As the way consumers interact with one
another is changing, so too are the rules of commerce. Social networking is
becoming the prevalent form of communication and, consequently, the likes of
Facebook and Pinterest are becoming primary outlets for businesses to reach
their customers.
Increasingly, however, these social
platforms with large networks are also enabling members to make purchases for a
wide variety of goods from games to clothing.
By facilitating compelling shopping experiences and transaction
capabilities, social networking sites could have the potential to overthrow the
existing market power houses and transform the payments industry as we know it.
Just how real is the possibility of a Bank of Facebook and what does this mean
for traditional payment players?
Social networking sites typically boast
networks consisting of millions of people and so the advantage of doing
commerce through these platforms is the reach to a much wider and willing
customer base; businesses can easily, and at a relatively low cost, reach their
target audience. It is unsurprising then that we are witnessing a move to
social commerce. However, as social networks gain users, who spend increasing
amounts of their time on these sites, inevitably consumer confidence and trust
in these channels is growing. Whilst to date this has opened opportunities for
businesses looking to procure their goods via this platform, this also opens
the gate for social networking sites to shake up the traditional payments
model.
Traditional card schemes currently cannot
offer an affordable solution for low value payment acceptance and so allow social
platforms - Facebook in particular - to exploit this gap in the market by
providing merchants with an alternative and more viable micropayments system
through its virtual currency, Facebook credits. In an interesting turn Facebook
recently announced that they are abandoning Facebook Credits in favour of local
currency pricing. Unsurprisingly, this has caused many to suggest that Facebook
payments could be the future of micropayments.
However, before we get ahead of ourselves,
it is worth mentioning that Facebook and its counterparts do not have the
security credentials that the traditional card schemes can claim. Even one of
the most eager adopters of F-commerce, the online fashion retailer Asos,
handles payments by redirecting users to an Asos site within Facebook – and
reiterates that fact that the company does not then share details with
Facebook, clearly illustrating their belief that any issues around security and
trust could slow consumer adoption rates.
The fact remains that Facebook and its kind
have yet to suggest that payments servicing is an area they are interested in
moving into. At the moment, especially
for Facebook, the bulk of revenue comes from advertising space and payments is
not a core competency in which they have years of experience. Nevertheless, Facebook
has proven it has the capability to move into the payments space. The likes of
Facebook are a force to be reckoned with and the payments industry needs to
innovate to ensure its future existence.
