In the ever-evolving payments landscape, banks can’t afford to rest on their laurels. With a low barrier to entry, payments, perhaps more than any other aspect of financial services, is a prime area for nonbank competitors to get in the financial game, as the likes of PayPal, Square, Dwolla, and others have proved.
As consumers continue to eschew checks — and even cash — and become increasingly comfortable conducting transactions on emerging channels, it’s imperative for banks to begin to offer services that cater to changing tastes. For this reason, Toronto-based RBC in December launched a person-to-person payments service for its mobile banking customers to send money via Facebook Messenger contacts from within the RBC Canada app. RBC says it’s the first bank in North America to offer such a service.
“As we develop our payments strategies, we want to continue to ensure we are a leader in the marketplace,” explains Linda Mantia, executive VP, cards and emerging payments, at RBC. “We need to be where our clients are.” The service runs on the Canadian payments network cooperative Interac, which comprises more than 80 member Canadian financial institutions. Interac allows consumers to send money to anyone with an email address and Canadian bank account. Mantia says the new RBC service is even more convenient as consumers sending money only need to be friends with someone on Facebook. The service is only available for RBC customers who use the bank’s iPad app, though there are plans to extend it to the iPhone soon as well.
Once customers are logged on to the RBC mobile app, they can click a “send money” tab with the Facebook logo, which will prompt them to log in to their Facebook accounts. The RBC app will then ask if it can access the customer’s Facebook friend list, a requirement, and the customer can select a friend and a bank account from which to send money and the amount. The person sending the money can also include a note describing what it is for. Recipients will then receive a Facebook message informing them of the transfer, which they can deposit in their own accounts via the Interac network. The recipient does not need to be an RBC customer.
Mantia says RBC has “a long-standing relationship with Facebook,” doing things such as partnering on mini-hacks. She says the two companies “discussed interesting ways to work together,” and the idea for the Facebook Messenger payments came up. Mantia notes that RBC “worked very closely” with Facebook developers on this service, not only to ensure a quality customer experience but also on the issue of security.
“Security for us is the cornerstone of our business,” says Mantia. “We are just using Facebook Messenger the same as you would someone’s email with Interac. Facebook has none of the financial data. The transaction is authenticated the same as in online or mobile banking. If you are comfortable with online banking, you will be comfortable with this.”
A Burgeoning Trend
According to Nick Holland, senior payments analyst for Javelin Strategy & Research, it makes sense for banks, or any players in the payments game, to explore social media payments. First, he notes, people are becoming more comfortable conducting transactions in social networks. According to a recent Javelin report on the topic of social payments, 26% of consumers overall have made a purchase on a social media site in the past 12 months, Holland says. He notes that Gen Y consumers were the most likely to do this, at 44%, followed by Gen X at 37%.
Holland believes this makes P2P payments on social networks, especially Facebook, natural for many people. He notes that research indicates 80% of all US consumers have accessed Facebook over the past year. “Facebook is a great platform for a P2P network because you’ve already got your network of friends and family on there,” he says.
Another aspect of social media payments is attractive for banks and their nontraditional competitors alike. Holland notes that, despite the hype, mobile wallet products have not taken off much, in part because retailers are reluctant to invest in point-of-sale technology that few of their customers are using. But if a bank or nonbank competitor were to “virally build up a P2P network,” then down the road merchants would be more likely to install hardware to accept it, Holland says.
“You can see social P2P payments as a kind of Trojan horse to build up a large payments network first, then look at areas like a physical point-of-sale system,” he adds. “You can go to a retailer and say, ‘Hey, I’ve got 90 million users already. Will you buy into this point-of-sale system?’ ”
For RBC, rolling out its Facebook Messenger service is just another way to offer convenience to its customers, Mantia says. But if the demand warrants it, the bank may seek to expand the service to other social media sites as well. So far, the early returns are encouraging. Mantia says that although the service is just over a month old, 100% of its mobile banking customers have upgraded the app to get this service. And though RBC doesn’t yet have hard numbers on how many transactions have been made using the service, Mantia says qualitative data indicates it is successful.
“We’ve heard from a lot of customers who are happy with the service,” she says.