June 15, 2021
Payments data monetization is becoming the new battleground for financial services organizations and their corporate clients. Processing of payments data has evolved from a back-end operation to a critical space for innovation. Banks are determined to get more value out of payments data while corporate clients are willing to work with any partner that can help them do it.
As one senior executive at a global bank commented: “(Data monetization) would have been very costly to do on a mainframe. The newer technologies like cloud allow you to do this in a much more efficient and effective way.” A recent survey of bank executives conducted by Celent, sponsored by MongoDB and Icon Solutions, revealed that payments data monetization is a high priority for key technology decision makers. Download the complete report here.
What is payments data monetization?
Payment data includes transaction records as well as data contained within messages. The monetization of payment data is relevant for a number of use cases, including:
- Using payments data to improve internal operations, identify clerical errors, and optimize procurement processes
- Improving straight-through-processing rate, which is the percentage of transactions that are passed through the system without manual intervention
- Incentivizing customers to make payments at different times to optimize the liquidity position of the bank
- Using payments data to enhance existing corporate-facing services
- Tracking payments and forecasting cash balances more accurately
What's new in the payments industry?
The time to invest in payments data monetization is now, according to a survey of hundreds of senior bank executives, corporate treasurers, and CFOs. Banks are eager to monetize their payments data, particularly as real-time payments accelerate and the push by the various regulators around the globe to adopt ISO 20022 intensifies. FedNow in the U.S. is the first true attempt to modernize the American payment landscape.
At the same time, high demand for data-led services is prompting corporate clients to look beyond their existing banking partners to access new and alternative payment services. More than half of corporate clients surveyed relied on a partner other than their lead bank for cash forecasting (62%) and cash visibility (56%).
The hope among banking professionals is that corporate clients would be willing to pay for service improvements and significant value-add services. But where banks see value-add features, clients see obligatory services their banking partners should offer by default. There are, however, opportunities for banks to justify additional fees, including:
- Using payment data to support new propositions and business models
- Driving value-added services through enriched third-party data sets
- Partnering with other organizations to launch new offerings
Which services will corporate clients pay for?
Corporate clients are seeking a wide range of payment services and are clear about the services they’re willing to pay for, including real-time cash balances and forecasting, better security and fraud protection, and data consolidated into a single dashboard. Services like virtual accounts, automated tracking, reconciliation of receivables, and better integration with corporate workflows are also considered high value but are seen as features that shouldn’t carry added fees, according to corporate clients. Their most sought-after services include:
Consolidated real-time data from multiple banks in a single dashboard (38%)
Real-time cash forecasting (37%)
Better security and fraud protection (36%)
Real-time cash balances (35%)
The push for ISO 20022 standardization
The payments industry and corporate clients are in agreement about the need to adopt ISO 20022 message formats in its native JSON representation, which will allow richer data to be sent across the network and increase rates of automation without further adjustments to legacy data models in relational databases. According to the survey, banks plan to make significant investments in supporting ISO 20022 so they can offer improved services to corporate clients; 74% of banks see ISO 20022 migration as an investment opportunity in new data-led services. For their part, 32% of corporate clients want help managing ISO 20022 changes from their banking partners, and 31% said they would switch providers if it meant receiving help supporting ISO 20022 compliance.
Cloud and agility
Perhaps no sector of the market is more attached to monolithic legacy applications as the banking sector. But if banks wish to differentiate themselves through innovation, they’ll need to leverage modern data architectures to address customer needs with greater agility. Cloud technologies will be essential in the push to adopt modern database design because they offer the ability to create more flexible and responsive applications and microservices with on-demand scalability. According to the survey, banks have the opportunity to unlock long-term gains by combining data assets and integrating payments data into an enterprise-wide data strategy. As the survey points out, “Data monetization is a strategy, not a product.”
Consolidated payment data and single-view dashboard
The most sought-after payments service by finance executives — cited by 38% of corporate clients, 53% of which boast revenue of $500 million to $1 billion — is a single dashboard that provides a consolidated view of real-time data across all corporate bank partners. Although technology solutions for this service exist, implementation lags. Banks should embrace this critical need as an opportunity to differentiate themselves from competitors.