Dive Brief:

• Payment processor Shift4 Payments is joining the ever-growing roster of payment companies leaning on AI to improve customer service and the shopping experience.
• The Allentown, Pennsylvania-based company is partnering with Elon Musk's artificial intelligence firm xAI, CEO Taylor Lauber told analysts on a Feb. 26 webcast of the company's fourth quarter earnings call.
• Shift4 will use xAI's services to better leverage customer data to answer customer questions and reduce cart abandonment, he told investors on the webcast.

Dive Insight:

The artificial intelligence company is best known for operating Grok, the chatbot available to users of the social media platform X. That AI tool was recently the subject of news coverage after an update caused it to refer to itself as "MechaHitler," in conjunction with antisemitic remarks.

“We're building predictive models that analyze personal signals to prevent churn before it happens, while leveraging the vast trove of data we collect from customer interactions to identify and resolve customer pain points more rapidly," Lauber said in the call.

AI's tentacles will extend into most parts of the payment processor with the ultimate goal of helping workers function faster and more efficiently, he said.

"We've deployed AI assistants within our key products to help resolve inquiries more quickly and with less human intervention," Lauber said. "These tools have recently been expanded to providing operational insights to our merchants as well."

Digital payments company Block last week announced that it would cut 40% of its staff and replace their work with artificial intelligence tools. A Shift4 spokesperson declined to say if the company plans to reduce its own workforce or say when the partnership with xAI started.

Lauber also discussed the company’s expansion plans. Shift4 is looking to the Middle East and Asia for more customers, and plans to add thousands of new clients in those regions, thanks in no small part to acquisitions of foreign companies like the Swiss firm Global Blue, Lauber said on the earnings call.

"Global Blue's tax-free shopping is unrivaled, and when combined with eligibility detection at the point of payment, it adds meaningful utility to retailers of all sizes," he said. "We believe we can add thousands of merchants as a result of this capability, and are targeting 15 countries for launch in 2026."

Shift4 will focus initially on Japan and Saudi Arabia, Lauber said. "These are large markets that align perfectly with our core competencies," he said.

The CEO also provided some insight into Shift4's acquisition strategy. Merging with a company in an international market is more efficient than simply moving into that market on its own, because the acquired company already has expertise and a foothold in a coveted region, he said.

"You're acquiring a team that's got a proven track record of adding customers," Lauber said. "And you're emboldening that team with your own product, and inevitably, they're bringing a batch of customers with them that are a quick and easy cross-sell."

However, not everyone approves of the payment processor's strategy. "Shift4 must stop doing mergers and acquisitions until it can demonstrate the ability to monetize what it has already acquired," William Blair analyst Andrew Jeffrey wrote in a note to investors Thursday. 

Shift4 reported net income of $53 million for the fourth quarter of last year, a 60% increase from the $33 million the firm reported in the year-earlier quarter.

The company also reported $610 million in revenue for the quarter, a 50% increase from the $405 million it reported in the same quarter last year.