EY-Smart Commerce Battling for Customers in Digital Retail
-
Upload
euglena-verde -
Category
Documents
-
view
223 -
download
1
Transcript of EY-Smart Commerce Battling for Customers in Digital Retail
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
1/40
Smart CommerceBanks battle for customers
at the frontline of digital retail
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
2/40
Contents
Introduction 01
Executive summary 02
Research methodology 04
Research results 06
01
The growing threat to banks 06
9& KeYjl;gee]j[]\]f]\ 07
:& KeYjl;gee]j[]\]eYf\Yf\\jan]jk 10
;& KeYjl;gee]j[]Y\ghlagf 12
D. The threat to banks 16
02Banks responses 19
A. Strategic ambitions and drivers 20:& Ghhgjlmfala]kZ]qgf\hYqe]fl 24
;& ;`Ydd]f_]klgkljYl]_q\]dan]jq 26
D. Skill and capability gaps 32
Gmjna]okYf\j][gee]f\Ylagfk gjfYf[aYdk]jna[]kafklalmlagfk +.
Contacts 38
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
3/40
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
4/40
02
Smart Commerce
Banks battle for customers at the frontline of digital retail
Research results
:Yfckk]]l`]ajdgkkg j]d]nYf[]lg[mklge]jk\m]lgafl]je]\aYlagfYkl ]c]q
l`j]Yl^jgel`]eYkkY\ghlagfg^KeYjl;gee]j[]k]jna[]k&
J]khgf\]flkZ]da]n]l`Ylkaehda]\\a_alYdhYqe]fl$[gehd]e]fl]\Zq]fja[`]\
e]j[`Yfl'[gfkme]j[geemfa[Ylagf$oaddZ]Yll`]`]Yjlg^KeYjl;gee]j[]Zml
expect it also to include entirely new digital shopping services.
KeYjl;gee]j[]\]n]dghe]flakZ]af_\jan]ffglgfdqZq[gfkme]jf]]\kZml
YdkgZql`gk]g^e]j[`YflkYf\ZqdYj_]hjglhggdk$kge]gmlka\]g^hYqe]flk&
Logg ]n]jqn]j]khgf\]flkZ]da]n]l`YlKeYjl;gee]j[]oaddZ]
a mass-market phenomenon within two years.
:Yfckj]_Yj\l`]eYafjakchgk]\lgl`]eZqKeYjl;gee]j[]Ykl`Ylg^
customer intermediation and the decline in bank relevance to consumer
commerce should this occur.
:YfckYj]hdYffaf_lg\]dan]jYeZalagmkKeYjl;gee]j[]k]jna[]klg[gmfl]jl`]
threat of intermediation.
Egklj]khgf\]flkoYfllgZ]YKeYjl;gee]j[]kgdmlagfhjgna\]jg ^]jaf_
integrated solutions incorporating both payments and broader purchasing
^Y[adalYlagfk]jna[]k]&_&$\a_alYddgqYdlq$hjgeglagfkYf\j][]ahlaf_!$Yf\
most intend to deliver this within two years.
Over 80% of respondents believe banks can support targeted digital merchant
promotions using customer data in addition to their traditional payment services
role; however, one in eight thinks that banks should stick to providing only
hYqe]flYf\fYf[]k]jna[]kafKeYjl;gee]j[]&
HYjla[ahYflka\]fla]\l`j]]eYaf[ Ydd]f_]klg\]dan]jqg KeYjl;gee]j[]
kljYl]_a]k2gn]j[geaf_[gfk]jnYlan]afl]jfYd[mdlmj]k3k]d][laf_l`]Z]kl
kgdmlagfo`]fl`]j]akfg[d]Yjoaff]jYf\^jYm\'\YlYk][mjalqjakckYj]Yc]q
concern; and ensuring regulators are kept up to speed.
Most participants also need to address capability and skills gaps notably in
distribution, mobile app development and in social media.
Gmjna]okYf\j][gee]f\Ylagfk^gjfYf[aYdservices institutions
At Ernst & Young we recognize both that the intermediation fears exhibited in
l`akklm\qYj]o]dd^gmf\]\ZmlYdkgl`YlKeYjl;gee]j[]hj]k]flkYfmfmkmYd
ghhgjlmfalq^gjfYf[aYdk]jna[]kafklalmlagfklg_]f]jYl]j]n]fm]^jgeYhjgl
pool to which they have had little access to date: retail sales promotion.
O]Z]da]n]l`YlYddjekkmhhgjlaf_j]lYadhYqe]flkoaddf]]\lg\]ka_fYj]khgfk]
tailored to their market and competitive contexts, capabilities and ambitions but,YZgn]Ydd$oal`km^[a]fl]paZadalqlgeYfY_]l`]mf[]jlYaf^mlmj]afl`ak]p[alaf_
and fast-moving space.
Executive summary
76%of respondents voicedconcern that Smart;gee]j[]oadd\aklYf[]them from customers ifcustomers start to usenon-bank digital walletsinstead of a bank cardto buy things.
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
5/40
03
Smart Commerce
Banks battle for customers at the frontline of digital retail
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
6/40
04
Smart Commerce
Banks battle for customers at the frontline of digital retail
Research methodology
Ernst & Young conducted in-depth interviews with
,)k]fagj]p][mlan]kZ]lo]]f
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
7/40
Smart Commerce
Banks battle for customers at the frontline of digital retail
05
Summary of interviews by industry and region
Americas2 Europe 9kaY%HY[a[ Total
Retail bank 6 11 2 19
Credit card processor or scheme 1 3 0 4
Financial services other , 7 0 11
Financial services companies 11 21 2 34
Fgf%fYf[aYdk]jna[]k[gehYfa]k 2 3 2 7
Total 13 24 4 41
1 Retail, technology and telecommunications
2 Includes one respondent from Latin America
To support our interviews, we provided respondents with a number of supplementary
\]k[jahlagfkYf\\]falagfklg[dYja^qim]klagfkYf\Ya\j]khgfk]k&O`]j]j]d]nYfl$
we have included this additional information alongside the relevant chart in the report.
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
8/40
06
Smart Commerce
Banks battle for customers at the frontline of digital retail
The growing threat to banks
Banks see their loss of relevance to customers dueto intermediation as the key threat from the massadoption of Smart Commerce services
C]qf\af_k2
9&KeYjl;gee]j[]\]f]\
J]khgf\]flkZ]da]n]l`Ylkaehda]\\a_alYdhYqe]fl$[gehd]e]fl]\Zq]fja[`]\e]j[`Yfl'[gfkme]j[geemfa[Ylagf$oaddZ]Yll`]`]Yjlg^KeYjl;gee]j[]Zml
expect it also to include entirely new digital shopping services.
B. Smart Commerce demand and drivers
KeYjl;gee]j[]\]n]dghe]flakZ]af_\jan]ffglgfdqZq[gfkme]jf]]\kZmlYdkg
Zql`gk]g^e]j[`YflkYf\ZqdYj_]hjglhggdk$kge]gmlka\]g^hYqe]flk&
C. Smart Commerce adoption
Logg^]n]jqn]j]khgf\]flkZ]da]n]l`YlKeYjl;gee]j[]oaddZ]YeYkk%eYjc]l
phenomenon within two years.
