Facebook: Connecting people, connecting bank accounts?

Generation Y has redefined the rules of communication. Interaction is now expected to be instant and personalised, and social networks play a significant role in this movement. Facebook alone boasts 900 million active users worldwide, of which 200 million access the social networking site through their mobile phones every day, writes Bernhard Lachenmeier, Head of Products and Marketing, SIX Payment Services

Generation Y has redefined the rules of communication. Interaction is now expected to be instant and personalised, and social networks play a significant role in this movement. Facebook alone boasts 900 million active users worldwide, of which 200 million access the social networking site through their mobile phones every day, writes Bernhard Lachenmeier, Head of Products and Marketing, SIX Payment Services

The Gen Y consumer expects 24 hour instant interactivity and real-time access to people, products and services – and it is is well documented how this has impacted our financial services, where convenience, speed and security are now the defining features of banking and payments.

It comes as no surprise that we are seeing increasing overlap between the spheres of social networking and financial services. There has been much discussion, for example, around Facebook’s own payment plans. In 2011, the site launched Facebook Credits, with which members could buy virtual goods in any game or app on the Facebook platform. In 2012, Facebook introduced local currency pricing to Facebook Credits, causing many to suggest that Facebook payments could be the future of micropayments.

But fast-forward to January 2013 and Facebook’s revenues reveal that fourth quarter revenues from payments flat-lined, despite overall revenues increasing by 40%. Is now the time to accept that in the financial services space, social networks are better suited to marketing functions than payments?

Social networks typically consist of millions of people, who spend growing amounts of their time on these sites, with ever-increasing confidence and trust in the channels. This creates potentially fertile ground for social networking sites to shake up the traditional payments model. Yet to hail Facebook as the future of payments is to overlook the importance that consumers continue to place on security.

Facebook and its counterparts do not have the security credentials that the traditional card schemes can claim. Even one of the most eager adopters of F-commerce, the online fashion retailer Asos, handles payments by redirecting users to an Asos site within Facebook – clearly illustrating that consumers could be uncomfortable making payments through Facebook.

This isn’t to say that banks can take their foot off the pedal – Facebook has shown an interest in payments, and this alone should be enough to make traditional financial institutions accelerate their social banking plans. And if you don’t believe that the payments industry is turning increasingly social? Just take a look at American Express’ Pay-By-Tweet partnership with Twitter. The likes of Facebook and Twitter cannot tackle payments alone, but they’re being clever and partnering.

‘Social’ will certainly impact the payments industry, but there is no clear dominant strategy yet. The face of consumer and micro payments in 12-18 months will be unrecognisable to today.