Gain exclusive insights into the evolving world of payments that are reshaping the banking sector and enhancing customer experiences.

Thought Leadership

Thor Arve Vartdal, scheme compliance expert at Rivero, observed that digital operational resilience is a driving force in modern dispute management, as it continues to evolve from basic efforts to shorten dispute cycles into complex, data-driven interactions. 

“I’ve been working with compliance, fraud, and disputes for quite a few years, on both the issuing and acquiring side,”

“Optimising disputes is not new; 20 years ago, Visa had a project called Red, which stands for re-engineering disputes, with the objective of shortening debates between issuers and acquirers about which party is liable for a dispute. But dispute management is so much more than that.” 

In our “Mastering Dispute Management” webinar (hosted on September 2024), Vartdal explored industry trends with Ben Beer, senior consultant, dispute optimisation at Visa. Beer noted that disputes had leveled off following the pandemic but have begun to rise again and 

75% of current dispute traffic is fraudulent

“We’re paying a high price for disputes across the European region,” Beer said. “The Visa network processed around 

 worth, roughly $928 million in 2023, and European volumes may cross a billion relatively soon, because we had an increase of 8% between 2021 and 2023.”

Beer went on to say that organizations are beginning to evaluate the operational costs of dispute management, citing the following six pillars of effective dispute processing:  

Beer stated that he has seen some issuers’ team members use up to five or six applications to manage a single dispute. It may begin with a customer emailing a form, which requires Outlook. Then the form needs to be scanned, which requires document imaging, and subsequently uploaded to a CRM, such as Salesforce. After raising the incident as a dispute through Visa Resolve Online (VROL), the transaction may also require research in a different application, such as a fraud prevention tool or solution. In this example, the organisation used six different applications to process a single dispute.  

Vartdal noted that Amiko could replace all such side applications and enable issuers to manage the entire dispute from initial inquiry and case management to resolution in Amiko. 

“We have received feedback from issuers who have doubled their capacity to handle disputes by using Amiko,”

“Others have saved costs by automating dispute management functions, which enabled them to resolve small-ticket disputes that had previously been too expensive to process.” 

Rivero x Visa webinar

 due to incomplete forms or missing information, 

 optimises dispute management by presenting required information on demand. As a customer’s first touchpoint, the Virtual Agent can also use this data to deflect first-party misuse by providing customers with details that jog their memories and demystify questioned transactions. In fact, an issuer recently told Rivero that only one-third of conversations initiated by the Amiko Virtual Agent resulted in actual dispute cases.

How resilient is your dispute management?

Events in July 2024 could be likened to a stress test of the global financial ecosystem. Escalating fraud and service outages involving Microsoft operating systems and UK’s CHAPS interbank payment system tested the resilience of banks, enterprises and service providers worldwide.  

Alex Reddish, responsible for international expansion at 

, compared payment flows to water, electricity, and other public utilities, which tend to be taken for granted until something breaks. 

“The CHAPS outage illustrates how much we depend on these systems and the smooth flow of payments, no matter which system they pass through.”

Recent service interruptions had been caused by third-party service providers, Reddish noted. Microsoft Windows operating systems went dark on 19 July 2024, after security provider CrowdStrike distributed a faulty update to its Falcon Sensor software. CHAPS went down the following day, due to operational difficulties at third-party provider Swift. These events raise questions about legacy systems, he said, and their capacity to manage modern-day commerce. 

Thomas Müller, co-founder and CEO of Rivero, observed that recent outages brought down computer systems around the world, impacting banks and payment gateways and causing airlines to ground flights in many countries. 

“It may still be a while before the financial cost of the outage is totalled,”

“However, this incident is a reminder of the need for resilient systems that can withstand faults without causing widespread disruption.”

