Back in 2023 I wrote about how Artificial Intelligence (AI) was going to personalize merchant service (https://www.libertyccs.com/payment-blog/2024/1/10/ai-personalization-and-merchant-services), and today AI continues to slowly transform the digital payment landscape, enhancing security, efficiency, and customer experience.
For example, fraud is a major concern in the payment industry. Traditional fraud detection systems struggle against sophisticated cybercriminal techniques. AI driven fraud prevention leverages machine learning to analyze transaction data, identifying anomalies in real-time. Unlike static rule-based systems, AI continuously learns, improving fraud detection accuracy while reducing false positives. Behavioral biometrics, such as typing speed and mouse movements, further enhance authentication, improving security without adding friction to transactions. This is probably the most advanced use for now.
Relatedly, AI plays a crucial role in mitigating risks such as chargebacks and financial losses. By analyzing transaction patterns, AI can predict and prevent disputes. High-risk transactions can be flagged for additional verification, reducing fraudulent chargebacks. AI also helps businesses assess credit risk, ensuring smoother financial operations and improved customer trust. We are close to this become real.
Although systems are not quite fully formed, at some point A.I. will optimize transaction approvals by assessing risk factors and making real-time decisions, and simultaneously select the most cost-effective payment path to minimize fees and transaction times. These innovations will translate into cost savings for merchants and a smoother experience for customers. This will happen, but as of now, it does not exist.
AI-driven chatbots enhance customer service by handling payment inquiries, refunds, and transaction updates. These automated assistants reduce operational costs and improve response times. AI chatbots can also predict customer needs, suggesting relevant payment options based on transaction history. This level of personalized service increases engagement and customer retention. This already exists.
For businesses with subscription models, AI could manage recurring payments more effectively by predicting customer churn and suggesting targeted retention strategies. Failed transactions could be retried at optimal times, reducing involuntary churn (turnover) and maintaining steady revenue streams. I’m sure someone is working on this now.
Merchants will come to embrace AI-driven solutions only when all of these features are fully integrated into platforms by payments processors. Perhaps in another two years, these will also be standard solutions accessible to all merchants.