BNY's Barker on what really concerns clients about AI and payments

• Key insights: BNY has invested in AI across its business, including payments, enabling intelligent routing and payments facilitation. 
• What's at stake: Fintechs have offered payments facilitation for years, but AI is giving banks a new way to compete. 
• Expert quote: "AI is a capacity creator. As our business grows you need more capacity to support growth. AI helps us bring more efficiencies." —Jennifer Barker, BNY 

People aren't that interested in real-time payments, or any other emerging transaction rail, but they do know if their money is received or sent accurately without any trouble, according to BNY's Jennifer Barker.
"Clients aren't concerned about how a payment happens," said Barker, the bank's global head of payments & trade and depository receipts. "Clients want their payments sent over the most efficient rail. A common theme is clients are most concerned with the outcome rather than what it is. They don't have to tell us which rail they want, whether that's real-time, FedNow, RTP or ACH, because we can help remove that operational burden."

Barker spoke with American Banker following a strong earnings report that included analyst praise for the role the payments unit is playing in the bank's success. Barker has helped lead several artificial intelligence initiatives at BNY over the past two years, which have positioned the bank to be a payments facilitator, or a way to automatically route funds that's become a key payments function as more digital options flood the market. 

Invisible payment

A payments facilitator chooses the best option for a transaction based on speed, channel or cost. Since faster processing costs more, not all payments need to settle instantly, and a payment facilitator sorts a user's basket of transactions based on desired processing times and what the sender is willing to pay in fees.

Payment and bank technology companies have sold payment facilitation for years, though the introduction of new forms of AI is making it easier for banks to provide the service in competition with fintechs such as Block, PayPal and Stripe.

The growth of digital assets as a way to improve processing for international payments adds another option for payment facilitators to consider.

BNY's Barker defines payment facilitation as a system in which clients don't have to determine the payment option as a set of preferences forms the basis for an automatic transaction decision. The bank has a single API connection that supports payment facilitation. As the number of payment options increases, payment facilitation becomes more complicated. "It's not just selecting the payment rail," Barker said. "There's fraud, smart routing and going through internal controls, as well as pre- and post validation."

It's here where AI comes in. 

AI can help sift through the different payment options and the client's parameters to quickly route transactions, especially as new forms of currency such as stablecoins and tokenized deposits become options.  

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"Digital assets are one piece of that solution. If you're a CFO you have many more options," Barker said. "It may be a fiat currency, it may be a tokenized deposit, a stablecoin."

There are several use cases within the payment facilitation model for AI, according to Phil Philliou, a payments consultant. One uses AI and machine language to compress merchant risk review from a manual, multi-system pull into an automated scored package that can be delivered in about 60 seconds, with approved merchants flowing straight into boarding at the processor. 

"The beauty of the PayFac model is that banks can monetize sponsorship at scale without owning tech," Philliou said. "AI is improving the underwriting/boarding process and preparing for how sub-merchants handle non-human-initiated transactions."

BNY's AI wave

BNY's work on payment facilitation comes as the bank deploys AI across most of its functions, with Barker leading the way in her department. For example, in payments operations, AI helps address multicurrency payment exceptions in real time and AI handles about 10% of payment exceptions. 

"AI is a capacity creator," Barker said. "As our business grows you need more capacity to support growth. AI helps us bring more efficiencies."

BNY has pushed AI across the company. CEO Robin Vince has touted AI's potential during calls with analysts, saying the bank has seen a return on its AI investments. And while BNY's headcount has fallen 7% over the past few months, the bank says it's continuing to invest in talent and has taken the position that AI will help companies grow and employ more people. BNY also reports AI has improved workforce management and increased average compensation."

People want to do more complex work, and have more access to clients," Barker said, noting AI is focused on more routine work. Analysts have given the bank's strategy positive reviews. JPMorgan equity analysts said BNY's overall growth has been highlighted by strong growth in its payments and trade units. And BofA Global Research wrote "the clarity of [focusing on] near‑term tactical stuff right while not taking the eye off long‑term strategy, including AI adoption and the potential migration of real‑world assets on‑chain, combined with strong execution is what sets BNY apart from many of its peers," BofA analysts said in a research note.