D. The threat to banks
:Yfckj]_Yj\l`]eYafjakchgk]\lgl`]eZqKeYjl;gee]j[]Ykl`Ylg^[mklge]j
intermediation and the decline in bank relevance to consumer commerce should
this occur.
01
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
9/40
Smart Commerce
Banks battle for customers at the frontline of digital retail
07
Section 01 The growing threat to banks
9&KeYjl;gee]j[]\]f]\
J]khgf\]flkZ]da]n]l`Ylkaehda]\\a_alYdhYqe]fl$
[gehd]e]fl]\Zq]fja[`]\e]j[`Yfl'[gfkme]j
[geemfa[Ylagf$oaddZ]Yll`]`]Yjlg^KeYjl;gee]j[]
but expect it also to include entirely new digital
shopping services.
9ll`]klYjlg^gmjafl]jna]ok$o]hjgna\]\gmjafl]jna]o]]koal`YZYka[\]falagf
g^l`]logc]qYj]Ykl`Ylo]Z]da]n][`YjY[l]jar]KeYjl;gee]j[]af[dm\af_Zgl`payment and additional services as follows:
1. Digital payment methods that simplify and enrich the experience at POS,
both physical and online
;gfkme]jkmk]\a_alYdoYdd]lkZgl gfdaf]Yf\afalaYl]\^jgeYegZad]lghYq
for face-to-face transactions.
HYqe]flmk]kYkaehd][gfkme]j%^ja]f\dqa\]fla[YlagfYf\n]ja[Ylagf
method, consistent across face-to-face and remote channels.
DgqYdlqhgaflkYj]YmlgeYla[YddqY\\]\YlHGK^gj[mklge]jkYf\ngm[`]jk'
coupons automatically redeemed with payment.
2. Rich communication between merchant and consumer, particularly
leveraging the mobile channel
L`][gfkme]j'e]j[ Yflj]dYlagfk ah ]Ylmj]kYj]_mdYj]p[`Yf_]g
information between selected merchants and their customers on all channels.
;gfkme]jkj][]an]lYj_]l]\Yf\j]d]nYfl\a_alYdhjgeglagfkYf\ngm[`]jkgf
l`]ajH;Yf\egZad]$g^l]fZYk]\gfl`]ajhjgpaealqlgYhmj[`Ykaf_ghhgjlmfalq&
L`]egZad]h`gf]'lYZd]lakY[gfklYflk ghhaf_[gehYfagflgl`][gfkme]j
and is also used by retailers to communicate in store to customers.
Afl]jna]o]]kj]khgfk]kgf`goY[[mjYl]dql`ak\]k[jahlagfg^KeYjl;gee]j[]eYl[`]\
their own views reveal much about the current standing, ambition and potential strategic
j]khgfk]kg^gmjj]khgf\]flk&KeYjl;gee]j[]oadd`Yhh]f&L`akhYjlg^l`]kmjn]qoYk
mf]imang[Ydoal`Yddj]khgf\]flkZ]da]naf_KeYjl;gee]j[]oadd\]n]dghafYld]Ykl
kge]g^l`]Yj]Yk\]f]\&
Seventy-three percent of respondents agreed with the retail future we described to a
dYj_]]pl]fl$oal`,)Z]da]naf_l`Yll`ak\]k[jahlagfogmd\[`YjY[l]jar]l`]eYbgjalq
of purchases.
Nearly three-quartersof respondents agreedl`YlKeYjl;gee]j[]is coming.
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
10/40
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
11/40
09
Smart Commerce
Banks battle for customers at the frontline of digital retail
@go]n]j$kge]hYjla[ahYflk^]dll`Ylgmj\]falagfoYklggfYjjgoYf\l`YlKeYjl
Commerce will incorporate broader offerings than the digitization of the current
POS experience.
9fmeZ]jg^j]khgf\]flkYdkgklYl]\l Yll`]qZ]da]n]\KeYjl;gee]j[]oadd\]n]dghaflg
a much broader service offering than the one outlined. In particular, respondents said
l`]qZ]da]n]\KeYjl;gee]j[]km[[]kkoaddaf[gjhgjYl]em[`egj]l`Yf\a_alaraf_l`]
current POS and retail experience, a step that was seen as merely a staging post en route
lgf]o\a_alYdk`ghhaf_lggdk^gj[gfkme]jkYf\e]j[`Yflk&
This is partly because some respondents saw digital versions of payments and promotionsYkfgl]fgm_`afl`]ek]dn]klg[`Yf_][gfkme]jZ]`Ynagjka_fa[Yfldq&9[[gj\af_lggmj
interviews, there is little wrong, for example, with current in-store debit and credit card
hYqe]fle][`Yfakek&J]khgf\]flk[al]\l`] Yadmj]g^]paklaf_F]Yj>a]d\;geemfa[Ylagf
F>;!l][`fgdg_qlgY[`a]n]oa\]khj]Y\Y\ghlagfl`mk^YjYkYhgo]j^md]pYehd]g^
consumers apathy toward incremental improvements, particularly those that fall into the
kgdmlagfdggcaf_^gjYhjgZd]e[Yeh&
Meanwhile, a number of targeted promotions and loyalty schemes already use mobile
phones as a channel. However, the majority of respondents do not believe there is scope
for a sustainable competitive advantage in mass discounting, whether digitally delivered
or not.
The real opportunity in Smart Commerce is in creating brand distinctiveness with a
differentiated digital personalized experience. We see Smart Commerce as addressing
How can I make you happy? not What can I sell you today?
International Retailer (Europe)
9[[gj\af_lggmjafl]jna]ok$l`]j]YdnYdm]afKeYjl;gee]j[]akdac]dqlg[ge]^jge
new services, which will genuinely improve consumers lives and help merchants meet
[gfkme]jkf]]\kegj]]^[a]fldqYf\[gfn]fa]fldq&EYfqg^l`]k]f]ok]jna[]kYj]Ydkg
likely to be disruptive to existing offerings. Our respondents said these disruptive services
are likely to bring together location tools, social networking, scanning, mobile and
payment technologies in new ways, potentially evolving in a manner that has not yet even
Z]]f[gfka\]j]\&Hmllaf_Yka\]\a^^]j]flna]okgf^mlmj]KeYjl;gee]j[]k]jna[]k$Ydd
respondents recognized that the creative and insightful use of data will be at the heartof these offerings. Our interviewees also recognized that the creation and ownership of
l`]ja_`l\YlYakdac]dqlgZ]Y[jala[Yd\a^^]j]flaYlgj^gjjekdggcaf_lghdYqYhYjlafY
KeYjl;gee]j[]^mlmj]&
The key part of Smart Commerce is actually not in the area of payments at all, but in the
area of cloud integration. For merchants this may involve non-payment functionality such
as stock control. For consumers it may involve functions such as the ability to pre-order
and have goods waiting for you when you get to the store.
Retail Bank (Americas)
The real value inKeYjl;gee]j[]aklikely to come fromnew services, whichwill genuinely improve
customers lives andhelp merchants meetconsumers needsegj]]^[a]fldqand conveniently.
