5 Benefits of Reduced Payment Friction

What is Payment Friction?

Payment friction refers to any obstacles or hurdles customers face when making a payment for a product or service. It creates unnecessary challenges that can negatively impact the customer experience and reduce conversion rates. 

Common sources of payment friction include complex checkout flows, too many payment options to choose from, slow loading times, requests for unnecessary information, and payment failures or errors. When payment friction is high, it discourages customers from completing a purchase.

Understanding Payment Friction:

Research shows that even small increases in payment friction can significantly reduce conversion rates. For example, adding an extra click or page to complete a purchase can decrease conversions by up to 20-30% (According to Forrester). This lost revenue adds up quickly at scale. Payment friction also diminishes the overall customer experience and makes a brand seem less professional or trustworthy. 

Customers want the payment process to be simple, quick and hassle-free. Any unnecessary delays or difficulties leave a negative impression and increase the chances they’ll abandon their cart or shop elsewhere next time. For businesses, reducing payment friction through streamlined checkout experiences and optimised payments is crucial for growth.

Ways to Reduce Payment Friction:

Here are some effective ways companies can reduce payment friction:

1) Simplify Checkout Forms

Only request essential information like name, address, and payment details. Remove unnecessary or optional fields that can be collected later to speed up the process.

2) Offer Popular Payment Methods

Provide options customers prefer, like credit cards, digital wallets, and UPI, to avoid compatibility issues or the need to create accounts.

3) Automate With One-click Payments

 Allow registered customers to check out faster with saved payment profiles and one-click payments on return visits for a seamless experience.

5 Benefits of Reduced Payment Friction:

By minimising friction during the payment process, businesses can enjoy several advantages. Here are the top 5 Benefits of Reduced Payment Friction

1) Increased Conversion Rates

 Simplified payments boost sales.

When the payment process is quick and seamless for customers, it significantly increases conversion rates for businesses. Customers are less likely to abandon their shopping carts or transactions halfway if they don’t have to spend time entering lengthy payment details. 

Research shows that reducing checkout steps by just one can increase conversion rates by up to 15% on average (Baymard Institute, 2019). This convenience encourages more customers to follow through with purchases and removes barriers to higher transaction abandonment rates.

2) Enhanced Customer Experience

Customers appreciate easy, quick checkouts and come to trust brands that make payments simple. Reducing friction in payments allows customers to check out in a matter of seconds without any issues. 

This increases customer satisfaction and loyalty as they will have a positive perception of the brand due to the simplified payment experience. This also improves advocacy and long-term value.

3) Improved Cashflow:

Faster payment collection means invoices get paid on time without any delays. This ensures the timely receipt of payments from customers. With money coming in quickly, businesses do not have to wait long to receive funds owed to them. 

This improved cash flow allows businesses to better manage their finances. They can pay their own bills on time, invest in inventory or expansion plans, and have the working capital readily available for daily operations.

4) Higher Average Order Values –

Simple payments encourage people to spend more. One report showed that the average order value increased by 9% after streamlining checkout (Baymard Institute, 2019). Streamlined payment flows reduce the perceived cost of a purchase in the customer’s mind. 

They are more willing to add that extra item to their order or upgrade to a premium version of a product. Overall, simplified payment experiences have been shown to increase average order values for merchants by reducing the friction that may hold customers back from higher spending.

5) Access to New Customers

Simplified and frictionless payments open up the potential to access new customers who would otherwise be lost. Customers want easy and seamless payment experiences. If checking out and making a payment is too complex or difficult, customers will abandon their purchase. 

By streamlining payments, more sales can be completed. This allows businesses to appeal to and convert more customers, especially those who may give up easily if faced with payment friction. It ultimately helps expand the customer base and market reach.

Powering Seamless In-Store and Digital Payment Experiences

NTT DATA Payment Services India offers a complete payment solution to advance both your in-store and e-commerce businesses. From online payment gateway and mPOS to IVR payments and Bharat QR Scan and Pay, we ensure maximum convenience and safety for all your payments.

NTT DATA Payment Services India helps enterprises address payment friction by offering omnichannel payment solutions. They leverage and optimise Customer checkout experiences. Features such as real-time authorisation and one-click payments enable businesses to eliminate errors and deliver fast, seamless transactions.

Conclusion:

Customers value simple, quick payments and increased conversion rates. Brands improve customer satisfaction, sales and international expansion when friction is removed from the payment process. 

By addressing sources of friction and enabling popular payment methods, companies can significantly enhance the digital commerce experience and payment performance.

FAQs

1) What is payment friction?

Payment friction refers to any obstacles or hurdles customers face when making a payment for a product or service. It includes things like complex checkout flows, too many payment options, slow loading times, unnecessary fields, and payment errors.

2) Why is reducing payment friction important?

Reducing friction improves the customer experience and increases conversion rates. Research shows that even small increases in friction can reduce conversions significantly. Customers want payments to be simple, quick and hassle-free.

3) How can payment friction be reduced?

Some ways to reduce friction include simplifying checkout forms, offering popular payment methods, allowing one-click payments with saved profiles, optimising page loading speeds, and automating workflows.

4)What are some other benefits of reducing payment friction?

Other benefits include enhanced customer experience and loyalty, improved cash flow, and higher average order values as customers are more comfortable spending more.

5)Does reducing friction help expand the customer base?

Yes, streamlined payments allow businesses to access new customers internationally by supporting local payment methods. It removes barriers for more people to complete purchases.