All the innovation in the world won’t change anything if it doesn’t meet the needs of the end user.
With expectations for convenience, speed, security and increasingly personalization of payments rising more than ever, innovation in the payments space is essential to integrate and deliver these benefits.
“The payments space is rapidly evolving in three dimensions across the entire value chain,” Kate Lybarger, head of payments innovation at Discover® Global Network, told PYMNTS, adding that it’s important to recognize that customer expectations are constantly changing and evolving, and to think about new and different solutions and experiences that meet those expectations.
“The possibilities and intelligence available today give industry-shaping trends like artificial intelligence a whole different life. [AI]open banking, embedded finance, etc,” she said.
The rapid evolution of the payments space means solutions must be ever-present, meet customer preferences with minimal friction, and deliver innovation at the heart of creating and capturing real value.
After all, as ice hockey player Wayne Gretzky once said, it’s all about “skating to where the puck is, not where the puck has been.” This metaphor also holds true when applied to the realm of payments innovation. Lybarger explained that while the focus on meeting new end-user expectations around seamless and secure payments is nothing new, the pace and variety of options available to consumers has increased dramatically.
As such, AI is emerging as a key tool for payments businesses to manage and stay ahead of the pace of change transforming payments, she said.
The Role of Artificial Intelligence in Payments Innovation
AI is not a new concept, and its various evolutions have influenced the payments landscape for decades. However, the accessibility of generative AI technology today has changed significantly with advancements such as OpenAI’s ChatGPT in 2023.
“The democratization of generative AI means that anyone with internet access can become a consumer, creator, and builder with this technology. The effort required to clean up data for AI use just isn’t there at the same level it was before,” Lybarger said. This widespread access is both exciting and daunting, as it opens up new opportunities for innovation but also brings new challenges.
“The large-scale adoption of generative AI is just the beginning of the maturity curve,” said Lybarger, noting that AI has the ability to “significantly reduce the burden on people in the payments value chain.” He cited Discover’s recent partnership with Google Cloud to use generative AI to improve customer experience by reducing resolution times in its customer care centers, showing how the technology is already transforming the payments landscape.
The journey to using AI in payments is closely tied to data and technology readiness. Technologies such as optical character recognition (OCR) have revolutionized the digitization of historical documents, making more data available to AI. However, the need for skilled talent that can develop and deploy AI solutions remains and is only growing.
And as Lybarger noted, AI literacy across competencies and functions is crucial. Organizations need to invest heavily in training and governance to ensure AI is used responsibly and ethically. With the rise of AI, concerns about security, ethical use, and compliance are inevitable. Lybarger emphasized the importance of developing AI models that manage bias, ensure transparency, and provide a level playing field.
Still, fraud prevention is a key area where AI can play a dual role as both a tool for fraudsters and a powerful defense mechanism, she added.
Embracing the Future of AI in Payments
The operational readiness to adopt AI and the specific impact it will have may vary across sectors.
Against this backdrop, Lybarger highlighted the difference between regulated and non-regulated industries: Regulated industries, such as financial services, must proceed carefully, ensuring compliance and dealing with different scenarios. In contrast, the non-regulated sector can move more quickly but must be held accountable by different stakeholders.
An interesting area for Lybarger to focus on is agriculture, where there is a wealth of data spanning decades. Using AI in agriculture can greatly improve productivity and sustainability. As Lybarger explains, “The volume of payments that happen within a seed being sold to a farmer, who grows the seed, who sells it to a processor, who sells it to a processor, all the way from farm to fork, is enormous.”
Looking ahead, Lybarger believes AI has great potential to transform the payments landscape. As open banking and other innovations mature, the collection and use of payments data will enable more personalized and efficient payment solutions. AI’s role will expand into operational and service-oriented applications, improving the experience for both customers and merchants.
Lybarger said Discover aims to work closely with retailers, acquirers and consumers to understand and address their needs and ensure its payment solutions are innovative and reliable.
As AI continues to evolve, the payments industry must navigate challenges including careful data management, technical readiness, and ethical considerations to harness AI’s full potential and ultimately create more seamless, secure, and efficient payment experiences that not only meet customer needs today, but also prepare for them in the future.
