Blogs | October 3, 2017

Why “frictionless” banking isn’t right for everyone

Might banks actually help some of their customers spend less by re-introducing a little inconvenience?

From contactless payments to opening current accounts with a selfie, new tools to make banking easier and more convenient for customers have been its Holy Grail for several years now. Removing the “friction” caused by needlessly slow processes is what many customers today expect in an age of instant gratification led by the likes of Amazon and Uber. 

But when nearly anything people want can be bought in seconds with the click of a button – with virtually none of the “pain of paying” that physically handing over cash entails – might  banks actually help some of their customers more by re-introducing a little friction, in certain circumstances? 

An example might be slowing spending down by adding steps to the transaction process. This may help people by making it easier to resist the temptation to spend. 

Thinking time

This might help shift people from what psychologist Daniel Kahneman in his book Thinking, Fast and Slow calls “System 1” mental processing to “System 2”. 

System 1 is said to be the brain’s “fast, automatic, intuitive approach”, while System 2 is the mind’s “slower, analytical mode, where reason dominates”. According to behavioural scientists, System 2 can overcome the intuitions and impulses of System 1 and carry out tasks that require effort and self-control; it can decide not to buy that expensive sound system or designer handbag. 

Some fintechs like Monzo are already looking into adding features such as alerts into mobile apps especially for those with mental health problems who struggle with over-spending.  For instance, a family member could be alerted when the person spends more than a certain amount, or spending could be blocked at certain times – such as late at night. 

Even for those who don’t need help to curb their spending, a little friction or inconvenience can be familiar and helpful. As this Age UK report states, many older people still like to use traditional products like chequebooks, and banks should cater for this.

And many others – of all ages – are not comfortable with fully automated money decisions – such as relying on robo-advisers to make financial choices for them, as the ING International Survey found. They still want a “human touch”.

Keeping control

It’s indicative of a wider trend. The poll of nearly 15,000 people in Europe found that many were not comfortable with frictionless processes even outside of banking. Just 32% felt OK about an internet-connected computer program ordering milk from a store on their behalf, and only 38%  would be happy using it to send a birthday card to a friend.

“While removing friction can allows banks to help its customers and remain competitive, there is definitely a case for making sure that it can be reintroduced when necessary, too,” said ING behavioural scientist, Nathalie Spencer.

So the next time you’re offered a new banking service, take a moment to think about the level of friction it offers and pick the one that’s most suited to you, personally.


eZonomics team
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