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A Fraction Too Much Friction?

‘Frictionless Banking’ and what it means to Financial Services

‘Frictionless Banking’ is one of those industry terms that feels like it has already become a cliché. In reality, it has become a more important topic than ever. Over the last 36 months, the Financial Services industry appears to have reached a consensus on what the term actually means. Broadly speaking, frictionless banking once only referred to the streamlining of back office processes in order to deliver quicker turnarounds and reduce internal costs. Today, however, the thinking has evolved to see frictionless banking become the removal of friction from the customer experience instead. Making every engagement a customer has with the financial institution simple and straightforward is the current Holy Grail of the sector.

New technology – and new challenges

As the digital footprint of customers expands exponentially, new technology is facilitating new ways to interact with customers and provide them with a more frictionless experience. Mobile banking apps that provide quick access to ‘glance-able’ account data but do not allow the user to make transfers. Biometric data such as iris or fingerprint scanning used as part of the authentication process. Location data from smartphones that can be used to pre-approve transactions if the user is identifiably at home or at the office. Institutions such as Atom Bank have even started using facial recognition software to allow ‘selfie-authentication’.

These digital technologies all deliver a simpler, easier experience to the customer. They exploit ubiquitous consumer technology such as smartphones while eliminating the need for cumbersome peripherals like card readers or fobs. Using technology to provide a frictionless experience in this way will become a key means for financial institutions to differentiate themselves from the competition now and in the future. More agile, digitally-savvy disruptor brands are rapidly entering the market and using technology to deliver frictionless experiences. There is no time to dither.

But there is a tension between providing a frictionless experience and ensuring that all customer interactions are secure and compliant with regulations. Something that provides a smooth experience for the customer could throw up compliance challenges for the institution. Storing biometric and location data on customers, for example, will allow the institution to provide the user with a hassle-free experience. Yet, as the technology grows more prevalent, how to securely store this data and use it correctly will become the subject of increasingly focused regulation. In these cases, there are third-party technology solutions that can provide a frictionless experience for customers and financial institutions alike. Many vendors provide tech that has built-in compliance measures in either the delivery of data or the segregation of customer details and customer records.

From frictionless to friction-right

It is also worth considering that providing a totally frictionless experience may not necessarily be the right approach. Rather, it is about providing the right amount of friction for the right product and the right customer at the right time.

Some might scoff at the idea of people using selfies as part of the authentication process, but this is a powerful way to interact with Millennials. This is how this audience expects to engage and providing them with this form of authentication gives them a frictionless experience. By the same logic, if older customers demand to use bankbooks as part of their customer experience, then the institution must provide them. It is about the customer segment and how they expect to interact with your business.

To use another example, mortgage lenders could use automated bots to deliver mortgage advice that regulation requires. However, for first-time buyers, it might not provide the reassurance and feeling of security they are looking for. A little handholding could still be required. The most technologically advanced or frictionless experience might not best serve the needs of the customer. It really does depend on the product you are selling and who you are selling it to.

So, when institutions consider how they approach frictionless banking and how they offer that experience to customers, a holistic perspective is required. Technology can fuel powerful innovations that deliver seamless and simple interactions with customers. Yet these possibilities must always be balanced with a consideration of the compliance challenges that they could throw up. And, perhaps most importantly, institutions must be asking themselves whether they are providing the right level of friction appropriate to the customer type or product.




Comments: (4)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 02 August, 2016, 17:091 like 1 like

Nice post. I agree with most of your recommendations except the second part of your sentence "The most technologically advanced or frictionless experience might not best serve the needs of the customer.". The way I see it, frictionless WILL ALWAYS serve the needs of the customer almost by definition. Just that frictionless needs to be viewed more broadly as an attribute of the customer journey, not of a piece of software or hardware, no matter whether any technology is involved in facilitating that journey. For example, Frictionless can be in how a bank staff interacts with a branch customer and how a paper form needs to be completed. In fact, in my blog post How Banks Can Increase In-Branch Sales, I'd specifically highlighted ways by which branks can increase in-branch conversion rates for their offers by delivering a superior CX without really needing much technology. 

João Bohner
João Bohner - Independent Consultant - Carapicuiba 03 August, 2016, 12:50Be the first to give this comment the thumbs up 0 likes

I agree with Ketharaman.

And Adam, you yourself mentioned in the last paragraph of your article: 'the holistic perspective is required', that means the 'whole corporation perspective'.

An enterprise wide perspective, a.k.a. a Corporate Architecture.

And then 'frictionless WILL ALWAYS serves the needs of the customer'.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 05 August, 2016, 17:08Be the first to give this comment the thumbs up 0 likes

@João Bohner: TY for your agreement! But I must admit that there are times when I've asked myself the same question that forms the title of this post. I've described my experiences and recommendations on my company blog "Can Something Be Too Frictionless?" (hyperlink removed to comply with Finextra Community Rules but this post will appear on top of Google Search results when searched by the title).

João Bohner
João Bohner - Independent Consultant - Carapicuiba 11 August, 2016, 00:12Be the first to give this comment the thumbs up 0 likes

Something can be frictionless (unachievable) or with friction.

In 'with friction' state, it will have a low or high coefficient of friction.

And, in CX, the lower the friction coefficient, better CX.

One of my Banks - Caixa Econômica Federal - provides, on my desktop, the following ceremony to reach my banking activity:

1. Click on the link to the site . Displays the entry page.

2. Click on the "My account access" button. A new screen appears.

3. UserName: type the user name previously recorded, without spaces, minimum 6 maximum 32 characters, letters and numbers, no special characters.

4. Click on a radio button to inform if I am a person, company or government.

5. Click on the button "go ahead". A new screen appears.

Dear Customer, click on the letters above if they are in accordance with the initials of your name. Otherwise, for your safety, click Back and restart your identification."

7. Click on the initials. A new screen with a virtual keypad with only letters, numbers  and caps key appears.
Use the keypad next to enter the Internet password."

8. Various clicks on the keypad, according to your password, previously recorded.

9. Click on the "Confirm" button. A new screen with a huge horizontal menu of service buttons appears. Arrows to scroll right and left are available on the screen.
Finally I've reached my "Banking Business"!

= = = = = =

Now here, a pit stop for thinking:

Let's note that, up to here, the friction is NOT due to the banking business.

The 'entry' ceremony is a kind of 'Foundational Service' which may be used in other businesses, not only for banks.

The BOA - Business Oriented Architecture, clearly deals with that.

Business applications should not concern themselves with foundational services such as security, logging, history, accounting, audit capability, etc.

The business applications/services should only focus on business processes, allowing construct solutions with less frictions! (At least, separate the frictions!)

The foundational services, are provided by the BOA infrastructure and can be reused for many businesses.

Thats it!



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