Over 50% banks turn to Generative AI for Instant Payment projects

By Gloria Methri

Over half (54%) of banks in Europe and the US are planning to leverage generative artificial intelligence (Gen AI) for the shift to instant payments and other payment modernization projects, research from RedCompass Labs has revealed.

The report, ‘AI in payments: The future of payments modernization?’ states that four in ten (42%) banks are actively considering this possibility.

Every bank in Europe is currently readying its infrastructure to meet the SEPA Instant Payment Regulations deadlines, which many think are unrealistic. Meanwhile, banks in the US are trying to meet the growing momentum for instant payments, while Canadian banks are preparing for the launch of their instant payments scheme as early as 2026. There is also the global shift to ISO 20022 messaging standards.

This urgency is reflected in the research, which reveals a substantial 9 in 10 (91%) banks rank payment modernization as either essential or very important.

Notably, these projects are draining time and budgets, with banks spending upwards of $100 million on multi-year payments modernization projects and hiring teams of up to 50+ business analysts to deliver them. Two-thirds of a bank’s time and investment on these projects is directed towards project analysis, testing and business/system analysis, areas ripe for AI disruption.

Could AI replace bank analyst jobs?

The research also reveals that AI is already impacting headcount, with 38% of banks believing AI can reduce the number of business analysts needed for these projects. An additional 27% anticipate this reduction will occur within the next 1-2 years, and 28% foresee it happening within 3-4 years.

Despite this, banks still believe human oversight remains essential. They believe in a balanced approach to human and AI collaboration, which is slightly tipped towards AI, with the minimum level consisting of 49% human and 51% AI involvement. Human involvement is most important for strategic tasks (37%), improving internal processes (34%) and customer experience (29%).

Other key findings include:

Banks are bullish on AI – 100% of banks surveyed are at least considering the adoption of artificial intelligence, with a significant 62% actively or aggressively exploring this transformative technology.

High level of AI knowledge – 28% have a very high level of knowledge of AI. In comparison, just over half (52%) describe their knowledge as high, meaning the vast majority (80%) of banks believe they possess an advanced understanding of AI.

Biggest AI concerns – Their five biggest concerns are user expertise (29%), low-quality inputs/outputs (28%), security and data protection (27%), transparency of decision-making (25%) and accuracy of AI algorithms (25%).

AI to improve collaboration with consultancies—Banks commonly work with partners on payment projects. The top five areas AI can improve when outsourcing payments projects are quality of work (46%), payment expertise (44%), long-term vision (40%), speed (38%) and cost (36%).

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

“But AI can help to close it or accelerate it. It just depends on who is first to take the opportunity. With AI, we can more than double output and maintain costs, or we can maintain output and more than half costs. It’s our choice. Banks and payment providers that don’t embrace AI in the payment modernization space will face both cost and speed disadvantages relative to those that do, resulting in a loss of profit margin and market share.”

“To access the full extent of these benefits in the payments world, we need to apply AI to a particular problem: instant and cross-border payments projects. Innovation and projects are held up because banks can’t get through their workload fast enough. AI can help. AI tools that are secure and private to the project yet can gather years of knowledge and produce documentation for review by humans are changing the game. These AI tools mean banks can keep up with the rate of change and the cost of change.