AI is rapidly becoming a game-changer in the digital payment solutions industry, and companies such as PayPal are increasingly leveraging it to enhance their capabilities. With the explosion of digital payments, the sheer volume of data generated is too much for traditional systems to handle. AI is an ideal solution to extract meaningful insights from this vast data trove. AI-powered systems can analyze transactional data in real-time to identify and mitigate fraudulent activities, thereby reducing the risks and enhancing customer trust. AI algorithms can also improve the customer experience by providing personalized recommendations and streamlining the payment process. Moreover, with the proliferation of IoT devices and smart assistants, AI can enable payments to be made seamlessly across multiple channels, further enhancing the convenience factor. As the digital payment landscape continues to evolve, AI is set to play an even more critical role in driving innovation and growth in this space.

PayPal, the global leader in digital payment solutions, has been at the forefront of leveraging cutting-edge technologies to enhance customer experience and trust. In particular, the company has made significant investments in artificial intelligence (AI) and data analytics (D&A) to bolster its risk management capabilities and safeguard the interests of its customers.

In this interview, V. Chandramouliswaran, Vice President of Data & Site Leader for PayPal India, shares insights into how PayPal is leveraging AI and D&A to establish customer trust and provide seamless payment experiences. He will also discuss the challenges and opportunities in implementing these technologies and the future roadmap for the company.

How is PayPal leveraging AI and D&A to establish customer trust?

At PayPal, we work towards ensuring that managing and moving money is convenient for anyone in the world. We are in the business of trust, which is a fundamental premise for both merchants and customers. This is where technologies such as AI and risk management with data & analytics play a pivotal role in boosting customer trust by delivering consistently enhanced user experiences. We increasingly rely on data science, automation, and AI as we continue our mission to democratize access to financial services. 

PayPal processes millions of transactions a day, collecting a plethora of data which gives us an insight into customers’ shopping behaviour. Many petabytes of this data form the backbone of our decision systems. These systems learn from decisions that have worked out well and those that haven’t and get better with every transaction. Furthermore, they learn what constitutes fraud and evolve to detect the most current and complicated fraud typologies, which in many scenarios, are ingeniously hidden. 

Through these systems, we can create frictionless experiences for our users while also ensuring that their data stays secure. Over the years, despite using increasingly complex algorithms, our turnaround time for decision-making has continued to decrease. This has helped users complete their purchases in record time. 

Our data science team uses AI to analyze individual customer journeys. We use a model ensemble to drive superior performance that helps us make better risk decisions. It brings together different types of models and PayPal’s proprietary story-based analytics approach. Multiple models and rules, from logistic regressions to deep learning models, are executed before deciding on transactions, all within milliseconds. The story-based approach is one where our analysts look for patterns in the decisions we make. The way to think about both these approaches is that the models approach issues from a global perspective while the story-based analytics approach problems from a local perspective. These approaches working in tandem has consistently helped PayPal deliver best-in-class risk management for merchants and consumers.

Our investment in data infrastructure plays a critical role in providing our data scientists access to diverse data as well as performing computations extremely quickly. A confluence of the AI and data & analytics technologies I mentioned earlier help us to intelligently monitor customers’ journeys to not only deliver delightful experiences but also predict any issues which may potentially occur. With these insights, our customer relations teams are prepared to manage every user in a personalized manner. 

Does the use of more advanced encryption and security technology translate into more trust-building with the customers?

Trust continues to be a critical commodity especially in today’s digital, data-driven world. For MSMEs trying to establish themselves in global markets, it is essential to partner with a trusted payments platform that holds credibility, provides a seamless experience, and further helps them evolve and attract new customers. 

Customers value flexibility, reliability, and security while shopping online. Using advanced technologies to deliver on these values will help businesses build trust. For example, if a business uses advanced encryption and authentication technology to secure its customers’ data, it will help the business position itself as trustworthy and secure.  

Our complete payments solution continues to evolve to enable small & medium-sized businesses to grow their business across borders, through effective risk management and implementation of advanced technologies. 

Recently, we added several new features to our platform that allow payments with compatible alternative payment methods, the ability for customers to save payment methods with the PayPal vault for faster future checkouts, real-time account updating to help customers keep their payment methods up-to-date, and access to new pricing options.

How do you see the digital payment ecosystem being transformed in the coming years by technologies such as AI?

India has been at the forefront of digital payment’s evolution – from taking UPI to tier II -III cities to creating financially inclusive solutions for MSMEs, the government of India has worked tirelessly towards making digital payments accessible to all segments of the country. With the objective of ‘Digital India’ initiative in mind, the country is well on its way to achieving “Faceless, Paperless, Cashless” status as a country .

The focused tech investment in the digital payments sector has been an important enabler of this progress. In the coming years, AI will help fintech provide a personalized experience to the individual user based on the mining-led intelligence gathered from transactional data. Functions like customer service and voice-based payments are on their way to becoming fully automated with the emergence of generative AI. In the long run, filling the gap of growing customer needs and making space for innovative payment solutions. 

What is the importance AI holds in managing risks?

The rapid growth in the digital payments sector has changed the outlook on risk. Companies across industries are wary of scammers who now have easier access to customer data. This has led to an increasing number of more sophisticated and organized forms of fraud. According to a report from CERT-In, India saw over 1.39 million cyber-attacks in 2022 . This has impacted small businesses and bruised customer trust. 

To remedy this, we have developed data-led, AI-focused solutions that help our engineers mitigate bad actors – through a gamut of data gathered over time, including past events, customer journeys, transaction history, buying patterns etc. We have evolved our risk management capabilities from a rule-based risk decision system to a predictive and intelligent ensemble of systems. As mentioned earlier, these complex systems continue to evolve as new algorithms and data bring predictive power.  

Our biggest differentiator is the combination of the model-driven approach along with the story-based approach to risk management. This approach coupled with multiple decades of deep expertise in risk management has allowed our teams to deliver world-class solutions that have had a profound impact on both consumers and merchants. 

How do you foresee the role of AI evolving in the coming years in the financial services sector?

Artificial Intelligence has played a vital role in helping the finance industry organize, optimize, and process day-to-day operations. As AI continues to evolve, it will enable financial institutions to find innovative ways to leverage their power, make better decisions, run efficient operations, and in turn, serve the customers better. 

Disclaimer: LLM tools have been used for the editing and rephrasing of this article