Frictionless Payments: What do you need to know?
Frictionless payments represent online and offline checkout processes where the obstacles of making a purchase are reduced to a minimum or even non-existent. The ultimate goal is to make the payment process convenient and easy both for the consumer and the merchant. Such efforts increase customer satisfaction and consequently reduce the abandonment of purchases at checkouts and increase revenues.
Frictionless commerce aims at providing buying opportunities consisting of as few steps as possible, using data insights from apps, devices among other sources. This strategy lies in the belief that when a consumer has less time to think about the purchase or payment, it increases the chance of a consumer finalising the transaction.
Side note: Frictionless payments are a complementary tool in lowering the buying barriers for merchants.
To define a payment as frictionless, in general, it should fulfill the following points:
- providing a faster and easier checkout process with fewer steps
- significantly decreasing waiting time
- lessen the cognitive strain of consumers
Examples of frictionless payment methods include e-wallets, contactless card payments, in-app payments, one-click payments, etc.
As mentioned, frictionless payments make the life of the consumer as well as the merchant much easier. There are a number of benefits for both parties. Consumers save time and are provided with greater convenience. By having payment alternatives available, you give the consumer flexibility and the chance of them returning grows.
As the payment process becomes more invisible, the customer focuses less on it and is highly likely to complete the payment and make the purchase. When it comes to offline checkout processes, incorporating frictionless payments reduces the required staff to assist consumers and significantly saves time for both parties.
It is estimated that by 2022, invisible in-store payments technologies will process over $78 billion transactions, according to Juniper Research.
The technology behind Frictionless Payments
NFC and Contactless Payments
The technology that enables contactless payments is called Near Field Communication (NFC). For example, it makes it possible for mobile wallets to connect with POS terminals by physically or virtually emulated HCE chips.
A transaction can be authorised through biometric technology that recognises and identifies a person through fingerprints, facial features, etc.
This technology enables the encrypting of sensitive data (eg. Payment account information), creating a token at its place and reducing time spent on filling in data already provided at an earlier moment.
Security concerns vs Consumer Convenience
As much as consumers require convenience and ease when making payments, data privacy concerns remain a key factor when consumers decide on how to make a transaction. Frictionless payments are often accompanied by doubts about consumer data safety, as businesses strive to provide the ultimate checkout experience.
The landscape of payments is slowly moving to an invisible and frictionless reality. These solutions may soon turn out to be an everyday consumers’ preference. However, on the contrary, distrust remains when it comes to frictionless payments and security concerns. How and to which extent frictionless payments will be incorporated into our day-to-day life is not known yet. What is visible, is the shift towards smart and seamless payment solutions in 2020.