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Beyond big data: value, loyalty, and customer retention

13 Jan 2016
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The value of every payment far exceeds its amount. 

Payment-related fees collected with each transaction are, of course, still attractive to all stakeholders such as PSP’s, Acquirers etc. but today’s payments industry is increasingly intrigued by the masked value of transactions, the embedded data – the metadata.

Metadata – ‘beyond data’, or ‘sets of data about transaction data’ – becomes valuable when it is mined and analysed leading to a wealth of insight into customer habits and payment trends. This process of payment data mining veers from traditional reporting databases and is directed towards business intelligence. Leveraging intelligent business analytics, merchants and their acquirers can develop bespoke, personalised services and offers tailored to their customer potentially driving customer loyalty and increasing retention rates.

The domino effect of these valuable relationships leads to mutually beneficial payment service integrations. This integration stage makes life so much smoother for acquirers and merchants. It is one of the reasons that big data is so important.

To get to the integration stage there needs to be wholehearted buy-in from merchants. They need to be convinced of improvements in the checkout process and inventory tracking. The real carrot is that they will get to know more about their own customers, who will also benefit. Value can be added via integrations in the form of gift vouchers and Dynamic Currency Conversion (DCC).

Analysis of data enables merchants to quickly pinpoint payment trends such as how customers are making purchases, when they did so, and where. This information is manna from heaven and can drive key business decisions to improve existing services, set in motion the creation of new offering, and build new revenue streams such as value-added services. These services are what will differentiate merchants from their competitors, providing them with a crucial competitive advantage when attracting new custom.

As the popularity of cloud services grows, so too do the means by which businesses interact with their data. Data associated with transactions is no longer stored statically, but in the cloud: accessible at any time and from anywhere, with no downtime. Cloud storage of transaction data opens up omnichannel opportunities.

This personalised approach also builds customer trust and loyalty as it begins at the very first interaction, leading to repeat custom for the merchant and an engaged customer.

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The importance of loyalty and experimentation

According to Gallup research (quoted here by Capgemini Consulting), US companies spend a staggering $2 billion on loyalty programs every year.

Capgemini’s own research, meanwhile, found that 97% of existing loyalty programs still rely on transactional rewards based on customer spending. In the digital age, Capgemini argues, this ‘transact for points’ system provides a number of challenges such as:

  • Engagement: Only 25% of loyalty programs reward customers for some form of engagement.
  • Personalization: Just 11% of the programs surveyed offered personalised rewards based on a customer’s purchase history or location data.
  • Omnichannel: Only 9% of programs offer points redemption across all channels – in-store, online, or in-app.

Just 3% of US companies are experimenting, thinking differently. The omnichannel experience is where loyalty and big data can really impact the bottom line. The merchants and acquirers that embrace big data and cloud technology can use a transaction in-store to enhance their online offering, while the geo-location data of an in-store transaction is of great benefit to the acquirer for fraud prevention purposes. The ability to know where a cardholder is and matching it with their transaction history is another feather in the cap of big data and cloud technology.

One of the major success stories incorporating payments and big data is Amazon, a company continually experimenting with the collection, analysis, and use of data.

Jeff Bezos’ business model has always been based on data. Amazon has over 250m cards on file, with 45m of them Prime users. Amazon has achieved this position by constantly experimenting with the data that it collects via its internet retail megastore.

A recent Fortune profile of Bezos had this observation on his success, ‘True innovators have an experiential approach to business and go out of their way to enable others to do the same. They understand testing new ideas will rarely bring instant success, but see each experiment as an opportunity to gather data to improve for the next time.’ Amazon continues to experiment and to reap the associated rewards.

In the recent past Apple, with the launch of Apple Pay and the iWatch, has also started to realise the latent value of the 800m-plus iTunes accounts (and payment cards) that they have on file. Tim Cook has already stated that iTunes is now one of the main drivers of the company’s business.

Indeed Apple, and Google via Android Pay, have both underlined the importance of loyalty when launching their mobile payment services – Apple, with a commitment to existing loyalty cards and, Google, with their smart tap loyalty. Android Pay has partnered with Coca-Cola to award users points when they tap their smartphone at a vending machine, while Apple has launched a host of loyalty programmes with US retailers to take the traditional loyalty card mobile.

Indeed, Apple’s mobile payment service plans, according to a recent Wall Street Journal article, could extend to their iMessage service with a Venmo-esque P2P proposition supposedly in the offing.

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Big data, big business

This adoption of loyalty into mobile has scope well beyond just Apple and Google.

Glenville Morris, Head of Consulting at MTT, outlined his vision in a recent op-ed titled Digital wallet – the ‘must have’ of 2016: “As more airlines and travel companies adopt digital wallets and the significance of mobile payments in travel increases, it is only a matter of time before we see greater integration of loyalty within the mobile strategies of airlines and travel companies.”

A great example of a multinational harnessing the value of big data is General Electric (GE) who recently opened up their Predix platform. Predix is described by GE as “the technical foundation to power industrial apps that drive outcomes ranging from the reductions of unplanned downtime to improved asset output and operational efficiency.”

GE envisages Predix becoming the Android or iOS of the machine world. Opening up their big data platform also allows GE to monetize it. In December 2014 GE licensed Predix to the Japanese telecom giant Softbank Telecom in a deal expected to yield $200m over a five-year period. That’s one big data license for $40m per annum. By August 2015 Bloomberg reported that GE was to spend $500m that year on Predix Cloud alone. This decision makes sense when GE, according to Bloomberg, made “about $2.4 billion from selling software and solutions relating to its Predix portfolio in the first half of 2015.”

Data without context is irrelevant

But this Big Data Land still exists in a world where mobile payments are yet to achieve ubiquity. Recent Gartner research predicts that half of consumers in mature markets are expected to use smartphones or wearables for mobile payments by 2018.

The amount of data that these payments produce is set to be a treasure trove for merchants. Especially for those merchants, and their acquirers, who believe in the business analysis process as a must-have. Harnessing this data will mean a migration from the typical report-based processes that are still commonplace in today’s back offices.

Data without context, after all, is of little help in making the smart business decisions. Users need to know what the data means. It needs to be analysed so that merchants and their acquirers gain considerable insight into consumer requirements and demands. “Knowing your customer,” Gartner added, “is imperative in order to capture a fair share of spending opportunities in this dynamic marketplace.”

When you know your customer, personalising the service becomes easier – all thanks to going beyond just the mere collection of big data.

Fexco Transaction Services uses the latest payment device and transaction integration technology to bring together payment sources from both physical and remote environments resulting in a truly omnichannel solution. Please contact us to discuss your payment transaction needs.

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