The Future of Payments: Time to make real money

What is the most valuable commodity with the best growth potential in the world for investors? Forget Bitcoin, real estate, gold, diamonds or fine wines – we think it is (certain types of) data.

The evidence underpinning our view is the way in which Google, Facebook, Apple and others have been able to monetise the value of the data they collect and use. Their business models mine very basic data to provide value to customers who continue to use your service. Imagine what those companies could do if they had genuinely detailed, personal data about individuals.

We believe that Tier 1 banks have the type of data that Google et al would give their right arms for. Unfortunately, banks don’t seem to recognise the value of their data, or they certainly have not succeeded in monetising it. Somewhat ironically, banking startups invest in analytics but don’t have much data; the Tier 1 banks that are awash with valuable data don’t invest enough in analytics to do anything really useful with it.

From current accounts and credit cards, banks could tell at an individual, micro- or macro- group (i.e. any granularity you find interesting), e.g.:

  • Socioeconomic information relating to income and outgoings

    • The working poor
    • The squeezed middle
    • The high rollers
  • Postcodes and specific shops where money is spent regularly
  • How and where people travel to spend money (e.g. if they use their bank card on the Tube)
  • Holiday / travel activity – where people like to go, how much they spend and on what
  • Other gambling, social and (sometimes even) sexual habits

The list is almost endless.

From their ATMs and POS devices banks are also awash with detailed economic data at a postcode level:

  • ATMs that act as biggest draw in an area
  • Shops with highest level of spend
  • Bank customers that spend money in those shops, by socioeconomic class, and where to target those customers with advertising

Start joining the dots, and it is not hard to envisage how banks could offer a greatly enriched service to retail, SME and some corporate customers:

  • For retail customers: highly targeted offers from local shops based on existing patterns of spending
  • And for SMEs and some Corporates:
  • Where is the best place for me to open my new shop?
  • Is the rent on my shop worth it?
  • Where should I advertise to attract my target socioeconomic customers?
  • Who should I make special offers to?

We have thought for some time that the social media / technology companies, drowning in cash, do not buy into banking because the ROI is too low (regulation is a pain too). However, if they looked at large banks as harvesting engines of very valuable data, M&A activity could potentially make a lot more sense as ROI goes through the roof.

Valentia Partners experience in Payments is in business requirements, payment scheme related changes, payment test environment management, business and technical test management, operating model definition and testing, and settlement.

In relation to big data, we partner with our best of breed technology partner for realtime analysis and decision making on very large data sets. The technology, KX, is used by multiple US and UK investment banks and by other organisations that process large (multiple-billions of rows of data) datasets, e.g. NASA.