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Why data is key to driving payment innovation

We look at how the vast amount of payment-related data available today can be used to support merchants.

Data, we are frequently told, is today’s most valuable resource and has been dubbed the ‘new oil’. If so, one thing is clear: there is no shortage of it to fuel business development and innovation across every industry and sector. So how can the vast amount of payment-related data be best used to support merchants?

In 2017, IBM revealed that 90 percent of the world’s data had been created in the preceding two years[1]. That number reflects the power of the internet, and especially the magnifying effect of the internet of things, which enables users to generate and share huge amounts of digital information. In other words, big data.

Unstructured information of every type and variety – transactions, logs, records, social media – is growing exponentially and provides an invaluable resource when harnessed and analysed for commercial benefits.

Payment-related data has become increasingly important in shaping business strategies and improving customer experience.

A recent survey produced for Barclaycard by YouGov shows how important this use of data is, with 29% of surveyed businesses using it uncover improvements to products and services. Additionally, 30% of businesses analysed data to help improve the customer experience[2]

Payment journeys and intelligence

Payment-related data has become increasingly important in shaping business strategies and improving customer experience. This, of course, includes minimising fraud. For every payment, whether completed or not, there is a data trail that can provide actionable insights about customers and their purchase histories and preferences. This is market intelligence that can be used to highlight risks as well as spot opportunities to enhance existing services or develop new ones.

The following example demonstrates data points on a typical payment journey. A customer entering a shop or a restaurant may have made purchases or bookings in the past at that location, at another one of the business’ outlets or through the website. They may have paid by debit or credit card, used their loyalty card, and have previously shared their email address and other personal details.

These interactions can build a picture of the customer which the business can use for marketing and/or communication purposes, where the customer has consented to the use of their data, with the information being personalised to match the individual’s preferences and buying habits.

Payment service providers can also tap into these rich data sets at all the key stages in the shopping/payment journey, from web browsing through to in-store or online checkout, which nowadays often means mobile. Moreover, they are in a particularly strong position because they have insights into merchants as well as consumers. 

Unlocking the value in payment data

All these touch points, and the data they yield, are hugely beneficial for payments innovation and the retention and acquisition of customers. The trick is to collate and consolidate all the data, and then find the value that would otherwise be hidden – what marketers call data mining and profiling. That means identifying preferred sales channels and transaction characteristics, and using that information to provide a more personalised and targeted service.

Every transaction tells a story, and because consumer data can be a predictor of future purchasing behaviour, it can be foundational in building marketing strategies and new products and services. An organisation like Barclaycard, which has a 360-degree view of the payments landscape generates extensive data on consumer spending and behaviour. That allows the business to create regular spending reports, as well as unique insights, which can be used to support the merchant’s business strategies. 

Payment security using machine learning

The more granular the data, and the more sophisticated the analytical tools, the better the customer insights. This is where machine learning is impacting the way data is analysed and applied. It is especially useful in tracking consumer behaviour and detecting patterns and shifts that have strategic importance for merchants. 

The more granular the data, and the more sophisticated the analytical tools, the better the customer insights.

Machine learning and other data tools are helping to improve fraud prevention today. And with stronger authentication a key requirement under of PSD2, payment service providers are increasing their focus on customer data and introducing new measures to enhance security without impeding frictionless commerce. If this was not the case, additional payment authorisation could be needed, increasing the chance of cart abandonment, while the number of transaction declines would increase, impacting merchants’ sales revenue

Innovation through cooperation

With the move toward open banking, payment service providers are forming fintech partnerships to realise the value of data and create new payment models. This is where cardholder data is merging with merchant data and other data sets to build value-added services on top of traditional payments.

Along with innovation, data is helping to optimise existing services. For instance, Barclaycard offers a customer service called Payment Acceptance Optimisation (PAO). This draws on the skills of a specialist team who provide actionable insights from post-authorisation transaction data, such as patterns behind transaction declines. Data is reviewed across different industry sectors, payment environments, countries, currencies and channels. The results can help merchants optimise performance and boost revenues.

The experience of Admiral highlights the potential benefits[3]. The car insurance company actioned a series of recommendations following deep analysis by a Payments Acceptance Optimisation consultant. This helped increase revenue by £6m during the first three months, and delivered a better customer experience with fewer card declines.

More than payments

Businesses who understand the power of data, and employ data analytics for optimisation and innovation, will gain a clear advantage in today’s mobile and connected world. One-dimensional payments are a thing of the past, and every transaction now should be seen as an opportunity for merchants to gain customer insights to drive better customer experiences, amend sales models to reflect customer needs and provide a more secure service.

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Your payment technology should be more than an operational decision – it should be a strategic one too. We can help you create a smarter payments strategy to help future-proof your business in an evolving landscape.