As the demand for real-time payments grows globally, banks face increasing pressure to upgrade their infrastructure to meet the requirements of instant payment systems.
New research from RedCompass Labs, a global leader in payments modernization, reveals that over half (54%) of banks are planning to leverage generative Artificial Intelligence (AI) to address the challenges of instant payments and other payments modernization projects.
Additionally, 42% of banks are actively considering integrating AI into their operations, signaling a growing trend toward automation and advanced technology in the banking sector. The report, titled “AI in Payments: The Future of Payments Modernization”, draws from a survey of 200 senior payments professionals across EU and US banks. It explores their perspectives on generative AI, their level of expertise, and their strategies for integrating AI into payment modernization.
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Key Findings From The Research:
•Al Adoption on the Rise: All banks surveyed are at least considering Al adoption, with 62% actively exploring its potential.
•High Al Knowledge: A significant 80% of banks rate their knowledge of Al as advanced, with 28% claiming a very high level of expertise.
•Top Al Concerns: The primary concerns about Al include user expertise (29%), low-quality inputs/outputs (28%), security and data protection (27%), transparency of decision-making (25%), and the accuracy of Al algorithms (25%).
•Collaborating with Consultancies: Al is expected to enhance collaboration with external partners on payments projects, particularly by improving the quality of work (46%), payment expertise (44%), long-term vision (40%), speed (38%), and cost efficiency (36%).
The payment innovation and market share are being dominated by a few major banking players, widening the competitive gap. However, AI offers a solution to either close this gap or accelerate it, depending on who seizes the opportunity first. With AI, banks can significantly boost output while maintaining or reducing costs. Those who fail to embrace AI will face disadvantages in cost and speed, losing profit margins and market share.
Tom Hewson, CEO at RedCompass Labs, notes that from a process, skill, and expertise point of view, payments innovation and market share are being seized by a few big banking players who are widening an already significant competitive gap.
He further adds that banks and payment providers that don’t embrace Al in the payment modernization space will face both cost and speed disadvantages relative to those that do, resulting in a loss of profit margin and market share. “But, if they leverage the billions that have been invested into Al, make use of the tools available, and gather industry knowledge, they have a chance to keep up with the rate of change”, he concludes.
However, the challenge for many banks in leveraging AI lies in internal governance, trust issues, and a risk-averse mindset. By embracing advanced technology, especially in instant and cross-border payments, banks can accelerate projects, handle workloads more efficiently, and stay competitive.
While AI’s short-term impact may be overstated, its medium-term potential is immense. The payment landscape is evolving rapidly, and banks must adapt or be left behind. By embracing generative Al, banks have an opportunity to streamline their payments modernization efforts, meet regulatory demands, and improve their competitive standing in an evolving financial landscape.