Friction on the financial highway

More than 50% consumers are in a digital dark zone; fintech brands lose billions as consumers drop out of transactions: Facebook Zero Friction Future report

Despite the massive thrust on digital transactions by government and private sector alike, just 40 per cent of the total consumer base for credit cards, 49 per cent for insurance products and 41 per cent for loans are part of the web of online financial transactions. Not only are brands unable to tap into nearly half the consumer base, they lose out close to a third and more of digitally engaged customers who drop out halfway through a transaction.

Nearly 29 per cent of consumers for credit cards drop out due to friction, as do 37 per cent in the insurance (life and others) category and 32 per cent in the loans (personal and others) category. Across the spectrum of financial products, media is the biggest cause for friction.

All points of interaction between brand and customers are labelled ‘media friction’. Any unnecessary additional effort, incremental steps or inconvenience that leads the consumers to abandon their purchase journey is defined as ‘friction’. Friction may occur offline or online and includes everything that adversely affects the consumer purchase journey.

The solution is a mobilefocused strategy. “The use of mobile could help brands tap into a credit card transaction opportunity of nearly $38 billion, insurance premium income opportunity of around $70 billion and loans outstanding opportunity of almost $219 billion, by reducing media friction,” the Facebook Zero Friction Future report for fintech brands said. The report goes on to say that by 2022, mobile could create an overall sales opportunity of close to $985 billion for financial services brands in India, by reducing friction and influencing purchases of credit cards, insurance and loans.

Consumers expect and demand convenience, speed, automation and simplicity. When they don’t find that, they drop off. Alok Mittal, CEO and co-founder, Indifi Technologies says, "The fintech industry as a whole is working together to remove friction from day-to- day banking experiences.” He adds that optimising the use of mobile is vital for analysing and working on large data models providing use cases of what customers across various verticals in cities, sizes or age of business need.

According to the Facebook team, the purchase of financial products, by their very nature, is a high involvement process and requires assistance. Pulkit Trivedi, director, Facebook India said at the time of the launch of the report last month, “As more and more Indians access the internet on their mobile phones, there is a big opportunity for financial companies to create a powerful digital experience that is intuitive, more seamless and free of friction points for their customers.”

Mobiles can help fintech brands provided they are able to design an experience that takes into account the unique needs of customers and also the data constraints faced by users across metros and small towns. Gayathri Parthasarathy, head, Financial Services-Advisory, KPMG in India said, “Digital savvy customers expect a nearly seamless, device agnostic experience in their financial transactions. Any inconvenience or an additional step in this path to purchase of a financial product can lead to loss of customers.”

While brands are aware of and are adapting to the new technology that is changing the way consumers transact, they are often caught unawares by the huge shift that this has brought about in customer expectations. Research shows that consumer pain points that lead to friction can occur across three main stages of the consumer journey: awareness, consideration and intent. Awareness friction refers to the problems consumers incur in getting to know the brand. Removing friction at this stage requires brands to make discovery and access a smooth process.

The next point of friction occurs at the ‘consideration’ stage. This takes into account every hurdle placed in the way of consumers when they are considering a brand. And finally there is ‘intent friction’ that kicks in when customers are close to making a purchase.

Mobile phones help cut the points of friction by cutting down the length of the purchase journey. As per the report findings, mobile-enabled purchase journeys are shorter than offline purchases by 22 per cent for credit cards, 17 per cent for insurance and 8 per cent for loan categories. Mobile can reduce friction by three percentage points across the purchase journey for credit cards and personal and other loans, while reducing friction to five percentage points across the purchase journey for life insurance.