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
12/40
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
13/40
11
Smart Commerce
Banks battle for customers at the frontline of digital retail
EYfqk]]ka_fa[Yfl[gee]j[aYd\jan]jk$afhYjla[mdYj$e]j[`YflkYd]khjgeglagfk&
E]j[`YflkYd]khjgeglagfkoYk$Zqkge]\aklYf[]$na]o]\Ykl`]c]qhjglhggd\janaf_
KeYjl;gee]j[]\]n]dghe]fl$[al]\Zqf]Yjdq^gmjgmlg^n]afl]jna]o]]k&L`]k]
j]khgf\]flkZ]da]n]l`Yl`]dhaf_e]j[`Yflklgk]ddegj]]^[a]fldqYf\]^^][lan]dqoadd
^mf\l`][gklkg^affgnYlagfZ]`af\em[`g^KeYjl;gee]j[]&
The focus of much digital payment effort to date has, by contrast, been focused on
helping consumers buy more conveniently. Respondents recognized that it is ultimately
retailers and manufacturers that pay for commerce services and have the most to gain
from digital improvements.
Merchant sales promotions
and loyalty schemes
Payments revenue
HGKfYf[]
Manufacturer sales promotions
18%
76%
47%
21%
:Yk]2>afYf[aYdk]jna[]kj]khgf\]flk+,!Respondents could select up to two answers
O`a[`Yj]l`]eYafhjglhggdk\janaf_KeYjl;gee]j[]\]n]dghe]fl7
While payments revenues were regularly mentioned by banks as a driver of Smart
;gee]j[]\]n]dghe]fl$l`]eYbgjalq\a\kgafY\]^]fkan][gfl]plYf\j][g_far]\l`]
jgd]g^KeYjl;gee]j[]afhjgl][laf_]paklaf_j]n]fm]$YdZ]algf]o`]j]hja[af_ak
already under severe pressure. A number of other respondents, typically online and digital
companies, see the opportunity to gain share of the payments market and the criticalaehgjlYf[]g^hYqe]flklgYZjgY\]jKeYjl;gee]j[]g^ ]jaf_&Afl`akj]kh][l$k]n]jYd
banks explicitly imagined a world where the larger digital organizations would give away
l`]hYqe]fl]d]e]flafgj\]jlghjgegl]KeYjl;gee]j[]ljYfkY[lagfk&
Fundamentally retailers will pay for Smart Commerce to drive their sales but manufacturers
may also decide they can go direct to consumers and bypass retailers. There are no NEW
hjglhggdkaf`]j]&L`]qYdj]Y\q]paklZmloaddZ]\akljaZml]\\a^ ]j]fldq&
Global Digital Payment Services Provider (Europe)
The large, online, digital payment platforms are looking to drive revenue out of the data
and are even willing to give away the payment revenue to make money on the promotion.
Retail Bank (Americas)
There is a belief that there is a new revenue stream in payments. There isnt.
Retail Bank (Americas)
Examples ofSmart Commerce
Digital couponsredeemedautomatically at the
point of payment
Digital statements asa vehicle for targetedoffers based on wherea consumer shops
Delivery of location-based messaging
to a customerssmart phonetriggered by proximityto a particular store
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
14/40
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
15/40
13
Smart Commerce
Banks battle for customers at the frontline of digital retail
Afqgmjna]o$o`a[`Yj]l`]egklka_fa[Yflaf`aZalgjk to Smart Commerce development?
Gmjkmjn]qhYjla[ahYflka\]fla]\YfmeZ]jg^gZklY[d]k$o`a[`eYqZ]j]klja[laf_l`]
hY[]g^KeYjl;gee]j[]\]n]dghe]fl&L`j]]af`aZalgjko]j]e]flagf]\Zqegj]l`Yf
half of the respondents: the slow pace of retailer adoption, the lack of added consumer
value in digital payment solutions offered to date and the impasse brought about by
[gfa[laf_[gee]j[aYdafl]j]klkZ]lo]]fhYjla]kYl\a^^]j]flhgaflkafl`]nYdm][`Yaf&
While slow retailer adoption was mentioned most often, the reason cited for this by
respondents was frequently that retailers do not believe that the solutions delivered to
consumers so far offer enough value to encourage adoption. Respondents understood
that retailers are unlikely to invest heavily in the infrastructure for new POS propositions
that are not compelling to their end customers. Our respondents, though critical
afhYjl$Y[[]hll`Ylj]f]oaf_l]jeafYdkaf%klgj][Yjja]kka_fa[Yfl[gkl^gje]j[`Yflk&
There is also widespread recognition that the proliferation of smaller payment solutions
is a further contributory factor to slow retailer adoption when there is limited visibility
of likely winners.
Will merchants want to invest if there are no lifts in sales as a result? Investment is not
just in the technology, but in staff training and infrastructure. The question for merchants
will be does this bring me extra business? If the consumer proposition is strong, retailers
will adopt it as retailers follow consumer demand.
Global Digital Payment Services Provider (Europe)
Too many small solutions
to gain critical mass
Base: Financial services' answering(33)
27%18%
15%
9%
Slow pace of adoption of digitalacceptance methods by retailers
Afkm^[a]fl[gfkme]jnYdm]to encourage adoption
;gfa[laf_[gee]j[aYdinterests of participants
Improvements to existingpayment methods
Regulatory barriersto data sharing
Consumer resistance tosharing personal data
58%
55%
52%
Respondents could select up to three answers
50%say that it will take uplgn]q]Yjk^gjeYkkadoption to take placeas three inhibitorsremain to be addressed.
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
16/40
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
17/40
15
Smart Commerce
Banks battle for customers at the frontline of digital retail
;gfa[laf_[gee]j[aYdafl]j]klkoYkl`]l`aj\g^l`]l`j]]eYbgjZYjja]jklgKeYjl
;gee]j[]hjg_j]kk]phj]kk]\afgmjj]k]Yj[`&Afl`]egj]\]lYad]\j]khgfk]k$kge]
highlighted the sheer number of potential participants in the value chain and the absence
kg^Yjg^YfqeYbgjf]ohjglhggdk&Oal`f]ohdYq]jk[geh]laf_afdgf_%]klYZdak`]\
market with aggressive business models, the scope for commercial tensions and
disruption is seen as particularly problematic.
Its not clear who should take the lead in Smart Commerce. It is a bit like a gold rush.
Everybody in the value chain wants to get a share of the riches, even the shovel maker.
9ddjekYj]j]Y[`af_ gjegj]l`Yfl`]qYj]]flald]\lgZmlmdlaeYl]dq]n]jqgf]ak
[`Ykaf_l`]kYe]hjgl&
Retail Bank (Europe)
Other respondents singled out individual participant types for effectively holding Smart
;gee]j[]\]n]dghe]fllgjYfkgeYf\^gj\]eYf\af_o`Yll`]j]khgf\]flkgZnagmkdq
felt was an unreasonable proportion of sales values. Mobile network operators (MNOs)
were mentioned more than any other type of participant in this respect, with very little
j][g_falagf^jgegl`]jhYjla[ahYflkg^YfqnYdm]l`]q[mjj]fldqZjaf_lgKeYjl;gee]j[]&
9[[gj\af_lggmjafl]jna]ok$o`Ylhgo]jl`]EFGk`Y\`YkZ]]fka_fa[Yfldq\adml]\
since the launch of the iPhone and the subsequent launch of rival smart phones, which
act as platforms for third-party app development. Progress is now limited by arguments
over the share of transaction fees due to different industry participants.
