Here’s the scenario that’s becoming an increasingly common way for transactions to be conducted:
You’re texting with a friend on Facebook Messenger about the tickets he got for you both to a concert in a few weeks. Rather than exit Messenger to go to your banking app to pay him back, you just tap the blue + icon on the bottom of the screen, enter the dollar amount, and send it off. “Thanks for taking care of this,” you message him as the total’s taken out of your debit card on file.
“Peer-to-peer transactions, especially through our mobile devices and over our social media feeds, are causing a huge shift in our financial ecosystem,” says Bo Zou. Zou is a Toronto customer experience strategy and design consultant with experience in the banking and finance sectors.
“It’s moving us closer to becoming cashless economies and really relates to the experience,” he adds. “Payments as we know them are really fading into the background of other activities. Layering social media on top of transactions is one way that ‘Uberization’ is transforming the system.”
Social payment platforms are seamless and inexpensive – as in free. Whether it’s Facebook Messenger or Paypal’s Venmo (the “grand-daddy” of the concept that was launched in 2009) or Google Wallet, you just register your credit or debit card and start tapping to “talk” and transfer money as needed. The functionality is there. And there’s no charge when you’re transferring funds between banks or making domestic payments.
It’s a system that works for a lot of people: Venmo, for example, handled $17.6 billion in transactions in 2016, but that almost doubled to $34.2 billion last year.
For all the advantages of social payments, there are also some downsides – from the provider’s perspective. Back when social image sharing app Snapchat launched Snapcash, it fast became another way to monetize porn by enthusiastic adult performers (never mind Snapchat’s rules to the contrary).
Despite such risks, Jeremy Allaire, co-founder and CEO of Circle Internet Financial, another social payments platform, believes anyone interested in playing the mobile commerce game must embed their products in social media to gain or buy instagram followers.
He told the PaymentsSource news outlet: “The No. 1 use of mobile devices is messaging. There’s a very deep connection between the future of consumer payments and messaging, as the messaging user interface allows for more possibilities.”
Bo Zou points out that for all the “gee whiz” commentary about young, socially savvy adults now being able to simultaneously text their friends and pay for last night’s share of dinner, the burgeoning world of social payments also has significant humanitarian aspects.
Currently, as Zou points out, over 2 billion people around the world have little or no access to banking services. Financial inclusion is key to moving people out of poverty.
Some of the big social sharing platforms, in fact, have targeted regions that are largely unbanked, but not unphoned. It’s a strategy of the two Chinese powerhouses, Tencent and Alibaba’s affiliate Ant Financial, which are establishing strong presences in Southeast Asia. And it’s working: At the end of last year, Ant’s Alipay service boasted 280 million users in Thailand, India, Hong Kong and the Philippines.
It may be a slow process in some underdeveloped economies, though. Africa, for one, is seeing adoption of mobile phones, the key delivery channel, on the rise. It’s reached 37 percent of the population.
But the growth pace of active social media adoption in Africa still lags: One report showed a 12 percent growth in users to 191 million last year. Most, 172 million, were mobile users of the dominant Facebook-owned platforms, WhatsApp and Messenger. Still, a population of 1.26 billion, that means there’s a way to go before social payments become a broadly viable solution to financial inclusion.
“It’s a situation that’s unfolding,” admits Zou. “But the potential is there. And not just for social payments using existing currencies. Integrate cryptocurrencies into the equation and we may be on the path to creating a level field for banking access. It all makes for exciting times!”