Streaming services are experiencing drastic increases in content consumed – what’s new? Services such as Twitch saw a sheer 100% increase year-on-year, to take one example. However, the problem of rewarding people for their streams still remains cumbersome; most platforms today are not compatible with user-to-user payments – specifically regarding cross-borders. If only Apple or Google were a perfect simple solution to this problem, however, their 30% cut on in-app credits won’t do the trick. These credits can’t just be converted back into cash without making the two corporations money transfer businesses. It is understandable why many of the big players in the streaming space started implementing their own currencies to counter this. To take it further – Kuaishou; a Chinese streaming app with millions of users, may decide to become a licensed payment institution to eliminate the middleman entirely. The verdict is out: streaming providers are ditching third party providers.
What is it that makes third party providers so unattractive? It’s displeasing enough that streaming apps are even considering hefty investments in licenses, not to mention having to deal with a list of regulatory complexities and reporting requirements that come with the switch of becoming a payments or a financial institution. Is It worth the hassle?
A major issue with donations is the high transaction and processing fee + no potential revenue for apps.
|Payment Processor||Transaction Fee|
|Popmoney||1.1% + 15 cents|
|Paypal*||2.2% + 30 cents|
|Square||2.75% per payment|
|Stripe||3.5% + 15 cents|
These tremendously high fees have a significant impact on both the creators’ income as well as the streaming service’s revenue stream. A content creator’s main source of income is through donations on streaming platforms – this is how a big problem is created. In addition, their audience is growing more and more global – this calls for the ability to accept donations internationally. Cross border payments and content watched per year is ever increasing – and the inability to cost-effectively and conveniently move small-value transfers between users leaves a lot of monetisation opportunities untapped. Even if apps are expanding, these additional revenues streams will not be captured.
Speaking of other issues, third party payment providers take complete ownership of financial data, the wallet owner, as well as determining fee structures. This leaves the streaming app itself heavily disconnected from the donation process. Even remittance service providers are not suitable for small-value transfers as their fee structure makes small-value transfers prohibitive – one would not pay 50 cents to send $1, this solidifies the inefficiency in the market.
These issues combined force streaming companies to source and develop their own solutions – which requires high investments in headcount, technology, and licenses. Even if we consider Kuaishou’s best case in acquiring their own payments license, they still do not solve the cross-border scalability. In order to provide the same payment provider capabilities in international markets, Kuaishou would have to go through the lengthy process of acquiring the right licenses again and again – for each country it plans on entering.
Innovation in this market is desperately needed. The app community should be able to store value in financial accounts within their own ecosystem. Transactions must first satisfy the necessity of having immediate transaction fulfilment between user-to-user payments; sending $1 during a livestream must be as simple as clicking the like button. Transactions must be seamless as well as cheap in order to make small-value transfers a reality. Following this, small-value transfers must be scalable across countries and provide interoperability with banks, ATM’s, and other wallets. In other words, a streamer or a viewer must have the ability to seamlessly top up or withdraw from an account as soon as needed.
What streaming apps need is an embedded finance service provider. Offering white labelled wallets, fully customisable, and enabling cross-border with top-up and withdrawal channels globally. Streaming apps and their community will be able to avoid the hassle of acquiring their own payment licenses or implementing their own currency. All they would need to do is connect to an embedded user-to-user payment service to start offering a digital wallet that can be used internationally!
Keep your eyes peeled on how we plan to solve all of the current issues the market faces today.