EFGkYf\ZYfck`Yn]`]d\mh\]n]dghe]fl&>gjn]lgkapq]Yjkal`YkZ]]fl][`fa[Yddq
easy to build the solutions but MNOs wanted 10% of payment values. There is a mismatch
in expectations of value a commercial standoff. MNOs wouldnt give access to the
phones and they control access to the important secure element.
Global Credit Card Provider (Europe)
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
18/40
16
Smart Commerce
Banks battle for customers at the frontline of digital retail
:Yfckj]_Yj\l`]eYafjakchgk]\lgl`]eZq
KeYjl;gee]j[]Ykl`Ylg^[mklge]jafl]je]\aYlagf
and the decline in bank relevance to consumer commerce
should this occur.
Some banks are concerned about the potential loss of direct revenue from cards and
current account balances.
9dgf_ka\]l`]Z]da]^afYKeYjl;gee]j[] mlmj]$ZYfckYf\[Yj\hjg[]kkgjk ]]dl`j]Yl]f]\
by it. Most respondents indicated some concern about the direct revenue impact of their
customers adoption of digital wallets for purchasing. The poor relative economics of
accepting cards as a funding source makes it likely that wallet providers will strongly
]f[gmjY_]\aj][l mf\af_ jgeZYfcY[[gmflkl`jgm_ Yf9mlgeYl]\;d]Yjaf_@gmk]9;@!
instead. This is likely to reduce card usage and revenue for bank card issuers.
The other direct impact cited by a third of interviewees was that some consumers would
start to maintain a balance in their digital wallets, which previously would have been
held in a current account, thus reducing a vital source of low-cost funding previously
considered reliable and stable.
=n]flmYddqo]dgk]l`][mklge]jYf\Yddl`]oa\]jnYdm]l`Ylgok^jgel`]j]dYlagfk`ah
if we dont maintain the relevance of the bank.
Retail Bank (Europe)
Person-to-person (P2P) payment completely wipes out interchange and card transactions
so the options (for us) are bad, worse and worst.
Retail Bank (Europe)
Section 01 The growing threat to banks
D. The threat to banks
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
19/40
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
20/40
18
Smart Commerce
Banks battle for customers at the frontline of digital retail
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
21/40
19
Smart Commerce
Banks battle for customers at the frontline of digital retail
Banks responses
Banks are planning to deliver ambitious
Smart Commerce services to counter the threat
of intermediation
C]qf\af_k
A. Strategic ambitions and drivers
Egklj]khgf\]flkoYfllgZ]YKeYjl;gee]j[]kgdmlagfhjgna\]jg^^]jaf_
integrated solutions incorporating both payments and broader purchasing
^Y[adalYlagfk]jna[]k]&_&$\a_alYddgqYdlq$hjgeglagfkYf\j][]ahlaf_!$Yf\egkl
intend to deliver this within two years.
B. Opportunities beyond payment
Over 80% of respondents believe banks can support targeted digital merchant
promotions using customer data in addition to their traditional payment services
role; however, one in eight thinks that banks should stick to providing only payment
Yf\fYf[]k]jna[]kafKeYjl;gee]j[]&
C. Challenges to strategy delivery
HYjla[ahYflka\]fla]\l`j]]eYaf[`Ydd]f_]klg\]dan]jqg^KeYjl;gee]j[]
strategies:
1. Overcoming conservative internal cultures
2. K]d][laf_l`]Z]klkgdmlagfo`]fl`]j]akfg[d]Yjoaff]jYf\^jYm\'\YlY
security risks are a key concern
3. Ensuring regulators are kept up to speed
D. Skill and capability gapsMost participants also need to address capability and skills gaps most notably in
distribution, mobile app development and in social media.
02
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
22/40
20
Smart Commerce
Banks battle for customers at the frontline of digital retail
Egklj]khgf\]flkoYfllgZ]YKeYjl;gee]j[]
kgdmlagfhjgna\]jg^^]jaf_afl]_jYl]\kgdmlagfk
incorporating both payments and broader purchasing
^Y[adalYlagfk]jna[]k]&_&$\a_alYddgqYdlq$hjgeglagfk
and receipting), and most intend to deliver this within
two years.
Which strategy option shown below is the closest match to yourSmart Commerce strategy?
Smart Commerce solutions provider
Smart Commerce payment provider
Smart Commerce sales promoter
Smart Commerce enabler
Base: Financial services' answering (32)
62%
16%
3%
19%
D
C
B
A
Smart Commerce solution provider
Develop integrated Smart Commerce
solution incorporating e.g., payment,
loyalty, promotion and service
Smart Commerce payment provider
Provide your own digital payment
solution to your customers
Smart Commerce sales promoter
Provide targeted marketing and
loyalty services to your customers,
leveraging digital channels
Smart Commerce enabler
Enable your customers to use digital
payment and Smart Commercesolutions provided by others
Limited participation
D
C
B
A
Extensive participation
Nearly two-thirds of respondents have ambitious aims to be a Smart Commerce
solution provider and in short timescales.
Section 02 Banks responses
A. Strategic ambitions and drivers
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
23/40
Smart Commerce
Banks battle for customers at the frontline of digital retail
21
afYf[aYdk]jna[]kYfko]jaf_+)!
35%
It has already happened 23%
29%
10%
3%
87%indicated that theirsolutions would bein market within twoyears, with a majority
of these intending todeliver within a year.
Nearly two-thirdsof respondents haveambitious aims to beYKeYjl;gee]j[]kgdmlagfhjgna\]jYf\in short timescales.
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
24/40
22
Smart Commerce
Banks battle for customers at the frontline of digital retail
Respondents Smart Commerce ambitions were motivated principally by enhancing
customer relationships and payment revenue.
The commercial drivers behind these ambitions were explored in our questions on the nature
g^l`]KeYjl;gee]j[]ghhgjlmfalq^gjj]khgf\]flkgj_YfarYlagfk&L`]egklhghmdYj
Yfko]jaf\a[Yl]kl`Yl`Yd^g^j]khgf\]flkk]]l`]ghhgjlmfalqafKeYjl;gee]j[]oal`af
the defensive commercial context of retaining and improving customer relationships.
J]khgf\]flkZgl`oal`afYf\gmlka\]g^ljY\alagfYdfYf[aYdk]jna[]kj][g_far]\ZYfck
as possessing a key asset in customer relationships and customer data with a very broad
view of their customers purchasing behavior. Many banks therefore see the opportunityin leveraging this data to increase customer loyalty and retain existing business revenues
by maintaining relevance to customers through improved customer experiences and
differentiated propositions. The customer experience examples mentioned by respondents
arise from the view that banks could offer more to customers, particularly in the post-
hmj[`Yk]K]jna[]klY_]g^l`][gee]j[]da^][q[d]&=pYehd]ke]flagf]\o]j]\a_alYd
receipting and tools to help consumers understand where they are spending their money.
