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Visualizing Payments Data for Customer Analytics

Apr 11, 2012 / Customer Experience / Payments

Bankers worry a lot: about regulation, about risk and certainly about revenue.

Ironically, bankers already possess data that can allay most of their worries. They have the data to comply with regulations, mitigate risks and even enhance revenues. The problem is they have too much data – much of it they cannot see, much less understand and use.

We are drowning in data. Each day, humanity creates more than 2.5 quintillion bytes of data, according to IBM. And, while most of this data is created by consumers, banks and other enterprises are responsible (and liable) for managing and securing 80% of it.

The good news is that new “data-taming” technologies – such as de-duplication and compression tools – have reduced the cost of storing and managing data to one-sixth of its cost in 2005. The bad news is that cost-effectively storing massive amounts of data doesn’t begin to address the biggest worries haunting banks.

Payments Dashboard

Of all the data for which banks are responsible, payments data is primary. Payments consummate connections, move money and drive the economy. Payments are not only central to the banking business model, they are central to banks’ most pressing regulatory, risk and revenue concerns. Durbin, overdraft opt-ins and new FFIEC online-authentication regulations all center upon payments.

With electronic payments growing, non-interest fee income shrinking and regulatory scrutiny increasing, banks need a clear understanding of their transaction channels, volumes and risks. They need immediate, at-a-glance awareness of trends for returns, red flags and risk threshold triggers. In short, banks need a payments dashboard.

New data visualization technology is now empowering banks to understand and capitalize on payment data that has historically been hidden away in inscrutable databases and spreadsheets. Just as data visualization revolutionized online banking by presenting customers with easy-to-understand graphs and charts of spending, saving and budgeting – think personal financial management – this same technology is now enabling banks to unlock the power and potential of their payment data.

On the back end, advances in Online Analytic Processing or OLAP, “in-memory” databases and clustering techniques enable instantaneous access to massive amounts of payments data. On the front end, application frameworks for writing and running rich Internet applications – such as Microsoft Silverlight and Adobe Flash – facilitate clear, interactive visualizations. When combined, these technologies allow banks to see and understand payments data more efficiently and inexpensively than ever before.

Visualizing payment data also provides new business intelligence and customer insights, spotlights opportunities to up-sell additional products and services and identifies barriers to deployment of payments services such as cards, ACH and remote deposit. For example, since the advent of remote deposit capture (RDC) in 2004, we’ve been repeatedly warned about RDC’s potential risks, especially duplicate presentment and fraud. The specter of RDC fraud risk, reinforced by compliance fears surrounding the 2009 FFIEC Guidance on Risk Management of Remote Deposit Capture and the 2010 FFIEC Examination Manual, has had a major and sustained chilling effect on RDC deployments.

These fears, combined with banks’ ignorance of actual RDC data, have paralyzed many and forestalled systemic efficiencies: less than 5% of small businesses have RDC while 87% of checks are still deposited manually in person at the branch. Giving banks better visibility into payments dispels exaggerated perceptions of risk surrounding payments services like RDC and frees informed banks to broaden such services, realize cost-efficiencies, book new business and easily satisfy examiners. Many banks new to this visibility are surprised to discover what the Financial Crimes Enforcement Network’s (FinCen’s) latest SAR Activity Review corroborates: remotely deposited checks are actually less fraud prone than paper checks.

As banks grapple with new FFIEC mandates surrounding “high-risk transactions,” and as they continue to combat commercial account takeover, visualizing payment data provides the means to assess and track risk clearly and categorically, compare and contrast customers on the fly, intelligently manage transaction velocity limits and identify “at risk” clients sooner than later. Moreover, sharing visualized payment data with regulators and examiners radically simplifies compliance.

So, get a better window on your payment data – and stop all that worrying.

Mr. Wetherington is director of strategic insight for Dallas-based ProfitStars, a unit of Jack Henry & Associates Inc. He can be reached at [email protected].