Why the time is right for social payments

Marieke Flament, MD of Europe at Circle explains how a revolution, led by technology companies, is changing the way we exchange money.

People around the world have benefited from the ability to share and discover content and communicate freely over the internet. The benefits to humanity of this ability to communicate quickly, without charge and instantly is really hard to even quantify. Today we can share messages, experiences, photos and videos with one another in an instant, wherever they are on the the other side of the world. This communication is instant, open, global and free. Why shouldn’t money work the same way?

According to Juniper, the value of global person-to-person (P2P) mobile payments is set to increase by 40%, to $540 billion, by the end of 2017.

The rise of this social payment revolution has been triggered by two key drivers; the first being an evolution in customer expectations. We spend an average of four hours each day on our phones. Our mobile phones are our lives and we do everything on them, including banking: over 50% of Europeans have accessed banking-like systems via their smartphone, with this figure much higher in some areas (80%+ in Scandinavia).

We increasingly expect services to be available instantly and for free. The way we sell our assets and our time is increasingly evolving towards a P2P ecosystem, with the rise of services such as Airbnb, Uber and Etsy to name only a few. If you want a taxi, order an Uber. Want to watch a film, use Netflix. Don’t fancy heading out for food, use Deliveroo. Forgot to buy a gift, use Amazon Prime. Whilst speed, convenience and choice are everything for today’s consumer, the banking industry hasn’t evolved at the same speed as other sectors to serve its consumers on a P2P basis.

Millennials understand technology and trust it – often more than banks. Financial crises around the world have not helped build trust in the banking industry; a 2015 US survey found that only 30% of consumers trust banks, whilst 75% trust tech companies such as Google, Apple and Amazon.

The second driver enabling this social payment revolution is the rise of new technologies which are enabling new entrants like Circle to create very efficient infrastructures and provide services to consumer at no cost. For example, at Circle we use blockchain as a protocol for moving money, offering global settlement, near-zero fees and near-instant transfers, artificial intelligence and machine learning with algorithms that help automate and lower costs while reducing risk and fraud, and cloud-based computing for all our networks.

Together, these two prominent factors have enabled a very fast rise in the adoption of social payments.

Alongside Circle, several other large tech companies and startups are getting involved in social payments. This phenomenon is often seen as a stepping stone to building digitalised,
future-proof financial services for consumers. China has long been seen as the birthplace of social payments – WeChat Pay has 600+ million users and $5.5 trillion was spent via mobile
payments in China last year. In Africa, Kenyan telecom company Safaricom has a product called M-Pesa, which allows its users to transfer money to one another via text message. As a result of M-Pesa’s success, an impressive 92% of Kenyans say they have used mobile P2P payments, and within less than ten years, the percentage of banked Kenyans grew from 25% to 75%. In the Nordics, players such as Vipps, Swish and mCash cover close to 80% of the population – enabling physical cash to disappear at a rapid pace.

Enabled by new technologies and led by consumers’ needs, a global revolution is underway. New services emerge daily, ultimately for the benefit of the end consumer, giving them better, cheaper, faster services. Changes are coming quickly and relationships between banks and FinTechs are evolving fast. The time for social payments is now.

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