I was
talking at the FST Conference in Sydney last year on Next Generation Customer
Experience. Majority of the questions I was asked were around the ROI on big
data analytics, which set me thinking on how do you identify the part of the
value chain to focus for highest benefit realization. A lot has been written
around the use of unstructured data in driving targeted one-to-one offers
helping generate higher revenues at better conversion rates. But, the ROI is
increasingly skewed with very few organizations able to harness the true
potential. So, where in the value chain do you focus?
The answer
lies in focusing efforts around forming stronger relationships with a wider
consumer base through a greater insight around transaction data. The entity
which controls this aspect of the value chain stands to gain the most in terms
of monetizing the transaction data for greater revenue share and retention. The
battleground will be checkouts (physical and online) in a bid to control access
to consumer spending patterns. Thereby, Unlocking insights around Payment transactions
will be the epi-center of the next analytics boom. This could lead to a new
payment method – consumer data. Both organizations and individuals in the future
will be able to pay through this new method trading off insights on spending
patterns.
According
to a Wall Street Journal story, consumer data and similar intangible assets
could be worth more than $8 trillion. MasterCard is packaging insights on
consumer spending patterns and trends gained through analysis of payments
transactions selling them to banks, governments and retailers. What stops super
market chains from working with individual brands within their store to on-sell
anonymous information of spending patterns on associated complementary or even
competitor products? Imagine Walmart through data analytics discovers that 70%
of the consumers of diapers in a locality of nappies buy baby food in the same
transaction. How valuable will this information be to Heinz who can then use
this information to co-market their baby foods with Huggies? What’s more, even
bigger value if Walmart can trade off that insight to the account payable to
Heinz.
We are not
far from the day when online retailers will choose a subset of ‘one-off’ buyers
to fill out their personal details and preferences (outside of the normal) and
trade that off as a discount against their product. They can get these customers to waive off the
privacy restrictions and trade their personal data to other channel partners
and retailers.
Banks,
traditionally being away from the consumer, lack a good understanding of their
customers shopping habits and sometimes location data to target & customize
their offers. This presents an opportunity for telcos and retailers, who are
touch-point advantaged to trade off that data as a payment method with bank
fees. This provides many benefits. First, they can reduce their liquidity
requirements for a greater rate of return by offsetting with the customer’s
other services in return. Second, it serves as an alternate currency and
investment vehicle, which can be independently traded and valued, bringing in
extra revenue at greater convenience.
As an illustration,
Rite Aid and CVS who are part of the MCX consortium recently blocked
mobile NFC payments specifically targeted around ApplePay as Apple masks
customer data thereby robbing them of consumer insights to analyze spend
correlations and patterns. Their own mobile wallet technology, PaymentC, aimed
at reducing credit card usage and pushing for lower transaction fee structures
is not out until mid-2015.
What do you
think? Feel free to leave comments and feedback
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