ARTIFICIAL INTELLIGENCE IN DIGITAL PAYMENT SYSTEMS ANDITS INFLUENCE ON CONSUMER TRUST:A STUDY IN CHENNAI

Abstract

Artificial Intelligence (AI) has significantly transformed digital payment ecosystems by enhancing transaction efficiency, security, and personalized financial services. In the context of rapidly growing digital financial adoption in urban India, this study investigates the influence of AI-powered dimensions Fraud Detection, Personalization, Transaction Speed, and Service Quality on Consumer Trust in digital payment systems among users in Chennai. A quantitative research design was adopted, and primary data were collected from 100 digital payment users through a structured questionnaire based on a five-point Likert scale. Structural Equation Modelling (SEM) using Smart PLS 4.0 was employed to evaluate both the measurement model and structural model. Confirmatory Factor Analysis (CFA) confirmed satisfactory reliability and validity of the constructs, with Composite Reliability (CR) values exceeding 0.80 and Average Variance Extracted (AVE) values above 0.50. The structural model findings reveal that Fraud Detection (β = 0.421, p < 0.001), Transaction Speed (β = 0.312, p < 0.001), Personalization (β = 0.293, p < 0.01), and Service Quality (β = 0.267, p < 0.05) exert significant positive effects on Consumer Trust. The model explains 68.4% of the variance in Consumer Trust (R² = 0.684), indicating strong explanatory power. The findings emphasize the strategic role of AI-enabled security mechanisms and customized digital experiences in strengthening consumer confidence toward digital payment platforms. The study offers valuable implications for fintech firms, banking institutions, policymakers, and regulators seeking to improve trust, adoption, and sustainability within India’s digital payment ecosystem.