What is a payment? It’s a transaction, sure. But much more importantly – to banks, merchants and credit card companies—it’s a story in a particular moment in time. A Tiffany’s purchase could signify a major life change. A sudden influx of Toys ‘r’ Us purchases might suggest another. A daily Costa payment gives away a favourite addiction. A single 9am payment at McDonald’s amidst a sea of Whole Foods payments could tell you that there was big night the preceding day.
‘Hard to get that complete story’
Compile the details of all those stories and you have a fairly comprehensive picture of your customer. Collectively, they are invaluable data points for credit card companies, banks or merchants. But it’s hard to get that complete story. Rarely does one party have sufficient data to paint a truly rich, three-dimensional picture of their consumer. Those data points might be spread between cards from various banks, issuers, department stores or prepaid program managers. To create a holistic picture, a one entity historically has had to buy data from others to flesh out the details.
In the world of payment data, mobile is the game-changer. For the first time multiple payment products can all live under a single application. The owner of that application is the one who can see the consumer story from beginning to end. Real value begins to take shape when you can connect the dots.
But for many digital wallets, the data available starts and ends at transactions. In fact, so much more can be learned about consumers by looking at how they engage with value-adds like prepaid, loyalty cards, remote transactions and in-app purchases. This is where digital wallets and the data they glean become truly interesting and valuable.
‘Traditionally, banks have done nothing to drive a transaction’
Let’s say I’m in the market for a new winter coat. Historically my bank only plays two roles in the process—it allows me to save money and then to spend it. In between, they’ve done nothing to drive a transaction, nor to gain any additional value from me as a customer.
Perhaps I’m browsing the Selfridges website and search for a Moncler jacket. It’s more than I want to spend, and I want to try it on in person before I commit to such a substantial purchase. Selfridges may retarget me later with a relevant banner ad while I’m reading the Financial Times online, but my bank is completely disconnected from the decision-making process.
Now imagine I was browsing on my digital payment enabled mobile phone. What would stop my bank from partnering with Selfridges so that the next time I’m walking along Oxford Street my bank pushes me an offer for a 2.9 per cent APR loan to make the purchase. Suddenly my bank has the opportunity to make incremental revenue through a simple targeted promotion, made possible by the data gleaned from my mobile behaviour.
It’s all about loyalty
Loyalty presents huge opportunities as well. If you know I buy my coffee from you every day, you don’t need to give me a discount—I already willingly give you money each morning. You’d be much wiser to give a discount or promotion to the guy who buys his coffee across the street every day. Suppose I’m the guy who buys his daily Americano at Costa—but Pret a Manger teams up with my bank and pushes me a notification saying, “If you buy your coffee right here, right now, we’ll give you additional reward points on your credit card.” I trust my bank—I’ve been putting my money there for years. They have a lot of clout when it comes to my purchase habits. Suddenly I’m inclined to change my behaviour. My bank wins, Nero wins, and if the coffee truly is better, then I win too.
Mobile payments will change how consumer data is collected
There is no doubt mobile payments will change the way consumer data is collected which will, in turn change the way consumers digitally interact with merchants and banks. But now the question remains: who will own that data?
At the moment, the mobile payment solutions being touted by global digital giants, such as Apple Pay, Android Pay and Samsung Pay, distance banks from the software, and thus, from the data therein. The most popular mobile wallets charge issuers and banks nothing or next to nothing to make their products available to users. So where does the revenue come from? It’s safe to say, data is a primary source.
The more central these leading wallets become, the further banks move from that data. If banks want to stay connected to consumer data they need to maintain full ownership of the digital wallet. What’s possible when they do?
From a consumer perspective there is the potential for one, streamlined user experience. Their home-screen real estate isn’t clogged by numerous financial apps—potentially they can manage their banking and payments all from one central application. But payments should only be one facet of a bank’s wallet. We already know the real data comes when a single wallet contains a breadth of products. Owning the digital wallet means owning the value-adds as well: loyalty, rewards, prepaid, promotions—every aspect of the transaction process.
Banks retain control of the user experience and they deeply engage their customers. Their tools have the potential to be more than just the plumbing of payments but a hub of tools and information, integrated in the customer’s daily life. In the process, banks drive incremental revenue through a breadth of relevant products and, perhaps most importantly, hold all the data points in a consumer’s path to purchase.
Connecting all those dots suddenly opens up endless opportunities for engagement and loyalty. As a bank there’s no end to the value in holding all the pages of your customer’s story.
Salim is the director of Business Development at Carta. He is responsible for the Carta’s commercial growth in EMEA with new and existing clients, covering the digital enablement and core processing verticals.
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