Building resilient systems may seem daunting at first, but Müller has seen financial institutions update systems without ripping out or replacing existing infrastructure. Each system, built to unique specifications, shares these four essential attributes: 

Modern SaaS solutions provide these capabilities without requiring heavy upfront investments and lengthy implementations, Müller noted. Participating banks can be up and running in weeks rather than months by using APIs to extend capabilities and improve efficiencies, he added. 

Achieving and sustaining resilience: the case of fraud and disputes

 (MRC) members warned of a recent uptick in refund abuse, first-party misuse, and chargeback volumes throughout the merchant community.  

The MRC advised merchants and solution providers to review current KPIs and velocity checks to identify any changes to transaction flows and to consider adding additional KPIs and velocity metrics to detect repeat refund requests. They also recommended evaluating the percentage of refunds and replacements in total sales, the amount of time that elapses between purchases and refunds, and prevailing reasons for chargebacks. 

“We haven’t identified a specific profile, meaning that the abuse appears to be across all card types, low and high-net-worth customers, card present and card not present, different merchandise categories, etc.”

Müller noted that the collective impacts of these fraudulent activities flow upstream to card issuers, but digital technologies can improve resilience and protect stakeholders from harm. He added, 

“For example, with our dispute management product, Amiko, we offer card issuers a rule-based virtual agent, which can be integrated into the bank’s app and is directly linked to Mastercard’s 

The virtual agent can then help cardholders remember the transactions in question by providing additional transaction details, alternative merchant names, logos, and contact information, as well as the device used at checkout. 

 has helped our clients and partners deflect 

 of friendly fraud, simply by sharing transaction data and digital receipts with cardholders.

In addition, advanced, SaaS-based solutions like Amiko enable financial institutions to automate manual dispute case management procedures and incorporate multilingual chatbots into cardholder communications. In the digital-first world, customers appreciate having self-service options for obtaining information instantly, on-demand, and in their native languages. 

 defines operational resilience as the ability to deliver critical operations through all types of disruptions. Achieving and sustaining resilience requires an appropriate framework, internal governance, and coordinated efforts of service providers and policymakers. With these pillars in place, banks are well-positioned to identify and react to threats, protect critical infrastructure and find teachable moments in disruptive, chaotic events. 

) reflects further efforts to legislate and standardise approaches to resilience in the financial sector. Enacted by the European Union in January 2023, and set to become effective in January 2025, the ruling aims at protecting information and communication technology (ICT) across banks, insurance companies, and investment firms, which the EU noted are susceptible to cyber-attacks and other disruptions. 

Noting that ICT supports complex systems used daily and high-level economic activities, regulators stated that these technologies must be safeguarded from threats and disruptions. 

 emphasised the need to harden security and improve preparedness across increasingly digitalised and interconnected workplace environments. 

“While the ubiquitous use of ICT systems and high digitalisation and connectivity are today core features of the activities of Union financial entities, their digital resilience has yet to be better addressed and integrated into their broader operational frameworks.” 

Events in July 2024 could be likened to a stress test of the global financial ecosystem. Escalating fraud and service outages involving Microsoft operating systems and UK’s CHAPS interbank payment system tested the resilience of banks, enterprises and service providers worldwide.  



Maintain continuity with resilient payment operations

Europe’s payment rails, like its many iconic structures, have stood the test of time. From earliest iterations, these technology frameworks have moved funds between payers and payees, creating a foundation for innovation and growth. Over time, payments industry stakeholders have striven to protect the sensitive financial data travelling on these rails by creating payment schemes, a complement of rules, regulations, and standards, continuously enhanced and updated in response to trends, requirements, threats, and opportunities throughout the global payments ecosystem. 

 are at times used interchangeably, which tends to conflate their respective roles and capabilities, according to Matt Jones, consultant and advisor at 

, a fintech and payments consultancy, who shared insights on this topic with Rivero.

“literal rails that move funds, often through third-party networks, serving as connecting forces between various parties in the payments ecosystem and as a core foundation of any functioning payment method.”

By contrast, payment schemes are mostly concerned with rules, regulations and consumer protection,Visa and Mastercard, are one well-known example. 

