Social Media Payments Opps and Challenges

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Addressing the challenges and opportunities of payments originating through social media. Projections, competitors, new investors.

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  • Discuss why payments integrity matters and how it can be broached.
  • Diffusion Theory – Sociology – Innovation itself, how information about the innovation is communication, time and nature of the social system in which it’s introduced.Technology Acceptance Model – similar but focuses on convenience, ease of use. Antecedent Usefulness and Ease of Use – Antecedent that Informs Ease of Use.In social networking, we are talking about social computing, rather than organizational models. Social computing is about embracing, rather just accepted.Behavior embedded in Society == Technology as part of a lifestyle,
  • Social networks are growing quickly and social gaming through social networks are servicing at the gateway for a new global marketplace operating without the intermediation and governance/protections of credit /debit cards, card networks and banks.Some say, what does it matter – online and mobile are just two channels in a mature economy with enough flexibility and safety to absorb and moderate new payment types and channels.This may not be true.Social networks, while maturing in the U.S., are still growing 25% per quarter in emerging markets.Social games and their payments are the entry point/gateway to virtual payments but payments will take on a life of their own.This has implications for the US because of ownership links among Russian, US, Chinese, South African investors that could potentially open up networks in a truly global way. For instance, Facebook Credits in the US could be exchanged for Qcoins in China or could enter into a Hyves account in Holland. What would it mean for money to flow from individuals to individuals to companies without an intermediary – a traditional payments firm??
  • Define: Social Networking/Social GamingDiscuss why payments integrity matters and how it can be broached.Facebook has 500 million users.Breakdown provides by Guardian, July 10, 2010Populations where Facebook has higher % penetration. (Facebook has about the same penetration in U.S., Chile and Sweden)Hong Kong 48.5062Canada CA 45.4791United Kingdom 42.7835United States 40.7232Chile 40.6994Sweden 40.6246They play often – in the US, 68% of gamers play at least once a day.Several times/day 36% Once a day 32% 2 - 3 times/week 28%Once a week or less 4% How many hours per week? U.S.< 15 min 0% 16 - 30 min 12% 31 - 59 min 17% 1 - 5 hrs 39% 6 - 10 hrs 18%> 10 hrs 14%
  • In 2009, Qzone (Tencent Holdings) had revenues of $1.8 billion, of which 13% came from advertising. The rest came from the sale of virtual goods. Operating profits were $882 million.Has the global recession had an impact – sure. Advertising now represents 4% of its revenue although overall revenue and profits were up significantly. Q1 2010 – revenues were $619 million an increase of 69% over Q1 2009.
  • Social Media Payments Opps and Challenges

    1. 1. Social Networkingand Payments<br />A Presentation to the <br />Federal Reserve Bank of Philadelphia’s<br />Payment Cards Center<br />Elizabeth Rowe<br />August 9, 2010<br />
    2. 2. Virtual Payments: Harbingers of Challenges to the Larger Payments System?<br />Traditional Flow of Payments<br />Consumer/<br />Business <br />Bank<br />Emerging Flow of Payments Diminishes Centrality of Banks and Issuers<br />2<br />
    3. 3. Self-Sustaining Payments System:Where are the Traditional Players?<br />3<br />
    4. 4. Consumers Increasingly Comfortable with Virtual Transactions<br />P2P<br />Facebook<br />Apple<br />Amazon<br />4<br />Antecedent Factors Drive Adoption<br />
    5. 5. In U.S., Social Networks Have Grown Quickly<br />Source: Simmons New Media Study, 2010 <br />Facebook has 500 million users, with half living outside the U.S. Globally, the largest domestic social network is China’s Qzone, with 388 million users.<br />5<br />
    6. 6. Time Online is Spent Playing Games at Social Networks<br />Source: The Nielsen Company, 2010 <br />6<br />
    7. 7. Virtual Currency - Likeliness to Purchase Virtual Items with Real Money (U.S. Social Gamers)<br />7<br />Source: 2010 Information Solutions Group, Social Gaming Survey <br />Question: How likely would you be to purchase a virtual item with (real-world) money if it gave you a modest short-lived advantage in a game, e.g., power-up special, bonus multiplier or special weapon or tool?<br />
    8. 8. Online Gaming (Micro)Payments are a Major Engine for Revenue<br />Source: Facebook and Analyst Estimates, 2010<br />Facebook takes 30 percent of each payment it processes. <br />8<br />
    9. 9. Smart Money is Following Virtual Currencies<br />Source: Company Press Releases, 2010<br />9<br />
    10. 10. Global Experimentation with Social Networks as Payment Platforms<br />10<br />As a Rule, Each Country’s Largest Social Network is Home-Grown<br />* From January 2008 to June 2010, the number of South Koreans has grown from 71,000 to 1.1 million. Month over month growth is currently 25%. <br />Source: Inside Facebook, CIA World Factbook and Nick Burcher, July 2010 <br />
    11. 11. The Dutch Model: Disruption and Revenue <br />Loss for Traditional Payment Providers<br />Hyves Transactions Move Seamlessly From Virtual to Real Worlds<br />11<br />
    12. 12. China Regulates Virtual Currencies<br />Source: Xinhua News Agency, 2006, 2008 and 2010 <br />12<br />
    13. 13. Conclusion<br />Virtual payments have the potential to introduce risk into the payments system.<br />They also represent engines for economic growth and innovation.<br />If these payments gain traction and liquidity, their disruptive potential should be monitored and moderated by regulatory authorities.<br />Thank you for your time today.<br />Elizabeth Rowe<br />13<br />
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