What Is a Social Payment?
Social payments are the use of social media or an app to transfer money to another person or business. The trend was first popularized by PayPal, but the sector now includes other applications like Venmo, Google Wallet, Cash App, and Apple Pay.
- A social payment is an exchange of money between two parties using a social media platform or app.
- The most popular forms of social payment include Venmo, PayPal, and Apple Pay.
- Social payments can be utilized between two friends or can be used for transactions either in-store or online.
- Encryption protocols for social payment apps keep accounts private and safe.
Understanding Social Payments
Social payment servicers link directly to the user's bank account or debit/credit card information via a website or an app. The companies draw money from the user when making a payment and deposit money into the account when the user receives money.
A user connects with "friends" through the service and can select a person and an amount and either pay or charge accordingly. Businesses also capitalize on social payment.
Apple Pay allows users to load their card information onto their phone and pay by scanning the phone or Apple Watch at stores and venues. Banks have versions of social payment, like Zelle, allowing a user to send money directly to another bank account.
Already popular outside the U.S., the Super-App is being explored by Elon Musk of X Corp., formerly Twitter Inc., and other tech companies. These apps integrate messaging, media, shopping, and banking.
Benefits of Social Payments
Social payments are an example of peer-to-peer, or P2P payment and provide users with:
- The ability to transfer funds quickly
- Avoiding using ATMs or carrying credit cards
- Encryption protocols to keep accounts private and safe
Social payment via smartphones allows users to avoid carrying valuable bank access cards like debit or credit cards.
Disadvantages of Social Payments
As technology advances and the opportunity to exchange money online becomes easier, digital currency brings risks that include:
- Hackers and scammers who access and transfer money from a bank account
- Cell phone transactions that do not require authenticating the identity of the user on the phone
Social payment services must maintain the highest cybersecurity standards. Many people avoid using social payments even though they are generally safe. It's wise to use extra security on a phone if it's connected to a social payment app by installing a phone PIN and logging out of the app when it's not in use.
What Is a Payment App?
A payment app is a tool to pay for goods and services and send money to vendors, friends, and family.
Is Money Protected When Making a Social Payment?
Users may not get the same financial protection they get from FDIC-protected banks or other financial institutions. However, many apps offer authentication technologies such as Secure Sockets Layer (SSL), digital certificates, and RSA encryption to protect personal and business information.
How Much Does It Cost to Make a Social Payment or Use a Payment App?
Many payment apps are free, while others charge fees to receive money quickly. Users may be charged credit card processing fees when using some payment apps.
The Bottom Line
A social payment exchanges money between two parties using a social media platform or apps like Venmo, PayPal, or Apple Pay. Encryption protocols for social payment apps keep accounts private and safe. Social payments can be completed between friends or used for transactions in-store or online.