Sometimes it seems that Amazon knows more about you than you do; its analysis of previous purchases can now anticipate your future needs – and wants. Meanwhile, ads on Facebook have become more relevant, Netflix knows what you should watch, and Spotify has the best music you have never heard. Big Tech companies like these have become well-versed in putting customer data to use. And when it comes to payments data, merchants have long been analysing transaction data to reward, and increase, their customers’ loyalty. For corporate treasuries, given the volume of transactions they – and their banks – have access to, surely they are also sitting on a treasure trove of data that can be monetised?
With the rise of artificial intelligence (AI) tools, the ISO 20022 payment format, as well as open banking, it is now possible to do a lot more with transaction data. However, the degree to which corporates are able to monetise payments data really depends on the kind of business they are in, says Toine van Beusekom, Strategy Director at Icon Solutions. If, for example, they are data-driven businesses – as with Big Tech companies like Google and Facebook – it is more likely they will be able to monetise their data effectively. “They can monetise data because their business model is selling advertising,” Van Beusekom says of Facebook.
Also, Big Tech has been encroaching the space of traditional financial institutions and has been getting into the payments business itself. The approach towards payments, however, doesn’t necessarily mean that the transactions will be directly monetised. Alistair Brown, Vice President, Global Head of Open Banking and Payments, at technology provider EPAM, highlights this in a blog about Apple’s move into buy now pay later (BNPL) with its Apple Pay Later solution. Apple has also been moving into other financial services, but its motivations are different from traditional banks. With a company like Apple, Brown notes, payments are not a product to be monetised directly but rather a feature of its ecosystem. With payments, the main goal is to increase the reliance on Apple’s other products and services and increase users’ loyalty. The same goes for Google, where a payment via Google Pay may not directly bring revenue to the company, but if a purchase is made after using the search engine and finding a business on Google Maps, it reinforces the need for those companies to be part of Google’s ecosystem and advertise on its platform.
This is just one approach that companies – particularly those that deal directly with consumers – can take with their payments data. For most treasurers, however, the priorities with payments are not what can be done with customer experience and making improvements on the front-end. Rather, the goal is to create efficiencies and make cash and liquidity management more effective.
When it comes to making use of payments data, Kieran Hines, Principal Analyst at Celent, comments that a priority for many corporates is operational efficiency and having visibility of cash. “You can make a lot of improvements with efficiency and managing payment flows if you know where the money is and where it is going to be required. It is far more efficient to have the right amount of money in the right currency, in the right country, when you need it rather than shuttling it around,” says Hines.
Sending money across borders or short-term borrowing are not cost-effective ways to cover outgoing payments, especially if data analysis shows it is unnecessary. Take, for example, a treasurer who needs to pay a supplier in Toronto in Canadian dollars. If they have visibility of a Canadian dollar payment that is due soon, they can use these funds instead and avoid the more expensive options.
These issues were covered in a 2021 Celent report, which Hines authored, entitled ‘Expectations Versus Reality for Payments Data Monetisation’. A survey of 217 treasurers and chief financial officers in Europe, North America and Asia showed the greatest pain points were the need for accuracy with cash balances and forecasting. Also, treasurers were often having to make decisions based on an incomplete, or out-of-date, picture.
The report showed that the greatest data opportunities for banks wishing to enhance their services to corporate clients lie in providing real-time balances, forecasts, improved security and visibility across bank providers. Rationalising the number of banking partners remains a priority for treasurers, although the average number still remains relatively high. According to Celent, the average number of bank relationships is 9.5, and this figure rises to 13 for corporates with group revenues of between US$5bn and US$10bn. “This creates complications, and it can be hard to manage in real-time how much cash the business has at any point in time,” says Hines. Although multi-bank dashboards that provide a consolidated view are available, doing this in real time remains a challenge.
Van Beusekom tells Treasury Today that many of these challenges for treasurers are persistent and many are still focused on getting visibility of their current positions and managing reconciliations more effectively. Some corporates – as Treasury Today’s readers will know – have undergone varying degrees of digital transformation, but many are still using Excel spreadsheets and spending their time on manual processes. There has been a lot of focus in the banking industry on real-time payments, notes Van Beusekom. However, what treasurers really want is real-time data.
