Why AI-Powered Verification Is Banking’s New Best Friend

The service economy thrives on delivering frictionless and user-friendly experiences.

For solutions providers catering to merchants and bringing them fully into the digital age, it’s critical to offer integrated payment solutions that can be embedded into platforms, streamlining the checkout process. One-click payments and mobile wallets are gaining in popularity.

Eric Stratman, senior director of analytics and insights at ValidiFI, told PYMNTS as part of the “What’s Next in Payments” series focused on the changing nature of the service economy that using data analytics to provide personalized payment options and recommendations — underpinned by bank account and payments data — can enhance that user engagement.

“There’s so much more information within that transaction,” he said, that can be mined from “looking into the bank account’s behavior and the consumer that’s tied to that bank account.”

The company’s online platform and database alerts client firms to evaluate risks linked to a certain account, while cash flow analytics offer details that let companies, for example, fine-tune their lending decisions.

To have that information ahead of time is good, but to gain real-time insights into the transactions and account status — ValidiFI’s services include account validation — creates a sense of transparency in the payments process that’s even more valuable, he said.

ValidiFI’s near-term roadmap includes further innovation of its validation solutions, moving beyond the confines of simply “checking at the time of payment to see if the account is open and valid — and then get that ‘check mark’ to proceed with the transaction,” Stratman said.

Alternative data layers additional information on top of what’s already out there to help FinTechs and banks make those informed decisions surrounding transactions, he said. In one example as recently as this month, the company announced it expanded its vAccount+ suite to include new capabilities for what it labeled “authoritative bank account verification” that includes access to Early Warning data and deposit performance data contributed by more than 2,500 financial institutions. ValidiFI estimated that it can validate up to 85% of accounts.

The Role of AI

No discussion of the service economy would be complete without touching on artificial intelligence. We’re well past the proof-of-concept phase with AI, and Stratman said the advanced technology can help — and is being used by ValidiFI — to identify and combat fraud.

“A lot of the buildout is at the front end of the transaction, and once you implement that solution, it provides those answers seamlessly in the transaction,” he said.

“The machine learning and AI algorithms can analyze hundreds of thousands of transactional patterns that can then be used to mitigate fraudulent activities” so that client firms can approve more transactions with a greater sense of the security of the transaction, he added.

“Not every [ValidiFI customer] use case is the same,” said Stratman, who added that “you need to provide enough information to be able to kind of tailor those experiences based on the user behavior and preferences that foster that sense of connection and loyalty between the customer and the user.”