How AI is transforming payment systems: Opportunities and risks for UK businesses

Artificial intelligence is changing the way payments work for UK businesses and the companies that process them. It enables faster transactions, smarter fraud prevention, and more personalised customer experiences. Yet the same technology that strengthens payment systems is also being used by criminals to run increasingly sophisticated scams. At the same time, regulators are tightening oversight to protect security and trust. 

The scale of the challenge is significant. UK Finance reports that in 2024, criminals stole £1.17 billion through fraud. AI-powered security helped banks block a further £1.45 billion, equivalent to stopping 67 pence in every pound of attempted fraud. Even so, new research shows that 93% of UK companies were targeted by fraud last year, with many attacks powered by AI tools. 

For UK businesses, the opportunity is clear: machine learning can improve payment routing, reduce costs, and spot fraud in real-time. But without the right safeguards, these same systems can create vulnerabilities, draw regulatory attention, and erode customer trust. 

For payment companies, the challenge is to give their business customers seamless, secure, and intelligent payment options, while complying with regulations and protecting sensitive financial data. 

This sets the stage for a closer look at how generative AI is transforming payment processing, as well as the emerging challenges of security, compliance, and customer trust in the UK market.

AI-powered payment routing: From static rules to adaptive intelligence

AI payment routing is moving UK payments from guesswork to precision

In the past, transactions followed fixed routes that couldn’t adapt when conditions changed. Now, payment providers use machine learning to analyse live data, such as processor fees, historical authorisation rates, network latency, issuer preferences, transaction type, and even the time of day. In milliseconds, the system can choose the fastest, cheapest, and most reliable route for each payment.

Benefits for UK businesses

The gains are real. Leading UK and global payment providers report that AI optimisation can lift authorisation rates by 6% to 10%, with even bigger jumps for certain transaction types. Smarter routing can also uncover lower-cost payment paths without slowing things down, delivering savings of 2% to 15%. For businesses, that means more approved sales, fewer retries, and a smoother checkout for customers online and in-store.

AI routing also learns with every transaction. Over time, it can spot the first signs of a processor slowdown and reroute payments before the problem becomes a crisis, reducing downtime and protecting sales during busy periods like Black Friday or major sporting events.

Risks and how to manage them

There are systemic risks when multiple payment providers train their AI on similar datasets. If their systems make the same routing decisions during network stress, it can create wider disruptions. Providers can manage this risk by diversifying their AI models, maintaining fallback processes, switching to rule-based routing when the AI hits unusual cases or low-quality data, and keeping human oversight for high-value or sensitive payments.

By combining AI-driven efficiency from providers with operational safeguards, UK business payment systems can run faster, cost less to operate, and remain reliable in a fast-changing market.

The AI security paradox: Advanced fraud detection versus evolving threats

Fraud prevention in the UK has become a high-stakes contest. Criminals are using artificial intelligence to create scams that are faster, more convincing, and harder to stop. In response, many businesses are adopting advanced AI fraud detection systems to protect transactions, while banks and payment providers work to strengthen the wider payments infrastructure against emerging threats.

How AI fraud detection works

Modern AI systems analyse thousands of signals in real time, including behavioural patterns, device fingerprints, transaction timing, location data, network activity, and historical spending habits. This enables far greater accuracy than older rule-based methods, which often triggered too many false alarms and frustrated genuine customers.

Machine learning models, trained on vast datasets of both legitimate and fraudulent transactions, can:

• Detect subtle warning signs that fixed rules might miss
  
• Adapt quickly to new and evolving fraud tactics
  
• Identify synthetic identity fraud, where real and fabricated data are blended to create convincing false identities
  
• Block account takeover attempts that bypass standard security checks through gradual infiltration

How criminals are using AI

The Payments Association warns that fraudsters are also leveraging AI to:

• Create deepfake videos and audio to bypass biometric verification
  
• Launch highly personalised phishing campaigns in multiple languages
  
• Generate synthetic identities and forged documents capable of fooling advanced ID verification systems

The double-edged sword

AI has helped businesses reduce false positives and uncover complex fraud patterns that traditional systems often overlooked. Yet the same technology is giving criminals more advanced tools, and some forms of offline fraud leave few digital traces for AI to detect.

