Blog: Frictionless payments - driving customer loyalty

contactless payment

Frictionless payment options have taken on new significance following the outbreak of Covid-19, but their significance runs much deeper. Nigel Phillips, commercial director of insurtech CDL, looks at the technology’s potential to redefine the relationship between insurance providers and consumers, and move beyond the traditional renewal cycle.

Concerns about the transmission of the coronavirus, added to the closure of shops, has contributed to a 50% reduction in the use of cash transactions almost overnight in the UK. Stepping into its place have been online purchases and contactless payments. Not only is this proving safer, it is highlighting the potential for frictionless payment to support economic activity while providing next generation consumer experiences.

Payment innovations

Synonymous with contactless card payments, auto-renewing subscriptions and mobile wallets enabling purchases with a fingerprint, frictionless payment is any checkout process where the barriers to buying have been minimised. Long before mobile payments, Amazon reaped the rewards of allowing customers to make ‘one-click’ purchases using stored payment details. Many encounter frictionless payment without even thinking about it, when using services such as Netflix and Uber.

In return for delivering a superior shopping experience, organisations realise fewer interrupted purchase processes, improved efficiency and greater customer satisfaction and loyalty.

Global influences

The demand for effortless payment methods is only going to increase with global trends, including the move away from cash, and in-line with expectations of streamlined consumer journeys and seamless checkout processes.

Global digital transactions are forecast to be worth €4.9tn (£4.3tn) by 2022, signifying that the ‘cash is king’ era is well and truly over. Worldwide, more than one billion people are forecast to make a mobile payment in 2020 and one in six adults are now registered for mobile payment services such as Apple Pay in the UK, where contactless payments rose by 31% in 2018 (UK Finance). Cash use is lowest among younger age groups, leaving no doubt about which way the trend is heading.

Data and dynamic pricing

Data plays a key role in facilitating the next generation of frictionless payment propositions, helping retailers achieve competitive advantage by enhancing customer experiences. This is where the greatest potential for the insurance sector lies.

Customer data collected through digital accounts and payments helps build up a profile of an individual’s preferences, which is then used to tailor product pages, discounts and offers. Combining data and dynamic pricing enables ‘auto switch’ options that adjust a customer’s premium and ensure they are paying the right price for the right cover – for example, if a speeding conviction expires or a car valuation is lowered.

Beyond its seamless and hassle-free nature, frictionless payment opens the door to a more personalised shopping experience. Integrated within a mobile platform it can offer cross-selling opportunities, such as proactive insurance recommendations and togglable add-ons become possible, signifying a transition from ‘one-click’ to ‘no-click’ purchases.

Insurance another way

These developments are conducive to a more open and value-based relationship between provider and customer, facilitating a move away from the ‘hidden charges’ perception of insurance.

Frictionless methods may also change the way in which insurance is purchased. Pay Pal Credit is already making waves in developing credit-based alternatives to finance, enabling customers to spread the cost of online purchases with pre-approved payments.

Frictionless thinking

In the future, frictionless payment will transform everyday financial transactions across the globe, reducing barriers to buying and bringing significant benefits to both customers and providers. As the technology behind it becomes more advanced, the stakes for the insurance sector will only become greater.

In an industry where providing unrivalled customer experiences is increasingly key to standing out from the crowd, it’s time for insurance organisations to adopt a frictionless way of thinking.

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