Connect with us

Business

Scammers exploit Bitcoin ATMs. Will new California laws help crack down on fraud?

Published

on

Scammers exploit Bitcoin ATMs. Will new California laws help crack down on fraud?

Jim Meduri answered a terrifying phone call in January from a man pretending to be his son.

The caller, who sounded on the verge of tears, said he’d been in a car accident. Meduri was convinced his son had been arrested for driving under the influence and injuring a pregnant woman and her daughter.

The San Jose resident later spoke to people impersonating a defense attorney and a courthouse clerk, who told him his son might be sent from the Bay Area to Nevada because of a monkeypox outbreak at the jail. Panicked and in a rush, Meduri agreed to send bail money through cryptocurrency. The fake lawyer directed Meduri, 65, to an ATM where people can buy the digital currency Bitcoin. He inserted $15,000 in cash into the machine, scanned a code provided by the scammers and transferred the money.

When Meduri realized he’d been duped, his money was gone.

“They played on fear and what a parent would do to help their kid, and it was elaborate,” said Meduri, who was able to get most of his money back with help from the Santa Clara County district attorney’s office.

Advertisement

Meduri’s misfortune is just one example of how scammers are using Bitcoin ATMs to swindle victims out of thousands of dollars, fraud that law enforcement officials warn is on the rise.

The machines, located in convenience stores, gas stations and even bakeries, are an easy way for people to buy cryptocurrency quickly with cash, which is harder to track than a wire transfer or check. As scammers exploit the convenience these machines provide, Bitcoin ATMs are also attracting the attention of lawmakers, regulators and consumer advocacy groups looking to protect people from fraud and exorbitant fees.

Starting in January, California will limit cryptocurrency ATM transactions to $1,000 per day per person under Senate Bill 401, which Gov. Gavin Newsom signed into law. Some Bitcoin ATM machines advertise limits as high as $50,000. The new law also bars Bitcoin ATM operators from collecting fees higher than $5 or 15% of the transaction, whichever is greater, starting in 2025. Legislative staff members visited a crypto kiosk in Sacramento and found markups as high as 33% on some digital assets when they compared the prices at which cryptocurrency is bought and sold. Typically, a crypto ATM charges fees between 12% and 25% over the value of the digital asset, according to a legislative analysis.

“This bill is about ensuring that people who have been frauded in our communities don’t continue to watch our state step aside when we know that these are real problems that are happening,” said Sen. Monique Limón, D-Goleta, who co-authored the bill.

While similar scams have existed long before the rising popularity of cryptocurrency, the use of these digital assets by fraudsters has been increasing, according to the Federal Trade Commission. Since 2021, more than 46,000 people reported losing over $1 billion in crypto to scams, the agency reported in 2022.

Advertisement

Victims of Bitcoin ATM scams say limiting the transactions will give people more time to figure out they’re being tricked and prevent them from using large amounts of cash to buy cryptocurrency. But crypto ATM operators say the new laws will harm their industry and the small businesses they pay to rent space for the machines. There are more than 3,200 Bitcoin ATMs in California, according to Coin ATM Radar, a site that tracks the machines’ locations.

“This bill fails to adequately address how to crack down on fraud, and instead takes a punitive path focused on a specific technology that will shudder the industry and hurt consumers, while doing nothing to stop bad actors,” said Charles Belle, executive director of the Blockchain Advocacy Coalition.

While California lawmakers have striven to balance the need to support the cryptocurrency industry and protect consumers, recent legislation has hewed toward tighter state regulation. Another law would by July 2025 require digital financial asset businesses to obtain a license from the California Department of Financial Protection and Innovation.

When signing the legislation, Assembly Bill 39, Newsom included a message that said the law needed further refinement to provide clarity to consumers, businesses and state regulators.

“It is essential that we strike the appropriate balance between protecting consumers from harm and fostering a responsible innovation environment,” he wrote.

Advertisement

In 2022, months before the collapse of cryptocurrency exchange FTX, Newsom vetoed a similar bill that would have required cryptocurrency companies to get a state license, citing concerns a new regulatory program would be costly and the actions were premature.

