Banks to use AI to meet instant payments project challenges

Banks to use AI to meet instant payments project challenges

• 54% of banks plan to leverage generative AI for payments modernization 
• 38% believe AI is already reducing the number of business analysts 
• Banks favour a balanced approach to AI with 49% human and 51% AI involvement 

London, 10th September 2024: New research from RedCompass Labs, a world leader in payments modernization, has revealed that over half (54%) of banks are planning to leverage generative artificial intelligence (AI) for the shift to instant payments and other payments modernization projects, while four in ten (42%) are actively considering the possibility.

The report, AI in Payments: The Future of Payments Modernization?, includes findings from a survey of 200 senior payments professionals at EU and US banks which examined their views on generative AI, their expertise, and their approach to AI in payments modernization.

With the global move to instant payments and migration to ISO 20022 well underway, banks are prioritizing payments modernization. A substantial nine in ten (91%) banks rank payments modernization as either important or very important. Over half (52%) deem it very important.

However, these projects are draining time and budgets with banks spending upwards of $100 million on multi-year payments modernization projects and hiring teams from two to 50+ business analysts to deliver them. Two-thirds of a bank’s time and investment on these projects is directed towards project analysis, testing and business/system analysis, areas ripe for AI automation.

The research also reveals that AI is already having an impact on headcount, with 38% of banks believing AI can already reduce the number of business analysts needed for these projects. An additional 27% anticipate this reduction will occur within the next 1-2 years and 28% foresee it happening within 3-4 years.

Despite this, banks still believe human oversight remains essential. They believe in a balanced approach to human and AI collaboration, which is slightly tipped towards AI, with the minimum level consisting of 49% human and 51% AI involvement. Human involvement is most important for strategic tasks (37%), improving internal processes (34%) and customer experience (29%).

Other key findings include:

Banks are bullish on AI – 100% of banks are at least considering the adoption of artificial intelligence, with a significant 62% actively or aggressively exploring this transformative technology.

High level of AI knowledge – 28% have a very high level of knowledge of AI, while just over half (52%) describe their knowledge as high, meaning the vast majority (80%) of banks possess an advanced understanding of AI.

Biggest AI concerns – Their five biggest concerns are user expertise (29%), low-quality inputs/outputs (28%), security and data protection (27%), transparency of decision-making (25%) and accuracy of AI algorithms (25%).

AI to improve outsourcing – Outsourcing payments projects is a common practice for banks. The top five areas AI can improve when outsourcing payments projects are quality of work (46%), payment expertise (44%), long-term vision (40%), speed (38%) and cost (36%).

Tom Hewson, CEO at RedCompass Labs, comments: “Banks across the globe are under immense pressure to keep pace with the rate of change, grappling with the drive towards instant payments and the migration to ISO 20022. But we are yet to see the true benefits of these initiatives because the vast majority can’t keep up with the rate of change. The biggest global banks are accelerating into the distance, widening an already significant gap.

“Most financial institutions are beginning to explore the potential of AI. Some are scratching the surface of use cases, focusing on chatbots and fraud detection and cost-cutting. The more forward-thinking have begun implementing this nascent technology for more ambitious projects. I believe that banks must leverage AI to multiply their greatest assets: people. AI, trained on the right data and used by the right people, can help banks modernize more quickly, for less money, and with better results than relying on hordes of junior business analysts often thrown at these projects.

“The rate of change in payments has never been this fast and will never be this slow again. The rate of change in society and financial services is no different. Banks can be ready for the onslaught or cede the ground to those who are.”

Read the full report here: AI in Payments: The Future of Payments Modernization?,

ENDS

About RedCompass Labs

RedCompass Labs enables good payments and helps stop the bad. We are experts in ISO20022 based payments, instant payments, cross-border payments, and payments interoperability. We use the latest micro-services technology and deep payment knowledge to deliver payment transformation projects, using our Payments Modernization Toolkit. These solutions help our clients accelerate their payments modernization programs, reducing costs and regulatory risk.

RedCompass Labs also offers advanced financial crime investigation tools, including the RedFlag Accelerator, a global reference for detecting modern slavery, human trafficking, and child sexual exploitation red flags in the financial industry. The RedFlag Accelerator provides investigation guides, advanced algorithms, Generative AI investigator interfaces, and a comprehensive online portal for our clients.

With offices in London, Warsaw, Brussels, Singapore, Tokyo, Miami, Toronto, and Pune, we support clients worldwide.

To learn more about RedCompass Labs and its services, visit our website at www.redcompasslabs.com.

Media contact

Michael Deeny/Aodhán Cunningham/Maeve Preston

Chatsworth

RedCompassLabs@chatsworthcommunications.com