Trends in social payments | Deloitte conclusions

Payment companies can partner with social media platforms to help them achieve the following goals:

1) Secure payments and identity protection. Consumers today expect the brands and platforms they interact with to respect the privacy of their data and be transparent about how their data is managed and shared with other companies if they have given their consent.⁶ However, social media platforms are not gaining customer trust: according to the 2024 Edelman Trust Barometer, social media is the least trusted.⁷

The rise of social media shopping scams may have further contributed to this lack of trust. Fraudsters can create false identities from shoppers’ social media profiles and hack into consumers’ accounts. A 2023 Federal Trade Commission study found that U.S. consumers reported approximately $216 million in losses from social media trading fraud from 2021 to mid-2023.⁸ Perhaps more concerning is that of all social media fraud reports filed in the first half of 2023, 44% came from consumers trying to purchase something promoted on social media.⁹ Generative AI may further increase the number of such frauds in the future. (See our predictions for AI-powered generative fraud.)

Social media platforms should move to the next level in supporting digital trust, making privacy, transparency and redress (the ability to obtain compensation in the event of harm from malicious forces) key tenets. For customers to be able to make in-app payments freely, platforms should cooperate with payment institutions to ensure safe and secure purchases. For example, payment companies can use their artificial intelligence and machine learning algorithms to generate behavioral patterns and 360-degree views of customers from their offline and e-commerce transactions to help platforms detect fraudulent and synthetic identity transactions. Moreover, with the advent of open banking, payment institutions can play a significant role in sharing data and collaborating with social media platforms to help authenticate identities and prevent illegal acquisition of money from fake accounts or threat actors.

2) Hassle-free payments with consumer option. Most shoppers use social media on smartphones rather than computers, so the primary expectation is a smooth checkout and payment process. Features like one-click payment can make in-app social commerce payments not only hassle-free but also invisible.

Additionally, consumers may want to be able to pay using both traditional and alternative payment methods, including digital wallets, cryptocurrencies and “buy now, pay later” financial products, as is the case with online and in-store purchases. In this regard, social media platforms have already partnered or are working with payment intermediaries that have a strong track record of individual integration with traditional and alternative payment methods.¹⁰

However, given greater optionality, how can card issuers become the preferred in-app contextual payment method while also offering the most optimal options on a six-inch smartphone screen?

Card issuers could offer exclusive loyalty rewards or launch co-branded cards to position their cards as the preferred choice (directly or through digital wallets) for in-app transactions on social media platforms. They can also integrate value-added features such as dynamic pricing and customized rewards based on customer lifetime value, automatic point redemption and loyalty program management to differentiate themselves and become the top choice for in-app purchases by social customers.

3) Faster settlements with additional financing options for merchants. In-app payments are expected to improve conversion rates not only for brands and sellers, but also for content creators who want to receive payments quickly. Advisors and payment networks can help solve this piece of the puzzle and enable social media platforms to move from earners to payers. For example, Visa offers products and partnerships that enable faster payouts because content creators are paid directly.¹¹

Additionally, small and medium-sized businesses (SMBs) and content creators may also appreciate integrated features such as cash advances and the flexibility to withdraw funds without having to accumulate a significant balance. With in-app payments, social media platforms can have a 360-degree view of seller performance in their marketplace, including their sales history, inventory, cash flow and even customer feedback. This data should enable social media and payment platforms to support each other and offer financial products beyond payments, as some e-commerce platforms do. For example, in November 2022, Amazon launched a cash advance program for small and medium-sized businesses on its platform,¹² giving them the flexibility to repay their earnings in this market.