Reportedly, companies can use AI to reduce their carbon footprint and create a payment ecosystem

Several governments and businesses have dubbed the next ten years the “decade to deliver” to combat climate change. The next-gen tech solutions form the cornerstone of these attempts to prevent or reverse adverse climate conditions. Intelligent products, new applications of existing technology or entirely new business models are emerging to increase energy efficiency and reduce overall energy consumption.

With constant technological innovation, Artificial Intelligence (AI) lies at the heart of sustainable practices. AI is disrupting every sector today, and the payments domain is no exception. Artificial intelligence is rapidly transforming the payments industry, and its potential for driving sustainability is enormous. Here are some payment avenues it’s going to revolutionize!

Optimizing Routing of Payment Processing Transactions

AI can optimize the routing of payment processing transactions to minimize energy consumption and hardware equipment. Harnessing the power of machine learning algorithms, models can analyze data on network traffic and route transactions in the most efficient way. It could also help reducing the number of servers and data centers used for payment processing, and lowering their energy and water consumption.

As we know, data centers and other hardware storing and processing payments can have an enormous carbon footprint. The International Energy Agency estimated that data centers use about 200 terawatt-hours (TWh), or about 1% of the world’s electrical demand. Moreover, another study found that by 2025, data centers may be responsible for 3.2% of all global carbon emissions. Hence, employing AI and reducing the number of data centers and other hardware used to store and process payments may not be an option but imperative. Google, one of the most future-forward organizations, applies AI to reduce electricity consumption across data centers significantly. Commencing their ingenuity as early as 2016, the organization harnessed AI to cut data center energy use by 15%. Other companies can follow suit by using AI to reduce their carbon footprint and create a more sustainable payment ecosystem.

Assessing Carbon Footprint Calculations and Carbon Offsetting Claims

AI can be utilized to assess carbon footprint calculations and carbon offsetting claims to avoid greenwashing and point consumers and banks toward truly sustainable businesses. E-Commerce giants like Amazon are already using AI to recommend products to customers. One day they may be able to recommend more sustainable products in the same way, taking into account the end-to-end product life cycle and shipment footprint. Big data and AI also have the potential to translate financial transaction data into individual carbon footprints. When this information is combined with digital banking services, it becomes feasible to demonstrate the environmental impact of purchases in real time. As consumers become more conscious and seek out environmentally sustainable products and services, this will encourage investments in greener production.

Financial Inclusion

Extending financial inclusion with Know Your Customer (KYC) and creditworthiness assessment is another way AI can drive sustainability agendas in payments. By enabling more people to pay digitally and avoid less sustainable practices, such as commuting long distances for cash payments, AI can help to reduce carbon emissions. This already exists in many countries where mobile payments are becoming the norm.

Robust Fraud Assessment

Detecting fraud while avoiding false positives is a constant battle in the payments industry, costing billions of dollars annually. AI has the potential to revolutionize fraud detection, allowing businesses to identify and prevent fraudulent transactions quickly. Machine learning algorithms can analyze vast amounts of data to identify patterns and anomalies that may indicate fraudulent activity. Technology can detect fraud in real-time, allowing businesses to act before significant losses occur. Moreover, AI can learn from past fraudulent transactions and adapt to new fraud patterns, making it a powerful tool for preventing future fraud. Vigilant fraud assessment will eventually eliminate the extra cost and waste related to the need for card replacement, extra transaction processing, and paper trails for refunds/chargebacks. Which leads us to one of the core of introducing any payment mechanisms –

Creating an Excellent Customer Experience

Sustainable practices and a heightened focus on environmental causes are some of the customers’ top priorities today. AI rests with the potential to create an unparalleled customer experience for dematerialized payments using tokens instead of less sustainable payment means like cash, physical cards, and crypto. Tokens are digital representations of payment means that can be easily processed without the need for physical cash or cards. This reduces the environmental impact of printing physical cards and handling cash, which requires energy and resources to produce and transport.

Customer service is a critical component of any business, and AI is transforming how businesses interact with their customers. AI-powered chatbots are becoming increasingly sophisticated, providing customers fast and efficient support. AI-powered bots can provide customer service at all stages of a cardholder’s life cycle, reducing the number of branches required for customer service. This reduction in physical infrastructures will reduce land, water and energy consumption and the need for employees to commute to work, resulting in a more sustainable ecosystem.

Another interesting use of AI could be to better evaluate actual cardholder’s needs, allowing banks to avoid sending cards to people who don’t need them. An estimated 20% of banking cards never get activated, and that’s a considerable quantity of plastic ending up in the landfills without ever being used. An accurate evaluation will enable banks to reduce the number of cards sent out, minimizing waste.

However, organizations must be cognizant that harnessing AI consumes a substantial amount of energy and water. Financial institutions and businesses need to consider the environmental benefit of using AI in commerce and payment, but also the environmental cost of using that very same AI. While the future is indeed artificially intelligent, it is not a panacea but an effective way of strengthening human judgment and amplifying the effectiveness of sustainability agendas.

https://www.financialexpress.com/business/blockchain-emerging-ai-trends-an-untapped-opportunity-in-sustainable-payments-3090327/