Erin West, a Santa Clara County Deputy District Attorney who helped Meduri recover his money, said scammers turn to Bitcoin ATM machines because they accept large amounts of cash. The value of Bitcoin can also rise, giving fraudsters a way to increase their plunder.

Scammers use different tactics to trick people into handing over their money, including creating a false sense of urgency and winning over their trust. Some befriend or seduce their victims through social media or dating apps, luring them into a web of lies that include fake emergencies. Other times, the scam starts with a text message directing victims to a fake cryptocurrency investment site.

West said her team has been able to recover $2.5 million for scam victims like Meduri by tracking down the cryptocurrency exchange that was involved in the transaction. After Meduri put $15,000 into a kiosk operated by Bitcoin ATM Services, the digital money ended up in the cryptocurrency exchange Binance. The exchange complied with a search warrant, allowing her team to retrieve the stolen funds from Binance and return them to Meduri.

While it’s possible for cryptocurrency victims to get their money back even if it travels overseas, West said it’s rare. Some cryptocurrency exchanges are more cooperative with law enforcement than others, she said.

Advertisement

“This whole thing is a speed game,” said West, who is part of a task force called REACT — Regional Enforcement Allied Computer Team — that combats high-tech crimes. “Can we get the victim in front of a competent investigator who knows how to find things on the blockchain in the least amount of time?” Blockchain is a type of shared digital database that stores information about crypto transactions.

An 80-year-old retired teacher in Los Angeles, whom The Times previously interviewed, said she hasn’t been able to recover $69,000 she sent to scammers through a Bitcoin ATM over multiple days in May. The stolen funds ended up in Seychelles-based cryptocurrency exchanges KuCoin and Huobi.

The scam started when Mrs. K, who wants to remain anonymous because she’s more wary about giving out her personal information, got a loud pop-up alert that her computer was infected with a virus. After calling a fake tech support number and later talking to a person impersonating the FBI, Mrs. K thought her Chase bank account had been taken over by foreign Chinese hackers involved in a child pornography case. To keep up the elaborate ruse, the scammers also sent Mrs. K fake Chase bank emails.

“If it wasn’t this convoluted mishmash, I probably would have been a little smarter and not fallen into this trap,” Mrs. K said. “I feel so disappointed in myself that I just fell hook, line and sinker.”

Mrs. K said the FBI impersonator told her to withdraw $75,000 in cash over three days from her Chase checking account and not tell anyone. If workers at the bank asked, the scammer told Mrs. K to say that she was withdrawing cash for construction.

Advertisement

The FBI impersonator convinced Mrs. K she could help law enforcement catch the child predators if she converted the cash to cryptocurrency and transfered the funds to a digital wallet the agency would monitor. The intricate lie eventually led Mrs. K to a Coinhub Bitcoin ATM machine at a doughnut shop in Highland Park that accepts up to $25,000 in cash daily per person.

By the time she realized it was a scam, Mrs. K had already sent $69,000 to the fraudsters. She reported the crime to police, but hasn’t been able to recover her money.

A Bitcoin ATM sits next to a regular cash ATM inside a gas station mini market in Los Angeles.

(Chris Delmas / AFP via Getty Images)

Advertisement

Under federal law, Bitcoin ATM operators are typically considered money services businesses so they’re required to register with the U.S. Department of Treasury’s Financial Crimes Enforcement Network, or FinCEN. The agency collects and analyzes financial information to combat money laundering and other illegal uses. The businesses must also maintain an anti-money-laundering program and report suspicious activity to the agency.

Logan Short, the CEO of LSGT Services, which does business as Coinhub Bitcoin ATM, said in an email the company does “everything in its power to protect consumers, but unfortunately fraud is not 100% preventable in any industry.” The Las Vegas-based company is registered with FinCEN but faced allegations that it operated crypto ATM machines in Connecticut without the required state license.

