Artificial Intelligence (AI) in digital payment systems is reshaping the payments industry in an era of quick technological transformation. From better fraud detection to more efficient transactions, AI is changing the way of payment processing.
Peko Wan, Co-CEO of Pundi X, a provider of blockchain-based point-of-sale (POS) solutions that enable retail stores to accept crypto payment with AI-powered solutions, has discussed how AI is transforming digital payments, the pros and cons of using AI in payments, Pundi X mission in the digital payment industry and other key Fintech trends.
Our discussion with Peko Wan is shared below.
Crowdfund Insider: Has the growth in Digital Payments been adequate? What could have been better?
Peko Wan: The growth in digital payments has been satisfactorily steady. Available figures suggest a little over US$3.5 trillion in 2017. By 2023, it had crossed US$10 trillion, and market researchers estimate it will cross US$16.5 trillion by 2028. However, the projected CAGR from 2024 to 2028 would remain under 10%. Moreover, the global payments industry size for 2023 accounted for US$1,800 trillion in value. Undoubtedly, there is immense scope for growth, both in terms of the size of the market and the rate of growth.
If you ask me about the bottlenecks, there have been quite a few. Higher transaction fees, challenges with maintaining data security, privacy, and integrity, and the lack of digital literacy among a large section of people worldwide, who also remain severely underbanked, are among bottlenecks that will appear at the top of my list.
Crowdfund Insider: How do you think AI has contributed to digital payments so far?
Peko Wan: There is no denying that GenAI has emerged as one of the most decisive technologies of our time. If we measure its impact by numbers, it has been explosive, to say the least.
However, the impact of AI cannot be fully understood by only looking at the market numbers. Its cascading impact across industries creates an effect that ripples far beyond the financial figures.
In the global payments industry, the reach of AI can almost be termed ubiquitous. From marketing to sales, customer onboarding, payment processing, and reconciliation to the streamlining of operations, grievance redressal, and customer support, the presence of AI has enriched every stage of the process life cycle.
According to our report, “The State of Artificial Intelligence in Crypto Payments,” users realize the value in AI and are willing to pay for AI services in crypto payments. More than 54% of our survey respondents believed that AI was beneficial, indicating a growing recognition of AI’s potential advantages in the financial landscape. 21.83% were willing to pay a fee based on the transaction, while 30.33% preferred a subscription model.
If you ask me about the application of AI in the core areas of digital payments, I would say it plays a significant role in detecting fraud and managing risks. It helps find optimized payment routes and makes conversational payments a reality. It goes even deeper when you look at the post-payment phase, where it enhances automated data parsing and reconciliation processes, adding value to the established mechanisms of exception handling, compliance, and reporting.
Crowdfund Insider: Crypto or virtual asset payments are a major component of digital payments these days. How do you see AI’s role in it?
Peko Wan: Crypto or virtual asset payments are expanding fast like never before. Looking at its potential, the scope is limitless. It has made digital transactions easier, trans-global, and low-cost. The ultimate aim, however, is to eliminate extra costs by cutting out cost-bearing middlemen who tend to monopolize the system unnecessarily.
Our report suggests a strong willingness to adopt crypto payments, with 30.17% of respondents indicating they have used such methods and 64% of respondents indicating they are likely to adopt or continue using them.
Now, one cutting-edge technology paradigm, like blockchain and crypto, should embrace another paradigm-shifting technology of our time: Artificial Intelligence. This integration is already underway. AI is helping crypto payments become more efficient and trustworthy by helping to detect fraud, identify anomalies, and combat suspicious activities in real time. Voice-based transactions and chatbots, technologies that draw heavily from AI, have made user experience better and enhanced customer satisfaction standards.
Biometric authentication techniques—like facial recognition, fingerprint scanning, and voice recognition—have made mobile crypto payments more secure. AI has also streamlined processes like KYC, which otherwise took a lot more time and resources.
The only way forward is to create an optimal synergy between technologies like Blockchain and AI to make the world of transactions and payments faster, more efficient, and beneficial for all.
Crowdfund Insider: How can AI support the integration of alternative payment methods, like virtual assets, into mainstream digital payment networks?
Peko Wan: Over recent years, crypto adoption among the population has risen dramatically. However, its use as a popular payment system has not progressed as much. This lack of integration of virtual assets into mainstream digital payment networks is due to concerns about risk, anonymity, and compliance.
Here, AI can help improve AML and KYC compliance—requirements for mainstream networks when integrating alternative payment methods—by identifying patterns in transactions and detecting fraud, thereby improving security.
AI can further assist banks and financial institutions, which are still apprehensive of crypto, by assessing risk in real-time for users adopting digital assets. Additionally, AI can accelerate integration by optimizing transactions for speed, scalability, and cost savings while also providing more personalized user experiences.
However, it is worth noting that AI itself is facing the threat of centralization. And for effective integration, we must ensure that, in the coming years, AI data and development remain open, decentralized, and accessible to all. It is essential to foster an interconnected ecosystem between AI and blockchain, enabling developers to efficiently create, secure, and trade AI data assets on-chain—thus preventing large corporations from monopolizing AI data.
We must remember that the true purpose of decentralization and AI is to make the world more democratic, equitable, and inclusive. The benefits of digital payments should reach everyone, especially those in emerging or developing economies where digital literacy is still growing and infrastructure remains nascent. Continuous innovation in this field will help us collectively achieve this goal sooner than we might imagine.
Crowdfund Insider: What do you think are some of the key challenges and ethical considerations that the digital payments industry will face as AI continues to advance?
Peko Wan: While AI will significantly improve the efforts to detect frauds, preemptively reduce its scope, and minimize human error, data privacy, integrity, and security concerns are likely to persist, at least in the foreseeable future.
The successful application of AI in digital payments will require feeding algorithms with large volumes of data. In the rush to make perfect AI in a short span, especially in today’s neck-breaking competition, companies might resort to unauthorized data access, resulting in breaches and other forms of data misuse. Additionally, AI developers must account for historical biases that could inadvertently enter the systems they build. If not dealt with caution, such biases may perpetuate discrimination.
Tackling these challenges will require companies to establish clear-cut AI integration and usage policies. These strategies must address multiple aspects, including data and cybersecurity, regulatory concerns, and knowledge gaps.
While tackling these challenges would require the deployment of resources, businesses must remain mindful of implementation costs to ensure AI in digital payments does not end up becoming prohibitively expensive for everyday users.