Authentication & Security

A Deeper Look at Facebook’s Strengths and Weaknesses as a Payments Player, and ‘What if?’ Scenarios

MEDICIFounder and Chief Strategy & Innovation Officer

By now many have read about Facebook’s upcoming foray into payments, It’s all over the web! Everybody is screaming from top of the hill that Facebook is going to be the Next Big Thing in payments, except Facebook that is. There is no doubt that Facebook will soon make a play in the payments market, but the extent to which they plan to do this has yet to have been made clear. Nevertheless I think it calls for an evaluation (as an industry observer) to see what it would be like to have Facebook in this space based on its strengths and weaknesses.

Strengths of Facebook:

  • Tim Cook recently said that if we are still carrying physical wallets in our pockets it means that Wallet offerings have not succeeded. One of the reasons is fragmentation. One thing does not work on the other platform. Facebook provides a platform agnostic tool accessible across multiple platforms through a website to mobile apps and no dependence on the OS.
  • It has already been a part of some POCs with banks. There are many examples such as CommonWealth’s Facebook banking app in Australia and ICICI bank in India.
  • Can give more power to the customer through easy to use links for payments, as was done for Ribbon by using “in-stream” payment option, with the user staying on his/her social page.
  • Can store user’s credit card details and can provide a seamless one-click payment experience at the checkout.
  • So far only players like Starbucks and Uber have shown successful integration of mobile payments because they own the commerce experience end to end. Facebook also has similar potential in some areas such as online services like e-gifting, video-on-demand, e-cards and even things like online fundraising for NGOs and charities.
  • Can target online and social gaming segment in a big way as the market explodes. Look at games like World of Warcraft; Facebook can easily target such games for in-game purchases.
  • Can easily tap into the remittance market with its amazing global reach and gain a vantage point in international money transfer services.
  • With acquisition of Whatsapp, which itself has reached 500 million users, Facebook can provide mobile money transfer service to the huge mobile messaging user base.
  • Companies can use Facebook’s ad network to get insights into customer segments and market specific products to drive more sales and also provide calls to action.

Facebook-Money

  • Security is a major concern. In January 2013, Business Insider reported that 90% of passwords used on social networking sites are vulnerable to hacking. 600,000 hackers try to attack Facebook every day.
  • Regulatory issues shall always arise when targeting the global financial space. Different countries have different currency systems as well as different regulations to handle those currencies. Dealing with the local banking authorities would be a challenge. For e.g., in India, Paypal had to amend its user agreement which involved a transfer cap and no money to be kept in PayPal account
  • Tough competition from players like Google, PayPal and Amazon as they have the first mover advantage in the payments market.
  • Past attempts and failures like “Facebook Credit” can create negative perceptions against it, especially pertaining to management of money transfer due to fluctuations in Forex market.
  • Consumer trust is the biggest challenge. To trust a social network with money where all kinds of spamming can happen is a challenge. It is difficult to change consumer behavior as far as usage of Facebook is concerned.

Have you ever thought if Facebook became one of the following – tell me what you think about these What if? scenarios:

  • Facebook becoming an international bank, an e-money bank with or without collaboration with banks throughout the world and providing a singular platform for the different currencies of the world. Making it easy for the user to save, invest, transfer money or do commerce.
  • Facebook as the biggest e-commerce player on the entire planet with Facebook pages acting as virtual retail outlets with payment methods integrated to complete commerce transactions. Using Facebook’s Whatsapp and also its Messaging app to get in touch with sellers to know more about products and discuss terms of payment. It can work the other way around too for sellers, essentially becoming a big platform for negotiating and making deals.
  • Facebook becoming the biggest remittance giant in the world providing high volume, secure cross border payments day after day. Like a digital version of the Western Union.

Amit Goel

MEDICIFounder and Chief Strategy & Innovation Officer

“Amit Goel is the Founder & Chief Strategy & Innovation Officer for MEDICI. Amit’s vision is to build a strong FinTech market network that involves financial institutions, banks, startups, investors, analysts & other key stakeholders across the ecosystem – helping each one of them in a meaningful way by removing the asymmetry of information and providing a platform to engage & transact.\ \ Amit is passionate about bringing actionable FinTech-focused insights, innovative products & services for the FinTech ecosystem. Some of his work involves startup scores, bank scores/assessments, predictive viewpoints & other innovations that have helped MEDICI’s customers and the ecosystem. He has been named amongst the Top 100 FinTech thought leaders/influencers in the world & Top 10 in Asia multiple times by reputed agencies, consulting firms as well as financial institutions. Amit has built MEDICI (formerly LTP) as a new-age, tech-enabled advisory/research firm, which is now considered the #1 global research & innovation platform for FinTech in the world.\ \ Amit has been writing pioneering viewpoints on financial technology space that have been ahead of the curve since 2010. His data-driven predictions have helped the customers as well as the ecosystem. His past work experience includes a strong background in strategy & market analysis and advisory to clients (from big business houses to Fortune 500 firms) in payments, commerce, financial services & IT/technology. In the past, Amit had also founded a successful consulting & research practice called GrowthPraxis and has worked at Boston Analytics, Frost & Sullivan, and Daimler Chrysler in strategy & research.”