Pocket Money: Facebook Payments and Mobile Wallets

Pocket Money: Facebook Payments and Mobile Wallets

The days of chasing down your friends for money are over. Apps like Snapcash, Venmo, and Paypal, and services like Google Wallet have democratized peer-to-peer money transfer and they have become extremely popular especially among millennials. Although these services are already successful and established, they will now have to compete with social media giant Facebook. Facebook has recently rolled out Facebook Payments, a revolutionary peer-to-peer money transfer service that has the potential to leverage social network capabilities to greatly impact the e-commerce arena.

How it Works

FacebookPayments is easy to use. The user accesses the feature in the Facebook Messenger chat window by simply clicking on a “$” button and entering the dollar amount they wish to send to the friend they are chatting with. The money gets transferred immediately from one account to the other (although some payments may take a couple of days to process). Limitations to this system are that money exchange can only happen once the two parties befriend each other on Facebook. However, this is a recurring feature of all peer-to-peer money transfer apps and it’s necessary to guarantee security and prevent hacking.

Advantages against Competitors

Payments has two main advantages: cost and network size. Facebook does not take any fees out of the transaction and it’s completely free for the user. This feature sets Facebook apart from competitors like Venmo, which charges a fee of about 3% of the total amount spent for credit card transactions (debit card transactions are free), and PayPal, which charges a fee of 2.9% of the total amount spent plus a flat 30 cents. The reason why Facebook can waive the transaction fees is that the company makes enough money on ads to account for monetizing payments directly.

As expressed in a recent article by TechCrunch, Payments’ goal is not that of building a payment system. Rather, as expressed by Facebook Payments’ product manager, Steve Davis,  the aim is to offer P2P payments for free to make Messenger “more useful, expressive and delightful,” and create an ecosystem where Facebook users can integrate their shopping and banking habits directly with their social media personas. Indeed, Payments’ other competitive advantage is its network of 1.3 billion users. A seamless customer experience coupled with a strong marketing strategy could push Facebook users to adopt Payments rather than a separate P2P payment platform. In doing so, Facebook will be likely to grab market share away from its competitors and dominate the peer-to-peer banking sector. If Facebook goes this route, it will have to compete with Snapchat, which, through Snapcash, has the potential of creating a similar social + P2P and eCommerce solution. After all, through features such as “Discover” and sponsored Snapchat stories, which allow companies to broadcast content to Snapchat users, Snapchat has already proven its ability to mix marketing and social.

Potential Implementations

Payments’ natural integration of social and banking and the dynamics of today’s sharing economy gives Facebook the potential to leverage data and content strategy and revolutionize the world of e-commerce. Big changes can happen on both the personal banking and retail side. Think of a group of friends on vacation. They can split the cost of their Uber ride from the airport while they post a picture of them sitting in the Uber. At the same time, their Facebook newsfeed could suggest them hotel accommodations, tours, and events in the area they are travelling to. Facebook collects huge amounts of data from users’ pictures, status updates, and other forms of social interaction. Therefore, given the
integration with Payments, Facebook could potentially send personalized, content-driven advertisements to the user’s newsfeed promoting relevant products that could be purchased with the simple push of a button.

Facebook has already been testing a “Buy” call-to-action button. The button is placed on ads and page posts and, once clicked, it connects the user to a page where they can purchase a given product directly, all without leaving Facebook. If implemented in Payments, this system could validate and augment content strategy efforts and create e-commerce experiences that are engaging, effective, and seamless. At the moment, the design of the “Buy” button is still misleading, making it look like an advertisement rather than a service.However, given the amount of testing that is being performed, chances are that Facebook will gather feedback and make necessary changes.

Facebook Buy Button

The Holistic Marketing Strategy

Facebook Payments represents a step forward in the arena of content strategy, banking, and e-commerce. Facebook has already been used by companies to reach potential customers on a personal level and send out targeted advertisements as well as marketing content pieces, such as blog posts and informational videos. In a world with a constant flow of information, services like Payments will push companies to observe consumer behavior closely and craft marketing



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This article was written by

Carolina is a progressive strategic thinker and sports, art, literature, and music enthusiast with skills in business administration as well as design. She mixes business and design in all of her projects, because she considers design a perfect tool to guide business thinking and represent a project's outcome.