Profits Are Hiding in Your Payments Data—Here’s How to Find Them

Insights to help reduce cost and increase sales

Digital payments produce a wealth of data. Merchants today find that this data—made up of social, digital and mobile information—can help reduce the cost of doing business and identify opportunities for growth.

Target the right markets

The opportunity to boost revenue might be the greatest benefit of transaction data analysis. Analyzing payments information can help businesses understand their existing customers and identify which markets to target next.

At Bank of America Merchant Services, we spend a lot of time helping clients learn about their customers through segmentation analyses. They’re also seeking answers to other critical questions: What are my opportunities for affinity partnerships in competitive, high-spend categories? Where should I open new locations? How well are my campaigns performing?

For example, a major sports franchise could use its payments data to evaluate the success of marketing efforts such as “Family Day” in real-time. Data that shows areas where customers live can suggest how effectively an event draws fans from specific areas. This could help the franchise decide which geographic locations it should target for future events.

In a similar vein, an auto parts dealer who primarily targeted its advertising toward baby boomers could learn that millennials represent a larger share of its customers. This, in turn, reveals that its marketing efforts have been targeting the wrong demographic.

Some businesses combine internal payments data with anonymized data about competitors to make better marketing decisions. For instance, a restaurant chain could learn from an aggregation of comparative data that its best-performing store is actually underperforming relative to its in-market competition, or that a weaker location is outperforming its peers nearby. As a result, company leaders may choose to allocate extra resources to their best-performing store in an attempt to take market share from the competition.

Likewise, a company might also ask where its customers spend money before and after their in-store purchases and use that information to help inform their advertising tactics or choose the location for a new store.

The most productive data analysis leads to changes in a company’s behavior. “You should be able to use the data and the insights gained to tell you to do something different than you would have otherwise,” says Chris Wearing, vice chairman of global advisory firm Teneo Holdings. “Is there something about the customer’s buying patterns that I didn’t know? Is there something about that information that will help my business grow? Those are the kinds of questions to ask.”

Payments data can help reduce costs

Internal operations such as chargebacks, authorization rates, transaction routing and consumer authentication all contribute to the total cost of payment. Analyzing your internal data on a monthly, quarterly or annual basis can help you understand your costs and identify areas where you might be able to trim them.

At the point of sale this could translate into influencing end customers’ debit transaction behavior. If you find out that your customers are choosing to sign for debit card purchases versus using a PIN, there might be room for reducing those costs.

Similarly, when a company only has card readers that allow swipes, the merchant must cover the cost of any chargeback (the credit card bank covers that fee when the card is inserted into the chip reader).

A close look at the data might indicate that upgrading technology at the point of sale could reduce chargeback expenses. Alternatively, an analysis could reveal more efficient ways to reduce chargebacks and their associated fees, such as requiring customers to input their zip code for credit card transactions.

Transaction data is everywhere, and it’s accessible to businesses of all sizes. The ways companies use that information can make the difference between leaders and laggards. Businesses that appreciate the potential value of payments data analytics can reveal the most attractive growth opportunities to pursue while reducing unnecessary costs.

Raoul Aranha is VP, security, fraud and analytics services for Bank of America Merchant Services. Previously, he held roles in technology and product strategy putting together solutions for clients to help them understand the scope of their addressable markets through big data analytics and secure their own payments and CRM platforms with the latest in token technologies.