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How is AI affecting the payments industry?

How is AI affecting the payments industry?

Sep 18, 2023
Tom Martindell

The emergence of AI within the payments industry can’t be ignored. It offers a wealth of benefits for businesses, helping you boost efficiency while reducing fraud rates. But how does artificial intelligence in payments work, exactly? 

This page will explain all you need to know, including how it can be useful in payments, which businesses should use AI, and how Checkout.com can help you leverage AI capabilities.

What is AI in payments?

Artificial intelligence (AI) describes the emulation of human intelligence in machines. It includes various applications such as speech recognition, language processing, and machine learning. In terms of payments AI, businesses harness these principles to improve payment processing, AI accounting and finance sectors. 

For example, AI-powered tools – like chatbots and virtual assistants – can efficiently handle customer inquiries during checkout or order fulfillment by using natural language processing. In other words, AI tools imitate human intelligence in order to solve payment-related problems quickly and cost-effectively. 

AI payment processing also proves valuable in open banking, big data analysis, and fraud protection, as machines can rapidly sift through massive data volumes, identifying potential risks and detecting unusual payments.

What ways can AI be useful in payments?

Artificial intelligence in payments can bring many benefits to different areas of your business, including:

Payment processing

The integration of AI tools in payment processing offers several advantages, including streamlining operations by automating repetitive tasks, minimizing errors, and enabling industry players to concentrate on strategic responsibilities. Through automation of data entry, payment reconciliation and reporting, AI technology becomes a time-saving and efficiency-boosting asset. 

This empowers businesses to optimize the customer journey, discover novel prospects, and better handle risks, meaning customers can enjoy a faster, more efficient, and precise payment experience.

Fraud detection

AI tools offer a game-changing solution to fraudulent activities by swiftly analyzing vast volumes of data in real-time, pinpointing patterns and flagging potential fraud. 

Leveraging data from various sources and employing machine learning algorithms, AI tools can uncover novel fraud patterns that were previously unknown. This not only translates into cost savings for your business and payment providers, but also improves the customer experience by reducing false declines.

False declines

The algorithms powering machine learning tools, such as our Fraud Detection Pro, can enhance fraud detection accuracy by identifying legitimate transaction patterns, then reducing false positives and negatives. 

AI payment solutions can also analyze new data quickly, adjusting to changes in fraud techniques, resulting in more effective detection and prevention of fraudulent transactions. With this real-time data analysis, your business can benefit from quicker identification of potential fraud, minimizing the risk of false declines and improving the overall customer experience.

Predictive analytics (for customer payment preferences and buyer behavior)

In predictive analysis, AI uses statistical techniques to review historical customer information to predict future customer behavior. AI enables your business and service providers to monitor customer spending behaviors and detect patterns and preferences in their usage. 

By accessing a customer's transaction history, you can provide personalized deals and discounts, allowing your retail business to create tailored pricing models and offer customized payment choices during checkout.

Payment optimization (e.g. acceptance rates, reducing cart abandonment)

AI can optimize payments in many ways. First, it can reduce cart abandonment by enabling your business to send personalized emails with targeted offers, as it analyzes customer behavior and preferences. The algorithms determine the best timing and frequency for email campaigns, ensuring relevant messages reach the right customers, resonating with their interests and needs.

AI can also identify customers who potentially abandoned their carts, enabling your business to display relevant online ads. With dynamic retargeting, you can tailor your ad content to maximize conversion chances based on user behavior.

Second, AI can help improve your organization’s acceptance rates. For example, Checkout.com’s Intelligent Acceptance tool enables merchants to improve acceptance rates, reduce interchange fees, and enhance card data security. This AI-powered tool efficiently lowers costs for your business by directing transactions to networks with the most favorable fees, especially in markets with multiple debit, local, or global payment networks.

KYC (Know Your Customer)

By leveraging AI technology, you can automate identity verification, document authentication and risk assessment, as AI algorithms can quickly review large volumes of data, detect fraudulent activities, and flag suspicious individuals, ensuring compliance with regulations while saving time and resources. AI can also continuously learn and adapt to evolving patterns, improving the accuracy and efficiency of your KYC procedures.

Benefits of artificial intelligence in payments

Research from 2021 shows that 61% of employees reported a boost in productivity after the adoption of AI within the workplace, which is just one of the benefits AI can bring to your business. 

Below, we’ll briefly explain the biggest ways AI can help the payments industry…

Increase efficiency and productivity

First and foremost, AI technology offers a remarkable boost to productivity and efficiency, surpassing human capabilities in task completion. By delegating mundane tasks to AI, your employees can focus on more complex parts of your business, leading to increased productivity and improved overall company efficiency.

