Merchants have faced an onslaught of disruptions over the past three years. From the pandemic-induced pivot toward digital commerce to supply chain shortages and economic instability, it has been anything but "business as usual." With these developments, commerce technology decision-makers are under pressure to accommodate a growing list of new business and customer needs. Our Voice of the Enterprise: Customer Experience & Commerce, Merchant Study 2023 provides a detailed update on the strategies, trends and technologies that are top-of-mind for decision-makers as they navigate uncertain times.
Macroeconomic pressures will create no shortage of turbulence for merchants this year as they seek to adapt to changing market conditions and buyer behaviors. Encouragingly, our survey shows that, despite the market challenges, commerce technology decision-makers remain steadfast in delivering on their digital transformation strategies. The through lines in this year's survey results are a strong commitment to creating contextually relevant customer experiences and a deeper focus on modernization and optimization. These themes have multiple intersection points and together have strong tie-ins with the macroeconomic environment. From alternative payment methods being used as a tool to drive personalization and cost optimization to payments systems being integrated with business applications to help build a unified view of the customer, many of merchants' top priorities are interrelated and transcend multiple business functions. For payments and commerce technology vendors, it is important not only to align with these priorities, but also to have a view into the broader business transformations that their products and services could support.
Summary of findings
Payments and fraud
The business impact of payments is in focus, driving increased emphasis on modernization. The majority of respondents agree that payments are critical to the success of their organization's customer experience (69%), operational performance (60%) and top-line revenue growth (58%). For most merchants, driving results across these areas requires payments infrastructure modernization — something that two-thirds of respondents believe will be highly transformative for the business over the next three years. This is increasingly factoring into vendor selection, with 60% of respondents indicating that "quality of tech platform" (e.g., use of modern APIs, cloud) is highly important when selecting a payment processing partner.
Macroeconomic pressures have put a spotlight on payments optimization. Forty-five percent of respondents indicate that their organization will be increasing focus on payments optimization strategies over the next 12 months in response to current economic conditions. Additional high-priority strategies for dealing with the economic environment include automating fraud prevention processes (39%) and incentivizing customers to user lower-cost payment methods (38%). Given that alternative payment methods have an important role to play in optimizing both top- and bottom-line performance, it is no surprise that increasing acceptance of APMs again ranks as the most important payments initiative that respondents' businesses are pursuing this year, cited by 48% of respondents.
Large merchants, in pursuit of flexibility, prefer to work with multiple payment providers. More than three in five (63%) respondents from organizations with over 1,000 employees prefer to work with multiple providers to process payments, compared with 38% of those from organizations with fewer than 1,000 employees. As organizations become larger and more complex, we find they often look to orchestrate multiple processors for a variety of reasons, including to optimize costs and authorization rates, and to effectively serve multiple geographic markets. This can be summarized as a desire for flexibility, which ranks as the top business driver supporting this approach, cited by 71% of large merchants.
Embedded payments are increasingly in demand. Three in five respondents strongly agree that having payment processing integrated with their business systems (e.g., CRM) is a priority for their organization. This can create a variety of advantages, including improvements in business intelligence, reconciliation and customer experience. Aside from building out robust enterprise software partner ecosystems, payment processors should also be considering how they can leverage software partners for distribution. Tellingly, payment processing ranks as the top service that merchants could envision using from their e-commerce platform (59%), followed by fraud prevention (50%) and loyalty programs (48%). These results signal a growing opportunity for SaaS platforms to make deeper inroads into financial services.
Merchant BNPL adoption remains strong, although some of the benefits may be softening. Thirty-seven percent of respondents indicate that their organization currently offers a buy now, pay later (BNPL) option at checkout, and another 38% are in the discovery phase or are planning to adopt in the next 12 months. Results are promising, with 68% of those currently offering BNPL indicating it has led to an increase in purchase size and 67% saying it has helped to attract new customers. However, both of these areas are down roughly seven percentage points compared with our 2022 survey — a possible result of both economic conditions and saturation in the BNPL provider competitive landscape. There is still a role for multiple types of BNPL providers to play, however, with preference split across bank-branded (33%), fintech-branded (32%), merchant-branded (20%) and co-branded (13%) options.
