As instant payments become the norm, financial institutions could be at risk of falling behind with increasingly sophisticated AI-driven fraud posing significant threats, Citi, the global investment bank and financial services provider, warns in a new report.
A $1trillion global fraud crisis driven by AI scams and deepfakes could be on the horizon, leading to Citi calling for financial institutions to embrace AI-powered fraud defence and other enhancements to antiquated AML and KYC processes as a critical priority.
In its latest report, ‘Real Time: 24/7 Finance in an Always-On World‘, Citi analyses how real-time payments are reshaping finance, technology, and global commerce. In the report, it details how Asia and emerging markets are leading the way when it comes to the 24/7 availability of seamless instant transactions. To many, this will come as no surprise, with real-time systems like Pix in Brazil, UPI in India, or M-Pesa in Kenya, driving economic development.
Real-time payments are already facilitating global commerce across over 80 markets, with nearly 266 billion real-time transactions processed globally in 2023 alone, a 42 per cent increase year-over-year. Looking to the future, this trend appears set to continue, with estimates suggesting that and with estimates saying this number could reach 575 billion by 2028.
Citi says this transformation requires a fundamental shift in existing business models and infrastructure, highlighting a need for FIs to move away from legacy systems and vertical silos towards more integrated, horizontal, real-time solutions.
A 2024 Citi Treasury and Trade Services survey of banks revealed that fintechs stand to gain approximately 10 per cent market share in cross-border payments from banks in the next two to five years, underscoring the need for traditional institutions to adapt and innovate.
Despite the enhancements to the speed of payments across the globe, and the promise of boosting global GDP by over $280billion in 2028, a more interconnected, always-on environment can amplify the risks of fraud. Citi warns that in 2024, consumers globally lost an estimated $1trillion to scams across all payment methods.
Huge global growth potential
However, despite a higher level of fraud risk, and increasing demand for robust security measures, the repot also details how this environment presents unparalleled opportunities.
Citi says that by embracing innovation, prioritising cybersecurity, and fostering collaboration across the financial ecosystem, businesses and financial institutions can start to unlock the full potential of real-time payments and build a more inclusive, efficient, and dynamic financial future.
By enabling faster settlements, improved working capital management, and enhanced customer experiences, real-time cross-border payments are unlocking new opportunities for businesses operating globally.
While the complexities of cross-border interoperability and regulation remain a key challenge, Citi details how, if resolved, instant cross-border payments could impact businesses for the better across a variety of industries:
Empowering the global gig economy
Real-time cross-border payments simplify payroll and ensure that gig workers receive their earnings instantly, directly into their preferred bank accounts or digital wallets. This is particularly beneficial for workers with limited access to traditional banking services, providing greater financial inclusion and economic empowerment. This could also enhance platform loyalty and engagement, giving companies a competitive edge in attracting top talent.
Streamlining passenger compensation
In the travel industry, real-time payments expedite compensation for flight delays, lost baggage, and
cancellations. This not only improves customer experiences, but also increases satisfaction and operational efficiency for airlines.
Unlocking liquidity in global trade
Liquidity constraints have long posed a challenge for businesses engaged in international trade, particularly small and medium enterprises (SMEs) that often rely on expensive credit mechanisms to manage cash flow.
Instant cross-border payments are enabling real-time settlements between buyers and suppliers. This optimises working capital management, strengthens commercial relationships and reduces reliance on costly trade finance solutions.
Transforming cross-border remittances
Real-time, low-cost cross-border remittances are now a reality, benefiting millions of households worldwide. This shift is particularly impactful in emerging markets where timely access to funds can impact economic well-being.
