By Pete Rizzo, Editor (@pete_rizzo_)
This is probably not a news flash: Card issuers are particularly well-situated to benefit from big data thanks to the sheer volume of customer transaction information they collect. The potential to use it to better serve and retain their current cardholders â”€ and acquire new ones â”€ is massive.
Yet issuers are losing an enormous amount of money by failing to capitalize on that potential, and are in some cases even ceding the opportunity to others in the payments ecosystem.
In fact, research from Oracle has revealed that 93 percent of C-level executives believe they have lost money by failing to capitalize on their data. TSYS suggests this revenue loss may be even greater for card issuers, as they hold some of the most valuable information relating to consumers’ purchases, balance transfers and ATM withdrawals.
The problem, according to a couple of payments data experts at TSYS, is that many issuers remain unsure of how to realize the potential of their data.
“FIs need to better understand the uses of data and how to deploy a big data initiative effectively,” Rob Hudson, TSYS’ senior director of client management, told PYMNTS.com. “They need strategies for acquiring, organizing and analyzing volumes of data so they can use it to improve their decision making.”
But, what are the initial steps issuers need to take to begin leveraging big data, and what best practices can they implement along the way? In this PYMNTS.com report, we break down TSYS’ new white paper, “How Card Issuers Can Leverage Big Data to Improve Cardholder Retention Efforts,” and speak to its authors for answers.
Big Data Starts Small
Before attempting to leverage big data, issuers need to work with small, more manageable data sets, according to Hudson. By jumping to the refinement stage without mastering the basics, he suggested, issuers could miss opportunities. He cautioned against a shotgun approach, saying that issuers should take care to avoid wasted resources and false starts.
“FIs can get the most significant return by taking advantage of information that they already have, such as customer and transactional data. The biggest uplift from managing data will come from the data points issuers already have immediate access to, but that they may not be leveraging to the fullest,” Hudson said. “Once issuers can crack the code on the basics, they then can look to types of data that will yield much more decreasing marginal returns.” Hudson named data from social media sites like Facebook, Twitter and Foursquare as one example of a later-stage big data strategy.
TSYS’ white paper advises issuers to first identify the types and variety of available data they can use to meet their business goals. Richard Hamilton, product consultant at TSYS, told PYMNTS.com that budgeting at this stage is easy, as FIs “can leverage existing internal human resources, such as database administrators, market intelligence analysts and report writers to use their own data.”
Big Data Lives Long and Targets
Once customer segments are identified, TSYS instructs, issuers should then decide how to approach these segments with specific offers based on their preferred communication methods. Then, issuers should develop concrete goals in areas like cardholder retention.
Hamilton and Hudson say that card issuers should harness data to adopt a “cradle-to-grave” approach to customer retention due to the high cost of acquiring new cardholders. The price of adding a new account, they note, exceeds $100 in many markets. TSYS suggests that card issuers should use data to go beyond traditional marketing and maximize the retention of key demographics, such as balance-transfer cardholders and high-quality cardholders, and increase revenue through relevant messages and offers.
Best Practices for Big Data
Of course, managing and measuring the performance of a big data initiative poses yet another challenge. As such, TSYS’ white paper detailed three best practices that card issuers can follow to ensure the long-term success of their data strategies:
1. Identifying and analyzing the characteristics and behaviors of cardholders
2. Using if/then scenarios and testing to boost retention
3. Using data to retain cardholders
Each of these best practices is analyzed in detail in the white paper. To learn how you can put these best practices to use and truly unlock the value of your big data, download your copy of the TSYS white paper, “How Card Issuers Can Leverage Big Data to Improve Cardholder Retention Efforts,” here.
Listen to the full audio interview with Hudson and Hamilton below.
*If you have trouble with the audio player above, click here.
Senior Director of Client Management, TSYS International
Rob Hudson is senior director of Client Management for TSYS International. He is responsible for TSYS’ UK clients, their card processing performance and delivery against operational and financial objectives. A 25-year veteran of the payment card industry, Hudson has previously managed the full product portfolio across TSYS’ European business. Prior to his time at TSYS, Hudson held senior roles at HSBC, GE Capital and PricewaterhouseCoopers, and has played a key role in all card sectors including consumer and commercial issuing, merchant acquiring and debit.
Product Consultant, TSYS International
Richard Hamilton is a product consultant for TSYS International. He is responsible for the development and deployment of data analytics products and strategies to banks and retailers across Europe. In his current role, he is actively engaged in thought leadership activities, including research and advising clients on how best to leverage evolving information. Hamilton joined TSYS in 2009 with pan-European experience consulting in instalment credit, savings and investments and life assurance markets.