“They maintain an ever-evolving set of requirements and standards, everything from interchange fee regulations, chargeback rules, compliance requirements, and so on.” 

Jones pointed out that Visa and Mastercard function as both rails and schemes, unlike many other payment mechanisms. UK’s Open Banking, for example, runs on Faster Payment Service (FPS) rails. Built to manage bank-to-bank transactions below a certain value, Open Banking operates without extensive pre-defined rules or KYC/KYB requirements, which streamlines customer enrollment but heightens potential for fraudulent activities. 

“There have been reports of [Open Banking] users scanning a QR code that redirects to a scammer’s bank account, with no recourse for victims to initiate a chargeback,” 

“This highlights the need for Confirmation of Payee (CoP), a solution that can check the name on the receiving bank account to confirm it is being sent to the right account. Some payment providers have implemented CoP, but customers do not always check these details. Fraud actors, aware that there will be no consequences or chargebacks, exploit these situations.”

Beyond simply moving transactions, UK’s Open Banking enables third-party service providers to access customer profiles and financial histories through application programme interfaces (APIs). This data can power loyalty, rewards, and cash-back programmes but must be safeguarded against misuse as adoption soars. A recent 

 found 10 million active open banking users in the United Kingdom in November 2023. 

With growing demand for speed and convenience, payment mechanisms are architecting payment rails and schemes in uniquely innovative ways that vary by region. Despite markedly different characteristics and approaches, these methodologies are making payments more secure, agile, intelligent, and transparent in their respective markets.

Payment Rails & Payments Schemes

“In Europe and the UK, all payments systems are managed in a very consensual way,” 

“There's a regulator, various industry bodies, and respective participants, all working together to refine and launch payment products.” 

Collaborative approaches are non-disruptive to markets and give all participants a voice in decision making but can also move slowly, Jones explained. It takes time for regulators and industry bodies to build consensus while steering clear of abrupt changes that could negatively impact specific stakeholders.

By comparison, India’s UPI is more of a centralised scheme with set rules and regularly published updates. UPI formed part of a broader cashless initiative that removed 86% of the country’s cash from circulation. Fortunately, India was not a strong market for credit and debit, which made migrating from cash to UPI relatively frictionless, as consumers were not replacing existing card payment preferences. 

Despite regional differences, payment schemes have similar approaches to consumer protections and best practices. Scheme members manage rules and releases on a regular basis, helping participants adapt to rule changes to mitigate risk and avoid costly non-compliance fines and penalties. Working with standard bodies, regulators, app developers, and each other, schemes may one day achieve an interoperable future, where stakeholders can freely transactacross borders. 

“Real-time payments are often viewed as competing with cards but that is not always the case,” 

Jones said, noting that cards are used throughout Sweden, an almost cashless country. 

“Riksbank's data shows fewer than 10% of the population used cash for their last purchase. Cards and Swish, a popular payment scheme, are both prospering.”

The Swish app simplifies splitting payments and supports both peer-to-peer (P2P) payments and merchant payments. Swish's website states 

"For information regarding the terms and conditions of Swish, visit your bank’s website,"

 which makes it more an enabling technology and app than centralised scheme with formal rules and regulations.

Jones recalled that Swish was far ahead of other European real-time payment schemes when it was launched in 2012 by six Swedish banks. The simplified real-time payments system continues to scale, attracting more banks, users, and merchants. Alongside Swish, local settlement house Bank Girot launched a real-time payments system (BiR) that facilitated year-round settlements around the clock until it was shut down in 2024, when settlement was moved to The Riksbank's (Swedish Central Bank) RIX-INST system.

Jones acknowledged that modern payment rails and schemes are giving merchants better options but questioned how they benefit consumers. 

“Open Banking and various real-time payment schemes seem to have been focused far more on the needs of businesses than consumers,” 

“For instance, UK’s Open Banking offers lower fees than cards, no chargebacks, and immediate settlement and none of these things matter to consumers.” 

