What Are Frictionless Payments? (& Why They Matter)

In many cities, getting on a bus requires a little planning in advance.

You might be in the middle of nowhere — but you're relieved knowing a bus is about to arrive at the stop where you’ve been waiting. As you see it approach, a sudden, cold thought comes to mind: you don’t have any cash to pay for the ride.

Frictionless payments represent the opposite of that frustrating experience: an easy, trouble-free way to buy what you need at any time. Any digital business that takes payments needs to consider the growing expectation of frictionless payments as part of its customer experience. Here, we'll take a closer look at the concept, review its advantages, and see some examples of what it looks like in practice.

What Is A Frictionless Payment?

Frictionless payments refer to an online or offline process where the obstacles to purchasing have been minimized.

Frictionless payments make the process of buying much smoother, which contributes to improving the customer experience. It also makes it easier for merchants to sell — decreasing shopping cart abandonment, improving conversion rate, and ultimately increasing revenue.

A typical example of a frictionless payment is Uber. Instead of having to wait for a driver to process a card payment using a POS terminal or hoping you carry the necessary amount of cash, Uber’s app charges you automatically.

After your ride, you’re free to go, no need to sort through cash or pull out your credit card. Going back to our bus example, we find the City of London bus. In London, you can jump on the bus and pay with your card (or phone) contactless payment system.

You’re automatically charged the "pay as you go" fare when you tap your card on the bus’ card reader. You don’t even need to buy a separate travel card. Now, that is convenient.

For a payment to be considered frictionless, it should follow specific criteria:

• It provides a fast checkout, minimizing the number of steps needed to complete it.
• It shows cognitive ease — often by removing steps in the purchasing process.
• It’s integrated within a good customer experience, like using a progress bar throughout a payment pathway to give more clarity.

Advantages of Frictionless Payments Systems

People are now more accepting than ever of more modern paying methods, like using a contactless card to pay for groceries. By now, you’ve probably seen that frictionless payments can be pretty convenient when used well. But why are frictionless payments so relevant to marketing and sales? Because they offer many advantages compared to other methods of payment.

Of course, a primary reason is that consumers aren't taking precious extra time to think about filling in forms to buy what they want — instead, it’s a smooth journey towards completing their checkout.

For example, if the registration process to create an account to buy something online has too many steps, it’ll potentially make buyers abandon their shopping carts. Frictionless payments prevent this from happening.

Here are some of the advantages of frictionless payments.

Higher Payment Security

Digital payments can be far more secure than cash or credit card payments. Using a tokenization system, merchants replace sensitive data with a non-sensitive equivalent, referred to as a token.

One of the most common uses of tokenization is in recurring subscriptions. Here businesses save customers’ billing information for their next automatic payment without the dangers of keeping their data themselves (for example, for a Netflix subscription).

One-click checkouts, pioneered by Amazon, are also a typical case of tokenization. They improve the chances of customers going through the checkout process because there are fewer obstacles to finishing the transaction.

Image Source: Shopify

Better User Experience

Frictionless payments create a more convenient shopping experience. NFC technology speeds up the checkout process. You don’t need to pay using cash and wait for your change — and you won’t need a signature or to remember a PIN code either. Instead, you can complete a payment in seconds, using something as simple as a fingerprint.

Decreasing Cart Abandonment

An advantage of a frictionless payment we already mentioned is that it simplifies the checkout process, preventing cart abandonment. Shopping cart complexity and duration impacts how likely someone is to complete a purchase. The Baymard Institute found that having too long or too complicated of a checkout process is the reason why almost 20% of shoppers abandon their cart.

Image Source: Baymard Insititute

Examples Of Frictionless Payments

Frictionless payment is a broad term that includes mobile and digital wallets, in-app payments, one-click payments, auto-renewing subscriptions, contactless card payments, and other digital payment options. Here are some of the most relevant examples.

