How will AI impact the payments industry for businesses in 2023?
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How will AI impact the payments industry for businesses in 2023?

14 Feb 2023
How will AI impact the payments industry for businesses in 2023?

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No longer the stuff of science-fiction, Artificial Intelligence (AI) is rapidly transforming the way businesses operate globally, and South African businesses are no exception. With the increasing availability of data and advancements in technology, AI has the potential to bring significant benefits to local enterprise. But while most people may be aware of its ability to generate written articles and digital artworks in seconds, there is a lot of uncertainty about how the technology will impact a key aspect of your business: payments.

In this article, we discuss some of the ways that AI is changing the world of payments, and share our thoughts on what South African businesses should be aware of in 2023.

What are the benefits?

One of the biggest advantages of AI is its ability to automate routine and repetitive tasks, freeing up employees to focus on more strategic priorities. In this way, the technology can improve operational efficiency and reduce costs – and more importantly, help businesses make better decisions by providing insights into customer behaviour and market trends. This can lead to improved customer experiences, higher customer satisfaction, and increased sales.

The payments industry has already begun to see these developments emerge, with innovations such as AI chatbots enabling a more proactive and deeply personal form of customer experience. Beyond this, AI is starting to be used by financial institutions and payment platforms alike to crunch large amounts of user data, generated through digital payment channels, to identify new tools and services that speak to the specific needs of businesses and their customers.

What are the limitations?

But while AI has the potential to bring significant benefits to the payments function, it would be naïve to believe that the technology will revolutionise the industry overnight. Rather, there are several challenges which first need to be overcome for AI to play a larger role in the South African payments landscape.

Firstly, it is important to recognise that cash will always be a preferred form of payment in South Africa. Simply put, cash is easier to use and is unmatched in its ability to provide speed, flexibility, anonymity, and affordability as legal tender. But it is also the physical nature of cash that inhibits the uptake of AI, which can only inform decision-making by processing large amounts of data, which in turn can only be generated at scale through digital transactions.

However, that is not to say that digital payments have not made headway in South Africa. In fact, the fintech revolution and proliferation of mobile phones have enabled businesses and payments platforms to gather that much-needed customer information used to improve quality of life. But a key obstacle remains – the high cost of internet access and mobile data. With widespread unemployment, low incomes and inequality, most South Africans are forced to be more frugal with their online activities, which forces consumers to resort to more reasonable payment methods, such as cash.

In an effort to overcome high data costs, many retailers and merchants have looked to alternatives such as zero-rating their marketplaces or investing in Unstructured Supplementary Service Data (USSD) services to make it more affordable for consumers to transact online. Good examples of this include our own integration into the Capitec Banking App and MTN Momo. Payments platforms will need to explore these avenues more deeply for AI to gain a foothold in the African market.

Except, industry is still faced with one more major issue: loadshedding. Regardless of data costs and payment habits, the uptake of AI in the South African payments industry cannot escape the ongoing energy crisis, which affects everything from the battery life of your device to your ability to connect to the internet. If users are unable to get online, they will not be able to communicate the data needed to spur AI.

In addition to these challenges, AI also raises important ethical and legal considerations for businesses. Because of the technology’s reliance on user data, businesses need to recognise that this highly personal information belongs to individual it is generated from. Businesses must then adopt responsible AI practices in order to safeguard their most important stakeholder: the customer.

These are just some of the challenges facing businesses in the field of AI-payments. But the sector is also rapidly evolving, and ultimately, it is the businesses that stay up-to-date with the latest developments in the field, that will stay ahead of the curve and take advantage of the new opportunities as they emerge.

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