Facebook's biggest mobile payments challenge: trust

Eden Zoller/Ovum
22 Apr 2014

Unlike in mobile advertising, where it has made impressive progress, Facebook has a poor track record in mobile payments, but it is no surprise that the social network is looking to redefine its payments strategy. Ovum predicted that Facebook would launch a renewed push into mobile payments this year, and its focus on mobile money transfers (pending the receipt of an e-money license) makes sense. These applications are gaining good traction with consumers, particularly in emerging markets, where Facebook has ambitions to be the prime platform from which people access and interact with Internet services. Facebook’s user base in emerging markets is growing fast, but when it comes to mobile, Facebook will have its work cut out and the biggest challenge will be consumer trust.

Facebook created a payments division in 2011 and has had plenty of time to get to grips with payment market dynamics. If it is serious about staking a claim in the payments market, then it needs to show the world that it has a credible payments strategy, as opposed to the scattergun approach that has characterized its efforts to date.

Facebook is reported to have applied for an e-money license with the Central Bank of Ireland (the social network has its European headquarters in Dublin). The license, if granted, will allow Facebook to provide payment services in Europe, including transfers and remittances. Person-to-person (P2P) mobile money transfers are particularly important for local users in emerging markets, and for migrant workers abroad. Facebook’s user base in emerging markets is growing fast – it had 200 million emerging market users in Asia alone at 4Q13. The social network is on a self-proclaimed mission to connect the next billion by acting as the key platform via which users interact with Internet-based content, communications, and commerce. Providing an essential and in-demand service such as mobile money transfers could help it to achieve this objective.

However, Facebook will face competition from local banks and operators in emerging markets, many of which have established highly successful, trusted mobile money services – M-Pesa and EcoCash being stand out examples. Moreover, operators in Europe have also obtained e-money licenses: Deutsche Telekom has ClickandBuy, and Vodafone is in the process of rolling out M-Pesa in selected European countries.

Messaging + transfers could be compelling

The introduction of P2P money transfers is a logical step for Facebook. Its users have networks of friends and family on the platform, with contacts details at hand. The next step is for Facebook to bring mobile money transfers to its huge base of mobile messaging users, established through its acquisition of WhatsApp and, to a lesser degree, via its homegrown Facebook Messenger application. WhatsApp has more than 450 million monthly active users worldwide and is strong in both mature and emerging markets across Asia and the Middle East.

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