Digital payments that aim to reduce “friction,” and are aimed at making financial transactions quick and easy for customers, are rapidly gaining popularity.
The number of cashless transactions will increase nearly 50% globally, from 1.5 trillion in 2024 to 2.3 trillion in 2027, according to data from Statistica.
It’s easy to see why, said Brian Shniderman, senior managing director and head of the North American payments practice at Accenture.
“Frictionless payments are a game-changer for improving efficiency, customer satisfaction and staying competitive. They help cut down on transaction errors, streamline operations and meet the growing demand for flexible payment options,” Shniderman said in an email. “When businesses make paying easy, they’re more likely to see higher customer loyalty, fewer abandoned carts and new growth opportunities."
Frictionless payments, including digital wallets like Apple Pay, contactless cards and payment links like QR codes, can also slash transaction times, reduce cash-handling, improve data security and provide valuable insights into consumer purchasing behavior and preferences.
Businesses have taken note and are increasingly using payment data to change their products and services to meet customers’ needs, said Phillip Goericke, CTO of engineering at embedded payments platform NMI.
“This is really valuable in subscription models or omnichannel environments where consistency and convenience are paramount,” Goericke said.
Privacy, security and data management challenges
While frictionless payments offer businesses and consumers a range of benefits, there are some drawbacks.
Frictionless payments are more vulnerable to certain privacy and security risks than other payment methods because they collect and transmit valuable information using technologies like near-field communication, radio frequency identification and biometrics.
That’s raised concern among consumers and data privacy advocates who worry about bad actors using information on consumer behavior for nefarious purposes, including unauthorized purchases.
As a result, businesses that adopt frictionless payments may experience increased disputes, chargebacks and returns, which can increase costs and lead to customer mistrust, said Jennifer Fagan, retail partner at consulting firm EY.
“It may be frictionless on the frontend, but there’s going to be friction on the backend,” Fagan said. “You could have a friendly fraud situation where you ask for a chargeback and say, ‘I didn’t purchase that,’ or maybe a family member had done it on your behalf.”
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