Some thoughts on payments

coinsI’ve written about payments quite a bit lately – in both my newsletter last night as well as in one two weeks ago. Between the rapid expansion of Apple Pay and announcements by its would-be competitors (if you want to call them that), Android Pay and Samsung Pay, all of the major platform providers are attempting to hone in on this lucrative market. Further up the stack, software-defined services are attempting to do the same, offering cross-platform universality: PayPal/Venmo, of course, and now Snap Cash (which is really Square Cash), and (finally) Facebook payments.

Unless you’ve been paying close attention, it’s easy to get confused by all of these new payment methods. Which are peer-to-peer? What do I use in a store? How do I just pay the damned dog sitter?

It seems to me that too many people think of payments in a strictly traditional sense: like writing someone else a check, which is how many of us have long used PayPal. That was probably fine for a time, but I think that era is over. It’s time to broaden how we think of payments to fit the age of social.

Payments are an inherently social activity – not only because it involves two (or more) parties, but because you’re actually sharing something tangible between you. Snapchat understood this early on. The problem for Snapchat is that their user experience is, by definition, very shallow, and also, in a way, defined by what is not shared on Snapchat. The beauty of Snapchat, after all, is that it’s ephemeral, while payments are really not at all. Rather, sending money to people is actually deeply rooted in context – whether it’s for rent, or your share of dinner, or for dog sitting. That context is probably at least partially revealed by your friend list, location history, events you’ve attended and messages you’ve received.

In other words, everything you do on Facebook already, but not really Snapchat. And definitely not Venmo.

Facebook is the social network of record, and by any measure one of the strongest presences on home screens everywhere. Facebook Messenger had 500 million users in November 2014 (almost six months ago), and they’re all about to have access to the company’s new payments feature – meaning that not only will all of those people have the app on their phones, but most of their friends will too. Oh, and pretty much any merchant, too.

This is why I suspect that Square Cash and Venmo are on borrowed time. When considered in a social context, payments fit much more squarely with Facebook’s environment than in others. And when Facebook expands their payments system to include WhatsApp and international transfers – the game is essentially over.

In commerce, on the other hand, the field is a little more open. Apple Pay is and will remain the dominant mobile wallet system, both because their system is demonstrably superior to any currently available and all of the most desirable consumers are using their platform. In stores, Apple Pay will naturally see an increase in adoption as the 2015 liability shift forces merchants to upgrade their terminals and MCX gradually disintegrates. But as I’ve said before, I think that the longer-term goal of Apple Pay is to establish Apple as a central player in ecommerce, particularly on mobile. Already, Touch ID is established on newer iPhone and iPad models; in 2016, I expect it will come to future versions of the MacBook. The security and ease that Touch ID-enabled Apple Pay offers makes it irresistible for merchants selling online, and it will soon become the standard for completing transactions in a mobile app.

But what of Facebook? Since they do not own the hardware layer, and thus cannot force merchants to include their payment option in their apps, Facebook must therefore encourage merchants to come sell on Facebook instead. Indeed, they’re already well down that path:

  • Step one: build the biggest social network anywhere, where users spend tons of time.
  • Step two: give businesses the ability to reach and microtarget audiences anywhere (at a price, of course) with excellent precision.
  • Step three: give users the ability to pay and complete transactions with the tap of a screen.
  • Step four: convince merchants to build their stores on Facebook’s platform, because that’s where their customers are and want to spend money.

Imagine a WhatsApp crossed with Tmall. I think that is something like the long-term plan.

tmallEven if the “Facebook Tmall” plan fails to launch, the company is left with a payments infrastructure that strongly supports its social ecosystem, so it’s a win-win either way.

Will merchants want to sell on Facebook’s platform rather than their own, though? Perhaps not, but it may not matter. Amazon has demonstrated that the reach of a dominant platform is often enough of an incentive to get most merchants to fall in line and sign up. With over a billion people on Facebook globally and time-spent figures like the ones they have, few merchants (particularly retailers) can afford not to be there. Fewer still will be able to convince their customers to jump through additional hoops to buy their goods.


Update, 3/25:

The Facebook “Buy” button surfaces. From Re/code:


Called it.


One Comment

So, what do you think ?