Social Commerce, Banking & Payments: Updating banking with AI, Short-Form Video & Embedded Payments

The session will explore the merging of influencer-driven short-form video and live-streamed commerce with AI-driven personalization to create powerful, embedded shopping experiences that are growing exponentially with TikTok Shop, Instagram, Amazon Inspire, PayPal Venmo, Temu and YouTube. These platforms are reshaping consumer expectations for real-time transactions by legacy financial institutions and payment brands that require new thinking and updates for instant, secure processing infrastructures—or risk losing ground to more agile competitors. This session will explore how AI, short-form social commerce, and integrated shopping impact established players and fintech newcomers alike, offering a forward-looking roadmap for thriving in this new era of "shoppertainment."


Transcription:

Heidi Liebenguth (00:09):

Our theme today is Social Commerce, Banking and Payments, and we have a great panel here with deep experience in all those topics. Perhaps each of you could introduce yourselves and tell us a little bit about your background and what you're doing now.

Jessica Chiu (00:24):

Sure. I'm happy to kick it off. I'm Jessica Chiu. I'm VP of Strategic Partnerships at Airwallex for those unfamiliar Airwallex was founded in 2015 to build financial infrastructure for the globally connected economy. I run strategic partnerships, which means we partner with some of the largest third party e-commerce marketplaces as well as social commerce sites spanning Amazon, Walmart, TikTok shop, Shopify, WooCommerce, et cetera. So excited to be here today.

Zachary Aron (00:51):

Zachary Aron, I lead the payment practice both globally in the US for Deloitte. We are one of the professional services firms that does a variety of consulting risk and financial advisory services. We have about 2000 people who focus on payments serving the entire ecosystem, everything from banks, networks, merchants, platforms, and fintechs as well. So delighted to be here and share some of the research we've been doing in this space.

Raman Walia (01:19):

Hi everyone. Raman Walia. Most recently I was with eBay and previously with Meta and Intuit. My career has primarily been in the payments and financial services industry over the last decade and a half. Currently I do consulting as part of Act1 Payments with small and medium businesses and delighted to be here and privileged to be part of this panel.

 Heidi Liebenguth (01:41):

Great, thank you. I think most of us think about social commerce as watching some kind of term short form video, buying things through an embedded payment button and so forth. May it be on TikTok, on Instagram, on Facebook, wherever it might be. Perhaps the ultimate social commerce that we've studied is Pinduoduo in China, where people actually team up with others, friends and family to buy things and earn a quantity discount. We thought when Temu at Korn Consulting, we thought that Temu launching here in the United States would maybe take that same tactic, but we have not seen that yet. And show of hands here in the audience, anybody on TikTok, on Instagram, on Facebook, anybody who's made purchases through those channels? Yes. So people are doing this right here in the room. That's great. Raman, can you tell us a little bit about how we got here and how social commerce is growing and evolving?

Raman Walia (02:51):

Sure. I think it's important to sort of see the evolution of how social commerce has evolved over the last decade and a half or two. And one of the interesting things that has happened is social commerce in the context of advertising and in the traditional advertising world, there was a large gap between the time when a consumer saw an advertisement and they went to the store to actually buy the purchase. That particular gap has been narrowing over the last couple of decades. So we moved from print advertising to television advertising to then Google search and click through advertising. Then we moved to social media advertising and we are at now the stage where advertising and commerce has actually merged together where people see the advertisement, they click on the advertisement and they buy it in context within social media. And I think that's the evolution that we are seeing in the social commerce space, and that's a very important trend to sort of see.

(03:51):

And on the other hand, from a service provider standpoint, the different providers in the payment space, in the banking industry, in the e-commerce space and in the social media space, they have been expanding their footprint beyond their core competencies and their core competencies, whether it's social media like Meta or TikTok or if it's a pure play payments company like PayPal or Stripe, they are now expanding into areas beyond the core payments and going into social and other forms of commerce. And I think those are the two sort of important trends as we see the social commerce evolution as well as the advertising and the services provide revolution.

 Heidi Liebenguth (04:33):

Yes, thanks Jessica, you're deeply involved in the whole social commerce scene. Can you talk to us a little bit about how that's bridging this online, offline world?