Accelerated workflows

In the fast-paced digital era, AI is ideal for expediting tasks and processes within your businesses, allowing your teams to achieve results faster, leading to tangible profits.

Better customer service

AI makes it easier for your business to interact with a larger customer base, providing personalized care and attention. With AI handling multiple customers simultaneously, your customer support teams can deliver exceptional service, leading to improved customer retention rates.

Advanced monitoring capability

AI's ability to quickly process lots of data leads to efficient monitoring and issue detection, enabling prompt actions to address problems. Whether it’s for things like factory equipment maintenance or cybersecurity, AI can help prevent major disruptions.

Minimized human error

Introducing AI into your company significantly reduces human errors, improving overall work quality and efficiency. While AI errors are possible, they’re far less frequent compared to human errors, saving costs and time.

What business should use artificial intelligence for payments?

When it comes to AI in payments, these four types of businesses would benefit most:

Ecommerce

AI technology offers significant potential to improve the ecommerce shopping cart experience in two key ways. Firstly, it can elevate personalization by analyzing browsing and purchase history to suggest complementary products and offer enticing discounts to encourage purchases. 

Second, AI streamlines the checkout process and reduces cart abandonment rates, as it automatically fills in customer information – like shipping and billing addresses – and provides multiple payment options tailored to the customer's preferences.

B2B (business-to-business)

AI-powered procedures – like invoice processing – streamline the laborious task of data entry, minimizing errors and expediting payments. AI matches incoming payments with outstanding invoices and reduces manual efforts by automating payment reconciliation. 

AI can also identify potential payment delays, such as disputes, enabling proactive resolution. This not only accelerates payments but also improves payment data accuracy, fostering stronger business relationships.

SaaS (software-as-a-service)

AI can help Saas brands in many ways. First, AI enables personalization by analyzing user data and offering tailored recommendations, improving conversion rates in SaaS marketing campaigns. 

Second, AI automates repetitive tasks, such as data entry and report generation, freeing up the time of your employees for more strategic tasks, which is particularly useful in SaaS project management. 

Third, AI's predictive analytics capabilities help in SaaS CRM, identifying sales opportunities and improving customer retention. AI’s predictive analysis can also bolster your cybersecurity by detecting and mitigating threats in applications like cloud storage. 

Lastly, AI promotes scalability by automating processes, managing extensive data, and complex workflows, while AI's automation leads to cost savings and boosts overall efficiency, benefiting small and medium-sized businesses that have limited resources.

Subscription 

AI is a valuable asset for subscription businesses, offering effective solutions for churn management and recurring payments. By leveraging AI, your subscription-based business can predict churn, implement personalized retention strategies, and automate customer communication. 

AI also streamlines recurring payment processes, analyzes usage data to understand customer behavior, and provides predictive pricing insights. These capabilities should improve customer satisfaction, reduce churn rates, and ensure seamless recurring payments.

What about the risks of AI in payments?

You’ll probably have read a lot of articles recently about the risks of AI, from killer robots to super-intelligent machines enslaving humanity. We’re not going to cover these topics in detail here, but we did want to talk about some of the more immediate risks to merchants that AI technologies could pose.

More scams, with less effort

Fraudsters can use AI to carry out automated activities at a larger scale, using generative AI to create spam emails and fake websites, social media accounts, or fake reviews, or other deceptive or misleading online content that tricks people into revealing sensitive data.

Impersonation

AI systems be trained on a person’s speech patterns and language and there has alread been one report of these programs used in a fake hostage scam. Executive impersonation, fake customer calls, or blackmail using AI-generated images are an increased risk with the ability of AI to look or sound like a particular person.

Anonymity

With an AI-based system there may not be a human fraudster to track at the other end of a scam. Fraudsters can use these systems without leaving a trail, making it harder for authorities to detect who is behind the attack. 

Thomas Martindell, Senior Manager at Checkout.com adds a final thought:

In the wrong hands, AI can be used for more sophisticated and powerful attacks at a larger scale, and it’s becoming harder to know whether text, speech, or even pictures and video are real or fake. Strong security methods and training on spotting suspicious communications can help protect your business from AI-based fraud.

Explore AI with Checkout.com

AI is transforming the payments industry. That’s why we recommended leveraging AI capabilities in order for your business to stay ahead of the curve, which is where Checkout.com can help.

Not only can you increase sales and optimize costs with our Payment Processing tool, you can reap the rewards from our AI-powered tools, including our Intelligent Acceptance and ID Verification, helping your business boost acceptance rates, reduce fraud and improve overall efficiency. 

Contact our sales team for more information on how Checkout.com’s AI processes can help your business.

Unlock your payments potential today

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September 18, 2023 14:32
September 18, 2023 14:32