Guest Analysis: For Merchants, Big Data More Than Just a Buzz Word

BENJAMIN GROSSMAN

It can be easy to write off “big data” as an empty buzz word and the hype around it as a cynical marketing ploy, especially because the talk about big data often lacks an explanation of what it really is in real world terms. For a quick-and-dirty definition, this will do: Computers today can store, read, compare and draw conclusions from vast amounts of information — and they can do it really fast. But it’s not just more information and modern processor speeds that blow folks’ hair back when it comes to big data.

BIG DATA FOR BIG PROBLEMS
When we get excited about big data, we’re excited about the possibilities that our ability to analyze all of this information can bring to life — like doctors and healthcare companies using big data to predict epidemics as highlighted by Forbes in 2015 or scientists leveraging data to predict and remedy global food shortages. Big data also presents possibilities to solve one of the biggest problems facing merchants, payments processors, card issuers and financial institutions in 2016: fraud.

Major credit card companies like Visa recognize the power of big data and have expanded their use of data to detect fraud in recent years. For small businesses and e-commerce merchants, access to more data represents a significant opportunity, one many are not yet using to its full potential.

HOW BIG DATA HELPS STOP FRAUD
Speaking at the 2016 Northeast Acquirers Association Annual Conference in Boston in January, a panel of card and payment industry experts discussed how companies can leverage big data to mitigate fraud. They described that using data to effectively detect and limit fraud means taking a bird’s-eye view of the problem and recognizing patterns that show themselves when information from a broad range of credit card transactions is woven together.

The panelists explained how firms help merchants identify fraud by analyzing a multitude of data points behind each order. By considering the unique fingerprint of each transaction — dollar amount, location, type of device used, type of card used, transaction velocity, IP address, the list goes on — and comparing it to patterns detected across millions of transactions.

When more merchants opt in to anonymously share data, the data pool grows, allowing for more educated risk calculations backed by more and more evidence. For merchants looking to protect their reputations and bottom lines, with more data comes more power to recognize fraud when it happens. It prevents more chargebacks, sunk shipping costs, lost product, wasted time and strained relationships with payment partners and card issuers.

EMBRACING THE BIG PICTURE
Big data can be intimidating because it means embracing more complexity in some ways. No matter how many transactions a single business processes, the set of data available to them in-house is extremely limited compared with the greater scheme of what’s out there. This is where big data tools come in.

What merchants want are tools that allow them to leverage as much of the available data as possible in ways that streamline the fraud review process and help boost revenue. For many, manual review of orders still takes up huge chunks of time and budget. Having access to more information helps analysts quickly approve innocent transactions, review more transactions per hour, and spot a higher rate of fraud.

For e-commerce merchants whose fraud losses are a rapidly waxing slice of the overall fraud pie chart, data is crucial. These merchants are at an automatic disadvantage in recognizing suspicious behavior and shutting down fraud at the point of sale. Tapping into the reserves of available online payment information can help merchants cut fraud losses, optimize their manual review process, prevent chargebacks and protect their business. That is what big data can offer to real world businesses, and that’s what makes it more than just a marketing buzz word.