Bitcoin ATM Services, which operates the kiosk used by Meduri, says on its website that it is registered with FinCEN. The Times couldn’t find a record of Bitcoin ATM Services being registered as a money services business with FinCEN. A company called Cash ATM Services that has the same mailing address as Bitcoin ATM Services was registered. Bitcoin ATM Services did not respond to a request for comment.

Law enforcement has cracked down on unlicensed crypto ATMs,but it can be tough for consumers to tell how serious the industry is about addressing the concerns. In 2020, a Yorba Linda man pleaded guilty to charges of operating unlicensed Bitcoin ATMs and failing to maintain an anti-money laundering program even though he knew criminals were using the funds. The illegal business, known as Herocoin, allowed people to buy and sell Bitcoin in transactions of up to $25,000 and charged a fee of up to 25%.

Cryptocurrency regulations vary by state. California has long exempted crypto ATMs from licensing requirements for businesses engaged in money transmission.

Advertisement

Crypto ATM machines serve people who don’t have a bank account or just want the convenience of buying cryptocurrency at a gas station, convenience store or other shop, said Ayman Rida, CEO of Cash2Bitcoin, who works with cryptocurrency ATM operators including in California on complying with state regulations. The fees ATM charge are higher than online exchanges, he said, to cover certain expenses. That includes the cost of leased space, machine maintenance and cash management.

Crypto ATM operators aren’t opposed to having clearer rules and guidelines, he said, but they are against capping fees and transactions. Crypto ATM operators typically require more forms of identification if a customer makes a transaction more than $1,000 and in some cases flag high-value transactions, which could help stop scammers.

“Scammers are getting smarter,” he said. “My question for the regulators is, why are you killing an industry when scams also happen to other industries but they’re not doing anything about it as well?”

As for Meduri, who was duped in a Bitcoin ATM scam, he’s just relieved his son wasn’t really arrested and in a car accident. Oddly enough, finding out it was all an elaborate lie came with a sense of relief.

“My wife and I were just wrecked that day,” he said. “I didn’t even care. I was happy he was OK.”

Advertisement
Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Business

The lowdown on inherited IRAs

Published

on

The lowdown on inherited IRAs

Dear Liz: I inherited my mother’s Roth IRA when she died in 2015 and have been taking yearly required minimum distributions based on my age. My spouse is my primary beneficiary on this inherited Roth IRA. What happens if I pass away before she does? Can she just roll it over into her existing Roth IRA, as is generally permitted for spousal IRA inheritance? Or are there additional limits imposed because it becomes a “doubly inherited” Roth IRA?

Answer: The SECURE Act largely eliminated the so-called stretch IRA that allowed non-spouse beneficiaries to take distributions over their lifetimes. IRAs inherited on or after Jan. 1, 2020, must typically be drained within 10 years.

That likely would be the case for your wife. Special rules allow a spouse to treat an inherited IRA as their own, but only when they inherit from the original IRA owner, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

There are a few exceptions. Your wife may be able to spread the distributions over her lifetime if she is disabled or chronically ill, for example.

If that’s not the case, she’s back to draining the account within 10 years. Many inherited IRAs require annual distributions. Since this is a Roth IRA, however, the original owner would not have been required to start distributions. Therefore, the spouse of the inherited Roth IRA beneficiary does not have a requirement to distribute annually over the 10-year period but may wait until the end of the 10-year period to do the full distribution, Luscombe says.

Advertisement

Dear Liz: I am in my late 50s, married and woefully unprepared financially for my later years. I was a stay-at-home mom for many years. I now work almost full time but my employer has no 401(k) or profit sharing or really any benefits at all. I just started putting $8,000 (the catch-up amount) into my Roth IRA. What else can I do now to make up for lost time?

Answer: You can’t really make up for the decades of compounded returns you missed by not investing earlier. But you can make some smart decisions now for a more comfortable retirement.

Your most important decision likely will be how you and your spouse claim Social Security. Your spouse almost certainly should wait to claim until age 70 to maximize their lifetime benefit and to lock in the highest possible survivor benefit. If you outlive your spouse, this benefit could comprise the bulk of your income. Consider reading “Get What’s Yours,” a book about Social Security claiming strategies by Laurence J. Kotlikoff and Philip Moeller. Just make sure to get the updated version that was published in 2016, since earlier versions refer to strategies that Congress eliminated.