Best practices for businesses and payment providers

For businesses, AI-powered fraud detection works best when combined with clear internal controls, skilled human review, and customer-friendly verification processes. For payment providers, the focus should be on building the safeguards that protect the entire payment ecosystem. These can include:

• Secure integration protocols for business fraud detection systems
  
• Behavioural biometrics that analyse how a user interacts with devices
  
• Device intelligence that tracks hardware attributes and unusual activity
  
• Network analysis to flag suspicious connections or proxy use
  
• Rigorous identity verification across both digital and face-to-face channels

This is where UK innovators are stepping up. Wonderful is taking a strategic approach to building next-generation fraud prevention systems. In its recent Asima launch announcement, the company detailed how its Google Cloud migration is enabling proprietary transaction monitoring tools designed to tackle the unique challenges of open banking fraud.

Asima’s AIS platform provides businesses with regulated access to customer bank data from multiple institutions but only with explicit customer permission. Wonderful holds full AISP authorisation under PSD2 and FCA rules, connecting directly to banks through their official APIs. This means transaction histories, balances, and standing orders are pulled securely, authenticated strongly, and cleaned into real-time, standardised data.

For businesses, this removes the headaches of unreliable screen-scraping and regulatory red tape. They can instead use Asima to build multi-account dashboards, automated bookkeeping systems, risk assessment tools, and smoother onboarding processes, while Wonderful ensures compliance and security at the infrastructure level.

By aligning business-level AI defences with provider-led safeguards like these, the UK can address the evolving threat of AI-enabled fraud while keeping payments smooth, secure, and trusted.

AI payment agents in the UK: How agentic commerce is changing business transactions

A new wave of artificial intelligence is transforming how UK businesses manage payments. AI payment agents, sometimes called agentic commerce systems, can now make financial decisions, approve transactions, and optimise spending with minimal human input. For many organisations, this means faster purchasing, smarter supplier choices, and lower operating costs.

What is an AI payment agent?

Think of it as a digital assistant that can compare suppliers, negotiate payment terms, and even switch providers automatically. Mastercard’s Agent Pay and Visa’s Intelligent Commerce Initiative are developing tools that enable businesses to reorder stock at the best price, cancel unused subscriptions before they renew, or shift spending to preferred partners, without needing manual approval for every decision.

Examples in action

Early uses include subscription management tools that cut waste, inventory systems that forecast demand and place orders, and travel booking agents that rebook at cheaper rates. In future, AI agents could handle energy contract switches, procurement negotiations, and large-scale vendor evaluations—all within pre-set rules.

Who keeps AI payment agents in check?

Here’s where payment service providers come in. They must ensure agent-initiated payments are secure, compliant, and aligned with a business’s financial policies. That means:

• Strong authentication for AI agents before they can move money
  
• Spending limits and approval workflows for large transactions
  
• Real-time alerts and override controls for finance teams
  
• Detailed audit trails for every automated decision

As Kieron James, CEO of Wonderful, observes: “People are comfortable with AI as a co-pilot but not yet ready to hand over the controls.” His recent analysis of agentic commerce highlights that the convergence of AI automation and security necessitates thoughtful user consent frameworks and control systems. According to Kieron, this intersection demands careful attention to how users maintain agency over automated processes, while ensuring that robust security measures remain firmly in place.

By pairing AI-driven automation on the business side with these kinds of safeguards from payment providers, the UK can unlock the benefits of agentic commerce while maintaining control, transparency, and trust in every payment.

UK regulatory landscape: Balancing innovation with compliance

For UK businesses adopting AI in payment systems and financial operations, understanding the regulatory environment is essential. The right approach can unlock innovation while protecting customers and meeting legal obligations.

In January 2025, the UK government launched its AI Opportunities Action Plan, reinforcing its commitment to encouraging AI-driven growth in financial services while safeguarding critical infrastructure. This framework makes the UK an attractive base for businesses developing AI-enabled payment and transaction solutions, especially compared to jurisdictions with stricter rules.

From 2025 onwards, payment service providers and other regulated entities using AI for payment processing, fraud detection, or transaction optimisation will operate under enhanced oversight. The Payment Systems Regulator (PSR) is prioritising competition, innovation, transparency, and user protection, while the Financial Conduct Authority (FCA) requires AI-driven payment services to comply with consumer protection laws, explain automated decisions clearly, and ensure fair outcomes.

Compliance with the UK General Data Protection Regulation (GDPR) remains essential. Providers must ensure transparency in how payment data is used, secure explicit user consent, and embed privacy-by-design principles throughout AI development and deployment. For high-risk applications, robust governance and regular auditing are mandatory. Businesses adopting AI-powered payment solutions should work with providers that can demonstrate full compliance.

The UK’s five AI principles guide responsible adoption in payment systems:

• Fairness: Treat all customers equally and avoid bias, supported by regular audits.
  
