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AI in Payments: What Merchants Can Expect

Small business owner checking mobile phone

News about artificial intelligence (AI) can be pervasive in  global media, but the payments industry has used AI for decades to detect fraud and help build more secure networks.  As AI becomes more broadly accessible, the power of this technology that was once the exclusive domain of data scientists is becoming available to everyone.

“While the growing prominence of AI is undeniable, it is not a new concept in Fintech,” says Andrew Stucchio, vice president of global pricing and analytics at Discover® Global Network. “But now that its capabilities and potential are widely known and publicized, people’s expectations for AI are high.”

Across industries like education, healthcare, and financial services, much of the conversation around AI has been focused on the ways it will disrupt industries, experiences, and competition. However, by leveraging AI responsibly, companies may improve their products and services over time and invent new value propositions while also protecting customers.1 Rather than swiftly transforming industries, the current and emerging AI tools provide small and mid-sized business owners and merchants the opportunity to enhance the security, speed, and efficiency of their operations.

As AI improves, payments evolve

A projected 5.2B people worldwide will use digital wallets for their payment transactions by 2026.2 As digital wallets gain momentum, consumer demand and expectations for real-time, seamless, and secure transactions are likely to intensify. This poses a set of fresh challenges for merchants, including heightened concerns related to security, identity, user experience, and operational efficiency, all of which AI tools can help to address. 

“AI provides opportunities to improve customer experiences while simultaneously minimizing fraud and compliance issues,” says Stucchio. “At Discover Global Network we are leveraging AI to help monitor, detect, and alert our partners to potential fraud, and many of our partners are embracing AI for predictive forecasting and automation to more accurately anticipate demand and adjust inventory and staffing.”

For merchants navigating the digital payments ecosystem, AI comes with the potential to bolster their operations and elevate the experiences they offer customers. Harnessing technologies like machine learning algorithms, predictive analytics, and natural language processing, businesses are implementing AI tools to:

  • Build more efficient security protocols. AI payment solutions analyze new data quickly and their algorithms continue learning as new data is found. This real-time data analysis helps identify changes in fraud techniques and minimizes the risk of false declines during transactions, which helps merchants deliver a more seamless customer experience.
  • Pinpoint system vulnerabilities. Self-defending AI systems can perform continuous in-depth analysis of networks to identify security events like attempted malware and malicious code that may be hidden among the billions of transactions that happen every day. This has become even more critical given the lightning-fast speed at which sophisticated hackers now operate.
  • Improve customer service. AI can quickly identify a customer problem and then present customer service agents with the current and accurate information needed to resolve it. In the past, the agent would need to search for information across the system while live with the customer, and doing both tasks at once can result in errors and callbacks. In the coming years, merchants can anticipate using AI-driven live chat to respond to multiple customers concurrently—giving employees more time to focus on inquiries that require human attention. 
  • Personalize shoppers’ experiences. Predictive analysis AI tools review historical customer information to detect patterns and preferences that predict future behavior. Merchants can use predictive analytics to enhance the customer experience with personalized payment options and recommendations based on shoppers’ individual spending habits and preferences.
  • Sharpen know your customer (KYC) checks. Merchants can also leverage predictive analysis AI to improve the accuracy and efficiency of their KYC checks. Because AI algorithms can quickly review large volumes of data, fraudulent activity and suspicious transactions can be detected and flagged quickly. Additional fraud prevention tasks—like document authentication, identity verification, and risk assessment—can be automated.
  • Manage friendly fraud. AI tools can quickly collect robust data on customers’ behavior and purchasing histories to determine whether disputed transactions fit a customer’s profile. This can help merchants quickly and efficiently distinguish genuine claims from illegitimate ones. 
  • Identify and manage customer sentiment. Natural language processing (NLP) is a domain of AI that processes human language. It combines linguistics and machine learning to understand sentiment and emotion expressed to customer service or voice agents. Merchants can use this information to troubleshoot an escalating situation or better understand how customers’ interactions with their business are articulated through social media.

Person using artificial intelligence chat on mobile device

Navigating the future of AI

With all the opportunities AI presents for business owners to strengthen their relationships with customers and improve operations, forward-thinking merchants may be eager to use it to gain a competitive edge. 

Much publicity has been given to the possibility that AI will replace people’s jobs,3 and it does have the potential to increase productivity and minimize human error by completing basic tasks employees do not like and do not excel at. For example, AI tools can automate accounting and compliance processes that are repetitive in nature, such as categorizing transactions, correlating data from invoices and receipts, and reconciling accounts. 

Merchants may want to consider delegating mundane tasks to AI so employees can focus on more complex aspects of a business such as productivity, efficiency, and customer service—but as merchants begin to adopt AI tools, it is wise to remain cognizant of the potential for AI errors. Current iterations of AI technology are known to make up information, a phenomenon often referred to as “AI hallucinations.” 

Research by leading AI companies is underway to minimize these AI hallucinations and strengthen consumer trust in the accuracy of their products. In the meantime, merchants should carefully consider what tasks they automate with AI, and ensure they are protecting their business from AI hallucinations that could expose them to fraud and make them susceptible to bad actors. 

AI is also poised to improve chatbot experiences and help customers get the information they need more quickly. In the coming years, merchants can anticipate innovative chatbot features like the ability to respond to multiple customers simultaneously—giving employees more time to focus on inquiries that require human attention. 

AI will remain a driver of innovation

Many AI-powered tools in the payments industry are still in the early stages of development. Merchants can expect to see more cutting-edge AI emerge in the coming years—like the ability to analyze currency exchange rates to enhance cross-border payments, or to automatically detect and reconcile peer-to-peer payments. 

With paradigm-shifting innovations that address such a wide range of business challenges, the new wave of AI will continue to be an increasingly integral and helpful tool in the 2024 payments ecosystem and beyond. 

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  1. MBA Knowledge Base (n.d.) Sustaining and Disruptive Technologies. Viewed 15th December 2023 from
  2. Juniper Research. (2022, August 22.) Digital Wallet Users to Exceed 5.2 Billion Globally by 2026, as Digitisation Accelerates Cashless Transition. Viewed 6th December 2023 from  
  3. Kessler, Sarah. (2023, June 10.) The A.I. Revolution Will Change Work. Nobody Agrees How. The New York Times. Viewed 14th December 2023 from