Embedded Payments: The Future of Global Payments Transformation
- Chinmay
- January 2, 2025
- India, Internet of Things
- AI fraud detection, AI in payments, CDCVM, Digital Payments, embedded payments, financial services, future of payments, IoT, NPCI, tokenization
- 0 Comments
Arjun Chowdhry, Group Executive for Affluent Banking, NRI, Cards/Payments, and Retail Lending at Axis Bank, brings over 30 years of diverse experience in consumer banking. An alumnus of St. Stephen’s College, Delhi, and the Indian Institute of Management, Bangalore, he has been instrumental in building card, wealth, and salary franchises, and has led significant mergers, including Axis Bank’s acquisition of Citibank India’s consumer business in March 2023.
In his recent insights, Mr. Chowdhry discusses the transformative impact of IoT, Big Data, and AI on the global payments industry, highlighting India’s leading role in this digital revolution.
The global payments industry is undergoing a remarkable transformation, driven by emerging technologies such as IoT, Big Data, and AI. India stands at the forefront of this revolution, reshaping its payments landscape through innovation and technology. AI, in particular, is emerging as a game-changer, with the National Payments Corporation of India (NPCI) estimating that it could contribute over $1 trillion annually to financial services.
The Rise of Embedded Payments in IoT
Imagine paying for groceries through your smartwatch or settling utility bills via your smart refrigerator. These scenarios are no longer futuristic fantasies. The embedded payments market, valued at $66.8 billion in 2022, is projected to grow at an impressive CAGR of 25.4% from 2023 to 2032.
Embedded payments provide unparalleled convenience by eliminating the need for physical cards or PINs. These systems integrate advanced security measures to protect user data while offering personalized experiences through IoT devices.
Enhancing Security with CDCVM
Security is a critical consideration for IoT-enabled payments. The Consumer Device Cardholder Verification Method (CDCVM) is pivotal in ensuring secure transactions through IoT devices.
Key security features of CDCVM include:
- Secure Pairing: Establishes a secure link between the IoT device and the user’s primary device, allowing only authorized devices to initiate payments.
- Dynamic Codes: Each transaction generates unique codes, making it nearly impossible for fraudsters to intercept and misuse.
- Biometric Authentication: IoT devices integrate features like fingerprint and facial recognition, with future possibilities including voice-based systems for enhanced security.
- Tokenization: Replaces sensitive card data with unique tokens to safeguard user information further.
As IoT adoption grows, CDCVM’s role in creating a safe and seamless payment environment becomes even more critical.
AI Revolutionizing Embedded Payments
AI is not just enhancing security; it is revolutionizing the payment ecosystem. By integrating AI with CDCVM, payment providers are achieving new levels of efficiency and personalization.
AI’s Impact on Payments:
- Fraud Detection: AI-powered algorithms analyze transaction patterns to identify anomalies, preventing fraud in real-time.
- Dynamic Risk Assessment: AI assesses transaction risks instantly, enabling swift responses to potential threats.
- Personalized Experiences: AI customizes authentication processes, balancing security and user convenience based on transaction risks.
Beyond CDCVM: Innovations in AI-Driven Payments
- BNPL (Buy Now, Pay Later): AI evaluates creditworthiness, personalizes offers, and automates payment schedules, providing flexible options.
- Open Banking: AI-driven analytics aggregate data for personalized financial insights.
- Biometric Authentication: AI ensures secure and convenient identity verification.
- Voice-Activated Payments: Hands-free payments enhance user experience through intuitive systems.
Preparing for the Future of Payments
To harness the full potential of AI, IoT, and embedded payments, financial institutions must build robust data platforms and infrastructure. A centralized data backbone is essential for managing and analyzing data in real-time. Additionally, standardized protocols are required to develop, deploy, and monitor AI models sustainably.
A Transformative Path Ahead
Embedded payments, powered by IoT and AI, represent the future of global transactions. They promise a world of seamless, secure, and personalized payments, enhancing user experiences and fostering trust. For India, as a leader in digital payments, these advancements herald a new era of financial innovation and inclusion.
