Facebook recently announced its ambitions to become a payment platform, with the intent to occupy a more important part of its users’ lives. This is a significant move for Facebook towards becoming a Facebank. Unlike a few social networks or virtual worlds, Facebook thrives on its users assuming their real identities and interacting just like in their real lives. Overwhelming users on Facebook have real identities and disclose a lot of information. Facebook’s stated mission is to make the world more open and connected. The payment facilitator undoubtedly takes Facebook closer to its mission.
Paypal, with its 110 million active registered users, made $ 4.4 bn revenues in 2011. Paypal is an early mover into the payments space and makes its revenues by simplifying and facilitating millions of small value transactions and hundreds of thousands of subscriptions, charging a small facilitation fee. Facebook has an immense opportunity to match Paypal’s reach with its 1 bn active users, 40 million pages (business, professional, government, celebs etc) and 75,000+ apps. Facebook is a natural fit for a business model like this and can facilitate seamless payments, even beating the convenience offered by Paypal or Google Checkout.
Becoming Facebank: What does Facebook need to do
- Ease of Use
For Facebank to take off, the key is to enable seamless, one-click payments. Facebook can offer unmatched analytics to marketers, allowing them to identify needs and target buyers with precision. Enabling a quick, one-click buy option will increase the value for both the seller and the buyer.
For example, if a user is buying subscription:
Freemium game to paid portion – (Facebook already does this via Facebook credits …Zynga)
Ecommerce payment facilities – case study of bookmyshow a ticketing website
Free Social reader to paid portion – One click payment option
User can have a simple profile settings screen to manage payments and subscription history, where he can change card details or alter his subscription plans.
- Quantum of charges
To go after volumes, Facebook has to be competitive enough to match Google Checkout, Amazon, Paypal and other systems. Going Apple’s way on payment commissions is a complete no-no for Facebook! Also these charges depend on the value addition Facebook is bringing to the subscribers and the vendors. The charges could be in the range of 3% to 30% depending on the transaction type.
For instance, for virtual games, the fee could be as high as 30% (similar to iTunes) and for a grocery purchase at Walmart’s page at 2.5% (typical credit card processing fee)
For a user, one-click payment through Facebook makes sense because the experience is seamless and he doesn’t have to spend too much time passing through payment gateway screens and for the vendor, it’s an additional channel to increase revenues.
- Integrating with Ads
- Buyouts and Partnerships
Banks: Naturally, Facebook will forge partnerships with Banks to make its Payment systems work, but integration with small-business accounting suites like Intuit makes for a compelling case to scale up the reach.
Stock Trading: Another interesting partnership opportunity will be with stock trading platforms. What if we make the stock trades from our Facebook page and the payment settlement is facilitated by Facebook itself? Imagine the volume it can generate!
Paypal: The biggest coup Facebook can pull is to partner with eBay and tap into Paypal’s base could be a game changer for Facebook payments.
Credit scoring and risk evaluation: Axciom a company that keep track of more than 30million people in the US seems to be another avenue of partnerships. Facebook already has partnered with market intelligence companies such as..Axciom’s revenues are …an integration into that path and seamless integration to vendor’s could further boost Facebook’s revenue prospects.
- Security & Privacy concerns
Revenue breakup : looking from a crystal ball of my own
If Facebook manages to pull off Facebank successfully, in 5 years time, the Payments business can form 25% of the $ 30 bn revenue that Facebook expects to touch.
Providing instant payments facility to the user via seamless integration, in my opinion, could be a great bet for Facebook in the long run. And with social proof, reach on its side, the advertisers can see value in Facebook as a business platform and not merely advertising channel.