Although AI is not new, many financial institutions are only beginning to explore its potential. Early use cases primarily focus on chatbots, fraud detection, and reducing costs. The broader applications, such as in payments, are just emerging.

New research from RedCompass Labs has shown that over half of banks, 54%, are planning to implement generative AI to support payments modernization, including the shift to instant payments. Meanwhile, 42% of banks are considering this possibility.

AI in Payments Modernization

RedCompass Labs surveyed 200 senior payments professionals from banks in the EU and the US to understand their approach to AI in payments modernization. Banks often outsource payments projects but face challenges with quality control, cost management, and aligning short-term goals with long-term strategies.

Many banks believe AI can help address these issues. Among banks with advanced AI expertise, 57% see AI as improving long-term vision, 47% believe it can enhance payments expertise, and 44% think it will speed up project delivery. Banks with lower levels of AI expertise prioritize improvements in work quality: 56%, and cost management: 38%.

“From a process, skill, and expertise point of view, payments innovation and market share is being seized by a few big banking players who are widening an already significant competitive gap,” commented Tom Hewson, CEO at RedCompass Labs.

“But AI can help to close it or accelerate it. It just depends on who is first to take the opportunity,” he continued. “With AI, we can more than double output and maintain costs, or we can maintain output and more than half costs.”