Jessica Chiu (04:45):

Yeah, happy to. So first I'll start with what I think is the super interesting phenomenon, which is usually when someone goes on a social site, they're not necessarily looking to purchase, right? If I want a pair of shoes, I'm not going to meta, I'm not going to TikTok immediately. So people going to these sites are typically more upper funnel, more in discovery and inspiration phase. And then because these sites know that there's a really natural synergy between discovery and inspiration on their platforms and then bridging that into higher intent like wanting to purchase, wanting to get recommendations from creators, influencers, people in your network, they can push people lower funnel to a more shopping intent. And so that's a lot of what we're seeing. And so I think the bane of now where we're at today is a lot of marketers trying to figure out how do you bridge that online attribution to then someone maybe not checking out in-app, maybe not checking out with a redirect, but then physically a time later going into a traditional brick and mortar retail store to actually purchase the item.

(05:42):

I think because these social commerce sites are a prime to want to bridge that full funnel conversion gap, they monetize off of it right through ads. They have a lot of ways to plug programmatically data from an offline conversion through data uploads, APIs plugging into a third party CRM or POS system so that they can take transaction level and user level data and match it to the actions or the engagement that's happening on the social site. It's not a perfect match, right? It's fuzzy match. It depends on the data completeness on both platforms, but I think it's good enough, it's only going to improve with time and it definitely gives marketers, brands, merchants a really good full funnel picture

 Heidi Liebenguth (06:18):

And it's actually enabling a lot of these creators to morph from, as you said, advertisers to sellers in their own right.

Jessica Chiu (06:28):

Absolutely.

 Heidi Liebenguth (06:31):

Social commerce dominates online shopping in China with 600 billion I think was the number you gave us in sales versus 25 billion here. Jessica, do you see it reaching that same kind of dominance here in the US?

Jessica Chiu (06:47):

I think with time, so we're definitely lagging and there's a few factors behind that, but I think we're probably five conservatively, probably more like 10 years behind a market like China. And for me, there's two main reasons for that. One is China is inherently mobile first in terms of both app usage and payments. So mobile first payments penetrations over 80% in China versus it's half of that in the us. We've certainly accelerated that adoption speed and curve with the pandemic, but being able to check out on a mobile optimized site, having QR codes to pay easy checkout mechanisms on mobile or even on desktop still definitely lagging in the us. China's been a cashless society for a really long time. And then secondarily, I think because the social media phenomenon really started in the US, we started with a desktop first experience and we're still not fully mobile optimized versus China exploded social media after smartphone penetration and after the mobile app ecosystem was already a thing.

(07:45):

So WeChat Rose Lucian in 2011 DU Duo in 2013 to 15, and they were prime in a time when mobile penetration, digital payments, mobile payments, social media was already a prevalent use case. And so we're seeing the US catch up because of those factors, but we also have some competing dynamics like walled gardens in the us So we're getting there slowly with the beginnings of commerce into social media, but we're still far from the super apps where people in China are used to doing everything, running their life, paying, getting a ride, ordering food, shopping within their mobile phone right in front of them.

 Heidi Liebenguth (08:24):

Zach, tell us what you're seeing in your banking practice.

Zachary Aron (08:27):

So maybe to build on Jessica's comment, one of the interesting aspects when we look at things from a banking perspective around this and in the US is sort of the similar aspect of the US infrastructure was way ahead of everybody and it works. And one of the blessings and challenges is that often what we have has been deemed good enough and works. Now we could have a whole different conference about the ways we want to improve that, but fundamentally things worked in a certain way and what we have seen outside the US is that infrastructure didn't exist. So people built to where the infrastructure was going and in the US you have to increment to continue to get there. When we think about it from the banking practice, a couple things stand out. One is banks have viewed this as a channel and that goes all the way back to when the internet started to take hold.

(09:25):

It was, oh, should it rechange how we think about banking? And we would argue 95% went it's a channel, 5% said no. Some took, that changed a little bit the dynamic, but for the most part they went to a channel and now we've looked at social media and they sort of still go, it's a channel. And so what we see is banks participate and it's not that banks look at this and go, the head isn't in the sand, but it's sort of still viewed in the construct of the way the infrastructure works today, the notion that this is a channel. And so what we are seeing and having a lot of discussion with our banking clients about is there's a little bit of a risk that you're taking because as Raman said, this stuff moves together. We're making now things much more done in context.

(10:18):

And it's not, you think about shopping now, you think about paying, it's actually you do the whole thing and paying is deemed not to be the problem. And the financial services side is not the problem. And so our commentary around that is banks have to think about this a little bit differently. Some are trying to think about engaging. I'm sure we'll talk a little bit more about those examples, but a lot really have to sort of think a little differently and go think beyond the way that you have traditionally thought about these interactions and the way commerce is going to be able to capitalize.

