What is Vendor Lock-in?
Vendor lock-in describes a situation where a customer becomes entirely...
Frictionless payments offer the least amount of effort to get a transaction closed. There is no universally accepted definition of a frictionless payment, it is more of a design principle than anything else: place as few barriers between the consumer and their purchase as is humanly possible. As e-commerce has grown and evolved, the options available to reduce the strain on the consumer have multiplied and grown, from storing credit card details to implementing new payment methods to integrating with smart device-resident wallets. Merchants who are looking to optimize their revenues need to become experts on frictionless payments, which Statista estimates will represent a cool $8B in sales in 2024.
The COVID-19 pandemic changed things up in the physical world, as consumers increasingly moved away from using cash (which would mean exchanging objects with other people in a germ-aware situation) and looked for ways to reduce their interactions. Methods that took off during this period included
Online payments, of course, offered a trickier challenge: unlike in-person customers who could be required to have physical control of their card or device, making it difficult to use a fake device or number, online buyers were out of sight. And as online fraud has continued to grow in its sophistication, so removing friction from the process has had to rely on sophisticated approaches, such as
The opposite of a frictionless payment, of course, is a payment that is slowed by friction - extra actions to take, forms to fill out, passwords to type in, and so forth. While this is arguably worse for the merchant than the consumer (failing to make a sale is, for all but the most vital of goods, more of a loss to the seller than the buyer), that is not to say that customers don’t benefit from getting their payment done without friction. Specific benefits include
On the other hand, there are some downsides to frictionless payments, including
When non-cash payments started, we lived in a largely analog world, where simply owning a piece of plastic with your name on it, and a matching ID, with the ability to provide a signature that vaguely matched the back of the card was enough to reasonably safely pay for whatever you needed. As the world has become increasingly digital, not only have fraudsters become more advanced and effective, the tools we have available to thwart them have evolved too, and none more meaningfully than the smartphone.
Today’s smartphone includes the ability to directly confirm the user’s identity - often through biometric entries (face scan, fingerprint scan, etc) that make that authentication way more reliable than simply knowing a 4 digit personal identification number (PIN).
Merchants should be looking now at automating their payment systems so that they can control the friction that stands between them and their customers. The first step is to ensure payment systems do not have a single point of failure with an exclusive PSP, which can eliminate opportunity to manage processing fees, deliver customer-preferred payment methods, and efficient cross-border transactions.
Vendor lock-in describes a situation where a customer becomes entirely...
3D Secure (3DS) is an extra layer of protection for consumers when paying by credit card online....