Delaying retirement is another powerful way to compensate for a late start, since you’ll have more years to work and save. Consider finding an employer who will help you secure your future by providing a 401(k) with a generous match. You’ll be able to contribute substantially more to a workplace retirement plan than you would to a Roth.

You and your spouse should consider hiring a fee-only financial planner to review your situation and offer customized advice.

Advertisement

Dear Liz: You recently responded to an elderly couple who planned to move into assisted living, but were concerned about capital gains taxes on the sale of their home. You suggested an installment sale or renting out the home as possible options. While not for everyone, another possibility is a home loan or a reverse mortgage to cash out tax free.

Answer: Reverse mortgages have to be repaid if the borrowers die, sell or permanently move out of their homes. If one of the spouses planned to stay in the home, a reverse mortgage might work, but not if both plan to move to assisted living.

A home equity loan or home equity line of credit might be options if the couple have good credit, sufficient income to make the payments and a cooperative lender. A tax pro or a fee-only financial planner could help them assess their options.

Liz Weston, Certified Financial Planner®, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.

Advertisement
Continue Reading

Business

Plastic Spoons, Umbrellas, Violins: A Guide to What Americans Buy From China

Published

on

Plastic Spoons, Umbrellas, Violins: A Guide to What Americans Buy From China

Photo Illustration by Zak Bickel/The New York Times; Photographs via Getty; Unsplash

Advertisement

Tariffs are up. Tariffs are down. Shipping is frozen. Shipping is back on.

In the past several weeks, Chinese imports to the U.S. have been on a seesaw, leaving Americans uncertain how tariffs will affect their lives.

Advertisement

It’s impossible to say what tariffs will do to the price or availability of any particular item, although even the Trump administration’s current level of 30 percent tariffs — on top of previous levies — will certainly make many things more expensive.

But thanks to detailed trade data, we know what Americans buy from China, and how much of it, and thus what might be most sensitive to future swings in trade status.

Here are several ways of understanding what’s on those container ships, based on 2024 data from the U.S. International Trade Commission.

Advertisement

First, the products where the greatest share of our imports are Chinese imports:

Advertisement

Goods Americans import almost exclusively from China

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

ITEM Imports
from China
in millions
1 Baby carriages $380
2 Artificial plants $991
3 Umbrellas $491
4 Filing cabinets $88
5 Vacuum flasks $1,634
6 Fireworks $465
7 Children’s picture books $505
8 Portable lighting $901
9 Combs $367
10 Travel kits $42

Advertisement

This list is the simplest way to think about which Chinese goods the U.S. relies on most. But percentages aren’t everything. Americans buy so much from China that even goods with smaller imported shares from there could still be significantly affected by tariffs.

Advertisement

Chinese goods that Americans spend the most on

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement
ITEM Imports
from China
in millions
1 Telephones $50,085
2 Computers $35,473
3 Electric batteries $17,022
4 Other toys $13,463
5 Motor vehicles; parts and accessories $9,059
6 Video and card games $7,083
7 Video displays $6,770
8 Electric heaters $6,607
9 Seats $6,582
10 Packaged medications $6,146

This list skews slightly toward more expensive goods that the average American purchases infrequently, particularly electronics. But the International Trade Commission also tracks how many of each good the U.S. imports.

Advertisement

Advertisement

Chinese goods with huge U.S. import quantities

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

ITEM Items imported
from China
in millions
1 Plastic housewares 67,895
2 Other plastic products 19,158
3 Plastic lids 13,688
4 Electrical capacitors 12,125
5 Semiconductor devices 11,368
6 Electrical resistors 9,276
7 Other toys 6,390
8 Other cloth articles 5,466
9 Shaped paper 3,895
10 Low-voltage protection equipment 3,626

In that list, you can see Americans’ well-documented reliance on China for plastic products.

Advertisement

Many of America’s major imports from China are consumer goods: things you buy for yourself, like clothes, housewares or entertainment. Drill down into those categories and specific products stand out.

