In this new epoch of payments, technologies and channels that were still experimental last year are going mainstream at speed — none more so than splicing artificial intelligence (AI) into the DNA of connected devices, creating new ways of transacting that go with the connected flow.
“Over 50 percent of shoppers now are likely to buy on social,” Kresse said, pointing to Worldpay from FIS findings that up to two-thirds of Generation Z, millennials and Generation X shoppers “have purchased something through social media. Social is no longer a marketing tool as it historically was for retailers. It’s actually a transactional tool as well. The old ‘buy’ buttons that used to redirect consumers to a retailer’s website … are a thing of the past.”
With mobile wallets now exceeding cash for in-store payments for the first time, Kresse said that users have firm digital-first expectations — and optimizing those is key for all stakeholders.
“FIS predicts that global mobile commerce will rise at 16 percent annually over the next five years to make the overall market worth $4 trillion,” he noted, adding that he sees “a big opportunity to create a great overall experience, and a secure experience” if merchants and tech partners move quickly.
Mobile-Social Contextual Payments No Longer Optional
With smartphones morphing into both digital access portals and personal payments control centers, researchers explored the forces altering this terrain in the latest Anatomy Of Consumer Payments Playbook: The Consumer Devices Edition, a PYMNTS and FIS collaboration.
The Playbook cited a report predicting that cash payments will account for only 13 percent of in-store purchases globally within three years, pushed out by contactless options. That’s put mobile payments security on the hotseat, but proponents think it’s ready to go.
“Everyone now believes they should be able to make a payment from their mobile device, and mobile payments are adding an extra level of security for retailers and consumers with a lot of biometric authentication [via smartphones],” Kresse told PYMNTS, adding that “in the past year, as consumers have seen the ease of shopping on a smartphone … mobile is no longer … a nice to have. Merchants need to have this as a critical part of their overall strategy. By 2024, mobile wallets could make up roughly 41 percent of transactions” at the point of sale (POS), he said.
In this mix is another novelty tech that’s finding a purpose: digital wearables. Anatomy Of Consumer Payments cited research that the wearable technology market is set to expand at a compound annual growth rate (CAGR) of 14 percent to reach $82 billion by 2026. Kresse confirmed the growth in wearables usage, with a caveat: growing fraud.
“We’ve been hearing about wearable payments … for years, but with the pandemic pushing the popularity of cashless transactions, we now believe that wearable payments is becoming very much mainstream,” Kresse said, adding that with “wearable payment modalities becoming mainstream, fraudsters immediately see that as an area for opportunity.”
AI Augmentation Mounts Offensive On Connected Device Fraud
New fraud attacks are specifically targeting the booming digital-first device economy, exploiting its many access points, climbing now to billions of connected devices with payment capabilities. This is where the conversation returns to AI and its improving smarts.
Saying “there’s fraud risk associated with any type of payment, even a chip in a card” and conceding that the proliferation of devices does “present a unique risk,” Kresse said that provisioning third-party devices and transmitting sensitive credentials “essentially through the air, right over a wireless connection” gives fraudsters new avenues to abuse.
However, “we believe the upside of those technologies far outweighs the risks,” he said, with AI augmentation as a powerful new weapon in the arsenal of connected fraud fighters.
Kresse continued that “AI augmentation … is going to be instrumental in quantifying the transaction risk and creating meaningful scores that analysts can use to prevent card payment fraud. If you evaluate and include information on things like the internet browser that’s being used by the consumer, the IP address, the device ID, keystroke logging and comparing that against historical data, we’re ultimately going to have a better view of the risk of a particular transaction being fraudulent.”
Among payoffs of all particular modernization, said Kresse, is the ability to combine merchant and consumer behavioral insights at an individual level “to identify risky behavior across both merchants and issuers to stop the fraud before it happens. And not only stop the fraud, but … also reduce false positives so we can increase overall approval rates.”