Artificial Intelligence and the Future of Payments

What is Artificial Intelligence (AI)?

The term “artificial intelligence,” or “AI,” has many definitions. The dictionary definition is “the capacity of a computer to perform operations analogous to learning and decision making in humans, as by an expert system, a program for CAD or CAM, or a program for the perception and recognition of shapes in computer vision systems.”

In the payments industry, however, Fintech News defines it as describing “advanced analytical technology that has an outsized potential to improve the payments ecosystem for banks, payments processors, merchants and consumers.”

Due to its benefits and growth potential, artificial intelligence is seeing an increase in use in the payments industry. A recent IDC analysis found that financial services companies are expected to spend $11 billion on AI in 2020, more than any other industry in the analysis.

How is Artificial Intelligence Used in Payments?

Artificial intelligence has a number of applications in the payments industry - automating alternative payments, customizing commerce, predicting propensity to pay and reducing false card declines are just a few.

Automating Alternative Payments

Alternative financing is a new online payment method involving short-term loans at the point-of-sale (POS). It offers customers the opportunity to purchase a product now and pay later, in installments.

Tools and apps are beginning to appear that use AI to analyze the user’s spending habits, and then find ways to help them save money, such as choosing a credit card with lower fees or finding available options to reduce the dollar amount of recurring payments. As the user uses the software repeatedly, the AI “learns” more about the user’s habits, and adjusts its recommendations accordingly.

Customizing Commerce

Over recent years, artificial intelligence has been used to create new and easier ways for customers to pay for goods and services. More and more customers are already beginning to expect businesses to anticipate their needs and make suggestions that reflect those needs. Businesses will need to meet these growing demands of their customers by utilizing AI technology. A few of these new payment methods that use AI are:

  • Chatbots - Credit card companies and social media networks have partnered together to create chatbot functionality that can be used as a payment method directly on a social network. For example, in 2017 American Express created a chatbot for use on Facebook Messenger. The chatbot can be used to pay Facebook directly for apps and other digital goods, and it can also answer frequently-asked questions.
  • Smart Stores - While some stores have ventured into cashless transactions by having customers purchase items by scanning a QR code with their cell phone, a few stores have taken the technology even further. Amazon has recently opened a small number of Amazon Go stores, where checkout is not required. These stores use AI technology to detect when customers take products off the shelves. When a customer leaves the store with their items, Amazon automatically charges their account and sends them a receipt.
  • Personalized Shopping - Tech companies are starting to experiment with using artificial intelligence to enhance the customer experience and purchasing process. For example, tools are now available that leverage AI to learn from customer’s buying patterns in order to suggest additional products the customer might be interested in purchasing.

Predicting Propensity to Pay

Businesses want to understand more about their customers in order to better understand their spending habits and their payment preferences. Specifically in the healthcare industry, there are a growing number of outstanding balances that practices have to deal with each month. Some practices are now using the propensity to pay machine learning to help them to predict which patients will pay their bills during a certain timeframe, which is done through AI learning.

Reducing False Card Declines

“False declines” occur when a card is erroneously declined even though the cardholder has sufficient funds available to cover the purchase. Javelin Strategy & Research estimates that false declines in the United States equal nearly $118 billion yearly.

One example of using artificial intelligence to help prevent false declines is Mastercard’s Decision Intelligence solution. This software uses AI to analyze transaction data and customer data, and then uses that data to determine how likely a transaction is to be fraud or legitimate, helping prevent false declines.

Fighting Payments Fraud

Similarly to how artificial intelligence can help prevent card declines, it can also use this type of technology to help prevent payments fraud. As payments technology continues to evolve, so do the types of payments fraud. As AI is designed to be continually learning, it’s perfectly suited to the task of learning the new types of payment fraud and then coming up with ways to prevent it.


Artificial intelligence has many benefits and uses both for businesses and consumers. As technology continues to evolve, AI’s learning will evolve with it, likely allowing it to be developed for many additional uses in the future.