SAN DIEGOBig data can combine information from a variety of sources to tip off ISOs and agents when their merchant clients are preparing to leave for another transaction-services provider.
That power of prediction isnt a dream of the futureits available today, Mary Winingham, senior consultant at Mirror Consulting, told an audience at the Field Guide Seminar here last week at the Western States Acquirers Association Annual Conference.
ISOs and agents can use that kind of tip on a restless merchant to shore up the relationship and retain the client, Winingham suggested.
And its just an example of the uses ISOs can make of big data, including offering it to their merchants in the form of business management tools and loyalty programs.
"Until now, weve squandered the data we had," Winingham asserted.
But thats changing, and meanwhile big data is growing at staggering pace, she told attendees, noting. that 90% of the electronic data that exists has been created in the last two years. A Google search recently yielded 111 million results for "big data" and just 33 million for "credit card processing," she said.
Frequent benchmarking of the intelligence derived from big data can alert ISOs and their merchants when trends are moving in the wrong direction and require a change in strategy, Winingham said.
Conversely, it can indicate that a problem is becoming increasingly less-severe and doesnt merit action, she noted.
Despite such benefits from combining data collected in the payments process with data from other sources, the information revolution has a dark side that makes some people feel a little uncomfortable, Winingham warned.
She noted that a company she knows can tell a small-business owner that Mary Winingham bought something in their store twice last week, lives eight miles away, owns her own home and drives a certain kind of car.
Undeniably, however, when information of that sort is combined for all of a merchants customers, some startling results can rise to the surface.
For example, a restaurant owner can learn that even though she doesnt sell that many fish tacos, that menu item brings in a large number of customers who otherwise would not come to the establishment, said another speaker, Billy Hubbard, director of channel sales at Swipely, a tech company that operates as a wholesale ISO.
Thus, the restaurant owner learns from the data that it makes sense to raise the price of the fish-taco plate by a dollar and display it more prominently in the menu, Hubbard said.
Companies that can provide that sort of actionable data, often called independent software vendors, or ISVs, can help ISOs retain customers, he maintained.
ISVs can assist ISOs in offering merchants analytics, customer relationship management, marketing, loyalty and gift cards, Hubbard said. He noted that those services can help merchants achieve their goals of attracting more customers, achieving higher profits and freeing up more time to run their businesses.
Big data can also ferret out data breaches long before theyre discovered through ordinary means, according to another speaker, Neil Jones, sales director at Rippleshot.
His company combines data from many sources and discerns the patterns that point to where the breaches are occurring. On average, it can detect an attack 119 days earlier than the merchant realizes it has become a victim, Jones said.
ISOs can provide the service to their merchants to minimize the damage from breaches, he told attendees.
Other speakers at the Field Guide Seminar, an informal course for ISOs and agents thats conducted at many of the regional acquiring-industry trade shows, concentrated on some of the industrys fundamental questions.
Attorney Paul Rianada, for example, explored questions surrounding the decision to sell a merchant portfolio.
Ten years ago, ISOs and agents often resorted to distress sales to cover their debts or divide assets in a divorce, Rianda said. These days, some are selling because they fear the market disruption that big tech companies may cause when they enter the business. He noted that the fear strikes him as overblown.
In the last two or three years, portfolio prices have recovered from the lows they reached during the Great Recession, Rianda said. Just the same, buyers often have strategic reason for paying a premium for larger portfolios and have an interest in buying smaller portfolios only at bargain prices.
In any case, he cautioned sellers to obtain professional advice and pay close attention to detail.
Another speaker, Mark Dunnwho owns Field Guide Enterprises LLC and puts together the Field Guide seminarsoffered advice on when to make the change from retail ISO to wholesale ISO.
Wholesale ISOs have large portfolios, sign up lots of new accounts and shoulder risk, while retail ISOs tend to be smaller, sign new merchants at a lower rate and dont assume risk. The risk at issue here arises from financial details, chargebacks, security, returns, damaged reputation and hefty fines imposed by the card brands, Dunn said.
Wholesale ISOs employ underwriting staffs to evaluate prospective merchant clients, he noted. They also face requirements from the card brands to add numerous merchants to their portfolios on a regular basis.
Retail ISOs sometimes decide to become wholesale because theyre presented with a market opportunity, Dunn said. I one example, a retail ISO was receiving only 50% of residuals for its high-risk merchants. The ISO considered it prudent to take on the risk to increase its revenue.
Retail ISOs also have better opportunities to brand their companies, he noted.
Still, he cautioned that ISOs should have the necessary size, growth rate and a compelling business case before attempting to become wholesale ISOs.