The Green Sheet Online Edition
July 27, 2026 • 26:07:02
Legal ease
AI, payments and law: A tri-state bonanza
Faster. Cheaper. Better. That's all you can hear over here in the tri-state area of AI, payments and law. Like cars before seatbelts, there will be crashes along the way as payment professionals rush head-long into harnessing the irresistible tools powered by AI. Here are four legal issues that payment professionals should consider as they tumble into the contemporary reality of pervasive AI situations.
1. Where is the data?
Most AI data processing happens in those vast data centers popping up all over the place and not on your own computer or server. This is not the end of the world; most payment platforms do not run their own servers like they did 20 years ago. Most payment platforms (directly or indirectly) procure hosting services or software-as-a-service (SaaS) plus hosting services using backbone suppliers like Azure or Amazon AWS.
In plain English, when you log in to your business gmail account, all the data for that account is in a Google server somewhere far from your phone or desktop. The idea that data is no longer local is not new. What is new is that a lot of data put into AI models becomes part of vast pools of data that make AI better. For now, AI is "smart" only because it has seen everyone else's way of doing the thing you are learning about.
Back to the issue then. When a payment processor uses AI to manage risk on a portfolio of merchants, the processor should consider how much merchant data is going to the AI platform servers and whether that data could become identifiable to anyone other than the processor itself.
In the fullness of time, I expect AI platforms to be scored on how well they avoid or discard identifiable data. For now, users are often in the dark, but payment platforms should still ask the tough questions of their AI suppliers and consider whether the answers are reliable or not.
Payment platforms are already highly aware of risks associated with data breach, notably because they often assume liability for payment network fines related to PCI-non-compliance and data breaches. This gives payment platforms a leg-up on holding AI providers to data security standards that are the law of the land in payments.
2. Perplexity: The case
All of AI is holding its breath over Amazon.com Services LLC v. Perplexity AI, Inc., No. 26-1444 (9th Cir. 2026). Amazon alleged that Perplexity's AI shopping agent caused or facilitated access to Amazon's platform in violation of Amazon's Terms of Use when users used the Perplexity bot to shop on Amazon.
On March 10, 2026, the U.S. District Court for the Northern District of California granted Amazon an injunction allowing it to block Perplexity's agents. Perplexity is appealing. When you and I go to Amazon to order paper towels, milling around on the site often results in buying a bunch of other stuff. When you or I send a Perplexity agent to buy paper towels for us, the bot stays on task and doesn't get lured in by deals or advertising.
This presents a challenge to Amazon because it earns revenue from advertising that we humans fall for and from the additional sales made to us. Unflappable agents are not big spenders.
If I had to bet on where this whole issue is going, like restaurants, taxis and hotels before it, Amazon will most likely cave to being a supplier to an army of shopping bots, letting go of some of its connection to us humans. Even when we humans shop at Amazon, our orders go through several computing instances such as: (i) a local device; (ii) a browser; (iii) a router; (iv) a modem; (v) an ISP switch; (vi) the ISP itself and countless other hops between machines and systems.
The introduction of one more layer, a Perplexity bot, is merely a subtle variation on the pre-existing reality where a string of machines stand between buyer and seller. Given the billions of dollars earned from ad revenue, there are grounds to believe that there will be some paradigm shift, but businesses will always advertise and consumers will always fall for ads.
Ads are already popping up in various AI chats, and AI algorithms can easily steer consumers one way or another. Unless Amazon wants to retreat to IRL/in-store only transactions, fending off the bots is perhaps a fruitless task.
Assuming my guess is right, and the shopping bots are here to stay, there are important takeaways for payment professionals. Fraud is shooting up exponentially. Processors and their ISOs should consider exactly who carries liability for a bot bamboozling a merchant into giving up product or funds on the basis of stolen cards.
Payment professionals have a golden opportunity to be anti-fraud advisers for merchants, not just on card matters, but also on deepfakes, social engineering and the torrent of creative criminals trying to get people to part with their money.
3. Say what you do: AI disclosure in privacy statements
If a payment platform is using AI, the fact of that use should be disclosed in privacy statements. Beyond the fact that that disclosure is likely required under state law, the disclosure gives merchants information that they deserve to manage their own risk and preferences. While a given AI setup may be entirely legal and safe, for one reason or another, a merchant might have an aversion to their data being used by AI. Consider building systems that can create walled gardens for merchants who want to opt-out of AI-supported tools.
4. Privilege
It looks like dumping legal advice into AI breaks privilege on the advice. The recent case of United States v. Heppner, (S.D.N.Y. Feb. 17, 2026) resulted in a defendant's legal strategy no longer benefitting from lawyer-client privilege because he uploaded it to Claude AI. The takeaway here is that what happens between you and your lawyer should stay between you and your lawyer.
In publishing The Green Sheet, neither the author nor the publisher are engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. For further information on this article, please contact Adam Atlas, Attorney at Law email: atlas@adamatlas.com, Tel. 514-842-0886.
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