Artificial Intelligence

Taking AI Beyond Fraud Prevention And Into The Realm Of Smart Payments Routing

Merchants, quite logically, want to keep transaction conversion rates high. And consumers want to pay with their preferred methods, across cards or digital wallets.

Artificial intelligence (AI) can improve the eCommerce experience – not just in terms of warding off fraud, but also in making sure payments can be processed efficiently and that the most effective payment gateways are accessed.

In an interview with PYMNTS, Mark Ranta, payments practice lead at Alacriti, said that “not all data are created equal. But by leveraging data, and advanced technology, you get the details that can help drive decision-making processes or the routes that a payment can take.”


At least some of that data, he said, can be gathered at the point of sale interaction. The rise of eCommerce can give merchants information ahead of transactions, which can be used to route those transactions with speed and security. That information can include whether consumers are authenticated and where the point of sale is located. The technology can also “reach upstream” across applications to access member rewards or loyalty programs as consumers opt to pay for goods and services.

Said Ranta: “When looking at smart routing, it's important to note that it's not [only about] the information you get at the time the card is swiped or the consumer hits checkout.” Instead, granular levels of detail about consumers’ purchasing behaviors (and perhaps demographics) can be gathered from integrations between merchants and banks’ systems. Integration and shared insight among stakeholders serving a consumer in a transaction can lead to optimal payment decisions, too – such as offering “just-in-time” financing that allows customers to stretch out payments.

Smart (or intelligent) routing, then, is not just about choosing the cheapest route through which transactions can be sent (thus saving merchants or banks money). Nowadays, said Ranta, “intelligent routing starts to go beyond the networks, and starts talking to the payment types themselves to determine whether that payment token is a card or a checking account. As we've switched into this eCommerce-focused and more mobile-centric world, we're also seeing a change in the underlying payments market in the U.S.”

Ranta noted that new payment rails are taking root in the States and abroad, with announcements like The Clearing House’s RTP system. Consider the fact that just a few years ago, alternative payment rails Zelle and Venmo didn’t even exist.

In an age where intelligent routing must also recognize and consider alternative payment methods, according to Ranta, “it’s not just about taking a payment token and then deciding which way to send the money. It's about trying to influence which payment token is selected, and the reasons could be driven by that data. Intelligent routing has evolved from a ‘nice to have’ to help save money into a way to ‘flip’ the transaction into the experience layer itself."

This is where AI comes in. For example, the shopper who buys a new coffee mug online can choose – depending on how quickly the order may be filled and shipped – between a credit card transaction that will happen now (but settle to the mug maker in a few days or weeks) or a real-time payment, or any number of other methods. Intelligent routing is especially important, said Ranta, where different payment methods have different agreements within the network regarding how quickly the money is withdrawn, how quickly it is deposited and even what claw-back methods and timing may be.

“The new model – what we’re seeing now and what will likely come to bear in the market over the next three to five years – is going to be more of those direct-from-account payment types, which move money directly into merchant accounts, and less traditional card-based transactions due to their interchange fees and slow settlement of funds,” Ranta said. “That world was once dominated by PayPal, and I think we will begin to see it finally expand.”

One of the key advantages of smart routing, maintained Ranta, is that with flexible payment choices in place, merchants see higher conversion rates. That’s especially useful in cross-border transactions, he told PYMNTS, where eCommerce has given consumers the ability to shop pretty much anywhere in the world, with just their fingertips and screens.

For merchants and platforms, having modern payments architecture in place and embedding cross-border payments is easier than ever, allowing consumers to make transactions across different currencies. That seamless interaction is built with APIs, where updates to payment offerings, security protocols and currencies become almost automatic.

“There are many ways in which the payments industry is looking at AI,” said Ranta. “But innovations sometimes get stuck in the shadows because of the many positive implications AI has for fraud prevention.”

Of smart routing, Ranta said it’s important to get those “conversations out of the shadows, and really talk about the end user. At the end of the day, what's going to help move these payments and new opportunities forward is the consumer experience.”



New forms of alternative credit and point-of-sale (POS) lending options like ‘buy now, pay later’ (BNPL) leverage the growing influence of payments choice on customer loyalty. Nearly 60 percent of consumers say such digital options now influence where and how they shop—especially touchless payments and robust, well-crafted ecommerce checkouts—so, merchants have a clear mandate: understand what has changed and adjust accordingly. Join PYMNTS CEO Karen Webster together with PayPal’s Greg Lisiewski, BigCommerce’s Mark Rosales, and Adore Me’s Camille Kress as they spotlight key findings from the new PYMNTS-PayPal study, “How We Shop” and map out faster, better pathways to a stronger recovery.