A subtle shift is happening in consumer payments, but the potential for change over the next several years could be seismic. New payment “types” like Facebook Pay and Shopify’s Shop Pay claim to offer consumers new ways to pay, but do they? Yes, these payment schemes offer new functionality and utility within their own platforms and across integrated partner platforms, but in the end the consumer is most often billed through an existing credit or debit card. According to a representative from e-commerce leader Shopify, “Shop Pay will become available to all merchants selling in the U.S. on Facebook and Google, even if they don’t use Shopify’s online store, positioning Shop Pay to become the preferred checkout for all merchants, whether they are on Shopify’s platform or not.”
Similar to e-wallets like ApplePay and GooglePay, Facebook Pay and Shop Pay are not disintermediating banks for their core banking functions, but for their branding , marketing, and ability to influence and monetize customer behavior. So the shift for the consumer is subtle, because they are still using their existing credit/debit cards to pay, but ultimately the shift could be seismic for banks as these new payment wrappers take control of the consumer relationship away from traditional banks. In many ways, Facebook and others are licking the icing off of the cupcake by occupying the sweet spot at the front and center of the customer relationship and gathering valuable marketing data about consumer spending specifics, while leaving the heavy lifting of underwriting, credit losses, fraud, and disputes to the banks.
The expansion of Facebook Pay, says Facebook CEO Mark Zuckerberg, “means that you’re going to start seeing it as a checkout option on the web and especially in web views that you see within our app after clicking on ads or other business content. The commerce experiences are now accessible across most of our services, and we have a full road map of deeper integrations that I’m excited about in the months ahead.”
Facebook Pay has already lived through several launches in its 2-year existence, and it remains to be seen if it will live up to expectations of offering value to consumers outside of the Facebook framework. It also remains to be seen if banks will react to this shot across the bow, or will continue to allow new payments brands to live in the space between them and their customers.
Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group