O]Yj]]plj]e]dq\YlYja[`Zmlo]eYc]hggjmk]g^al&L`]ghhgjlmfalqakafegj]]^[a]fl
and effective use of our data to provide a truly differentiated offer in terms of value to
the customer. For example, if someone is about to spend 300 we could give them real-
time data that would tell them whether they can afford it, or whether they could afford it
but be in real trouble next week. We can then give customers options in terms of purchasing,
purchasing with an advance, etc. Customers have never been less trusting of retail banks
but never in more need of bank advice.
Retail Bank (Europe)
We have a fantastic advantage today if we wake up and do something. With balance sheet,
trust, distribution and global scale, we have a great opportunity to build the future for
digital payments.
Global Credit Card Provider (Europe)
Section 02 Banks responses
A. Strategic ambitions and drivers
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
25/40
23
Smart Commerce
Banks battle for customers at the frontline of digital retail
Nearly a third of interviewees were seeking to gain or maintain payment revenues. While
digital payment providers are certainly targeting the payment revenues of the banks and
[Yj\af\mkljq$ZYfckl`]ek]dn]keYafdqk]]l`]hYqe]flkghhgjlmfalqafKeYjl;gee]j[]
gflog^jgflk2jkl$eYaflYafaf_]paklaf_j]n]fm]klj]YekZq\]dan]jaf_Yegj]k]Yed]kk
and enhanced payment solution, and second, growing the use of lower-cost and more
k[YdYZd]KeYjl;gee]j[]hYqe]flkgdmlagfkYll`]]ph]fk]g^[Yk`&
What do you see as the opportunities arising from Smart Commercefor organizations such as yours?
Developing differentiatedpropositions
Base: Financial services' answering(33)
32%
29%
24%
18%
Retaining and expandingrelationships with customers
Gaining/maintainingpayment revenue
Providing supporting servicesand technology
Delighting customers throughimproved experience
Extending alongthe value chain
50%
32%
Respondents could select up to three answers
Nearly a third ofinterviewees wereseeking to gain ormaintain paymentrevenues.
We have a fantasticadvantage today ifwe wake up and dosomething. Withbalance sheet, trust,distribution and globalscale, we have a great
opportunity to buildthe future for digitalhYqe]flk&
Global Credit CardProvider (Europe)
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
26/40
24
Smart Commerce
Banks battle for customers at the frontline of digital retail
Over 80% of respondents believe banks can support
targeted digital merchant promotions using customer
data in addition to their traditional payment services role;
however, one in eight thinks that banks should stick
lghjgna\af_gfdqhYqe]flYf\fYf[]k]jna[]kaf
KeYjl;gee]j[]&
Beyond Purchase, which of the other three elements of theSmart Commerce value chain below can banks participate in?
The Smart Commerce value chain
Promote
Manage customer data
Design promotions
af[&j]oYj\'dgqYdlq
programs)
Target promotions
;geemfa[Yl]promotions
Redeem promotions
Service
Measure satisfaction
Provide support
Offer additional
services
Purchase
;Yhlmj]gj\]j
Provide payment
Hjgna\]fYf[]
Select
Supply product
information
Display product
Product trial
and testing
n/a83% 33% 47%
:Yk]2>afYf[aYdk]jna[]kYfko]jaf_+(!Respondents could select up to three answers
Eighty-three percent of respondents saw potential for banks to go beyond the
Hmj[`Yk]klY_]g^l`]nYdm][`Yaflgg^^]jk]jna[]kafKeYjl;gee]j[]hjgeglagf$
Ydl`gm_`j]dYlan]dq^]oY[lmYddq]phj]kk]\l`akYkYkh][a[ghhgjlmfalq^gjl`]ek]dn]k&
Once again, our interviewees recognized the powerful and valuable data that banks
`Yn]Yll`]ajf_]jlahk&
Section 02 Banks responses
B. Opportunities beyond payment
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
27/40
25
Smart Commerce
Banks battle for customers at the frontline of digital retail
however, one in eightthinks that banks shouldstick to providing onlyhYqe]flYf\fYf[]services.
The detail of responses from interviewees focused on developing end-to-end solutions
shows the desire to control customer data and the opportunities respondents believe may
exist to attract new customers and generate new revenue through differentiated offerings.
A new wave of promotions that use consumers bank payment transaction data in a more
intelligent and targeted manner was seen by many respondents as the most likely route
for banks to follow. This compares to the limited and imprecise nature of much existing
digital promotion, which is based on location or the purchasing history of a customer with
just a single merchant.
We plan to be very active. We want payment mechanisms put into digital wallet alongwith credit cards, promotions that create loyalty, rewards strategies that compound
savings giving customers meaningful discounts on some purchases.
Retail Bank (Americas)
Banks have an opportunity in the way they operate to use data to drive promotions.
However, they will need alliances to add value in other elements of the value chain.
Digital Payment Services Provider (Europe)
Assuming the current account remains the key processing hub then banks have a role to
play in promotion, but they need to move quickly to maintain their relevance.
Technology (Europe)
However, this was not a universally held view, with some respondents expressing concern
about banks participating in areas in which they have no experience and which may end
up damaging their reputation and brand. Others pointed out that while banks may want
to participate in all areas of the value chain, they doubted banks had the skill sets
f][]kkYjqlgY[`a]n]l`akdg^lqYeZalagfoal`dalld]lgY\\afl`]Hjgegl]Yf\K]d][l
k][lagfkg^l`]nYdm][`Yafaf[gehYjakgflgkh][aYdaklk&;j]\aZadalqaff]oYj]YkoYkYdkg
seen as an issue for banks to overcome when participating outside of the payments
sphere. In all, 12% of respondents suggested that banks should remain solely in the
Hmj[`Yk]klY_]g^l`]nYdm][`Yaf&
Banks are not the organizations to help consumers select and choose which productsto buy.
Retail Bank (Americas)
More than
80%of respondents believe
banks can supporttargeted digitalmerchant promotions
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
28/40
26
Smart Commerce
Banks battle for customers at the frontline of digital retail
HYjla[ahYflka\]fla]\l`j]]eYaf[`Ydd]f_]klg\]dan]jq
g^KeYjl;gee]j[]kljYl]_a]k2
1. Overcoming conservative internal cultures
2. Selecting the best solution when there is no clear winner and fraud/data security
risks are a key concern
3. Ensuring regulators are kept up-to-speed
Most banks need to overcome a conservative culture, which nearly two-thirds say does
not support rapid innovation and change and nearly one-third feels is concerned about
the cannibalization of other services.
What are the key challenges you face in delivering yourSmart Commerce strategy?
