Social commerce is an increasingly popular means of marketing and reaching out directly to customers, especially for micro, small, and medium enterprises (MSMEs), particularly those in the informal sector. Online shops on Instagram, TikTok, and other social media platforms are now becoming the preferred means of buying goods and services, especially for those in the fast-moving consumer goods market.

With over 4.6 billion social media profiles today, this can be a big market for both individual and commercial sellers. However, while social media can be a no-brainer for marketing, converting those “likes” into actual sales can be tricky, especially if there is transactional friction involved. Potential buyers can find traditional payment mechanisms slow and expensive, and some might even mistrust existing solutions, especially those that have gained notoriety for fraudulent transactions.

The global payments market is worth over $2.5 trillion as of last year, and it is projected to grow to nearly $5 trillion by 2029, fueled by the growth of e-commerce and digital services. However, traditional online payment mechanisms are no longer able to keep pace with these developments. Cross-border transactions, for instance, continue to be plagued with high fees, especially when dealing with an intermediary–whether a bank or a digital payments processor. Not everyone can afford to take big cuts off their revenue.

Crypto transactions come to the rescue, but more work needs to be done

The rise of blockchain technology and cryptocurrencies have somehow ushered in improvements to online commerce, particularly with cross-border transactions. To illustrate, crypto payments are set to grow at a CAGR of 18.5 percent from $639.16 million in 2023 to $2.109 billion 2030.

Major payment gateway platforms like Stripe are also incorporating cryptocurrency payments into their solutions, enabling customers to pay for goods and services using their cryptocurrency wallets. In particular, Stripe will be supporting payments using the USDC stablecoin (the value of which is pegged to the US dollar). ”Stripe will start supporting global stablecoin payments this summer. Transactions instantly settle on-chain and automatically convert to fiat,” says Stripe Co-Founder John Collison.

However, there are still challenges, even as businesses start accepting crypto payments either directly or through intermediaries. For one, the global payments landscape is mired with fragmentation, which makes it inconvenient for customers to pay, and which also negatively impacts cashflow for businesses.

“Payments is a very fragmented and complex market globally, holding back businesses and excluding millions, especially in emerging markets,” says Jonny Griffith, Head of Partnerships at FinTech startup BVNK, who adds that traditional payment mechanisms are slow, expensive, and risky for both consumer and business. “Number one pain point that we see and that resonates with almost all clients remains the effect payment processing issues can have on cash flow.”

Even sending payments using cryptocurrencies per se can be quite daunting to the beginner, as it often involves long wallet addresses consisting of a mix of letters and numbers, which can be difficult to keep track of. This calls for a more elegant approach to digital payments.

Unifying payments with social usernames

Social commerce transactions across the globe were estimated at $992 billion as of 2022 and is set to grow to around $8.2 trillion by 2030. Given the increasingly social nature of online commerce, it only follows that digital payments should also be as convenient as connecting to an individual or business’ social platform.

There are inherent advantages of being able to directly make payments through a social media account and login. Having one’s social alias as a payments username eliminates the need to juggle different wallets or payment methods.

“This eliminates the need to exchange personal details, emails, phone numbers, etc. when sending money in fiat currencies,” says Gregor Arn, Chief Executive Officer of Web3 payments platform TransferMole, whose innovative approach allows individuals to turn their social usernames into a universal payment identity, eliminating the need to share crypto addresses, bank details, or beneficiary information. “For people paying in crypto, it eliminates the need to exchange address and blockchain details and on/off-ramping.“

This can also mean payments that are embedded directly within the social platforms that people are using every day, which results in a truly frictionless buying and selling experience. In essence, utilizing social media usernames acts as a “directory” for routing payments. Users can get paid by using a single sign-on (SSO) mechanism straight from their social platform like Instagram, Facebook, or TikTok.

Fragmentation often involves multiple platforms with varying speeds, transaction costs, and security levels. Simplifying payments will be beneficial to businesses of all sizes, and this can include improving cashflow for small businesses, freelancers, and professionals who engage in global transactions.

More opportunities with Web3

The integration of social usernames as payment aliases addresses the fragmented nature of digital payments, but it goes beyond simple convenience. The integration of Web3 technology also involves smarter payment routing, which enhances the financial landscape by ensuring a more efficient and secure processing of payments.

Beyond simple payments, Web3 also provides better transparency and security, and it can also facilitate automation in payments through smart contracts through programmable payments, as an example, paving the way for exciting new business models.

The convergence of social media and Web3 has the potential to revolutionize how we buy, sell, and interact financially online. With social usernames as payment aliases, social commerce becomes truly social, in the sense that frictionless transactions can transcend borders and empower businesses of all sizes. We can expect even more use cases, from micropayments to community-driven revenue models, enhancing financial inclusion. Web3 makes the future of payments not only seamless but digitally social.

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Featured image: Freepik

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