January 18, 2023

Enriching transactions with categorisations: a must-have in digital banking

Today, people are more cost-conscious than ever before. However, nearly 40% of UK adults say they aren’t confident in how they manage their money. And the onus is on banks to help them navigate their finances using a powerful tool we all have in arm’s reach– the banking app on our phones. One effective way to do this is using categorisations for improved transaction enrichment.

At Snowdrop Solutions, we’ve developed an API called Merchant Reconciliation System (MRS), which is quickly being adopted in the digital banking ecosystem and is expected by consumers concerned with keeping track of their budgets and spending habits.

In this article, we’ll delve into how categorisation works and why this is a must-have feature for financial and digital banking institutions.

How does categorisation work?

As the name implies, “categorisation” is a way for banking apps to group transactional data within the app, giving clients and banks the opportunity to see where money is being spent. For example, when a user purchases food at their local supermarket, they see the transaction under “groceries”. Then at the end of the month, they can see what categories are getting the most of their funds.

This works through a system called “Merchant Category Codes (MCCs)”. It’s simply a four-digit identification code that businesses are assigned so credit/debit card companies can categorise the transaction type. However, most banking apps used a simplistic version that gives rudimentary data and is often mismatched to the product or service.

Our MRS API takes it a step further and comes back with clean code that accurately matches the business’s name, location, and transaction category with a 95% success rate.

Visual examples os categorisation use cases
Some visual examples of how categorisations can be implemented

What are some of the benefits of adding categorisation to transactions?

Categorisations, with a consumer-centric approach, are a novel way for improving the user’s experience and boosting user engagement. It gives customers a visual representation of where they’re spending the most money so they can better manage their finances.

With Snowdrop’s Transaction Data Enrichment API, everything is clean and succinct, where it has the merchant’s clear name, logo, and verified location. And customers can create as many categories as they like and need to get granular insights into where money is going out.

They can then select and filter out transactions like ‘utilities’, ‘gas’, and ‘groceries’ to see if they’re spending too much on coffee or going out to the pub.

Categorisations help users better understand their spending habits

Categories can also be combined with location data for more enriched transaction details as well. With these two together, consumers can visualize on a map where they are spending the most time. This can also be effective in helping people and banks catch fraud attempts early. When people can see exactly where money was spent, it’s easier for them to spot it and inform the bank’s fraud department.

And from the bank’s perspective, this gives invaluable insights into the habits and wants of their customers. That way, they can develop specific and targeted products, offers, and solutions based on consumption habits. Not only does this add value to the customer, but it’s also an effective way of building brand loyalty and trust.

How can Snowdrop Solutions help?

For a decade now, we at Snowdrop Solutions have worked together with digital banks and financial institutions to develop solutions that improve customer experience and boost engagement across the board. With our Merchant Reconciliation System API, companies can turn their messy transaction data into enriched transactions with categorisations, clean merchant data, logos, precise location data, and much more. Give your customers the tools they need to take control of their financial trajectory and give yourself unparalleled insights into their consumption habits.

If you want to learn more about our MRS API or how categorisations can benefit you, then contact us today and speak with one of our friendly professionals.

Get in touch