Virtual Currency: More Waves of Change Hit the Payments Industry

Jun 22, 2011

Virtual Currency: More Waves of Change Hit the Payments Industry


Javelin Identifies Opportunities as Social Media Players Bring Change to Traditional Transactions and Payments

San Francisco, CA, June 21, 2011 – A new Javelin Strategy & Research report issued today —“Virtual Currency and Social Network Payments – The New Gold Rush” focuses on the growth of virtual currencies, predicting change in traditional payments methods as U.S. revenue from virtual goods is projected to quadruple between 2009 and 2012, from $0.6 billion to $2.4 billion. The increased use of virtual currencies and socially networked payments present new challenges to traditional payments services providers, regulatory bodies, and even cross-border economies. The report, based on data from surveys with 10,000 consumers, cautions financial, Telco and online providers to monitor closely this virtual trend, as social media players create new ways to transact – and claim market share from FIs in the payments space.


Virtual currency, first used by the online gaming industry, has extended into the exploding social media market. Virtual currency can be exchanged for digital, virtual and physical goods, as well as traditional currency, and has the potential to displace traditional currency in both the e-commerce and traditional markets. In fact, the social network giant Facebook will require use of its own virtual currency as the payment option for all games later this year.

Given the projected growth of virtual currencies, Javelin forecasts that payments services market share will shift from FIs to socially networked providers. Javelin found that two-thirds of consumers who have used an alternative payment method in the past 12 months are current Facebook users, compared to 58% who used credit cards.

“FIs should keep an eye on social networks and the virtual economy and determine how to position themselves,” warns Beth Robertson, Javelin. “Currently, credit and debit cards have the greatest share of the overall e-commerce payment market, comprising 40% and 29% of all e-commerce transactions, respectively. However, nontraditional payment options like alternative online payments and prepaid and gift cards will gain traction in the coming years and take market share and transaction fees away from FIs.”

“Regulators need to sit up and take notice,” said Javelin’s James Van Dyke. “The state and federal laws and other regulations that FIs must follow to prevent money laundering and to protect consumers may extend to those issuers of virtual currency and other participants like payors and merchants.”

The Javelin report will help the financial industry understand how social media players transact in the virtual economy and the impact of virtual currency on currency issuers, payments services providers, and the global economy.

Selected Key Report Findings: Virtual Currency and Social Network Payments – The New Gold Rush

  • The factors influencing the growth of virtual currencies.
  • In-depth profiles of key social media players and their virtual currencies.
  • How mobile consumers will propel the growth of virtual currencies.
  • How key federal and state laws and industry regulations may affect transacting in the virtual economy.
  • The demographics – age, race, income – of social networkers and their preferred social networking websites.

Contact

For more information about this or other Javelin reports, please contact Crystal Mendoza at (925) 225-9100 ext. 35 or cmendoza@javelinstrategy.com or visit www.javelinstrategy.com/research.

To arrange an interview with a research analyst and/or view available research (available to qualified members of the media), please contact Crystal Mendoza at (925) 225-9100 ext. 35 or cmendoza@javelinstrategy.com.

About Javelin Strategy & Research

Javelin Strategy & Research is the leading provider of quantitative and qualitative research focused on the global financial services industry. Our extensive quantitative data and deep analyst experience enable us to forecast the direction of the financial services market and make recommendations that empower you and your business to succeed.