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Data-driven Payments: unlocking the secrets to financial success

Alexander Groot, Product Lead at Silverflow, discusses how businesses now have an unexplored opening to boost transaction quality, prevent fraud, and enhance consumer experience.
data driven payments blog

With the rise of data and data-driven insights, businesses have an unprecedented opportunity to streamline operations, optimise margins, and create better consumer experiences. Lack of data leads to cumbersome support processes, low authorisation rates, reduced business insights, and more potential for fraud. In this article, we'll explore the role of data propagation in better-quality transaction processing, as input for fraud prevention, and enhanced consumer experience. 

Although it might be clear that having as much data as possible flowing from the cardholder to the merchant to the card issuer is important, it’s still quite common in payments for this data to get dropped between entities and lost in the chain. 

Processing quality – transaction insights

A smoother 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, because of the many parties involved in payments, such a process can be difficult to achieve. Every link in the chain increases the risk of losing data, which 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 through the entire chain is essential in order to achieve better payments. 

From the moment of the transaction submission, all parties need to ensure that all data components of the transaction are properly flagged to issuers to make informed decisions, leading to better approval rates. It is not uncommon for one of these parties to misinterpret the type of transaction from one of the many integrations or even drop some critical data components. This causes poor performance but acquires also receive integrity fees levied by the card networks. It is equally important for as much data to flow back from the issuer to the merchant. Although an issuer might think that sharing the minimum amount of data is the proper way to combat fraud, this is a tricky assumption. 

According to research by the Baymard Institute, over 70% of carts are abandoned in e-commerce – 6% of these are due to declined transactions. What if you could improve the authorisation rates? Next to avoiding declines, we can also 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. With this, they can determine whether to re-submit transactions with step-up authentication, if a technical tweak is needed, if the card security code was mistyped or if the used card has just expired. 

Fraud insights 

While research from Statista shows that global e-commerce sales are expected to grow by 10.4% in 2023, it also indicates that the value of e-commerce losses to online payment fraud is expected to increase from USD 42 to USD 48 billion. As the ongoing global surge in e-commerce activity stays the course, we also face increasing fraud. One way to combat this is data. The more data available, the more acquirers, PSPs, merchants, and risk providers can distinguish legitimate versus fraudulent transactions. Some examples could be unusual 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 also 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. The more data you have, the better these techniques will work.

Next to the synchronous fraud prevention flow it’s also important to analyse transaction data after they have been completed. By combining all the transaction events, acquirers and PSPs are able to recognise patterns that might seem harmless, but can reveal patterns of behaviour such as money laundering activities.

So, in order to minimise fraud, data needs to be propagated through all systems in the payment chain while linking together transactions, refunds, fraud notifications, and disputes.  

Merchant and consumer behaviour

In addition to using data to identify unwanted behaviour, it also allows you to add value to the consumer's shopping experience. By analysing fully enriched transactional data, merchants are able to gain insights into market trends and consumer behaviour and preferences. Based on this insight, personalised offers and rewards can be made that are more likely to resonate with individual customers. This can prompt increased customer loyalty and satisfaction, as customers feel that their needs and preferences are being taken into account.

In summary

Acquirers, PSPs, merchants, and service providers should ensure that all data related to the transaction propagates all the way through the payment chain. This will lead to higher conversion rates and lower fees due to better quality transaction processing. In addition, this data aids in making more informed decisions, serving the dual purpose of combating fraud and gaining insights into consumer behaviour, market trends, and other factors that can inform business decisions. This results in a better product offering, less friction, and increased conversion.

About Alexander Groot

type: embedded-entry-inline id: 6bGSFqX6infU6bEepSNmqAlexander 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.

About Silverflow

Silverflow is a new kind of payment processing platform designed for today's payment needs and fit for the future. A cloud-native solution with a single API to the card networks. One platform with one connection. Reducing cost and complexity, easy to use, and data-rich, Silverflow frees you to innovate.

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