Twitter, Facebook Make Payments Moves, But Do They Threaten Payments Firms?

Twitter Inc. and Facebook Inc. both made moves in the electronic-payments space this week, but analysts question whether the giant social networks are preparing frontal assaults on the payments industry.

Menlo Park, Calif.-based Facebook on Thursday revealed that it is testing a “Buy” button that will let members buy products directly from businesses without leaving the Facebook site. The button appears at the bottom of sponsored ads and is being tested by a few small and medium-size U.S. businesses. Facebook gave no details about the merchants.

“With this feature, people on desktop or mobile can click the “Buy“ call-to-action button on ads and Page posts to purchase a product directly from a business, without leaving Facebook,” the company said in a Web posting. Facebook said no credit or debit card information provided to the social network for completing a transaction will be shared with advertisers, and members can elect whether to save card data for future purchases.

Twitter, meanwhile, on Wednesday said it has struck a deal to buy CardSpring Inc., a payments-infrastructure company that works with digital publishers and retailers. CardSpring’s clients also include leading payment processor First Data Corp., whose OfferWise offer-redemption service uses CardSpring's technology.

“Twitter has always been a vibrant environment for users to discover product recommendations and promotions from artists, experts, brands and friends,” Nathan Hubbard, Twitter’s head of commerce, said in a blog post. Hubbard noted that Twitter already gives users the ability to get deals and discounts or add items to an online shopping cart directly from a Tweet. “As we work on the future of commerce on Twitter, we’re confident the CardSpring team and the technology they’ve built are a great fit with our philosophy regarding the best ways to bring in-the-moment commerce experiences to our users,” he said.

Both Twitter and CardSpring are based in San Francisco. Terms of the deal were not disclosed.

Analysts don’t see either development signaling that Twitter and Facebook plan to become bonafide payments companies. But that doesn’t mean that payments incumbents shouldn’t watch their backs.

“I don’t think these are indicative of payments aspirations as much as they are indicative of these companies’ desires to consummate sales,” Rick Oglesby, senior analyst at Centennial, Colo.-based Double Diamond Payments Research, says by email. “One of the major implications of online commerce is that advertising and selling can merge into a single activity. To do this, online advertisers need some payments capability, although the goal isn’t necessarily to monetize payments themselves. Rather the goal is to monetize selling, of which payments is a part.

Payments firms, however, do face some risks as the social networks work to make e-commerce on their sites easier, Oglesby adds. “What they [payments companies] currently sell as a stand-alone solution is being swallowed up by greater solutions that incorporate payments,” he says. “So payments companies need to be rethinking their long-term strategies.”

Nick Holland, who leads the Retail Payments Practice at Pleasanton, Calif.-based Javelin Strategy & Research, a unit of Greenwich Associates, calls Twitter and Facebook’s actions “interesting moves, but not entirely unanticipated as social networks strive to add value and additional revenue streams.” He notes in an email message that social networks are well placed to become person-to-person payment networks, and that Javelin’s research has shown “significant growth” in social-network digital-content payments and even physical purchases.

But the social networks still face significant hurdles in payments, a big one being convincing consumers that their money is safe with them. “The question … remains whether these networks can muster the necessary consumer trust to become bona fide payment channels, or whether they would be better partnering with players that have a greater pedigree and reputation for data protection,” Holland says.