How are online and offline transactions becoming more frictionless?

For some time now, consumers have been moving toward demanding more frictionless payment methods across online and offline channels. The social distancing and sanitizing practices brought on by the pandemic proved to be the push that encouraged many consumers to try proximity mobile payments (paying for goods using a mobile phone as a physical point-of-sale [POS]) for the first time. Ecommerce retailers, not to be outdone, are finding ways to improve their transactions as well.

We forecast that the total number of US proximity mobile payment users will jump from 101.2 million in 2021 to 125.0 million in 2025, which will also be the first year that over 50% of all US smartphone users will transact using this method.


Data suggests adults plan to continue to use touchless payment methods after the pandemic is over. According to Fiserv’s September 2020 survey, nearly three out of four millennials who have used touchless payment methods will continue doing so, and approximately two out of three consumers in other generational cohorts will do the same. This indicates most consumers are satisfied with this payment system.


As the proximity mobile payments market grows in importance, companies will be working hard to win over consumers. For example, Apple Pay and Google Pay both offer cash-back bonuses. Brands can also offer incentives such as discounts and free gifts in exchange for using a specific payment method.

One of the ways brands and retailers are working to reduce ecommerce friction is providing more payment methods at checkout. Buy now, pay later (BNPL) options such as Klarna, Affirm, and AfterPay are proving popular with consumers, leading to more retailers offering them. According to a September 2020 study by PYMNTS and Paypal, 41.8% of US adults cited the clarity of fees or interest rates as a reason they use BNPL, while just 11.2% cited the same of credit cards.

Furthermore, a Jungle Scout study found that 51% prefer shopping from retailers that offer BNPL or other payment options, significant figures for an emerging category.

These BNPL options reduce friction by asking for less money up front, but what about asking for no money up front? Startup BlackCart offers "try-before-you-buy" ecommerce, in which shoppers select items online that are then sent to them to try on at home without a credit card pre-authorization. Once customers have decided on what items they’ll keep or return, they are charged automatically. A BlackCart transaction is worth approximately 45% more than a typical transaction on that same website, trying approximately two times more items and keeping 1.7 times more, according to figures from BlackCart founder and CEO Donny Ouyang.

Another element that creates friction is declined transactions. A Sapio Research and ClearSale study conducted across five countries in March 2020 discovered 28% of consumers have experienced an ecommerce decline.

False declines are an important issue given that the pandemic created a flurry of ecommerce activity, often from new users who experience false declines at a higher rate than most because of a lack of data around that customer’s purchasing behavior and in-store interactions. According to estimates from Aite Group, brands and retailers lose up to 75 times more revenue to false declines than to fraud. Given this data, it seems only logical to prioritize approvals in the name of improving customer acquisition and lifetime value rather than solely minimizing fraudulent transactions.

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