 Heidi Liebenguth (10:48):

Raman. Any thoughts on that?

Raman Walia (10:50):

No, I think I agree with what Zach mentioned, and I think it's interesting that the banks have such a wealth of the data and information that's coming to them as part of these transactions from social commerce. And there's an opportunity for the banks to actually play a role upfront, whether it's onboarding, whether it's identity management, whether it's risk, and then also on the backend side of the payments transactions because ultimately all these social commerce transactions are landing at the bank's desk because they are the ones who have to adjudicate the risk and approve it.

(11:28):

And so banks have a huge opportunity here. And in terms of whether they can even branch out, I always feel like card-linked offers is a very interesting area for banks where it kind of bridges the marketing, the social aspect, the opportunity that sits out there. And banks have a huge role to play for, and that's an example, but that's a way where banks can actually make inroads into this vastly growing space of social commerce and be there to actually influence the transactions on the front end side, but then also on the backend side by adjudicating them.

 Heidi Liebenguth (12:08):

Good point. Banks today can easily measure the growth of their transactions that are happening on social media because in their MID reports, those are the merchants of record. And with AI, they could do that analysis much, much faster. One could argue that these creators and influencers that we see on social media are the newest, fastest growing segment of SMBs. How do banks and platforms go about vetting and nurturing these entrepreneurs?

Zachary Aron (12:42):

I'll start, and maybe a quick anecdote. We were doing research around how everything evolved and one of the people on our research team said, we posed the question, when did this all start around this notion of influencers and entrepreneurs? Lot of us were raising our hands going, well, we're thinking about Farmville on Facebook and things like that. And someone said, actually incorrect, I'm going to pause it, that this started in the 1980s. And we said, okay, but did Al Gore invent the internet at that point yet? And fundamentally they said, no, it happened the eighties. You know what? And we said, okay, we're now all bought in. The home shopping network was the actual first set of influencers out there, people that you didn't know that were sitting there with a product that you didn't realize you wanted. I mean, who needed to know they needed Boba, the dancing panda in its automated thing, but once you saw, oh, a thousand people are buying this, you want to be, oh look, the person there was like, look how cute the panda is.

(13:53):

I love it too. And you're like, well, this person looks like me. This person acts like me. Totally. I'm going to buy it. And so sort of humorous side we looked at and said, actually, you're right. And so what it's interesting to us is that actually this phenomenon has been out there for a while and it really speaks to influencers really actually having an outsized view of trust or being trusted and being authentic. And for us, when we think about it from a banking perspective, we actually also go traditional role of banks is trust. You strip it all. I mean, yes, there's a lending, but it's trust at the end of the day, who do you trust with your money? And now you have who do you trust with your money? And now who do you trust to spend your money? And now we've got kind of this mix in together and there's a huge opportunity for banks to think about that in a very significant way.

(14:48):

Can the influencers actually help with banks? I mean, we've already heard about Fin Influencers as an example, which actually I have a 25-year-old and it frightens me when he tells me where he gets his news. I'm like, how about call dad? But apparently the fin influencer is much better. And so you've got, but the notion of there's a partnership there when you think about brand around trust, how do you trust about money and where it's used? And then secondly, Raman highlighted it as well is banks should think about the totality of this ecosystem. You've got a platform, you've got an influencer, you've got needs for fast payouts, you have the ability to sort of look at a string of commerce and how it's being connected. There's a lot of things that now can be done to enable that.

 Heidi Liebenguth (15:37):

Jessica, you're onboarding these folks. Tell us about that.

Jessica Chiu (15:41):

Yeah, I'm happy to speak about it from a FinTech perspective. So typically the way that we try to look at it is what are these SMEs, these creators, these influencers trying to achieve? And then what are some of the pain points or use cases they need solutions for? So typically if you're an SME or you're a merchant and growing on a social commerce site, usually a want amplification, that's why you're on the site. And then hopefully down the line looking to monetize and collect your payments, collect your revenue. And then social sites, with the exception of a few like Facebook marketplace is hyperlocal. The vast majority of these social sites are inherently global. They're a merchant and SME located in one region of the world selling to everywhere else to buyers, wherever that social media platform amplifies too. There's a very big cross-border aspect. And then therefore there's the need to collect payments across multiple currencies.

