How Snapchat and Instagram could grow the payments ecosystem

As e-commerce expands onto platforms like Instagram, the opportunities for payments continue to grow. Instagram has been rolling out in-app payments for users who want to buy things they see in posts without exiting the app to do it and Snapchat has been testing the potential for an in-app commerce platform, for other brands, with Snap Store, a Snapchat merchandise store that lives in its Discover section. It's a well-trodden path: “The idea of Google entering commerce, developing wallets and ecommerce capabilities, led to other online networks doing the same thing,” said Jason Oxman, director of the Electronic Transactions Association. “Spreading payments capabilities to these gateways and marketplaces makes a lot of commercial sense and I expect this trend will continue.” Similarly, Facebook recently enabled payments capability in messenger to allow users talking with friends or chatting with a retailer’s customer service representative to complete payment transactions in the message thread — rather than sending them outside of Facebook to start the conversation over again somewhere else. Instagram currently lets some users register a debit or credit card as part of a profile and set up a security pin to make purchases without leaving the app. Neither Facebook nor Instagram responded to requests for comment. Through a deal with Square, Snapchat users can add a debit card, type a dollar amount into Snapchat’s text-chat feature, and hit a green “pay” button to send money to someone instantly. It’s effectively a white labeling of Square Cash that gives friends 24 hours to accept the payment before it’s refunded to the sender, to make sure it didn’t disappear. Snapchat partnered with Shopify and Darkstore on a Nike experience earlier this year, in which users would use the Snapchat camera to scan a code displayed on a basketball-hoop backboard to view the Air Jordan III “Tinker” sneaker in the app. The opportunity for Instagram or Snapchat to introduce peer-to-peer payments is similar, Oxman said, though that doesn’t make them threatening to any current players but each other. Instead of competing against existing or traditional financial services, social media platforms are acting as distribution channels for them. “The services that have come on [the scene] in the last couple years to compete with Venmo are in many cases something you can do already that have p-to-p built in,” he said. For example, Google lets customers email money to friends or family using their Gmail account, Zelle lets users send money inside their bank’s mobile app, Square and Venmo have created social networks built on p-to-p rails. Mobile payments through Instagram or Snapchat would be a huge driver for mobile payments, though. But whether there will be an Instagram Cash card living in Apple Pay wallets remains to be seen. “I would analogize it to mobile wallets like Apple, Samsung and Google Pay,” Oxman said. “The only thing they’re killing is the plastic card. You’re still using traditional credit and debit rails and the same financial services products.” Download Tearsheet's new guide, detailing eight ways banks can learn from retailers in areas like mobile payments, brick and mortar locations and pop-up experiences.