In business it’s called friction. Any difficulty or hurdle to getting a client onboarded to your product or service is friction. Any barrier to making payments is friction.
Friction affects a variety of important business metrics, and is the key to truly identifying the challenges your customers are facing.
And of course you can closely investigate those metrics individually such as conversion rates, support ticket numbers, churn rates, page load times, cart abandonments or customer retention costs.
However, The real insights are found in the customer journey, and friction is the number one impediment to a seamless customer journey. Because It’s only when you visualize the complete journey that your customers take, can you really start to address the root causes.
In the business of decentralized finance however, there are simply many more friction points to consider. The customer journey is more complex. There are additional layers of Know Your Client (KYC) procedures, complicated UI/UX, and technical knowledge barriers which are affecting the DeFi industry as a whole.
If you want to see where the DeFi industry has to move to, look at Software-as-a-Service (SaaS). SaaS businesses have their friction points nailed down. It’s a mature industry where it is easy to diagnose and address the common pain points SaaS customers face.
This just isn’t the case in the emerging DeFi industry. It doesn’t matter if you are a mainstream crypto exchange, a new NFT marketplace, an innovative crypto trading app, or a disruptive DeFi product, the friction is there. The friction needs to be dealt with in order to achieve widespread market adoption and success.
Coinbase is a perfect example of a crypto-native company who focused on the friction problem at the core of their business. They focused on extremely easy customer onboarding, and simple user experience: they hid all of the complexity behind excellent user experience and user interface design. They made making payments so easy, that anyone could buy some Bitcoin with their credit card. No friction.
Returning to the customer journey, decentralized finance businesses need to think about the entire journey from start to finish. From how users will register, how they will get their money into the actual product, how they will complete KYC, how they will interact with the interface with the product, customer support issues, and then how they will pull their money back into fiat when needed.
Because even increasing just your conversion rate from 2% to 4% is doubling your sales. This is the power addressing the friction points. This is why the customer journey analysis is such a powerful tool.
And doubling those sales could be as simple as removing one step from your onboarding process. Doubling your sales could be the result of adding a simple automation for when a customer’s payment method is rejected. The difference between losing a customer – and having to pay the costs to replace them – could be as simple as an email which is worded more clearly.
Friction is the pain, but also the opportunity to fix something.
The Largest Friction Point: Banking & Payments
One of the largest friction points that all DeFi solutions are facing is on the banking and payments side of their product. Specifically, how crypto native companies are dealing with how users on-ramp their money into the crypto world, and then how they off-ramp back again to fiat.
Simply put, just getting your money in-and-out of crypto is a major friction in itself. Making this process of on-ramping and off-ramping into DeFi products smooth affects user acquisition and retention in a very direct way.
These DeFi platforms and companies are still at the whim of traditional banks, because users obviously need the full functionality of banking and payments in order to conduct business. And every user has a different bank, which makes it near impossible to solve these issues at scale.
Embedded Finance To The Rescue
There is a new breed of companies who are aiming to tackle these issues. Because it just makes sense for crypto native businesses to work with a banking and payments provider who “gets” their specific challenges and the unique friction points.
We spoke with one such company working on the challenge. OpenPayd, is a UK based banking and payments provider who have built a solution for crypto-native companies which can be embedded in any DeFi product.
“Building decentralized financial products is hard enough, without all of the complicated friction points related to banking and payments. We designed our platform from the ground up — with specific features to address the unique friction points crypto-native companies and their users experience. Our embeddable solution can be integrated into any DeFi product easily through a single API, and be fully up-and-running in less than two weeks. No more friction.” — Dimitar Dimitrov, Director of Technology — OpenPayd.
This is how service-based businesses are born.
As a new disruptive industry emerges, so do unique friction points and challenges emerge for these new businesses and their users. And the crypto companies who address these friction points, and really dig deep into the complete customer journey will emerge as the winners.
They will be the ones who stand out, experience exponential growth and survive the worst bear markets. More importantly, they will be the ones with happy customers and raving fans.