This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.
More banks and credit card companies are starting to adopt artificial intelligence (AI). Read on to learn how it will impact both consumers and financial institutions.
Image source: Getty Images
Credit cards have been a staple of personal finance for decades. Currently, there are close to 600 million credit card accounts in the U.S. However, as technology continues to advance, we are starting to see the rise of artificial intelligence (AI) in the credit card industry. AI is an exciting development that will have a significant impact on both consumers and financial institutions. AI is the umbrella term for any computer program that can think or behave like a human being. This technology will impact credit cards to make accurate predictions and decisions based on data analysis, such as spending habits, demographics, and more. Here are five ways in which AI will affect credit cards in particular.
1. Personalized offers, promotions, and maximizing rewards
With the use of AI, credit card companies will be able to analyze consumers’ spending habits and provide personalized offers and promotions. This will ultimately increase customer satisfaction and loyalty. For example, if the AI system discovers that a user frequently spends money on travel, it can provide offers for discounted airfare and hotel stays.
Save: This credit card has one of the longest intro 0% interest periods around
More: Save while you pay off debt with one of these top-rated balance transfer credit cards
Another example is MaxRewards, an app that helps you manage all of your credit card points and miles. It can also help you maximize credit card rewards. One of MaxRewards’ key features is recommending the best credit card to use at nearby merchants so you can earn the most rewards on purchases. You can quickly see the best credit card to use for each spending category and see all the offers you qualify for. Credit cards often offer bonus rewards and deals that you may not know about, but the app automatically activates them for you so you can earn more rewards.
2. Fraud detection
As more people shop online, credit card fraud is expected to hit over $400 billion over the next decade! AI systems can analyze millions of transactions at an incredibly fast pace, allowing banks and credit card companies to detect fraudulent activities quickly. This will help to reduce the number of fraudulent transactions and protect consumers from identity theft. Additionally, AI can learn from consumer behavior patterns and detect deviations, flagging any suspicious activity automatically.
By analyzing past data points related to fraudulent activities, AI algorithms can be trained to recognize certain patterns that could indicate future attempts at fraud before they occur. This means that financial institutions can be alerted about potentially fraudulent activity much faster than if they had relied on manual methods. This helps ensure that any potentially fraudulent activities are detected early on, before they have a chance to cause serious losses or damage.
3. More accurate credit scoring
AI has the potential to revolutionize how credit scores are calculated. AI can identify patterns and trends that may not be obvious to human analysts. For example, AI can detect subtle changes in a person’s financial behavior over time and predict how those changes may affect their creditworthiness in the future. This information can be used to provide personalized recommendations to improve credit scores, such as paying off certain debts or establishing a track record of timely payments.
Additionally, AI can help lenders make more informed decisions by providing them with a more accurate picture of a person’s credit score. AI also has the potential to help individuals who are starting out with no or limited credit history. Lenders can use alternative data, such as their employment history and online behavior, to determine whether to extend a loan or credit card offer. AI can also monitor borrower behavior and provide personalized financial advice to help them build credit and improve their overall financial health.
4. Customer service
AI-powered customer service chatbots are already in use and are quickly becoming more advanced. This will provide a more streamlined and efficient experience for customers who have issues or questions with their credit cards. AI-driven chatbots can learn from earlier interactions and continually improve their responses.
Banking has shifted from in-person at branches to digital banking online as chatbots have become one of the most widely adopted technologies. In 2019, only 2% of banks and 3% of credit unions in America deployed chatbots. Going into 2023, that number has increased tenfold, with 18% of banks and 30% of credit unions adopting it and an additional 25% of credit unions planning to do the same in 2023. By 2030, experts state that customers won’t be able to tell if they are interacting with a bot or a human!
5. Predictive analytics
With its ability to analyze large data sets, AI can provide insights into consumer behavior patterns. This information can be used by credit card companies to predict which products and services could be successful in the market, allowing them to stay ahead of the competition. Every year, Americans pay $120 billion in credit card interest and fees, adding to nearly $1 trillion in total credit card debt.
It is important for Americans to be able to accurately compare and find the best credit cards for their needs. AI can now quickly compare features like annual fees, rewards programs, and interest rates in order to help a consumer find the perfect fit for their personal finances.
AI is still in its infancy when it comes to its full potential, but we can already see a considerable impact in the credit card industry. With its ability to detect fraud, offer personalized promotions, and streamline customer service, AI is shaping up to be a game changer for the financial sector. With time, AI will continue to impact the credit card industry, helping both banks and credit card holders.
Alert: highest cash back card we’ve seen now has 0% intro APR until 2024
If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.
In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
