Mark Zuckerberg recently shared that Facebook would “partner with everyone who does payments.” In addition, Forbes reported that Facebook was working with multiple businesses including Uber to facilitate payments. While the slow uptake in a market like the US, which already has multiple competing payment platforms is understandable, the real demand would be in developing markets, especially those with the largest number of active Facebook users such as the Brazil, India, Indonesia, Mexico, Turkey and the Philippines. Even though many of these markets have various alternatives to making payments, a Messenger wallet that allows people to send money and pay for goods not only from linked bank accounts but also prepaid and e-money accounts could dramatically increase financial inclusion especially in counties like Indonesia and the Philippines.
It is also clear that Facebook isn’t planning to directly make money by taking a cut from mobile payment transactions made through Messenger, but rather provide a better value proposition to increase usage of Messenger and increase revenue via its advertising business.
As mentioned, in countries with large international remittances including India, Mexico and the Philippines, a Facebook facilitated cross border remittance service that is free and would only require small currency exchange fees could completely disrupt the entire remittance industry and would rapidly achieve the goals of the G20’s Global Partnership for Financial Inclusion to bring down the costs of remittances below 5%.
In a more recent article Forbes noted that the success of Facebook’s bigger payments play on Messenger will come down to execution. While Facebook takes a page out of the success behind WeChat’s mobile payments service in China it will not only have to take into account the differences between markets but will also need to incorporate linkages to bank and non-bank financial providers that offer simple transactional accounts like e-money, mobile money and prepaid debit cards. In markets that are challenged with complicated or limited interbank funds transfers, Facebook could dramatically ease interoperability not only between those with bank accounts but also those with non-bank e-money or mobile money accounts. Facebook will also need to ensure security and trust, however, this should be achievable via Facebook’s two factor authentication.
My prediction is that Facebook could be the game changer for not only mobile payments in the developing world but also remittances. Facebook will definitely be the new mobile payment player to watch this year.