(16:30):

So traditional banks, especially in the US with the exception of the large mega banks, a lot of them play in one market. Banking licenses are in one market usually. And so banks traditionally aren't necessarily primed to be the one-stop shop for a creator to collect in, I don't know, 20 currencies around the world versus I'd like to think a little bit biased, but that's where a lot of fintechs like ALS couldn't come into play where if you're an SME or you're a creator or you don't have the time or the capital to spin up local entities or bank accounts across the world, and yet you want to collect locally to a buyer in USD buying in the US, you want to collect locally to a UK buyer buying in GBP and then vice versa around the world. And that's something you can do with a FinTech

 Heidi Liebenguth (17:17):

Raman. Tell us your perspective on this. You have a long history at eBay, and

Raman Walia (17:23):

I think onboarding is one of the most critical aspects a lot of the platforms actually are faced with similar to what Jessica mentioned as well, and whether it's meta, whether it's eBay, whether it's other companies, one of the most important aspects of onboarding a seller is to make sure that those sellers actually have a frictionless experience and the amount of data that every platform has is limited to what they can get access to based on their transaction portfolio based on service providers. And I think that's where banks can step in and have these partnerships with platforms like Air Wallet with other service providers even directly with e-comm platforms, and they can share this information and monetize it in a way that can make that onboarding experience identity management, both for the buyers as well as for the sellers, super important and also frictionless from their perspective.

 Heidi Liebenguth (18:26):

Tell us a little bit more about those kinds of value added services that banks can bring.

Raman Walia (18:30):

Yeah, I think as we were sort of alluding to some of these things earlier, there is this notion of, and I think I was talking to a couple of folks during the break that one of the opportunities or also the pain points for these platforms is that social commerce generates in some cases a lot of fraudulent transactions and there is just a whole plethora of different kinds of transactions that get generated because of social commerce. Not all of those are approved by banks in some cases. There are false positives that the banks actually have to make sure they adjudicate them in such way. And so there is an opportunity for the banks to partner with the platforms to be able to lower down these declines. We were talking about this in the break with a few folks, as I mentioned about NSF declines.

(19:27):

NSF declines, as we all know, they are a pretty significant part of the total declines the car industry faces. As such, the issuers have to decline. Is there an opportunity to see that? Could there be lesser declines? And also because social commerce is a relatively new area for the banks, and so the risk modeling, the risk management around some of these transaction profiles that are coming over is also new, and that's where perhaps the opportunities where banks can step in and try to really address this new and growing area of the business on the backend side.

 Heidi Liebenguth (20:03):

Right. Yes, fraud and risk are big issues in this market. And we've seen, as mentioned previously in the conference, JP Morgan Chase is forbidding the use of Zelle on social media platforms. Let's talk a little bit about the efforts to secure identity and create security and protection for consumers. Zach,

Zachary Aron (20:28):

And I think it really goes to sort of the earlier comment around the infrastructure of what we have. And we will look at it and say, banks have always had one job. One is do no harm and protect my money. And one of the, I mean, that's just number one, right? Whatever you do protect, that's what banks were. It's why do we have vaults, right? And so now you look at this new dynamic, and I think about back in the day, Raman and his friends at eBay and PayPal change that dynamic to not just protect money but protect me and really ensure that I want to buy something, this person wants to sell something. We can vouch that these people are legitimate buyers and sellers that changed a dynamic, but our infrastructure in many respects is set up to still say, protect the money more than it is about the person in its totality.

(21:24):

So what we've done to compensate is we layer a whole bunch of things on top of it. So you want to make a payment as an example, and it's like, well, first I would like your thumbprint. Now please tell me your text. Can you repeat the six digit code? The robot is asking you if you're a robot and you're going through just these layers upon layers upon layers of things that create actually a very poor customer experience. In fact, the more that you're asked to authenticate, you're actually increasing the odds that no one is actually going to complete the sale because they're just tired of going through all the variety of loops. When we think about this, there's a variety of things. This is one of them. And our belief is triggering what's going to need to be a real durable identity that exists. And this is where the banks, the platforms, the regulators, this is not a differentiated thing that needs to exist, but I think you need to see, frankly, the whole ecosystem get together and start to decide on standards around identity that really talk about the person is who they are.

(22:36):

The person can buy this, the person can sell this, and be able to use that as really the foundation for how we enable transactions.