Losing chargeback capability is actually a bad thing for consumers and why should a consumer care whether or not a merchant gets funds immediately? What’s far more important, when architecting a new payment method, is to begin with the end-user in mind, by building products that appeal equally to merchants and customers. 

 and consider creating incentives for customers. 

“Consumers who move away from cards stand to lose cashback offers, points and miles. What new rewards and incentives can modern payments offer that will make it worth the ride?” 

Payment Rails vs Payments Schemes

European countries are leveraging payment technology to drive innovation and growth in financial services. While consumer preferences vary in each country, they share common principles, which researchers Justus Meyer and Federica Teppa summarized as secure, easy to use, widely accepted, and cost-effective. Their report was based on findings from the European Central Bank’s Consumer Expectations Survey, which included the following key takeaways: 

: Making payments and managing personal finances are integral to most consumers’ daily lives and much of these activities have become digital following the outbreak of the COVID-19 pandemic. Financial institutions and service providers must be able to meet customers where they are, across digital, mobile, online and in-person channels. 

: As more tech companies offer payments and banking services, traditional financial institutions find themselves competing in an increasingly crowded playing field. 

: Payments provide useful customer data that banks can use to improve cost efficiencies and drive financial inclusion. 

: Fraud has become more sophisticated and widespread, requiring banks and service providers to implement multilayered security to protect customers. 

: Understanding consumer payment choices is critical to all stakeholders in the financial services ecosystem. In a 2022 survey, ECB researchers noted that consumer payment preferences are driving engaged discussions in the financial services community about cash usage, open banking, cross-border payments, central bank digital currencies, and more. 

 of 1500 ecommerce and brick-and-mortar merchants in France, Germany, Italy, Spain, Sweden and Poland, Payments Europe characterized the Europeans’ relationship with cash as evolving.  

Vicky Lloyd, Legal Director, International Regulatory Affairs, WEX, said, “Our survey population was clear: three in four prefer digital payments over cash. Cash remains the most common payment method in Europe. However, its overall share of total transactions is declining rapidly and 65% of merchants would even like to have the ability to refuse cash.” 

Lloyd further noted that 85% of survey respondents believed that accepting a wide range of payment methods increases sales and 77% of merchants said that mobile payments, which have tripled in the last 3 years, have helped them scale their business. These data points reflect a competitive European payments ecosystem, she said, which the European Union is helping to foster emerging solutions such as instant payments, open banking and the Digital Euro. 

Consumers throughout Europe are embracing pay-by-bank as a simple, secure, and easy payment method. Technology providers are rapidly iterating to connect underpinning technologies and support growing demand for seamless pay-by-bank experiences. 

Tamara Romanek, Head of Partnerships at Plaid, and Trevor Nies, Senior Vice President and Global Head of Digital Strategy at Adyen, discussed pay-by-bank benefits, which Nies summarized as ease of use, reliability, and cost-effectiveness, an 18 June 2024, fireside 

, Mastercard explored a mostly unified approach to open banking practices in the Netherlands, France, Spain, and Switzerland, “noting how a common open banking agenda paradoxically depends on an appreciation of the very differences that underlie that unity.” 

Pointing out that 59% of Swiss consumers prefer to initiate payments from their bank accounts “without having to input credentials, versus 61%, 65% and 74% in France, the Netherlands and Spain,” Mastercard researchers predicted that open banking practices will double between 2022 and 2027, driven by digitization, consumer preferences, technological progress, and regulators seeking to increase competition.  

In the first half of 2023, non-cash payments in Europe totaled $67 billion, and 54% of all transactions were made by credit and debit cards, according to the European Central Bank’s 

“In the first half of 2023 the number of card-based payments within the euro area increased by 15.6% to 36.5 billion compared with the first half of 2022,” ECB researchers wrote, adding that the total value of card-based payments rose by 14.1% to €1.5 trillion, reflecting an average value of around €40 per transaction. Of all the countries surveyed, they noted that Lithuania had the largest percentage of non-cash payments in the first half of 2023, at around 78%. 

