Digital Transactions recently published an article that should catch the attention of anyone who manages payment and data security. In Don’t Lose the Key to Your Data Vault by Ruston Miles, founder of Bluefin Payment Systems, he emphasizes the importance of payment data ownership for ISVs and merchants in terms of security and company valuation.
Data ownership has increasingly become important for software-as-a-service (SaaS) organizations, particularly in the context of mergers and acquisitions (M&A). Owning transactional data, especially related to payments processing, is a critical factor in determining a company’s valuation during an M&A process. The lack of data ownership can significantly downgrade a company’s valuation and hinder its attractiveness to potential investors. Control of transaction data is the key to a smooth process.
While many SaaS organizations initially partner with large payments processors to handle transactional responsibilities, owning their own data becomes imperative for maximizing revenue and increasing the appeal of the SaaS side of their business. Reliance on third-party processors for data management poses risks to companies’ valuations, as it limits data portability and control over their most valuable assets.
Miles explains that as the need to secure ownership of data increases, tokenization has emerged as a strategic solution to address data ownership concerns, offering a way for organizations to retain control of their data while mitigating security risks.
While tokenization provides an upfront value-add for customers, it’s also self-serving, Miles explains. Tokenization via a large payments processor can act as a mechanism to lock in companies by making it difficult for them to terminate partnerships. Miles believes that data portability is key.
The data at stake is too important to let go so freely. SaaS companies should start by demanding tokenization portability – and then, rather than rely on a large payments processor for tokenization, migrate to a third-party tokenization provider when the opportunity allows, which secures stronger investment options and less potential valuation reductions.
Read full article here.