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How AI and standards secure effective cross-border payments

5 min read

AI and standards secure effective cross-border payments

What are the latest technological trends in cross-border payments, and how is AI impacting the payments industry?

Cross-border and online payments have exploded in the past few years; events like global lockdowns and technological advances have created the perfect environment for the digitization of the industry: a 2022 report from analyst firm BCG (Boston Consulting Group) "Global Payments Report 2022 - The New Growth Game," expects that cross-border payments will soar to over $250 trillion by 2027. The report writers use a single word to describe the payments sector, "resilient." 

Behind the strength in the cross-border payments sector are standards work from SWIFT and ISO, technological advances, including financial sector APIs for interoperability, and effective anti-fraud measures using AI-enabled solutions.

The technology and standards behind effective cross-border payments

“Payment transactions are at the center of a dramatic cultural shift that has evolved with modern technology.” - BCG

The cultural shift mentioned in the BCG report highlights an important aspect of the cross-border payments gold rush: the need to build rails and security that provide a framework to allow cross-border payments to soar. In February 2023, the FSB (Financial Stability Board) released a report, "Roadmap for Enhancing Cross-border Payments." This report was an endorsement of the requirements set out by the G20 in 2020. The roadmap had three interrelated areas requiring exploration:

  1. Payment system interoperability and extension.
  2. Legal, regulatory, and supervisory frameworks.
  3. Cross-border data exchange and message standards.

The FSB roadmap is a plan that embraces practical projects to enhance cross-border payments with a goal of implementation by 2027. The alignment of planets behind the success of cross-border payments is captured in certain technological (including future tech) and standards advances highlighted in the report roadmap, including:

  • Updating the application of AML/CFT rules (on wire transfers)
  • Adoption of ISO 20022 messaging standards to improve the consistency and usability of message data in cross-border payments and facilitate more efficient AML/CFT checks.
  • FSB messaging standards to improve the consistency and usability of message data in cross-border payments and facilitate more efficient AML/CFT checks.
  • Exploring the use of technology in AML/CFT; encouraging greater use of technology for more efficient AML/CFT processes.

Future technologies are here now in cross-border payments

The future technologies mentioned in the FSB report are acknowledged by analyst firms such as Juniper Research and BCG, who agree that AI-enabled technologies are the key to delivering the promise of cross-border payments. Moreover, amid this technological and regulatory push and pull are AI-enabled applications for fraud prevention:

RegTech and Artificial Intelligence applications

The drive for secure and effective cross-border payments is helping to move AI out of hype and into production; IBM research shows a growing acceptance and use of AI-enabled technologies in the industry, with automotive and financial services industries much more likely to roll out AI than other sectors. One of the applications of AI in the financial sector is to enable more effective and secure payments across borders. Intelligent financial crime prevention solutions are critical to the security and enablement of cross-border payments. The market agrees; Juniper Research predicts that AI-enabled financial fraud detection and prevention platforms will reach $10 billion by 2027.

AI enables cyber criminals by providing new mechanisms to generate synthetic identities and identity documents used in KYC/CDD processes. To protect against the nefarious use of AI, cross-border payments must be secured using AI-enabled financial crime prevention solutions during identification and cross-border transactions. AI-enabled technology to secure cross-border payments include the following:

Fraud detection

AI and machine learning (ML) are uniquely placed to identify fraudulent events across vast volumes of cross-border transactions. Modern fraud tactics are complex, and traditional fraud detection methods simply cannot keep up with the evolving landscape. The added challenge of AI-generated synthetic identities make fraud detection even more difficult. AI-enabled transaction and relationship analytics provide deep insights to create accurate risk scores and identify anomalous behaviors. Unsupervised AI models can optimize and calibrate alerts to reduce false positives. AI-enabled fraud detection uses AI-generated predictive models to identify emerging fraudulent transactions. Eastnets PaymentGuard is designed to work in the SWIFT payment environment to identify fraud before it happens.

Watchlist screening

Watchlist screening is another area of financial crime prevention that benefits from AI-enabled systems. Eastnets SafeWatch Screening uses an AI-based matching system with contextual screening from pre-processing to historical decisions delivering accurate risk scores and reducing false positives.

Optimize cross-border payment routing.

SWIFT payments GPI-tracking data is used with Eastnets PaymentSafe AI-enabled solution to reduce time and costs in cross-border payment charges. This AI-driven intelligent router provides the fastest and cheapest correspondent bank to transfer payments.

SWIFT and ISO 20022

Standards and technology must work in unison to advance secure cross-border payments. Technology must be built upon a solid foundation of interoperability, especially in the globalized world of payments. Standards bodies such as SWIFT and ISO have been instrumental in forging technology relationships to build solid rails for payments. The evolution of standards promoted by these two entities reflects technological advances and payment requirements. ISO 20022 is a case in point. The ISO 20022 standard is designed to provide the rails for seamless cross-border payments: ISO 20022 began a two-year implementation period starting in March 2023.

An AI-enabled, standards-based digital backend will deliver seamless and secure digital transactions across borders; as the 2020s unfold, this digitization will continue to move at pace, but cybercriminals will follow. AI enables both fraud and anti-fraud. Compliance and KYC/CDD, along with AML and watchlist checks, benefit from an integrated approach to regulations enabled by advanced technologies such as AI.

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