Credit card companies are among the most data-savvy organizations in the world and they have been ever since their birth. The reasons for this are very simple and arguably the biggest one of these is the fact that credit card companies operate with enormous numbers of both credit card holders and merchants. In order for this machine to keep running the way it should and for it to keep making money for the credit card companies, it needs to rely on pure data.
Early Adopters
Whereas for most organizations (even the big ones), big data did not raise more than a few eyebrows until 2012 or even later, credit card companies have been harnessing the innumerable benefits that this approach can bring to their business. For example, American Express upgraded to a Hadoop infrastructure back in 2010. Other major companies have been doing the same from the early days too.
Big data simply does too much for the entire industry and it is only natural that the industry jumped on the bandwagon in the early days. Big data benefits everyone in the credit card ecosystem credit card companies, credit card holders and merchants that accept credit cards.
Benefits for Credit Card Companies
It goes without saying that credit card companies are the biggest beneficiaries of using big data. It may sound cynical, but if this had not been the case, they probably would not have invested as much in big data as they have.
For one, it allows them to notice patterns that were previously invisible or extremely difficult to notice. For instance, MasterCard’s big data analysis has shown that different cities have different spending patterns. They have also identified different online personas that can help them increase the number of “positive” outcomes, such as spending or activation.
More importantly, big data and new analytic methods are dramatically decreasing the relative amount of money that is lost due to credit card fraud. For instance, Doug Johnson from the American Bankers Association estimates that in 2012, banks managed to prevent $10 of fraudulent transactions to every dollar, while in 1997 this ratio was one to one. In essence, credit card companies and other large entities are now, thanks to new analytics and big data, reducing the success rate of credit card fraud 10 times more successfully.
Benefits for Merchants
Thanks to the new patterns that are unearthed through big data and improved analysis, merchants can now work much better with credit card companies in creating new offers and deals which will benefit them both. This is a two-way street kind of relationship, where data provided by merchants can help credit card companies determine patterns and then “hint” to certain merchants how to act on these, work in unison in order to increase sales.
Of course, merchants also benefit greatly from improved security and the reduced amount of credit card fraud. They often have to, at least, share part of the blame for the fraudulent transaction, and they can even find themselves on “blacklists” that make it extremely difficult for them to work with payment processing companies.
Benefits for Card Holders
When it comes to card holders, the “mere mortals”, if you wish, they also benefit from the convergence of the industry and big data, if nothing then indirectly.
For one, credit card companies are now coming up with offers that are far more in tune with different kinds of consumers. This can be observed on credit card review sites like Highya which now feature a much more “sensible” array of credit cards that will actually provide card holders with what they need.
Credit card holders are also seeing more deals which suit them and which give them bonuses on their credit cards. Furthermore, they are also benefiting from the increased security provided by big data, as, let’s be realistic, they are hurt the most when their credit card information is stolen. In short, their lives become safer, more comfortable and, often, cheaper.
Closing Word
Depending on how cynical we are, we can see the convergence of big data and the credit card industry as just a better way for credit card companies and merchants to take advantage of unsuspecting consumers. However, the reality is such that this is a relationship that will benefit the Average Jane and Joe as much as a huge credit card company.
