Social Media Payments Opps and Challenges
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Addressing the challenges and opportunities of payments originating through social media. Projections, competitors, new investors.
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Social Media Payments Opps and Challenges
- 1. Social Networkingand Payments A Presentation to the Federal Reserve Bank of Philadelphia’s Payment Cards Center Elizabeth Rowe August 9, 2010
- 2. Virtual Payments: Harbingers of Challenges to the Larger Payments System? Traditional Flow of Payments Consumer/ Business Bank Emerging Flow of Payments Diminishes Centrality of Banks and Issuers 2
- 3. Self-Sustaining Payments System:Where are the Traditional Players? 3
- 4. Consumers Increasingly Comfortable with Virtual Transactions P2P Facebook Apple Amazon 4 Antecedent Factors Drive Adoption
- 5. In U.S., Social Networks Have Grown Quickly Source: Simmons New Media Study, 2010 Facebook has 500 million users, with half living outside the U.S. Globally, the largest domestic social network is China’s Qzone, with 388 million users. 5
- 6. Time Online is Spent Playing Games at Social Networks Source: The Nielsen Company, 2010 6
- 7. Virtual Currency - Likeliness to Purchase Virtual Items with Real Money (U.S. Social Gamers) 7 Source: 2010 Information Solutions Group, Social Gaming Survey Question: How likely would you be to purchase a virtual item with (real-world) money if it gave you a modest short-lived advantage in a game, e.g., power-up special, bonus multiplier or special weapon or tool?
- 8. Online Gaming (Micro)Payments are a Major Engine for Revenue Source: Facebook and Analyst Estimates, 2010 Facebook takes 30 percent of each payment it processes. 8
- 9. Smart Money is Following Virtual Currencies Source: Company Press Releases, 2010 9
- 10. Global Experimentation with Social Networks as Payment Platforms 10 As a Rule, Each Country’s Largest Social Network is Home-Grown * From January 2008 to June 2010, the number of South Koreans has grown from 71,000 to 1.1 million. Month over month growth is currently 25%. Source: Inside Facebook, CIA World Factbook and Nick Burcher, July 2010
- 11. The Dutch Model: Disruption and Revenue Loss for Traditional Payment Providers Hyves Transactions Move Seamlessly From Virtual to Real Worlds 11
- 12. China Regulates Virtual Currencies Source: Xinhua News Agency, 2006, 2008 and 2010 12
- 13. Conclusion Virtual payments have the potential to introduce risk into the payments system. They also represent engines for economic growth and innovation. If these payments gain traction and liquidity, their disruptive potential should be monitored and moderated by regulatory authorities. Thank you for your time today. Elizabeth Rowe 13
Notas del editor
- Discuss why payments integrity matters and how it can be broached.
- Diffusion Theory – Sociology – Innovation itself, how information about the innovation is communication, time and nature of the social system in which it’s introduced.Technology Acceptance Model – similar but focuses on convenience, ease of use. Antecedent Usefulness and Ease of Use – Antecedent that Informs Ease of Use.In social networking, we are talking about social computing, rather than organizational models. Social computing is about embracing, rather just accepted.Behavior embedded in Society == Technology as part of a lifestyle,
- Social networks are growing quickly and social gaming through social networks are servicing at the gateway for a new global marketplace operating without the intermediation and governance/protections of credit /debit cards, card networks and banks.Some say, what does it matter – online and mobile are just two channels in a mature economy with enough flexibility and safety to absorb and moderate new payment types and channels.This may not be true.Social networks, while maturing in the U.S., are still growing 25% per quarter in emerging markets.Social games and their payments are the entry point/gateway to virtual payments but payments will take on a life of their own.This has implications for the US because of ownership links among Russian, US, Chinese, South African investors that could potentially open up networks in a truly global way. For instance, Facebook Credits in the US could be exchanged for Qcoins in China or could enter into a Hyves account in Holland. What would it mean for money to flow from individuals to individuals to companies without an intermediary – a traditional payments firm??
- Define: Social Networking/Social GamingDiscuss why payments integrity matters and how it can be broached.Facebook has 500 million users.Breakdown provides by Guardian, July 10, 2010Populations where Facebook has higher % penetration. (Facebook has about the same penetration in U.S., Chile and Sweden)Hong Kong 48.5062Canada CA 45.4791United Kingdom 42.7835United States 40.7232Chile 40.6994Sweden 40.6246They play often – in the US, 68% of gamers play at least once a day.Several times/day 36% Once a day 32% 2 - 3 times/week 28%Once a week or less 4% How many hours per week? U.S.< 15 min 0% 16 - 30 min 12% 31 - 59 min 17% 1 - 5 hrs 39% 6 - 10 hrs 18%> 10 hrs 14%
- In 2009, Qzone (Tencent Holdings) had revenues of $1.8 billion, of which 13% came from advertising. The rest came from the sale of virtual goods. Operating profits were $882 million.Has the global recession had an impact – sure. Advertising now represents 4% of its revenue although overall revenue and profits were up significantly. Q1 2010 – revenues were $619 million an increase of 69% over Q1 2009.