AI Poised to Transform the Payments Industry in 2025

Artificial intelligence is set to play an increasingly visible role in the payments industry in 2025, helping merchants process transactions more efficiently and offering consumers new ways to pay, according to analysts and academics who study financial technology, as stated in Payments.dive. 

While AI has already reshaped payment processing behind the scenes—particularly in fraud detection—its impact on everyday transactions is expected to grow significantly. From streamlining checkout experiences to enhancing fraud prevention, AI-powered solutions are set to make payments faster, more seamless, and more secure.

AI’s influence on payments will be especially noticeable at checkout, where it will enable a broader range of options, including «buy now, pay later» (BNPL) services. By analyzing transaction history and creating instant risk profiles, AI can help merchants offer alternative payment methods without added friction, said Davi Strazza, president of North America for Adyen, a Dutch fintech platform.

“There’s a new generation of shoppers that care a lot about what those terminals offer,” Strazza noted, emphasizing that Gen Z consumers prefer speed and flexibility in payments.

Beyond checkout, AI is also expected to refine personalized marketing efforts. Michael Imerman, an assistant professor at UC Irvine’s Paul Merage School of Business, explained that AI-driven insights into consumer spending patterns will make targeted recommendations more precise.

“It almost seems like they’re reading your mind,” Imerman said. “But it’s really just taking the digital footprint that you created from your transactions and putting content in front of you that aligns with your preferences and interests.”

Additionally, AI can reduce the frequency of unexpected card declines by incorporating alternative data—such as bill payment history—into credit risk assessments, according to Bill Maurer, director of UC Irvine’s Institute for Money, Technology, and Financial Inclusion.

For businesses, AI is streamlining payment processes and reducing administrative burdens. Melissa Forman-Barenblit, president of the Dallas-based payments platform TriumphPay, highlighted how AI is being used to standardize invoice processing and automate approvals.

“Each of those parties will be able to validate that an invoice is real and then execute a payment,” she said. AI also helps identify missing documentation and resolve payment issues more efficiently.

The technology is also automating financial reconciliation, a process that can be time-consuming for businesses handling large volumes of transactions. Rocio Wu, a principal at F-Prime Capital, pointed out that AI is taking over many manual back-office tasks, allowing companies to operate more smoothly.

AI’s ability to detect fraudulent transactions has long been one of its most powerful applications in the payments industry. Companies like ACI Worldwide and Fiserv use AI to analyze vast amounts of payment data and spot irregularities in real time.

“You can find these patterns much quicker and more effectively using AI,” said Tom Warsop, CEO of ACI Worldwide.

However, as financial institutions use AI to fight fraud, criminals are using the same technology to carry out sophisticated scams. Andrew Shikiar, CEO of the FIDO Alliance, warned that generative AI is making phishing attacks more convincing and harder to detect.

“With generative AI, fraudsters can very quickly create grammatically perfect native language phishing attacks that bring someone to a pixel-perfect replication of the website,” Shikiar explained.

To counteract these threats, financial institutions are using AI to analyze transactional data at scale, flagging suspicious activity faster than traditional methods. Taira Hall, head of enterprise payments strategy at Citizens Bank, emphasized AI’s role in proactively identifying fraud.

AI “could create an opportunity to leverage data to better understand customer behavior and recognize patterns, enabling us to identify fraudulent transactions more quickly,” Hall said.

While AI-driven payment innovations aren’t entirely new, the growing scale of computing power is pushing them to the forefront of financial technology. As John Wilson, director of the MS Fintech program at the University of Connecticut’s School of Business, put it, “The techniques that many people are calling AI, they’re not innovative, they’re not new, but they’re happening perhaps at a larger scale because of computing power.”

As AI continues to evolve, its role in the payments industry will only expand, shaping how consumers and businesses conduct transactions in 2025 and beyond.