The increase in data usage and data-driven insights has given businesses an abundance of opportunities to streamline operations, optimise margins, and improve the customer experience. Without this data, businesses could struggle with support processes, low authorisation rates, reduced business insights, and there could be higher chances of fraud. However, while 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. Here, I’ll delve into the role of data and the benefits it can bring.

Improving transaction performance

Clearly, a smooth payment process benefits all parties involved in the payment chain: the consumer, the merchant, the payment service provider (PSP), the acquirer, the card network, and the card issuer. However, having so many parties involved can also complicate matters. For example, there’s always the risk that every link has the potential to lose data. This in turn can cause lower authorisation rates, dissatisfied customers, missed revenue, and a lack of insight into margins and how to improve the business – proper data propagation across the entire chain is crucial.

As soon as a transaction is made, all parties must ensure that every data component is properly flagged to issuers so they can make more informed decisions, that leads to better approval rates. We must also be cautious that parties can sometimes 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. Although an issuer might think that sharing the minimum amount of data is the proper way to combat fraud, I’d argue it is vital that as much data flows back from the issuer to the merchant. Estimates suggest that while 70% of carts are abandoned online, 6% of these are due to declined transactions. But we can actively influence the rates by sharing and propagating all transactional

details, including the decline reasons. PSPs and merchants will have the ability to properly identify inefficiencies and optimise operations by interpreting declines.

How data can mitigate fraud

Although research expected global e-commerce sales to grow by over 10% last year, it also indicated that the value of e-commerce losses to online payment fraud was expected to rise from $42b to $48b. I believe data could hold the key to combating this increase.

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This is because, with more data available, acquirers, PSPs, merchants, and risk providers can identify between those unusual transactions that are legitimate or fraudulent. For example, this could be abnormal purchase amounts, high-risk locations, suspicious transaction sequences, or refund behaviour.

Rule-based systems can block some instances of fraud, but they are easily outsmarted and could even unintentionally block good customers. Data analytics, pattern recognition, clustering, and outlier detection should be used to discover fraud and block it before it occurs in real time. Clearly, it’s also important to analyse transaction data after they have been completed too. 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

While I’ve covered a lot of the benefits of utilising data to identify unwanted behaviour, I must be clear that it also adds value to the consumer experience. This is achieved through analysing fully enriched transactional data. In doing so, 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. The benefit? Increased customer loyalty, satisfaction, and customers that feel listened to.

This is an exciting area of where data can make a real impact. But returning to my original point, acquirers, PSPs, merchants, and service providers must ensure that all data related to transactions propagates all the way through the payment chain. In doing so, it will ensure higher conversation rates, smoother transaction processing, lower fees, combating fraud and informing business decisions.

This results in a better product offering, less friction, and increased conversion.

Alexander Groot is Product Lead at Silverflow