Capitalize on social payments

 Illustration by Filo/iStock

Social payments methods like Venmo and Cash App protract to grow in popularity, and the data is there to prove it, creating an opportunity to requite customers what they want: 24/7 wangle to cashless, P2P and mobile transactions. So how do social payments fit in polity banks’ long-term future?

By Colleen Morrison

Social payments have taken today’s digital environment by storm. A recent Mercator Advisory Group survey found that 69% of respondents have used PayPal in the past year, and a full 10% reported using Facebook Pay. In addition, reports indicate that Twitter may seek to expand its payments offerings.

These facts demonstrate how social channels are now woven into the tapestry of consumer and merchantry behavior. Even without some slow starts from products like Facebook’s Libra, social payments, which constitute any transaction that occurs on a big tech or social platform, have taken hold.

“PayPal was the first visitor to offer this service, but with the explosion of social media, Facebook, Zelle, Square Cash App, Venmo, Apple Pay, Google Wallet and Twitter all support the full-length today,” sums up ICBA Bancard president and CEO Tina Giorgio.

The widespread use of these apps has opened them up to rhadamanthine default accounts, making them home to standing balances. In fact, a 2020 NerdWallet survey found that 68% of consumers have maintained a wastefulness in their mobile payment app, and on average, those who use them have unliable up to $287 to stockpile surpassing they transfer it to their bank. Those behaviors may pose a real threat to polity banks.

“Super apps like PayPal have well-nigh $3 billion stored in their digital wallet, and Cash App by Square has well over $1.5 billion,” says Giorgio. “That ways that those deposits are no longer in insured wall accounts, disintermediating banks from the consumer relationship.”

“We know customers want to be worldly-wise to do these things with low friction, but they are moreover worried well-nigh the risks of dealing with a nonbank company, so we provide them with the safety and security of their bank, while still giving them the worthiness to make the payments easily.”
—DJ Seeterlin, Chesapeake Bank

The polity wall opportunity

But among these competitive concerns, possibilities sally for community banks.

“Fifty-eight percent of those weather-beaten 13 to 37 are interested in purchasing items directly from their [social media] feeds,” said Tede Forman, vice president of payment solutions at service provider Jack Henry & Associates. “It really creates the opportunity for financial institutions to retain their customers and alimony them within the financial services space by offering integration for social payment capabilities.”

Solutions including Zelle, a bank-based, closed-loop digital payments network, and CHUCK, an unshut network for instant payments from a consortium of banks, bring with them a frictionless payments wits emanating from the bank’s digital financial app. While Zelle is account-to-account, CHUCK is receiver-platform agnostic, permitting the recipient to take in a payment via the app of their choosing.

“Customers needed to be worldly-wise to send money on these networks,” says DJ Seeterlin, senior information officer at $1.3 billion-asset Chesapeake Wall in Kilmarnock, Va., which offers Zelle and is in the process of launching CHUCK. “We know customers want to be worldly-wise to do these things with low friction, but they are moreover worried well-nigh the risks of dealing with a nonbank company, so we provide them with the safety and security of their bank, while still giving them the worthiness to make the payments easily.”

Security is all

Safety and security repeatedly upspring as key factors in consumer decisioning. In fact, a 2020 Deloitte study found that increasingly than 75% of consumers consider banks and credit vellum companies to be the weightier positioned to offer a financial superstore app, compared with technology companies or social media platforms. These findings point to security as a key differentiator for polity banks in the realm of social payments.

“The opportunity for banks is to create a safer environment, a safer process,” shares Mickey Goldwasser, vice president of marketing and senior of staff at payments provider Payrailz, the white-label P2P solution that powers CHUCK.

“You’re not going to replace Venmo, but unbearable people trust the wall that they would use the product. So, now increasingly and increasingly folks can engage in a social payment.”

Putting customers first

As polity banks consider the right tideway for creating a digital payment wits within their institution, how they assess their customers’ needs matters. Whatever strategy they employ should uncurl with consumer behaviors.

Starting by analyzing existing data may lead them on the path to identifying the towardly solution for their banks.

“I recommend monitoring the transaction trends to determine which social apps your customers are sending or receiving transactions from and what the growth rate on the various apps is to determine what education and product offerings they can provide,” advises Giorgio.

Seeterlin concurs: “We can’t overlook the importance of understanding where the consumer needs to be. We need to try to understand what their needs are, really identifying what problem they are trying to solve and implementing on that.”

In factoring in all these variables, polity banks will land on solutions that not only respond to consumer expectations virtually social payments, but moreover solidify their connection with their customers and deepen the overall banking relationship.

“As polity banks protract to offer services that support consumer policies in payments,” says Forman, “you’ll see a shift in folks either wanting to protract to stay with financial institutions, or potentially bringing them back.”

Colleen Morrison is a writer in Maryland.