 Heidi Liebenguth (22:49):

Jessica, did you want to speak to that identity question? How do you confirm identity and,

Jessica Chiu (22:55):

Yeah, yeah, absolutely. So I hate to bring it to generic AIML, I know that's top of everyone's mind, but Airwallex , one of the ways that we're seeing identity verification really speed up, become more scalable, reduce false positives, and generally speed up the process and have a better, faster customer experience. There's two areas in which we deploy this. One is in the onboarding and KYC phase. And so the example I like to give that's been working really well for us is for any SME or business that comes into our site, we do liveness checks, verification checks, IDV checks, we look at their website and that to a large extent lately we've been able to automate with our AI models and reduce false positives. So we can see if someone is selling a champagne dress or champagne glasses as opposed to being a beverage seller.

(23:40):

So actually identifying pretty programmatically and automatically if they're a high risk industry or prohibitive industry, et cetera. And then two is also in transaction monitoring. So obviously as a payments company, we have to monitor every leg of a transaction or money movement flow. And on the backend we have our AI ML models running to based on the wealth of pattern data that we have, the billions of anal transactions identify usage behavior that are deemed high risk. Is the person all of a sudden trying to buy from the Cayman Islands? Are they buying from multiple IP addresses? And so this again reduces the need for manual intervention rules that are traditional rule-based models that are very lagging. We can plug in new risk and fraud rules in real time as reports come in. And again, we've seen just really streamline our entire processes and create generally a better faster user experience to not pause transactions that truly should go through and then also speed people through with the right people through our onboarding process.

 Heidi Liebenguth (24:43):

Raman you had mentioned when we were chatting earlier about the difference between push and pull payments and how they need to be treated differently.

Raman Walia (24:53):

And I think to your question about the Zelle aspect of how different commerce channels are treating Zelle, I think Zelle has done phenomenally well over the last few years. And I think I was reading some reports, I think it might have reached almost a trillion dollars in volume in the last 12 months. And one of the reason for the ramp of Zelle has been that it's a very low cost channel for money movement where the receiver does not actually have to pay. And that also is, while that's a huge advantage for this money movement channel, it's also is its bane in some ways. And the reason is channels that are not monetized will have less investment in them as it relates to fraud management risk management. And that's the reason why banks have been somewhat hesitant in some cases investing too much because it's not a monetization channel for them.

(25:54):

And in order for it to become monetized, that's where the traction with the users could go down. So it's in some cases it's a trade off that different institutions are making, but at the heart of it is that the Zelle is a push payments mechanism and push payments is still early in the journey when it comes to fraud management, risk management, whereas pull payments is a lot more advanced from a credit card perspective. There's just a whole slew of different services that are available, particularly in US and developed markets in Europe with three DS authentication. And all of those things are geared towards a lot of the activity that happens on pull payments, but push payments still a lot of work needs to happen. And I think it's the balancing act of if it's too expensive than the traction of that particular money movement channel is lower. If it's not too expensive, then the investments are actually lesser by the value generated in that ecosystem.

 Heidi Liebenguth (26:56):

I know the American Banker has been sending me emails about a couple of webinars coming up later this month on AI fighting financial crime, other thoughts on the use of AI here,

Zachary Aron (27:11):

And I think Jessica really did a great analysis of what we see around how to think through some of the financial crime aspects and how to enable legitimacy. I think some of the other things in addition, we sort of look at it beyond the fraud side are also around how can AI actually help create greater personalization in how you target as well. Now there's some early stage gen ai, so there's some funny stories out there. One was a financial institution wanted to do a thing around financial management, financial literacy. They said, let's create a bunch of images and AI looked at all of it and spit out 10 images of all men. And they said, okay, that's probably not what we were trying to do. So there's always a little bit of early stage learnings about how to target that. But I think what we are seeing though is using people are experiencing to go how to get real personal because I think there's the aspect too of today still there's a lot of things and there's a debate if your phone is really listening to you or not. But I'm on good advice that I think the answer is apparently no, you just think it is.

(28:29):

But there's this aspect still of like you say something and all of a sudden you sort of feel like you're getting this sort of if you will, spam of types of things and you're like, that really wasn't exactly what I was hoping to look for. And I think we're seeing a lot of though investment to try to go, how do we make this even more personalized and in a way that is really valuable and with the intent of what it is that you're trying to do as opposed to sort of like, oh, I landed in a new city, I pulled up Instagram and Instagram is offering me a chance to buy a condominium in the city when I'm kind of here for 24 hours and it'd been great if Instagram gave me a good restaurant to go after. So I think to us that is a really big frontier is being able to really get that hyperconnectivity between a user, where they're located, what they're looking for and the right seller.

