Frictionless isn’t always better when it comes to banking

  • Words like seamless and frictionless seem to have become permanent fixtures of product releases and announcements pertaining to financial products. 
  • Some fintechs and banks are reintroducing friction into the digital banking process so that the design can safeguard consumer interests and wellbeing.

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Frictionless isn’t always better when it comes to banking

Words like seamless and frictionless seem to have become permanent fixtures of product releases and announcements pertaining to financial products. 

But most UX designers and design ethics practitioners will say that friction is like any other tool in the designer’s toolkit. 

It isn’t in of itself bad or good. Just like other tools like contrast and animations, it’s the implementation that matters. And the implementation of friction or the removal of it is a conscious choice in an environment where no choice is really value-neutral. When websites relegate the unsubscribe button to the bottom of an email and make it as imperceptible as possible, it is a design and business decision. The choice to push the “reject all cookies” options on a website behind multiple clicks and screens is a business decision as well.

So how does this discussion on choice architecture and friction pertain to financial services? 

Turns out the battle to eradicate friction from banking processes isn’t as wholly positive as marketing strategies will have you believe. In fact, there can be and are negative consequences of removing friction as a report by the Center for Financial Inclusion (CFI) shows. 

One downside of frictionless design is that the delivery of important information can be deprioritized to improve speed. The impact of this design decision is most obvious in places when customers sign up for a loan or commit to a transaction for which the fee structures or overhead charges aren’t entirely understood.

The negative impact of these design decisions can be even more severe in underbanked geographies. For example, 11% of Kenyans report unexpected or unclear charges according to a report by Innovations for Poverty Action. But analysts suggest these issues can be addressed by increasing comprehension of fee structures through design. 

There are also examples of banks around the world working with policy makers and researchers to introduce friction in banking processes so that they improve customer well being. 

Read the fine print

Jumo, a digital financial service provider in Africa, observed that customers who spent more time reading the Terms and Conditions of their loan applications were less likely to default. The company tested and collaborated with behavioral researchers to come up with designs that increased consumer interaction with T&Cs. The firm presented the T&C screen as a clickable option when customers opted to “request a loan”. Their design also gave precedent to viewing the Terms & Conditions through text as well as using a numbered list that nudged customers to click on the T&C first. 

Jumo’s experiment found that the new design increased engagement with T&Cs from 9.5% to 23.8% and that those who interacted with the T&C screen had a 7% percent lower delinquency rate than those who didn’t.

Wireframes showing the experiment run by Jumo for their Topcash product. On the left the two wireframes show the original screen where customers had three buttons they could click: 

i) Request a loan 
ii) About Topcash
iii) View T&Cs 

On the test version 
the first screen shows two buttons
request a loan and about topcash. When user click on request a loan they are presented with another screen to which has two buttons "View T&Cs" and "Proceed to loan request".

These changes to the app also included redesigning how charges and fees were presented to the consumer with separate screens detailing each type of fees that will apply to the application: 

Table showing that Jumo is presenting information about fees on 4 separate screens. 

a) Separation of finance charges and principal
b) Separate line detailing loans and loan repayment details 
c) Late payment penalty details 
d) Active choice approach to view and T&Cs

Adding friction to transactions

Research in the UK has found that people with mental health issues are more likely to be overly-indebted and are more likely to have trouble managing money. Factoring these findings in with frictionless banking experiences that are touted as universally good reveals that frictionless-ness can amplify harmful behaviors like overspending and gambling. 

To counteract this, Monzo introduced a “gambling block” which stops credit card payments for gambling merchants from going through. When customers turn this block on, they are asked to specify a “cool down” period which ranges from 72 hours to a year, which would kick in if a customer tried to turn the block off. This block not only allowed customers to be more in control even when their wellbeing and decision making faltered but also deterred them from making impulsive decisions and diving back into gambling when they may not be feeling their best. 

Translating case studies to America

Only 22% of American customers that were charged an overdraft fee reported that they expected it, with 43% reporting being surprised by the charge. Moreover, The Clearing House found in 2021 that despite increased usage of fintech apps, 77% of customers don’t read the Terms and Conditions and those who do read them don’t feel confident in their comprehension of the document.

Poor comprehension of fee structures and Terms and Conditions is just as prescient a problem in America as it is in Africa, and similar design interventions can help alleviate the harm that can come to customers. 

Similarly, while Monzo is based in the UK where sports related betting has been legal for far longer than in the US, banks in the US have started to benefit from the change in legality of this type of gambling. In 2023, FedEx Field in Maryland was the first NFL stadium to open a sportsbook (which is a sport gambling name for a company that offers sports betting). Bettors in 28 states can now partake in gambling through their phones. With sports gambling on the rise in the US, banks in the country may soon need to introduce design interventions like that by Monzo to ensure consumer well being. 

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