Facebook Money Services? The Social Network’s Massive User Base Gives Facebook an Advantage in Payments

by Jennifer Kent | Apr. 14, 2014

The Financial Times reported on Sunday that Facebook is preparing to offer financial services. According to the report, Facebook plans to allow its users to send money to each other and make international money transfers, though details on other potential payments services – such as electronic bill pay or payments for goods and services outside of Facebook’s own ecosystem – are slim. 

Facebook’s move into the payments market is not surprising; its top tech competitors Google and Apple have both made concrete steps into the payments market. However, whereas Google and Apple have both prioritized the brick-and-mortar retail environment – a space that is developing slowly – Facebook is prioritizing the booming electronic financial services market. Much of the world’s population—especially in developing markets— lack access to financial institutions like banks and financial instruments like credit cards. This underserved market is experiencing a payments revolution thanks to the growing adoption of mobile phones, through which consumers can now send money to others and pay bills, thanks to new financial services offered by mobile carriers and other alternative payments providers.  

However, leading mobile e-payment systems are limited by the need for both the sender and recipient of funds to have an account with the same money service provider.  Mobile carriers have sufficient scale to overcome this barrier in some markets, but other alternative payment services – especially those targeting the U.S. Market, such as American Express Serve and Dwolla – do not. Facebook’s ubiquity and massive user base (1.23 billion active monthly users at the end of 2013) is an incredible asset from this perspective. The ability for consumers to send money to any other Facebook user provides an ease of use that email providers (Google’s Gmail money service), mobile carriers, start ups (like Dwolla), and even payment networks cannot match.

Of course, it remains to be seen whether consumers will trust Facebook with their money; Facebook has a poor record of being sufficiently transparent with users, especially in regards to privacy issues. But with Facebook already crediting 10% of its revenue to fees associated with in-app payments (primarily for Facebook games, the social network has already primed its users to view it as a transactional platform. 

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