Social media payment infrastructure likely to consolidate into UPI

As Facebook is beta-testing mobile recharges through its Messenger app, social media payments have become an integral part in the Indian payments space with the presence of other global players such as Google Tez and WhatsApp Pay.

“Social media payments would become a mainstream offering within the next 12-18 months, with a more robust infrastructure and technology. Earlier, it used to only be authentication through social media, and not actual payment transfer through social media,” said Sachin Sheth, Partner, Financial Services, Advisory, EY.

Payment through social media is a feature that banks and wallets have been offering for quite a few years. While leading Indian banks enabled payments through Twitter in 2015, it was built on Twitter’s public API services. Banks had previously also partnered fintech players to enable social media payments but failed to garner traction. Social media payments are finally picking up because of the united payments interface (UPI) infrastructure, say experts.
 

While Hike Messenger became the first social media network to integrate UPI-based payments, Google Tez, which started off as a pure payments app, later added conversations to compete with WhatsApp Pay. Google and Whatsapp did not respond to queries regarding the same. Most major banks are also working on conversational banking, after realising that the age-old maxim, “banks need to be where the people are”, applies to social media in the case of the younger population. Leading banks such as HDFC Bank and YES Bank have integrated their chat bots into Facebook’s Messenger app, which help users make bill payments, send money as well as check account balance. Private sector lender IndusInd Bank announced earlier this month that it will be integrated into WhatsApp, which would enable customers to check balance and other such services through WhatsApp chat.

“Payments should be a consideration at the heart of a bank’s social media strategy because it is central to so many customers’ lives. By embracing social media, financial institutions can provide customers with the right financial and payment product at the right time, through a customer’s preferred channel and with a more satisfying customer experience,” said a report by TSYS Payment Solutions.
 

Social media is the new marketplace and it is a space that banks have been trying to penetrate a long time. But, fragmented infrastructure and interfaces as well as lack of consumer awareness meant that the bank’s earlier social payment efforts didn’t really take off. But, UPI has the capability to change that, said EY’s Sheth. “UPI is promising and it does not have complexity usually related to a wallet. UPI has several advantages as it is built on a framework which makes it easier to transfer and receive money,” said DD Mishra, research director, Gartner.
 

The rise of UPI has been an undisputed fact in the payments industry, with rising volumes leading to most major wallets and banks integrating UPI into their own apps.

UPI is also strongly supported by the Indian government, and thus using the UPI network also means that a financial institution is comparatively more cushioned from security and other norms.
 

“The experience UPI provides in a native environment, which takes away the friction seen in these transactions usually, has greatly helped the adoption of UPI and indicates a huge growth of UPI in times to come,” said Hemant Gala, Member, Payments Council of India and Head of Bank Relations & Srategic Partnerships, Phonepe to Business Standard earlier.

Social media payments need to be consolidated on a single network in order to be successful and UPI’s popularity means that it can serve as the platform.
 

“Today it is UPI; in the future it will be something else. But all social media payments would have a single consolidated network to ensure a smooth consumer experience and convenience,” Gartner’s Mishra said.