A frictionless payment refers to an online or offline transaction that requires fewer steps to complete a purchase. The process involves using data and technology to minimise obstacles or barriers that could slow down or complicate the payment.
Merchants who implement an effective frictionless payment experience can reap significant benefits. A more streamlined user experience can reduce cart abandonment rates and improve customer loyalty, ultimately increasing revenue. But, while it may be tempting to remove as many steps as possible between decision and checkout, this can compromise the security of the payment process and erode customer trust if you’re not careful.
The implementation of new technologies that can both enhance security and create an optimised payment experience for customers should be a priority for merchants.
For as long as people have exchanged money for goods and services, merchants and customers have looked for ways to make the buying process simpler. The digital transformation we have witnessed in recent years and the rapid growth of new solutions have made it easier and more affordable for merchants of all sizes to create a convenient and secure customer journey. This is just as well, given that the modern consumer seeks nothing short of a friction-free experience when navigating the landscape of payments.
Part of creating this journey is down to an evolution in how merchants store data. Over the years, things have transformed from physical ledgers and paper records to offline computer systems – and now, predominantly, to digitalised platforms. This shift towards digitalisation is especially evident among online merchants who handle large amounts of sensitive information, ranging from payment details to customer addresses.
However, it is important to remember that merchants are tasked with ensuring the security of every step of the transaction process, from the moment a customer initiates a purchase to the storage of their data post-transaction. Ensuring a speedy process is not all that matters.
Some of the most significant recent advancements in the payment industry that are enhancing the security of transactions while making them more convenient are:
Mobile wallets and contactless payments – these payment methods have experienced a surge in popularity, significantly impacting the transition to cashless transactions. By accepting these methods, merchants enable customers to make purchases anywhere without the need for a physical wallet, leading to quicker and more convenient transactions in offline stores. Moreover, these methods minimise the exposure of sensitive card information, thereby enhancing security. Ultimately, this makes customers feel safe when completing transactions in new locations.
The integration of mobile wallets into online payment systems also reduces friction during checkout, as customers no longer need to enter their card details, hence decreasing thinking time and lowering cart abandonment rates.
Tokenization – while mobile wallets encrypt payment details, tokenization takes security a step further by replacing a primary account number (PAN) with a unique payment token. This ensures that even if someone were to obtain the transaction data, the corresponding PAN cannot be decrypted. It is an extremely effective way to safeguard against fraud and protect sensitive financial information.
Biometric authentication – the use of fingerprint scanning, facial recognition, palm scanning, or iris scanning adds another layer of verification beyond traditional password or PIN-based systems, thus safeguarding against unauthorised access as biometric data is unique to everyone. Biometric authentication also allows consumers to conduct frictionless transactions – saving time by using fingerprint or face ID instead of inputting a password. This is increasingly common online, but it is also gaining momentum as an in-store authentication method. Biometrics also mean merchants can optimise their workflow by streamlining checkout processes and reducing operational inefficiencies.
3-D Secure (3DS) authentication – the use of 3DS authentication makes card-not-present transactions more secure by ensuring a two-step authentication process on every purchase. By exchanging data across merchant and issuer systems, transaction legitimacy can be determined quickly, and false approves can be prevented. For merchants, it is worth noting that liability shifts to the card issuer when the transaction is authenticated.
Although this article won’t explore every technology impacting the payment industry, these examples show that even by embracing the most prevalent functionalities, merchants, regardless of their size or budget, can improve the security of their transactions. Ultimately, these changes can have a positive impact on customer experience, increase sales, and build customer loyalty, driving business growth and success. The ongoing evolution of technology and a broader trend towards digitalisation translate into introducing new and secure ways for merchants to maximise their output – and make it easier for customers to complete transactions, which is a strong incentive to keep up with the progress.
Beyond safeguarding the customer journey, merchants must also prioritise the security of their internal systems, ensuring they remain impervious to unauthorised access by third parties. With the increasing complexity of cyber threats, maintaining robust security measures across all aspects of their operations should be viewed as a critical priority for merchants. After all, an oversight of security measures could result in data leaks or hacks, jeopardising not only the security of sensitive information but also the reputation and trustworthiness of the merchant.
While there may be a rush to embrace every cutting-edge technology out there to enhance the customer journey and maintain competitiveness in the market, doing so hastily can carry significant risks. Opting for uncertified or cheaper alternatives to established brands may seem enticing initially, but it can lead to adverse consequences in the long run, such as compromised security or functionality. Furthermore, careful consideration must be given to how new technologies will be integrated with existing systems. Ensuring compatibility and safety when interconnecting systems is paramount to avoiding potential disruptions or vulnerabilities.
The discussion here aims to assist merchants in navigating their way towards a secure and frictionless payment journey by encouraging them to carefully assess their situation and adopt the solutions that best fit their business. While embracing innovation is vital, it must be done with the customer in mind, and it should take into account specific market characteristics and challenges. And it goes without saying that adherence to all relevant regulations is non-negotiable.
Ultimately, it is important to consider new technologies and features that could enhance the payment experience. The solutions that make the customer journey more convenient and secure already exist. Such innovations should be introduced to meet customers’ needs and protect their privacy. The silver bullet is a solution that reduces the steps between purchase decision and checkout and simultaneously improves security – rather than jeopardising it. By keeping up with innovative features and ensuring customer privacy, businesses can achieve long-term success.
Ray Shinzawa is the Managing Director of JCB International (Europe) Ltd., JCB International’s subsidiary based in London. His primary role is to oversee JCB's business expansion including acceptance coverage, business development, marketing, customer service, technical support, and partners across the region. Ray ensures that JCB's European strategy matches with JCB's long-term global strategy, balancing business growth with regulatory compliance, promoting the opportunities of working with JCB, and strengthening partner relationships.
JCB is a global payments brand and a credit card issuer and acquirer in Japan. Its acceptance network includes 46 million merchants globally. JCB issues cards across countries and regions internationally with more than 156 million cardmembers. JCB has formed alliances with banks and financial institutions globally, increasing its merchant coverage and cardmember base. JCB commits to providing responsive and high-quality service and products to customers worldwide.
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