Visa pilots settlement prediction service for client banks

Visa is leveraging AI and real-time analytics to pilot a new service that will help banks manage their transaction settlements. [caption id="attachment_217446" align="alignright" width="300"] Image by Pixabay[/caption] Smarter Settlement Forecast will be a subscription service available through the Visa Analytics Program, although Visa has not yet revealed the price. The service will provide Visa clients with a seven-day forecast of the settlement amount required daily to make their Visa transaction payment, according to Gourab Basu, vice president of global network processing at Visa. It’s a new approach for Visa, one that allows the company to move beyond using AI for risk and fraud detection to solving other customer and client problems, Basu said. Visa is currently piloting the service with three clients, with plans for a formal launch later this year. The Smarter Settlement Forecast announcement was part of VisaNet +AI, a suite of AI-enabled services unveiled this week. The company did not disclose the names of the clients piloting the tool. Settlement payments are made at the end of the day in bulk, and forecasting how much money to set aside for payments falls to the bank treasurer. For some banks, this is a manual process, while other, larger banks have forecasting platforms that look at transaction patterns, Basu said. “If I’m an issuer, I'm the treasury person in the issuer shop, and I manage cash,” Basu said. “I need to make sure that I have enough liquidity in my settlement account to pay out, because every day I am in a net debit position,” he added. “This product, basically, will give me — the treasurer at the bank — a prediction of how much [the bank] will have to pay in the next seven days.” To predict cash outflows and inflows, the service uses information generated by historical settlement volumes, seasonal indicators, macro-economic trends, outlier events like the pandemic, and real-time transaction data. David True, a partner with PayGility Advisors, a payment industry consultant, said the new service offers Visa another revenue stream while generating some goodwill with banks. “I see it as a way of Visa trying to make banks happier working with them since it says to them, ‘It will make it easier for you to do your cash flow forecasting,’” True said. “From the treasury's point of view, anything that improves your forecasting helps, because then they know how much cash they need to have ahead, and how much cash they can invest.” Visa noted in a prepared statement that the forecasts will help issuers and acquirers “optimize treasury and liquidity management processes, and assist financial institutions settling in multiple currencies with predictions for each currency.” Banks will likely see more such offerings, said Enrico Camerinelli, a senior analyst with the financial services consulting firm the Aite Group. He predicted back in 2018 that financial institutions would build innovative credit risk models using diverse data sets. “The ability to anticipate cash inflow and outflow needs using information from multiple and also ‘non-traditional’ (e.g., social media, commercial data repositories) sources is the new frontier that corporations are trying to achieve and offers an opportunity for banks to service their clients,” Camerinelli told Bank Automation News in an email. A second tool in the Visa suite is Smarter Posting, a service that uses AI to deliver a customized score for each transaction as part of the authorization process. The tool uses transactional and historical data to predict whether a transaction amount will stay stable through clearing. For example, it would give a lower rating to a transaction involving a tip than to one from a grocery store, which is less likely to change. In testing, the model has been 98% accurate, Visa stated. Smarter Posting will be available in Europe in April and expanded globally “in the near future,” according to a company statement. The goal of that service is to empower FIs to “provide a more consistent end-to-end payment experience, for example, by provisionally updating the account balance that a card holder sees,” Visa said in a statement. Shares of Visa [NYSE: V] were trading at $209.57 as of 2:59 p.m., up 0.15% from market open.

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Visa pilots settlement prediction service for client banks

The company leans into AI with debut of analytics products

Weekly Wrap: RBC and CIBC double down on proactive insights

Deloitte: Risk management looks to automation in 2021

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