For example, American wardrobes are somewhat dependent on China: about a fifth of U.S. clothing imports. But a majority of neckties and gloves and pantyhose are imported from China.

Advertisement

Clothing

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

ITEM Imports
from China
in millions
1 Hosiery $149
2 Neckties $52
3 Gloves $724
4 Handkerchiefs $13
5 Women’s and girls’ bathrobes $217

Includes knit and non-knit clothing. Excludes leather, plastic and rubber clothing. Various fibers combined into single categories.

Advertisement

The U.S. is more reliant on China for things made with polyester and nylon (like pantyhose) than for those made with cotton.

Athletes, especially racket-sport players, are also dependent on China:

Advertisement

Sporting goods

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

ITEM Imports
from China
in millions
1 Badminton or similar rackets $64
2 Equipment for table tennis $34
3 Lawn-tennis rackets $41
4 Gym and athletic equipment $1,652
5 Other sports and pool equipment $1,345

There are also consumer-goods categories whose “Made in China” status may not be as well known. For example, the U.S. gets a lot of its imported string instruments — such as violins and cellos — from China.

Advertisement

Musical instruments

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

ITEM Imports
from China
in millions
1 String musical instruments played with a bow $31
2 Brass-wind instruments $49
3 Percussion musical instruments $42
4 Wind musical instruments except brass $48
5 Grand and upright pianos $4.8

Advertisement

The Japanese company Yamaha manufactures some of its instruments in China, including trumpets and drums.

The U.S. also relies on China for many of its vitamins …

Advertisement

Vitamin derivatives

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

ITEM Imports
from China
in millions
1 Vitamin B6 $32
2 Vitamin B1 $43
3 Vitamin B12 $59
4 Vitamin C $139
5 Vitamin B3 and B5 $35

… and eels. (China has a robust eel farming industry.)

Advertisement

Fish

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

ITEM Imports
from China
in millions
1 Preserved eel $38
2 Frozen cod-like fish $8.5
3 Frozen tilapia fillets $308
4 Dried, salted and brined cod-like fish fillets $37
5 Frozen flatfish fillets $58

Advertisement

Includes processed, frozen, fresh and live fish.

Then there are the goods that the U.S. imports primarily to put inside other things, like car parts.

Advertisement

Advertisement

Car parts

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

ITEM Imports
from China
in millions
1 Vehicle windshields and window parts $358
2 Motor vehicle wheels and accessories $1,338
3 Vehicle parts: brakes, servo-brake and parts $1,697
4 Bumpers and parts for motor vehicles $79
5 Seat belts for motor vehicles $11

The U.S. relies heavily on Chinese imports to build electric vehicles in particular: Some 70 percent of its imported lithium-ion batteries are from China.

Advertisement

Even batteries made in the U.S. often rely on raw materials from China, particularly graphite. (China tightened its export controls on graphite at the end of last year, so this year’s numbers could end up looking very different.)

Advertisement

Critical minerals used in E.V. batteries

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement
ITEM Imports
from China
in millions
1 Graphite and artificial graphite $376
2 Manganese ores, oxides and articles $86
3 Cobalt ores, oxides, hydroxides and articles $9.8
4 Nickel ores, oxides, hydroxides, sulphates and raw nickel $30
5 Lithium oxide, hydroxide and carbonate $2.6

Mr. Trump’s newest tariffs are not the only levies imposed on Chinese goods, and there’s a complicated interplay of which tariffs apply to which products. Some goods that a lot of Americans buy received exemptions from the latest tariffs (though perhaps not future ones), including one item the U.S. imports almost exclusively from China: children’s books.

Advertisement

Advertisement

Select exempted goods

Advertisement

Advertisement

Advertisement

ITEM Imports
from China
in millions
1 Children’s picture, drawing or coloring books $505
2 Smartphones $40,675
3 Portable computers $32,169

Advertisement

That’s a window into what Americans buy from China. But for some imports, the U.S. doesn’t rely on China. It’s a list that includes large vehicles, precious metals and tomatoes, all of which America imports largely from other countries.

