New Revenue and New Risk, In a Payments World Powered by Partnerships

“Most banks get it.” That was the finding of this year’s Accenture study on Banking Technology. They conducted a survey where 79% of North American banks agreed that that AI will “revolutionize” the way that banks and customers interact.

Now that most banks are seeing immense value from using some form of machine learning to power back-end processes like fraud detection, we’re seeing a shift in AI from the back office to the front office. AI is beginning to power every touchpoint along the customer journey, from marketing to sales to service, and 2017 is the year of this transition.

A new way to pay is born

Yesterday, Paypal and Skype announced a partnership that will allow users in 22 countries to send money over an updated version of the Skype mobile app, extending PayPal’s reach by around a billion people. It’s a partnership that follows on the heels of Apple’s announcement this summer, at the Worldwide Developer’s Conference, that Apple Pay will have person-to-person payments when iOS 11 becomes available later this year. Money will be transferred to an Apple Pay Cash Card, which can be sent to your bank account. As The Verge reported, “That means Apple is not only coming for the Venmos of the world, but maybe the banks themselves.”

Partnerships like these aren’t just new animals entering an ecosystem, but entirely new forms of life, and criminals are looking for every opportunity to mine cash in this fast-evolving landscape. With the opportunity for a new revenue stream, like Paypal’s new access to Skype’s users, there’s also the risk for new vulnerabilities, because any time there’s a new way to pay, there’s a new way to commit fraud. A criminal accessing your Skype account can now access your money. So organizations shifting to digitally-fit business models will discover that new revenue streams are only as strong as their risk engines, and by now it’s clear that only a risk engine powered by artificial intelligence can provide the accuracy and speed to solve for risk without adding customer friction.

Regulation that favors the brave

New regulations are only accelerating this disruption that’s well underway. In Europe, PSD2 will open the floodgates for non-bank innovators to enter payments, and customers are ready. In last month’s Paypers report on open banking, Feedzai CEO Nuno Sebastiao pointed out that European customers are already high adopters of companies that are waiting to enter the post-PSD2 world. He cited a PricewaterhouseCoopers Strategy showing that 88% of people surveyed used third-party providers for online payments, and that 85% of them rated the security of these alternative payment services as high or very high. “Third party payments have already earned customer trust,” he wrote. “The banks that are able to recapture some of their projected lost revenue due to displaced bank-customer interactions will be the ones who see PSD2 as an opportunity rather than as a threat.”

European banks are watching closely as their North American counterparts find new ways to make money from customer-centric innovation. The Accenture study found that “76% of bankers agree that competitive advantage will not be determined by their organization alone, but by the strength of their chosen partners and ecosystems.”

At the intersection of criminal and customer

At its core, PSD2 is about empowering the customer, and the banks that succeed in opening up new revenue streams under PSD2 will be the ones who extend their reach, choose the right partners, and engage with the right platforms in order to build, maintain, and capitalize on their most valuable asset: customer trust. Risk and revenue have never been so tightly bound. So the advent of attainable AI is here just in time. By uncovering patterns that were invisible to us before, and doing it in milliseconds, with hypergranular accuracy, artificial intelligence is the only tool that can solve for both criminals and customers at the same time.

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