Splitting rent with roommates or paying friends back for that cab ride may have become a whole lot easier. While online and mobile banking have made everyday activities faster, social media banking provides more payment options.
Many of the companies venturing into social media commerce are still in their beta stages, but Facebook and Twitter have gotten a jump-start in the new finance frontier. A federal financial regulatory agency is trying to catch up as third-party companies become the “middle man.”
The Federal Financial Institutions Examination Council has begun to formulate social media guidelines for social media eCommerce.
Fear of online banking has largely dissipated over the past few years, with mobile banking now a mostly accepted method of paying bills. With the addition of social media transactions, however, security is again a major concern.
John Oxford, director of external affairs at Renasant Corp., a financial services company, feels that security is the biggest deterrent to the adoption of the social media banking platform.
“As the technology becomes more accepted, just like online banking and mobile banking, it will happen. The benefits would be an entire new demographic, a younger generation of banking clients that are not only comfortable with this medium but expect products to merge into it. It would also create an entirely new convenience factor,” Oxford said.
Below are the latest developments in the social media eCommerce:
American Express and Twitter have begun a venture to allow customers to “pay- by-tweet.” Users are encouraged to unlock “the power of a #Hashtag” by turning their tweets into purchases. Launching in full in late February, Sony, Xbox and even the Celtics took in the beta launch on Feb. 13.
The Amex + Twitter partnership brings companies one step closer to their consumers, making it possible to order and communicate in real time, according to American Express.
Coupon-less savings through tweeting, the first stage of the partnership’s social banking, was first introduced to Amex card members last March through the company’s card sync program and received a positive response.
“Based on the initial success of Amex Sync for offers, we know there is significant power in combining out assets with Twitter’s platform to bring value to card members and merchants,” said Leslie Berland, senior vice president of Digital Partnerships and Development at American Express in a press release Feb. 11. “Now, we’re leveraging our unique technology and closed-loop network to introduce a seamless solution that redefines what’s possible in the world of social commerce.”
Chirpify Inc. a similar platform that uses Twitter, as well as Instagram, has capitalized on the purchasing power social media can offer. Bands can sell music directly to fans, non-profits can collect donations through their followers and checks can be split amongst friends.
With numerous payment options to choose from, Chirpify’s “selling in-stream” on social networks allows for instant sales. The company has also created “social storefronts” that aggregates listings so users can buy, embed and share sales.
Social money transfers
Venmo Inc., one of the social money transfer “middlemen,” has already taken hold in the U.S, providing an easy way to pay your friends for, as the company states, “extra booze, cab rides, seasoned fries, and everything in-between.” With a goal to design a digital platform for when you don’t have cash, Venmo has taken the complexity out of getting that $5 dollars back for the pizza last night, according to Venmo’s promotional video.
John O’Donnell, now a 23-year-old paralegal in Washington D.C., started using Venmo back in college.
“I started using it when my college roommates and I would order food together and instead of paying each other back with change we found,” O’Donnell said, “it was much easier to use Venmo because you could use it to pay back the exact amount.”
Venmo’s setup process is simple: New users can download the app, fill out their personal and banking information, select a contact from your address book, enter the amount of money and click “Pay.”
Venmo also allows users to “Charge” money they wish to transfer and the app includes its own social platform. It gives users the options of publishing their transactions to the app's wall, Facebook, Twitter or Foursquare.
It is not a feature that appeals to O’Donnell, however.
“I have never have had any use for the social aspect or looked at what everyone else was doing,” he said.
Venmo requires users to enter the last four numbers of their SSN. Such personal information is, “required by banking industry regulations and federal law to verify the identity of each account holder,” the company says.
A disclaimer on the bottom of the registration page let users know that their data is sent over a 256-bit encrypted connection – the same connection that was adopted by the U.S, government and is a key size variant apart of the Advanced Encryption Standard that some banks use.
Boston-resident Ben Klein, 23, and his roommates use the similar program Rentshare.com.
“We put all of our expenses we have to share into it,” Klein said, “cable, party supplies and any other expenses we want to share. At the end of the month it generates a check for us and mails it to our landlord to pay for our rent.
Klein turned to third party sites for one reason: “I think it is the convenience, otherwise we would be writing separate checks every month. It’s an easy way for us to organize everything for our apartment,” Klein said.
Neither Klein or O’Donnell are concerned much about privacy or security issues.
“I’m probably more comfortable than I should be,” O’Donnell said. “It was originally one of my friends who encouraged me and I was at first wary but what I read about the security seemed pretty good and so far, I haven’t seen any reason not to trust it.”
Across the pond, the UK company Azimo Ltd. has teamed up with Facebook to offer a social money transfer service. By signing into Azimo with Facebook, customers can select “friends” from their Facebook profile to send money to.
Once recipients create a personal account with Azimo through a Facebook message and provide their payment preferences, money can be seamlessly transferred from bank account to bank account or one of 150,000 payout desks available in 125 countries. Transfers can also be sent to the recipient’s mobile provider to “top up,” or add money.
Social media guidelines and hackers
Each week organizations face an average of 1,719 attacks for every 1,000 users, according to a 2013 threat report by Websense Security Labs, which tracks and investigates mobile attacks and data.
“Year-over-year, the number of malicious web-based attacks increased by nearly 600 percent,” said Charles Renert, vice president of Websense. “These attacks were staged predominately on legitimate sites and challenge traditional approaches to security and trust. The timed, targeted nature of these advanced threats indicates a new breed of sophisticated attacker who is intent on compromising increasingly higher-yield targets.
Privacy issues and the rapid expansion of U.S. banks into social commerce over the past year prompted the Federal Financial Institutions Examination Council to create a proposal for social media guidelines.
While the guidelines are still only in their beta stages, they are, “intended to help financial institutions understand potential consumer compliance, legal, reputation, and operational risks associated with the use of social media, along with expectations for managing those risks,” according to the FFIEC.
Oxford, the director of external affairs for Renasant Corporation, sees the immediate danger in a broad adoption of such third-party companies with the current setup of social media platforms:
“The disadvantages is the platform creation to begin with – it’s just not there yet. If someone could hack your financial transactions through a social media site, think of all the personal information they could clean at the same time: photos, locations, likes, etc. ID theft goes to an entirely new level,” Oxford said.