Social Payment Revolution

By Marieke Flament, MD of Europe at Circle

A social payment revolution led by technology companies is underway and it’s fundamentally changing how we exchange money.

We can share messages, experiences, photos and videos with one another; we can communicate in real-time with anyone on the planet; publish our news and opinions through any form of content, all in an instant, open, global, free and delightful way. 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 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 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: the 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; 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 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 10 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.

A global revolution is underway led by consumers’ needs and enabled by new technologies. 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.