This blog first appeared as a blog on Answer Pay’s website: Instagram payments, a Meta-phor for missed banking opportunities?
Instagram launches payment service
In case you missed it, Meta CEO Mark Zuckerberg recently announced a new “payments in chat” feature for Instagram.
According to Techcrunch this means:
..users can purchase products from small businesses and track orders via direct messages on Instagram in the United States
This is a hugely exciting development – bringing together communication with the payment presents many opportunities to improve upon the transaction experience. In Instagram’s case they find that customers often talk to businesses before purchasing via a separate process so combining the two together makes things slicker for the consumer and business.
Request to Pay
Outside of Meta’s platform the same is happening elsewhere but is perhaps even more complex. Picture for example the Direct Debit process where a mandate is agreed for a future series of payments. A few months later the billing company sends out their notice that they will collect payment for x amount on y date. The customer does not want the money to leave the account on that day so would like to change the date, how do they make this happen? A telephone call? Visit the biller’s website? It is anything but straightforward.
This was one of the reasons that Request to Pay was created. Request to Pay is a communication channel that uses banking and payment applications as the interfaces allowing a biller and payer to correspond prior to a payment being made. There is an ISO standard which both the Pay.UK and SEPA R2P schemes have used as the basis to create their own frameworks launched in 2020 and 2021 respectively. It is a competitor to the new Instagram service; which will win the battle for adoption?
Bye Bye Banks?
We have seen the disruption Big Tech has made to the telco industry effectively relegating mobile operators to playing the dumb pipe role, far down the customer value chain. We’ve also seen within the payments industry banks slowly lose their competitive edge first via innovators like PayPal that own the payment experience for customers online, then via contactless where banks are subservient to the experience provided by Apple and Google wallets. Not forgetting also Open Banking, a regulatory drive to allow third parties to provide the interface to the bank account itself.
On the face of it then things don’t look good especially considering that in the 2 years following the Request to Pay launch not a single bank has seized the opportunity. Some of this is perhaps down to their naturally risk averse nature given their high regulatory constraints where the stock response to any new service is often “What if it doesn’t……?”. With Request to Pay perhaps the question should be “What if it does and what if we’re not part of it?”
All is not lost
There are some distinct differences though, between Instagram’s service and Request to Pay, that provide a limited time opportunity to make a difference. The first one to mention is that whilst Meta has incredible scale it relies on both the biller and payer subscribing to the same platform – much like you would have on eBay and therein is the issue. What if the biller is on eBay and the customer on Meta there is no interoperability leading to billers and payers having to support a multitude of platforms.
The alternative with Request to Pay is that you continue using the banking app that you’ve always used and they can be different ones for the biller and payer. In that way each party chooses the interface which has the experience they prefer. Rather than the interfaces being standardised (as is the case with Instagram) the APIs linking them are. Scale is also less of an issue in the UK in particular as the top 5 banks give you over 90% coverage of the retail consumer base.
The next issue is trust. Banks have a lot of trust as we rely on them currently to keep our money safe. Do we view Meta in the same way? I’m not convinced we do; so in a head to head with a bank who already handles your payments and in a way that may be more convenient as you choose your own experience then my bet is on the banks. With one big caveat, banks must engage.
This stark warning from Meta comes at a time when businesses and consumers are crying out for a new way of paying. Authorised Push Payment fraud is going through the roof meaning the old means of sending a payment link in e-mail or SMS has to stop as customers can no longer trust the messages. Add to this the rising cost of living crisis, then inevitably consumers want more control over their bills and billers are more concerned than ever by cashflow. Banks therefore must move quickly to compete, tackle fraud, improve customer experience and meet customer demand.
The good news is that it is possible to move quickly. Answer Pay provide Request to Pay as a managed service and with easy to integrate APIs so you can augment your banking or payment app in less than 2 weeks.
Answer Pay cover both the UK and SEPA markets for both sending and receiving Request to Pay messages so whatever your proposition we’re here to help.
This newsletter first appeared as a blog on Answer Pay’s website: Instagram payments, a Meta-phor for missed banking opportunities?