Community
Last month it was announced that Instagram is introducing a ‘payments in chat’ feature, where users can purchase products from businesses and track orders via the direct message function. Initially being rolled out across the US, if it follows the format of most trials from Meta, it’ll likely be available in more markets in the near future.
Given Instagram is not yet ten years old, its evolution has been remarkable. Initially positioning itself as a photo sharing site, it is now a platform for sharing news, videos, messaging and of course, promoting and selling brands and services. Instagram found last year that 44% of the people it surveyed use Instagram to shop weekly, using features like shopping tags and the Shop tab. So any businesses not using the platform to make sales is missing out on a huge opportunity.
However, to date, when promoting products, the user has to click on the Shop tab and then be directed off platform to view and pay on the website. This new function is designed to make the sale even easier for the time-poor, convenience-accustomed consumer.
On the surface, this sounds like great news for merchants, particularly those smaller and medium sized businesses which have until now been hindered from taking payments through the platform in this way. It will certainly help with conversion – consumers can be lazy – and retailers are taking advantage of this with one click/ one swipe purchases. If you are promoting your products on Instagram but customers then have to be directed off platform to purchase, you may lose their interest.
But it’s early days, so it may be worth exercising some caution before signing up as a business. There are a number of considerations to bear in mind, so any merchant may want to monitor how Meta deals with these issues before jumping in.
Firstly, we need to establish the choice of checkout provider: Many retailers will use services including paypal, Checkout.com or a number of other new innovative payment platforms. Being obligated to use Instagram’s checkout method may add further administrative headache and resource to manage. Merchants will be looking for choice here.
Confirmation of a reasonable pricing structure will be beneficial. As with many of these new features, it may come at a discount initially but will it then gradually become the monopoly with merchants charged excessively for what may rapidly become a commodity? There needs to be some reassurance that this will remain an attractive prospect for small businesses that may have tighter margins.
Establish watertight protection against fraud: There are many scams on Instagram including ‘pump and dump’ shops who never fulfil their merchandise (or offer poor quality that does not reflect what has been promoted). How will Instagram stop this from happening and protect the consumers? Negative experiences through the platform will deter consumers from purchasing via Instagram again, so can impact the merchants who are doing the right thing.
Will Instagram be offering fraud and chargeback protection or SMEs? Fraud can impact a merchant so it is important to understand if some insurance protection is available. Protection against excessive chargeback claims from consumers is also recommended, to cover the administration costs and resource required when managing any chargebacks.
The platform is trialling first in the US, but what about businesses which operate in different markets – what will the process be in relation to FX rate conversation and charges? Will SMEs be able to take foreign currency payments without facing excessive charges for conversion? Many merchants will want to know if it will be possible to keep multiple currencies in their wallet, otherwise conversions may be more complicated and expensive.
Many businesses also now accept crypto payments. As innovative payment methods such as these grow in use, will Instagram consider enabling consumers to use them? Or factor this in for future growth of the platform?
It is estimated that around one billion people across the world use Instagram. And the majority of these are aged between 18 and 34 – a generation that has grown up with online shopping and have no qualms buying a product through their phone. Any retailers wanting to reach these consumers, whose spend may increase as their earning potential evolves would be remiss not to explore new opportunities for making sales online.
Any platforms that give SMEs the same opportunities to trade as the global giants is welcome. The new service is initially rolling out in the US, so we will be monitoring the response there, and hoping these considerations and nuances will be answered transparently so we can be confident that UK businesses are doing the right thing by signing up.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Ritesh Jain Founder at Infynit / Former COO HSBC
04 October
Nick Jones CEO at Zumo
Nkiru Uwaje Chief Operating Officer at MANSA
03 October
Dirk Emminger Managing Director at knowing finance
02 October
Welcome to Finextra. We use cookies to help us to deliver our services. You may change your preferences at our Cookie Centre.
Please read our Privacy Policy.