Generative AI Enhances Embedded Finance, Driving Growth and Efficiency

Generative artificial intelligence (AI) is revolutionizing the world of embedded finance by accelerating advancements and delivering substantial benefits, according to the PYMNTS. With the increasing digitization of daily life, AI is becoming an essential optimization driver for future-ready solutions, especially in the realm of payments.

The capabilities of AI offer the potential to redefine and enhance financial interactions by providing next-generation personalization for end-users and enabling identity verification and compliance automation for service providers. As eCommerce, digital wallets, and embedded payments continue to grow exponentially, businesses face the challenge of safeguarding against modern fraud while simultaneously acquiring and retaining customers in an ever-evolving landscape where incumbents and innovators pose competitive threats.

While the commercialization of AI has generated excitement, sustainable long-term applications that demonstrate its utility across industries are crucial for overcoming the current hype surrounding the technology. Fortunately, generative AI is emerging as a changer at a crucial juncture in the offline-to-online journey.

By integrating AI technologies into their solutions, companies that focus on developing digital engagement channels, particularly in the payments and finance sector, can harness winning efficiencies that drive differentiation and accelerate sustainable growth.

PYMNTS research on «How The World Does Digital» revealed a 29% year-over-year growth in the use of digital wallets offered by Big Tech, such as Apple Pay, Google Pay, and Samsung Pay. Given the significant reliance on software components in numerous consumer touchpoints, generative AI is poised to transform how businesses engage with customers and compete.

Historical frictions in payment journeys and traditional financial services have created a valuable opportunity for generative AI to add value. Tom Randklev, global head of product at payment orchestration platform Cellpoint Digital, noted that embedded payments have already greatly enhanced consumer convenience. With generative AI, this smooth experience is expected to continue accelerating, reducing the journey from product selection to payment to just one or two clicks.

Compared to earlier generations of predictive AI, the latest generation of generative AI excels in real-time, non-closed loop, iterative tasks. It is already streamlining complex processes and reshaping end-user interactions with digital tools, setting new expectations for efficiency and simplicity. Areas where generative AI is projected to have an immediate and significant impact include identity verification and nontraditional credit scoring, with potential applications for automating and optimizing these processes.

Generative AI shines in complex processes with large data volumes, particularly in marketplaces where speed and accuracy are essential. Amias Gerety, partner at QED Investors, emphasized its application in fraud, risk management, and underwriting as industries where practitioners can leverage AI for rapid, accurate results.

Furthermore, generative AI can drive revenue growth through enhanced personalization of services. As transactions increasingly shift to digital platforms, AI becomes the best bet for businesses. By creating synthetic data sets, generative AI can retrain older models with new data, opening up novel possibilities for contextual commerce and payments.

Andrew Gleiser, Chief Revenue Officer of Aeropay, envisions integrating generative AI into merchant payment portals to provide customers with compliant information about their best clients, including metrics like average order value, overall volume, and purchase cadence. This deeper understanding enables businesses to make informed decisions that help retain and acquire customers.

Generative AI is revolutionizing embedded finance by fueling growth and efficiency. With its potential to optimize processes, enhance personalization, and generate new data trajectories, AI is shaping the future of payments and financial services.