Age of Entitlement welcomes AI in Banking

AI already runs payments. Every tap, click, or online order is scored by algorithms deciding in milliseconds if it’s safe. Fraudsters are blocked faster than ever, and customers are better protected than they were even a few years ago.

So yes, AI is working. Fraud attempts are being stopped before they hurt consumers. We’ve seen real progress. But here’s what surprised many in the industry. Fraud losses are falling, yet disputes are climbing.

Fraud detection is strong, but not the full story

Every transaction runs through three checkpoints - the merchant, the acquiring bank, and finally the issuer. Each one uses AI models tuned to spot risky behaviour, whether it’s an unusual IP address, a suspicious device, or spending that doesn’t fit the pattern.

Not long ago, it was the cardholder who had to catch fraud and call their bank. Today, banks send a text or push notification before the money even moves. That’s a huge step forward. Still, fraud detection alone doesn’t explain why disputes keep piling up.

The frictionless dilemma

Consumers want speed. If every small purchase triggered a password prompt, a text code and a phone call, people would give up. So, banks are training AI to know when to tighten checks and when to let a payment flow. Get that balance wrong, and the risks multiply. Too many hurdles, and customers walk away. Too few, and fraudsters slip through.

This constant balancing act has become one of the toughest problems in banking.

The age of entitlement

The bigger issue isn’t fraud. It’s behaviour. We call this the “age of entitlement.” Customers now expect refunds to land as quickly as deliveries. And they expect deliveries almost as fast as Amazon Prime. If an order takes longer than a day or two, or if a refund takes more than a few hours, the instinct is to file a claim.

Consumers don’t think of it as fraud. They think of it merely as a concierge service. But it’s still money leaving the system.

During Covid, banks built faster digital claim processes to cope with demand. That convenience never went away. Filing a chargeback now feels as easy as checking your balance.

Regulators are chasing a moving target

The UK is still out in front when it comes to rules and regulations like open banking and Authorised Push Payment reimbursement, but even regulators admit they’re struggling to keep pace.

Honestly, nobody is caught up – not the regulators, not the banks. The challenge is protecting consumers without choking off innovation. It’s a messy job. Regulators have to juggle demands for speed, safety, competition and fairness, all while the underlying technology evolves by the month.

Banks are going digital-first

Customer service is being reshaped too. A few years ago, banks boasted about local call centres. Now they highlight the fact you don’t need to call at all. Chatbots, apps and instant messaging are becoming the default.

Even older demographics are part of this shift. Previous OFCOM data shows record mobile use among over-65s. The future is clear: fewer phone queues, more apps.

The future: trust above all

Fraud prevention is stronger, and customer service is faster. But the real question is whether banks can hold on to trust while expectations keep climbing. Consumers want to feel safe first. Once they feel safe, they’ll embrace new services. But if they sense that safety is at risk, they’ll push back hard.

That’s the paradox of AI in banking. It’s stopping fraudsters, but it can’t rewire human behaviour. The next frontier isn’t only about crime prevention. It’s about building confidence in a system that has never moved this fast.