Speed and convenience are the name of the game in the consumer checkout experience. However, a checkout experience can quickly turn sour when a customer experiences payment friction.
Payment friction is any type of obstacle that prevents a customer from making a final purchase. This can involve a complicated checkout form, few payment options or having to enter numerous personal details. This is bad news for merchants. Payment friction is the usual suspect in cart abandonment, lower conversion rates, and ultimately, the loss of revenue.
In a recent PaymentsJournal podcast, Suman Chaudhuri, Vice President of Revenue at CSG Forte; Javan Watson, Executive Director of Strategic Business at CSG Forte; and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, delved into what contributes to friction in the payer’s experience, how to minimize that friction and what strategies can be implemented without compromising the bottom line of a business.
When we typically think of friction, we associate this event with the online checkout stage. But according to Chaudhuri, payment friction can occur at any point before, during, and after a payment is made. He also recommends that businesses begin seeing the payment process as a journey and not a point-in-time event.
“Customers today want choices when it comes to making a payment. They want choice of payment methods, choice of channel and choice of timing,” Chaudhuri said. “So, when you start to offer fewer choices in the areas of payment methods, channels and timing, it results in inconvenience, which thereby increases the chance of errors or missed payments and thereby decreasing customer satisfaction overall.”
Another point brought up by Chaudhuri is customers’ growing concern about fraud. After the onset of the pandemic, it was found that 60% of customer service agents worked from home. This can pose significant security concerns for consumers, who would mostly be disinclined to offer their credit card information over the phone, further contributing to payment friction.
Finally, siloed back-office systems are unable to provide instant data as to whether payments have gone through for customers or when businesses hope to be paid. “I think one of the things that is causing friction is the checkout process being clunky,” Watson said. “Requiring the customer to input more data than is absolutely necessary.”
Understandably, merchants require new customers to create accounts to build a database and establish a relationship, which allows merchants to send targeted marketing messages and offer discounts and promotions. However, Watson said, he often just wants to make his purchase. Not offering a guest checkout option can lead to cart abandonment, as many consumers simply do not want to enter all of their personal information.
Watson also points out that offering few payment options can lead to friction, as can redirecting customers off the merchant’s main website and on to a third-party site for payment. This creates distrust among consumers, contributing to payment friction and cart abandonment.
Keyes added, “customers want to be able to pay the way they want to pay. It’s frustrating when they can’t, and they may abandon a transaction altogether or at least be very frustrated.”
Checkout’s have never been more fragmented, with credit cards, debit cards, ACH, BNPL, digital wallets and a lot of different digital wallets and more and more options showing up every day. Businesses don’t need to offer each one, but they need to offer enough to give customers the right variety of options. Otherwise, it will really bother customers in a way that is really challenging to a business.”
How To Decrease Friction
To reduce payment friction, businesses need to meet customers where they are. If customers do not want to create an account during checkout, guest checkout should be offered. When invoices are issued, businesses must ensure that they are clearly identifiable with information on what and how much a customer is being billed for. Furthermore, businesses should consider optimizing their website for mobile use to appeal to consumers who are increasingly on the go. Not implementing these strategies will cause frustration, making consumers less inclined to make their payments.
Offering a number of payment methods also helps minimize friction. Beyond the mainstay of credit cards, businesses should consider offering ACH payments and accepting payments from digital wallets. Secure, recurring payments that are tokenized are another effective strategy, as consumers would not need to enter their personal information every month to make their payments. Setting up tokenized recurring payments also ensures cash flow for businesses.
Chaudhuri emphasized the importance of not only working to remove payment friction from the customer experience but also digitizing their experience. He recommends businesses collect a working phone number and address from customers to reach out to them before a payment is due. He also mentioned the importance of having fallbacks. To maximize on-time payments, he encourages businesses to reach out to customers via email or text if a bill gets lost in the mail or the customer doesn’t open it.
“One thing that merchants are not always keeping in mind is that it’s very difficult to eliminate all friction from an initial purchase from a customer,” Keyes said. “You have to input some information somewhere because you’ve never shopped there before.
“But what merchants often don’t think about is how much consumers who are returning are expecting none of that friction again when they come back after the first time. They want to be remembered fully. They can accept logging in, but the payment information, shipping information, what they’ve ordered before and any other information needs to be there, very easy to access, as few clicks as possible, or you’re not going to have a loyal customer.
Implementing Strategies Without Compromising the Bottom Line
Most businesses are aware that their customers experience payment friction and do want to address the issue. The biggest roadblock to resolving this problem is a lack of capital and resources.
Watson recommends businesses consider partnering with a payments provider, like CSG Forte, to assist them. CSG Forte has a ready-built, low-code platform that can help meet the payment needs of businesses of all sizes.
Chaudhuri also mentioned the importance of using analytics to determine which customers to reach out to, and then sending them payment reminders through the channels they prefer.
The Payment Experience: Looking Ahead
According to Chaudhuri, artificial intelligence (AI) and analytics will be key to offering businesses many benefits, including boosting on-time payments, delivering insights that help businesses determine what to cross-sell and upsell to their customers and creating personalized customer experiences that boost customer satisfaction and build brand loyalty.
Keyes mentioned it’s not just about providing as many payment options as possible but also including the right payment methods. It’s important not to overwhelm customers with a plethora of digital wallet options. AI analytics can shed some light on which payment methods consumers use most often and help businesses approach each consumer with the most appropriate payment options based on what they typically use.
Businesses should continue prioritizing the optimization of the customer payment journey. Doing so leads to increased customer satisfaction, on-time payments, and a predictable cash flow.