Advertisement

Goods that the U.S. imports the least from China

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement
ITEM Total imports
in millions
1 Delivery trucks $47,524
2 Other precious metal products $21,231
3 Planes, helicopters, and/or spacecraft $18,309
4 Diamonds $15,938
5 Raw aluminum $10,113
6 Refined copper $8,627
7 Platinum $6,973
8 Wine $6,697
9 Other fruits $5,923
10 Silver $5,088

Advertisement

Imports value includes all countries, not just China. Includes categories where less than 0.5 percent of goods are from China.

It’s also worth noting what America exports to China. Though the U.S. sends fewer goods to China than it receives, these could still be affected in a trade war. (China has been instituting its own exemptions, which are broader than those of the U.S.)

Advertisement

Goods that the U.S. exports the most to China

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

ITEM Exports
to China
in millions
1 Soybeans $12,761
2 Civilian aircraft $11,522
3 Integrated circuits $8,716
4 Vaccines, blood, antisera, toxins and cultures $6,680
5 Petroleum gas $6,187
6 Crude petroleum $6,160
7 Cars $4,931
8 Machines used to manufacture semiconductor devices, electronic integrated circuits or flat panel displays $4,170
9 Medical instruments $3,460
10 Scrap copper $2,795

Advertisement

Export value includes only exports to China, not other countries.

To let you take a closer look at what America does and doesn’t import from China, we’ve included a searchable list below of all goods for which the U.S. imported at least $20 million (from any country) in 2024, excluding America’s major exports.

Advertisement

Advertisement

Advertisement

About the data

Advertisement

We analyzed U.S. International Trade Commission data on goods imported for consumption in 2024. We used product descriptions from the Observatory of Economic Complexity to label the goods, and edited these descriptions lightly.

For the lists of major imports and exports, and the full searchable list, we grouped goods using the first four digits of their code in the Harmonized Tariff Schedule, which lists categories of products. For more specific lists of goods within these categories, we looked at the first six digits of the product code.

We excluded goods that are widely produced in the U.S., using export data to remove goods where the U.S. exports at least 50 percent of what it imports by value. (We did not do this for the critical minerals or imports by quantity data.)

Advertisement

Continue Reading

Business

AI is changing shopping. Will consumers buy in?

Published

on

AI is changing shopping. Will consumers buy in?

Carolyn Bennett remembers flipping through a yellow telephone book in the 1980s to find carpet stores and workers who refinished wood to help renovate her home.

Today, the 67-year-old uses a chatbot to help her shop. Bennett has turned to ChatGPT, which she refers to as “Chat,” to find vendors for a kitchen renovation project, compare heat pumps and weigh in on whether she should buy a convection oven.

The San Francisco resident could have browsed websites on Google, but she prefers using ChatGPT to save time.

“Any product that has multiple features that you want to compare across different products, I think it’s super helpful,” she said.

Advertisement

The rising popularity of artificial intelligence-powered chatbots that can generate text and images is already changing the way people brainstorm ideas, write and research. Tech companies and payment services are also betting that AI will transform how people shop. They’re even experimenting with AI agents that can place orders on a customer’s behalf with their permission.

Google, Amazon and other major tech platforms envision a future where online shopping becomes even more personalized and proactive. But companies will also have to convince consumers to buy into the idea, ensuring them that they’re protecting their privacy and providing accurate results.

AI chatbots have spewed out incorrect or nonsensical information before. And shoppers might be reluctant to give control to AI agents, especially when it comes to handing them their credit card, some retail experts said.

“There’s a lot of concern about the reliability of these kinds of tools,” said Rachel Wolff, a retail and ecommerce analyst at eMarketer. “So you might not want to trust these agents fully to make decisions on your behalf.”

For now, AI shopping experiences are growing. Last month, OpenAI said it’s experimenting with new shopping features, including a way to see images and prices of several products along with links for people to buy the items.

Advertisement

Perplexity, which introduced a new feature last year that allows subscribers to buy items through its chatbot, also teamed up with Visa to help improve its shopping experience in the future.

