The Pros and Cons of Frictionless Payments

Frictionless payments, designed to make financial transactions seamless and hassle-free, are gaining momentum globally. By 2027, cashless transactions are projected to grow nearly 50%, rising from 1.5 trillion in 2024 to 2.3 trillion, according to Statista.

It’s no wonder businesses and consumers alike are embracing this innovation. Frictionless payments—ranging from digital wallets like Apple Pay to contactless cards and QR code payment links—are revolutionizing how people pay. These methods significantly reduce transaction times, improve data security, and provide businesses with actionable insights into consumer preferences.

Brian Shniderman, senior managing director at Accenture, underscores their transformative impact:

“Frictionless payments are a game-changer for improving efficiency, customer satisfaction and staying competitive. They help cut down on transaction errors, streamline operations, and meet the growing demand for flexible payment options.”

For businesses, frictionless payments often lead to increased customer loyalty, fewer abandoned carts, and new growth opportunities. Additionally, as Phillip Goericke, CTO at NMI, highlights, payment data offers invaluable insights that businesses can use to tailor products and services—particularly in subscription-based or omni-channel models where convenience is key.

Privacy and Security Concerns

Despite the advantages, frictionless payments come with notable risks. Technologies like near-field communication (NFC), radio frequency identification (RFID), and biometrics, while enabling convenience, also raise privacy and security concerns. Consumers and advocates worry about bad actors misusing personal data or making unauthorized purchases.

Jennifer Fagan, retail partner at EY, points out another layer of complexity:

“It may be frictionless on the frontend, but there’s going to be friction on the backend. You could have a friendly fraud situation where you ask for a chargeback and say, ‘I didn’t purchase that,’ or maybe a family member had done it on your behalf.”

For businesses, these challenges can translate into increased disputes, chargebacks, and customer mistrust—all of which add costs and logistical hurdles.

Striking a Balance

Frictionless payments offer undeniable benefits, but businesses must address privacy and security concerns to build consumer trust. By implementing robust safeguards and maintaining transparency about data use, companies can fully leverage the potential of frictionless payments while minimizing the risks.