For MasterCard, Processing and Analytics go Hand in Hand

For MasterCard, selling products and services created from data analytics could become its core business.  Its traditional focus on payments processing – 34 billion card transactions each year – could evolve into simply the platform for generating data.

For the time being, MasterCard’s major revenue continues to come from payments processing.  For Q1 2014, that amounted to $2.177 billion. For information products, including sales of data, it totaled $341 million.  However, the rate of growth for the latter was 22 percent versus 14 percent for payments.  Retailers,  corporate headquarters, governments, financial institutions and individuals are among the buyers of the data products and services.

This is being orchestrated through MasterCard Advisors. Created more than a decade ago, it has given MasterCard the edge of being an early adopter in monetizing data analytics.  Its current mission seems to be to continue to scale that upward.

MasterCard Advisors identifies itself as “the professional services arm of MasterCard Worldwide [which] provides real-time transaction data and proprietary analysis, data-driven consulting, and marketing solutions to help clients optimize, streamline, and grow their businesses.”  There are three divisions: Information Services, Implementation Services and Consulting Services.

What’s sold could take the simple form of information and insights about shopping patterns during the week before a major holiday.  In 2012, that’s what the MasterCard Advisors Media Solutions Group offered to advertisers and marketers.  It was then up to those advertisers and marketers to configure their own campaigns derived from those findings.

Or the data could be bundled as concrete selling solutions for specific settings such as music stores or restaurants. Those would be considered as “unique” because they are based on MasterCard’s 360 degree profiles.  Those capture the customers’ overall patterns of behavior, with data not limited to just shopping.

Another way the data is packaged is as products such as the Travel Controller.  Introduced in 2013, it is targeted at corporations and individual travelers.  The Controller identifies the most cost-efficient and user-friendly travel choices. The usual attempt to cut travel expenses can involve reviewing so many options that the process winds up wasting the time of highly paid professionals. In the end, that is a heavy cost in itself.

Operating in 210 countries, MasterCard’s reach is global. Before the World Cup in Brazil, MasterCard provided insight to luxury retailers about how rising food prices would be an obstacle for domestic sales.  In developing nations, it can do deep data dives about the dynamics of never having an economy based on credit cards.  Some of those nations will likely build their payment systems around cell phones.

In the data analytics game, a high degree of specificity is central for creating and maintaining a trusted brand. MasterCard has proved itself there.  For example, it issued a report that each city in the U.S. has its own spending DNA. That covered the categories of shopping, travel, dining, e-commerce, utilities and “other.”  It was based on its data from October 2010 to September 2011. Each category was broken down into percentages of dollars spent.

MasterCard, of course, hammers the privacy issue, both for consumers and merchants.  The data represent anonymous bits and pieces of information, not aggregates of personal profiles.

Its ambitions in monetizing data analytics are obvious in its recent moves.  Last year it opened the Advanced Analytics Centre of Excellence in India.  That will give MasterCard the edge in identifying global spending trends. From that it will create unique solutions which its customers can use as concrete action plans for getting specific results.

MasterCard Advisors partnered with Mu Sigma, one of the world’s largest analytics and decision sciences firms. This partnership, in which MasterCard bought equity, will help it both scale up and enter new segments.  Mu Sigma’s signature is for breakthroughs in approaching data. It does that through a multi-disciplinary approach that ranges from math to business.

Could MasterCard’s expansion into data analytics confirm the speculation by some stock analysts that the payment industry will be commoditized?  With commoditization the competitive arena would be dominated by a dog fight over pricing while profit margins would erode.

If that is to happen, MasterCard is again an early adopter, as it had been in launching MasterCard Advisors more than a decade ago.  It will be ahead of the rest of the payment industry in putting payments processing in direct service of its data analytics products and services.