Facebook is getting into the money business. The Financial Times reports that the company is in talks with Irish regulators and three European startups to create a service that would “allow its users to store money on Facebook and use it to pay and exchange money with others.”
The news comes as other companies, such as Amazon and Google, increase their own interest in payments platforms. Amazon CEO Jeff Bezos has “identified payments as one of the top areas of focus and investment for Amazon” and reportedly told the company’s payment team to work faster. Google has been developing new payments tools, including one that allows Gmail users to send money with an email, and continues to increase its focus on the sector.
It seems that payments will become yet another battle ground on which the four largest tech companies — Apple, Google, Facebook, and Amazon — will wage their great war for consumer interest. These companies already compete with hardware, digital marketplaces, and digital platforms that control the way people interact with the Web. Now they’re looking to manage the payments, and presumably all of the attention and information they entail, as well.
It’s unclear how Facebook’s payments platform would work. Google’s efforts are interesting because it’s using its vast infrastructure to facilitate payments; Facebook would have to do something similar to stand out in a swath of startups focused on making it easier to spend and transfer funds. And, as the Financial Times notes, Facebook’s users might hesitate before they trust the social network with their cash. Facebook already knows what you listen to, read, watch, say, don’t say, and more. Adding your purchase history to the mix might be a bit much.
But some believe that introducing payments tools can actually increase trust in a company. Gartner analyst Brian Blau told me ahead of Twitter’s IPO last year that one of the company’s major failings is that it doesn’t have any financial transactions with its users. “When you cross a line of accepting or facilitating payments, you really start to take on a different perception in the consumer’s mind,” he said. “If you give a company your credit card information or allow them to handle your money, all of a sudden you put a trust in them you didn’t have before.”
Reactions from around the Web
The Next Web thinks that a Facebook payments platform would be aimed at developing countries:
E-money and remittances would help Facebook be more relevant in emerging markets and build up its momentum to push into these markets. Last week, for example, Facebook passed 100 million users in India. Already, Chinese Internet giants including Alibaba and Tencent have rolled out mobile payment initiatives as they seek to tap on e-commerce by replacing traditional payment methods to ease the friction of paying without bank-issued credit cards.
Re/code notes that, much to its reporters’ surprise, Amazon offers a peer-to-peer payments product:
As for another hot category, peer-to-peer money transfers, many people would be surprised to learn that Amazon already offers a peer-to-peer payment feature similar to PayPal’s. I know I was.
‘It’s not a significant part of the business,’ Taylor said, ‘and we haven’t really promoted it.’
Why is that? I asked.
‘We’re not sure we’re doing anything better than anyone else,’ he said plainly. If and when we think that has changed, he said, ‘we’ll emphasize it.’
Quartz writes that Google’s new payments features could help it become more popular:
Think of how SMS-based money transfers allowed mobile payments to spread quickly in the developing world. Gmail is, in a sense, the SMS of developed economies.
Google can also help solve another point of friction with mobile payments, which is that both sides of the transaction need to have accounts with the service handling the money. The same is true for Google Wallet transfers, even over email, but having a Google account is way more common than having an account with, say, Venmo or PayPal. Google may be the closest thing the world has to a universal bank.
Pando weighs in
Carmel DeAmicis notes that payment tools have become so popular in recent years because people are sick and tired of PayPal:
PayPal has pissed off enough companies and consumers with its poor customer service and erroneous fraud detection system that it opened a space in online payments that Braintree and Stripe have been racing to fill. Developers love Stripe because it makes it easier for them to split up payments between different parties (helpful for sharing apps like Lyft where drivers and the startup both get a cut). Braintree is trying to compete and rolled out its Marketplace product that does payment splitting in August.
Braintree has nailed the consumer side of the equation by making it easy to pay for something on your phone without needing to enter credit card information. Simplicity of transaction is key in mobile, and mobile may be the gate keeper for winning in the online payment processing space. If so, competitor Stripe has been criticized for being late to the mobile game.
But she and Michael Carney think that PayPal’s acquisition of Braintree might have actually helped the latter company’s reputation:
A key element of the PayPal-Braintree acquisition was the decision to have the two companies operate independently, only sharing loosely-described “resources” and perhaps a mutual halo-effect. That gave Braintree, which was already leading in payments 2.0, a huge boost in terms of credibility without weighing it down in bureaucracy and institutional memory of the older PayPal. PayPal, on the other hand, gained access to the type of next-gen payments platform and innovative culture that it had failed to build over the preceding decade.
Furthermore, the deal gave Braintree the backing of the eBay brand, a mark of credibility for big enterprises considering which online or mobile payments provider to adopt. People liked Braintree before, a feeling that will likely only grow with the addition of thousands more engineers and access to PayPal’s relationships in 190 countries. That’s a lot more meaningful than the prospect of betting on a startup that has won the hearts and minds of early stage companies in Silicon Valley.
Sarah Lacy reported on PayPal CEO David Marcus’ efforts to fix the company’s problems:
There was no quick fix to what was ailing PayPal. Nothing that can be boiled down to a press release. An acqui-hire wasn’t going to do it. A new product wouldn’t fix it. Nor would a splashy new ad campaign, free food, iPhones or UP bracelets for the team. He had to deeply change the culture. “It’s the hardest thing I’ve ever done in my career,” he says.
But once he did it, he saw that it could be done. And if they could change that, Jesus, the assets of PayPal were unlike anything anyone else possessed.
Nearly 18 months in, there are signs to Marcus that it’s working.
[Image via Thinkstock]