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CoverStory

AI: the bad and the good Successful agents do not sell on price or place generic
countertop POS terminals, Kopelman noted. "They sell
Many merchants and service providers are integrating ar- value, service and solutions, and make it harder for busi-
tificial intelligence with their fraud prevention toolboxes. nesses to switch or want to switch by locking clients in
Think in terms of enhanced identification, authorization with multiple services," he wrote in "Best-selling business
and authentication, like biometric recognition and multi- strategies Part 4: Value-added solutions," The Green Sheet,
factor authentication. Ditto for their breach prevention ef- June 24, 2024, issue 24:06:02.
forts.
"Selling value-added services can help create stickiness
However, as Victor Orlovski, founder and managing part- and long-term customer relationships, but certain rules
ner at R136 Ventures, a venture capital firm focused on apply," Kopelman counseled. "First and foremost, consider
business-to-business and fintech startups, noted in "AI how the solution will specifically add value to the mer-
brings new opportunities to payments," (The Green Sheet, chant's business and addressable market." And stay clear
Feb. 26, 2024), AI can also be used by fraudsters and data of anything that comes with a large price tag. Otherwise,
breachers. your customers will become prime pickings for competi-
tors.
Indeed, according to Visa, suspected fraudulent transac-
tions rose significantly during the year-end holiday shop- Make it your goal to offer at least one value-added service
ping season, due in part to the adoption of AI by fraud- each month, Kopelman advised. But not just any product.
sters. While AI is no panacea for fighting fraud, Orlovski You need to know and play to your audience. So, custom-
noted it does improve the infrastructure of payments and ize, and remember, one size does not fit all in merchant
the merchant-customer relationship in numerous ways: services, Kopelman added.

• It can help reduce fraud, as it is capable of ingest- Value-added services was a hot topic at TRANSACT 2024,
ing enormous datasets and applying advanced algo-
rithms to identify patterns and anomalies indicative the ETA's annual conference. Throughout the exhibit hall
vendors showcased flexible, modular solutions designed
of fraud.
to be easy to manage, customize and deploy.
• It enhances know-your-customer risk assessments by
analyzing engagements among customer accounts, "Technology providers have so many ways to add value,
merchants and banks, with an eye toward suspicious create loyalty and expand choice, because payments touch
activity. everything and represent the ultimate interaction with
consumers," Brad Giles, senior vice president at Ingenico,
• It improves the speed and efficiency of transaction told The Green Sheet.
processing, analyzing and categorizing transactions
to give banks and merchants a bead on spending be- CFPB gets into act
haviors. The Consumer Financial Protection Bureau, the consumer
watchdog created by the Dodd-Frank Act, made its pres-
To get ahead of the breach curve, IBM's Skapinetz urged ence known in 2024 in many ways. One of its more ambi-
investments in AI-driven defenses. Merchants and their tious endeavors was to set up guardrails for open bank-
service providers also need to invest in new skill sets that ing. Specifically, it created a personal financial data rights
address emerging risks and opportunities presented by rule that will provide consumers with greater control over
generative AI. what organizations can access their critical banking infor-
mation, and to what extent.
Where AI is deployed extensively, organizations are see-
ing on average $2.2 million less in breach costs, vis-à-vis Open banking is relatively nascent in the United States,
organizations that don't use AI defenses, according to having been pioneered in Europe. The new rule set aims
IBM's research. to govern data sharing between various financial services
Adding value to merchant relationships firms, making it easier for consumers to switch providers
without incurring costs, or risking financial privacy or
In a healthy relationship, any party can leave when they data security, the agency stated. It remains unclear if or
choose. But the goal is to not let that happen. How? With when the new rule set will take effect, as it is already being
respect to merchants the answers are value, convenience challenged in federal court.
and security. Allen Kopelman, co-founder and CEO of
Nationwide Payment Systems and 2024 Street SmartsSM The CFPB also finalized a rule bringing big tech compa-
author, noted that the agent-merchant relationship has al- nies that offer digital payment apps under its oversight.
most always had a value-added component. There was a The rule, which became effective at the end of 2024, ap-
time, for example, when PIN pads were a major value add. plies to companies processing over 50 million transactions
The same was true of check services. Now, software and annually.
POS solutions are in-demand value adds.

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