Social Payments is a term that most people associate with hand-outs from the government, however it also describes a new way of sending money to friends and family using mobile phone apps.
As consumers, we are all seeking instant gratification. We want to watch a video, why rent a DVD when you can stream it from Netflix? We want to chat to someone, then why bother picking up a phone when we can instant message them with facebook messenger or WhatsApp?
Social payments are based on a similar principle where we want to money to someone and we want to do that now. We don’t want to hang around in a bank, or travel to a Western Union outlet and go through the hassle of identify checks and currency exchanges.
Working in a similar way to WhatsApp where you establish peer-to-peer communication with a friend or family member using your mobile phones, social payments can be quickly made with instant transfers, even if the money is being sent abroad.
As long as each person has the mobile phone app, the sender initiates the money transfer, and the payments provider automatically makes a currency exchange, if required, and pays the money straight into the receiving persons bank account.
The service is completely free, even if currency exchange is required.
Social payments made this way are also safe and secure. If you think about it, your bank trusts mobile phone technology by using security measures such as fingerprint recognition with their apps, so social payment apps such as Circle can also be trusted.
What sort of payments can be made by these apps?
The hint is in the name. Social payaments are all about transferring money to someone in your social circle. So if you are eating out with some friends, you can quickly and easily split the bill amongst you. Maybe one of you pays with their credit card and the others in the group then transfer their share of the bill using the social payment app.
Perhaps you want to send a friend living abroad a cash gift for their birthday. In this case it is a simple matter to make the payment using the app, which deducts the sterling amount from your bank account, and then pays the gift amount straight into their account.
Quick, easy and free, even if the payment is going to the other side of the world in a completely different currency.
Is this suitable for large payment amounts?
Circle, one of the leading social payments providers, do put limits on the amount that you can transfer each week. They restrict weekly payments to £300, although you can increase this to £2000 per week by porviding more detailed information about yourself.
If you need to send larger amounts abroad, for example if you are buying a house abroad, or are paying foreign university tuition fees, then you should consider using a foreign exchange service such as TorFX which specialises in large currency transactions at highly competitive rates.
Social payments are the future
App based money transfers are booming. Global research firm Ovum suggests the value of these mobile peer-to-peer payments could top £214bn worldwide in 2019.
It is the younger generation that is smartphone and social messaging savvy, that is driving this staggering growth. With the likes of WhatsApp being used by 36% of all mobile users in the UK, social payments will soon be used as an extension of this app based communication.
With the increasing use of cashless payments and free money transfers using social payment apps, the cash in your pocket will be needed less and less, as long as you have pounds residing in your bank account, of course!