Smarter Insights, Fewer Errors: How AI Is Reshaping Payments

Various industries are looking into artificial intelligence (AI) and the labor and cost-saving efficiencies it promises.

When it comes to leveraging the technology’s novel capabilities for enhancing payments, the question is “How,” and the answer is “Now.”

“AI and machine learning (ML) are incredible tools [for the payments sector],” Justin Shoolery, head of data science and analytics at sticky.io, told PYMNTS for the series “What’s Next: The Role of Artificial Intelligence in Payments.”

“At checkout, we see AI employed to increase conversion rates either by optimizing for success rates on the initial payment, or by leveraging AI to walk consumers through errors or help them complete a checkout,” he said.

And in the subscription payment space, AI is intelligently automating billing processes, Shoolery noted. This enhancement leads to reduced payment errors, higher customer retention and improved consumer experiences.

“Subscriptions can continue seamlessly without a lot of consumer interaction” thanks to AI, Shoolery added.

Additionally, AI-driven algorithms provide subscription recommendations, such as pausing, changing replenishment quantities or adjusting billing frequencies. These recommendations cater to individual preferences, thus enhancing customer satisfaction and increasing customer lifetime value.

Enhancing Efficiency While Elevating User Experience

“All of these [AI-driven] optimizations are translating into more successful businesses,” Shoolery said.

That’s because AI innovations allow for smarter insights to be culled from payment data. Historically, electronic payments lacked the depth of data required for sophisticated analysis. However, AI has transformed this landscape by allowing businesses to gain smarter and faster insights from their payment data.

“More recently, we are seeing the rise of the [AI] chatbot analysts that can generate insights much faster than traditional human analysts, as well as AI-driven applications that help merchants address declines and help prevent churn,” Shoolery said.

Traditional use cases of AI — including enhancing anti-fraud measures and reducing payment-related risks, as well as ensuring the security of financial transactions — are also enjoying a technological boost.

“By analyzing payment data, merchants can gain valuable insights because AI can identify trends and customer behaviors and help optimize pricing strategies and marketing channels [around those insights], and even predict and prevent customer churn,” Shoolery said.

Read also: Generative vs Predictive AI’s Role Across the Future of Payments

Ethical Considerations in AI and Payments

As AI becomes more prevalent in payments, ethical concerns must be addressed.

“Anytime that we’re leveraging data to impact people, we should be sensitive to the ethical concerns. I think that’s crucial when it comes to AI and payments,” Shoolery explained.

“Providers need to ensure that there’s transparency and fairness in their AI algorithms so that we can avoid bias in decision making, and the nature of payments means that a lot of sensitive data is being exchanged. We all need to be careful to continue implementing robust cybersecurity measures and complying with all the relevant regulations,” he added.

Complying with regulations such as GDPR and PCI is essential to protect consumer data and maintain trust in the marketplace, and handling sensitive data in payments requires a strong commitment to privacy and security.

When asked about the future of AI in payments, Shoolery emphasized the potential of large language models (LLMs).

“The rise of LLMs is going to drive a lot of innovation in the space. The applications have not even been fully vetted out yet, but things like chatbot analysts and smarter insights from AI are going to make a big, big impact on eCommerce and payments in general,” he said.

As we look to the future, the potential of LLMs and AI in payments is an exciting prospect. AI may likely continue to shape the payments landscape, enhancing customer experiences, driving business efficiency and ensuring the security and integrity of financial transactions.

From optimizing checkout experiences to automating subscription billing processes and providing smarter insights from payment data, AI is revolutionizing the way we transact.

As PYMNTS has written, generative AI promises to accelerate the efficiencies already offered by predictive AI around things like authorizations, compliance and fraud detection. More generally, the technology may enact cost-effective and non-manual decisioning processes that are increasingly auditable and do not sacrifice security for convenience.

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