Could Messenger Payments Be a Tipping Point for Digital Payments?

15. November 2017.

The news earlier this week that Facebook has chosen the UK as the second territory after the US which it will roll out Messenger payments to certainly caught the attention of the payments market.

Another headline that received less attention but which could be equally significant was the news that Amazon had registered three new domains that may signal that they’ll soon be accepting cryptocurrencies like Bitcoin and Ether through their e-commerce platform. Whatever the hierarchy of significance for these stories though, both suggest that the big tech giants are starting to set the future direction of digital payments.

Could this news be the tipping point that fuels the adoption of new technology amongst consumers and businesses? For this to happen, some important obstacles must be passed.

Customer convenience is key

Digital payments may not have taken hold across the world but success stories in China, Sweden and Kenya show that mass adoption can occur. While Facebook’s move into the UK makes sense considering the number of active Facebook users here and the penetration of smartphones in this tech-savvy consumer base, digital payment services have long been available here without significant uptake.

Cash still plays a big part in UK consumers’ lives, with the number of people describing themselves as relying mainly on cash at 2.7 million in 2016, up 1.1 million from three years ago. Not only that, contactless cards in the UK have established themselves as a preferred method of payment, with one third of all card payments in June 2017 being contactless.

On top of this, PayM, the banks’ and credit firms’ attempt to provide a digital payment service through mobiles has not caught on. It’s generally accepted that one of the key issues with PayM was that it required users to log into their banking apps. The fact that Facebook Messenger payments will be immediately accessible from one of the most used apps ever gives it a huge advantage.

No doubt the importance of a digital payment service that fitted into rather than interrupted a user’s routine was not lost on Facebook’s owner Mark Zuckerberg when he assessed the success of M-Pesa first hand on his visit to Kenya last year.

Without doubt, the convenience of onboarding new customers is a significant problem that needs to be solved in another area of the digital payments world, that of cryptocurrencies. Currently, the process for transferring fiat currencies into cryptocurrencies as well as vice versa can take days when it should be done within hours.

As more users want to get involved in these markets, the need for better onboarding journeys will only become more acute. At the same time though, the underlying distributed ledger architecture of cryptocurrencies does answer another of the key blockers for digital currency adoption.

Reassuring customers about security

One of the reasons behind the decision to not make a PayM app but instead incorporate the technology into existing providers’ apps was the assumption that users would feel more comfortable with the security provided by their bank.

While convenience is key, security is certainly an important issue for customers as they decide whether to use digital payments. There are now more than 30 blockchain-based debit cards in circulation, with leading providers such as Visa and MasterCard offering their own versions. These cards have the same PIN security as other debit cards, with the only difference being that they enable customers to use cryptocurrency holdings rather than fiat currencies to make payments.

Even though the security processes are the same, there is still an uncertainty about cryptocurrencies in the public consciousness. To combat this, the industry needs to educate them about the security of the shared ledger and cryptography that underpin these currencies, while the banks need to stop seeing them as a threat and start accepting them as an inevitable part of the future.

Collaboration, not antagonism, between providers

The reality is that the banks talk a lot about the potential of blockchain technology but have a very different view when it comes to the use of cryptocurrencies. This is not just another example of banks being behind the curve when it comes to developing services for new customer needs. It is the wilful termination of banking provision to individuals and businesses that use cryptocurrencies.

Across markets, there are examples of banks shutting down accounts and denying access to established banking services for those with even the suggestion of cryptocurrency involvement. Of course, they are entirely within their rights to deal with whichever customers they choose. However, the sudden and unexplained closure of normal banking activity for these customers is totally unnecessarily.

It is also goes against the tide of public interest in cryptocurrencies, which is continually growing. Wouldn’t it be better if, instead of shutting down accounts, these institutions started to embrace the cryptocurrencies that their customers want to use?

We know that all the major banks and credit firms are working with Facebook in the continued growth and development of Messenger Payments. Presumably, this is because they realise that such a service is built around what customers want. If they could take a similarly collaborative approach to cryptocurrencies, they would not only be correctly accepting the inevitable but also helping to secure their own futures.

About The Author

Ben Jones is the CTO and co-founder of Bitwala – the world’s first Blockchain Bank. Ben moved to Berlin after graduating from the London School of Economics. He quickly caught bitcoin fever and dived head first into the crypto scene.

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