By Bruno Lichot, Head of Product at :hiperstream
What is the price of registering a customer's email incorrectly? Or how much does a company lose whenever there is a wrong number when generating a barcode? The value may vary from one business to another, but Bruno Lichot, Head of Product at :hiperstream, suggests a way of calculating the cost of data friction in transactional communications.
In 2014, experts have predicted that the amount of data on the planet would grow tenfold by 2020, from 4.4 to 44 zettabytes. That sounded like something far away from happening, but 2020 is here and it's time to say it: data management is critical for success. And every company faces some kind of problem related to this matter.
Working on the development of solutions for financial data validation, I have realized that the pain points are usually in integrating different systems or communication channels. It commonly happens to businesses that use CRM and sales software, or that offer a variety of services (e.g.: internet, cable TV, and streaming) without relying on a unified database. Add to this manual validation processes, and you can understand why any error might have a huge impact on the production chain.
By being so comprehensive, calculating financial loss isn’t an easy task. But what I suggest here is an important reflection for any decision-maker - :hiperstream has been working like this to help clients like a Brazilian credit card processing company to reduce financial losses by 86% over three years.
Calculating the hidden costs of friction
In business, there is only one thing worse than not having any data at all: managing inaccurate, incomplete, bad data. That is a problem estimated in more than US$ 3 trillion per year for U.S. companies.
Considering the example of an organization that processes 50 million invoices a year, I have worked on a transparent cost impact simulation. Take a look at the Bill Sumary Calculator (download available from Google Sheets).
Even in a scenario where the success rate is above 99%, there would be 360,000 fails throughout the year. If all these people reach customer service representatives to solve the issue (consider a six minute call, at a cost of US$ 1.15/minute), the money loss easily reaches US$ 2,471,580, 00.
And I am optimistic when considering an average loss of US$ 2.50 per bill. Add to this the operational costs for reissuing invoices and the dedication of other departments (or third-party partners) such as an ombudsman, legal, and communication. The amount only grows bigger and bigger.
Why should companies invest in technology for financial data validation?
If you are asking yourself that question, you are already one step ahead. Financial data friction is still a difficult, uncomfortable topic to discuss inside many organizations. After all, it’s not “only” about money loss - the way sensitive information is handled also connects to the brand’s protection and reputation.
But noticing flawed processes is not enough; it is necessary to resolve them. At :hiperstream, this solution is called DVA (Data Validation Automation). The platform follows customized business rules to identify inaccurate information as well as to provide insights to prevent and correct errors.
Validating 100% of financial data addresses challenges such as transaction growth, data handling, financial losses, and customer relationship. Now I am the one who is asking: why hasn't your company invested in technology for financial data validation yet?