Merchant transaction data is an umbrella term used to describe data derived from the transactions for goods or services occurring at a business. Some of the data attributes that can be derived from merchant transactions include:
– Card revenues: Revenue a business receives from credit and debit card transactions.
– Card transactions: Card transactions at a business over a period of time.
– Customer counts: Volume of customers at a business over a period of time.
– Chargebacks: Volume of forced reversals of a card transaction by a bank.
– Revenue growth: Growth rates of a business’s card revenue over a period of time.
Collectively, these data points paint a detailed picture of a merchant’s financial health.
Banks, payment processors, and other financial institutions gather merchant transaction data from credit, debit, and corporate card transactions, as well as from a merchant account’s financial statements. Lenders can use this data to identify businesses that are thriving and others that may be struggling.
This is useful for risk and underwriting teams looking to understand an applicant’s true financial position and monitor risk in their portfolio. And marketing and sales teams can leverage merchant transaction data to identify top prospects and provide additional services to grow customer relationships.
But there’s a catch. Despite its value, merchant transaction data can be challenging to use. Why?
Raw card transaction data is messy, inconsistent, and duplicative, because formats and naming conventions vary between financial institutions and business entities. This makes it hard to match data to the correct business — a process known as entity resolution. Even sophisticated lenders may struggle to achieve the level of granularity they need to reliably leverage the data for crediting, underwriting, servicing, and risk management.
Other institutions rely on self-reported merchant transaction data, which a merchant provides during the application process. The self-reported data doesn’t always reflect the full picture of a merchant’s financial health. Plus, this approach means that marketing can’t use merchant transaction data for new customer acquisition efforts.
Finally, some data providers require a lender to have written approval from the merchant to access transaction data. This multi-step process can slow down customer onboarding.