Why Would You Want to Own Your Merchant Data?

Software companies choose to become payment facilitators – rather than having third parties manage their payments – to advance a variety of goals. They might want to increase their revenue or improve the payments experience for their customers.

A desire to own their merchant data is also high on this list of motivating factors.

But why is that important to some companies? Why would you want to own the data associated with the payments happening on your platform?

There are several reasons, primarily having to do with providing a better customer experience as well as making it easier for you to be a one-stop service provider for your customers.

Not again…

When someone else owns your customers’ data, that adds friction for anything you might want to do in the future, whether that’s changing processors or adding new embedded payment capabilities.

Any merchant that wants to accept electronic payments must go through underwriting. They have to demonstrate to their payments provider that they are who they say: a viable business owner and a low fraud or credit risk.

To conduct the necessary checks as part of the underwriting process, the payments provider must ask for sensitive, personal information from the merchant applicant. Naturally, people can be reluctant to hand over that information. For that reason, it’s preferable to avoid asking for it more than once.

Yet, if you want to make any sort of change to your services and you weren’t the one to collect the information and store it for your customer, that’s exactly what you’ll have to do.

If you’re in a referral agreement or working with a Payfac-as-a-service provider, your customer will work directly with the payments provider for underwriting, or you will pass the application information along to the provider. You will not retain that information.

So, for example, say you find a new payments provider who’s a better fit for you and you decide you want to make a change. In addition to the work of coding to a new processor, you will have to go back to your merchants and ask them for their application information all over again.

If, however, you own the data yourself – if you’re the entity that collected and stored the information for the customer – you have greater flexibility to make changes on the back end without having to ask the customer to resend sensitive information.

Owning the data also gives you the flexibility to add new services more easily. You may want to offer your merchants the option to use new payment types like Alipay or Venmo, or a new solution like buy now pay later (BNPL).

Any time you want to add something new that requires underwriting, owning the data means you can add your merchants with a click. On the other hand, if you don’t have the application information yourself, it’s back to the merchant you go.

Tell me about yourself

Owning your customers’ data will also enable you to make better decisions about what you want to offer, and to whom.

When you’re considering new value-added services, it’s unlikely that all of your merchants would qualify for what you want to offer. But if you have access to a merchant’s ongoing financial and transaction data, you can use analytics to understand the history of each individual merchant and whether they’re performing consistently. If you like what you see, you might feel comfortable offering them your new service.

Transaction data is a valuable view into a merchant’s business – another layer of information that will help you understand your customers’ behavior. If you’re a full Payfac, you own it all. You’re the software platform, you’re the payments provider, you know the customer best, and you get to offer them the new capabilities that will solidify you as their provider of choice.

Choosing to become a payment facilitator relies on a variety of factors, and merchant data ownership is simply one of those. When it comes to offering payments in some capacity, it’s important to understand who you want to be for your customers and how your choice of payments models will fit into that vision. For more information on merchant data ownership and what it takes to be a Payfac, reach out to the payment facilitator experts at Infinicept here.