For banks and credit card processors (and even one or two of the digital payment providers)
l`]\a^[mdlqg^[j]Ylaf_Y[mdlmj]kmhhgjlan]lgjYha\affgnYlagfYf\\]n]dghe]flakk]]f
ZqeYfq.*!YkYc]q[gfkljYaflgfKeYjl;gee]j[]hjg_j]kk&Oal`l`]Zmj\]fg^
legacy systems, are many banks even capable of the overhaul necessary to deliver the more
accelerated new product development that consumers now demand? Our respondents
[gf[]\]Yegj]]flj]hj]f]mjaYd[mdlmj]j]hj]k]flkYka_fa[Yfl[`Yf_]afYhhjgY[`^gj
organizations better known for robust and lengthy testing processes, and for building
bespoke in-house technology rather than buying bolt-on solutions. This conservative culture
Ydkgf\kYfgl`]j][`gafl`]*1g^j]khgf\]flk^gjo`ge[gf[]jfYZgml[YffaZYdarYlagf
of existing banking payment products is seen as another potential roadblock.
Designing from the perspectiveof the merchant and consumer
Base: Financial services' respondents (34)
32%
32%
29%
24%
Creating a culture of rapidinnovation and development
K]d][laf_kgdmlagfkoal ]fgm_ ]paZadalqlgmaintain technical and customer relevance
Gaining the internal share of voice and
afn]kle]fl gjl ]ghhgjlmfalqafl ][gfl]plg gl ]jeYbgjaf\mkljq[`Ydd]f_]k Y[]\
9[[]hlaf_l Ylf]ok]jna[]keYq[YffaZYdar][mjj]flk]jna[]k
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
29/40
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
30/40
28
Smart Commerce
Banks battle for customers at the frontline of digital retail
What are the key operational risks that Smart Commerce providerswill have to manage in order to succeed?
L`]c]qgh]jYlagfYdjakcl`YlKeYjl;gee]j[]kgdmlagfhjgna\]jk`Yn]lgeYfY_]
regards the security of customer data in an environment where new devices and
participants will become part of the commerce ecosystem. Two-thirds mentioned fraud
YkYc]qgh]jYlagfYd[gf[]jf$-1\YlYk][mjalqYf\+0egZad]Yf\\a_alYdl][`fgdg_q
security the top three responses to this question.
O`ad]eYfqfYf[aYdk]jna[]khjgna\]jk`Yn]jgZmkld]_Y[qkqkl]ekYf\hjg[]kk]k
to help prevent and manage fraud risk, our respondents expressed concerns that thehjgda^]jYlagfg^kgdmlagfkgff]oYf\dYj_]dqmfl]kl]\hdYl^gjeke]YfkKeYjl;gee]j[]
is vulnerable to fraud.
According to our survey, these concerns are compounded by the potential scale and
\]hl`g^[mklge]j\YlYl`YlYj]dac]dqlgZ]afngdn]\afbgaf]\%mhKeYjl;gee]j[]
solutions and by the sheer number of parties likely to be involved in a single customer
purchase journey.
9fmeZ]jg^fYf[aYdk]jna[]kj]khgf\]flkYdkg]phj]kk]\[gf[]jfkl`Ylf]okgdmlagfk
providers are operating with less stringent risk models that will put the entire Smart
;gee]j[]afalaYlan]ZY[cq]Yjka^YeYbgjk][mjalqgj^jYm\Zj]Y[`g[[mjk&L`]j]o]j]
differing views expressed about whether banks would ultimately suffer reputational
damage in the event of a security breach outside of their control.
Mobile/digital security risks
Customer permissions risks
Payment process risks
Brand-contamination risks
Base: Financial services' respondents (34)
38%
Data security risks 59%
Fraud risks 68%
32%
26%
24%
Respondents could select up to three answers
Section 02 Banks responses
C. Challenges to strategy delivery
Security and fraud arethe biggest issues.Data is just not goingto be secure thingsare not going to be
private and theresnot much you cando about it. In thatcontext customerpermissions maywell end up becomingn]jqka_fa[Yfl&
Retail Bank
(Europe)
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
31/40
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
32/40
30
Smart Commerce
Banks battle for customers at the frontline of digital retail
Section 02 Banks responses
C. Challenges to strategy delivery
Historically we have talked to ourselves when developing, rather than looking at the
merchant and consumer. There has also been a tendency to focus on protecting the
revenues we have. Looking forward, we have to decide who we are designing for is it a
52-year-old, or his 20-year-old daughter?
Card Processor (Americas)
We want to design solutions from the perspective of the merchant and consumer
but often get caught up in internal way of thinking.
Retail Bank (Americas)
9[[gj\af_lggmjj]khgf\]flk$l`]dY[cg^nakaZadalqYklgl`]Z]klYhhjgY[ eYc]k
kljYl]_a[hdYffaf_\a^[mdl$mf\]jhaffaf_l`]aehgjlYf[]g^j]lYafaf_]paZadalq&
One in four agreed that they still do not have a clear M&A strategy to support their
KeYjl;gee]j[]YeZalagfk&O`ad]Zmqaf_f]ol][`fgdg_qoYk^Yngj]\ZqgfdqY^]o
respondents, many of those that did believe acquisitions or commercial partnerships
`Y\Yjgd]lghdYqafddaf_kcaddk]l_Yhkj][g_far]alYkYoYqg^^YklljY[caf_l`]aj
KeYjl;gee]j[]kljYl]_q&
In contrast, some respondents saw acquisitions as a high-risk strategy, though it was
unclear from responses whether that view held consistently across hardware and software,
Y[jgkkY[imakalagfkg^Yddkar]kgjYlYddhgaflkafl`]nYdm][`Yaf&:YfckYdkg]phj]kk]\
concerns about committing to a single technology and the importance of retaining
l][`fgdg_q]paZadalq&L`]afl]flagflghYjlf]joal`l`aj\%hYjlql][`fgdg_qhjgna\]jk
lgk]]o`YlogjckoYkY[geegfj]khgfk]&
The answer is not clear today. Other banks want to be a leader in this space, but we are
still unsure on how to address the issue. We want to be a smart follower to leverage what
comes up and keep our options open.
Retail Bank (Europe)
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
33/40
31
Smart Commerce
Banks battle for customers at the frontline of digital retail
Others feel they must also get regulators ready for Smart Commerce.
In some areas, regulators are seen by respondents to be somewhat in denial at the large-
scale adoption of new payment processes that could easily fall outside of the existing
regulatory framework. Some banks articulated the view that the newer payment solutions
are already operating beyond the remit of a single regulator. However, banks recognize
the role they have to play in helping to educate regulators and in shaping regulation that
akl^gjhmjhgk]afl`]ogjd\g^KeYjl;gee]j[]&
Within Europe, there is some debate over the need for single, cross-border regulations
lgj]hdY[]YhYl[`ogjcYhhjgY[`g^\a^^]jaf_fYlagfYdj]_mdYlagfkYkKeYjl;gee]j[]develops. Will a standard emerge led by a few key industry players?
The current regulatory mindset is based on a world where the bank owns the payment
system, but Smart Commerce changes this and regulators are not ready for this.
