Frictionless payments are financial transactions where the payment process is designed to be as easy and quick as possible for the customer. This type of payment system requires minimal action from the customer (e.g., choosing previously saved payment information or using technology that enables payments with just a touch or a glance).

Below, we’ll cover what businesses should know about frictionless payments, including the technology that powers this type of transaction, benefits for both businesses and customers, and how Stripe can help businesses incorporate it as part of their payment ecosystem.

What’s in this article?

• Frictionless payment technology
  
• Frictionless payment methods
  
• How frictionless payments benefit customers and businesses
  
• Drawbacks of frictionless payments
  
• The future of frictionless payments
  
• Best practices for frictionless payments
  
• How Stripe enables frictionless payments
  

Frictionless payment technology

Frictionless payments are only possible because of how payment technology has evolved. Transactions that happen with minimal effort for the customer usually rely on a mix of hardware and software solutions. These technologies include:

• Near-field communication (NFC)
  NFC technology allows two devices—a mobile device and a payment terminal, for example—to communicate when they are close to each other. NFC is contactless, and it facilitates swift transactions when the device is tapped onto (or even just held near) the terminal. The technology has been widely incorporated into smartphones and payment systems, enabling quick, minimal-touch payments.

• Radio frequency identification (RFID)
  RFID technology uses electromagnetic fields to automatically identify and track tags attached to objects, which contain electronically stored information. In the context of payments, RFID-equipped cards can be scanned by readers without initiating direct contact or scanning a barcode, which speeds up the payment process and reduces physical wear on the card.

• Biometrics
  Biometric verification uses unique physical characteristics, such as fingerprints or facial features, to identify individuals. It confirms a payer’s identity with just a touch or a glance, allowing the transaction to proceed. Biometric systems have become increasingly sophisticated and accurate, reducing the likelihood of unauthorized transactions while speeding up the process.

Frictionless payment methods

There are a variety of frictionless payment methods. Depending on where a transaction takes place, what type of customer is involved, and what they’re buying, some of these methods might be more relevant for businesses than others. Here are the payment methods that facilitate frictionless payment experiences:

• Digital wallets
  The digital wallet is not just a virtual container for credit and debit cards—it’s also a comprehensive solution for loyalty programs, tickets, and boarding passes. For customers, digital wallets put all of their monetary tools conveniently in one place, accessible with a single authenticated action. For businesses, digital wallets integrate loyalty and reward systems into the payment process, encouraging customer retention.

• Contactless cards
  Contactless cards, powered by the same NFC technology that digital wallets use, create a payment experience that is as quick as handing over cash—with none of the physical contact. Retailers and service providers reap substantial rewards, with an expedited checkout process allowing for higher volume and throughput, especially during peak times. Customers spend less time in line and have a more pleasant shopping experience.

• Payment links
  Payment links are a flexible tool that can be used across various business models, from independent artisans selling bespoke creations via Instagram to large-scale utilities companies collecting monthly bill payments. Payment links support mobile business models, allowing for payment upon service delivery, which can dramatically improve cash flow. They also open up new opportunities for monetizing digital content, as creators can sell access to content or services with a simple link.

These payment methods represent a shift toward a more direct, immediate form of commerce.

How frictionless payments benefit customers and businesses

Frictionless payment methods provide substantial benefits for both customers and businesses. These include:

• Transaction speed
  It takes less time for customers to complete a purchase. With a tap or a scan, payments are processed almost instantly, which is an improvement from older methods involving more physical interaction and slower machinery.

• Convenience
  Customers don’t have to carry physical wallets, remember PINs, or sign receipts. This ease of use extends to online purchases, where digital wallets can autofill payment information, reducing checkout time.

• Financial tracking
  Digital wallets and related apps can send customers instant notifications on spending, help them budget, and offer a consolidated view of their financial health.

• Service efficiency
  When transactions complete more quickly, businesses can serve more customers in less time. This efficiency can increase revenue and can be particularly beneficial during busy periods.

• Reduced cash handling
  When businesses use contactless payment methods, they don’t handle physical currency. This decreases the risks associated with cash, such as physical theft or loss, and can reduce the time spent counting and transporting money.

• Customer loyalty
  Many digital payment systems allow businesses to integrate reward and loyalty programs, which can encourage repeat visits and build a loyal customer base.

• Data security
  Frictionless payment technology includes advanced encryption that protects transaction data, ensuring that sensitive information is kept safe from unauthorized access.

• Business insights
  Payment data can offer businesses a wealth of information on buying patterns, peak purchasing times, and customer preferences—which can in turn inform strategic decisions.

Drawbacks of frictionless payments

There are some drawbacks associated with frictionless payment experiences and the technologies that enable them. Here’s an overview of the challenges:

• Security risks
  The convenience of tapping a card or phone can create opportunities for unauthorized transactions if a device or card is lost or stolen. Businesses must ensure payments are simple for customers but not for fraudulent actors.

• Privacy concerns
  A lot of data is generated every time a customer taps their payment device or card. While this information can be invaluable for businesses that want to personalize their services, there are concerns over how this data is stored, used, and shared. Keeping customer data private is not just a good practice; it’s a mandate in the digital economy.

• Dependence on technology
  The infrastructure needed to support these payment methods is complex. When there’s a glitch, it can disrupt sales and frustrate customers. Businesses must be ready to troubleshoot or have backup systems in place.

