There is quite a buzz surrounding alternative business data and its growing list of benefits. Are you curious about what’s driving all of the excitement?
Put simply, if you are a merchant acquirer, healthcare financing or POS finance company, you need better insights to control risk and improve performance. Better insights for many companies often require new data sources, but what benefits can you expect if you invest in alternative business data? We’ve got some thoughts to share that will help you examine this more closely. We must begin with the catalyst behind the alternative business data movement – embedded finance.
Embedded Finance Fuels Alternative Business Data Demand
You’ve probably heard about embedded finance before. Embedded finance, or the integration of financial services like payment processing or insurance into nonfinancial businesses’ infrastructures, is expected to expand rapidly across the next decade. In fact, global revenue from payments for embedded finance vendors is expected to reach $59 billion in 2027 (Juniper Research). As embedded finance grows, the demand for better business data to evaluate risk has also grown. Many companies today are reaching beyond traditional data sources to gain a comprehensive and more reliable view of their customers. The wave of unmet data needs has given birth to new alternative data companies. The primary goal of alternative data providers is to provide data and insights that enable better decision-making at the start of and improved risk mitigation throughout the life of the relationship.
What type of insights are made possible with alternative data, and how do they compare with what has been available previously?
Alternative Business Data Enables Fresh Insights
Companies have long relied on data from public records, such as bankruptcy filings, and information from vendors like Dun & Bradstreet, which is often self-reported. In recent years, new, more dynamic data, including company reviews, have grown in popularity as many companies place a greater emphasis on reputation and customer sentiment. Some within the industry are said to value reputation as the newest currency for a business. As the presence of public reviews and online referrals grows, more companies are looking to track customer perception, brand reputation, and the likelihood of repeat and new customers (data appeal.io).
Alternative data can not only broaden a company’s understanding of a prospective customer but also provide greater assurances about a customer’s risk profile. At Verdata, we leverage identity verification, behavioral data, and sentiment analysis to facilitate better decision-making around onboarding risk and enhanced monitoring over the lifetime of the relationship. For example, we can identify when a business partnership was closed due to fraud or other negative performance. In addition, shifts in customer sentiment, including mentions of scams, fraud, and more consumer abuses, are being monitored closely. Regardless of the data provider, valuable insights will depend heavily on superior data quality – mainly more accurate and timely data. If done correctly, alternative business data can deliver benefits beyond better insights, including greater efficiency and more objective decision-making.
Standardization, Vendor Consolidation, and Automation Made Possible by Alternative Business Data
While new insights fueled by alternative data can create a more complete business picture, the list of benefits includes standardization of decision-making, vendor consolidation, and automation.
Today, data is often manually sourced by one or more team members. Manual processes require human involvement, which results in subjective and inconsistent execution. Another benefit alternative data delivers is broader and deeper objective data that allow for more standardized and measurable decision-making to establish a foundation for ongoing strategy refinement.
In the shifting economy, companies are looking to improve spend management by minimizing the number of vendors utilized to reduce expenses and ensure efficient data purchasing. Providers such as Verdata can support vendor consolidation and provide employees with a “comprehensive single view,” which lessens time spent evaluating a potential customer’s fit. Consolidation also prevents businesses from sorting through conflicting and outdated information.
This process of manually procuring data from disparate sources for each business decision is cumbersome, costly, and nearly impossible to do at scale. As you can imagine, this circumstance is even worse for those companies that are heavily weighted toward small businesses, many of which are newer and have gaps in their profiles at traditional sources. Gaps in information combined with manual processes drive up costs at a time when the pressure on profitability is growing. As a result, time and cost savings realized from using alternative data coupled with automated workflows are welcomed.
A recent step we have taken to harness the power of alternative data and automated workflows is the release of daily notifications. Now, when a business experiences a regulatory complaint or partnership status change, an organization leveraging Verdata will receive a notification alerting them with details to perform due diligence. Combining alternative data with technology-enabled workflow allows a company to utilize actionable insights. This shift directly supports the industry’s ambition to evolve from reactive management to proactive portfolio optimization and risk mitigation.
The growing benefits of alternative business data requires strong partnerships with companies like Verdata. Learn more about the insights and proactive notifications you can receive about your customers by downloading our Verdata Notifications One-Pager .