Mobile Apps

Use a store’s mobile app to order and pay both online and in-store. For example, some brands allow you to use the app to order and pay when you are at the store. Online, you can use it to pay quickly because your card details are already stored in the app. In some cases — like the example below from Zara Home — you can use your mobile wallet to pay even faster. All you need will be authenticating yourself on your phone.

Image Source: Zara Home

Mobile Wallets

Leaving your home without a wallet and still going grocery shopping wasn't even possible all that long ago. Now, mobile wallets let you quickly and conveniently pay using your smartphone — nothing else needed.

Mobile wallets are probably the best example of what frictionless payments are about. Using NFC to make payments, the technology behind Apple Pay, Google Pay, and Samsung Pay let consumers quickly pay using their phones. These digital wallets work well for retailers because they can minimize fraud, handle payments faster, and decrease processing fees.

Image Source: Zara Home

Contactless Payment Cards

Contactless cards have a small embedded chip that sends short-range radio waves. When you place your card close to a contactless-enabled payment terminal, the payment information is transmitted.

Contactless payment cards use near-field communication (NFC) technology. The contactless system is efficient, so you don’t need to add a PIN to complete the transaction. Instead, most banks set a limit. Whenever you spend less than that amount, you won’t need to provide a PIN.

Buy Online, Pick Up In-Store

The model of buying something online and picking it up at the store provides many of the advantages of online shopping without the downsides of other types of digital shopping experiences.

The system is a middle ground between traditional retail shopping and buying online. It allows people to get a hold of their purchases quickly without having to pay for shipping costs.

Buy Online, Pick Up In-Store became relevant especially during the Covid-19 pandemic because it meant people could limit their exposure to others by simply picking up what they already bought online.

Image Source: Zara Home

Buy Now, Pay Later

Buy now, pay later (BNPL) is an alternative to credit that gives people the flexibility to shop over a set number of installments instead of all at once. Some charge interest, some don’t — and rescheduling a payment or paying late can potentially come with charges.

BNPL apps like Klarna, Affirm, or Afterpay are experiencing massive growth. Adobe Analytics reported the number of online holiday shopping orders paid for using buy-now-pay-later plans in 2021 was up 466% over 2019.

Image Source: Cosmetics Business

Payment Links

Payment links are URLs or QR codes that connect to a personalized payment experience. Clicking a payment link takes the customer right to checkout, with the details of their purchase already preloaded.

These links are particularly useful for subscriptions, invoices, and quotes because you can embed them directly into the form or email. This lets customers jump straight to finishing the transaction, without having to worry about logging in or searching for a payment screen.

Pro Tip: Sales Hub users can create secure payment links with the HubSpot Payments tool. This tool also gives you frictionless options like eCheck and recurring payments, which can help streamline your payment process.

Growth Of Frictionless Payments

Given the advantages of frictionless payments over more traditional methods like cash, it will only continue to become more important. According to Statista, the total transaction value of Digital Payments is expected to show an annual growth rate of 12.24%.

It’s worth mentioning that despite all the improvements that frictionless payments bring, some consumers have concerns over its safety. A survey of more than 5,000 people in five different countries showed that over half of the survey participants had reservations about these kinds of payments — citing Uber and Lyft. More specifically, participants said they were concerned about maintaining data privacy.

One way to approach this issue is by offering more payment options at the checkout. According to the report’s author, when it comes to ecommerce, offering more payment options at checkout is a good way for businesses to cater to consumers concerned about the safety of their financial details.

Frictionless payments that aren’t secure are worth nothing. While it may seem that prioritizing a frictionless shopping experience would be the best way for merchants to boost sales, the truth is that if a sophisticated shopping experience leaves customers concerned about the security of their financial data, sales will suffer.

A Better Payment Experience For Customers

As the technology behind frictionless payments continues to develop, you can expect to see improved customer experiences and better business results. As digital payments become safer for businesses and consumers, the progress of frictionless payments will continue to bring more conversions and smoother, trouble-free checkout experiences.

This post was originally published in December 2021 and has been updated for comprehensiveness.