The concept of frictionless banking has been gaining traction in recent years. Initially just shorthand for improving support and admin functions within the financial services industry, the term now designates an aspiration to make customers' banking journeys as simple and as smooth as possible.
Few would argue that the financial services industry has reached its destination in that respect, and most would agree that there's still much work ahead before the dream of frictionless banking can be realised. What developments can we expect from frictionless banking in the coming years?
As we've highlighted previously, the financial services industry is likely to put a great deal of effort into finding the most effective balance between banks' (and customers') need for high-level security and account holders' need to be free from onerous checks and secondary verification. For example, using the biometric readers present in most smartphones as a way of confirming a banking transaction – say, by providing a face or fingerprint scan – would seem a more frictionless experience for customers than using card readers, codes or other forms of two-factor identification.
Identifying technologies that can truly help understand the customer is also likely to be an area of focus for those pursing frictionless banking. This might involve using sophisticated data analytics or artificial intelligence to identify customers' upcoming needs – from raising a credit card limit to opening a new savings account or taking out a mortgage – and responding to them appropriately.
For example, rather than using indiscriminate mailouts to advertise a new offering, identifying the right customer and the right time to advertise to them is the ideal – but one the industry hasn't yet entirely delivered.
Similarly, using AI to pre-determine the suitability of a customer for a product, and sparing them filling in reams of application forms, could prove beneficial. Artificial intelligence is also likely to make banking more frictionless by taking over routine customer services queries and tasks, extending the hours the customer services function is available and cutting down on wait times.
Behaviourial analytics could be used to help predict when a customer might be ready for a new, or different, financial services product by analysing a user's interests – someone who's been making repeated payments to an IT support hotline may be in the market for a new PC and might want their credit limit extended accordingly. But it could also be used to help cut fraud, by identifying normal banking usage patterns and flagging up behaviour that falls outside of those norms. This might involve measuring how long a user typically takes to log in, the clicks they make, and the typical screens they visit and in what order, and then flagging up a user not following the same path as potentially an unauthorised login. Or it could mean simply using location data to work out when a customer is on holiday rather than suspecting their card is being spoofed by someone in another country. In various ways like these, behaviourial analytics could prove useful in removing friction from banking.
Perhaps most importantly, frictionless banking will cause a drive to financial services companies 'meeting the customer where they are': finding where and how consumers want their banking, and integrating services accordingly. The rise of banking APIs is likely to facilitate such practices, enabling diverse fintechs, social media services, websites and mobile apps to integrate payments and other functionality into their run of business.
The future of frictionless banking will be dictated by customers' wants and needs – just as it should be.