By Dale S. Laszig
DSL Direct LLC
Some of us remember the magic of electronic authorizations over analog phone lines that liberated merchants from manual paper-based processing. Thirty years later, machines are doing so much more than processing payments. They're part of the Internet of Things: often abbreviated IoT, it is a global network of connected devices that collect and report information.
Merchant level salespeople (MLSs) are at the forefront of an industrial revolution. Technologies are changing the way we read, write, shop, consume entertainment and buy things. The catalysts for change in payments are the same ones that brought us to the dance: communications technologies and machine intelligence.
In his white paper Modernizing Machine-to-Machine Interactions: A Platform for Igniting the Next Industrial Revolution, Nikhil Chauhan, Director of Product Marketing at GE Software, described a network of "Brilliant Machines" that "facilitate the ability of industrial companies to remotely manage and control industrial assets and use them as intelligent devices."
He further noted how machine-to-machine intelligence and data analytics drive process improvement and help businesses "safely and securely deploy, manage, upgrade, and decommission an increasingly intelligent set of assets in a controlled, deterministic manner, whether the asset is a single device or an entire fleet or plant full of assets."
Achieving this level of interoperability requires more than just technology. "What [would be] needed is the technology and best practices that support a modern industrial environment, one that is data and analytics driven and based on machine-centric distributed computing models designed specifically for industrial settings," Chauhan wrote.
How can payments industry leaders leverage machine intelligence? Following are recommendations of chief executive officers, technologists and members of GS Online's MLS Forum.
Customer relationship management (CRM) technology with built-in analytics helps MLSs keep updated customer profiles. These software platforms have become easier to use than earlier versions and continue to evolve in response to shifting business paradigms. In The Next 15 Years of CRM, Barton Goldenberg of CRM Magazine identified three essential elements of modern CRM applications: engagement, mobility and real-time interaction with customers. "In the next 15 [years], increasingly sophisticated (yet easy-to-use) social media tools and techniques will make creating and sustaining lifetime customers central to customer-centric business strategies," he wrote. "But customer needs will keep changing, leading to a difficult balancing act, one requiring not just commitment, expertise, and innovation, but also mastery of [these] three essential CRM developments."
Going beyond CRM's obvious value as an account retention tool, Goldenberg described in Integrating Social Media Is a Strategy for Success how CRM can drive engagement. He wrote, "[S]ocial CRM mixes the emotional or sentimental insights gathered from what a customer says on social communities (e.g., what he or she likes or dislikes about doing business with your company) with static customer transactional information coming from your company's back-office systems (e.g., that customer's purchase history) to give you a dynamic and robust understanding of how to sell, service, and market to that customer."
Cost reduction consulting is a growing segment of merchant services. Most cost reduction companies are non-credit card processing entities that perform independent audits of merchant accounts. While fee structures vary, most are compensated on the savings they generate.
Anand Goel of Atlanta-based Optimized Payments Consulting summarized the objectives of applying analytics to payments:
Unlike competitor merchant statement analysis, the aim of most cost reduction companies is not to get the merchant to change processors. Studies have shown that most merchants remain with incumbent processors after these firms have completed their due diligence and made specific cost-savings recommendations.
In a recent MLS Forum discussion www.paymentlogistics.com wrote, "We did our own review prior to ever speaking with the [cost reduction] consultant and made some minor reductions in our rates and also helped [the merchant] uncover some additional cost savings related to interchange qualification in a new e-commerce venture they had just launched.
"[The merchant] first met with me and then called the consultant in. I went over our analysis with the consultant, and the consultant on the spot agreed to waive their fee 100 percent and walk away from the account. Since that time, the consultant has contacted us a few times with referrals for clients of theirs whose incumbent provider was not willing to negotiate."
Forum member Steve Norell admired the cost reduction model. "I have had personal experience with a major company that has been doing this for a long time," he wrote. "The first and smartest thing they do is only go after large and major volume accounts such as Colleges/Universities. They then put the [merchant] out to bid to companies like [ChasePaymentech, FDR, Elavon,] all direct. The bids start at 5 [basis points] over cost and [go] lower still. This allows them to get the greatest savings and earns them a much larger payday for their 50 percent [residual, which they take for 36 months].
"I think they are genius [so much so] that I am considering doing this myself. Look at the benefits. 1. No more having to take service calls from [merchants] that want you to jump to their every need. 2. No [need to change] processors, provided the current one meets the pricing you are requesting. 3. You get to enjoy listening to the utter BS that most uneducated MLSs try to spew and then poke holes in it. The list goes on.
"It sure beats where [we've all been headed] in the last several years. And for the record, there are quite a few former credit card guys doing this, so they know what they are talking about [vs.] the company in the previous example."
As the network of intelligent machines continues to grow, there will be an increased need for data storage. In The CEO's Perfect Storm: Demographics, Data, and Devices Change Everything, Oracle Corp. President Mark V. Hurd wrote, "As big as today's data-storage numbers are, just wait until this phenomenon called the Internet of Things starts to kick in, and we go from 8 billion or 9 billion devices connected to the Internet today, to 40 billion or 50 billion Internet-connected devices a few years from now.
"Everything from warehouse pallets to medical devices to pets and household appliances, not to mention clothing and tools and plants and swimming pools, will be tied into the Internet, streaming huge volumes of data about all sorts of things.
"Here's why all of this is so important: companies that can deploy new data-storage technologies will be able to transform this data and device explosion from runaway expenses to sources of enormously valuable insights and raw materials for new products and services, new and better ways of engaging with customers, and greatly enhanced abilities to anticipate what's over the horizon."
Venkat Viswanathan, founder and Chairman of LatentView Analytics Ltd., foresees a spike in mass marketing of data storage. In an article titled "5 Data Analytics Trends that Will Make Waves in 2014" and posted at http://tdwi.org/articles/2014/01/28/5-data-analytics-trends-2014.aspx, Viswanathan wrote, "Amazon Web Services (AWS), Microsoft Azure, and other cloud computing platforms will continue to gain ground in 2014. Big data analytics solutions that require a pay-as-you-go data storage and computing-intensive analysis infrastructure can leverage these platforms and go to market with much lower capital costs than ever before.
"Innovations such as the cloud data warehouse platform from Amazon, RedShift, will gain ground and set new standards in self-service BI [business intelligence], enabling scalable, fast, and secure solution at very affordable prices."
Leading security analyst Mark Curphey is committed to expanding the role of analytics in IT security. In Tomorrow's Security Cogs and Levers, he wrote, "If we compare the best efforts happening in the security industry today against the complex supercrunching in financial or insurance markets, we may be somewhat disillusioned, yet the same advanced techniques and technology can probably be applied to the new security discipline with equally effective results."
Reflecting on data mining, Curphey added, "The current phase where the field is adopting metrics and measurement may be generating the data, and the upcoming supercrunching phase will be able to analyze it, but social networking will probably be the catalyst to prompt practitioners to share resources and create vast data warehouses from which we can analyze information and build models."
To Curphey's point, machines do a great job of collecting and organizing data. For the foreseeable future (and hopefully the rest of my lifetime) the job of leveraging machine intelligence will continue to be performed by humans.
Dale S. Laszig manages business development and strategic initiatives at DSL Direct LLC, a payments consulting company that helps clients promote, design, and deliver secure, leading-edge technology solutions. Her clients include software integrators, manufacturers, retailers, and value-added service providers. She can be reached at 973-930-0331 or dale@dsldirectllc.com.
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