Glenbrook’s Model for Social Payments (A Work in Progress)
I’ve been thinking a lot lately about social payments, and have reached two conclusions. The first is that a payment facilitated by a social network is not a social payment—it’s just a normal customer-not-present payment. The second is that social payments are, by definition, social in nature and involve multiple parties. Hear me out on these two thoughts.
What if I used my Visa card to buy a cat flap being sold by a cat flap merchant on a social network? How is that really any different than buying a toaster from a merchant with a Yahoo store? It’s not. One merchant, one buyer, one transaction.
What if the merchant had a Facebook storefront and I was using my card on file in a Facebook wallet? I still say no difference. What if the merchant was enabled by Facebook to accept Facebook credits as a form of payment, and the merchant was subsequently funded by Facebook, minus normal Facebook payments acceptance fees? I’m still not biting. This would be intriguing in a Facebook-centric world, but still not a social payment in my mind. Still one merchant, one buyer, one transaction.
I’ve concluded that for something to be a social payment, it’s got to be social. It’s got to involve multiple parties paying at once. Or multiple parties being paid at once. Or one party buying and another party paying. On and on. The more I look at this, the more examples I find. Here’s a couple obvious ones:
- Group payments. This is multiple people all on the same team, in the same club, or part of the same informal group funding a single payment. Everybody kicks in $18.73, for example, to cover chips and sodas for the little league team party. CircleUp comes to mind as an enabler in this category –– who’s paid, who hasn’t paid, etc.
- Contingent payments. This is multiple people, maybe even strangers, all making partial payment towards funding an artist to create a community sculpture or a filmmaker to create a documentary. It’s all contingent, because if the overall funding goal isn’t met, all the transactions reverse and everybody gets their money back. KickStarter is a good example here.
- Networked payments. This is little Sally buying something and then passing the hat around between her grandparents until she has enough to finalize the purchase. More formally, a promise to pay passed through a network of friends until the obligation is settled. Kwedit comes to mind here, particularly the “Pass the Duck” feature on a Kwedit Promise.
- Dual-party payments. This is one person buying, another person paying. Happens all the time in business payments. But in the world of social payments this is Alice shopping online and having the bill sent to her mother. BillMyParents is the poster child here, but eBillme also comes to mind.
- Parallel payments. One person with a bunch of IOUs or items in their shopping cart from various merchants, settles everything—in parallel with each party—though a single transaction. A good example is here is TwitPay. Payvment, a new multi-merchant shopping cart, also facilitates parallel payments. Note that in both cases, it’s PayPal Adaptive Payments doing all the work in “parallel” payment mode.
I’m sure other examples will emerge, and maybe even other categories. I just saw a new company called WePay profiled on TechCrunch. It passes my social payments smell test and falls into group payments. A WePay account is a PayPal-like account owned by the members in a group. Multiple people can fund the account, and the WePay system facilitates group purchasing. The group can even attach a WePay Visa debit card to the shared account. Put that in the annual report!
I’m still thinking about old-fashioned P2P payments (I love that P2P is considered old-fashioned, by the way) and don’t know if they fit or not. On one hand its pretty social. Grandma sending Gretchen money for her birthday. On the other hand, it doesn’t feel multi-party enough. Grandma could have done the same thing with a check and I’m pretty sure that’s not a social payment!
One might argue that all these social payment examples are just “applications” that take advantage of core payment systems. But I believe there is more to it, particularly when you start thinking about a single payment trigger setting off multiple payments, transaction reversals in a multi-party context, buyer recourse, consumer protection, multi-party fee structures, etc. It feels like something important is happening.
Social payments are intriguing, but they’re just one part of the emerging Web 2.0 payments ecosystem. My partner Erin McCune and I will be addressing this topic in more detail at the NACHA Payments 2010 conference in Seattle in a session entitled “Web 2.0 and the Emergence of Social Payments.” In addition to social payments, we’re be talking about the other Web 2.0 payment building blocks — micropayments, virtual currencies, game currency cards, offer-based currencies, and bill-to-mobile — and will be trying to put it all together so that it makes sense.
Be sure to look us up if you’re going to be at the conference. We’d love to hear your feedback on our model and learn more about what you’re thinking about the Web 2.0 payments space.
If you’re not going to be at NACHA Payments 2010, Glenbrook will also be exploring this topic in an upcoming webinar. Social Payments – Scenario Analysis will be held May 5th, 2010. Registration is open now.