 Heidi Liebenguth (29:33):

And it has to feel authentic, doesn't it? Exactly. Raman your thoughts.

Raman Walia (29:37):

Totally agree with Zach. And I think personalization and being able to use the power of AI to be able to have the direct messaging to the consumers is so huge. And on the subject of AI in general, whenever I speak to my friends in the risk and fraud world, they sometimes cough at it in the sense that they could say, well, machine learning has been there in the fraud industry and risk and management for a very long time. So it's not new to us, even though I think the concept of AI has now become more pervasive and generative AI and so on, so forth. But in the world of fraud management, risk management, machine learning has been there for a very long time.

(30:22):

And so I do feel like there is some very good infrastructure that already exists. And I think with generative AI sitting on top of some of those machine learning models, it can greatly enhance of how we can really catch fraud and decrease the false positives. And I think that's the opportunity.

 Heidi Liebenguth (30:41):

Clearly there's a lot of upside in this whole evolving market for banks. Is this something they go alone? How do they partner with fintechs?

Jessica Chiu (30:53):

I'm happy to take that one. So a little bit of background, Airwallex does not have a banking license. We have no near term ambitions to. And so as a result, we partner with a global network of over 60 banks and other financial institutions globally. And so I think my personal bias is that banks can definitely use fintechs as a distribution layer and then we plug into the end third party e-commerce site or social commerce platform. I think there's several things that these end platforms really look for in a provider. One is do they have the technical layer? Do they have the technical capability to provide the solutions that this tech first platform wants in terms of managing payouts or payments? And then two is they want a one-stop shop. They don't want to usually partner with an entity or a partner in every jurisdiction in which they have merchants or buyers for ease of implementation, for ease of vendor selection, they want one provider. So these are all things we saw with our partner TikTok shop for example. And so a lot of banks, not all, but many of 'em don't necessarily have the scalable programmatic APIs that a third party can just build into and build really robust composable systems for any part of the payments flow that they want. And then secondarily, many banks are more regional or maybe only serve certain demographics, and again, we can stitch together a global network.

 Heidi Liebenguth (32:21):

Raman your thoughts.

Raman Walia (32:23):

I think maybe just a detour, I'll take it. As I was thinking about the subject, one of the things that struck me was that if you think about traditionally the different kinds of consumer payments that are happening in the commerce world, impulse by purchases was actually a smaller component

(32:48):

And impulse by, I mean if you go back to the traditional commerce impulse buy used to be things that we don't really are aware of, but once we see the advertisement, then we get excited about it and we buy that particular product. Impulse buy purchase as a share of total commerce is increasing. And I think it's also important back to some of the points that Zach and Jessica also mentioned is that the younger generation is engaged more on the social commerce than especially the segment between 25 and 35. There are some reports that almost a fourth of the entire social commerce actually resides in this very small segment. And the amount of impulse purchases that are happening now as a result of social commerce has been growing exponentially. Meaning anybody that is presented with a social commerce advertisement by influencer by creator, they're more likely to purchase it on the spot versus they would have had it not been a social media context.

(33:56):

And so as this particular impulse and non-intentional by purchases is growing, we will continue to see that this area in particular becomes bigger and bigger from the perspective of the overall commerce. And then coming back to your question, I think again, there's a huge opportunity for different players to come in this space and really try to define some standards around social commerce. Currently, a lot of companies are experimenting in different ways. Some companies are partnering directly with banks, some companies are partnering with intermediate service providers to build some kind of an infrastructure that can help support in context payments, but there isn't an institutionalized or a standardized way to actually do these transactions across all the different players that are doing it. And I feel like maybe back to Jessica's point as well, which is there's a lot going on in this space where fintechs are partnering with the banks, and I think fintechs have a huge opportunity to be able to set the standards to create these industry-wide procedures where it becomes easier and more quicker for some of these companies to be able to implement.

 Heidi Liebenguth (35:14):

Cool. We still have smaller banks and credit unions here in the US that aren't even supporting digital wallets like Apple Pay, PayPal and the others. Are they missing out completely on this growing market?

