Frictionless payments are essential for e-commerce platforms to reduce the barriers between online shopping and completed checkouts. The buying process needs to be easier for both the customer and the seller, because an enjoyable user experience leads to higher conversion rates and fewer abandoned shopping carts.
When done right, frictionless payments improve the checkout process by eliminating waiting times. It’s all about reducing barriers and the steps toward a completed sale. Ultimately, frictionless payments should feel like a natural part of the experience.
Understanding how frictionless payments have developed and reviewing the history of buying processes will help us understand how businesses will be able to continue their growth in the digital age. So, let’s explore the evolution of frictionless payments and predict how businesses will drive conversion rates and create better customer experiences.
1950: Debit and credit cards
The credit card was developed in the mid-twentieth century, but it wasn’t until 1973 that the card payments system was computerized. This frictionless payment reduced transaction times to just one minute and gave rise to the era of electronic consumer payments. Computerized payments would eventually allow for future online transactions, where e-commerce businesses could contact banks to finalize payments with ease. In 1994, Stanford Federal Credit Union in California was the first financial institution to offer online internet banking, leading the way for online transactions to begin in 1995.
Bookseller-turned-global-conglomerate Amazon patented an online transaction process called "1-Click" in 1999. This allowed customers to buy products with just a click of a button. Items could be purchased at the product level, without adding to a shopping cart, meaning that customers could buy a product in a flash. Voila: no shopping cart abandonment. With 1-Click, personal details and your bank account details are stored online, along with your usual delivery address.
The patent has expired, meaning a flurry of businesses can now use this frictionless checkout method. Given the global average rate for shopping cart abandonment is 70%, skipping over the shopping cart means that e-commerce businesses can maximize their conversion rates through this simple process.
2003: Chip, pin and tap
In 2003, the introduction of chip and PIN in the U.K. allowed cards to store data in a small chip on the face of a card. This data could then be accessed using a four-digit PIN, authorizing the payment. The American conversion to chip and PIN was announced in 2012 and completed in 2015.
Not only did this process increase efficiencies for both customers and businesses by automatically authorizing payments rather than making a customer sign a receipt, but it also curated a secure form of payment. Only those with access to the card and the secret PIN could access the account. The advance demonstrates how frictionless transactions can be made easier, and, importantly, more secure at the checkout.
Contactless payments were introduced in 2007, making the checkout process even easier. Today, one in five card payments is contactless.
2011: The mobile revolution
As mobile phones became smaller, they became as much an essential accessory as a wallet or purse. They’re with us all the time. So it’s not surprising that these handheld devices have become ingrained in the checkout culture. Leading mobile manufacturers Google, Apple, Android and Samsung all launched digital wallets between 2011 and 2015, allowing users to complete transactions with them rather than use their debit or credit cards.
These transactions had the added security benefit of authorizing payments through a fingerprint or facial scan. Furthermore, these digital wallets could be used in-store or online, storing personal data to automatically fill in those arduous forms with personal details, delivery addresses and billing addresses. The innovation helps further speed up online sales and transactions.
See also: The B2B Digital Payment Opportunity
Now and the future…
As online transactions become easier and quicker on the customer side, some obstacles for businesses to achieve a completely frictionless payment remain. Businesses must ensure that they balance the risks and rewards that come with streamlining checkout and ensuring protection from fraud and abuse.
As the popularity of omnichannel sales, digital wallets and one-click buying continues to develop, innovative ways to maximize sales without being affected by fraud and abuse have been developed. Commerce protection platforms, such as Signifyd, drive automated decisions on all transactions, approving more good orders and recovering lost revenue from chargebacks. This streamlines the customer experience, limiting the need for authentication forms and processes. Overall, commerce protection platforms feel like a natural part of the checkout process, going unnoticed by customers, and they can increase conversion rates by 4% to 6%.
Frictionless payments will continue to improve, creating better customer experiences and improving business performance. As more sales move online, and transaction speeds and efficiencies increase, it’s important to tackle attempts at fraud and abuse. At every stage of the evolution of frictionless payment, new processes are helping to make every transaction safer and more worthwhile for customers and businesses.