“Visa knows a lot about its customers, and if customers opt in, there can be that anonymized data sharing, so that the recommendations you get in Perplexity are in line with your kind of purchase and transaction history so you can get better quality answers,” said Dmitry Shevelenko, Perplexity’s chief business officer.

(The Los Angeles Times partners with Perplexity to generate summaries of ideas expressed in opinion pieces.)

These efforts are still early, but AI companies are also trying to differentiate themselves from rivals such as Amazon and Google that also have chatbots and AI shopping features. Both Perplexity and OpenAI note the products shown within their chatbots are not ads. The chatbots cite websites that review and rate mattresses, coffee makers and other products.

Google also is stepping up its AI shopping features as it competes with OpenAI. Last week, the search giant said in the coming months people will be able to use AI mode, a tool where people can ask questions and get answers like they would to a chatbot, to find and compare products. The tool is powered by Google’s AI model Gemini.

Advertisement

Vidhya Srinivasan, who leads the Ads and Commerce teams at Google, said Monday in a press briefing before Google’s annual I/O developers conference that the company displays search results in AI mode based on what’s most relevant to questions people are asking.

Some of the results also highlighted reviews from websites, but Google has more than 50 billion product listings and that information gets refreshed.

“We’re doing even more personalization in this mode, where we get to personalize based on brands and styles,” Srinivasan said.

The Mountain View-based company is exploring and experimenting with ads in their AI shopping experiences. Google unveiled other AI shopping tools, including a way to try out clothes virtually and buy products when the price falls.

Visa executives say they envision a future in which AI agents will book plane tickets, hotel rooms and other services and products on behalf of the customer with their approval.

Advertisement

Rajat Taneja, president of technology for Visa, said that people will be able to set limits around what an AI agent could purchase like when someone hands over their credit card to a friend, family member or assistant, to help them shop.

The San Francisco-based payment company, partnering with such AI companies as OpenAI, Perplexity and Anthropic, unveiled a new initiative in late April to enable AI agents to shop and buy products for people but that work is still being tested.

Product recommendations, he said, will only get more personalized in the future.

“They’re going to be different ways in which this will manifest itself, much like the analogy of the internet has evolved in so many different ways,” Taneja said. “The most important thing is we are all unique, in our likes, in our dislikes, in what we gravitate towards and what we buy.”

Consumers are already using generative AI for shopping, research shows. Adobe Analytics, which surveyed 5,000 U.S. consumers, said that 39% reported using generative AI for online shopping and 53% planned to do so this year. Shoppers used generative AI for research, product recommendations, deals and other shopping tasks, according to the survey.

Advertisement

Capgemini Research Institute, which surveyed 12,000 adult consumers across 12 countries, found that 24% of consumers used generative AI in shopping experiences. The use was higher among Gen Z and millennials compared to Gen X and boomers. But the survey also found that consumer satisfaction with generative AI also fell.

Elliot Padfield, a 21-year-old growth marketing consultant in San Francisco, uses AI for other tasks but he says the shopping experience has fallen short. As a result, he doesn’t always trust a chatbot’s recommendations.

When he tried out shopping on Perplexity for the first time, his order never arrived but he was able to get a refund.

And while chatbots can provide a comparison of four types of wireless headphones, for example, he wants more information about how the recommendations fit his needs and priorities.

“I still have to guide the AI through supporting me in the way that I need it to,” he said. “I actually find it easier at that point to then just go to the retailer.”

Advertisement

From going to the mall to shopping on websites or through social media, retail experts see generative AI as just another option for consumers.

Retailers will have to learn how to navigate chatbots that might not recommend their products. But AI could also level the playing field for small businesses, experts say, if the results aren’t based on optimizing for a search engine or buying a ton of ads.

Caroline Reppert, director of AI and Technology Policy at the National Retail Federation, said she thinks generative AI is here to stay. Ultimately retailers will meet consumers where they are, she said.

“The trend is kind of still emerging and we’ll see if it ends up being an enduring one,” Reppert said.

Advertisement
Continue Reading

Trending