Facebook & Payments. What to Expect?

Yesterday what extremely caught my attention was a brief article by TechCrunch about how Facebook has secured an e-money license in Europe. In fact, a more interesting thing is that none of this went public – as we can see from the screenshot from the Central Bank of Ireland, the license was authorized on 24 October 2016. Since there were no major announcements from Facebook itself ever since, this raises definite curiosity and a lot of speculations.

As visible from the data above, Facebook Payments International Limited (FBPIL) can now issue e-money, provide payment services including credit transfers and money remittance. A point worth noting here is that since Ireland is a member of the European Union, this allows Facebook to operate with the authorized licensed in all other 27 EU member states.

Facebook is authorised to operate in all 28 EU member states.

One obvious (and probably core) application of such license is peer-to-peer payments via Facebook Messenger. Also, with reference to statement by Facebook, the license authorizes FBPIL to issue donations from Facebook users to charities registered in the European Economic Area (EEA) only. This one is quite questionable though, but it is worth consideration nevertheless.

Shift to US

To get a better understanding of how this will work, it is worth looking at the United States market, where Facebook has introduced payments earlier this year.

Facebook strives to make Messenger a full-featured experience, so users can spend even more time on it.

Of course, the idea behind all of this is that Facebook strives to make Messenger a full-featured experience, so users can spend even more time on it. Instead of opening an additional app like PayPal or Venmo when one wants to spilt dinner or Uber bill, now it all can be done with several taps via Messenger. And it is convenient.

With the payments feature Messenger becomes much more like its Chinese competitor WeChat, whose wallet is very popular for small purchases in China. Since there is no available data yet, it is hard to evaluate or estimate how is it going for the Messenger Payments since its launch. But I assume it should be gaining its popularity.

How does it work?

Basically, you have to connect your VISA or MasterCard debit card to the Messenger app, tap “$” button and you can send friends money on iOS, Android, and desktop. And all is done with zero fees. Credit cards are not allowed since they would incur additional costs.

Safety

Transactions and payment information are encrypted, and as Facebook states, the payment systems are kept in a secured environment that is separate from other parts of the Facebook network and that receive additional monitoring and control from an anti-fraud team.

For extra security, users are prompted to set an in-app payments passcode or Apple TouchID fingerprint to confirm transfers, though they can opt out of this extra authentication in the settings. Also, in case there are any doubts, Facebook will ask users some extra financial security questions, however, the precise procedure is not so clear as of this.

What about the future?

PayPal, Venmo and Western Union should pay special attention to what is happening in Messenger.

Of course, Facebook says that it is not striving for the payments industry. On the contrary, according to them, the feature is build for friend-to-friend transfers. Anyway, such companies like PayPal, Venmo or Western Union should pay very close attention to what is happening here since Messenger might take its stake out of the payments business. Looking further in the future, particularly remittances might be the field where Messenger Payments will find its audience, and quite a huge one.

All in all, I strongly believe that in the future Facebook will be one of the biggest and most important companies in the world. Hence, I especially like the term Facebook of Things (FoT) here.

More about Facebook:

Facebook: Emerging E-commerce Powerhouse?

Facebook Marketplace: A Threat or An Opportunity?