The cost of frictionless transactions

Last week Slate wrote about Chris Grey, a user of the Venmo mobile payment app, who was extremely surprised to see an unauthorized charge for $2,850 show up in his bank account. He was even more surprised when he realized it was a Venmo charge, made after his email and password were changed, changes he wasn’t notified about. “I never got an email that my password had changed, that another email was added to my account, that another device was added to my account, or that a lot of my settings had changed.” The Slate article also noted how Venmo made it extremely easy to connect a bank account to the app, especially when the option to connect a credit card (better fraud protection for the user) is not as prominent. Last week, Venmo still had not replied to Grey’s request for assistance.

An Engadget followup from from today referenced Venmo’s response to security claims. Venmo’s goal is to, of course, increase its user base and to do so it wants to make its signup process as easy and with as few steps as possible. As Slate pointed out, late last year Venmo “added features that let iOS and Android users who downloaded the Venmo app link it directly to their bank accounts using their existing online-banking credentials. This more “frictionless” process,eliminated the previous need for users to manually enter their bank routing information into the app.” By reducing the complexity of the signup process and especially of each mobile payment, Venmo tried to make its app easier than using any other method to transfer money between friends.

Venmo is not the only company trying to “reduce friction” in the payment process. Apple thinks it can make it easy to pay with a tap with its Apple Pay. Ideally, the user can pay at stores with only one touch that’s easier, faster, and safer than a regular credit card. Yet, even though the process requires banks to authorize credit cards per person, fraudsters have already found a way around it. While we’re on the topic of Apple, they make signing up for a new Apple ID on a new device without a credit card extremely difficult which makes unintended iTunes, App Store and in-app purchases too easy… or should I say frictionless?

Cash with small change:  most friction per payment

Cash with small change: most friction per payment

Another attempt to reduce friction comes from Uber. Slate mentions this as well: a 20% tip is already added to the cost of the ride and there is no payment made to the driver at any point during the trip. It’s frictionless for the driver and the rider. It’s all great until the rider gets an unexpected charge for $452.

Amazon has had a frictionless feature for several years with its “1-Click Ordering.” Since it already has the user’s shipping and billing information on file, Amazon doesn’t require additional information fulfill the order yet the user might be surprised at what shipping costs are charged. With Amazon’s new voice-activated speaker Echo, users can place Amazon orders without even that one click. Frictionless? Indeed.

What all these services have in common is that users give up some of their buying power, some control over the purchasing process,or even the safeguards inherent in a credit card transaction in return for a faster, or even nonexistent, checkout. This trade-off works when the charges are as expected, when the user’s disposable income is large enough to ignore minor discrepancies, or when there is no fraud (or if there is, it’s settled at no cost to the user.) The question is, can the benefits of a frictionless transactions cancel out the extra costs or unnecessary purchases for users or will the future of frictionless payments add more features that support users, not wheedle more money out of them.

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