Generative AI is one of the most hotly anticipated developments in the fintech landscape in 2025, and its disruptive influence over the payments landscape could be transformative for purchases online and in-store.
The generative AI in fintech market was valued at $1.13 billion in 2023 and is expected to reach $7.28 billion by 2029, representing a CAGR of 36.3%.
Fintech leaders have been quick to embrace the artificial intelligence boom, and the potential that generative AI tools bring to the industry can help support future integrations like embedded finance, super apps, the metaverse, peer-to-peer wallets, crypto payments, and BNPL services.
The rise of generative AI can help fintech firms develop closer relationships with their customers while maintaining a greater level of security. Let’s explore five ways the generative AI boom will become a disruptive force for the payments industry in 2025:
Hyper-Personalization
The payment landscape is undergoing a transformation from a process to an experience for consumers. Generative AI tools provide a unique opportunity for firms to build an emotional connection with their customers, whether at the point-of-sale (POS) for a customer purchase or achieving financial goals.
World-renowned platforms like Alipay, YONO, WeChat Pay, and Grab are gaining traction for providing a comprehensive platform to comprehensively match customer expectations.
As well as payments, these platforms can leverage experiences ranging from shopping to entertainment. They can also use the data generated by customers like their spending history to tailor recommendations at scale.
This can pave the way for generative AI tools to deliver highly personalized interactions with customers not only in their native language but also using colloquialisms to bond with them on a more personal level, on an around-the-clock basis.
Brands can also use generative AI to create bespoke rewards and loyalty programs for customers with the help of spending analysis. This can help firms to develop targeted incentives that are more likely to drive more engagement and loyalty.
Risk Management
Generative AI is also improving risk management throughout the payments industry by identifying possible red flags long before a transaction is made.
With the help of machine learning (ML), artificial intelligence tools can monitor vast quantities of structured and unstructured data to spot patterns and trends that could be beyond the capabilities of human analysts. This helps banks to make more intelligent decisions to reduce their risk exposure.
Generative AI can also be used to bring visualization tools to these complex patterns, improving our understanding of the data and its risk assessments.
In the world of modern payment processing, trends are changing, and the arrival of open banking can provide better risk assessment data than ever before throughout the payments landscape.
With open banking tools capable of communicating seamlessly with one another, we’re able to use multiple data sources and interpret them using ML before generative AI tools convert these insights into actionable reports and recommendations.
Fraud Detection
Similarly, because AI has the power to analyze big data and a series of unstructured data sources in a rapid manner, the generative AI boom is perfect for improving payment fraud detection.
Whenever a card transaction is made, dozens of data points are instantly generated. Artificial intelligence tools can analyze this data in real-time and incorporate ML technology to actively learn from historical instances of fraud to decide to approve, deny, or quarantine the payment.
As we move towards digital payments, cybercriminals are increasingly looking to take advantage of the vulnerabilities of legacy payment systems. However, advanced generative AI tools are capable of learning to detect suspicious behavior and act upon it.
Today, platforms like Kount are strong examples of how artificial intelligence can help minimize the risk of fraud, and we can expect the evolution of GenAI to deliver more sophistication to the industry throughout the decade.
Customer Service
Today, 69% of consumers already prefer to use chatbots for service-related questions, and this makes generative AI an essential tool for adoption throughout the payment processing industry in 2025.
Generative AI tools like chatbots and artificial intelligence technology like virtual assistants can unite to handle a multitude of different customer queries during the checkout process in a fully autonomous manner.
With the help of large-language processing (LLP), generative AI chatbots can handle queries in a conversational tone to quickly solve payment-related problems.
Because of its convenience, we’re also seeing merchants experiment with chatbots to reduce the problems associated with handling outstanding invoices.
This helps to illustrate the future of embedded finance, where customers can make a payment to a business through its native app or website without the need for using a third-party processing service.
Dynamic Product Pricing
Another way that generative AI will improve the payments landscape in 2025 is through dynamic product pricing that’s capable of analyzing market dynamics, customer behavior, and live inventory data to create a bespoke pricing structure designed to drive greater sales volumes for brands.
Dynamic product pricing will empower banks and fintechs to price products based on factors like demand, supply, seasonality, overstocking, and other important metrics.
Although this strategy could certainly be open for abuse among more exploitative brands, dynamic pricing structures should pave the way for a fairer environment for consumers, where new bargains can be uncovered with each visit, improving foot traffic and access to underselling stock.
This innovation can also be used among banks, fintech firms, and insurance providers, to provide dynamic pricing for loans, insurance premiums, and investment portfolios based on risk assessments, market conditions, and customer needs.
Scaling Generative AI in Payments
We’re on the precipice of a generative AI revolution in the world of payment processing. In terms of driving security, safety, personalization, and more power to firms adopting AI solutions, we can see unprecedented levels of efficiency and insight arriving in the industry.
The scalability of AI solutions will help to improve their integration with legacy systems why improving AI capabilities can boost product sales and the availability of financial services like loans on a more bespoke basis.
The generative AI boom will gather speed in 2025, and for a payments industry that’s ripe for innovation, we’re set to see use cases accelerate throughout the year. The benefits of embracing this new artificial intelligence ecosystem will be felt by both consumers and institutions alike.