Today's Social Buying Experience: What You Need to Know
Reshaping peer-to-peer payments by mixing them
with social interactions
Millennials are reshaping entire industries, from multifamily dwellings to ride sharing to banking. The most connected generation in history is gravitating toward shared experiences, fueled in part by mobile technology and social media.
These digital natives love being alone, together. They gravitate toward social channels for ratings, reviews, shopping and even meeting up with friends. Their social world exists in real time, all the time. So it's no surprise that this always-on 'sharing economy' is transforming the payments industry as never before.
What's more, millennials are increasingly demanding payments that support their hyper-connected lifestyles by enabling, for instance, the transfer of cash through social media, the ability to split the bill with friends or the ability to order and pay for a pizza by texting a single emoji. Welcome to the world of social buying.
While many still think of millennials as credit averse, in the coming years, one can expect them to generate the lion's share of credit card transactions as their lifestyles dictate the need for additional credit. Millennials, however, are not yesterday's credit cardholders with a wallet full of plastic cards. They now gravitate toward alternate payments, such as PayPal, for shopping and paying online; and social buying through services such as Venmo, a free digital wallet that allows for shared payments. These peer-to-peer payments are burgeoning across popular social platforms including Facebook and Twitter.
What exactly is social buying and how does it work?
Gone are the days when making small payments began with the awkward exchange, "Can you break a $20 for the $5 I owe you?", "All I have is a $100", or "Could you split this bill six ways?" Social payments eliminate the friction of cash transactions.
Millennials, however, are not yesterday's credit cardholders with a wallet full of plastic cards.
Peer-to-peer payments allow consumers to send and receive money on the go using mobile apps, such as PayPal and Venmo. Venmo allows the user to pay someone with a phone number or email – they don't even need a Venmo account to send money. Western Union is also pushing into social payments with its WU Connect, which "integrates with social media and messaging services to transfer money worldwide." Facebook offers the ability to send or receive payments using its messenger application. A friend tested this service for us, described as a simple three-step process, and found the experience easy and effective. Facebook instructs one to just open a chat with the recipient, click the $ icon and enter the amount of money to be sent, add one's debit card, and then click 'pay.'
While signing up for these services is quick and easy, there are fees and limits to consider. These services are also intended for payment to trusted sources such as friends and family, so as with every payment method, caution is advised when sending or accepting payments from strangers. And, of course, consumers should look for services that provide payment notifications and strong data encryption. Venmo, for example, is compliant with the Payment Card Industry Data Security Standard (PCI-DSS), meaning the data is encrypted during transmission – a key consideration when evaluating which social payment service to use.
What's the potential for social payments?
Social buying and peer-to-peer payments make money transfers easier and faster. This is not just great news for U.S. millennials, but also for emerging markets that lack the infrastructure to support ATMs on every corner. Social buying services are already well defined in some parts of the developing world, including Africa, where the m-pesa mobile based service is one of the world's most successful models.
Social buying and peer-to-peer payments make
money transfers easier and faster.
As always, innovation is key to staying relevant in the U.S. market as digital natives come of age, and will fuel successful growth in emerging markets as consumers increasingly rely on their smartphones for day-to-day financial transactions.
This article first appeared in the July 5th issue of n>genutiy. The statements and opinions of the writer do not necessarily reflect those of TSYS.