According to the latest edition of an annual study of global payments, non-cash transactions grew at 11.2 percent in 2014-15, the highest in a decade to reach 433 billion. Emerging Asia, growing at more than 43 percent, and Central Europe, Middle East and Africa, growing at 16.4 percent, were at the forefront of this spurt.
Meanwhile in India, Finance Minister Arun Jaitley announced in his budget speech a target of 25 billion digital transactions for FY 2017-18. Unified Payments Interface, USSD, Aadhaar Pay, IMPS and debit cards – constituting the basic mechanism that will carry these transactions, will be hugely instrumental in providing easy access to digital payments to millions of Indians. However, another technology, namely artificial intelligence, will also play a role in digital payments by bringing about innovative offerings and great customer experiences.
“Apart from analytics and artificial intelligence, Blockchain (and other Distributed Ledger Technology) will be the third force in digital payments.”
The potential economic impact of AI is estimated at a USD 15.7 trillion contribution to global GDP by 2030, where USD 6.6 trillion will come from productivity gains and the remaining from consumption effects. Most certainly, some of that will link back to digital payments as well.
But a precondition for successful AI is a strong foundation of transaction data and analytical insight. In a rapidly digitizing India (and especially thanks to demonetization, which bumped up cashless payments overnight) transaction data is abundantly available. However, that has not translated into abundant insight. Our banks may possess the latest technology and analytics platforms, but are far from exploiting it to the fullest.
Non-banking technology companies with digital payment aspirations are way ahead in this department. An exemplar is Google, which has poured its insight about users’ search and transaction behavior, needs and pain points, into Google Tez, a new payment solution it has specially created for India. Realizing that customers were using a multitude of payment mechanisms, and paying interconnect fees and other commissions at every stage, the company hit upon an idea for a simplified digital payment solution that only needed an app and the UPI infrastructure (an open source stack that ironically, was supposed to serve commercial banks) to work.
“ Where AI will offer prediction and personalization, and analytics customer knowledge, Blockchain will provide the infrastructure to conduct digital payments safely, transparently, cost effectively, and in real-time, at scale.”
Banks should learn from this incident to extract better analytical insights from their own data and combine that with AI applications based in machine learning, deep learning etc., to create innovative and personalized products and services. Not only that, they must also use the power of AI to perform analyses that are beyond human capability to understand and manage payment transactions more efficiently and pass on the benefits to their customers. If they fail to do so, they will play right into the hands of their new age rivals, who are simply waiting for an opportunity to pounce.
Apart from analytics and artificial intelligence, Blockchain (and other Distributed Ledger Technology) will be the third force in digital payments. Where AI will offer prediction and personalization, and analytics customer knowledge, Blockchain will provide the infrastructure to conduct digital payments safely, transparently, cost effectively, and in real-time, at scale. Therefore banks must also include Blockchain in their payments agenda to ensure they present a complete and consummate offering to their customers.
The author is Associate Vice President - Finacle Product Strategy.
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