Retail Bank (Americas)
There will have to be changes to recognize that new organizations are entering
l`]kmhhdq[`Yafl`Yl\gflll`]]paklaf_\]falagfkg^j]_mdYl]\jekZq]paklaf_
authorities, for example, a company that maintains electronic/digital wallets; does
alll`]\]falagfg YfYf[aYdafklalmlagfgjY\]hgkallYc]j7
Retail Bank (Europe)
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
34/40
32
Smart Commerce
Banks battle for customers at the frontline of digital retail
Most participants also need to address gaps in skills
and capabilities notably in distribution, mobile app
development and in social media.
L`]af\ana\mYdj]khgf\]flko]j]Yddafngdn]\afl`]KeYjl;gee]j[]nYdm][`YaflgY
greater or lesser degree but had varied roles within their organizations. Even accounting
for these differences, our bank participants expressed needs for a broad range of additional
[YhYZadala]klg\]dan]jl`]ajafl]f\]\KeYjl;gee]j[]kljYl]_a]k&L`]eYbgjalq`a_`da_`l]\
two or three capabilities where they believed their organization needed to add to existingresource and skill sets.
Oal`afl`]ZjgY\[Yl]_gjqg^F]okcaddk$egZad]hjg\m[lYf\Yhhda[Ylagfkcaddko]j]Y
particular area of need cited. Meanwhile, enhanced distribution capabilities to retailers
Yf\Y\\alagfYdhjgeglagfkcaddk$hYjla[mdYjdqafl`]Yj]Yg^kg[aYde]\aY$o]j]a\]fla]\Zq
`Yd gjegj]g^gmjj]khgf\]flk&Hj]\a[lYZdq$Ykegklj]khgf\]flkYj]]klYZdak`]\fYf[aYd
k]jna[]khdYq]jk$^]o]j^]dll`Yll`]ajfYf[aYdeYfY_]e]fl[YhYZadala]kf]]\]\
Ym_e]flYlagflgkmhhgjll`]ajKeYjl;gee]j[]kljYl]_a]k&
Where interviewees planned to augment skills, most felt that recruitment was the preferred
approach over training or acquisition of an established business. The change required for
KeYjl;gee]j[]l`afcaf_oYk$^gjeYfq$lgg_j]Yllg]ph][l]paklaf_klY^^lgZ]YZd]lg
Y\Yhlafk`gjl]fgm_`lae]k[Yd]k&:jaf_af_aff]oklY^^oYkk]]fYkY_gg\[YlYdqkl^gjl`ak[`Yf_]&:mlY[imajaf_Yo`gd]Zmkaf]kk]&_&$YegZad]kg^loYj]\]n]dghe]flZmkaf]kk
was generally considered too much of a risk, and most wanted to manage the transition
from using third-party support to providing this internally more gradually.
Our decision on which route to take to address capability shortfalls depends on the
urgency. Mostly we like to build in-house, but if its urgent and its available we shouldnt
be afraid to buy.
Retail Bank (Americas)
60%of respondentshighlighted a needto bolster distributionto deliver their Smart;gee]j[]kljYl]_q&
Section 02 Banks responses
D. Skill and capability gaps
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
35/40
33
Smart Commerce
Banks battle for customers at the frontline of digital retail
O`a[`g^l`]n][gehd]e]flYjq[YhYZadalqlqh]kk`gofZ]dgo\g]k your organization need to deliver its Smart Commerce strategy?
:Yk]2>afYf[aYdk]jna[]kj]khgf\]flk+,!
Multiple-choice question whereby respondents selected all the categories that applied to them.
New technology resources
For example:
Handsets
Mobile network
Mobile software
Applications
EgZad]'\a_alYdjakceYfY_]e]fl
technology
Data warehouse and analysis
F]ofYf[aYdeYfY_]e]fl[YhYZadala]k
For example:
;mklge]ja\]fla[YlagfYf\n]ja[Ylagf
9ml`gjarYlagf'k]lld]e]fl
;j]\alYf\^jYm\jakcYkk]kke]fl
Funding
Payment
Deposit taking
New distribution resources
For example:
Mobile customer bases
Retailer relationships
Payment acceptance capability
(POS and remote)
;gfkme]j'j]lYad]jZjYf\k
New skills and capabilities
For example:
E9'hYjlf]jk`ah\]n]dghe]fl
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
36/40
34
Smart Commerce
Banks battle for customers at the frontline of digital retail
:gl ZYfckYf\j]lYad]jk Yn]o]dd%]klYZdak`]\\akljaZmlagfklj]f_l`k$q]l.(g^j]khgf\]flk
`a_`da_`l]\Yf]]\lgZgdkl]j\akljaZmlagflg\]dan]jl`]ajKeYjl;gee]j[]kljYl]_q&
Partnership was seen as the preferred route by banks seeking new distribution, focused
as they are on enabling merchants to accept their payment and other solutions. Such
partnership may take the form of a straightforward commercial arrangement to access
a retail client base through e.g., a promotions management company rather than a
more complex partnership or joint venture, which might be valuable if joint development
were required.
F]Yjdqlog%l`aj\kg^gmjj]khgf\]flkYdkga\]fla]\Yf]]\^gjf]ol][`fgdg_qkhYffaf_
wallets, payment services, data warehousing and analytics software and mobile apps for
ZYfcaf_$h]jkgfYdfYf[]eYfY_]e]flYf\e]j[`Yflhjgeglagfkmhhgjl&9^YajfmeZ]j
suggested that they would expect to use the technology built by third parties (e.g., the
card schemes digital wallets) to support their strategies but some banks still plan to build
such solutions internally. Where respondents expanded on their intentions to build new
technologies in-house, many did so in reference to the culture of their organization and
l`]\]kaj]lgZmad\Yf\gof]n]jql`af_&
Segmentation, customer modeling, marketing (technology) because theyre available
and we need them quickly and Im not too worried about building in-house.
Retail Bank (Europe)
Section 02 Banks responses
D. Skill and capability gaps
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
37/40
35
Smart Commerce
Banks battle for customers at the frontline of digital retail
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
38/40
36
Smart Commerce
Banks battle for customers at the frontline of digital retail
This is an exciting time to be involved in consumer
commerce. However, the speed of change and uncertainty
g^KeYjl;gee]j[]Ydkgd]Y\klgka_fa[Yfl[gf[]jfk&
One of the most surprising insights from this study was
the real and widespread fear articulated by established
gj_YfarYlagfkl`YlKeYjl;gee]j[]\]n]dghe]floadd
j]kmdlafafl]je]\aYlagf$oal`hgl]flaYddqka_fa[Yflconsequences for banks that go well beyond payment
service revenues.
L`]k]^]YjkYj]o]dd^gmf\]\&L`]f]ohdYq]jkafl`]KeYjl;gee]j[]nYdm][`YafYj]
already demonstrating aggressive business models that are vastly different from the
traditional payment and banking model. These models are based on rich data on consumer
transactions that cross-subsidize payment services by promoting and sharing in merchant
Yf\eYfm^Y[lmj]jhjglhggdkoal`hgl]flaYdlg^mjl`]j\akhdY[]ZYfckljY\alagfYdhdY[]af
the purchasing experience.
