The payments landscape is changing rapidly. While mobile banking apps and contactless payment methods get a lot of play, retailers and financial institutions are also figuring out how to make payments social. Here are some emerging and interesting ways to make purchases in our very social world:
When a friend sends you a gift on Facebook, one of the choices now is a Facebook-branded gift card – a physical, plastic card – preloaded with funds from one (or more) of a handful of retailers. The card, which arrives via snail mail after you accept a virtual greeting card and provide your address, is reloadable: when you receive another gifted amount, it is added to the same card. The gift card’s associated mobile app helps users manage account balances for each retailer. Through Facebook’s partnership with Discover, participating retailers like Target, Starbucks and Sephora process the card like any other bank plastic. (Here’s Facebook’s own description of how it works.)
Perks & pitfalls
The Facebook gift card not only brings the social network’s influence offline, but also monetizes data Facebook has been gathering for years (birthdays now serve as prompts for the network to invite users to buy gifts), and opens a new source of revenue for the publicly traded company. The benefit for consumers, provided they buy in, is the convenience of sending and receiving gifts via the social network, where visitors spend an average of 6.75 hours each month.
However, to quote an infamous relationship status, “It’s complicated.” The card presents a couple of major hurdles for Facebook (and consumers), including its basic concept: multiple accounts represented by one card. The card is not a single-brand gift card usable at only one retailer, and it is not a general purpose gift card that can be used anywhere because of its Visa, MasterCard or Amex logo. Instead, it is a sort of hybrid card. (And as industry insiders would note, Discover’s network may prove to be a limiting factor if Facebook gift cards become more universal… making it an interesting choice for the social giant.)
A second hurdle is convincing consumers to think of Facebook as a payment brand and not just a social brand. Currently, the social network is far from top of mind when shoppers are gift-buying. Consumers will get there eventually, but Facebook has a lot of training to do first.
Amex Sync
After registering with Amex Sync, American Express cardholders can purchase products and claim deals offered via three social networks. On Twitter, after users tweet an offer’s hashtag, Amex responds via a dedicated Sync notification handle (@AmexSync) asking you to tweet a confirmation hashtag. If it’s a purchase, Amex automatically sends the product to your billing address, and if it’s a discount, the savings is loaded to the card and applied as a credit to your account after you use your Amex card with the merchant. AmexSync works with Facebook via an app and with Foursquare via check-ins.
Perks & pitfalls
Users never have to leave the social streams or feeds to make transactions. In addition, Amex Sync brings to social two recognizable consumer behaviors: impulse buying and the desire for instant gratification.
However, Amex may have to work to gain consumer trust in the process. Social interactions can be fleeting and prone to interruption. Consumers will want to be reassured that forgetting to verify does not create confusion and that Amex has taken appropriate steps to protect account information. Hashtags are casual; security cannot be.
Chirpify
Chirpify, the first way to make an in-stream Twitter purchase, now also “enables you to sell digital and physical items directly in-stream” on Facebook and Instagram, as well. Sellers (and buyers) create accounts with Chirpify, which gives them access to a dashboard for managing payments. To sell products, you create listings within your dashboard. To buy products or claim offers (once you’ve signed up with an authorized card or PayPal account), you reply to product offerings with hashtags, like #buy or #gimme. In addition to its business applications, Chirpify works for charities (#donate) and person to person (pay @username). The company charges a five percent transaction fee “any time you get paid,” but “it’s always free to buy, donate or send a payment.”
Perks & pitfalls
Presently, Chirpify seems to have the broadest application. The ability to make in-stream purchases, sales, peer-to-peer (P2P) payments and donations makes it the closest thing to an all-in-one option among the social payment technologies.
Unfortunately, there are a number of barriers to significant adoption. First, big players like Visa, Mastercard and Amex could easily push Chirpify aside, as noted by Inside Social Commerce when it says that offerings like Amex Sync bypass Chirpify, turning it into a “middleman.” Second, the P2P space also has a well-established and trusted player, PayPal, a major competitor to those trying to build their own customer bases.
And finally, Chirpify’s dashboard is “just one more” online location for brands and individuals to manage. We believe the most successful social payment providers will not ask consumers to jump through any hoops.
Who has the edge?
Both established players and start-ups are reshaping online financial transactions, making payments (like everything else) rapidly more social every day. And the challenges are similar across the board: ease, privacy and security – which is no small task. Visa, for example, has spent decades and millions of dollars establishing security as a pillar of its brand.
That sort of legacy (and investment) seems to give the big payment-network players an advantage as they have years of experience understanding and solving for barriers to consumer adoption and use. The very nature of social payments – living within unique business models, like Facebook and Twitter, which are heavily tied to openness and sharing – can be at odds with security and privacy. It’s going to have to be done exactly right. It will be difficult for start-ups – no matter how innovative and “out of the box” they may be – to compete with the state-of-the-art technologies and other resources available to established financial institutions, like Visa, Amex and MasterCard.