There was no doubt in anyone’s mind that Facebook would one day enter the world of payments. This was true when Facebook had 500 million users; it is true now when they have over a billion users.
The confirmation came when a brilliant Mark Zuckerberg was able to poach the President/CEO of PayPal David Marcus to head the Messenger division within Facebook. David leaving PayPal was a huge surprise to the payments world.
No one saw it coming. No one.
I’ve always believed that Facebook has the power to be more than just a social media platform. As early as 2009, I had an inkling that with such a large platform, there is no way the management team is not thinking about commerce. It is hard not to.
What was even more brilliant by Facebook, is that they did not get into a race with everyone else. They took their own time. They set out their own schedule.
Facebook has one chance to get it right and they (in my opinion) are doing just that – getting it right.
Eyeball Time Counts… a Lot!
As an active Facebook user, I spend a lot of time on their app, scrolling through my feed, liking stuff, watching videos, posting content, connecting with people. My eyeball hours on Facebook are probably off the charts.
Now, when you compare the likes of Apple Pay, PayPal, Venmo (also a PayPal company), Square Cash, Samsung Pay, etc. all these are apps that I do not spend time on, unless I have to pay.
That is a huge differentiator.
Sure these apps might even be better than Facebook for payments, but this is where Facebook taking it’s time to perfect their service will pay off. Facebook wants you to have the best experience in payments, not a rushed job. They will slowly keep releasing the right payment mechanisms on their platform so customers can gradually get acclimatized to it.
I once installed an app that used to calculate how much screen time each app was getting on my mobile. Facebook beat everything else combined!
Communication is the Key
Clearly, anyone who controls a communications platform, bundled with a social media platform – would hands down win when it comes to natively integrating payments in the very same ecosystem.
As humans we do two things:
- We read, watch and listen to content (absorb passively)
- And we communicate (actively) with others.
Facebook offers both. It is a timeline that can be passive/active and it also has an active messaging platform.
This is where others have a disadvantage. PayPal may be a great product, but I am not spending any time staring at the PayPal app and admiring it. I use it when I have to. The same holds true for other apps. You use them when you have to, and then you close them.
With Messenger Payments, that Facebook is rolling out, you would be able to pay within the Facebook ecosystem – seamlessly. Yes, this would also include WhatsApp and Instagram.
Facebook Cross-Border Payments?
Will Facebook be offering cross-border payments? Absolutely yes! I know this for a fact.
When Facebook launches a small or large feature, it usually (not all the time, but usually) doesn’t have to deal with specific regulations on a country-by-country basis. It just rolls them out. Most Facebook features get rolled out in the US first and then slowly, the updates happen everywhere else.
Payments is not so easy. Payments are highly regulated and that’s putting it mildly. Not only are you dealing with various financial regulators, but you are constantly dealing with compliance monitoring and reporting issues. Each and every transaction has to be monitored, accounted for, checked/re-checked and, in many cases, reported to the regulatory bodies.
Every roll-out needs a regulatory approval. Risk has to be accounted for and, not to mention, a very robust AML/Fraud/Compliance team at the back end. This task is more monumental than one can imagine.
Citi Bank, which has millions of customers, has about 30,000 or so people employed in its compliance department worldwide. 30,000 people — think about that! And to top it all, Citi Bank needs to hire more.
So imagine a bank if you will, that has 1 billion customers, how many people would need to be employed in compliance?
Facebook already has money transmitter licenses in the US, and has also got a Payment Institution license in Europe. It is slowly opting for licenses elsewhere in the world.
Because of the immense scale, I would not be surprised if in 5 years time we would be conducting commerce on Facebook, as natively as we chat.
In-app payments, being able to pay for products/services online (within Facebook pages), peer-to-peer money transfer, and even issuance (debit card) linked to your Messenger Payments account are all scenarios that would be a reality in the coming years.
Others Don’t Have A Chance!
Other players really don’t have a chance. Well, let me correct myself – one should never say they they will never have a chance – instead, let me say, others have essentially lost out. They are in a game where winning against Facebook will require some real innovative thinking about winning eyeball time.
Farhad Manjoo wrote a great article called: The Great Tech War Of 2012 (Apple, Facebook, Google, and Amazon battle for the future of the innovation economy). This is a must read article and the main contenders in the payments battle are clearly outlined here.
Microsoft had a chance, but right now, is nowhere to be seen (even though Microsoft has also acquired money transmitter licenses).
When comparing social media platforms – think about it, which platform truly exists today? There are only a couple: Facebook, Twitter, LinkedIn and in some oddity Instagram / Snapchat / Google+.
Which one has the most active users? Clearly Facebook. Commerce on LinkedIn is not going to happen any time soon. Twitter may have a chance with payments, but at present, Twitter does not know where it is heading. Google+ for all practical purposes is dead. People post on Google+ only because of Google’s SEO points, no one else goes there. Instagram is already owned by Facebook, SnapChat would probably have a decent chance with the young crowd, and could be a competitor in the peer to peer transfers, but not otherwise. I, for one, see Facebook’s Messenger rolling out features that would essentially kill SnapChat. So what else is there?
The only other survivors are payment platforms themselves: Venmo, PayPal, Square Cash, Android Pay, Samsung Pay, Apple Pay. They would have to compete for your eye-ball attention – a lot.
Granted, there are specific applications that do things better than anyone else, this is why we have a Gmail app, Twitter app, Uber app, AirBnB app, LinkedIn app, Evernote app, etc. but then think about the possibilities of implementing these apps or lookalike components of such apps within the Facebook ecosystem. Uber would find it extremely difficult to compete with Messenger Payments, but would rather implement Messenger Payments as one of the methods to pay for a ride. Same goes with AirBnB and LinkedIn, etc.
The best way to describe Facebook and its Messenger Payment app is that they are Social Currencies. They are social and they are payments. All bundled into one.
What makes them even more powerful is that they are device agnostic and telco agnostic. It doesn’t matter whether you own an iPhone or an Android to use Facebook/Messenger.
Apple and Google (and Samsung) do not have this option…yet. So far, they are bundled to the hardware. Apple may be the first one to break away and allow Apple Pay to be used on any Safari browser, which would be the first case of unbundling a payment solution that was inherently tied and limited to the iPhone.
I personally feel, Apple will allow any Apply Pay user to pay anywhere on the internet, when a Safari browser is used. This may change and be more open and free, but making payments using your Apple device on Safari, may be the first step before decoupling.
Will Facebook become a bank? It already has – of sorts. It is your Content Bank. It keeps your pictures, messages, list of friends, etc. It is only a matter of time, you will trust your money (or part of it) with Facebook as well.
Messenger Payments are set to arrive in interesting times where everything is in the cloud and apps.Our content and our communication is already in the cloud/apps and the next logical step is our money.
Just to give you some form of semblance as to how powerful and useful Facebook Messenger will eventually get, here is what David Marcus and his team announced today: KLM + Messenger (read original post: https://www.facebook.com/davidm/posts/10156841782530195)
More to come from the good folks at Facebook!