The Middle East and artificial intelligence (AI) share a special relationship. The region is home to the world’s first AI ministry in the UAE. It is a hot zone of adoption and innovation, and economic predictions for AI’s impact are eye-catching. According to a recent McKinsey report, in the GCC region, an estimated $150 billion could be added to the combined GDP—some 9% of the regional economy—with a qualification that generative AI could inject even more growth and inflate the projections. PwC’s Strategy& agrees, surmising that the GCC could see just under $10 of economic growth for every $1 invested in generative AI, amounting to a regionwide $23.5 billion annually by 2030.
This AI growth will happen amid another growth spike. The Middle East has become the fastest-growing market for real-time payments, according to the 2024 Prime Time for Real-Time report from ACI Worldwide. The region witnessed year-on-year growth in transaction volume of 33.6% in 2023. Some 855 million real-time payment transactions were recorded, and this figure is expected to reach 3 billion by 2028, a five-year CAGR of 28.5%.
These two trends of real-time payments and AI are set to converge. While this will no doubt have immense potential to unlock value for individuals and businesses, if not managed properly, it could also damage public trust in both arenas. Oman, Kuwait and Qatar debuted their national real-time payment platforms last year, joining earlier launches by Saudi Arabia, Bahrain and the UAE. The global financial ecosystem will certainly benefit as regional transaction value hurt towards the trillion-dollar mark ($90 billion by 2028).
Challenges and opportunities
Legacy payment systems took days to process transactions, which allowed institutions more time to discover fraud. Real-time payments are great for the customer experience but also raise security challenges exacerbated by the speed and volume of transactions initiated, fraudsters’ use of generative AI, and enterprises’ rush to integrate real-time payment options as part of their digital transformation strategy. Interestingly, the AI that intensifies the threat from fraudsters allows defenders more options to prevent illegitimate real-time payment transactions.
Middle East financial service industry (FSI) entities integrating real-time payments must overcome several challenges. Take identity theft. Synthetic identity fraud is easier with AI, so in the spirit of “set a thief to catch a thief”, AI is the ideal tool to counter it. But to do so effectively requires an abundance of granular, high-quality data. A range of factors determines the accuracy of AI models, but most of them are data-related. With too few data points or too many inaccurate ones, the results will be too inadequate to stand as an effective countermeasure to fraud.
Fraudsters also need data to be effective, so the other side of the data challenge is protecting personal information. A criminal can use the data they find to impersonate a banking customer and sell that information to others on the dark web for a handful of dollars per record. Anti-fraud has, therefore, become a battle between FSI entities and their criminal adversaries over who has the best data for training their AI models. Remember that a real-time payment transaction is not subject to rollback, so there is more pressure to build models capable of making the right decision in real-time.
Front of house vs. backstage
The data requirements mean that global payment companies operating for decades will have a significant advantage. The more established a payments company is, the more data it can leverage through its payments orchestration platform in the fight against fraud. When sitting on billions of historic transactions worth trillions of dollars, an institution is in a better position to combine data depth with breadth and apply sophisticated AI and machine learning (ML) to spot patterns and adapt/evolve. Such an organisation can better spot anomalous behaviour using behavioural biometrics, where AI examines a user’s mouse movements and typing and touch patterns.
Behavioural biometrics allows continuous authentication of users without any extra security demands, thus providing a seamless, frictionless payment experience. In a region where slick digital experiences are increasingly regarded as the minimum requirement of excellent customer service, banks and other FSIs gain a lot through AI. In the face of it, they delight customers; in the backend, they beat the fraudsters at their own game. Financial institutions can go beyond real-time fraud prevention and anticipate future criminal campaigns with enough high-quality data and AI tools.
One hardly needs to draw a graph to visualise the drop in the effectiveness of AI-based anti-fraud systems as a bank’s scale and available budget decrease. Small and mid-sized banks will be vulnerable unless they partner with global payment processors with the scale of data and the sophistication of AI to be effective against criminal elements.
Central payment infrastructures have a vested interest in protecting the payment rails. As the central point of transaction processing, they must ensure security to maintain trust, prevent fraud, and support the overall stability of the financial system. Payment companies have a stake in avoiding fraud, too, and to that end, they will only be too happy to partner with any bank of any scale to see the job done.
As time passes and the right partnerships form, all institutions will gain much more than the means to protect their customers from fraud. They will also gain monetisable customer insights. More significant volumes and higher data accuracy will help banks identify macroeconomic and market trends, paving the way to new business opportunities, products and services.
Safe at last
The parallel rise of AI and real-time payments (and their intersection) in the Middle East is a double-edged sword—a boon to the customer experience but a bane to those entrusted with customer data. Integrating AI into security operations enables FSI entities to snuff out the flames of fraud before the house catches fire. And if the right partners team up, this can happen at scale to enable a happier future for all—except the fraudster.
