Payment data monetization is increasingly allowing organizations to use payment data to provide additional value-added services, increasing revenue and leading to better outcomes for end-customers.
How is payment data generated?
Payment data is everywhere, with all commercial transactions generating new types of data. Payment processors, financial institutions, and banks are custodians of large amounts of payment data. Merchants and other businesses also generate payment data with every transaction they engage in. Each payment transaction provides a rich source of information on consumer behavior, at an individual and aggregated/macro level.
The current state of data monetization
The potential to monetize the data available across the spectrum of organizations, particularly payment processors and financial institutions, has been a hot topic for the last decade. However, actual use cases for these are still evolving. To date, very few organizations have made significant progress on this journey. There are also geography-specific trends evolving. These are driven by initiatives such as open banking and market leaders pushing adoption. Europe has a head start here, with several use cases being explored by traditional players, as well as by new FinTech organizations. Currently, Asia-Pacific and the Middle East are agile markets in this space.
Examining use cases
Organizations today have matured significantly in their data strategy pursuits, allowing them to draw vital insights. Despite this, a consistent effort needs to be maintained to review monetization use cases. First of all, this requires a team who can understand the market opportunities presented by mining this data. Additionally, organizations should utilize an execution team of data scientists and engineers to implement the necessary solutions.
How do we achieve data monetization?
Payment data monetization can be achieved by provisioning data to third parties, in aggregated form, through API calls, or by building a layer of services on top of the data that is beneficial for corporates or end consumers.
With the advent of open banking, in particular, payment data has readily been made available by financial institutions – opening up significant opportunities to further utilize the information. The potential for financial institutions to charge for the data itself marks the start of the monetization lifecycle. Consumers of this data can aggregate across different sources and offer additional services such as the new upsell or cross-sell of products to benefit the consumer or provide insights to corporate marketing teams, allowing them to offer personalized solutions to end consumers.
Deciphering consumer spending patterns
When looking at specific examples of data monetization, the most common pursuit of aggregated payment data is to decipher consumer spending patterns. This can be done at various levels, such as:
• Identifying a demographic pattern to assist in driving marketing strategies for organizations
• Identifying terminals or merchandise that is delivering maximum value to merchants
• Provisioning location-based services and using this data to deliver hyper-personalized services to the consumer
Payment processors can monetize this data by making it available to merchants for the above use cases. They can also directly provide value-added services to end-consumers by recommending the right product for them to subscribe to.
Companies are embracing data monetization
Organizations have primarily been focused on developing the underlying technology infrastructure to ensure that raw data is available. They are also partnering with data analytics and FinTech firms to offer additional services and capabilities. Whilst there are currently only a few examples of payment data monetization available we can clearly see that there is an opportunity for organizations to do more in this space. Going forward, companies seeking to exploit data monetization opportunities and open new revenue channels should focus on developing new use cases that are relevant to the market. This means that investing in engineering expertise in this space is essential.
(This article is authored by Aravind Irodi, Senior Director, Technology, Synechron)
