Is Friction Always The Villain It’s Made Out To Be In Fintech?


Snigdha Kumar is head of product operations at Digit.

Slogans such as “taking the friction away,” “one-tap access” and “simpler, faster, better” are ubiquitous across financial technology product marketing. Fintechs, whether in banking, lending, savings, budgeting or investing, have always focused on simpler, faster and frictionless products. Dealing with money is hard and scary for most people, and, therefore, fintechs’ endeavors to simplify and make products frictionless are definitely noble.

But is friction always the enemy? No.

Friction, when used carefully and intentionally, can be a helpful product feature versus a product bug. It gives fintechs an opportunity to build trust with their consumers and prevent consumers from making costly mistakes.

Preventing Consumers From Making A Costly Mistake

Fintechs deal with one of the most vital and sensitive aspects of someone’s life: money. Even the smallest money mistakes have the potential to cause irreparable harm to users. I believe the probability of making such mistakes increases in a no- or low-friction environment.

For instance, if a peer-to-peer payment application makes it very easy and quick to send money to a friend, it could also increase the likelihood of sending money to the wrong person and never having it returned. If a robo-advisor reduces the barrier to invest, it might also allow novice investors to potentially make financially catastrophic trades. If a buy now, pay later company makes it frictionless to “afford” anything at a click of a button, it might also offer an opportunity for customers to take out more debt than they can afford to pay back.

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Is the answer to make fintech apps incredibly difficult to use and add friction before every step? Of course not. However, adding speed bumps before high-stake actions are vital to the success of the overall user experience. A few ideas on how strategic speed bumps can be introduced in the product experience include:

1. Gate complex financial products for novice customers. Let’s take an example of a robo-advisor. If a retail trader wants to conduct options trading, maybe the solution they’re using could require them to demonstrate their understanding of the topic. Perhaps they could answer a knowledge questionnaire or upload a certification that verifies their understanding. Alternatively, if a retail user wants to learn by doing, they could be given a small limit to invest in options for “X” months or until they demonstrate their understanding of options trading.

2. Add a cognitive barrier before a sensitive action. Let’s say a user wants to transfer a large amount of money using a peer-to-peer payment app to a first-time recipient. They could be shown a confirmation screen that outlines their amount of transfer and the details of the recipient address/handle before they are able to send the money. This can weed out the “zero” error problem or prevent money from going to the wrong beneficiary.

3. Make users understand the consequences of incorrect usage. Consider the example of BNPL loans, in which case a user might not understand that they are taking on “debt.” Additionally, the consequences of using these products repeatedly and not paying them back might not be clear to all users. This could not only lead a customer down a debt spiral but also increases potential delinquencies for the BNPL provider. A winwin solution could be to have a screen that summarizes all the fees and includes a notification that a customer is taking out a loan before they agree to the terms and conditions. After all, let’s face it: Nobody is reading the lengthy terms and conditions before completing a purchase.

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Building Trust With Customers

The underpinning of any fintech’s success is trust because they deal with people’s hard-earned money. The expectation customers hold regarding fintechs is a fast and seamless experience. However, if some friction is communicated and contextualized as friendly friction, it can give customers confidence and create trust. Here are two specific ways in which friction can be used to build trust with users:

1. Protecting users from bad actors: When friction is applied to protect customers’ money, financial information or identity, it can be perceived as a security feature versus friction by customers. Research suggests that customers want their financial institutions to put additional guardrails around account openings and money transfers for added protection. However, the answer here is to not make customers fill out lengthy forms or require authentication for every transaction but to get a bigger bang for their buck for each friction touchpoint that is introduced to the user.

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For example, during the account-opening process, most financial institutions require users to input know-your-customer information. This is required friction for compliance, fraud and legal reasons. Fintechs can get more value out of this friction if they reuse pieces of KYC information and run email, phone verification and identity theft alerts. By using multiple fraud signals from the same set of data, fintechs can provide more robust protection against fraud and protect users’ identities and money, thereby building trust.

2. Giving users control: Money is so personal at an individual level that no matter how “intelligent” fintechs get, they are going to make mistakes and miss edge-case scenarios. Therefore, giving users control to course correct is imperative. For example, in an automated budgeting application, giving users the option to adjust their bill amounts, payment schedules, and transfer and spend limits will help users feel in control and also build trust.

In the fintech industry, strategic friction can help protect and build trust with the consumer. When executed thoughtfully, this friction can be done in a way that ultimately maintains a seamless and pleasant user experience. As in physics, friction is the force that helps us move forward with stability. Similarly, in the fintech industry, strategic friction is essential to move the industry forward.


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