• Digital divide
  Not everyone has access to the latest technology or feels comfortable using it. Becoming overly reliant on no-touch payment methods might alienate customers who prefer traditional payment methods. Businesses must find a balance between innovation and accessibility.

• Regulatory compliance
  The financial sector is heavily regulated, and staying compliant with evolving rules for digital transactions requires constant vigilance. Businesses must adapt to meet legal standards in every market they operate in.

• Fraud detection and prevention
  With the rise of digital transactions and the increase in sophistication of fraudulent schemes, the systems for detecting and preventing fraud must improve just as rapidly.

• Chargebacks and disputes
  The ease of making payments can lead to an increase in disputes and chargebacks, as customers might not recognize transactions or might regret impulsive purchases. This places a burden on businesses to resolve these issues while maintaining good customer relations.

The future of frictionless payments

The future of frictionless payments will undoubtedly be different than its current state. The technology will continue to evolve, as will the way businesses and customers transact. These relationships are dynamic, and having a firm grasp on frictionless payments means keeping track of how the technology is progressing.

With that in mind, let’s look at how frictionless payment method technologies and adoption are likely to change, and why:

• Customer behavior
  As digital natives become more prominent in the customer base, their preference for digital-first and mobile-centric payment options will continue to push businesses toward prioritizing these methods. Mobile point-of-sale (POS) payments alone are expected to exceed $5 trillion worldwide by 2027.

• Technology integration
  Wearables, Internet of Things (IoT) devices, and even vehicles are becoming new interfaces for payments. As these devices become more interconnected, frictionless payments will expand further into everyday life.

• Artificial intelligence and machine learning
  Businesses are using artificial intelligence and machine learning to personalize shopping experiences. This includes offering predictive checkout processes that anticipate a customer’s purchase patterns and preferences, which could reduce the steps to checkout.

• Decentralized finance (DeFi)
  Blockchain and cryptocurrencies are introducing new ways to think about value exchange without traditional financial intermediaries. This could lead to payment methods that are frictionless and also more accessible on a global scale.

• Regulatory shifts
  The regulatory environment will need to keep pace with these advances, likely leading to new standards for data protection, transaction reporting, and cross-border commerce—which could reshape the payment processing sector.

• Security innovations
  As threats evolve, so will the methods to counter them. Expect to see more sophisticated fraud detection systems and authentication protocols that protect customers and businesses without adding friction to the payment process.

The common theme of these predictions is adopting payment methods that are not just faster and safer, but also more intuitive and integrated into the larger digital environment.

Best practices for frictionless payments

To create a smooth customer experience with frictionless payments, there are several best practices businesses can adopt:

• User experience (UX) design
  Ensure the payment process is as intuitive as possible. Simple layouts, clear instructions, and minimal steps are key. The fewer clicks or taps from cart to confirmation, the better.

• Multiple payment options
  Cater to a broad customer base by accepting a variety of payment methods. From digital wallets to contactless cards, providing options allows customers to choose their preferred way to pay.

• Up-to-date technology
  Use the latest payment processing technology to keep transactions quick and dependable. Regular updates and maintenance are necessary to keep everything running smoothly.

• Customer education
  Informing customers about payment options and security measures can increase their confidence and encourage the use of frictionless payment methods.

• Security investment
  Implement and maintain robust security protocols. Use encryption, tokenization, and other methods to protect payment data.

• Data privacy compliance
  Stay compliant with data protection regulations. This includes being transparent about how customer data is used and giving customers control over their information.

• Regular security audits
  Conduct and learn from regular security audits to catch potential vulnerabilities and stay ahead of threats.

• Fraud detection systems
  Employ advanced fraud detection systems that monitor transactions in real time to prevent unauthorized access or use.

• Customer service
  Have a responsive customer service team ready to assist with any payment issues that may arise. Quick resolution of problems maintains trust and reduces frustration.

• Feedback loops
  Encourage and monitor customer feedback on the payment process to identify areas for improvement.

How Stripe enables frictionless payments

Stripe’s entire suite of payment solutions is focused on building customer experiences and business operations that have minimal friction. Stripe works with all aspects of frictionless payments, from technologies to payment methods.

Stripe supports a broad range of payment methods, facilitating frictionless transactions without unnecessary steps. Here’s a quick overview of how this works:

• Digital wallets
  Stripe simplifies integration with digital wallets such as Apple Pay and Google Pay. This lets customers pay on mobile, on the web, and in-app with just a touch or a glance. Businesses can access a customer base that values tech-savvy solutions and expects a swift checkout experience.

• Contactless payments
  Stripe’s point-of-sale solutions handle contactless cards, offering customers a speedy way to pay in store without inserting a card or entering a PIN. This translates to shorter lines and happier customers.

• Payment links
  With Stripe, creating and sending payment links is simple. Whether it’s for goods sold on social media or services offered remotely, Stripe’s Payment Links can facilitate transactions without the need for a traditional storefront.

• Integration and APIs
  Stripe’s suite of application programming interfaces (APIs) allows businesses to customize their payment processes. With these tools, a business can embed payment functionality directly into its website or app, creating a frictionless transaction process that’s tailored to its brand.

Stripe’s payments infrastructure is resilient, reliable, and adaptable—ensuring that as payments evolve, businesses have the tools they need to keep pace and meet their customers wherever they are: online, in-app, or in person.

Learn more about Stripe’s solutions.