Researchers found 669.5 million debit and credit cards in circulation during the first half of 2023, 4.7% more than the first half of 2022, equating to 1.9 payment cards per inhabitant across a total population of 350 million, they stated.

b862a136-4c6c-4757-a593-b2fda69a9fe1_1456x1048.png

, found a diversified payments ecosystem, in which major digital wallet providers Apple Pay, Google Wallet, WeChat Pay, and PayPal are widely accepted and new players are gaining market share by appealing to consumer expectations for speed, convenience, security and ease of use.  

On the domestic front, researchers saw local wallet growth in select markets and multinational expansion through partnerships and mergers and acquisitions. Overall analysis of 46 domestic European solutions found 27 solutions, similar to Swish in Sweden, BLIK in Poland, and TWINT in Switzerland, that offer P2P, ecommerce and point-of-sale (POS), which led researchers to propose that having all three factors in one solution is a key success driver. 

Additional solutions were highly specialized, researchers found, stating, “Notably, some like Bluecode (Austria) and iDeal (Netherlands) specialized as business-to-consumer platforms, a decision often rooted in a commercial focus. Furthermore, many solutions incorporate additional functionalities, including voucher redemption, bill splitting, and social features like chat or sharing videos and pictures in a social media-like environments.”

In conclusion, researchers characterized the European payment landscape as diversified and fast growing, with numerous digital wallet and P2P use cases achieving both high adoption and high usage in their respective markets.

European Central Bank Board Member Piero Cipollone unveiled the Digital Euro Project, a complementary enhancement to the Single Euro Payments Area (SEPA) initiative aiming to unify fragmented European payments. His 

, delivered at a 24 April 2024, board meeting, positioned both projects as effective strategies for removing barriers to competition and restoring balance of power between non-European and native technology providers. 

“As we transition into the digital age, it is imperative that we preserve the same level of integration and ensure that our currency remains future-proof,” Cipollone said. “There is no reason why public money should not go digital in keeping with all the other forms of payment. We need to adapt to evolving consumer preferences, which are increasingly digital.”

Consumers could use digital Euros for basic transactions and at no charge, Cipollone noted, while maintaining a level of privacy that is similar to cash. This effort would strengthen the “classic SEPA” framework, he said, and provide the backbone for innovative European payments, furthering pan-European reach and resilience.

From Rivero’s unique vantage point in Zurich, Switzerland, we are fortunate to participate in Europe’s vibrant financial ecosystem. As we stay attuned to unique payment preferences of citizens throughout the region, we can collectively build a more innovative, inclusive future. 

European countries are leveraging payment technology to drive innovation and growth in financial services. While consumer preferences vary in each country, they share common principles, which researchers Justus Meyer and Federica Teppa summarized as secure, easy to use, widely accepted, and cost-effective.

European Consumer Payment Preferences Reflect Robust, Diversified Economy

The integration of large language models (LLMs) like GPT-4 in regulatory technology (RegTech) and payment systems marks a new era in the financial sector. With their advanced language processing capabilities, these models have already generated a lot of buzz. 

They are set to revolutionise how financial institutions manage compliance, risk, customer interactions, and transaction processing. However, when it comes to the transformative potential of LLMs in these domains, there is still a question about how we balance the promise they hold against the challenges they pose.

LLMs can offer highly efficient tools to navigate the ever-growing maze of financial regulations. They can offer interpretation of complex regulatory texts and real-time compliance guidance. This capability extends to monitoring regulatory changes globally, ensuring financial institutions adapt swiftly to new requirements.

Risk management also can benefit from the use of LLMs. By analysing extensive datasets, including unstructured data like emails or social media posts, LLMs can reveal hidden risk patterns and potential compliance breaches. This proactive approach is vital in mitigating financial crimes like fraud and money laundering, which are increasingly sophisticated and elusive.

