Why is Transaction Enrichment Important for Winning the Digital Banking Race?

But did you know that data enhancement is also at the core of many online businesses? For example, in banking, billions of transactions get enhanced this way every day. We call this payment or transaction data enrichment.

Understanding Data Enrichment and its Impact on Banks

Payment data enhancement is a process of adding additional information to the transaction data that already exists. The goal is to make the data more valuable and informative, typically by filling in missing values or by providing context that would otherwise be unavailable. In banking, transaction and payment data enhancement is probably the most visible kind of enrichment.

In simple terms, banks take machine-readable payment information and make it human-readable as well. This can be done in several ways. Most often, it is done by adding a merchant logo, proper merchant name, exact location and sometimes even CO₂ footprint. This information is then shown to the customer in mobile banking apps or online banking.

Enhancing transaction data is essential because it helps the customers know more about their transactions through insights and additional data, which helps them make smart decisions about their financial lives and build trust with their bank, who becomes their financial partner on the life journey. Merchant enrichment, specifically data like logos, names and locations, all updated in real-time, play a crucial role in the banking app experience and customer satisfaction. Banks also learn more about their users without asking them for extra information by analysing transactional data, which can improve their services in many ways. For example, it helps to understand their clients more and bring valuable new products to the market that will actually have practical use. As such, with transaction data reconciliation, you can significantly improve the customer experience and make banking more pleasant and engaging. The more data are enhanced, the more robust the financial ecosystem of a bank becomes. It's a win-win.

The Benefits of Payment Data Enrichment for Banks

Banks have access to a large amount of data, but this data is often siloed and difficult to use. Enhancing this transaction data can help to overcome these challenges by providing a more holistic view of the customer. By supplementing customer financial data with data from external sources, banks can gain a better understanding of who their customers are, what they need, and how they behave. This data can improve customer service, target marketing campaigns, and make better lending decisions. Besides understanding the customer better, payment data enrichment allows banks to streamline operations, reduce fraud, and enhance customer satisfaction by making data more actionable.

In addition to improving customer understanding, payment data enhancement can help banks manage risk more effectively. By incorporating data from multiple sources, banks can get a more accurate picture of their borrowers' spending habits and identify early signs of financial distress. This information can then be used to manage risk and proactively prevent losses.

Finally, payment data enhancement can enable banks to develop more targeted marketing campaigns. By understanding their customers better, banks can identify opportunities for cross-selling and upselling products and services most likely to interest them. This data-driven marketing approach can improve customer satisfaction and higher sales volumes.

While banks are often at the forefront when it comes to the smart use of transaction data enhancement, it also holds strong potential for a wide range of other financial institutions. These include insurance companies, asset managers, payment processors, and credit unions, all of which stand to gain from enhanced data utilisation across their various departments. Transaction enrichment in these broader financial contexts is not just about improving customer understanding; it plays an important role in refining decision-making, improving risk management, and uncovering deeper customer insights.

In financial institutions, departments such as compliance, finance, marketing, and operations all benefit from enhanced financial data. For instance, finance teams can gain a clearer picture of cash flow trends and investment opportunities, while compliance departments can better track and flag suspicious activities through more detailed transaction categorisations.

Risk management is a critical function across all financial institutions, not just banks, and enhanced data provide a more nuanced understanding of risk by incorporating a variety of data points from both internal and external sources. Insurance companies, for example, can use enriched transaction data to assess claims more accurately and detect fraudulent activities. Asset managers can leverage this data to refine their portfolio management strategies by understanding clients' financial behaviors and potential risks more comprehensively. Payment processors can improve fraud detection by analyzing patterns and anomalies across enriched datasets, leading to faster and more accurate threat identification. In short, there are many uses inside the financial company, and to the outside as well.

Let's quickly look at some of those enhanced data aplications in real-life scenarios. Revolut, a rapidly growing neobank, leverages enhanced payment data to offer a highly personalised banking experience. Revolut uses transaction enrichment to categorise spending automatically, providing users with real-time insights into their spending habits across various categories like groceries, entertainment, and travel. This data not only enhances the customer experience by offering clear and intuitive financial overviews but also helps Revolut in refining its product offerings. For example, by analyzing aggregated spending data, Revolut can identify trends and gaps in their service offerings. If a significant number of users are spending heavily on international travel, Revolut might introduce a new travel insurance product or special foreign exchange rates to meet this demand. 

Deutsche Bank, one of the largest financial institutions in the world, has used enhanced data to streamline its operations and easily follow regulatory compliance. The bank enriches its data with detailed information about transaction parties, including their legal and financial history. This data allows Deutsche Bank to automate much of its compliance reporting, ensuring that transactions meet all regulatory requirements without manual intervention. Furthermore, enhanced payment data helps Deutsche Bank improve its anti-money laundering (AML) efforts by analyzing detailed transaction histories and identifying unusual patterns. The bank can then flag and investigate suspicious activities more effectively. 

How to Choose a Right Provider for Data Enhancement

Regarding transaction data enhancement, banks have a few options to choose from. One option is to develop the data enrichment capabilities in-house. However, this can be costly and time-consuming. Alternatively, banks can work with external providers. When choosing one, a few things to remember are their data sources, quality, and pricing.

Data sources are important because they determine the types of data provider can offer. Banks should make sure that the provider has access to high-quality data sources. Additionally, data quality is crucial because it determines how accurate and reliable the data is. Banks should ask potential providers about their data quality controls. Finally, pricing is important because it will affect the bank's bottom line. 

The choice of provider can also hinge on the type of financial institution that's seeking help. Besides regular or online banks, such data can be very helpful to other financial institution services (FIS). Compared to banks, they should prioritise providers that can offer tailored solutions specifically for FIS, ensuring that the enriched data aligns with their unique regulatory and operational challenges.

Choosing a payment data enhancement provider doesn't have to be complicated. By keeping these factors in mind, banks can find a provider that meets their needs and budget.

Learn more about how Tapix can transform your digital banking experience

Tips for Getting the Most Out of Their Services

Transaction data enhancement services can be valuable for banks and other financial institutions. By providing accurate and up-to-date information about their customers, banks can utilise them to assess risk better, identify opportunities for cross-selling, and prevent fraud. However, transaction data enhancement services can also be expensive, and many banks are unsure how to get the most out of them.

Here are a few tips:

1. First, make sure that you have a clear understanding of your data needs. What information do you want to enrich, and why? This will help you to identify the right service for your needs.
2. Second, don't be afraid to negotiate. Many services offer discounts for volume customers, so it pays to shop around.
3. Try before you buy. This simple principle is extremely popular in B2C. Not so much in B2B. You should, however, test the desired API and your data to see how well it suits your needs. This way, you can determine the usefulness of the integration.
4. Finally, consider using such services with other data sources. By combining data from multiple sources, you can get a more complete picture of your customers and their needs.

Get the Right Partner

Transaction data enrichment is a process that can provide banks with more prosperous, more valuable customer data. Adding additional information to your customer data sets can improve your marketing efforts and increase sales. Many different types of services are available, so choosing the best provider to meet your needs is essential. When working with a provider, take advantage of all the benefits they offer to get the most out of the service. Want to learn more? Tapix offers free intro calls so you can discuss your specific needs with one of our experts and see how we can help you drive sales and grow your business.