Zachary Aron (35:30):

Short answer, yes. And I think to build on Raman's point, our prediction, and we wrote a prediction last year, it said by 2030 in-app, social commerce payments are going to be the dominant way of e-commerce payments, which it's all the trends that we've talked about. And banks can sort of all sizes can choose to say, well, I hope they use my product at the end of the day as the one they want to pay. And I don't know if that's really the right way to go. And I think to Jessica's comment as well is actually when we think about small banks, we think about credit unions, we think about community banks. We actually are often, those are the institutions that actually really know their customers the best. And when we think about the move around personalization as well, that combination could actually be extremely powerful in terms of the insight to actually say, we actually know these small businesses and their needs better than literally everyone. We understand the cashflow, we understand who their customers are, and there's unique combinations. And again, I think it goes beyond just sort of saying, please pick my product to actually, how do I combine to create real unique insight and then build the products off the insight?

 Heidi Liebenguth (36:55):

Yes, that's part of their opportunity to nurture the entrepreneurs in their community and help them succeed on these broad international channels.

Zachary Aron (37:05):

Yeah, it's a big piece. I guess maybe one of the points that BBD expand even broader to my previous concepts about it being just a channel is I think also a lot of our traditional financial services institutions think about this too much in terms of big macro aggregate statistics. So they go, if I miss out on this set of transactions, I'm kind of okay because I'm thinking about how I manage my overall risk. I'm thinking about some pretty big ticket numbers about how I manage and run my credit business. But to the points made, if you look at Gen Z and look at the Alphas as an example, they don't view banks the same way around trust around who they should go to, how they use their money. Gen Z I think it's 117% more likely to want to buy something that's been influenced by someone that they perceive as authentic. And so I think a big risk that we see with these institutions are they think about it as just a channel just about their product getting in the transaction and sort of to use a social media construct, they're going to move from death by a thousand cuts to death by a thousand followers at the end of the day, and it's going to be that over and over and over, and you're going to wake up and go, oh, all I am to use Jessica's construct is I'm just the risk layer

(38:30):

On this. And everyone else is actually really building unique experiences that help people actually use their money the way that they intend to.

 Heidi Liebenguth (38:41):

From another perspective. Are banks having much success using these social media channels to promote their own services? Are they influencers term you used earlier? It sounds like it's pretty compelling. You were seeing this enormous conversion of exposure to sales. What's the opportunity here for banks? Are we seeing any banks that are succeeding in that regard?

Zachary Aron (39:09):

I mean, I'll start and then Raman, Jessica, please jump in. I mean, so short answer, yes. I mean I think it's always, it's too easy to say, oh, the banks aren't doing anything. But I mean even as early as 2009, 2020 10 on Twitter, formerly X, you had stories of Capital One helping customers actually go, oh, let me help you call. They would just sort of jump in on a feed and say, how can I help you go through something? So again, I think there's awareness, we're seeing some of that. We are seeing some very unique partnerships as well that exist as well outside the US some really interesting things where you see Southeast Asia, great example of banks that go, I know the merchant, I know the customer. Let's create a unique loyalty sort of proposition as well. So there's actually a lot of, I think, interesting examples that can be built on.

Raman Walia (40:10):

Absolutely, and I think just to add to, as Zach was mentioning, I think there is also this concept of the local community bank used to be a relationship based banking where the banker actually has relationship with the community and as a result of that, they have built this portfolio of their products and services with the local community. And I think as we are moving to this newer world of social commerce, maybe there's an opportunity to have this relationship banker be virtual. How is it possible? Again, I think that's for the marketing minds to think about, but there is this concept of relationship banker that used to have this voice of kindness and concern about what's going on in the community and be there to help and advise their clients and then have this virtual relationship banker where they can do the exact same thing through influencers.

Jessica Chiu (41:09):

Yeah, I'll add to both those points and I agree, yes, but I also think with the caveat, it depends on the type of bank you are, right?

(41:16):

So if you're a large bank that is trying to specialize in commercial real estate lending, I would say maybe rethink your social media strategy. Do you really need, is that your target audience, right? But you are seeing, I think some really interesting use cases, particularly with neobanks that are trying to target very mobile first banking, gen Z, maybe people earlier in their savings lifecycle. First bank account, first debit card, first credit card. And that is exactly the social media demographic. So the proof is in the numbers, right? Neobank is a company, neobanks I follow really closely. So is Chime. They all have millions of followers each on Instagram versus you look at more traditional banks, hundreds of thousands, and it's not that they don't have a social media presence or aren't willing to have a marketing team invest in it, it just simply may not be as good of a product market fit.

