Meta– the owners of Instagram recently announced that it is introducing a new function for businesses – the ability to accept ‘payments in chat’. It is initially being trialled in the US but assuming due diligence has been carried out, and it is received enthusiastically, it won’t be long before European merchants also have the ability to take purchase direct from consumers without leaving the ‘chat’ function. Written by Rob Straathof (pictured) , CEO, Liberis
Shopping via social media has become acceptable to the public in a very short amount of time. Facebook Shop launched in 2020, allowing businesses to sell their products without even having to pay for a website. It was therefore inevitable that Meta’s other big platform, Instagram wouldn’t be far behind in making transactions as easy as possible – more sales equal more profit for the global tech giant.
Over 130 million people currently use Instagram shopping. And while this sounds high, there are around 1.39 billion people using the platform*, so that’s a lot of untapped potential. By removing any hurdles currently standing in the way of consumers purchasing through Instagram, brands have a huge untapped market to reach. Historically, if a user wants to buy a product they like the look of on Instagram they will be taken off platform – involving several clicks, often long and unwieldy forms updating their information, address and payment details. Many consumers will resent this time and effort commitment, and retailers will be losing that purchase as a result. Particularly as other services allow a ‘one click’ or swipe purchase, consumers these days are all about convenience.
This function, therefore, sounds like welcome news. It can enhance the relationship with the consumer and crucially reduces the risk of them abandoning their purchase when encouraged off-platform. Yet before merchants sign up, it’s worth considering some aspects that aren’t clear at this stage. I’d suggest the following points be clarified by Meta before merchants jump on board:
Confirm the pricing structure for the foreseeable future. We’ve all been lured into signing up to platforms or membership programmes for an attractive looking monthly fee – only for cost to slowly creep up and unsubscribing not an option. It’s important to be reassured that this isn’t the case, and that pricing will remain reasonable, particularly for smaller businesses that in the current economic climate are operating on tighter margins than ever.
When it comes to payment, Instagram is enforcing Meta Pay as the sole checkout provider. However, many merchants will already have partnerships with services such as Checkout.com, paypal and other new innovative platforms. If they are obliged to only use one platform, this may increase costs as well as administration time and resource. Merchants and consumers expect choice these days, and limited flexibility may deter some from signing up.
Clarify whether different currencies can be used for payment. The beauty of the internet is that we can access it from anywhere. Will it be possible to accept foreign currency payments without being excessively charged to convert? What will the process be in relation to FX rate conversation and charges? Will global companies which operate in different markets be able to hold multiple currencies in their wallet? No merchants wants to commit to conversion charges that become prohibitively expensive.
Establish whether alternative payments will be accepted in the near or distant future. 40% of those aged between 18 and 35 – a large proportion of Instagram’s demographic – say they plan to pay using crypto in 2022, according to recent research. **. Meta needs to be considering embracing crypto as more consumers will have expectations of using it.
Ensure merchants and consumers are fully protected against fraud. Scammers are rife on social media, with Instagram often victim to ‘pump and dump’ shops who never fulfil their merchandise (or offer poor quality that does not reflect what has been promoted). Consumers need to feel protected otherwise they won’t place a purchase. If they experience fraud when buying from a merchant, this will impact its reputation, regardless of the systems they implemented to protect against it. What is Meta doing to insure against this?
And equally, will Meta offer fraud and chargeback protection for SMEs? Protection against excessive chargeback claims from consumers is also welcome, to cover the administration costs and resource required when managing any chargebacks.
Small businesses are likely to welcome this new ‘payments in chat’ function. By chatting directly with customers, they have the opportunity to build relationships and even upsell. Many will be jumping at the chance to connect with new and existing customers in this way and provide a seamless and straight-forward method of payment. With it rolling out initially in the US, European businesses have a chance to wait to see how it is received. With any luck, all the considerations laid out above will have been ironed out so that merchants here can be confident that ‘payments in chat’ will have no disadvantages and can only benefit their bottom line.
