How data can improve the payments process

As the payments landscape becomes increasingly competitive, it’s crucial that businesses improve the customer experience with optimized margins and streamlined operations. This can be achieved by having as much data as possible, which can support processes, provide more insights, boost authorization rates, and even reduce the chances of fraud.

However, we must also be cautious that we don’t lose data between entities in the payments chain (i.e. data flowing from the cardholder to the merchant to the card issuer). Otherwise, we won’t get enough value from analyzing the transactions.

Boosting transaction performance  

Firstly, to avoid the risk of losing data between multiple parties at every stage of the payments process, data must be propagated efficiently and securely. Everyone in the chain must properly flag each data component when transactions are made to issuers. Otherwise, parties may misinterpret transaction types from one of the many integrations, or even drop some critical data components. Acquirers can also receive integrity fees levied by the card networks. 

Ensuring that data flows smoothly across the entire chain will benefit everyone including the consumer, the merchant, the payment service provider (PSP), the acquirer, the card network, and the card issuer. They will be able to enjoy an improved customer experience, increased revenue, and offer greater insight into margins and how to improve the business. 

Using more data to analyze declines will also help PSPs and merchants properly identify inefficiencies and optimize operations. For example, while it’s estimated that 70% of carts are abandoned online (6% of these are due to declined transactions), sharing and propagating all transactional details, including the decline reasons, could possibly help reduce cart abandonment.

How data analysis can combat fraud

Fraud has posed a significant challenge for ecommerce. The value of ecommerce losses to online payment fraud was expected to rise from $42b to $48b last year, although global e-commerce sales were also predicted to grow by over 10% last year. However, having data flow back from the issuer to the merchant may be the solution, despite assertions that fraud can be reduced by sharing a minimum amount of data.

For example, while it may be difficult for acquirers, PSPs, merchants, and risk providers to navigate around a fog of suspicious transactions, having as much data as possible could help them identify which ones are fraudulent or legitimate. This may include abnormal purchase amounts, high-risk locations, suspicious transaction sequences, or refund behavior.

Furthermore, rigid systems that are put in place may not be enough to block illegitimate cases of fraud, since legitimate transactions could also be blocked, and some systems are more vulnerable to more sophisticated tools. However, with the use of data analytics, pattern recognition, clustering, and outlier detection, fraudulent transactions can be blocked before occurring in real time.

Reviewing each individual transaction is crucial, but by combining all the transaction events, acquirers and PSPs, you’ll be able to detect patterns of fraudulent behavior (i.e. money laundering activities) which may have seemed harmless at first.

More data leads to a happier customer

Now that we’ve explored how an abundance of data used to mitigate criminal behavior is highly beneficial, we must also discuss how fully enriched transactional data adds value to the consumer experience. Merchants can gain insights into market trends and consumer behavior and preferences which can enable them to make more personalized offers and rewards to their customers. This can boost customer loyalty, satisfaction, and ensure customers feel listened to.

To seize on the opportunity data analysis can bring, acquirers, PSPs, merchants, and service providers must efficiently propagate all transaction data through the payment chain. Companies can enjoy a better product offering, less friction, and increased conversion rates with smoother transaction processing, lower fees, combating fraud and informing business decisions.

  • Alexander Groot

    Alexander has experience in payments, implementing global payment connections, and product propositions. He joined Adyen in 2016, where he was responsible for the global expansion of the acquiring solution before becoming product lead. He was also involved in setting up Adyen’s Issuing proposition. At Silverflow, he is responsible for expanding and shaping the product proposition across different geographies, payment channels, schemes, and product features.