• Transparency: Clearly explain AI capabilities, limitations, and decision-making processes.
  
• Accountability: Maintain clear governance for AI-driven decisions and their impacts.
  
• Security: Anticipate and defend against attempts to manipulate AI models.
  
• Privacy: Protect payment data from collection through to model deployment and operation.

For payment service providers, these principles set the benchmark for compliant AI adoption. For UK businesses, working with providers that uphold these standards is essential to maintaining customer trust, avoiding regulatory risk, and ensuring payment operations remain secure and fair.

Innovations in payment gateways: AI and open banking are reshaping the transaction landscape

Across the UK, businesses are starting to see how AI and open banking can make taking payments faster, cheaper and more secure. By combining real-time analytics with secure bank-to-bank transfers, modern payment gateways can route transactions more intelligently, spot fraud earlier and adapt payment flows to suit each customer.

Open banking, introduced under the PSD2 framework, allows customers to pay a business directly from their bank account without using card networks. This can lower costs, speed up settlement and make payments more transparent. Customers approve these transfers through regulated third-party providers, opening the door for new services and more competitive pricing.

Take Wonderful, for example. It offers transparent pricing, instant bank payments and lower costs than traditional card processing, starting from just one penny per transaction. Its Plus Plan, at £19.99 plus VAT per month for 2,000 transactions, includes advanced WooCommerce integration and customisable payment links, providing UK merchants with a flexible, low-cost way to get paid.

Wonderful has recently gone a step further with the launch of Asima, its next-generation payments infrastructure. Positioned as the “plumbing” of open banking, Asima provides clean APIs and predictable pricing, removing the complexity of connecting directly with multiple banks.

The timing aligns with major regulatory milestones, including the FCA’s Future Entity framework and the UK Payments Initiative, which CEO Kieron James called “the most significant moment for Open Banking since its launch.” 

Asima is designed to help businesses save on fees, speed up settlement, and offer customer-controlled recurring payments that work as a modern alternative to Direct Debits. Behind the scenes, the platform also leverages Vertex AI to strengthen fraud prevention, deliver real-time analytics and scale instantly as transaction volumes increase.

Global providers are also pushing the limits of what AI can do in payments. Stripe uses machine learning, trained on billions of transactions, to improve processing success rates. Its Radar system identifies fraud with advanced algorithms, applies dynamic 3D Secure only when it’s truly needed, and times retries for better approval rates.

Adyen has built AI-driven identity verification covering 33 countries and 23 languages. Its RevenueProtect system blends behavioural analytics with fraud prevention, helping merchants improve the customer experience while reducing chargebacks.

Worldpay uses AI to optimise payment routing in 174 countries, weighing up cost, approval probability and network conditions to make each transaction more efficient.

Put together, these innovations are making AI-powered payment gateways and open banking the backbone of tomorrow’s payment infrastructure. For UK businesses, that means higher approval rates, lower fees, stronger fraud protection and smoother payment journeys for customers.

Understanding data privacy and building consumer trust in AI payments 

When it comes to AI in payments, trust starts and ends with how data is handled. These systems run on huge volumes of transaction information, from the time and place a payment is made to the device being used and even the way a customer taps or types. That’s what makes them brilliant at spotting fraud in seconds. But it’s also why privacy and control are such hot topics.

For payment providers

The heavy lifting happens here. Providers have to make sure privacy is baked in from the start. That means:

• Finding ways to spot fraud trends without exposing individual behaviour, such as using differential privacy.
  
• Training AI models without hoarding sensitive data, through approaches like federated learning.
  
• Encrypting everything from end to end, so information stays secure in motion and at rest.
  
• Keeping clear audit trails so regulators and customers can see the proof.

Furthermore, UK GDPR rules require explicit consent for the use of data and clear plain-English explanations for any automated decision that affects a payment.

For businesses using these services

Even if the AI sits with your payment provider, your customers will still hold you responsible. That means choosing providers with solid privacy credentials and being transparent about how their systems work. If an AI model reroutes a transaction or flags it for review, inform the customer why in plain language. Make it part of the service, not an awkward afterthought.

Cross-border considerations

If you sell internationally, the rules get more complex. Different countries have different privacy laws, so both providers and businesses need a governance frameworks that work across borders. Permission management and clear policies can help you stay compliant without slowing down payments.

