Facebook introduces P2P Payments
This week, the social media giant announced the launch of a capability that will allow its users to exchange money directly from their bank account through Facebook’s Messenger. The feature comes to no surprise after the appointment last June of David Marcus, former CEO of PayPal, as the leader of Facebook’s messaging products.
Facebook joins the peer-to-peer payment scene after two other services have emerged as major players in this particular niche. Square’s Square Cash currently powers Snapchat’s Snapcash and it has been gaining traction, but it is PayPal’s Venmo service that is the true leader of the market. The volume of P2P monetary transactions has continuously increased over the past years, and it is not showing signs of slowing down in the near future. Despite this growth, it has been reported that Venmo is currently not a profitable venture. Facebook has publicly stated that their P2P service will remain free to their users even with the platform absorbing the cost of bank fees incurred in the back end.
It is unlikely that Facebook sees the new feature as a first step to building a new revenue generating stream; instead, the company wants to improve the usability and add value to their Messenger service. While it is difficult to imagine that Facebook will turn P2P payments into a money-making venture, it does not mean that there isn’t anything there for their taking.
Facebook has two clear advantages over Snapcash and Venmo. First, their already established and considerable global reach means that they do not need to spend any money attracting users. Second, and perhaps more importantly, Facebook has the ability to sustain the service without the need to make money from it (they make enough money from selling advertising).
Peer-to-peer payments will allow Facebook to obtain access to their users’ wallets. This is, perhaps, the biggest gain that the company can achieve through this feature. It is certainly not a stretch to think that Facebook’s long-term strategy could be to delve into P2C payments or eCommerce capabilities. Getting users to buy products in-store with their mobile devices via their Facebook profile, or online directly from their News Feed would be considerably easier if the transaction only takes a couple of clicks. Connecting Facebook users with their debit or credit cards can be a key step towards achieving this goal.
So, while PayPal may breathe a momentary sigh of relief for not having to compete toe-to-toe with Facebook, it is the likes of Apple Pay, Google Wallet and even Amazon who need to need to start bracing for the social wave to hit them.