Fraud growth has cooled off since the pandemic, but remains a widespread issue. As the pandemic rapidly shifted sales volume into digital channels, 37% of respondents in our 2021 survey cited a significant year-over-year increase in fraudulent online transaction volume. That figure dialed back to 29% in our 2022 survey and further reduced to 22% in our most recent fielding. While the declining growth rate in fraud is an encouraging trend, the majority (58%) of respondents are still reporting an increase in fraud volume overall, with their top concerns including fraud losses (48%), customer experience impact (44%) and fraud management costs (43%). While messaging about the customer experience will remain important, concerns pertaining to fraud losses have increased seven percentage points since our 2022 survey — likely a factor of growing bottom-line pressure.
Merchants want a fraud prevention partner that can address fraud holistically. After payment fraud, respondents cite friendly fraud and policy abuse as the top areas where attacks are on the rise. Given the diversification of fraud threats in recent years, the ability to protect against multiple fraud types ranks as the top benefit or feature that respondents say their organization looks for when selecting a fraud prevention partner, cited by 45% of respondents. Fraud prevention vendors with "journey-wide" propositions should be well-positioned to cater to this need.
Commerce and digital experiences
Despite economic challenges, merchants plan to increase spending on commerce technology with an emphasis on digital customer experiences. Nearly three in five (59%) respondents indicate that their overall commerce technology spending budget in 2023 will be greater than in 2022, while 38% indicate it will remain the same. Even with the pandemic in the rearview mirror, digital channels remain a major beneficiary of commerce investment, with 79% of respondents indicating they are prioritizing investments in e-commerce customer experiences equally to in-person experiences (40%) or ahead of in-person experiences (39%).
Merchants are increasingly focused on achieving a unified view of the customer. Sixty-seven percent of respondents indicate they are placing a high priority on integrating sales channels (e.g., in-store and online) to obtain a unified view of the customer, up seven percentage points from 2022. In line with this added emphasis, improving customer fulfillment options (40%) and optimizing the customer journey across multiple channels (37%) rank as two of the top three commerce initiatives that respondents' organizations are prioritizing this year.
While still early, metaverse strategy development is guided by marketing and CX initiatives. Roughly half (49%) of respondents indicate that the metaverse will be highly strategic in meeting their organizations' long-term e-commerce needs. However, just 30% say their organization has developed a formal strategy for embracing it. An additional 58% are in the evaluation or consideration stages, underscoring the formative state of this trend. Among those with a metaverse strategy or considering one, improving brand awareness (31%) and enhancing customer engagement (29%) are the top two goals for embracing the metaverse.
Generative AI has become part of the conversation for a majority of merchants. More than half (54%) of respondents indicate that they expect generative AI to be highly transformative to their businesses over the next three years. Our report Top generative AI use cases across employee, customer experiences highlights an array of areas in which this technology could change the landscape of company operations, including human resources actions such as candidate matching, marketing efforts such as copywriting, and customer service in the form of smarter chatbots.
Influencer marketing is expected to receive a boost in the coming year, highlighting a larger shift in regard to social media strategies and the greater creator economy. Brands are rapidly adjusting their social media tactics to include more user-generated content and develop more authentic campaigns. Eighty-seven percent of respondents expect their organizations to increase (37%) or maintain (50%) influencer marketing spending over the next year. Platforms such as TikTok and Instagram have built strong creator brands that are capturing significant consumer attention in ways that traditional channels are increasingly unable to.
Spending on advertising for connected TV remains strong. More than half (53%) of respondents indicate that their organization will keep CTV advertising spending at current levels, and another 34% expect a rise in spending. Only 10% expect a decrease in category spending. Connected and over-the-top television have dethroned traditional TV in recent years due to cord-cutting and widespread adoption of streaming services. Providers are still learning how to optimize their platforms, especially with the sheer number of services on the market. Reaching customers at home is a vital messaging strategy that has long existed through TV. Right now, the industry is going through a molt.