Social Payments Could Become Bank-Centric

The session titled "Social Payments: What They Are and Why They Matter to Bankers," at the BAI Payments Connect 2012 conference in Las Vegas was packed with key industry players, from bank CIOs to consultants and executives at card schemes. The session revealed that while third-party vendors are ahead of banks in offering social payments solutions, banks do have an opportunity to come up with their own models.

The financial industry has yet to come up with an exact definition for the term social payments. However, it doesn't simply refer to all payments made on social networks, according to Allen Weinberg, a payments consultant at Glenbrook Partners. "It's whole new class of payments that we wouldn't be talking about four or five years ago," he says. "It's not just one thing, and it's not the traditional buyer-seller model."

Weinberg says that in general terms, social payments are social in nature, involving multiple parties. He points to Kickstarter, a web-based platform where people can fund and raise funds for projects, and Bill My Parents, a way for parents to give money to their teens and then monitor how it's spent.

Currently, most social payments solutions seem to be coming from third-party vendors such as those listed above and like Dwolla, a cash-based payments company whose COO Charise Flynn also participated in the session. But session moderator George Warfel, consulting director of global payment solutions at Fiserv, says he knows of one bank that has successfully created its own social payments product. He points to Commonwealth Bank of Australia's Kaching, a mobile app that facilitates several types of payments in one place.

Bank customers can use the Kaching app for P2P payments to their mobile, e-mail or Facebook contacts, and also to make contactless payments using MasterCard PayPass Technology at the point of sale. Payment goes directly into a payee's Commonwealth bank account. Payees that don't have an account are directed to collect their funds at Commonwealth Bank's website, which presents a cross-sell opportunity.

Commonwealth created Kaching because it saw no clear winner model for new media or social payments, according to Warfel. "In [Fiserv's] view," he says, "this is probably the most bank-centric model we've seen yet." Weinberg says, though, that bank-centricity isn't necessarily key to customer adoption. "It all boils down to the value that the bank brings," he says. "All that matters is that it's cheap and ubiquitous. And customers want frictionless experience. It's easy to move money, but can it be frictionless and immediate?"

As of now, the panel concluded, that completely frictionless, immediate social payments system -- or payments system in general -- does not exist. Banks, just as much as vendors, have an opportunity to try and make it happen.