When determining the value of a payment, the first, and most obvious, inclination is to look at the amount of the payment itself. But that is only part of the equation. In a rapidly developing payments ecosystem in which real-time information, transparency, security and efficiency are increasingly in demand, payments data is almost as valuable as the payment itself.
Data can be used, for example, to detect fraudulent activities, identify operational improvements and gain a better understanding of customers. With the right tools and infrastructure, financial institutions can use the data collated from payments to deepen customer relationships and make better strategic decisions.
An evolving payments landscape
The rate of change in the world of payments is increasing quickly. Consumers want to move money faster, and in new ways, and fintechs and financial institutions have responded with a proliferation of new capabilities.
Offerings that were once novel have rapidly become table stakes, yet this transition has not always been easy. The move to instant payments, for example, and the required on-demand, all-the-time processing, has impacted the predictability of the traditional 9-to-5, Monday-through-Friday operating model. However, the transition to newer, more digital forms of payments has also opened new opportunities to leverage the data associated with those payments.
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Why data insights are crucial
The ongoing digital transformation taking place across the financial services industry has brought new attention to the untapped value of data and information. Financial institutions already have a large amount of information flowing through their payments systems. The key is turning that data and information into actionable insights.
Real-time data dashboards and predictive analytics can provide the context financial institutions need to make smarter and timelier decisions. By combining payments data with machine learning, AI and modeling, financial institutions can amplify their ability to categorize and analyze data to deliver improvements in areas such as risk mitigation, liquidity management, operational efficiencies and customer engagement. Additionally, by leveraging this data, financial institutions can invent new and innovative solutions for customers and identify the right solutions to offer to customers based on their previous activity.
With more consumers processing larger transactions outside of typical business hours, financial institutions and their customers have become increasingly vulnerable to fraud. It is simply not feasible for most financial institutions to manually monitor for fraudulent activity around the clock. Therefore, they are looking for options and strategies to supplement their staffing.
Data analytics tools can provide real-time monitoring to effectively identify patterns or spikes that might be indicative of fraud and merit further investigation. With these enterprise-wide tools, financial institutions gain a much higher caliber of security than with manual monitoring alone, freeing up risk officers to focus on the most suspicious cases.
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In an “always-on” payments environment, financial institutions need to constantly monitor their funding position with their central bank. Yet, for many, monitoring that moving target can pose a huge challenge. Overfunding the financial institution’s account at the central bank is costly and unsustainable. Underfunding could cause even greater problems.
With advanced data analytics tools, financial institutions can monitor payment flows, track operational efficiency and predict future liquidity needs. Tools such as these take the guesswork out of liquidity management, so banks can confidently ensure that sufficient funds are available to them. Getting it right is about more than just potential financial costs; it underpins a financial institution’s reputation and, by extension, customer trust.
Creating an automated, efficient operation
Many financial institutions rely on inefficient methods, including manual monitoring, to execute daily functions. During a traditional workday, those methods can lead to overlooked system problems that could disrupt payments processing, especially if data is on different platforms. The risk rises exponentially with large volumes of overnight, weekend or holiday transactions.
To provide customers with the level of service they expect, financial institutions want ready access to real-time data and an automated process for raising red flags. A modernized payments infrastructure, paired with robust data analytics, enables closer monitoring of processes for faster resolution of problems. An automated process can fix problems or find alternate channels before customers are even aware that an issue exists.
Enhancing customer engagement
Being able to move money fast is becoming a major differentiator. Further, pairing swift service with enhanced insights enables financial institutions to gain a significant advantage by cementing consumer loyalty and opening potential revenue streams.
Payments data enables financial institutions to identify consumer trends, including typical spending habits, payment frequency, volumes, and top payees. With intelligent analytics tools, financial institutions can use data to determine what solutions and products would most likely resonate with their customers. Instead of mass marketing products and services, financial institutions can increase engagement with a highly targeted approach that suits individual customer needs.
A complete view of payments data can also unveil a deeper, more comprehensive understanding of a consumer’s credit capacity and risk profile. By expanding their view of consumers’ liquidity and funding levels, financial institutions can advance credit-related solutions – such as automated credit risk assessment - they might not otherwise offer, resulting in new lines of revenue and deeper customer relationships.
The transformation to digital payments
With consumers and corporate customers continuing to demand a more efficient and secure way of moving money, digital payments will soar. Adapting to that reality will require financial institutions to implement integrated solutions that provide the visibility needed to operate in an on-demand environment.
As outlined above, the benefits of harnessing payments data insights are clear. Financial institutions can gain a true 360-degree view of payment activity through the collection of accurate and comprehensive information in real-time. With the right toolkit, financial institutions can mitigate risk, improve liquidity management, achieve operational efficiencies, and enhance customer engagement, establishing a real competitive advantage while meeting the increasing demands of customers for more efficient and tailored payment services.
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Andrew Bubbs, director of product management, Fiserv (opens in new tab)