Turning a Profit on Merchant With AI Monitoring Takes Time

Patience is in short supply in a lot of places these days — and the business world is no exception. It’s tough to get a company executive to wait out something to see what happens or where things go in a world that’s moving so fast all around them.

That’s probably why almost one out of every five (19%) merchants onboarded by acquiring banks in the U.S. every month leave too quickly to turn a profit for the average acquirer, according to the December 2021 edition of “AI In Focus: Gaining Ground On Merchant Monitoring,” a PYMNTS and Brighterion collaboration.

If they stick around a bit longer, they could realize the benefits that come with relying on artificial intelligence to monitor their systems and ensure no nefarious activity breaks through the security to compromise the business and its customers, even for a second.

But it’s hardly an overnight transformation. In fact, our research shows that almost half of the merchants on acquirers’ platforms are unprofitable, so there’s a bit of a delicate balance when it comes to convincing a CEO to stick it out when the results take longer to show up than they might want.

Fraudulent activity and low transaction volumes also prevent 12% and 9.3% of the merchants on acquirer’s platforms from being profitable, respectively, according to the report.

“AI In Focus: Gaining Ground On Merchant Monitoring” explores why AI is so important to the merchant-monitoring strategies at most acquiring banks. PYMNTS surveyed 104 executives at acquiring banks throughout the U.S. to learn how they use AI to monitor their merchant accounts and what benefits the technology has delivered to their businesses.

Read more: How 104 Acquiring Banks Are Using AI to Beat Fraud, Boot Unprofitable Merchant Accounts

The report aims to provide actionable insights into how acquirers can leverage AI to improve their bottom lines and provide a holistic set of value-add services to their merchant customers.

And, while merchant monitoring using AI is hardly a new phenomenon, it’s something that still has plenty of potential in 2022 and beyond. In fact, almost one out of three acquirers (31%) plan to invest in AI systems to monitor merchants in the next three years, our research shows.

As is the case with fraud detection, acquirers that do not plan on investing say they already use AI to monitor merchants, so they’re ahead of those who are just now learning what they probably should have been doing for years now. Nearly all U.S. acquiring banks intend to expand their AI capabilities in the future.

Our research also shows that 45% of acquirers generating less than $100 million in annual revenue plan on investing in AI to enhance their merchant monitoring in the next three years.

Acquirers generating more than $100 million in annual revenue are far less likely to expand their AI capabilities in that time because they already utilize the technology, as only 15% of acquirers with more than $100 million in annual revenue will enhance their AI capabilities in the next three years, and 85% already use AI for this purpose.