Social media platforms have been dipping their toes in to ecommerce for a little while now,but recently they seem more committed to taking the plunge in these potentially lucrative waters. What does this mean for the future of payments? George Carey asks the experts.
Ecommerce has moved rapidly in recent years as an increasing number of people go online to shop, pay bills and transfer money to friends and family. With consumers’ voracious appetite for innovation showing no sign of abating, there has been a steady flow of new and exciting ways to manage money online.
The latest development in this never ending conveyor belt of progress is the integration of payments with social media platforms. While the capability has been around for a couple of years now, it is only through refinements over time and increased user uptake that social media payments are making their presence felt in the ecommerce environment.
Increasing consumer confidence
With any new type of payment solution there will, of course, be some reticence as consumers’ worries about security and efficacy come to the fore. But having had the past couple of years to let the idea percolate, people are coming around to the potential of social payments. Indeed, a third of shoppers (32%) polled said they were ready to buy via social media, in a YouGov study – Are We Ready to Use the Social ‘Buy’ Button – published by Bronto Software in September 2015.
Furthermore, the study revealed that consumers are willing to spend an average of £55.68 on a single item via social channels, equating to a social commerce marketplace of 16m UK adults spending an estimated £900m. This enthusiasm for social commerce is sweeping Europe, with potentially significant consequences for the payments industry.
One man who has been watching the ascent of social media payments with great interest is Nitin Mangtani, founder of Predict Spring. “People are using it but it’s still early days,” he says, adding: “consumer behaviour takes time to change.” He estimates it will take another 12 to18 months for buy buttons to be material for a brand, so they can identify the percentage of revenue gained from Twitter or Google.
Comparing the rise of social commerce to the ad tech industry, Mangtani says: “That took about 15 years to be material. It will go through the same phase and then it will undergo a rapid adoption curve. The thing with innovation is that what looks hard today will just look like common sense three years from now.”
Room for improvement
While enthusiasm abounds in some quarters, not everyone in the industry is so excited. Payments specialist Jonathan Jensen, for example, remains to be convinced by something that he doesn’t see as a particularly functional development. Jensen doesn’t see social commerce as fitting into his payments philosophy that methods need to be “frictionless and frustration-free”.
Indeed, he thinks it can only add a layer difficulty, saying: “If you put another intermediary like a social network in there, you’re just creating another point of friction in the whole thing. I guess with social media networks trying to get into payments they’ll be looking for the value to sit in their world.”
Friction is an issue that Mangtani acknowledges in this teething stage of social payments, but he doesn’t see it as an insurmountable obstacle. He explains: “The biggest problem is that most brands have 10 or 15 different systems to enable e-commerce. They have a product catalogue system, a payment system, a shipping and logistics system, and so on. These are complex integrations, so it’s very difficult for a brand to integrate with 30 different apps all trying to link up with their systems. The last mile connectivity has been the biggest thing holding things up.
However, with the emergence of apps offering one platform through which brands can integrate with every social media network or other intermediary, integration is a concern that’s rapidly moving into the rear view mirror.
And the winner is…
With consumers realising the virtues of this new way of paying, the race is on for the big social networks to make themselves the shopping network. So far there seems to be one in particular that’s excelling in this regard.
“I think Pinterest is one of the more innovative networks because it’s such an inspiring way to shop. It’s actually a really interesting platform for companies to sell their product on,” enthuses Emmanuel Leroy, Online Marketing & Social Media Expert at AXA Bank Europe.
Leroy sees the way Pinterest handles fashion as the network’s crowning achievement because of how it makes suggestions for purchases with its boards and collections, as well as pictures of people wearing the latest trends.
“I think it also stimulates impulsive buying more because it makes it so easy to pay” he adds. “You don’t have to leave the platform, which makes the whole thing a lot more frictionless.”
