The handling of payments within retail and commerce is a messy business: far messier than is commonly understood. Despite the advent of the age of digitalised e-commerce, much of commerce still relies on payment processes that are far from seamlessly integrated into the digital ecosystem.

As commerce struggles to adapt to a digital world, one divide that emerges is the disconnect between the first-party data collected from e-commerce and in-person transactions – with the systems of many retail operations being wholly unable to pair the details of in-store or physical transactions by a given customer either with each other or with the e-commerce profiles of the same customer.

With about 80 per cent of retail transactions globally still conducted in person, a large amount of first-party data is emerging fragmented, leaving businesses with only a piecemeal and partial picture of their customer base.

This represents a lost opportunity for business intelligence and insights – one that only grows as the potential of data analytics for providing insights into customers habits, preferences and incentivisation schemes advances.

Addressing legacy issues

One legacy issue is the lack of interoperability between the systems that support transactions and payments in stores, both between themselves and, in turn, within the purely digital systems that support e-commerce.

Adyen, a Netherlands-based payment solutions provider and the silent payments partner in the region for the likes of Careem, Hilton, Atlantis, Apparel Group, Chalhoub Group and Starzplay, is one company that is in the business of bridging this divide and turning first-party data back into an asset.

Sander Maertens (pictured, right), head of Middle East for Adyen, notes that physical payment transactions remain highly disconnected. For 80-90 per cent of regional retailers, transactions processed by debit or credit card scanner are not even relayed back to a shop's main order systems.

Instead, retail staff end up manually collecting receipts, often in a tray or bucket, before later inputting the details from the receipts back into the system – a process known as reconciliation – in order to close orders. And even once reconciled, many payment systems struggle to match up individual transactions with customer profiles.

This disconnect between transactions has a big impact on data collection. As a simple example, Maertens notes: "When you check in to a hotel, they know a lot about you if you are a member, but the moment you go to the restaurant in the building and you pay by card, they do not know how much you have spent anymore."

Other data aggregation issues emerge in international commerce, where a single customer might buy from a certain brand "today in New York, next week Amsterdam and a week later in Paris", using different payment methods and systems – fragmenting the data and obfuscating the customer journey.

Such fragmented data sets can be of little use to businesses in terms of profiling their customer base, but aggregated and matched to customer profiles – one of the processes that Adyen performs – such data can once again be used to shed light on the customer base and customer journeys, and can be used to determine a customer's lifetime value – a key metric for commerce.

Leveraging integration

Better-integrated payment systems also lend themselves to other forms of value-added customer experience. As Maertens explains: "You hear people talking about payments as a commodity, right? You change one terminal to another, and just negotiate costs. We do not believe in this at all. We really try to deliver added value that ultimately helps the customer."

One way in which Adyen has done this is with its integration of payment systems within leisure or entertainment complexes. An example is at Dubai's Aquaventure Waterpark at Atlantis, The Palm, where Adyen has introduced radio frequency identification (RFID)-equipped wristbands that enable parents to keep track of their children and to also make in-park purchases.

Such systems add security and control, as Maertens notes: “You can say: my kids can spend $10 a day on food, but not on merchandise. You can really control this. We offer payment solutions that add value. It is not about a terminal with a different colour; it is about a more intelligent payments setup.”

Bridging the data disconnect

The bigger picture and potential gain for businesses, however, is the ability to use first-party customer data better. A more accurate picture of the customer base, customer journeys and customer lifetime can provide a business with vital insights into customer behaviour and enable the business to make more informed decisions about how best to meet customers’ needs.

Adyen, through one of its data products, found that one of its global restaurant service clients was only linking 15 per cent of its transactions with registered customer profiles. With better data integration, they were able to link 2 million unidentified transactions to existing customer profiles, increasing their recognition of repeat customers by 50 per cent.

More detailed customer information can also help provide clarity on "cannibilisation", says Maertens. "When you open a new store, we see the migration of customers. A given location might get 5 per cent fewer customers and not meet their targets, but we see that it is because 5 per cent have migrated because they live closer to a newer store."

In another example, a European fashion client of Adyen's was using third-party data to calculate a churn – the rate at which a business loses repeat custom – of 4 per cent. Its first-party data, properly processed, showed that the churn was actually 13.9 per cent. This reoriented the approach that the business took to retaining customers.

Amid the impact of inflation on retail, with 2022 seeing 42 per cent of retailers experience decreased customer loyalty, such insights can prove crucial. As Maertens notes: "We believe that if you use the payments data properly, you target your customers better. Ultimately, you can create loyalty."

Many businesses are currently only harnessing a fraction of their first-party data, with far more being lost through the cracks in payment systems – and many businesses in the Middle East seem to know it. Adyen’s regional team has grown from just Maertens to 25 people in the past three years as demand for the firm's insights has grown.

Globally, there is significant emphasis on third-party data, but one lesson that is still being learnt is that first-party data can be just as powerful a strategic tool.