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Smart Commerce

Battling for customers in digital retail

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With tablets and smartphones at the forefront, consumers are experimenting with and (in some cases) embracing online shopping, digital wallets, digital payments and online retail sales promotions. We refer to this developing digital retail landscape as ‘Smart Commerce.’

Merchant-driven development

In our recent survey, all respondents reported belief in a future of simplified digital payment methods and richer communication between merchants and consumers. However, the real value in Smart Commerce is likely to come from new services in retail sales promotion, improving consumers’ lives and helping merchants meet consumers’ needs more efficiently and conveniently.

Smart Commerce goes mass market

Survey respondents believe that Smart Commerce is evolving quickly. Forty-one percent believe that digital retail will be a regular experience for most consumers within two years, and 91 percent believe Smart Commerce will be mass market by 2018.

How soon will Smart Commerce be a daily experience for most consumers in your market?

EY- How soon will Smart Commerce be a daily experience for most consumers in your  market?

Base: Financial services respondents (34)

Three issues – each mentioned by more than half of respondents – stand in the way of Smart Commerce progress to date:

  • Slow pace of retailer adoption
  • Lack of added value for consumers in digital payment solutions
  • Conflicting commercial interests 

Risk or opportunity?

Banks see customer intermediation – and the accompanying decline in bank relevance to consumer commerce – as the main risk posed to them by Smart Commerce. Most respondents fear the potential dilution of the end-bank customer relationship and its impact on brand relevance.

Many banks and card processors feel threatened by a future dominated by e-wallets, digital payments and new electronic point-of-sale hardware. Most respondents indicated some concern about the direct revenue impact of their customers’ adoption of digital wallets.

Yet Smart Commerce presents an unusual opportunity for financial services institutions to generate revenue from a profit pool to which they have had little access to date – namely, retail sales promotion. 


Bank support for digital payment

Survey respondents recognize that banks possess a key asset: bank customer data and its view into purchasing behavior. More than 80 percent of respondents, therefore, believe banks can support targeted digital retail sales promotions using customer data, in addition to their traditional payment services role.

However, one in eight thinks that banks should stick to providing only digital payment and finance services in Smart Commerce.

Key challenges

For banks and credit card processors, the difficulty in creating a culture supportive to rapid innovation and development is seen by 62 percent as a key constraint on Smart Commerce progress.

According to our survey, the key operational risk that Smart Commerce solution providers must manage relates to customer data security. Two-thirds mentioned fraud as a major operational concern, 59 percent cited data security and 38 percent said mobile and digital technology security.

Regardless of the challenges, Smart Commerce will happen. Simplified digital payment, complemented by enriched merchant/consumer communication, will be at the heart of Smart Commerce and will bring about entirely new digital shopping services.

Download “Smart Commerce: battling for customers in digital retail” as a printable document

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