Payments data: A risk / reward dilemma
It was Clive Humby, the Sheffield mathematician who helped Tesco design its Clubcard system who first likened data to oil. It's "just like crude" he said, "valuable, but unrefined". It has to be changed into something to become valuable.
Data, in its raw form, also needs refinement to create true business value and the likenesses don't end there. Like oil, data is a precious, highly sought after commodity, but, like crude, data that's not properly managed has the potential to wreak havoc and disaster.
Payments data has the potential to bring huge value to an organization ? it literally delivers funds ? but it also presents one of the biggest risks. When payments data is wrong - and the research suggests that as many as one in eight payments contain errors - the impact shoots directly to the bottom line.
Clearing up payment errors, chasing missing information and resolving discrepancies swallows up time, money and resources at an alarming rate. A firm with 100k customers can easily spend £600,000 on failed transactions even before the damage to its brand, customer satisfaction and loyalty is counted.
Neither is the problem set to disappear any time soon. With data multiplying across the world at an exponential rate, the average enterprise must expect to manage 50 times more information in 2020 than it does today. With more customer details to manage, more regulations pending and the bar of customer expectation lifting ever higher, there's a pressing need to implement robust procedures to guarantee the accuracy and integrity of payments data.
We hope these tips will help you kick start the process of cleaning up payments data within your business. Who knows, they might just help you avoid a data disaster.
Validate the format of all data prior to uploading
Sending payments in the incorrect format is a rapid route to penalty fines. Once SEPA regulations go live on February 1st 2014, any bank or corporate sending payments to SEPA countries must use the correct SEPA format or risk incurring a penalty fine.
Whilst converting account numbers and matching the correct payment BIC is a time consuming manual process, It is critical to ensure that you can validate the payment data you are converting and you understand the rules for converting such data for each country. If time and resource are at a premium, consider using an external format converter. The improvement in payments data quality is likely to pay for the investment many times over, providing your do your homework and choose a conversion service that allows you to pick and choose the services you need and only ever pay for what you use.
Validate that the payment coordinates are correct
Once the format is resolved, its time to check that your payment is heading towards the correct destination. Validating payment coordinates prior to making a payment can help spot errors, such as an incorrect account number or BIC early.
Highlighting errors before payments are sent avoids the cost of failed transactions and helps prevent a potential customer service eyesore.
Research shows that one in ten new direct debit instructions are unsuccessful. Each one of those failed transactions costs your business up to £50 so a firm processing 5,000 direct debit instructions each year can quickly rack up a £25k bill for failed payments.
As more customers choose to pay by direct debit, the problem will only become more urgent. Forecasts predict that by 2021 we'll be jointly processing 4 billion transactions, representing a 20% increase over the next ten years.
Consider the impact that a 20% growth in failed transactions could have on your business? Do your staff have enough hours to chase incorrect data? Could your cashflow stand the constant unpredictability? And what about your customers? If outstanding service is at the core of your business, incorporating real-time validation into your processes is a no brainer.
Ensure that all IBAN countries payment data is stored as IBANs
When sending payments within Europe and the Middle East, you'll need to ensure that the correct International Bank Account Number or IBAN is used.
This internationally agreed method of identifying bank accounts has now been adopted by most European countries as well as many in the developing world, especially in the Middle East and Caribbean. It is constantly expanding with new countries adopting the standard.
The fully correct Validation of an IBAN is done by checking that the data within the IBAN is valid, such as bank codes, account number formats and the domestic modulus routines. If this method is not fully carried out you run the risk of entering incorrect data and still create an IBAN that passes the basic checks but means that the payment will still fail.
In practice, the conversion process is time consuming and prone to errors when carried out manually so look to incorporate an automated IBAN convertor within your workflow.
Check the payment BIC for each IBAN
The next step is to check the Business Identifier Code or BIC for each IBAN. Again, the process or validating and verifying the BIC can add unwanted delays and consume valuable business resource that could be better employed driving revenue and growth, but it really is crucial to run regular checks, say monthly and if possible using a validation service to save time.
If outsourcing BIC verification makes sense, ensure that you understand vendor costs both now and in the future. Whilst historical solutions have often required upfront IT investment and frequent, compulsory upgrades, new cloud-based solutions can deliver the same service faster at a fraction of the price. As everything is hosted in the cloud, software is automatically upgraded so that data is always checked using the latest technology.
Validate payment data when sending a payment
Before you press "send" take this last opportunity to validate the payments data. Is your payment heading towards a bonafide bank, account number and customer? Global payment reference databases carry over 700,000 records and it is estimated that each year over 70,000 records are changed. As payment data is constantly changing it is possible any of your important payment coordinates could be out of date.
So it pays to know before you press "send" as solving errors proactively will help you escape penalty fines.
If your business regularly collects payments data over the phone or online, a real-time validation service will offer maximum safeguard against bogus data.
Ensure that your payment data is only checked against official sources
In the age of big data there are many people claiming to be data experts, adept at lifting data from here or information from there. When it comes to your payments data, however, it is vital to only ever validate against official sources.
Official sources such as banks, code issuers, local communities or regulatory bodies have stringent measures in place to ensure that their data is of the highest possible quality so ensure you take advantage of this when scoping out your validation processes.
Finally, ensure that systems data is refreshed frequently
Every single minute 255 people are born whilst 107 die. Simultaneously, people are moving house, changing bank account, getting married or divorced. The world never stops turning, changing at a relentless pace and taking your data along for the ride.
Estimates suggest that as much as 35% of business data goes out of date each year, leading to errors in up to 12% of all bank account data.
Having diligently checked your data against official sources it is tempting to sit back and relax but the reality is that managing your payments data is a never-ending job.
Feeds from official data sources should be regularly updated and flowed through into customer records. For optimum results, data should be refreshed weekly but, in any event, never let your systems payments data get more than a month old.
About Apply Financial
Apply Financial exists to make payments simpler.
We believe that everyone should pay the same straightforward price for our services. We don't see large companies coming and suddenly hike the fees and we don't keep you waiting on decisions because we're agile and responsive.
But small doesn't mean inexperienced. We have extensive experience in global transaction management acquired over 25 years. We have designed; built and sold a huge range of solutions in payments, trade finance, cash management, treasury and multi-system integration.
Our aim is simple. To shake up the payments industry and stop you paying too much.
Visit www.applyfinancial.co.uk now to find out more about our SEPA consultancy services or to begin a month's free trial of our payments pre-validation products. You'll find full disclosure of prices, more information about how our solutions work and get the first taste of a more straightforward, better way for payments.
Mob: +44 (0)7802 514502
55 Baker Street,
London, W1U 7EU, England