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AI is being employed in the payment sector

Globally Employed Artificial Intelligence in Payment Services: A Shift from Fraud Detection to Marketing Strategies - Exhibiting Case Studies from Visa and Klarna

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Artificial Intelligence Integration Across Payment Sectors
Artificial Intelligence Integration Across Payment Sectors

AI is being employed in the payment sector

In the ever-evolving world of finance, Artificial Intelligence (AI) is no longer a novelty, but a crucial tool for payment service providers. The industry is witnessing a transformation as AI extends beyond its traditional role in fraud prevention and anti-money laundering, becoming a key driver for real-time payment optimization, personalized customer engagement, embedded financial offerings, and operational automation.

Qonto, a leading player in the sector, has developed its own AI to assist in recruitment, write job advertisements, transcribe and analyze job interviews, and even create individual contracts. This proactive approach to AI adoption is becoming increasingly common among payment service providers.

Some of the most notable AI applications include payment routing optimization and cost reduction. PayPal, for instance, uses AI to select the best route for payments, making transactions faster and more dependable. Adyen's RevenueAccelerate applies machine learning to optimize payment routing, resulting in higher authorization rates and increased merchant revenue.

AI is also being employed to detect duplicates and validate payments. Visa leverages AI to verify payment details, detect duplicates, and ensure compliance accuracy, reducing errors and the risk of fraud.

Personalized payment experiences and offers are another area where AI is making a significant impact. By analyzing customer spending habits, AI can recommend tailored promotions, discounts, payment schedules, or subscription management, enhancing customer satisfaction and retention.

Embedded finance and new services are another area of growth. Firms like Adyen are expanding embedded finance capabilities, enabling merchants to integrate financial services more seamlessly into their offerings, adapting to evolving digital business models. AI also facilitates add-on services for travelers, such as specialized insurance or expense management.

Real-time transaction risk scoring is another critical application of AI. Major providers like Visa process enormous transaction volumes daily using hundreds of AI applications to flag suspicious activities in real-time while minimizing false positives. This approach balances security with a frictionless user experience.

Visa partners with AI provider ServiceNow to speed up dispute resolution processes. Other payment service providers utilize AI for various purposes, including fraud prevention, anti-money laundering, credit risk evaluation, customer data analysis, cybersecurity, software development, and market analysis.

PayPal uses AI to analyze customer behavior and personalize advertising, while companies like Klarna have replaced some employees with AI technology to optimize customer service for speed. The workforce at Klarna has shrunk by 22 percent since 2023 due to the implementation of AI.

AI is being used in various ways in the payment industry, extending beyond the specific areas relevant to payment service providers. In the areas of Know Your Customer and onboarding, Lemonway, Mastercard, Monei, Riverty, Scalapay, and Treezor are employing AI.

Companies like Ixopay, Otto Payments, Ratepay, and VR Payment collaborate with Hawk AI for AI-based transaction monitoring. American Express uses AI for pricing strategies, product development, market expansion, personalized offers, and customer service chatbots.

In the Eurozone, there were approximately 72 billion cashless payment transactions with a total value of around 113 trillion euros in the first half of 2024. This shift towards digital payments is driving the need for AI to streamline processes, enhance customer experiences, and enable innovative financial services.

As the use of AI in the payment industry continues to grow, it is clear that its impact will be far-reaching. From optimizing payment routing to personalizing customer experiences, AI is transforming the payment industry, offering exciting opportunities for innovation and growth.

Sophie Deistler, a freelance journalist who reports mainly on topics from the financial world, has provided insights into this transformation. Deistler completed a Master's program in Socioeconomics at the University of Duisburg-Essen and a Bachelor's degree in Social Sciences from the University of Cologne, and attended journalism training at the Cologne Journalism School.

For a comprehensive infographic on the use of AI in banks and fintech, visit our Website-URL.

[1] Source: [Link to Source 1] [2] Source: [Link to Source 2] [3] Source: [Link to Source 3]

  1. Evidently, Artificial Intelligence (AI) is no longer confined to its conventional roles in the finance sector, as it is now instrumental in optimizing payment routing for efficiency and cost reduction, with PayPal and Adyen utilizing AI for this purpose.
  2. Furthermore, in the world of business, AI is being employed extensively to enhance customer experiences by personalizing payment offers, recommending tailored promotions, and improving customer satisfaction, as demonstrated by several payment service providers such as Visa and Klarna.

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