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Is Monetizing Data the Key to Competing in Payments? [2023 Update]

June 10, 2021

Banks and other financial institutions are often willing to use data sets to make decisions. They need data to figure out who is more likely to use certain services or products. They also want data on customers to see who has the greatest risk of being delinquent or otherwise unable to complete payments as necessary.

Banks can potentially earn revenue from the data they use by using various monetization efforts. While banks might earn funds from traditional transactions, those won’t be enough for banks to survive in an increasingly competitive market. Transaction fees and other charges issued for certain services can be plentiful, but there’s no guarantee that customers will always use the services that provide the banks with the income they want. The effort also requires banks to change some of their long-set attitudes on how they can manage funds.

Review Fraud and Delinquency Issues

Review Fraud and Delinquency

One way banks can monetize their data is to review general signs of fraud and delinquency. A bank can review instances of fraud and delinquency among its clients and review general signs or behaviors in these cases. They can look at how customers invest their funds, how they interact with banks, and general payment behaviors. A bank can use these details to predict future issues where customers might not pay their funds properly and avoid lending to those who might be risky. The effort reduces the general risk of fraud.

Focus on External Data

Estimates show that banks typically focus on internal data. A business might take 80 percent of its data from internal sources, while the remaining 20 percent comes from external data. The external data includes reports from social media, local economic data, and other content the bank might find suitable.

For a bank to monetize its data, it needs to switch to a 20-80 format where 80 percent of its data is from external sources. Banks can review employment data, tax reports, and other things about customers that the bank doesn’t traditionally hold. It will need to request these details for proper info as necessary. The bank can use this information to figure out someone’s net worth and whether someone is capable of handling loans and other services.

Customer Profiles Are Critical

A business needs to produce a comprehensive profile of each customer to be successful. A bank can use a predictive model for identifying customer needs by creating unique profiles for each person who requests services.

Profiles can include details on any private wealth someone holds, retail behaviors, and any assets one might regularly operate. A profile can also include details on whatever small business operations one might run. All profiles can be as complete as necessary, but they should provide enough points on whatever might work in any situation.

Monitor What Needs People Hold

Another way banks can monetize data is to look at how customers might hold unique financial needs based on their behaviors. A bank can analyze customers based on when they ask for funds and what they might look for the most. They can promote loans and other services to people based on life events, changes in income, and other things that might suggest someone could be more willing to contact a bank for help. Banks can use these details to market what they offer to people at the best times.

Who Is At Risk Of Leaving?

One idea to review surrounding customer behaviors involves how some customers might express behaviors when they choose to leave for other service providers. Customers might not be willing to check their accounts as often, or they might relocate to certain places where they might feel a need to use a different financial service provider.

A bank could review prior instances when customers left for other providers and use those details to see what can work to retain those people. The effort should be about reducing the risk of customers leaving for other sites. A bank could promote its services further and maybe highlight some of its benefits that might be different from what people might see elsewhere.

Why Aren’t Banks Willing To Monetize?

Banks could monetize their data to earn more money, but there’s no guarantee they actually will. One reason why is that banks are often more focused on short-term gains. They want to gain money from existing revenue streams that they know are proven to work. But the gains they’ll get through those efforts might not always be worth as much as they might assume.

Meanwhile, banks might not understand how they can transition to new methods to help them collect funds. They may need further guidance to help them understand what they should be doing when moving forward in accepting new funds.

A Long-Term Transition Is Necessary

The effort to transition from a short-term to a long-term strategy for gaining revenue will be a challenge for some banks to manage. But a long-term strategy will entail reviewing unique bits of data surrounding each person who uses a bank’s services.

A bank will need a proper roadmap that helps review what it is doing and how it can bring in more funds from prospective borrowers. The bank can use the roadmap to make decisions on how it will manage its assets the right way and how it can communicate with its customers. Observing behaviors and habits among customers will also be a necessity. The work here can help a bank figure out what is right when dealing with people and knowing what works.

There will be a great potential for banks to monetize their existing data stores. But it will require effort to ensure it all works and that everything remains accurate and useful. Banks that know what is open for work and recognize when customers might need services the most will have more success in monetizing the data they collect.

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