The way we pay for goods and services has evolved, and as we’ve moved away from clunky payment devices such as PIN pads and shifted to digital, we are heading toward a world of truly streamlined – or frictionless –payments.

What does friction in payments mean? Friction essentially refers to any hurdle or obstacle in the payment process that may slow down or, in undesirable cases, deter customers from completing their transactions. Often, this relates to the amount of information required or the number of steps required to complete a payment.

But not all friction is bad. It can actually be your friend – friction can ensure the security of transactions and is vital to collecting the necessary information for a successful payment. Paced correctly, a payment involving friction can provide a sense of assurance to both sides, ultimately bolstering conversion rates. The key is finding the right balance between providing a smooth payment experience and ensuring security when collecting payment information.

It’s important to understand all the factors at play in a purchase, and the levers businesses can pull to create the best experience for them – and their customers.

The relationship between friction, conversion, and intent

By reducing friction, you are typically going to achieve higher conversion. However, this is for a “typical” payer; if you have a payer with a really high intent to buy, regardless of how much friction exists in their payment experience, the consumer is highly likely to continue with the checkout process.

However, for payers that are still on the fence, the amount of friction at the checkout can be make-or-break. Low-intent purchases, such as the spontaneous purchase of an item advertised on social media, are typically more impulsive, and any friction in the payment process can significantly lower the conversion rate. In such cases, merchants must aim to have as little friction as possible to ensure high conversion rates.

High-intent purchases, such as those made for expensive items, may require ‘good’ friction in the payment process. In such cases, customers may have to provide more information (such as matching billing and shipping addresses) to ensure the security of the transaction, protecting both parties. Both the merchant and customers want this friction to ensure their payment and purchase remain secure.

In face-to-face cases, the buyer intent is generally higher as well. For example, if you go to grab a coffee before work and your card fails for one reason or another, you put it back in your wallet. You take another one out, and that one fails because of something your kids did online yesterday, and then the third one succeeds. You’re willing to go through that additional friction to get your coffee as it’s something you really need at that moment. 

The psychology of friction

The goal of frictionless payments is to give customers a seamless, secure, and efficient payment experience. By understanding the importance of friction, merchants can tailor their processes to suit the needs of their customers and increase conversion rates, while still maintaining security.

As a merchant, you must think about your customer mindset; who your target customer is, what you’re selling, how it’s presented, and their familiarity with your brand (as well as pricing, another common friction point). If you remove some of these things or change them, you can affect conversion.

Paying can be the most emotional thing a customer experiences all day: Imagine someone finally being able to buy the laptop they’ve been saving for, or paying an overdue bill. Payments are a ‘charged’ experience, and making a payment is the highest stakes event in eCommerce.

The future of frictionless payments

A growing trend among payments is presenting a moment of authorisation once, and then from then on, delivering very little friction. The obvious examples are recurring payments and subscription services; you essentially authenticate once, and then the merchant has your details to automatically collect future payments.

PayTo, introduced across Australia by the New Payments Platform as the new way for merchants and businesses to initiate real-time payments from their customers’ bank accounts, is an example of how this can be integrated effectively. Once a consumer sets up their PayTo mandate, the merchant can bill them continuously for the goods and services – they authenticate once, and then it’s frictionless in the background.

PayID, which creates a proxy for your identity around your payment, enhances this, which will be very useful once familiarity with the concept increases. By linking account information with a short identifier, businesses, and consumers can transact seamlessly without needing to manually input bank account details.

You might argue that we already have a fast way to take recurring payments, that is, a ‘card on file ’ transaction. However, PayTo trumps the card offering in a number of ways. Getting your card details can be tedious and inconvenient, such as going through your bag to find the card or having to save it online, which is not super secure. On the other hand, it is much easier to remember a PayID because it can be a mobile number or email address. Bank accounts also do not expire, whereas cards do, which is often a cause for failed payments and additional friction in the payment process.

Additionally, PayTo is cheaper than credit cards, and that saving can be passed onto the consumer to encourage them to use a more secure, convenient option – or become savings for the merchant. At GoCardless, we are trying to get to the point where bank payments are as familiar as cards because it offers the right balance of friction and security.

This is an exciting time in payments, but it’s vital to remember convenience isn’t the only priority at checkout. The key point to remember about friction is that implementing processes to slow the pace of a transaction is key to providing both sides with assurance, security, and confidence. Utilised correctly, it will work wonders for your conversion rate.

Andy Wiggan is chief product officer at GoCardless.