Yet reliance on LLMs for regulatory interpretation could lead to oversights if the model misinterprets nuanced legal language or lacks updates on the latest regulations. While LLMs can be leveraged as supportive tools to interpret compliance requirements or identify hidden risk patterns in risk management, they may also generate false information, leading to unnecessary investigations and resource allocation. 

Elevating Customer Experience in Payments

LLMs are also redefining customer engagement in payment systems. Their ability to understand and respond to natural languages allows for more personalised and intuitive customer interactions. This immediacy in communication, crucial in the fast-paced financial world, can enhance customer satisfaction and loyalty.

The deployment of LLMs in conversational interfaces can simplify payment processes, catering to a broader range of customers, including those less familiar with digital services. For example, an LLM-powered chatbot on a website can assist senior citizens in navigating online payments, ensuring they can do online banking without difficulty. This human-centric approach is not just about ease of use of services; it’s about inclusivity and accessibility.

Despite these benefits, there are challenges in ensuring these systems accurately interpret diverse dialects and slang, potentially leading to misunderstandings. In addition, in highly regulated domains like payments, processes and rules are more strictly defined, and therefore, an over-reliance on automated systems could lead to misinterpretation of rules and miscommunication in customer service. For example, an automated customer service system mistakenly suggests to a user that they have a dispute right for a two-factor authenticated payment, whereas according to the dispute rules of payment networks, there is no chargeback right for the transaction.

Any bias or error in LLM outputs can have significant repercussions, given the sensitive and highly regulated nature of the financial industry. Another tricky area is data privacy and security are paramount. As LLMs may process sensitive or confidential information, robust measures must be in place to protect data and comply with stringent data privacy and confidentiality in the financial sector.

LLM outputs are also not reproducible and deterministic, making them hard to apply to cases where the decisions are rule-based and, therefore, should be reproducible across multiple cases. The fact that these complex models often operate as 'black boxes' makes it challenging to understand and explain their decision-making processes. Therefore, this makes them even less applicable to domains where transparency and explainability of decisions among stakeholders and regulatory bodies are required.

While LLMs in the financial sector can offer groundbreaking opportunities, their successful integration into core processes rests on addressing these challenges.

The Next Phase for LLMs for RegTech and Payments

The European Payments Initiative (EPI), in its ambition to unify Europe’s fragmented payment landscape, recently acquired iDEAL, a successful payment system entrenched in the Dutch marketplace since 2005.

As the project expands across Europe, aiming to provide a ‘unique, European-grown instant payment solution’, it faces a multitude of areas to consider — and among them, compliance and fraud dispute management are paramount.

Scheme compliance is the linchpin of any payment ecosystem, enforcing interoperability and maintaining consistent consumer experiences. It’s the underlying structure that ensures the harmonious functioning amongst all participants in the ecosystem. International payment networks, like Visa and Amex, have established scheme compliance to keep participants apprised of updates and requirements. Weekly bulletins, accessible portals, and strict deadlines are all part of their robust compliance machinery.

Scheme compliance, managing fraud and disputes

However, for the EPI, replicating such a complex operation will be challenging, requiring tremendous coordination and collaboration among various stakeholders. It will be interesting to witness how EPI creates and implements a process that keeps every participant aligned with evolving rules and protocols, thus ensuring a seamless consumer experience.

Alongside scheme compliance, managing fraud and disputes is another area that the EPI will need to consider. With e-commerce transactions on the rise, consumer protection is becoming increasingly important. Consumers need assurance that they are safeguarded against mishaps, whether it be a failed delivery, a defective product, or a cancelled service.

At present, most account-to-account payment methods lack defined rules or guidelines around consumer protection. Contrastingly, the likes of Visa and 

 have developed robust protection frameworks. As cardholders, their customers can dispute transactions, provide evidence, and potentially get reimbursed if things go awry. Such protections not only provide peace of mind to consumers but also foster the adoption of these payment methods.