 Heidi Liebenguth (42:02):

In preparing for this channel, I did a little looking myself on Instagram at various banks and their social media postings and so forth. And I think the worst possible scenario is a bank where people are posting complaints and the bank never jumps in and answers or reaches out to help that person who is in distress. That's a really bad look. So hopefully nobody in the room here is guilty of that audience. Tell us, do you have your observations of your own questions you'd like to ask? Are very experienced panel up here? It looks like we have Richard Cron as usual in the front.

Audience Member Richard Cron (42:46):

Gosh, what a great panel. I'll have to say probably the best panel of the whole conference. If we mystery shop on TikTok and press the payment key, it draws up a TikTok shop prompt for six payment types.

(43:04):

Three of them are P2P enabled Apple, the Apple Pay wallet, PayPal and Venmo. It also pulls up the friction base 16 digit, put all your account numbers in if you want, and then two of 'em are buy now, pay later Affirm and Klarna. Gosh, is there an opportunity to layer social commerce on top of social payments? Meaning Venmo is the one of those six and it was kind of the first advent and really the only play in the USA with a social payment aspect of broadcasting what you've purchased. The question for the panel Rama, if you think about your experience at eBay, if you think about your experience at Meta, Jessica, if you think about what you're bringing up now for TikTok shop and then Zach, given what's happened in China where team payments actually drove more than a billion users and still grows exponentially in China for Pinduoduo, what's the next wave in payments and our team payments going to come from Venmo or team payments going to come from the platforms? Or do you not even see team payments ever making it here? And for the audience, a team payment is where users band together, the purchase is put in escrow until as many people come together and they press pay and they earn a quantity discount based on how many people came in, which is a viral aspect in and of itself as a part of the purchase process.

 Heidi Liebenguth (44:51):

Jessica, maybe you could start off on that.

Jessica Chiu (44:54):

It's the wild west of e-commerce in China, right?

 Heidi Liebenguth (44:56):

Yeah,

Jessica Chiu (44:57):

Yeah. I mean it's a really interesting use case. I don't think we've seen anything to my knowledge close to it in the US yet, right? I think it all comes to is there a payment processor or payment gateway that's willing to do that and willing to hold the reserve and take on the risk? I don't know yet in the US if we are.

Raman Walia (45:18):

I think it's a great question, Richard, and we are seeing Venmo actually catch on and I think we were chatting about this in our pre-discussion before the panel about how PayPal is now considering Venmo as a major growth driver. And I think we were talking about the push payment examples. The challenge with some of these P2P payment methods has always been how do you monetize them? And Venmo is a great example where it was traditionally a P2P now venturing into a P2M where customers are now making purchases, but those payments are going to actually the merchants.

(46:03):

And I think Venmo is a great social foot in the door for PayPal, for social commerce where they can start to expand quite a bit. And I think we started to see that happen with some of the platforms do have Venmo as a payment method. One thing just to maybe also layer in is that all of the e-commerce platforms, they are making these trade-offs between conversion and cost. And I think it's important to see this particular question also in that context where how do you drive the maximum conversion by not blowing up your cost, right? So we have the traditional marketing and finance sort of trade off there, which is from a marketing perspective, you want to maximize conversion by adding 15 payment methods because you don't want miss out on anybody. But at the same time, the proliferation of payment methods can increase your cost, it can confuse the customer and can be counterproductive. And so I think that's kind of the ongoing optimization that all platforms have to do at some point. And whether that can tilt more towards social payment methods like Venmo. Absolutely. How much I think we'll probably see it play out.

Zachary Aron (47:26):

Two, I think it might be the last words for food. So two things into play. One, the increased change in demographics. It's a slow change, but as an example, talk to some of the more newer members of our practice, asked him about TikTok and the ban and said, how do you feel? And they said, do you have concerns about your data? And you almost unanimously it was, well, why am I worried about my data? My data's already accessible by everybody, so I don't understand the risk here. And so that sort of belief around that is increasing as we get more generations in who are spending, that's going to be one factor that moves it. The second is the economics of how we view payment companies. And right now we still live in a very much a take rate type of an environment. I think to Raman's point, and the other thing that will manufacture this is we do believe those economics will change where we talk about payments as enabling a halo effect on a variety of things and monetizing the insight around it. As those economics changes around that, then those propositions, which aren't great take rate propositions, but they're great customer propositions, start to become more valuable. So probably the answer is not now, but likely coming.

 Heidi Liebenguth (48:54):

Alright, well Raman Walia, Zach Aaron and Jessica Chiu, thank you so much for sharing your insights with everyone today. I'm Heidi Liebenguth with Crone Consulting LLC, and thank you everyone for attending.