Social Payments

Digital Citizenship
March 10, 2020

Social Payments

Financial service and payment providers are tapping into social interactions to facilitate financial transactions.

Key Insight

Financial service and payment providers are tapping into social interactions to facilitate financial transactions.

Why It Matters

As social payment offerings grow more robust, millennials may opt out of traditional banking services entirely.

Examples

Late in 2018, Amazon worked to expand Amazon Pay from the digital-only space to physical brick-and-mortar gas stations and restaurants. The move coincided with a rollout of new cashless (and cashierless) Amazon Go stores.

While Amazon’s system is new, the digital wallet model isn’t, and consumers now prefer convenience to traditional point-of-sale transactions. Venmo launched nine years ago as one of the first social payment apps in the U.S., and incorporated social features into its interface. Users were required to caption their transactions with a comment or emoji, and could share publicly with whom they were transacting.

China-based AliPay launched 15 years ago and now has amassed more than 870 million active users. Through its financial partner, Ant Financial, AliPay users get much more than emojis. They can access wealth management services, loan applications, and credit scores. Other popular peer-to-peer payment apps include PayPal, Apple Pay, Square’s Cash App, and Google Pay. The most advanced players seek to embed seamless functionality into the customer experience, including chat applications.

In the Chinese market, WeChat and Alipay drive mobile payment, thanks to a highly developed network of merchants that now accept chat-based payments. These apps blur the lines between sending money to a friend versus sending money to a store. What’s Next Late in 2019, Facebook launched Facebook Pay for WhatsApp, Instagram, and Facebook Messenger—Facebook Pay exists separately from Calibra, the company’s digital wallet, and its Libra cryptocurrency network.

We expect to see more integrations for social payment systems from the big tech companies in 2020.

The Impact

Government regulation for all major tech companies is threatening to become more stringent in the wake of data breaches, privacy concerns, rampant fraud, and claims of antitrust violation. Social payment systems are a valuable way to transfer money, but they could face heightened scrutiny this year.

Watchlist

Alibaba, Amazon, Ant Financial, Apple, Baidu, Facebook, Google, Mastercard, Microsoft, PayPal, Tencent, Visa, WeChat.