The need for the EPI to adopt best practice

Will EPI emulate such best practices? It remains to be seen whether it will establish clear rules and guidelines to ensure consumer protection, regardless of the specific bank a customer is associated with. Providing a consistent, well-regulated dispute resolution process across all participating banks is crucial, giving customers the confidence they need to adopt this new payment method.

Taking iDEAL’s example, which operates as an account-to-account payment system in the Netherlands, EPI must build a common framework for all European countries. If a customer encounters an issue while using iDEAL today, the bank’s response varies depending on the case and institution. Under EPI, such ambiguity should be eliminated, creating a payment scheme that provides uniform protection and liability parameters, fostering trust among its users.

Another aspect under the umbrella of consumer protection is fraud. The increasing cases of unauthorised transactions using stolen credentials pose a significant challenge to any payment scheme. While disputes might arise from issues with purchased goods or services, fraud-related disputes are an entirely different beast, requiring careful consideration and swift resolution. Taking examples of card payments, Visa and Mastercard fully protect consumers in cases of fraud (with the so-called zero-liability policy).

Balancing act: convenience, security and consumer protection

EPI needs to have a well-articulated strategy to handle fraudulent transactions, providing clear guidelines to banks on how to manage such cases while also guaranteeing consumer protection. Striking a balance between convenience, security, and customer protection will be a delicate act, but one that is essential to EPI’s long-term success.

In conclusion, as EPI embarks on its journey, evolving from iDEAL’s existing network, it faces the significant task of creating a scheme compliance framework and consumer protection program that can rival those of established international players. It’s not just about providing a pan-European payment solution but also about ensuring a safe, secure, and reliable service for consumers across the continent. Ultimately, the success of the EPI efforts depends on consumer adoption – which will be very much influenced by seamless operations, ease of use and a sense of security.

European Payments Initiative compliance and dispute considerations: the road ahead

Advancements in generative artificial intelligence, and in particular large language models (LLM) such as ChatGPT, have simultaneously caused mass excitement and concern about their impact on each and every industry. As an industry that has already dipped its toe into the field of AI, payments is a little-discussed yet key testing ground for the real world implementation of LLMs.

Where can we find artificial intelligence in payments today?

A decade ago, data intensive processes in payments were mostly managed by rule-based systems. As machine learning became more feasible and increased efficiency across the card payments value chain - from fraud detection to customer onboarding - rule-based systems were gradually augmented with machine learning throughout the payments industry. 

The current pace of innovation in machine learning will be significantly increased by the introduction of LLMs, as the general benefits of ChatGPT and its competitors are realised. This will include assistance for software developers as they implement new payment applications, support for product teams as they refine business models for new payment products, and much more.

Large language models driving innovation in unexpected domains

Payment operations might experience a seismic shift when LLMs enter the card payments value chain, especially in sections that have remained unaffected by artificial intelligence thus far. 

A great example of LLM’s impact on payment operations is how issuers interact with their cardholders. Currently, issuers use a combination of chatbots directing cardholders to helpful resources and humans handling all decision making. Recent advancements in LLMs will enable issuers to utilise advanced chatbots and other automated customer service channels to perform actions upon the request of cardholders, acting as agents capable of executing decisions. 

Ambitious banks, traditionally a role filled by neobanks, will further leverage the capabilities of LLMs by utilising enormous training data sets and constant improvement from past interactions with cardholders to build virtual agents that act as the designated decision maker. This could include making authorization and onboarding decisions, increasing credit limits and handling disputes.

Another exciting area would be LLM’s text understanding capabilities; LLMs are able to analyse and make decisions based upon a larger and more diverse set of data and within a shorter period of time than a human can. If implemented cautiously, generative AI could bring about a significant decrease in the rate of escalated complaints and time spent by cardholders. 

