During the course of its evolution, social media has been used to connect with long-lost friends, market your small business, and stay on top of the latest trends and news. Over the last couple of years, social media is also being used to send and receive money.
Some say it started when Venmo went mainstream in 2013. There wasn’t anything like it. By using an app you could pay your roommate rent, pay your friend back for a concert ticket, or split a dinner tab with your family. It was fast, easy, and had made those awkward conversations regarding money a thing of the past. No wonder the app is on track to process a staggering $20 billion in mobile payments per year!
Since then, other social platforms have followed Venmo’s lead. You can transfer money directly to another party using Facebook Messenger or Snapcash. While digital wallets like Apple Pay and Google Wallet allow customers to make in-store, in-app, and even email transfers.
Perhaps most interesting is how traditional banks are also jumping on board. For example, Barclay’s introduced Pingit which allows people to pay each other via a Twitter handle or mobile number, while Kaypay from India’s Kotak Mahindra allows the transfer of money through Facebook.
Additionally, in 2015 IBM, Intel, JP Morgan, the Linux Foundation, and several big banks announced the “Open Ledger Project,” which is known as Hyperledger. This is an open-source blockchain platform that would let businesses build a distributed ledger for virtually any product or service they can imagine, such as a fast, secure, and direct payment platform.
In other words, social payments are already disrupting the entire banking and financial services industry, but what benefits and risks do they possess?
The Benefits of Social Media Platform Payments
They’re Seamless and Inexpensive
The most obvious benefit of social payments is how easy they are to use. That’s because in most cases the addition of a social payment is already in an existing app. Case in point; Facebook Messenger.
By simply adding a credit or debit card, you can send or receive money from friends or even through an app developed by a business via its some 30,000 chatbots with just a click of a button. And, since you’re already using Messenger, you don’t have to worry about downloading a new app. It’s already there for you to use and start using.
Furthermore, if you’re a business owner you can easily integrate your payment platform into social media payment platforms like Messenger or Snapcash. In fact, if you’re a freelancer you just need to have an account and a linked checking account or credit/debit card in order to accept and receive funds. For larger businesses, you can use AI bots, to painlessly transfer money.
Best of all? Most social platforms are free to use. They also do not charge anything if you transfer funds between banks and process domestic payments. If there are processing fees, they’re minimal, at around 2.8 percent.
Distinguishes You From Your Competitors
For business owners of all sizes, social payments allow you to stand out from others by helping you grab the attention of customers, as well as increase engagement and satisfaction. This is how Venmo gained such a large following.
As PayPal CEO Dan Schulman explained at the 2017 Goldman Sachs Technology and Internet Conference:
“…what Venmo has done and the thing that makes Venmo unique is it’s not a payment transaction, it’s kind of an experience. And what I mean by that is 90%-plus of all Venmo transactions are open to somebody’s friend network, and 90%-plus have a some sort of emoji or written commentary on that transaction. So if I want to see what you’re doing, who you’re dating, what you did, I can just go into your Venmo feed and see it. And there is like — and everybody shares. So it is not a payment transaction but an experience for people….”
Users enjoy the social aspect of social payments, like being able to see what their friends have been up to. Brands can use novelty, like videos or emojis, to engage with their customers while promoting their products and services.
At Due, our digital wallet comes with a social platform that encourages connection and engagement throughout the transaction process so that you can split bills and know exactly when the funds will be transferred into your bank account.
The Risks of Social Media Platform Payments
Let’s be honest. If you’re making online transactions they’re always a possibility that something could go horribly wrong. Venmo, for example, has experienced several instances where users had funds transferred without them noticing. And, there’s been no shortage of scammers setting up fake accounts and duping users on Venmo, Facebook, and Whatsapp out of their hard-earned money. And as for apps like Snapcash, they’re not exactly known for their security.
That’s not to say that security isn’t a priority. Most platforms encrypt data and are using security features like two-factor authentication and biometrics. The issue is that there will always be nefarious individuals looking to exploit user mistakes or minor security holes.
One of the biggest drawbacks of social payments is that they’re useless; if your friends, family, colleagues, or customers aren’t using the platform. For example, if you only know two people who use Venom — is that going to be enough to motivate you to set up an account? That may not be worth your time.
After all, the appeal to social payments is the sense of community.
Another limitation is where you can send and receive money. Some platforms may not allow you to transfer cross-border payments. Facebook Messenger was like that until the arrival of the TransferWise bot.
However, payments are still limited to the US, Canada, Europe, and Australia. If you have family or clients in South America, Africa, or Asia, that’s not going to do you any good. Instead, you’ll have to look for a truly global payment platform.
The Future of Social Payments
Social payments are all about improving the customer experience by offering fast, cheap, and convenient ways to transfer money. As with any technology, there will be certain risks and limitations, but these are both areas that are being corrected in order to guide us into a more seamless and contactless world.