April 16, 2014

Everything We Know About Facebook’s New Payment Service

Posted by Janna Leyde

The Facebook bank is nearly here. According to an article in the Financial Times, Mark Zuckerberg and friends are in the final stages of bringing us Facebook’s first mobile payment system. E-money, as it will allegedly be called, will give billions of Facebook users the means to pay for goods and services through the most popular social media platform in the world. The financial process will be called passporting. Although no one at Facebook has officially commented on plans to become a digital payments institution, we’re going to share what buzz has spread about this exciting development.

A Facebook bank…really?

Yes. This mobile payment system will function just as any payment processing and storage system does, yet it will only be available to Facebook users. As an e-money institution, Facebook will have the power to issue units of monetary value to Facebook users that represent a claim against Facebook. “Remittances [payments] are a gateway drug to financial inclusion,” a knowledgeable source told the Financials Times. Facebook appears ready to join the financial sector.

Should PayPal or Google Wallet or Apple be worried?

Maybe. Other companies have made similar ventures without much success. Google Wallet is losing money. Meanwhile, the two big e-commerce and social media companies in China, Alibaba and Tencent, are still navigating this new arena. Should Facebook successfully become a widely recognized e-money institution in Europe — a market where online users are becoming increasingly more comfortable making financial transactions online —we might soon consider FB a pioneer in this emerging sector.

Where is this happening?

Europe. Facebook wants to join the mix of companies — Google, eBay, and soon-to-be-Apple —that are taking mobile payment processing systems very seriously. Europe, a developing market that other companies have their mobile money sights set on, is the place to start. Apple Insider reported reach outs to select London-based financial start-ups, such as Azimo, Transferwise, and Moni Technologies. China and the US don’t look to be far down on the “where next?” list.

What are we waiting for?

Ireland.  Ireland is the seat of Facebook’s non-US headquarters. Therefore, for this deal to go down, Facebook needs the regulatory approval from the Central Bank of Ireland. Then, as an official e-money institution, Facebook users throughout Europe will be able to transact with the social media website.

Hasn’t Facebook already tried this?

Kind of. True, this is not Facebook’s first attempt at linking social media to e-commerce. There are Facebook Gift Cards (not to be confused with Facebook Gifts) where Facebook users can buy items as in-app purchases, most of which are video games. However, E-money may be the most persuasive attempt to date. This mobile payment processing system goes a step further than credits and virtual gifting. Passporting is the transfer of currency and the purchasing of real world goods and services.