Barriers for artificial intelligence to overcome

Predictability and explainability remain significant hurdles in the path of AI and its adoption across industries. Predictability is achieved once an LLM produces the same output when prompted with a certain set of inputs, whereas explainability is achieved once an LLM’s output can be explained in a way that makes sense to a human. 

Financial institutions are required to demonstrate to auditors how every decision was taken, making the current absence of predictability and explainability a fatal flaw for LLMs in the payments industry. This predicament was encountered by the insurance industry in the past decade; AI-driven agents demonstrated better accuracy than human operators, but insurance firms were not able to move the virtual agents into production due to regulatory shortfalls.

Artificial intelligence, already in use throughout the card payments value chain, has demonstrated its value in the payments industry. The leap taken by ChatGPT and other LLMs demonstrates great potential to vastly improve many payments processes, but previous challenges persist: banks and their regulators aren’t yet ready for the implementation of advanced AI.

The Impact of ChatGPT and Large Language Models on Payments

Are traditional payment methods losing ground in Europe? And how do the competitive positions of major international card schemes look like?

Cards continue to lead in Europe, with debit in the lead:

What do you think about these trends? Share your thoughts in the comments below.

Source: The annual review of payment data from 33 European countries, by 

Are traditional payment methods losing ground in Europe? And how do the competitive positions of major international card schemes look like?


The European Payments Landscape

,  we can explore how issuing banks can optimise their value chain. 

How is the card payment value chain structured? And what are the challenges for issuing banks?

, the card payment value chain consists of several parts. Traditionally, banks viewed payments as a commodity and outsourced a large part of the card payment value chain to Third Party Providers (TPPs). 

A high degree of outsourcing causes the value chain to become longer and more complex. This results in high costs per transaction/card, long implementation timelines (as a result of multiple parties being involved) and, last but not least, very limited flexibility for the bank to drive innovation and be fast in bringing value-adding features to their cardholders.

In the past decade, though, payments have become a strategic success factor for banks to gain and retain (mainly retail) customers, causing banks to focus on ways to differentiate their payment products offerings. However, at the same time, TPPs aim to standardise and streamline their offerings to maximise economies of scale. Therefore, in the last few years, the market observed several consolidations among TPPs. 

Earlier, there was more competition among TPPs, and banks had more bargaining power to negotiate prices and influence technology roadmaps. However, with the recent market consolidations, only a handful of TPPs are left, resulting in fewer options and less negotiation power for issuing banks.

Another important point to consider is that issuing banks often provide a large range of payment products (debit cards, credit cards, pre-paid cards) under different payment schemes (international ones like Visa and Mastercard, but also domestic schemes). Interestingly, it is uncommon for an issuing bank to streamline the processes for different payment products by having one value chain used across all payment product offerings. Instead, they build distinct value chains for each payment product, and thus, they may use different TPPs for debit and credit cards, for example. This adds to the existing complexity of managing costs, services across products and the value chain.

To analyse an optimised card payments value chain, it is useful to consider a challenger bank building a card value chain from scratch to satisfy their customer’s needs and provide the best experience possible. Having started with card payment products (rather than other banking products), challenger banks have a high degree of technical infrastructure and expertise in-house (unlike most incumbent banks). This technical independence from TPPs, coupled with streamlined processes across their payment products, has provided them with a cost advantage, high speed of innovation and the ability to quickly implement new product features.

In the past decade, the technology involved across every link in the card payments value chain has changed drastically, enabling challenger banks to bring technical infrastructure in-house. Cloud technologies, in particular, are allowing businesses to in-source large segments of their value chain - and also significantly reduce costs associated with data centres. In addition, the rise of API architectures has made it easier to build in-house technical infrastructure at a low cost. 

Card payment value chains are often fragmented, with many technical and operational processes outsourced. However, issuing banks looking to optimise their value chain are increasingly insourcing such processes, leveraging modern technologies to reduce costs and increase the speed of innovation towards their cardholders.