Intelligent information is invaluable to businesses. In the payments industry, data can open the doors to innovation, improved operations, and better, quicker decision making. In fact, the value of payment data has begun to rival that of the payment itself.
This shift has taken place as entities such as SWIFT, NACHA and The Clearing House have introduced initiatives that emphasise the transfer of more payment data, more quickly. Richer payment data provides context that benefits senders and recipients across the payments value chain.
Data enables more types of payments
The ability of data to move along with a payment is enabling more types of payments. Request to Pay or Request for Payment (R2P) is a perfect example of a payment type enabled by data. Created to sit alongside existing payment instruments, R2P provides a secure way for individuals, businesses and organisations to advise another individual, business or organisation of their obligation to pay, with the payor maintaining control over the timing and amount of the payment.
The value of R2P is that the requestor can raise the obligation to pay and include all the necessary information about the payment in a message that travels to the recipient electronically. The recipient then has all the information they need to initiate a payment, and all the un-altered information travels back with the payment for use by the requestor. This seemingly simple yet surprisingly significant innovation can reduce friction and increase the speed of payment, while enabling a myriad of new use cases.
R2P enables financial institutions to offer a smarter payments collection capability to several customer segments, saving them time and money compared to their existing process. For example, through R2P, a creditor can send a digital payment request that can appear in a multitude of ways – as an in-app notification or email. A wide range of supporting information can also be attached to these requests, and, if required, partial payments or instalments can be enabled. A richer amount of transaction information can also be made available, making it easier for individuals and businesses to understand their precise financial position.
Data facilitates reconciliation
The inclusion of data along with the payment also can facilitate reconciliation, particularly automated reconciliation. Additional and extended information helps the receiver to understand the details and reasons for the payment.
Historically, the lack of contextual information associated with electronic payments could make reconciliation more difficult and error prone. For example, if a check was received for payment of a specific invoice, that information could be noted in a memo line. In contrast, electronic payments lacked the ability to convey this detail, and could be credited to an account with no context whatsoever.
With standards such as SWIFT gpi and ISO 20022, data-rich information now can travel along with the payment. Payments can carry more structured data and include information about the parties involved in the transaction. This data can be communicated in a streamlined way, including across borders. SWIFT gpi has been transformative for correspondent banking relationships because it enables standardised data to be included with cross-border payments, allowing money to move more quickly despite variances between countries.
Data helps reduce fraud and risk
Payment data is the most critical component in the area of fraud and risk management. Even when the payment itself offers little insight, the data provides the raw material to help reduce risk and combat fraud and financial crime.
As tools such as machine learning (ML) and artificial intelligence (AI) become more prevalent, the ability to accurately analyse payments data will grow, leading to more refined insights that will enable better, quicker decisions and better, quicker fraud detection. And the ability to track transactions and spending patterns in real-time will allow for effective and efficient fraud mitigation and prevention while minimising disruption to customer’s business.
A growing volume of payment data will continue to unlock new revenue streams and business opportunities as companies turn information into valuable insights to inform business strategy, improve customer experience, and minimise risk. Given its potential, payment data has become nearly as valuable as the payment itself.