Getting started with payment data enrichment in banking: why is it important?

Ondřej Slivka
time-icon5 minute read

Tracking financial flows is one of the key elements of banking, and payment data enrichment is becoming an increasingly important tool for banks to improve their services and minimise risk. In this article, we look at why payment data enrichment is so important in banking and how to get started.

What is payment data enrichment?

Payment data enrichment is when we add more information to transactions that have already been recorded. This can include things like the name of the vendor, what type of product or service they sell, where they were purchased or the payment method used. This helps banks to better understand their customers’ financial habits, which in turn enables them to provide a better service.

Why do customers want enriched payment data?

Today, customers expect banks to use technological innovations to provide better and more efficient services, such as cashback programs, personalized offers, and other benefits. Payment data enrichment is a key element that enables banks to better understand their customers and offer them services and products that match their needs and interests. For example, a customer can categorize their spending so they know that they spend 20% of their monthly income on housing, 40% on food, 15% on cosmetics, 15% on investments, and 10% on travel. Banks that focus on enriching their data processes will have a greater ability to better understand their customers’ behavior and offer them personalized and efficient services. In this way, banks can improve their competitiveness and retain their customers, who will appreciate the benefits and added value the bank offers them.

Generation Z expects much more from banking 

Generation Z is a demographic cohort that includes millennials and post-millennials. In some contexts, it is referred to as “alpha”. Born between 1997 and 2012, Generation Z is the first generation to grow up with access to the internet and mobile phones, which is directly related to the maturity of the modern world.

So what does Generation Z expect?

They have high expectations for mobile banking and digital payments. Unsurprisingly, Generation Z is the first generation to have grown up with smartphones and therefore prefers using mobile banking and digital payment apps over traditional banking methods. 

Further, this generation demands clarity in managing their personal finances. Generation Z is more financially savvy than previous generations and may prefer personal finance management tools such as budgeting apps and robo-advisors to help them manage their money. This group is also interested in sustainable and socially responsible investments or cryptocurrency management options.

The focus of these users is on visually clear and user-friendly apps, which should preferably include all the functionalities mentioned above. This group of users does not want to calculate their family budget or categorize expenses in excel but wants to have enriched data directly in their mobile banking. Read more about Generation Z and banking in our article.

Where to use enriched payment data?

Fraud prevention 

Using payment data enrichment can help banks detect suspicious transactions that can lead to fraud. With enriched data, banks can identify transactions that are inconsistent with normal customer behavior or that have suspicious characteristics. This allows banks to react quickly and take action to minimize the risks associated with fraudulent activity.

Improving customer service 

Enriching payment data allows banks to better understand their customers’ financial behavior and tailor their services to their needs. For example, if a bank sees that a customer frequently shops at a particular store, it can offer them a discount or other benefits for shopping at that retailer. Such personalized offers can improve the customer experience and lead to increased customer loyalty.

Identify new opportunities

Enriching payment data can help banks identify new opportunities for cross-selling. With enriched data, banks can identify products and services that are relevant to customers based on their purchasing habits. This allows banks to offer customers additional products and services that may be of interest to them, thereby increasing their revenues.

Data enrichment: functionality or necessity?

Back in early 2021, Mastercard introduced revised rules for its card issuers in the European region, known as AN 4569 Revised Standards for the Display of Enhanced Merchant Data. These introduce standards for so-called enriched payment data, which must now be provided by all global payment network card issuers in selected countries. For more on this standard, see our in-depth article.

Cross-sell via a payment card with enriched data

As a customer, you open a personal financial account with a bank. The bank allows you to set a personal goal in the customer’s banking account, which could be a new car or a holiday, for example. So let’s say as a new client, I set a new car as my goal. The bank can use this data to promote relevant products and deals and guide me as a client to the car dealer of my choice. It will then credit me with cashback on fuel at selected partners and so on. 

Why is this model a win-win-win solution for all parties?

Higher client engagement with a mobile banking app, more cross-selling opportunities, higher loyalty & customer LTV

21st-century way to get offers from attractive partners personalized, easy to redeem, bringing real & material benefits

Access to new digital marketing solution that brings new clients and incremental revenue, with high ROI & ROAS

The bottom line

By enriching payment data, it is possible to control payments more efficiently and prevent unauthorized transactions. In addition, more payment information will allow banks to improve their services and offer better and more personalized products to their customers. This will be especially appreciated by Generation Z, which is far more demanding in this area than previous generations. Enriching payment data in banking is therefore a key element of modern and secure banking.

Customers expect banks to use technological innovation to provide better service and protect their interests, and banks that do not invest in improving their data processes will fall behind in the competition.