A relatively new concept in the U.S., social payments are even newer in the U.K., where Circle hopes a collaboration with Barclays and a dash of blockchain will interest consumers in sending payments the same way the send tweets and texts.
Circle, which started as a bitcoin wallet about three years ago, is a free social payment app available on iOS and Android smartphones, and the Web. Customers link their debit cards and bank accounts to their Circle app, and send and receive money along with messages, emojis and other staples of social network communication.
The Boston-based company's partnership with Barclays enables Circle customers in the U.K. to store, send and receive British pound sterling and link any bank account to the Circle app. Barclays will provide the infrastructure to allow Circle to operate in the U.K., and will also hold customer deposits.
In the U.S., social payments got an early start through the popularity of PayPal's Venmo. Facebook Messenger, a business line headed by former PayPal President David Marcus, also supports social payments.
"Social payments are still in their infancy in the U.K. The likes of Venmo and Facebook Messenger are yet to hit these shores, so it's a little early to predict consumer reaction," said Zilvinas Bareisis, a senior analyst at Celent's banking practice in London.
But if the practice does take off, Circle is in the right place at the right time, he added.
"This is a very exciting announcement," Bareisis said. "Not only is Circle one of the first to bring social payments to the U.K. domestically, it also enables fast and inexpensive cross border payments."
In addition to its early work in powering bitcoin transactions, Circle added U.S. dollar-based social payments to its mix late in 2015. It plans further expansion in Europe and Asia, where social payments are more widespread via Tencent's WeChat Pay.
Where Circle differs from most existing social payment apps is in its openness, according to Josh Hawkins, Circle's Vice President of Marketing
"Most products in the social payment space are closed systems," Hawkins said. "These products facilitate transactions among users of a particular product or service, and typically in a single country and single currency."
Circle is using its existing blockchain technology to enable payments outside of a person's closed loop of contacts or friends, as well as cross border payments and currency exchanges, working similar to HTTP or SMTP, which enabled the global interoperability of email communications in the 1990s. "We believe blockchain holds similar promise for value exchange and transaction settlement today," Hawkins said..
Circle customers do not have to exchange, hold or use the bitcoin currency, Hawkins said. Consumers use their local currency, and Circle instantly converts and transmits value in bitcoin over the blockchain to any digital wallet, remittance provider, payment processor or e-commerce destination accepting bitcoin.
"For Circle-to-Circle payments in U.S. dollars, British pound sterling, and soon other currencies, these transactions never touch the blockchain or have anything to do with bitcoin," Hawkins said. "These are just Circle ledger updates in our transaction system."
U.K. regulators, which generally do not support digital currency companies, have licenced Circle to operate an e-money service, Hawkins said.
Barclays did not comment by deadline. The bank has shown a willingness to adopt emerging transaction technology, such as wearables.
"It demonstrates progressive thinking by Barclays and the U.K. government as they continue to actively support innovation in financial services," said Bareisis.
Given the growth of social payment transaction capabilities, banks should probably work to broker relationships with social networks quickly, or risk being pushed aside by more proactive parties, said Nick Holland, an associate at The Strawhecker Group, who adds it's important to provide a user experience more attuned to the expectations of social network users, such as allowing person to person transfers to also contain components such as personal messages, emojis and graphics.
"It may seem trivial, but the success of platforms like Venmo can be partly attributed to making person to person fun. It may be just a veneer on an existing bank service, but it could be instrumental in keeping banks at least partially relevant to millennials," Holland said.