Why it matters

Nothing knocks customer confidence faster than a payment being declined for no obvious reason. The best AI systems balance fraud prevention and high approval rates, and the best businesses ensure customers can challenge decisions quickly and easily. In the UK market, the winners will be those who keep payments secure while making customers feel informed and in control.

Preparing UK payment infrastructure for an AI-driven future

The next decade will see AI embedded at the heart of UK payment infrastructure. For payment providers, this means scaling systems to handle soaring real-time volumes, projected to exceed $200 trillion globally by 2030, while ensuring that every transaction is secure, compliant, and reliable.

Cloud-based AI payment networks can already adjust capacity on demand, predict transaction spikes, and route payments efficiently during busy periods such as Black Friday or major sporting events. Advanced monitoring tools detect emerging fraud patterns, track AI model performance, and trigger automated failover when issues arise, ensuring that businesses stay running even during disruptions.

Regulators are watching closely. The Bank of England’s operational resilience framework highlights AI-related risks alongside cyberattacks and third-party failures. Payment providers must ensure that they can govern AI responsibly, manage risks proactively, and respond quickly when problems occur.

For UK businesses, the benefits are clear: faster fraud detection, smarter payment routing, and customer experiences tailored to individual preferences. However, these depend on providers building AI systems that incorporate privacy controls, algorithmic fairness, and transparent governance from day one.

The leaders in the next era of payments will be those providers who combine automation with human oversight, adaptive security, and close collaboration across the financial ecosystem. By doing so, they can deliver payment systems that UK businesses and their customers trust to be fast, fair, and dependable in an increasingly connected global market.

FAQ

How can AI payment routing directly reduce my business's transaction costs?

AI intelligently routes your transactions through the most cost-effective payment rail. This lowers your processing fees and increases your transaction success rate by avoiding inefficient payment channels.

What are the key differences between my current static payment rules and an AI-driven system?

A static system is rigid. An AI system constantly learns from real-time data to dynamically select the optimal route for your business, minimising costs and maximising acceptance rates.

How does AI improve fraud detection beyond traditional methods?

AI uses machine learning to analyse vast datasets and detect subtle, suspicious patterns that traditional systems miss. This proactive approach identifies and prevents fraud in real-time, improving your security.

With new AI threats emerging, how can my business ensure payment data security?

Protect your payment infrastructure with robust privacy controls and compliance with UK regulations like GDPR. Conduct regular security audits and invest in layered protection to stay ahead of evolving AI threats.

What is "agentic commerce," and what are its practical implications for my UK business?

Agentic commerce involves AI acting autonomously to complete purchases. Your business should prepare e-commerce channels forAI interaction and ensure compliance with local regulations for AI-initiated transactions.

Can AI payment agents improve customer service, and how do we get started in the UK?

AI agents offer 24/7 customer service, processing payments and handling queries. Your business can integrate compliant chatbots with payment capabilities into your website or social media channels.

What UK-specific regulations must my business consider before implementing AI in its payment system?

Your business must comply with UK GDPR and the Data Protection Act 2018. Stay informed on ICO guidelines and balance innovation with regulatory adherence.

How can my business ensure its AI payment solutions build customer trust around data privacy?

Build your customers' trust through transparency. Clearly explain your data usage and protection policies, strictly adhere to data protection laws, and implement robust privacy controls.

How will the combination of AI and Open Banking change the payment experience for my customers?

The synergy of AI and Open Banking will create a more seamless and personalised payment experience for your customers, leading to faster, more cost-effective transactions.

Is it difficult for a business to integrate new AI-driven payment gateways with existing systems?

Integration depends on your current infrastructure. Modern, API-driven solutions simplify the process. Evaluate vendors based on their integration support and ensure compatibility with your legacy systems.

What are the primary data privacy risks with AI-driven payments, and how can my business mitigate them?

Risks include data breaches and privacy violations. Mitigate these risks by using secure data storage, implementing strong privacy controls, obtaining explicit customer consent, and conducting regular audits.

How can my business build customer trust if customers are concerned about their data privacy?

Be transparent about your data practices. Clearly communicate your privacy policies, explain your security measures, and offer customers control over their data to reassure them and foster loyalty.

What are the first steps my UK business should take to upgrade its payment infrastructure for AI?

Assess your current infrastructure for automation opportunities. Focus on upgrading your data management capabilities for AI training. Consider a phased approach, perhaps with an AI-focused payment provider.

What skills are needed within my team to manage an AI-driven payment infrastructure?

Your team needs both technical and business expertise. Foster strong data analysis skills and a deep understanding of payment processes. Consider upskilling your existing staff and establishing an AI governance framework.