What Is a Social Payment?

Social payments are the use of social media or an app to transfer money to another person or business. The trend was first popularized by PayPal, but the sector now includes other applications like Venmo, Google Wallet, Cash App, and Apple Pay.

Understanding Social Payments

Social payment servicers link directly to the user's bank account or debit/credit card information via a website or an app. The companies draw money from the user when making a payment and deposit money into the account when the user receives money. A user connects with "friends" through the service and can select a person and an amount and either pay or charge accordingly. Businesses also capitalize on social payment.

Apple Pay allows users to load their card information onto their phone and pay by scanning the phone or Apple Watch at stores and venues. Banks have versions of social payment, like Zelle, allowing a user to send money directly to another bank account.

Benefits of Social Payments

Social payments are an example of peer-to-peer, or P2P payment and provide users with:

• The ability to transfer funds quickly
• Avoiding using ATMs or carrying credit cards
• Encryption protocols to keep accounts private and safe

Disadvantages of Social Payments

As technology advances and the opportunity to exchange money online becomes easier, digital currency brings risks that include:

• Hackers and scammers who access and transfer money from a bank account 
• Cell phone transactions that do not require authenticating the identity of the user on the phone

Social payment services must maintain the highest cybersecurity standards. Many people avoid using social payments even though they are generally safe. It's wise to use extra security on a phone if it's connected to a social payment app by installing a phone PIN and logging out of the app when it's not in use.

The Bottom Line

A social payment exchanges money between two parties using a social media platform or apps like Venmo, PayPal, or Apple Pay. Encryption protocols for social payment apps keep accounts private and safe. Social payments can be completed between friends or used for transactions in-store or online.