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A recent study by Statista predicts the digital payments industry in Singapore to surpass 38,370 million USD by the end of 2026. Similarly, digital payments in South Asian markets such as Malaysia and Indonesia are forecasted to surpass 37,900 million USD & 113,000 million USD over the same period. This and other allied metrics are indicators of how the digital payments industry across South Asia is experiencing unprecedented growth.
While there are multiple factors behind this growth, one which stands out, is the widespread adoption of frictionless payments. A recent study by Visa highlights how more than 56% of consumers across Singapore regularly choose contactless payments for day-to-day transactions. In fact, Statista estimates that frictionless payment technology will grow to a staggering $8 trillion by 2024.
In this blog post, we will delve deeper into how organizations can leverage modern technologies to create a frictionless experience for their customers and what are the advantages of nurturing a frictionless ecosystem.
What is a Frictionless Payment Experience?
Frictionless payments generally refer to payment processes that uses devices, apps and websites to streamline the purchase process for customers
In simple terms, a frictionless payment experience is one that makes it easier for consumers to pay and merchants to accept in-person or online payments. Frictionless payments have become increasingly popular as both consumers and merchants increasingly seek out flexible, secure, and simple payment options.
From a merchant perspective, frictionless payments have multiple advantages including reducing cart abandonment, improving the customer experience, and driving higher revenue. Frictionless payment methods include digital and mobile wallets, mobile apps, NFC (Near Field Communication), and contactless cards.
Components of a Frictionless Payment Experience
To understand the components of a frictionless payment system it is crucial to first understand what a typical payment value chain looks like.
At its essence, every digital payment value chain involves five key stakeholders
- Consumer: Is the end user who initiates the payment or transaction
- Issuer: Is the institution providing payment services to the consumer
- Network Provider: Is the bridge between all the stakeholders in the value chain
- Acquirer: Is the institution responsible for acquiring merchants & providing payment acceptance services
- Merchant: Is the receiver of the payment initiated by the consumer
To successfully complete a transaction, it is crucial that there is an efficient and secure flow of information between all stakeholders, which is an immensely complicated process, to say the least.
This is where a frictionless payment ecosystem shines; by making use of advanced technologies such as tokenization, real-time fraud detection, and biometric authentication, the ecosystem ensures that the complexities are efficiently managed in the background while the consumer and merchant are able to effectively take advantage of a one-click payment system.
Benefits of a Frictionless Payment Experience
The benefits of adopting a frictionless payment experience in today’s competitive landscape are crucial, both for merchants and consumers, these include:
Lower Cart Abandonment
Although the eCommerce industry across Singapore, Malaysia and Indonesia have been steadily witnessing more than 20% YoY growth, more than 75.6% of consumers abandon their cart without making a purchase. While there are multiple contributors to this phenomenon, a significant one is the hassle of paying for an item. Frictionless payment methods can greatly reduce cart abandonment by reducing consumer waiting times, providing a faster and simpler checkout experience as well as reducing the cognitive burden on consumers having to remember and input PINs.
Increased Cost Savings
Frictionless payments of all forms whether in-store or online, reduce the amount of time each customer spends in completing a purchase as well as how much time your employees spend on a single customer.
By introducing frictionless in-store payments you can efficiently reduce the waiting time at cash counters, meaning your employees can serve more customers in the same time frame, thus contributing to cost saving and increasing revenue in the long run. Additionally, a frictionless experience empowers your customers with more flexibility and freedom, which adds to their satisfaction and overall positive experience. Consumer generally feel more at ease being to pay with a simple click of a button.
Greater Customer Satisfaction
It is an established fact that a frictionless payment experience in an industry that is riddled with legacy systems can quickly become a competitive advantage, empowering merchants to not only offer greater customer satisfaction but also generate frequent repeat customers. In fact, 70% of C-level banking executives polled in a European study consider frictionless cross-border payments a core banking service.
Amidst today’s busy lives it is well known that consumers prefer an outlet which offers a faster and more satisfying purchase experience rather than one which does not & adopting a frictionless payment experience helps you in delivering just that. Online and traditional retailers that offer frictionless payment are seen by customers as more secure, technologically advanced and convenient than competitors.
How to Create a Frictionless Payment Experience?
While there are multiple ways to create and nurture a frictionless payment ecosystem, one of the best in is that of a digital or mobile wallet.
By design, digital and mobile wallets come with the added security and convenience of allowing customers to store their important payment credentials (such as linked bank accounts, credit & debit cards) in their device itself.
In addition to this, once setup customers can effortlessly access their mobile wallets from any device and use them to pay merchants both online and offline. One of the biggest advantages of a digital or mobile wallet lies in the fact that they use biometric as well as two factor authentication which increase overall payment security. Digital and mobile wallets can be used across channels, making them the perfect frictionless payment system of choice.
Along with this, from an innovation and implementation standpoint, as a financial institution you can simply enlist a reputed financial technology partner to design a mobile wallet to suit your exact needs. In many cases technology partners will have ready-made solutions which can be quickly configured to suit your organizational and customer needs, reducing your cost and time to market for a frictionless payment solution.
Frictionless Payments with Codebase Technologies
Codebase Technologies’ Digibanc platform contain dedicated frictionless payment components that leverage technologies such as NFC, QR Codes, BLE, Geofencing and Biometrics to provide customers a cohesive three-tier experience consisting of pre-payment, payment, and post-payment processes. The solution can be customized end-to-end as per your exact requirements and seamlessly integrated into your existing IT system and workflow to empower your customers with a frictionless experience that sticks.
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- apac, payments
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Raheel Iqbal, Managing Partner
Experienced Board Member with a demonstrated history of working in the financial services industry. Skilled in Business Planning, Management, Employee Training, Financial Accounting, and Product Development.