Mangtani is in agreement that the ‘trailblazer’ title belongs to the good folks digitising pin boards: “Right now Pinterest is leading the drive towards social commerce in a big way. They were the first to launch buy buttons. I think now there is a series of factors which are coming together to make mass use of buy buttons a reality.”
The key element for him is mobile, as he explains: “On desktop you can see a product, open it in a new tab and purchase it but on mobile that whole experience of going from a native app to a browser on a responsive site – which takes eight to ten seconds to load – has a very complex check out process.”
It is complications such as filling out three to four forms of credit card information, billing and shipping that he blames for conversion rates being a mere quarter of those on desktops. “If you download the Pinterest app, there are a lot of products that you can browse through and being able to pay with one click through apple pay is really beautiful,” Mangtani says.
So-called ‘buy buttons’ seem to be doing the most to narrow the gap “between discovery and commerce” as Mangtani puts it, and catalysing this very social movement in payments. “From a consumer perspective there’s the discovery phase and then the actual purchase funnel, and the buy buttons are trying to merge those two phases into one,” he says.
It’s this ease of transition from seeing a product to purchasing that the tech mogul sees as the big advantage of buy buttons. “Now you can just make the purchase right there and then. And it can happen for several reasons – maybe a friend recommended that product or perhaps you’re following a celebrity on Twitter or Pinterest and she posts a picture of her new dress. If you can purchase at the moment of discovery, it increases conversion rates dramatically.”
Exciting times ahead
Naturally, these payment innovations don’t occur in a vacuum and as online validation and security measures continue to evolve, it can only mean good things for the sustainability of this exciting form of ecommerce. “There area couple of significant changes coming down the line from the Payment Services Directive (PSD2) which will undoubtedly impact e- commerce merchants,” says Head of Analysis at CMSpi Steve Glover.
He continues: “Firstly, a new mandate for ‘strong authentication’ will have to replace the prevailing 3D-Secure model of static passwords. This will not only apply to card payments, but most other forms, including digital wallets and bank transfers.”
The other development Glover sees as key is ‘Access to Account’, or XS2A, which will require banks to share APIs with third parties, giving them access to customer account information. This means that banks will no longer have a monopoly on how and where customers view and use their financial information. It also opens up the potential for a new breed of ventures to revolutionise the payments market and give a huge boost to web and mobile payments innovation. Glover adds: “ This has the potential to disrupt not only the banks’ business models but card schemes such as Visa and MasterCard, too.”
This brave new world of social payments is one that Mangtani is keen to embrace, and he has some predictions of his own: “I think you’ll see a major shift from what we call traditional ads to ‘commerce’, so every piece of ad unit or content on social media will become shoppable and that will completely change the way consumers shop.”
He also sees a considerable smoothing in the payments process moving forward, with consumers no longer encumbered by the monotonous process of entering credit card details and shipping addresses; everything will be done through a digital wallet.
“Whether it’s Apple pay, Android Pay, MasterCard, Visa or whatever, I think we will move away from the traditional credit card model although it will be supported by a credit card in the back end. But for the consumer it will all happen in one click, with the digital wallet enabling the transactions. I estimate that by 2017 the majority of commerce will be done through digital wallets,” he concludes.
So it seems social media payments are here to stay. With every platform constantly improving their processes and consumer confidence rising as people become more comfortable with the concept, it looks like a fascinating development in the ever changing ecommerce space.
You may also like…
It's banks, not government agencies, that the British people trust to deliver biometric authentication payment services, says a new Visa study.
With less than two weeks to go until the US liability shift hits its first anniversary, MasterCard published new data evidencing the positive impact the technology is having on issuing banks, merchants and consumers, as well as saying adoption continues to grow.
Three years since the public consultation, and a year since the £20 was revealed to be the next note to have a makeover, 13th September marks the day that the new £5 polymer bank note enters into circulation.
Global card payments are growing at twice the rate of the number of cards in circulation as acceptance booms and consumer habits shift away from cash.