May 24, 2007

Report: Banks Should Mine Data Troves to Build Merchant Loyalty

An article in Digital Transactions News suggests that payment data could be tapped as a valuable and useful resource for merchants, thereby helping to justify the interchange fees that merchants pay to Visa and MasterCard.

“Tens of thousands of terabytes of payment data are lying dormant. The data could help shape programs that would get shoppers who go to a particular store often to shop there even more frequently, and could help merchants cross-market products within the store.”

“Visa USA and MasterCard Worldwide have a potent reason to cooperate with merchants in creating these marketing programs. By harnessing their data, they might have an easier time selling merchants on interchange fees. Retailers feel ‘trapped’ by interchange, since they don’t feel they can stop accepting bank cards and yet also believe they’re not getting full value for the rates they’re paying on each transaction.”

In the past, this has been complicated and expensive, since the data had to be processed, mined, analysed and used at some centralized database type machine. Using the data in that manner also triggers all kinds of privacy issues and even security issues if merchants are allowed to use card numbers to track purchase history.

But today, it is possible to use anonymous data embedded within the payment transaction, stored in new generation payment cards like EMV and contactless chip cards, to instantly trigger offers at the moment of payment. There are no additional costs for the merchant, the bank, the processor or anyone else, since the offer is simply printed at the bottom of the standard credit or debit card receipt. There are no privacy issues, since the merchant doesn’t have access to names, addresses or any other personal information that people get concerned about. And there are no security issues, since the merchant doesn’t need to store card numbers anywhere on the system.

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