Monetizing Payments Data Responsibly Pays Off

Originally published in Financial IT

If you are opening a small kiosk near a university campus in the Netherlands’ biggest student city of Utrecht, make sure you stock more premium coffee than cheap coffee.

At least that’s what the point-of-sale transaction data* shows. We’ve all seen the news articles poking fun at broke millennials for spending too much on artisanal products and avocado toast, so it’s not a groundbreaking insight that they also like splurging on fancy coffee. But it’s only now with the advent of connected devices that trends can be quantified accurately and in real time.

Payments have become a seamless part of the customer experience, able to be now completed with a tap, a wave or a click. Despite their invisibility, payments data can yield rich insights about economic trends.

Building an ecosystem of insights
Traditional methods of understanding consumer preferences are no longer effective on their own. For instance, surveys are limited, inefficient and biased. Transaction data can provide far more granular insights to various stakeholders – from retailers and restaurants to corporations and investors. Institutional investors and economists are already using this data to make better decisions. 

This means companies, from retailers to payments firms, can create a new revenue stream by monetizing their data. Even when this data is anonymized, many are still concerned about unintentionally exposing the identities of their customers. However, the key is in aggregating the data in a way that doesn’t include sensitive information about any individual source. 

Aggregate data, stripped of identifying details, can still be a powerful source of insights. For example, we track data on beverage sales in on-trade channels (the industry term for restaurants, bars and cafes) across six countries in Europe. This data can be used in all sorts of ways. A business can use it to help price products competitively without having to physically visit all the other bars in the city. An international food and beverage (F&B) operator can use this information to decide on the best location for its new outlet. Meanwhile, the payments solution provider collecting this data can tap into it to serve merchant partners’ needs. This means the same data can have a meaningful impact across different organizations and across the whole value chain.

Our mission is to democratize access to this underutilized data so that someday, even a consumer can use this data to find out where the cheapest gin and tonic cocktails are in their city!

Bringing outside insights into the boardroom

Sometimes analyzing your own business data simply isn’t enough to provide the full picture.

According to research**, the rate at which companies are using external data sources is outpacing that of internal sources. In a more connected and complex world, organizations are starting to realize that their internal data is just one piece of the puzzle.

For instance, many companies may already have a good grasp of what they sold last week, last month, or last year. But this may not be sufficient to predict what will sell tomorrow. The most accurate predictors often come from external sources – forward-looking market trends, competitive intelligence and insights that provide greater understanding of the environment in which the business operates. For example, by looking at historical sales of premium alcohol in our dataset, one can make inferences about growing affluence or gentrification in certain neighborhoods. Now, imagine being able to get a sense of that in real time!

The problem is most merchants don’t have the capability to easily crunch through all this information. This creates an opportunity for their payments partners to help connect the dots. They can use this data in a strategic way to create new products or expose the data in a way that delivers value to merchants.

Merchants shouldn’t have to think about data, after all, and be distracted from their core business. What matters for them is getting actionable insights. For instance, insights on anonymous customers’ full wallet spend and basket composition can help merchants optimize their operations or improve the end-customer experience. 

Knowing what your customers purchase in your store or restaurant is one thing – but being able to access aggregate industry data is even more powerful. If we see that nachos and beer in the same transaction lead to an average 30% higher consumption in beer, then we can advise merchants trying to increase beer sales to include nachos on the menu. 

Getting data monetization right

As all the examples above show, a robust data monetization strategy is important for innovation, growth and a competitive edge. But many companies are also wary of the challenges of extracting value from such vast amounts of data.

This is why it’s important for them to find partners that can help them establish a strong and safe data foundation in order to build the business case and technical platform needed to effectively monetize data. This requires close collaboration and a unified approach that can turn their data into both revenue and insights.

*Coffee sales in Utrecht from October 2017 – September 2018

**Business Application Research Center, March 2018

Leave a Reply