Frictionless payments: how they work and why they matter
You want your customers to find buying from your business as simple as possible. Words like “frictionless” and “seamless” are often used in association with various payment methods. But what does it mean to offer frictionless payments?
Read on to learn about this kind of payment, how it can benefit your business, and why your customers will love it.
What are frictionless payments, and how do they work?
Frictionless payments are a form of online or offline payment with minimal barriers to purchase. They simplify the buying process, reducing shopping cart abandonment, checkout abandonment, and customer churn rates.
There are a few criteria that qualify a payment as frictionless:
- A quick checkout with a few steps involved
- A clear customer experience
- Minimal waiting times
Less cognitive strain for customers
Why are frictionless payments important in modern commerce?
Modern consumers and businesses alike prioritize convenience, security, and flexibility. These must apply whether the purchase is occurring online or in-store. According to Statista, frictionless payments will grow to 8 trillion USD by 2024.
More and more consumers are concerned with an overly long or complicated buying process, which frictionless payments can help you avoid.
The first frictionless payment goes back to the 1950s, becoming more popular since. But there is a more recent reason for their widespread usage: the COVID-19 pandemic. Consumers increasingly adopted payments that didn’t require contact, thanks to the idea of low-touch or no-touch interactions. The demand seems to be here to stay.
What technology is used in frictionless payments?
Frictionless payments are enabled by several different forms of advanced technology, which are described below.
Tokenization is the process of substituting sensitive information with non-sensitive data. When it comes to payments, this could be something like bank account information that is replaced by a unique string of numbers and letters. The numbers can’t be tracked or used to uncover the original data without having specific keys. The keys are held separately from the tokens, which ensures no data is accessed by unauthorized users and provides a higher level of payment security.
NFC (Near-field communication)
NFC technology allows data to be transferred from one device (like a tablet or smartphone) to another device. It enables contactless payments via card or options such as Apple Pay and Google Pay. Also, NFC technology has expanded its reach, with recent advancements enabling in-store direct bank payments.
The working principle is as follows: each device must have a chip containing a particular RFID (radio frequency identification). When placed close together, they create a contactless connection to transfer information.
Mobile and digital wallets
You might have heard “mobile wallet” and “digital wallet” used interchangeably. But here’s the difference: mobile wallets store card details on a device via tokenization, as described above. With a digital wallet, however, any device can be used. The payment information isn’t stored on the device. Instead, it is kept within the store the user purchases from.
Biometric authentication is a way of identifying yourself to allow a purchase to occur. Fingerprints and facial recognition are among these unique identifiers. This technology can unlock a device used to make a purchase or allow a transaction to be put through.
Real-time fraud detection
Quick payments mean there is a need for the fast detection of payment fraud. Banks and other financial institutions increasingly seek solutions such as machine-learning algorithms and a network-level view of transactions to protect their users from fraud.
Examples of frictionless payments
Examples of frictionless payments include mobile wallets, digital wallets, in-app payments, contactless payments, one-click payments, QR code payments, and instant payments.
A mobile wallet allows consumers to leave their physical wallets at home and still make purchases in-store. All transactions can be completed using a smartphone-enabled with the technology to create a contactless payment.
A digital wallet uses a smartphone app to store payment information that can be used to complete a transaction. The purchase may be made in-store or online at businesses that accept this form of payment.
In-app payments are completed via a merchant’s mobile application. Shoppers can stay within the mobile app to purchase, creating a seamless customer experience.
Contactless payments are touch-free, and no cash or card swiping is required. The technology that makes this possible is NFC, which we’ve discussed above.
One-click payments allow customers to pay for a product or service by clicking a single button. By linking their bank account at the time of checkout, all subsequent payments require just one click.
QR code payments
A QR code is scanned with a customer’s mobile phone camera, which can then initiate a payment.
Instant payments are quick money transfers completed in as little as 10 seconds. They can even take place outside of regular business or banking hours. The money travels directly from one bank account to another, reducing friction.
Account-to-account, or A2A, is a form of payment that allows customers to link their bank account once during the checkout process, then complete subsequent payments with ease. Through kevin., you can choose to have A2A payments completed online, in-app, or even in-store with your existing POS equipment.
Benefits of frictionless payments for merchants and consumers
Frictionless payments have many benefits, both for your business and your customers. We discuss the principal advantages below.
A more efficient transaction means your customers don’t have to put in the time and effort that other payment methods might require. Reduced checkout times mean a superior user payment experience.
Improved customer experience, satisfaction, and retention
Customer retention should be a priority for any business. Frictionless payments are one way to ensure seamless payment, making customers more likely to return for future purchases.
Reduced cart abandonment
There are plenty of reasons for abandoned carts. You can eliminate some of these by enabling customers to store their payment information and complete transactions with as few clicks as possible.
Increased payment security
With features like tokenization and encryption, you won’t have to be concerned about fraud or unauthorized transactions using kevin. for frictionless payments.
When customers are satisfied with their payment experience at your business, they’ll likely return. That can mean an advantage over your competitors with a less convenient purchasing process.
The disadvantages of frictionless payments
Just like any form of payment, frictionless payments aren’t without some disadvantages.
Frictionless payments are growing in popularity, but some businesses have been slow to adopt their acceptance. Because of this slow rollout, frictionless payment methods aren’t available everywhere.
Perhaps one of the reasons for slow adoption, there may be a cost to accept frictionless payments if your business isn’t already equipped for them.
Resistance to change
Though the use of cash has been declining over the years, some are still resistant to the use of frictionless payments. But the newer payment methods have increased over time, signaling a growing favorable mindset towards frictionless payments.
Frictionless payments security
Though frictionless payments have many advantages, some people are still concerned about whether they’re truly secure. Thanks to tokenization, however, there is no exposure of the customer’s sensitive data.
A2A payments, like the ones kevin. enables, involve the same level of security as when you log into your bank account. This form of frictionless payment also involves measures such as strong customer authentication (SCA), which reduces the risk of fraud.
The future of frictionless payments
The future of frictionless payments is bright; the value of digital payments is expected to grow annually at a rate of 12.24%. Given the advantages of frictionless payments, particularly when compared to legacy payment systems, it’s no surprise that customers will continue to favor these methods.
Available both online and offline for purchasing, frictionless payments are an essential offering of your payment methods mix. Consumers are typically slow to change payment preferences, but they shifted drastically during the COVID-19 pandemic.
With more and more people adopting frictionless payments, you don’t want your business to be left behind.
How kevin. can help
Customers want frictionless payment options. Frictionless payments offer convenience, security, and speed, giving you a significant competitive advantage. It’s time to embrace this payment method and watch your revenue grow.
Get in touch with the kevin. team today, and let us provide the payment infrastructure that helps you reach your business goals!