Throughout history, humans have consistently found ways to exchange value from bartering with shells and stones to using coins, paper money, and eventually plastic cards.
Over the last 200 years, that evolution has accelerated, from the first wire transfers sent using telegraphs in the 1870s to the emergence of the first credit card in the 1950s. The arrival of the internet and smartphones took payments digital, paving the way for online banking and mobile wallets.
Today, the payments industry is undergoing another seismic shift, this time powered by artificial intelligence (AI).
Following the release of ChatGPT and other large language models in 2022, AI adoption across every industry has increased, with 78% of businesses now reporting they are using AI in at least one area of their business.
The payments industry is no different. From processing transactions and powering chatbots in fraud detection and compliance, AI is commercially imperative for banks of all sizes.
A pivotal moment in payments
The rise of AI couldn’t come at a better time. Instant payments are fast becoming the global standard, with transaction volumes expected to surge from 3 billion in 2024 to 30 billion by 2030.
This shift is being driven not just by consumer and business expectations, but by regulations such as SWIFT’s full transition to ISO20022 and the EU Instant Payments Regulation.
The latter bill, passed by the European Parliament and Council in February 2024, requires all payment service providers (PSPs) offering euro credit transfers to adopt SEPA Instant Credit Transfer, which allows for euro-denominated payments to be sent and received in seconds.
The first deadline, in January 2025, required all PSPs in the euro area to be able to receive instant payments. The second deadline, coming up on the 9th October 2025, requires PSPs to send instant payments while also complying with additional obligations, including enhanced fraud controls, pricing parity with standard credit transfers, and the provision of Verification of Payee (VoP) services.
For PSPs under pressure to meet tight deadlines and compliance obligations, AI is proving invaluable.
What AI brings to the table
AI automates, predicts and enhances decision-making. One of its core uses in payments is applying machine learning to navigate the complex web of global payment rails, completing transactions more efficiently and with fewer errors.
It also unlocks more advanced capabilities from enriching payment messages, forecasting cash flow, identifying liquidity gaps, to optimising reconciliation processes.
Crucially, AI helps PSPs cope with the increasing complexity of regulation. From document analysis to compliance reporting, AI can scan thousands of pages in seconds, extracting relevant insights and streamlining manual workflows.
This means the end of endlessly searching through paperwork for small details, which can feel like searching for a needle in a haystack.
Advanced AI models can even write and test code, accelerating product development, reducing time-to-market, and making system updates faster and more cost-effective.
The benefits are tangible. Companies using generative AI for customer service, coding, or operational processes report reductions in cost-to-serve of up to 70%.
Protecting against fraud
In addition to promoting the good, AI in payments also keeps out the bad.
In the fight against fraud, AI can recognise suspicious patterns and use algorithms trained on historical data to flag anomalous transactions.
This monitoring occurs in real-time, allowing for immediate action to prevent losses and incorporating machine learning models to reduce the likelihood of false positives.
Importantly, these checks happen silently and frictionlessly, with no disruption to legitimate users or the payment system.
It’s unsurprising, therefore, that 83% of financial institutions are now eyeing up generative AI for their fraud prevention strategies.
Striking the right balance
However, AI is not a silver bullet for the payments industry, and when poorly implemented, it can be ineffective or worse, introduce new risks.
To avoid this, PSPs should reset their expectations and strategically evaluate the most effective use cases for implementing AI, such as streamlining document analysis or automating repetitive tasks, rather than applying it indiscriminately across all areas of business.
AI implementation should be piloted in high-impact areas like fraud detection, compliance automation, and liquidity forecasting, while ensuring it is coupled with robust governance.
It should augment, not replace, human expertise. Payments professionals remain vital, not just to oversee operations, but also to provide the judgment and ethical guidance that no algorithm can replicate.
A catalyst for progress
AI continues to transform the payments landscape, driving the sector toward a faster, more efficient, and streamlined future. To maintain a competitive edge, payment institutions should emulate small fintechs, many of which now outpace large banks with superior products and customer service, by strategically and cost-effectively integrating AI into their systems.
As the payments landscape evolves towards real-time, intelligence-driven processes, alongside the shift towards instant payments, AI is uniquely positioned to assist PSPs in enhancing the efficiency of their operations. Those that fail to embrace AI risk not just falling behind but also becoming irrelevant.
