The Convergence Of Messaging Apps And Payments

Messaging apps are considering cryptocurrencies for seamless transactions

If you own a smartphone, chances are that you use at least one messaging app. Messaging apps have become hugely popular, with the three biggest platforms – WhatsApp, Facebook Messenger and WeChat – attracting more than a billion users each month. In fact, you no longer need a Facebook account to use the Messenger service.

It comes as no surprise therefore that companies are keen to tap into these hubs of consumer activity. Messaging apps present a B2C opportunity in which brands can advertise, communicate, and ultimately sell their products and services to customers. This means that payments need to be secure, reliable, and instantaneous. Could cryptocurrencies provide the answer?

The messaging marketplace

It’s already possible to interact with brands and make purchases within messaging apps. One standout example is Dominoes – the pizza chain’s chatbot allows users to browse menus and make orders, all within the Messenger app. Another brand that has taken advantage of the messaging marketplace is Skyscanner, a flight finding service. After finding a suitable flight, users can book and pay without being visibly redirected.

This demonstrates the huge potential for companies to sell through messaging platforms, a fact which has not gone unnoticed by the companies behind the communication apps. Much like Messenger, WeChat has enabled a variety of in-app payment options through WeChat Pay, and Telegram launched Bot Payments in 2017 to connect buyers, providers, and different payment services.

As well as facilitating B2C interactions, messaging apps allow users to make peer to peer (P2P) transactions. WhatsApp is currently trialling a P2P payments feature in India, which links user bank accounts via phone numbers verified by a unique personal identification (UPI) PIN. Facebook Messenger introduced a P2P payments service in 2015, allowing US users to send and receive money within the app. In 2017, the feature was rolled out in the UK. Users tap the blue plus icon, select ‘Payments’, enter their bank details and enter the amount they wish to pay. There are some limitations, of course, such as a £2,500 transfer cap. Recipients are also advised to wait three business days for completion.

It’s clear that messaging apps are an increasingly trusted option for digital cash transfer, whether that’s between customers and companies or from one individual to another. What’s not so certain is how messaging platforms will manage the increasing volume of transactions, and ensure the security of financial exchanges. There’s another killer question here, too. How can messaging platforms take advantage of their new status as payment platforms?

From middle man to manager

One way that messaging platforms could capitalise on in-app payments is by creating their own digital currencies. Creating a cryptocurrency has numerous benefits for businesses, including the chance to reach new audiences, create a more seamless user experience, and avoid fraud by cutting out third parties and taking full control of the payments process. Setting up a dedicated, branded token would allow messaging apps to take ownership of transactions and build more trust with users. As shown by the recent Initial Coin Offering (ICO) craze, corporate cryptocurrencies are already gaining traction. ICOs allow companies to launch their own tokens using a form of crypto crowdfunding.

There’s an interesting relationship between some messaging platforms and cryptocurrencies – namely WeChat. Last year, WeChat’s parent company Tencent banned merchants from raising funds through ICOs following the government’s crackdown on crypto. But, in light of Facebook’s recent movements into the  digital currency space, they might need to reconsider their hardline position. In fact, reducing the presence of external tokens on the WeChat platform could work in Tencent’s favour if they ever do release a cryptocurrency.

Cheque book, or Facebook?

Facebook’s first foray into digital tokens, Facebook Credits, was abandoned in 2013 after a 15 month stint. Six years down the line, and the company is pursuing a new project called Libra. The cryptocurrency, apparently named after an Ancient Roman unit used to mint coins, requires users to set up a digital wallet. It will be available on Messenger and also WhatsApp, which is owned by Facebook. Rather than being managed solely by Facebook, Libra will be presided over by the Libra Association: a group of partners including Spotify, Vodafone and Uber. Notably, users won’t need a bank account to use the token. It will completely bypass financial institutions, which could have serious implications for banks.

Libra isn’t the only messaging crypto on the scene. By the end of October, Telegram plans to make its new cryptocurrency, Gram, available to 200 million global users. The token is touted as ‘a way to move money anywhere in the world’.

There are various reasons behind Facebook and Telegram’s development of cryptocurrencies. On the one hand, Libra and Gram will give the platforms greater control over the payments process. There will be less reliance on external payment services, which will simplify the process for customers and brands alike. But what it also means is that both corporates and individuals will need to buy into the token to continue to use the messaging marketplace. As such, Facebook and Telegram will have access to far more user data – and sensitive financial data at that.

A way to pay that’s here to stay

Facebook’s first attempt to develop its own payments system failed, so what’s to say that Libra won’t meet the same fate? Well, quite a lot, it would seem. The recognition and acceptance of digital payment options – including cryptocurrencies – has ballooned. Bitcoin and Ethereum’s sustained success has encouraged businesses to be more open to tokens. Not only this, but the unavoidable migration away from physical money has made it all the more important for companies to offer online payments. Delivering products and services in messaging apps means there is minimal effort from the user. It also starts a conversation between buyers and brands that creates meaningful relationships instead of one-off interactions.

The convergence of payments and messaging apps is yet another example of business model diversification, pointing to a digital world characterised by competition in its broadest sense. If money is already being transferred within the likes of Messenger, WeChat, and Telegram, it makes sense that the companies running them should want greater control over the process. By releasing a dedicated cryptocurrency, they can standardise the exchanges.

So, will users accept specified tokens? How will brands – particularly those with their own existing tokens – react? Should tech giants like Facebook be allowed to access even more data? Will WeChat join the token race despite China’s crypto crackdown? With the launch of Libra and Gram fast approaching, we’ll soon find out.

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