Banks are racing to create the best possible user experience, as the new competitive battleground rapidly moves online and mobile, and customers can be won and lost before ever stepping into a branch or talking to a human.
Of course banks therefore need to create as hassle-free a process for their customers as possible in order to keep them engaged and loyal. If a customer experiences friction such as repetition or long form-filling exercise in any transaction, they are likely to abandon the process and take their business elsewhere.
But if you take the concept of frictionlessness to its ultimate conclusion, this presents problems.
There are three key reasons why frictionless banking could be risky:
First, while zero-click transactions have been proven to be possible, this removes any interaction whatsoever. Great for convenience, but very difficult for customer engagement. How will the customer even know whom they are dealing with?
Perhaps more importantly, from a security point of view, if the customer perceives the process as being too easy, they may become alarmed at the lack of apparent security process. Where personal money is concerned, most humans prefer tangible security hurdles, if only for the reassurance that they are being kept safe. This can of course be automated to dial up or down as appropriate – for example small contactless payments are friction-free while large transfers and transactions should require certain hoops to jump through, for the customer’s own peace of mind.
There is also, of course, regulation and credit risk to consider, another inhibitor that remains unaffected by the rapid march of technological progress. For example, totally frictionless mortgages used to exist many years ago, but are now a relic of the past: the regulator and the market’s appetite for risk are unlikely to go down that path again, having learned the lessons of 2008.
Friction-right, not frictionless
For these reasons, we suggest that the market ought to strive towards “friction-right” rather than “frictionless”. You need to dial your friction levels according to need, rather than remove it altogether.
Inevitably, the latest artificial intelligence (AI) technology can already intervene to automate this process. The software now exists to create a layer of AI that applies the most advanced biometric security procedures that the customer never even perceives, and only intervenes with a security question if the customer exhibits any behaviours that trigger an alert.
For example, we recently partnered with a fintech specialist to deploy such a capability for Nationwide, which actually incorporates behavioural biometrics into an app. It detects not only the details that the user enters, but how they do it: time taken, pressure and movement of swipe or mouse click, keystrokes per second etc. The customer never knows it’s there, but the bank can override it if any questionable behaviours are detected, and the levels of security (or friction) can be adjusted according to the risk score, in real time.
The solution, therefore, lies in striking the right balance. In today’s world of mobile, 24/7 banking, any lender will need a back end that is 100% secure, otherwise they will immediately be out of the race – that should be a given.
But at the front end, the right amount of friction will give the customer a welcome reminder that they are in good hands.