That so many of the respondents see themselves as potential providers of broad and
afl]_jYl]\KeYjl;gee]j[]kgdmlagfkak$o]Z]da]n]$YfY[cfgod]\_e]flg^l`akl`j]YlYf\addmkljYl]k gjmk`gok]jagmkdql`akakkm]akZ]af_lYc]faffYf[aYdk]jna[]afklalmlagfk
Y[jgkkl`]_dgZ]&Af\]]\$KeYjl;gee]j[]akgf]g^l`]^]oYj]Ykg^ka_fa[Yfl
discretionary investment still remaining in many banks in an environment of heightened
regulatory pressure and general cost reduction.
L`]\a^^]jaf_hY[]g^KeYjl;gee]j[]Y\ghlagf_]g_jYh`a[Yddqakq]lYfgl`]jkljYl]_a[
challenge facing banks and a variety of strategies and partnerships are likely to unfold
against this backdrop. Larger banks may be able to leverage their distribution reach in
hYjlf]jk`ahoal`keYdd]jjekl`Yl`Yn]YlljY[lan]KeYjl;gee]j[]l][`fgdg_qZmlfg
[d]YjhYl`lgeYjc]l&E]Yfo`ad]$d]kkY__j]kkan]Yf\d]kkY_ad]fYf[aYdk]jna[]k_jgmhk
k`gmd\k]]l`]\]^]fkan]nYdm]af\]n]dghaf_KeYjl;gee]j[]k]jna[]klgeYaflYaf
competitive parity with payment intermediators (both new entrants and other banks).
AfYdd[Yk]k$`go]n]j$o]Z]da]n]l`YlYemdla%kljYf\KeYjl;gee]j[]kljYl]_qakoak]o`ad]ka_fa[Yflmf[]jlYaflqafYfmeZ]jg^\ae]fkagfkj]eYafk&L`ak[gmd\e]Yfjmffaf_
for a period with parallel or competing solutions.
LgeYaflYafj]d]nYf[]lgl`]aj[mklge]jk$ZYfckYf\hYqe]flhjgna\]jkoadd`Yn]lgf\
oYqkg Y[[geeg\Ylaf_l`]jYha\\]n]dghe]fllae]k[Yd]k\]eYf\]\ZqKeYjl;gee]j[]
within organizations used to a much slower pace of change. They will also need to think
aff]ooYqkYZgml`gol`]ajKeYjl;gee]j[]k]jna[]k[YfY\\nYdm]afl`]ZjgY\]j
context of consumers lives and merchants businesses as well as addressing the new
fraud and data security risks they present.
Our views and recommendations^gjfYf[aYdk]jna[]kafklalmlagfk
:Yfck^Y[]kge]k]jagmkthreats and the riskof gradually beingdiminished to utilitystatus. However,if they make the right
choices, banks couldf\l`]ek]dn]kenjoying a continuedand expanding role atthe forefront of theKeYjl;gee]j[]revolution.
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
39/40
Smart Commerce
Banks battle for customers at the frontline of digital retail
37
For many this will involve relearning the merchant business with which many banks have
dgkl[gff][lagf&Af\]]\$e]j[`YflkYj]l`]f]onYdm]hggd^gjKeYjl;gee]j[]Yf\Yj]
innovating on their own account with services including payment. Larger merchants
(particularly online but also in physical retail) are already offering proprietary payment
services, which intermediate banks and threaten to go further. Smaller merchants will
YdkgoYfllgmk]l`]hgo]jg^KeYjl;gee]j[]kgdmlagfkhjgna\]\Zql`aj\hYjla]klg
enable them to punch above their weight.
With so much in this space still to be determined, we believe that the next few years hold
l`]hjgeak]g^Yj]Ydkl]h%[`Yf_]af[gfkme]j[gee]j[]&:Yfck Y[]kge]k]jagmkl`j]Ylk
and the risk of gradually being diminished to utility status. However, if they make the right
[`ga[]k$ZYfck[gmd\f\l`]ek]dn]k]fbgqaf_Y[gflafm]\Yf\]phYf\af_jgd]Yll`]
^gj]^jgflg^l`]KeYjl;gee]j[]j]ngdmlagf&
-
7/27/2019 EY-Smart Commerce Battling for Customers in Digital Retail
40/40
Ernst & Young
Assurance | Tax | Transactions | Advisory
About Ernst & Young
Ernst & Young is a global leader in assurance,
tax, transaction and advisory services.
Worldwide, our 167,000 people are united
by our shared values and an unwaveringcommitment to quality. We make a difference
by helping our people, our clients and our
wider communities achieve their potential.
Ernst & Young refers to the global organization
g^e]eZ]jjekg^=jfklQgmf_?dgZYd
Limited, each of which is a separate legal entity.
=jfklQgmf_?dgZYdDaeal]\$YMC[gehYfq
limited by guarantee, does not provide services
to clients. For more information about our
organization, please visit www.ey.com.
About Ernst & Youngs Global Banking
& Capital Markets Center
In todays globally competitive and highlyregulated environment, managing risk effectively
while satisfying an array of divergent stakeholders
akYc]q_gYdg^ZYfckYf\k][mjala]kjek&
=jfklQgmf_k?dgZYd:Yfcaf_;YhalYd
EYjc]lk;]fl]jZjaf_klg_]l`]jYogjd\oa\]
team of professionals to help you achieve
your potential a team with deep technical
experience in providing assurance, tax,
ljYfkY[lagfYf\Y\nakgjqk]jna[]k&L`];]fl]j
works to anticipate market trends, identify the
implications and develop points of view on
relevant sector issues.
MdlaeYl]dqal]fYZd]kmklg`]dhqgme]]lqgmj
goals and compete more effectively. Its howErnst & Young makes a difference.
*()+=Q?EDaeal]\&
All Rights Reserved.
=Q?fg&=C(),(
In line with Ernst & Youngs commitment to minimize
its impact on the environment, this document has
been printed on paper with a high recycled content.
This publication contains information in summary form and is
therefore intended for general guidance only. It is not intended
to be a substitute for detailed research or the exercise of
hjg^]kkagfYdbm\_e]fl&F]al`]j=Q?EDaeal]\fgjYfqgl`]j
member of the global Ernst & Young organization can accept
any responsibility for loss occasioned to any person acting
or refraining from action as a result of any material in this
hmZda[Ylagf&GfYfqkh][a[eYll]j$j]^]j]f[]k`gmd\Z]
made to the appropriate advisor.
The opinions of third parties set out in this publication are not
necessarily the opinions of the global Ernst & Young organization
gjalke]eZ]jjek&Egj]gn]j$l`]qk`gmd\Z]na]o]\afl`]
context of the time they were expressed.
www.ey.com
ED None
ContactsGlobal Financial Services
David Barker
Partner
#,,*(/1-)*((-
Americas Financial Services
Bernhard J. Klein Wassink
Principal
#)*)*//+,.+,
Melanie Henderson
Senior Manager
#)*)*//+)0-/
9kaY%HY[a[>afYf[aYdK]jna[]kRichard Williamson
Partner
#0-**0,.1.1.
EMEIA Financial Services
Tariq Khatri
Partner
#,,*(/1-))+(-
Jon MaleDirector
#,,*(/1-)/((,
Japan Financial Services
Noboru Miura
Partner
#0)++-(+)))-