How AI Is Revolutionizing the World of Payments

Revenue optimization, the businessperson’s polite term for making more money, is a universal objective across industries. Achieving this goal might be simpler and closer than many think, especially with the advent of Artificial Intelligence (AI) in payment processing systems.

This discussion explores how AI is not just changing but significantly enhancing the way payments are processed, drawing directly on insights from a recent Visa study to showcase new avenues for business profitability and success. The focus is not just on the mechanics of processing payments—such as swiping a card through a machine—but on the underlying metrics that can be instrumental in improving profitability and business success.

False Declines: The Flat Notes Affecting Business Performance

In the realm of payment processing, false declines represent a significant challenge. These are legitimate transactions that are wrongly refused, often for unclear or complicated reasons. The Visa study sheds light on the stark reality of this issue:

  • Card present transactions have a 99% approval rate.
  • Card not present transactions have a 92% approval rate.
  • False declines cost businesses $443 billion a year—surpassing the losses from actual credit card fraud.
  • Four in ten consumers report they will avoid shopping with a merchant again if their purchase is falsely declined.

The implications of false declines extend beyond lost revenue, affecting reputation and customer loyalty, both of which are critical for business success.

Creating Payment Acceptance Harmony with Big Data and AI

To combat the issue of false declines and improve the overall payment processing landscape, the integration of big data and AI plays a pivotal role. Payments orchestration, supported by AI, can significantly increase the likelihood of payment acceptance, thus enhancing the customer payment experience. This orchestration involves a series of functions such as data enrichment, dynamic retry, smart routing, and filtering—all aimed at reducing false declines and optimizing transaction success rates.

To provide more context:

Data Enrichment: Data enrichment in payment processing involves supplementing the transaction data with additional relevant information that can increase the likelihood of its approval. For example, if a customer’s basic transaction data lacks certain verification details, data enrichment might add in a verified shipping address or a customer’s transaction history to provide a more comprehensive picture to the payment processor. This enriched data helps in accurately assessing the risk of fraud, potentially reducing false declines without compromising security.

Dynamic Retry: Dynamic retry is a process where, if a transaction is initially declined, the system automatically attempts to process the payment again using different parameters or through alternative processing networks. This can be especially useful in cases where a decline occurs due to a temporary issue, such as a network timeout or a processor’s system being down. By retrying the transaction, possibly with different timing or through a different gateway, the chances that the transaction will go through successfully are increased.

Smart Routing: Smart routing refers to the AI-driven decision-making process that determines the best payment gateway or processor for a transaction at the moment it’s being made. This decision is based on several factors, including the type of card being used, the merchant’s historical data with similar transactions, and the performance metrics of the processors at that time. By intelligently routing transactions, businesses can ensure higher approval rates and lower processing costs.

Filtering: Filtering is the process of screening transactions before they are sent to a processor, so as to prevent avoidable declines. This might involve checking for simple errors in the transaction request, such as input mistakes in the card number, expiry date, or CVV code. Filtering can also refer to applying certain criteria to decide whether a transaction should be attempted based on the likelihood of its acceptance, thereby saving time and resources by not processing transactions that are likely to be declined.

By integrating these AI-powered functions, businesses can create a more harmonious payment acceptance environment that efficiently handles transactions, minimizes false declines, and improves the overall customer experience. It’s a fine balance of utilizing cutting-edge technology to enhance operational efficiency while maintaining the integrity of the fraud prevention system.

Impact on Customer Loyalty

An unexpected but valuable outcome of improving payment processing with AI is the enhancement of customer loyalty. The Visa study highlights a critical consumer behavior insight: 40% of consumers are likely to abandon a merchant after a single false decline. Therefore, by providing a positive, seamless payment experience through AI-driven solutions, businesses can foster repeat business and build a reputation for reliability and trust.

The integration of AI into payment systems is transforming the landscape, offering solutions to longstanding issues like false declines while opening new avenues for revenue optimization and customer satisfaction. As highlighted by the recent Visa study, leveraging AI not just alters how payments are processed but significantly enhances the potential for business profitability and success.


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