How are leading payment startups tackling artificial intelligence to create value beyond fraud and risk? Do they act differently from established companies?

When payment companies are communicating about the future of their solutions, artificial intelligence (AI) is nowadays almost a must-have in the story. Most stay very vague about it not divulging details. At least this is true if excluding fraud detection and risk management but looking at other areas of value creation, for example improvement of the customer experience. It is still early and most players are at best in a learning & experimentation phase.

Market Facts

iZettle: Researching AI in payments and commerce

Swedish financial technology startup IZETTLE, known for its solutions providing card payments on smartphones and tablets for small businesses, now raised EUR 30 million to be invested in research and development of emerging technologies. Two of the four areas are 1. insights and actions through machine learning and artificial intelligence and 2. digitalization of commerce processes.

Visa: Looking at it from the IoT perspective

What could be examples of digitized commerce processes enabled by AI? Credit card company VISA for example is looking at the topic from an Internet of Things (IoT) point of view. The objective of its IoT Group is to embed payments into all kinds of experiences for any connected device that a consumer might use. For example, refrigerators could keep themselves stocked by ordering products before they run out. The consumer remains inactive in this kind of use cases. In more active cases, the consumer initiates a purchase by tapping a button or speaking to a device.

The IoT will connect all kinds of devices such as washing machines, buttons, bracelets, fridges, smartphones, lamps, cars, speakers and so on with the parties that are involved in a process such as the consumer, the merchant and the payment partner. But to ensure that the resulting customer experiences are fluid, context sensitive, smart and personalized, AI can be of great help to get friction out of the process. The fridge not only sees what is in it and what is missing, but can predict what is needed based on consumption habits. It knows the prefered communication channel of the user and sends alerts to the right device at the right time. The voice enabled fridge can also understand correctly the meaning of what the user is asking in natural language. The system can securely authenticate the user when she places an order and transact the payment.

Wirecard: Artificial Intelligence and the power of predictive data

Only if IoT and AI are working closely together, the full value of the service can unfold. Payments specialist WIRECARD works on such cases to connect devices and objects in the in-store retail space. For example, a consumer may check-in at the entrance of a supermarket using his smartphone, then puts items into his basket and simply leaves the store. The payment is automatically completed in the background without any action required by the shopper. Amazon is testing the same idea with Amazon Go markets. These concepts work with a combination of sensors, apps and algorithms. But to go beyond these concepts and create more value, AI can help to make experiences even more fluid, context sensitive, smart and personalized. Retailer and/or payment partners need access to information on their customers and the environment (data), need interaction devices adapted to the context (IoT) and need to predict the right content at the right time / in real-time (AI). Wirecard puts it this way: “The kind of insight that AI brings has the potential to drive conversion rates and customer acquisition, and they are the key elements of every retail strategy that we come across.”.

If infrastructure, security, payment management and customer trust are traditional areas for payment companies, the end-to-end fluid customer experience based on IoT and AI can put them also into new roles in the digitized commerce process.

Square: AI a must-have in every business

Another payment startup like iZettle is US-based Square. Its founder Jack Dorsey sees AI as a tool to offset risk but also to create more automation and less mechanical action required on the merchant side. For itself the company already uses algorithms to send more targeted mailings to win new customers and to upsell to existing customers. The models trigger staff to call or email a client when data suggests the client would be most receptive to a new service. It’s their aim to look at every business challenge with AI, more specifically through the lens of machine learning. They also update the profile of a end user every time a payment is made and in a second step retailers can use this data via Square to offer for example tailored loyalty programs. The company management evaluates machine learning as so essential, that all their engineers and even other employees have to learn it. And an AI specialist is part of their board of directors.


Squares approach goes along with a mantra of many leading tech leaders from Silicon Valley. A company needs to have an AI strategy in place, a way of thinking about how innovations in machine learning, computer vision, natural language processing, neural networks, etc. can make their business smarter.

Payments + AI + Commerce: Access to knowhow and capabilities

iZettle and Square are both tech native companies and they are integrating AI early on. In addition, they both ramp up their knowhow on digitized commerce processes. Both companies keep acquiring other startups to enlarge their knowhow and capabilities. For example, Square bought an order ahead company as well as restaurant delivery companies. They see themselves as a provider of tools for business management, sales analytics and customer engagement. iZettle has bought a company named intelligentpos, that allows businesses in the hospitality and other industries manage their inventory, loyalty programs and customer flow. Knowhow and capabilities in commerce processes and AI are becoming a terrain of competitive advantages for both players.

AI in payments: It’s not about technology

At the same time it is not about technology and process alone. As Tony Fadell, creator of the iPod and founder of IoT service Nest, put it: “IoT is a label that fails to describe the range of possibilities that devices connected to the internet enable from the perspective of the end user – the consumer or business. People and businesses don’t buy things just because they are connected to the internet, they buy them because of what those things can do to make their lives easier and daily activities more efficient.”. This means, above all should be the consideration of the user (consumer and/or merchant) and what they really perceive and experience as added value.


Artificial Intelligence, and in particular Machine Learning, in combination with the Internet of Things and (Big) Data will enable more fluid and smarter end-to-end commerce processes. Payment and commerce need to work closely together to achieve valuable customer experiences that achieve real user adoption. Focus on digitized flows that make users lives easier and daily activities more efficient is required as top priority. Tech native players have an advantage based on their natural proximity to Artificial Intelligence.