Is AI changing customer expectations?

Merchants face increasing pressure to curate customized shopping experiences. AI-based chatbots and personalized recommendations have raised the bar for how customers want to interact with retailers — and many may have trouble keeping up.

When technology advances, 73% of consumers expect better personalization, according to Salesforce data.1 Studies also show that more than half of consumers say they’ll become repeat buyers after a personalized shopping experience.2

So how can retailers remain competitive in an ever-changing landscape? They can start by taking personalization to the next level by customizing payment processes for every shopper and streamlining the checkout process.

Here, we’ll unpack how AI is changing commerce experiences and ways merchants can use advanced technologies to personalize payments at scale.

The evolving landscape of consumer expectations

The commerce landscape is undergoing a major shift: Consumers expect personalized shopping and payment experiences across touchpoints. Whether they’re researching new products, checking out on an app, tracking a delivery, or coordinating a return, they want their interactions to be seamless and tailored to their needs.

Customer expectations are actually more advanced than many merchants realize, according to Zendesk.3 More than half (57%) of consumers are willing to share personal data in exchange for personalized offers or discounts.4

Gen Z shoppers, in particular, may prefer frictionless and efficient experiences driven by technology: 50% of Gen Zers say experience is important when it comes to retail interactions, compared to just 33% of Baby Boomers.5 For example, younger segments may seek convenient and digital-forward payment methods like buy now, pay later (BNPL), peer-to-peer (P2P) payment apps, and digital wallets.

So if retailers want to thrive, they should work to meet shoppers with streamlined checkout experiences that match their needs.

Holistic retailers and the importance of brand experience

Holistic retailers are committed to creating a seamless and comprehensive customer experience across touchpoints — from the first interaction to the customer service call. That means each shopper isn’t just seen as a potential sale, but an opportunity to build deep engagement.

To foster these long-term relationships, holistic retailers may adopt omnichannel strategies, making it convenient for people to shop in person, online, and on mobile devices. For example, holistic retailers may offer in-store mobile checkout to reduce wait times, personalized product recommendations through their apps, and curbside pickup and returns.

Providing these convenient and accessible experiences can help reduce friction and increase revenue. A 2022 study found that, Gen Z customers have little patience for slow or poorly functioning online payment sites, leading many to abandon their carts or even leave a negative review.5 Therefore, if merchants want to improve customer satisfaction and sales across cohorts, they should create smooth customer journeys across touchpoints.

The role of AI chatbots in personalization

AI chatbots enable personalized interactions at scale. By communicating with chatbots, shoppers can receive product recommendations, customer service, and order updates that are tailored to their specific purchase histories and behaviors.

Through AI algorithms, businesses can analyze consumer data to learn what customers want and generate personalized suggestions that match their interests. Add in chatbots, which use natural language processing and machine learning to simulate human conversation and consistently improve their automated conversations.

Enhancing shopping experiences through personalization

Customers value efficient and personalized experiences, and they’re willing to use AI to get them. According to Accenture, 42% of consumers aged 18-34 would be comfortable using conversational AI tools like ChatGPT for product recommendations.6

Here are a few ways AI chatbots can enhance customer experiences:

  • Product research: Shoppers can ask and answer questions about what they're interested in and narrow down their product search.
  • Personalized recommendations: AI chatbots can provide customized product recommendations based on each shopper's purchase history.
  • Order tracking: Customers can receive automated status updates about orders, deliveries, and returns.
  • Customer service: Instead of waiting on the phone for a representative, shoppers can receive immediate, AI-based customer support for general questions, concerns, and troubleshooting issues.
  • Loyalty programs: Members and subscribers can receive personalized rewards, offers, and promotions.

Agile, data-driven strategies and balancing physical and digital touchpoints

Retailers can leverage AI to deliver these personalized services and build cohesive experiences across physical and digital channels. For example, with an AI-powered unified payments system, merchants can gather data from various platforms and gain a comprehensive view of each customer’s journey.

They can then use those customer insights to enable omnichannel shopping scenarios, such as:

  • Buy online, pick up in store
  • Buy online, return in store
  • Buy online, receive membership perks and rewards for in-store purchases
  • Buy in store, receive personalized product offers to shop online
  • Buy in store, apply for buy now, pay later on an app
  • Buy in store, browse expanded inventory on digital kiosks

Delivering intuitive, omnichannel experiences can help retailers boost revenue and engagement with each interaction. AI-enabled tools can help by gathering customer data in real time and proactively reaching shoppers across channels.

Integration of AI in payments

PayPal is driving these personalized payment experiences, helping businesses thrive and navigate this new era of commerce. With PayPal Braintree, large enterprise retailers can seamlessly connect transactions, harness powerful insights, and deliver transformative customer journeys.

Powered by AI, PayPal enables modern merchants to provide shoppers with:

  • Personalized payment options: PayPal uses AI algorithms to analyze customers’ transaction histories, preferences, and behaviors. By gathering insights from these patterns, we can suggest preferred payment methods for seamless and convenient transactions.
  • Streamlined checkout experiences: PayPal employs AI and machine learning to create a one-click checkout process. The AI system pre-selects each customer’s preferred payment method, shipping address, and other relevant details to speed up each payment.
  • Advanced security measures: PayPal employs AI-driven fraud detection mechanisms to help protect transactions. Our AI algorithms continuously analyze transaction data, looking for patterns and anomalies that may indicate fraudulent activity. By leveraging AI, we can quickly identify and respond to potential threats, helping your payments be more secure.

Raise the bar with AI-powered payment experiences

AI chatbots are raising the bar for what consumers anticipate from their shopping experiences. Retailers that don’t keep up risk getting left behind and leaving valuable revenue on the table.

Modern merchants can meet and exceed these growing expectations by streamlining payment processes at checkout — creating a comprehensive customer journey.

PayPal is a leader in helping businesses implement innovative payment processes and data insights using AI. With PayPal's advanced solutions, you can go beyond just personalizing product recommendations and curate full-funnel commerce experiences that meet customers' needs every step of the way.

Learn more about streamlining payments with PayPal.

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