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The merging of social media, payments and mobile

December.07.2015 0 Comments

By Michael Hagan, corporate ID strategist and managing director of IDchecker, a Mitek company

No other online channel is driving retail sales and referral traffic quite like that of social media. BI Intelligence reports that between the first quarters of 2014 and 2015, social media increased its share of e-commerce referrals by nearly 200 percent.

And while this year saw the merging of social media and payments into an undeniable powerhouse, social engagement with retail is still limited when it comes to a mobile device. But in 2016, this will change.

For one thing, mobile is becoming the preferred channel for e-commerce. Forrester’s prediction that remote mobile payments (purchases made via apps and mobile websites) will be the largest area of growth over the next five years, expected to reach $91 billion in volume in the United States by 2019. And social media users are also migrating to the mobile channel. Last year, Facebook reported that more than 399 million of its users access the social network only from their mobile device. Moreover, while Facebook’s monthly user base has grown 14 percent year over year, its mobile user base has grown much more, at 31 percent year over year.

As commerce goes mobile and social networks become funnels for payments, what can the industry expect in the future?

Accelerated consolidation

For evidence that social media and payments are colliding, look no further than the return of Jack Dorsey as CEO of Twitter. Dorsey is also the current Chief Executive of payments processor, Square. Twitter’s first step towards its role as an e-commerce tool was the launch of its “buy now” button. This feature adds a button to sponsored tweets, which enables users to purchase advertised products or services directly in the network. Users who click on “buy now” buttons can view product information like size, color, and style without leaving Twitter. Now any U.S. retailer, big or small can sell physical products, digital goods or services all within a tweet.

Another example of a social network morphing into a conduit for commerce is Snapchat’s recent investment in shopping application, Spring. Spring is a mobile app that catalogs all the consumer’s favorite brands in one place and operates as a virtual shopping center, rather than users having to download multiple apps for multiple brands.

The payments space is ripe for disruption

There are nearly 200 million monthly active Facebook users in the U.S. alone, versus 79 million MasterCard credit card holders, so the customer base is already there. Furthermore, Facebook knows more about its users than most credit card issuers because it has access to a wealth of personal data on its users, their preferences, favorite brands, search histories, which ads they click on, and more. Social networks know what you’re interested in, they know the music you stream, they know the styles you pin and they know the places you go through the locations you check-in to. With data analytics on their side, they can make recommendations that are spot-on to shoppers’ taste and budget.

Whether social networks form new partnerships directly with credit card companies or choose to team up with new payments processors remains to be seen. But given the $40-50 billion a year credit card companies make from interchange rates (the money merchants pay to run credit card transactions), there is potentially an enormous payout for social media companies. If Facebook and Twitter are able to lower interchange fees they would save merchants money, which could persuade merchants to look for partnerships directly with the social networks.

Future of mobile social commerce

To capitalize on these opportunities mobile payments providers should position themselves for partnerships with social media companies. They should also ensure that they incorporate the latest technologies into their offerings to simplify the purchasing process. This can range from not forcing users to open separate apps or using the smart phone camera to capture payment information. The camera has proven to be a highly effective data capture tool in a mobile environment, and in fact many users prefer snapping a picture to manually typing in data on their mobile device. The camera can also provide a layer of fraud protection that companies like MasterCard are already exploring.

From driving direct sales with the use of embedded “buy” buttons on social media posts or referring traffic to retailers’ websites and apps, the power of social commerce has become impossible to ignore. There are more than 50 million tweets a month and 80 percent of those users are mobile. With more than 100 million Twitter users following at least one brand or merchant, the mobile social commerce opportunities are obvious.