Why It's Time to Embrace Financial Services' Dirty Word

Thea Garon leads the Urban Institute's Financial Well-Being practice area and serves as director of the Financial Well-Being Hub, a resource for data, insights, and evidence that improve household financial security. 

For years, financial service providers have waged war on the “f-word.” Not fees. Not fraud. Not that f-word. I’m talking, of course, about friction. Every extra click, password reset, or identity check was an enemy to be eliminated at all costs.

The rationale for this approach was clear. For providers, inefficiencies in onboarding and service meant abandoned applications, lower conversion rates, and less revenue. For consumers, friction meant the soul-crushing experience of endless applications, slow payments, and being asked to upload the same driver’s license three times.

But things look a little different in 2026. We’ve seen what happens when we optimize finances for zero resistance, and we don’t like the result. Frictionless gambling. Frictionless shopping. Frictionless scams. By removing friction from these experiences, companies have designed experiences that lower people’s inhibitions and encourage riskier behavior. Speed bumps exist for a reason, it turns out.

It’s time we reconsider the role of friction in financial services. We need to distinguish between “strategic friction,” the kind that slows things down just enough to keep people safe, and bad friction: cumbersome processes, needless bureaucracy, and inefficient services. Better consumer outcomes depend on getting the distinction right.

When Gambling is as Easy as Swiping Right

Let’s start by considering America’s new favorite pastime: sports betting. 

For much of human history, gambling has been frowned upon or banned outright. Societies from ancient Rome to post-war America sought to limit it. But in 2018, the U.S. Supreme Court overturned the federal ban on sports betting. Since then, 39 states — plus the District of Columbia — have legalized sports betting, with others on track to follow.

Most Americans now live in states where sports betting is legal. Even if you don’t, prediction markets like Kalshi or Polymarket offer loopholes allowing you to bet on whether your favorite QB will throw a touchdown.

No longer needing to venture to a Las Vegas casino or an Atlantic City racetrack to make a bet is already a significant reduction in friction. But even the friction of leaving your house has evaporated. Now you can place bets directly from your phone, using slick apps that make a 10-leg parlay as easy as ordering an Uber or swiping on Tinder. From start to finish, the gambling experience has become utterly frictionless. 

There is growing evidence that sports betting is taking a toll on people’s financial well-being. My Urban Institute colleagues and I recently found that people who bet on sports through online or mobile channels bet more frequently, spend more money, make more complex wagers, and report more financial challenges than people who bet at casinos, racetracks, or other physical locations. 

By removing friction from sports betting, we’ve removed its guardrails. We’ve given anyone with a smartphone in their pocket a 24/7 casino that sends strategically timed nudges and incentives to encourage ever more gambling. 

Taking the Shopper out of Shopping

Online shopping today is about as frictionless an experience as you can get. A few taps, and a package is at your front door before you’ve had time to consider whether you actually need it.

But Amazon, Google, and other internet giants are in a commercial arms race to make it even smoother. New AI agents promise shoppers the ability to compare options, assemble carts, and complete purchases, all with minimal involvement from humans. 

To some consumers this might sound like a dream come true. But at a societal level, it’s worth asking: Do we really need to make shopping easier? 

When shopping involves some friction, it requires people to make a conscious decision. They’re forced to slow down and consider whether a purchase is truly needed. When shopping is made easier, as we’ve seen with the rise of Buy Now, Pay Later (BNPL), both the likelihood and size of a purchase increase. These effects are strongest for financially constrained shoppers, suggesting that BNPL reduces the psychological pain of paying and makes spending money feel more manageable in the moment.

A world where shopping is rendered more seamless — where the psychological pain of paying is removed — may benefit retailers, but it’s unlikely to benefit society as a whole.

Fraud Loves a Frictionless World

Scammers have stolen tens of billions of dollars from consumers in recent years, turning deception into one of the fastest-growing industries in the digital economy. As financial services have become more sophisticated, so too have the tactics exploiting them.

Many schemes are disturbingly sophisticated. Fraudsters now use AI-powered voice tools to impersonate loved ones, calling victims in a panic and asking them for money to deal with an emergency. 

Other scams are alarmingly simple. A recent New York Times article described how fraudsters are sending fake party invitations loaded with malware. Thrilled to receive an invite, unsuspecting recipients open the link without stopping to consider why their college roommate whom they haven’t spoken to in years would invite them to a party.

Even financially savvy consumers are falling victim to frauds and scams because they’re busy, distracted, and coaxed into acting fast. Urgency is the scammer’s greatest asset.

Adding small delays, extra verification steps, or even a moment of confirmation can disrupt the speed and anonymity that scammers rely on. A well-placed pause creates space for doubt, reflection, and intervention. In many cases, that’s all it takes to stop a bad decision from costing thousands.

A One-Way War on Friction 

While financial service providers attack friction as the enemy, this crusade has always been selective: companies eliminate barriers that hurt their profits, while preserving, or even creating, barriers that burden consumers.

For years, financial institutions processed payments by transaction size, increasing the likelihood that customers would incur non-sufficient funds or overdraft fees. Banks made opening a checking account or a credit card as easy as possible, but require onerous, multi-step processes to close that same account. Many financial institutions resist open banking regulations that could make it easier for customers to switch providers.   

Companies across industries have also embraced procedural “sludge” — intentionally embedding friction such as endless wait times, dropped calls, and automated response doom loops into customer service processes to demoralize customers and push them to accept inadequate resolutions and less optimal outcomes.  

Embracing Friction as a Feature

It’s time we reconsider the role of friction in financial services. We should recognize friction as a feature, not a bug, that can lead to better outcomes for consumers when deployed strategically to their benefit. 

Already, there have been some promising developments on this front:

• After a rush to legalize sports betting, some states are now considering guardrails. New Jersey is exploring restrictions on micro-bets and in-game wagers, which have been linked to elevated risks of problem gambling. Ohio is considering banning mobile and online sports betting completely.

• To guide the future of agentic commerce, regulatory agencies, consumer advocates, and industry actors are working together to answer tough questions about how identity, consent, loyalty, and accountability should work when a human isn’t the one clicking the “buy” button.

• In the fight against fraud and scams, regulators are working with financial service providers to consider how transaction delays, stronger identity verification, scam warnings, and cooling-off periods for suspicious transfers can be part of a coordinated national strategy to address financial fraud.

For far too long, friction has been considered a bad word in financial services. It’s time we re-think that position. Financial firms already know how and when friction can benefit their bottom line. Now, it's time for the industry to consider where friction — deployed strategically and by design — can lead to better outcomes for consumers. 

The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.

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