Insight: Streamlining payments with data-driven insights

Alexander Groot,
27 Mar 2024

The increase in data usage and data-driven insights has given businesses an unprecedented opportunity to improve the customer experience by optimising margins and streamlining operations. On the other hand, companies without sufficient data may struggle with support processes, low authorisation rates, reduced business insights, and there could be higher chances of fraud.

However, while it may seem obvious that having as much data as possible flowing from the cardholder, to the merchant, to the card issuer is important, this data can often get dropped between entities and lost in the chain. 

Ensuring high performance transactions

The payments process needs to be smooth and secure across the entire payments chain to benefit everyone, including the consumer, the merchant, the payment service provider (PSP), the acquirer, the card network, and the card issuer.

However, with multiple parties involved there is a risk at every stage that data will be lost. Avoiding this by propagating data effectively across the entire chain can boost authorisation rates, improve the customer experience, increase revenue, and offer greater insight into margins and how to improve the business.

To make informed decisions and get better approval rates, everyone in the chain must ensure that all data components are properly flagged when transactions are made to issuers. We must also examine how parties may misinterpret transaction types from one of the many integrations, or even drop some critical data components.

As well as poor transaction performance, acquirers can also receive integrity fees levied by the card networks. Moreover, despite the perception among issuers that fraud can be combatted adequately by sharing the minimum amount of data, I’d argue it is crucial that as much data flows back from the issuer to the merchant.

Although it’s estimated by the Baymard Institute that 70% of carts are abandoned online – 6% due to declined transactions – sharing and propagating all transactional details, including the decline reasons, could possibly help reduce cart abandonment. PSPs and merchants will have the ability to properly identify inefficiencies and optimise operations by interpreting declines.

Using data analysis to prevent fraud

Despite researchers at Insider Intelligence predicting that global ecommerce sales would grow by over 10% last year, the value of ecommerce losses to online payment fraud was also expected to rise from $42 billion to $48 billion. Data could, in fact, be the solution to mitigate fraud.

As more data becomes available, it can help acquirers, PSPs, merchants, and risk providers distinguish which suspicious transactions are legitimate or fraudulent. This could include abnormal purchase amounts, high-risk locations, suspicious transaction sequences, or refund behaviour.

While there are rule-based systems in place for blocking instances of fraud, they may unintentionally block legitimate customers or be outwitted by more sophisticated tools used by fraudsters. Data analytics, pattern recognition, clustering, and outlier detection should be used to discover fraud and block it before it occurs in real time.

Of course, reviewing transaction data after each transaction is also crucial.

By combining all the transaction events, acquirers and PSPs can recognise patterns that might seem harmless but reveal patterns of behaviour such as money laundering activities.

Optimising the customer experience  

Since we’ve touched on how utilising data to identify unwanted behaviour is highly beneficial, we must also cover how it adds value to the consumer experience. This is achieved through analysing fully enriched transactional data.

Thus, merchants can gain insights into market trends and consumer behaviour and preferences, which can enable them to make more personalised offers and rewards to their customers. This can boost customer loyalty, satisfaction, and ensure customers feel listened to.

The impact that data analysis can make is exciting, but acquirers, PSPs, merchants, and service providers must efficiently propagate all transaction data through the payment chain. This will, ultimately, lead to higher conversion rates, smoother transaction processing, lower fees, combating fraud and informing business decisions.

That way, companies can enjoy a better product offering, less friction, and increased conversion.

Alexander Groot is product lead at Silverflow