facing as an upgrade for Text to Shop, said Anshu Bhardwaj, chief operating officer for Walmart Global Technology and Walmart Commerce Technologies, in a fireside chat at the National Retail Federation's Big Show in January.

Text to Shop launched in its current form at the start of 2023. That system enables shoppers to manage a shopping list through their phone's texting app. It's not meant to be a consumer's primary tool for shopping at Walmart, but rather a way to stay connected when they can't use the company's website or stores. The system already uses conversational AI to understand customers' instructions, but it could do more, she said.

"What AI is now allowing us to do is going from an omnichannel retailer to becoming an adaptive retailer," Bhardwaj said. In the example of Text to Shop, that would mean adapting to consumers' immediate needs by allowing them to work with Walmart on their ultimate goal — such as throwing a birthday or a Super Bowl party — rather than just manage a shopping list, she said.

When a consumer is planning a party, they might know to buy snacks and drinks but might forget about decorations — or a larger TV to watch the big game. AI can suggest the entire package they need, based on what Walmart is able to provide and has in stock.

The value to the customer is that Walmart saves them potentially hours of research in determining what they might want to buy, or individually checking stock in stores, Bhardwaj said.

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Supply, demand and self-checkout

Sainsbury's is working with NCR to add AI to its SmartShop system, which allows shoppers to scan items as they grab them from the shelves so that they don't need to be scanned at checkout.

To cut down on potential losses due to shoplifting or other forms of shrinkage, SmartShop users agree to random and targeted rescans. AI can help reduce this pain point, said Clodagh Moriarty, chief retail and technology officer for Sainsbury's, at the National Retail Federation's Big Show in January.

"Being able to deploy AI in the way that we are talking about … will stop us rescanning customers who we now have a much higher confidence [that] we don't need to rescan," Moriarty said. "The benefit there is that you improve that customer experience for everyone whilst improving the overall safety and security."

Over the 2023 holiday season, Sainsbury's used AI in its supply chain for the first time to determine how many items any of its shops would need, and when they would need them, by analyzing 10 times the data that the company had previously been able to use. This led to a 2% improvement in product availability, Moriarty said.

That level of impact was "candidly, immense," she said. "And from a customer perspective, it meant that our customers weren't disappointed."

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