Home / Credit News / Is data the next big thing in payment processing?

There has been a bit of a long-standing feud between merchants and the payment processing giants over swipe fees and how they're applied, but some experts say that in the near future, the whole relationship between these two groups might change.

Currently, many merchants are unhappy with the price they pay to credit and debit card transaction processing companies for every purchase they accept using these accounts, according to a report from Tech Crunch. These charges can range between 2 and 4 percent of a total purchase price, meaning that even relatively small businesses can end up paying thousands of dollars or more per year just for having the ability to accept card transactions.

But now there are new competitors in the marketplace for giant payment processors, and their presence could fundamentally alter the way in which these transactions are handled for all involved, the report said. These newer entries include Square, PayPal, and Intuit GoPayment, which tend to rely on mobile payment processing and charge lower transaction fees than what businesses usually pay to larger companies.

And while they may not have many clients or process a sizable number of transactions, relative to what long-standing giants like Visa and MasterCard can, what they may do successfully is give businesses more information about their customers, and that tends to be far more valuable going forward, the report said. For instance, while companies are unhappy with paying as much as 4 percent for a payment through Visa or MasterCard, they happily pay Google as much as 20 or 30 percent of the total purchase price for transactions completed as a result of online advertisements, because the business then receives very detailed information about the person making the purchase.

When that is extrapolated out to a larger number of purchases made through such an online ad, the data taken as a whole can allow companies to gain a more accurate picture of their clientele and better tailor their marketing efforts in the future, the report said. Therefore the value is that their advertising dollars are being better spent, making the value of the information more important.

The smaller startups understand this fundamentally, and may even allow businesses to see how ads noticed online affects real-world sales, which has long been an issue for that industry, the report said. Being able to "close the loop" - or, see the purchasing process germinate from online ad to real-world sale - is considered to be extremely valuable to businesses.

These efforts may also benefit consumers because of the way in which it will allow businesses to create tailor-made targeted advertisements and special offers that more directly appeal to a customer's specific habits and preferences. A number of mobile wallet programs now in development may help consumers to save these offers and use them in the real world, rather than only having access to them online.