Facebook to Compete with Google Wallet

Facebook is in talks with the Central Bank of Ireland to establish a partnership that would enable the U.S.-based social network to provide an electronic payment (or e-money) service, according to reports. Regulatory approval in Ireland is said to be weeks away, and if the deal goes through, users will be able to store money on Facebook with which to pay for goods and services as well as to transfer to other Facebook users. The e-money service would not involve linking Facebook accounts to credit card or bank accounts. Instead, the authorization from Central Bank of Ireland would allow Facebook to issue its own units of monetary value, which would represent claims against the company. Obtaining an e-money authorization in Ireland would require Facebook to hold capital of €350,000 (US $484,000) and segregate funds equivalent to the amount of money it has issued. It has not yet been stated in which countries the service would be available. If Facebook were to enter the electronic payments business, it would mark a major shift in the social network’s business model, which up to this point has been focused on revenue from advertising. Considering the company’s reach and wealth, it has the potential to be a serious player in a fast-growing space. As we have been reporting, electronic payment—particularly from mobile devices—is making headway worldwide. Having taken off in developing countries with “under-banked” populations, it is now spreading to more developed markets including Europe and the U.S. For example, Vodafone’s M-Pesa mobile-money platform, which has already met with great success in Africa and India, recently launched in Romania and is expected to be expanded elsewhere in Eastern and Central Europe. It appears that with this potential service, Facebook hopes to eventually get involved the global remittance market, in which foreign workers send money back to their home countries. There are 100 million active Facebook users in India, which saw over US $71 billion in remittances from abroad in 2013. Undoubtedly, Facebook’s entry into this market would be a significant move and represent a threat to competitors such as fellow internet giant Google (which offers the Wallet e-payment service) and various MNOs including Vodafone. However, Facebook’s success as a provider of monetary services will very likely depend on whether or not consumers can be convinced to trust a social network to provide enough security for transactions. In any case, the mere fact that Facebook considers this business worth its while is a reminder—if any were needed at this point—that electronic payment is going to be an ever-more important economic force all over the world.  The above item appeared in a recent issue of Tarifica's "The Story of The Week", a weekly report that analyzes two noteworthy developments in the telecoms industry from around the world. For past issues or to learn more about The Story of The Week :  http://www.tarifica.com/storyoftheweek.aspx