On March 17th Facebook, the world’s biggest social network,
announced that in USA its instant-messaging app will soon allow users to send
each other money just as easily as texts and photos. All they will have to do
is link their debit cards to their Facebook account, tap on a dollar sign in
the app, type in the amount and press send.
Facebook is not the first to enter the market for free
person-to-person (or P2P) payments. In November, for instance, Snapchat, a
messaging app that lets users send each other photos that disappear after a few
seconds, introduced a service called Snapcash. It competes with Venmo, a
popular money-transfer app owned by PayPal, an online-payments firm.
In contrast to Snapcash and Venmo, Facebook’s service does
not make instant payments: the money only arrives after a few hours or even
days, depending on how quickly users’ banks act. This is because money is not
transferred between accounts managed by the social network, but goes through
conventional payment channels from one bank account to the other.
Facebook’s new
offering is further proof that technology firms are moving onto banks’ turf.
Next month Apple will begin
selling its smartwatch, which will allow consumers to pay by waving their arm
at the cash register. This will help the firm’s new contactless payment
service, which already accounts for two of every three dollars spent in USA by
gesturing with a smartphone or a card.
Google recently bought Softcard, a mobile-payment service,
to boost its own payment app and catch up with Apple.
If some day Facebook expands its offering internationally
and makes it truly instant, the impact could be huge. Facebook has 1.4 billion
members, its messaging service 500m users. Many send remittances across
borders; some are probably unbanked. The regulatory and logistical challenges
of serving such customers will be huge. Banks struggle to profit from them.
Then again, that is just the sort of challenge tech firms relish.
