In an era of Big Data, with vast amounts of information accessible to businesses, the benefits of data analytics are becoming clearer every year; companies can engage more closely with their existing customers, market to new customers, discover their performance in comparison with their competitors, and gain insights into their business planning and decision-making. The cost of carrying out this analysis continues to fall, as new cloud storage systems reduce computing expenses, while the services that payment providers can offer to retailers and vendors have expanded dramatically.
The kinds of new data analytic-based services that can now be offered include identifying when a customer first enters a store. This allows merchants to link an initial card payment with offers and therefore helping to promote loyalty. ‘Heat maps’, which show payment frequency at certain outlets such as restaurants, can be linked to weather or event data, to promote additional trade. In the field of security, analytics can spot unusual payments, while more general connections between financial service providers can aid market understanding and facilitate benchmarking.
The financial ecosystem is changing so radically that new roles are appearing for payment service providers. The forthcoming PSD2 regulations are broadening access to financial services far beyond banks, financial institutions and their traditional payment service providers – and opening the sector up further to entirely new types of competitors, such as tech giants like Apple or Amazon. As a result, the value of customer data will grow ever higher, as tech companies have long specialised in data analysis and are adept at monetising their knowledge. This is a challenge to the whole financial services sector.
For merchants, the question of whether data analytic insights should be free or paid for will assume a new importance. Smaller merchants will look for improved connections to their customers, and may find that paying for a service which they cannot conduct themselves is beneficial. On a larger scale, data analysis may be carried out in-house, or offered as part of a contact with payment service providers, or other parties such as till technology providers.
The key issue is to offer insights which add value to products and services and fulfil needs for customers. As a major player at a crucial place in the payment ecosystem, we at SIX Payment Services recognise how privileged we are, and the high value of the information we can gather. We believe that this information can be employed to enhance customer retention and to gain new revenue streams, through careful data analysis and targeting. In loyalty schemes, for example, data analysis and precise targeting can promote offers to relevant groups at specific times, improving their effectiveness which in turn means that more can be achieved with fewer resources.
We are actively exploring new types of customer relationship management (CRM), loyalty schemes and customer retention, alongside yield management, predictive analysis and benchmarking. As the financial services markets evolve, we see a variety of new roles for ourselves, both in competition with other providers as we enter new markets, and in collaboration with new partners, as we seek to provide high level services to customers. We already have a leading role in the Swiss market, in Luxembourg and Austria. But we are also highly experienced in markets across Europe, and in an excellent position to form new collaborations and partnerships.
We have invested heavily in research, looking into future payment trends and technologies. This has included self-service payment systems and self-scanning technologies, which are becoming a common sight in retail stores internationally. Once again, data analytics can be employed in these situations, allowing more personalised offers and building on customer relationships. We are dedicated to rising up the customer payments value chain, forging new links and playing a greater role in relationships between retailers and customers. As part of this initiative, we plan to offer more loyalty products, which improve customer relationships, alongside programmes through which new revenue streams emerge.
To achieve these goals, at SIX Payment Services we have initiated new research programmes, where we contract smart programmers to develop new customer products. As part of SIX Group we host hackathon events, to foster new ideas, and use predictive analysis to create new benchmarking or loyalty schemes including gift cards, guarantees or cashback offers. Our merchant customers have access to our online database and network, giving details of forthcoming changes in standards, regulations and protocols. We are employing data analytics to improve this outstanding service yet further.
There are multiple challenges emerging for every player in the global financial services sector, but we believe that those who are best equipped to understand data analytics and apply these lessons will have a strong competitive advantage.
From January 2018, the European Union Revised Payment Services Directive (PSD2) will allow consumers and businesses to use third party providers for their banking needs. Bank accounts will remain, but third party providers will be able to provide financial services independent of these accounts, accessing customers’ accounts through open application program interface (API) technology.
Banks are likely to switch their focus towards customer relations, while financial technology companies will have a greater role in the sector. Companies like Google, Apple and Amazon, who are already active in financial services, are expected to play an enhanced role in the new environment.
The aim is to provide customers with quicker, cheaper, more personalised and more accessible financial services, with the possibility of customers gaining a wider choice and the option of having several providers, rather than one main bank.
The expectation is that PSD2 will radically change the European financial services market, reducing barriers to entry, increasing competition and offering greater choice.
Christian Baumann, Head of Value Added Services, SIX Payment Services
Image Credit: Håkan Dahlström / Flickr