Artificial intelligence (AI) and real-time payments are opening up new opportunities in ecommerce and the sale of digital goods, two high-growth segments of the digital economy that have unmet payment needs, according to a report from payment services provider Rapyd.
A primary driver behind the need for AI in these markets is the growing fraud threat. As ecommerce traffic increases, it becomes harder for ecommerce merchants and sellers of digital goods to screen potentially fraudulent transactions in a manner that does not degrade the customer experience. In theory, AI-powered fraud management tools help online retailers and B2B sellers quickly flag and score suspect transactions. Those results may in turn lower rates of chargebacks and transaction disputes.
Why fraud is an ecommerce problem with potential AI solutions
Fraud and chargebacks are two of the biggest issues facing ecommerce and sellers of digital goods. The same can be said in both the B2B and B2C worlds. Some 48% of B2B sellers and 46% of ecommerce retailers cited fraud as a leading business concern, according to the Rapyd report. In addition, 31% of B2B sellers and 30% of ecommerce retailers cited the risk of chargebacks as a leading concern.
Raypd surveyed 1,000 business owners and payment decision-makers from eight high-opportunity industries in January. Those participants came from 10 countries, including the United States, Canada and the United Kingdom.
In addition to improving fraud detection, AI can also be used to improve customer service. That can involve creating chatbots that function as a virtual customer service representative by mimicking human conversation through voice or text interactions.
On the payments side, the move toward real-time payments continues to accelerate as online retailers and B2B sellers look for immediate availability of funds. They are also looking for ways to improve cash management and provide a smoother customer experience.
“Speed of payments has never been more important than today, and adoption of real-time payments globally is a testament to this,” the report says. “Real-time payments are quickly gaining global prominence, addressing the complexities and prohibitive costs associated with traditional payment methods. This shift is driven by the need to overcome the challenges of errors, delays, and increased risks of international transactions. Businesses worldwide are increasingly adopting real-time payments as a solution to expedite their payment processes.”
AI trends in ecommerce
When asked to list what trends they foresee over the next 12-18 months, 46% of respondents said more acceptance of real-time payments in ecommerce, and 40% said more adoption of AI applications. Other trends cited include more use and acceptance of virtual cards (30%) and buy-now-pay-later loans (30%). Respondents could provide more than one response.
Since payment service providers are the ones that will be delivering these technologies, businesses need to evaluate them to select the appropriate partner.
When asked what criteria they use to evaluate a payment provider, 40% of ecommerce retailers and digital goods sellers cited ease of integration, while 31% checked speed of payments. Other criteria include availability of tools for fraud management that reduce the risk of regulatory and financial crime (26%) and tools for mitigating fraud and financial risk (23%).
“When evaluating a payments provider, ease of integration is consistently ranked as the most important factor across industries and regions surveyed, which directly correlates with speed and convenience,” the report says.
The reasons B2B sellers and ecommerce retailers prefer certain payment methods vary. Among B2B sellers, the top reason for accepting a payment option was speed of receiving or sending a payment (66%). No. 2 was convenience of acceptance (62%). No. 3 was having a lengthy relationship with their financial institution or payment provider (43%).
Reasons online merchants choose payment options
Among ecommerce retailers, the top reason for accepting a payment option was convenience of acceptance (59%). That was followed by a solution being the fastest way to receive or send a payment (51%). In third place was an option proving to be the most popular payment method in the market (36%).
With travel bouncing back post-pandemic, travel agencies are preparing for a future in which online sales could make up 76% of total travel and tourism revenue by 2028, according to the Rapyd report. As a result, there would be “secure and efficient transaction processes that keep pace with the rapid growth and unique needs of the global travel market,” the report states.
Respondents were asked to identify the top fintech trends in online travel sales over the next 12-18 months. 43% of them cited adoption of real-time payments and 35% cited adoption of AI applications. Other payment options online travel agencies see gaining momentum during that period include pay-by-bank solutions (32%) and virtual card acceptance and use (27%).
Threats cited by online travel agencies
Among online travel agencies selling to businesses, the top threat to their business is financial security data risks (49%). Next were compliance and regulatory risks (43%). Some 34% of agencies cited the risk of fraud, while 32% cited chargebacks.
Among online travel agencies selling to consumers, the top threat to their business is compliance and regulator risks (53%). Those were followed by financial data security risks (49%). In addition, 40% of respondents cited fraud and 24% cited chargebacks.
The top reason online travel agencies selling to businesses preferred a specific payment method was speed of the transaction. 54% of respondents cited speed when receiving a payment and 51% when sending a payment. Convenience of acceptance was cited by 52% of respondents when receiving a payment and 48% when sending a payment.
Among online travel agencies servicing consumers, speed of payment was cited by 46% of respondents when receiving a payment and 37% when sending a payment. Convenience of acceptance was cited by 51% of respondents when receiving a payment and 42% when sending a payment.
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Sign up for a complimentary subscription to Digital Commerce 360 B2B News, published 4x/week. It covers technology and business trends in the growing B2B ecommerce industry. Contact Mark Brohan, senior vice president of B2B and Market Research, at [email protected]. Follow him on Twitter @markbrohan. Follow us on LinkedIn, Twitter, Facebook and YouTube.