Four ways AI is transforming payments

By Michael Seaman, Co-founder & CEO of Swipesum

In a world rapidly embracing digital technology, efficient, reliable, and secure payments are more crucial than ever.

With the introduction of artificial intelligence into the payments space, both large companies and emerging startups alike are now grappling with how to best implement the new technological advancements to streamline processes, improve efficiency, and reduce costs.

Here are four ways that artificial intelligence is transforming the payments industry that business leaders should know.

Fraud detection and prevention

We have entered the age of digital payments, with 53%, more than half of Americans, using digital wallets more than traditional payment methods. This rise has led to a rather large increase in fraud, going from 47% in 2022 to 61% in 2023.

With those statistics in mind, it is no wonder that one of the biggest concerns for businesses today when managing online or digital payments is fraud and the financial and security costs associated with it.

AI can help not only with fraud detection but prevention as well. Artificial intelligence can analyze large quantities of data to identify patterns and anomalies within existing data. Businesses as a result can distinguish these patterns using transaction histories to predict future consumer behavior and identify unusual payments that deviate from the norm, thus preventing fraudulent transactions from being processed.

Preventing refunds and chargebacks

Another way artificial intelligence can be an indispensable tool is by preventing unnecessary refunds by companies and chargebacks for card issuers. With AI, payment and accounting professionals can reduce time validating documentation, verifying credit card information, and declining requests outside of required time limits to avoid invalid chargeback or refund requests.

In addition, similar to how AI can analyze transactions, artificial intelligence can also identify if an unusual amount of disputes have been placed by a specific account. This may help to prevent what is often known as “friendly fraud.”

Consumers who purposely purchase items and file claims for chargebacks by inaccurately identifying purchase issues commit fraud that increases chargebacks. With friendly fraud on the rise, preventing invalid chargebacks efficiently with tools like AI should be at the forefront of people’s minds.

Reduce payment processing and interchange fees

Navigating payments and payment strategies is tricky for most people and businesses. Setting up a payments system is one thing, but optimizing that system to be as seamless, efficient, and profitable as possible is a whole other ballgame. Often, businesses are being overcharged, and they don’t know it.

Artificial intelligence is a game changer when reducing payment processing costs and fees for businesses and merchants. New technologies now exist that can do what takes typical payment auditors months to find. These tools analyze processing statements and create digital cost-comparison sales proposals within minutes. These proposals can break down the intricacies and cost structures of a company’s current system and simultaneously showcase where cost savings are possible with processing fees, interchange fees, and more to improve the overall effective rate.

Improving customer experience and reducing support efforts

With artificial intelligence, organizations can increase sales by personalizing the shopping and payment experience. Using a chatbot, artificial intelligence can analyze large quantities of customer data on spending habits and provide customers with tailored recommendations and customized payment options throughout the shopping process. Without ever leaving the chat, customers can get cart suggestions based on previous purchases and a link directly to their preferred payment method.

On the other end, the payments industry is plagued with long wait times for merchant service calls, often answering the same questions. Payment companies can manually reduce the time spent answering questions and complaints by adding these common issues and responses to a database for the customer success chatbot. Those with often repeated questions or complaints can receive answers 24/7 without the payment support team lifting another finger.

Artificial intelligence can be an incredible tool for payment experts and professionals to boost customer retention, combat fraud, and improve the overall efficiency of an organization. Although any new technology has its risks, if we embrace AI and the challenges that come along with it, we have the opportunity to encourage innovation in the payments space for a future of more secure and seamless transactions.

About the Author

Michael Seaman is the Co-founder and CEO of Swipesum, a comprehensive payment processing and merchant services consultancy delivering innovative auditing solutions to businesses nationwide. Seaman founded Swipesum in 2016 with his brother, Stephen, to serve as Chief Payments Officer for businesses nationwide, combining industry knowledge, AI and proprietary software to create a transparent payments strategy that optimizes payment processing fees. The company has been recognized by the Inc 5000 as one of the fastest-growing privately held companies in the US.