Eliminating customer friction is paramount for many organizations as they attempt to stay competitive in the business environment. TechTarget defines frictionless payments, or frictionless commerce as:
“Frictionless commerce is a method of using data from devices, apps and websites to integrate buying opportunities as simply and seamlessly as possible into consumers’ everyday activities and natural environments.”
The international marketing statistic portal, Statista, has projected that frictionless payments will process $3.2 trillion globally this year alone, while a number analysts expects the technology to grow by approximately $500 billion annually until 2021.
This increasingly popular payment method uses smartphone apps, mobile wallets, and contactless cards to replace a traditional checkout experience, thus expediting the time it takes for consumers to complete a purchase.
There are three preeminent forms of frictionless payments:
- Mobile applications, used most notably by ride sharing companies and Amazon in its "Just Walk Out" technology, sync with your credit card or checking account and process payments automatically.
- Mobile Wallets digitally store your credit card, debit card, and rewards card information on your mobile device, allowing you to make purchases without having the physical card present.
- Contactless Cards allow you to wave your credit or debit card near a payment terminal to pay without swiping or using a chip card reader. A benefit to both consumers and merchants, contactless cards process payments substantially faster than EMV technology.
Why We Still Have a Long Way to Go
Despite the excitement around the efficiency of frictionless payments, many consumers still have their doubts about its safety.
According to the Digital Transactions article, A New Report Delivers a Cold Dose of Reality on ‘Frictionless Payments,’ the Paysafe Group surveyed more than 5,000 people in five different countries and asked about their trust in various forms of frictionless payments. More than half of the survey participants claimed they had reservations about these kinds of payments, citing Uber and Lyft. Specifically, participants said they were concerned about maintaining data privacy.
A larger share of survey respondents, 65 percent, explained that they would not purchase any products or services by using home automation technologies like Google Home and Amazon Alexa. In short, consumer confidence still has a long way to go before frictionless payments become the norm.
As a newer form of technology, it’s not surprising that frictionless commerce has a few bugs to work out and consumers to convince. However, we can expect the focus on reducing customer friction to continue as retailers look for differentiators to help them compete for shopping dollars.