Experts see huge potential in social media payments

Experts see huge potential in social media payments

Social media driving retail sales

According to an article by Michael Hagan on Mobile Payments Today, more than any other online channel, social media is driving retail sales and referral traffic.  Between the first quarters of 2014 and 2015, social media increased its share of electronic commerce referrals by almost 200 percent.

As 2015 came to a close, social engagement via mobile devices was limited.  But Hagan thinks that will change dramatically in 2016.  For one thing, remote mobile payments (those made via apps and mobile web sites) will be the largest area of growth over the next five years, reaching $91 billion in the United States by 2019.

To illustrate the potential of social media payments, Hagan points out that there are almost 200 million Facebook users in the United States alone, compared with only 79 million MasterCard users.  Besides the fact that its customer base is more than double that of MasterCard, Facebook also knows more about its users, thanks to the wealth of personal data is has gathered through use of the site: Facebook knows where its users shop, what they buy and what they’re interested in.  With those analytics at its disposal, Facebook can make recommendations that are specifically targeted to its users’ tastes and budget.

But that insight into buying habits is only part of the potential that social media companies like Facebook see.  Credit card companies currently make as much as $50 billion annually from interchange rates, the fees merchants pay to run credit card transactions. If Facebook, Twitter and other social media companies can offer lower interchange rates based on their existing structures, they could save money merchants a great deal of money and set themselves up as strong competitors for the credit card companies. This would force  companies like MasterCard to either lower their interchange rates, streamline their services, or both, or risk losing business to social media competitors.

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