Digital payments players have massive amounts of data to pursue an explosion of emerging opportunities. In the prescient words of HSBC’s former chairman Douglas Flint back in 2015, “It is clear that many who want to get into the payments industry don’t really want to get into the payments industry. What they want to get into is the industry of gathering individual customers’ payment data to monetize it and realize its value.” There is tension between traditional payment players, Big Tech and FinTech, as the latter strive to enter banking and payments – they’re looking for the data.
According to McKinsey
, digital payments generate roughly 90% of a financial institution’s useful customer data. This data is precious fuel, igniting the ability to attract more and more data, creating a virtuous circle of better understanding customers’ needs, building better products, attracting more customers and proactively promoting new value propositions within the emerging payments and banking ecosystem.
With the amount of payment data growing in most markets, the opportunity to leverage that data is world-wide. Mature markets, such as U.S. and Canada, are largely card-based. Other markets, such as China, India and Kenya, are at the forefront of innovation in payments, experiencing almost exponential growth in new payment methods such as account-to-account transfers, instant payments and “invisible” payments on a holistic platform that offers consumer services ranging from ride share to food delivery, as with AliPay. All of these markets are generating a treasure trove of transaction data from which valuable insights can be drawn.
The biggest challenge is that organizations can’t fully exploit the power of this data because it exists in individual data silos. Legacy data architectures are the result of organizational silos, product instead of customer focus and a failure to consider reuse. These factors impair the ability to exploit ALL their payments data, what Teradata calls “Pervasive Data Intelligence.” As a result, payments players struggle with visibility into the end-to-end customer journey spanning multiple customer touchpoints across multiple departments, the inability to sense and react to a multitude of customer pain points and opportunities and personalizing customer interactions in real-time at moments of truth. According to Forrester
, customer experience focus in banking is relatively rare, so a huge financial upside awaits companies that substantially transform their organizations to center on the customer.
A broad spectrum of business outcomes benefit from aligning the data needs of marketing, customer service, credit risk, security and fraud. Joining these data silos across fraud, authentication, credit risk, customer behavior and payment transactions delivers tremendous returns. Think of it as marrying the “dark” and the “light” side of the data to the shared benefit of both sets of situations in which a service can be applied. Examples include:
- Using behavioral data both to customize offers and also to identify suspicious anomalies that indicate fraud or account takeover
- Employing credit risk data to support new products like “Buy Now Pay Later,” and also to predict delinquencies and optimize collections
- Accessing geolocation data for personalizing offers, detecting fraud and improving customer convenience by eliminating passwords
Proper orchestration in a central platform with renewable data and analytics unleashes the power of all this data, pulling together data from throughout the enterprise. This is “The Infinity Loop” - the more data, the better joined-up it is, the more effective. See more at “Data Orchestration at Hyperscale
Subsequent posts in this series explore how to leverage payments data at every turn to generate revenue and profit by driving more payments, retaining customers, integrating with emerging value propositions, partnering with new players in the evolving payments ecosystem to avoid disintermediation and seed future growth, and apply real-time loss mitigation.