Data is instrumental in allowing businesses to become more efficient, make better decisions, strengthen relationships and understand more about themselves and their position in the world.
The payments industry is changing rapidly due to diversification, accelerated digitalisation and a rapidly evolving regulatory landscape, and is growing beyond traditional players. As payments become embedded into so many scenarios and different types of devices - yet still requiring fraud prevention and Know Your Customer (KYC) practices - there will be a need for data processing on a scale never seen before.
To address issues that can arise from this situation, there have been major advances in regulation on the one hand and technology on the other. Working in tandem, these advances should yield systems which allow the benefits of data to be leveraged without causing adverse effects within the industry or for the end-user.
What is Data Economy
The data economy is emerging from the data analytics and data science of the past decades.
A data economy is a global digital ecosystem in which data is gathered, organised, and exchanged by a network of participants to derive value from the accumulated information.
Data inputs are collected and exchanged by a variety of stakeholders, including search engines, social media websites, online vendors, brick-and-mortar vendors, payment gateways, banks and financial service providers, software as a service (SaaS) companies as well as an increasing number of firms deploying connected Internet of Things devices.
However, note that the data by itself does not create any value. It is the innovative use of data supporting a business model that leads to increased business performance. For example:
- Modern sales teams employ predictive scoring technologies that crawl the web to aggregate data about potential customers and calculate the likelihood that a customer will complete a purchase.
- Recruiters use data to identify the best candidates to pursue based on online profiles, blogs, social media accounts, and open-source software contributions.
- Product managers record users' actions to precisely understand which customer journeys exhibit confusion or drop off.
- Operationalising data to improve business performance will become a defining competitive advantage. New data infrastructures and sharing ecosystems powered by next-generation databases and data-exploration tools will bring information to people and organisations on the front line, helping them take quick decisions and actions.
Opportunities Arising from the Data Economy
- Opportunities for merchants - Merchants can benefit from the data economy by leveraging both operational and consumer data. A merchant can perform collaborative analytics with other local services or merchants to have a clearer view of the locality in which they are operating and of their customers. Beyond this, secure data sharing allows merchants to better view customer activity, both online and in physical stores.
- Opportunities for banks - The most significant data challenges banks face are fraud detection and management and effective anti-money laundering and KYC practices. Banks could collaborate and contribute data for better fraud detection models.
- Opportunities for consumers - The data economy raises questions about who controls data, what is consent, and how transparent the processes are. Establishing a data trust means there is a choice over who should be the custodian of the data. One of the key trends is for the end-users to be the custodian of their data, having greater transparency over where it is shared and how it is being used.
"The most effective solutions can only be realised through the secure sharing and processing of increasing amounts of data from different sources."
Opportunities for society - Medical research, smart cities, innovation, the fight against inequality, and sustainability can benefit from the data economy. Effective solutions require the secure sharing and processing of increasing amounts of data from different sources.
Core Considerations
- Regulatory frameworks - The emergence of a data economy will influence our personal, social, civic, and industrial lives, and regulatory frameworks will strongly influence our payment experience and technology going forward. Nations are recognising the potential of the data economy and proposing legislation to stimulate it whilst also seeking to protect citizens and businesses.
- Next-generation technologies and infrastructure - As the volume of data increase and technology advances, the data economy can be built in many ways. Which technologies are deployed and how they may be combined will shape the data economy and its services.
- Growing data (and digital) awareness - Data is a valuable resource for businesses, yet there has been little transparency in how it is used. This is often to protect business secrets, but it comes at the cost of the end-users having little or no view of how their data is being used. The level of transparency will affect how the data economy is shaped in the years to come. Beyond this, having transparency in and between companies will affect the pace and stability of growth of the data economy.
- Sustainable design – The environmental crisis is an immediate and pressing concern, and data insights could be one of the greatest tools available to deal with this. Worldline has partnered with FinTech ecolytiq, to provide people with insights about their carbon emissions by analysing their banking transactions.