This echoes what Treasury Today often hears from the treasury community. In a previous interview, Mark Sutton, Senior Manager at treasury and risk consulting firm Zanders, commented that having data-driven real-time vision is a key pillar of the digital transformation that many corporate treasuries are undergoing. Alexander Seelmann-Eggebert, Deputy Regional Treasurer, Asia Pacific at Nestlé commented that his digital aspirations were to reduce operational workflows, increase efficiencies and create data visibility. Meanwhile, Jason Teo, Head of Treasury, Southeast Asia (including Ventures in Korea, Data Centre and Renewables) has spoken of his desire to reduce manual processes and also to bring the treasury onto a single platform for cash visibility and forecasting.
A corporate does not want an API for this and an API for that.
Toine van Beusekom, Strategy Director, Icon Solutions
Many banks are clamouring to support corporates in these goals, but when it comes to monetising payments data many financial institutions struggle. In fact, a 2019 report by Aite entitled ‘The Payments Transformation Race: Criteria for Success’ noted that only 9% of banks were able to monetise transaction data effectively. The report noted that the shift to open banking – where banking services are provided in partnership with others – and real-time payments were drivers of change for banks, and monetising payments data provides them with an opportunity to cement their relationship with their customers, or create new revenue streams.
The use of payments data has moved up the agenda, says Celent’s Hines, because of the current migration to ISO 20022 and Swift’s drive to adopt the new format. With this messaging format, there is an opportunity to do more with the richer data, says Hines.
With more financial institutions sending and receiving payment messages in the ISO 20022 format, more data can be included with a payment. Invoices can be batched and paid in a single payment, credit notes can be included in a transaction, purchase orders referred to and so on. And for sanctions and anti-money laundering screening, documents can be referred to that show a payment is for a legitimate transaction, for example. The opportunities are endless and corporates are expecting their financial institutions to help them navigate the possibilities. For many banks, providing ISO 20022 solutions is not necessarily a means for them to generate new revenue streams from payments. Rather, providing services related to ISO 20022 will become table stakes for banks, says Van Beusekom, and not doing so is a churn risk. If they don’t do it, their competitors will.
There are many opportunities for banks to provide new solutions to corporates based on their transaction data, which in turn will give them a competitive advantage. If they don’t make moves to monetise their payments data, they risk losing out. Christian Löw, Partner, Financial Services – Payments, EY-Parthenon Financial Services, in an article writes, “Payment providers that find ways to monetise their vast wealth of transaction data can seize a powerful opportunity to differentiate.” He gives some examples, such as an online retailer credit scoring its customers based on payment data and using this to offer services such as BNPL. There are other opportunities for those who don’t sell to consumers directly, as Andy Schmidt, Vice President and Global Industry Lead for Banking at CGI notes. He writes in a blog that much of the transaction data that banks have is left idle and could be used to serve customers better. For example, a corporate that is making certain cross-border payments may be overpaying for their foreign exchange. A bank could identify this from the data and alert the customer, offering them a cheaper alternative, for example.
Also, Celent’s Hines comments, a closer analysis of transaction data can reveal where a corporate is exposed to certain countries that now carry a geopolitical risk, or the risk may be concentrated with certain banks. “The data is not just useful for cash management and payments – there might be other issues it can highlight such as risk and business continuity,” Hines says.
How far corporates rely on banks to help them with their data depends on the size of the corporate. The largest, with around US$10bn in revenues are likely to develop their own solutions so they can access their payments data through APIs [application programming interfaces] offered by their bank partners. For these corporates, the Celent report notes, real-time cash forecasting and real-time cash balances are the greatest needs. For smaller corporates – with US$500m to US$1bn in revenue – they are more likely to expect their bank to provide the services, such as a real-time consolidated view across their accounts and positions.
In an era of open banking, where solutions are available via different parties, the integration of APIs is important, but even managing this can be complex and banks need to make it as simple as possible. “A corporate does not want an API for this and an API for that – it needs to be simplified – otherwise they will do it for themselves,” says Van Beusekom.
Looking to the future, as the use of AI and analytics tools are on the rise, other areas also need to be simplified. This is one of the challenges that Zander’s Sutton previously pointed to: “Data is the fuel that powers AI. However, most organisations remain heavily siloed, from a system, data and process perspective,” he says. This view aligns with Van Beusekom’s, who comments that corporates need to get their ‘ducks in a row’ when it comes to managing their data and have it in a single place. If the data is not well managed, he says, there is only so much that an AI mechanism on top of it can do.
