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4/15/2014
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Facebook Mobile Payment Service A Tough Sell

Facebook's own e-money service could make the company millions, but would you trust it with your cash?

10 Famous Facebook Flops
10 Famous Facebook Flops
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Facebook is a few weeks away from gaining regulatory approval for a mobile payment system in the United Kingdom, according to a report from the Financial Times. This would allow users to store money on the social network and use it to pay and transfer cash to others.

The approval from the Central Bank of Ireland would also allow Facebook to tap into the remittance market, in which foreign workers transfer money to people in their home countries. Facebook's second-largest market is India, with 100 million active users. Remittances in the country topped $71 billion last year, according to World Bank.

Facebook's foray into the remittance market could prove lucrative and provide the social network with an additional revenue stream outside of advertising. The World Bank reports that globally, people channeled $404 billion in remittances last year. Transfer fees averaged about 8%.

[Get a grip on your account. Read 10 Most Misunderstood Facebook Privacy Facts.]

"The most likely scenario is that Facebook will allow their users to use this new functionality as a bank," said Brian Blau, research director at Gartner, in an interview. "They could surface this functionality as a payment system, but in some countries we could even see Facebook tie their payments to device operations. That could mean the phone itself could be the payment mechanism."

While the mobile payments market is hot -- Juniper Research says it will reach about $507 billion this year -- Facebook has struggled to tap into it. Former ventures included Facebook Gifts, which let users purchase items for a friend's birthday; Facebook Credits, a virtual currency for games that it will wind down; and Facebook Deals, which aimed to rival Groupon, but was shuttered by Facebook in 2011 after a four-month test.

Facebook also faces tight competition. Not only will the social network compete with services such as Google Wallet, which lets you transfer money via email attachment, it will go head-to-head with traditional banks, money transfer businesses, and other services such as PayPal.

But the social network's biggest challenge to overcome is consumer trust. According to Ovum's 2013 Consumer Insights report, only 1% of respondents said they trust social networks to deliver mobile payments. In contrast, 43% of respondents trusted banks and 13% trusted credit card companies.

"Over time we'll see technology providers like Facebook move into payment technology as a way to expand their influence and drive revenues and engagement within their own ecosystems," Gartner's Blau said. "Facebook will need to overcome their issues with user trust and convince businesses that transactions through its platform are not only complimentary to their current payment process, but will benefit them or even become a primary revenue source."

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Kristin Burnham currently serves as InformationWeek.com's Senior Editor, covering social media, social business, IT leadership and IT careers. Prior to joining InformationWeek in July 2013, she served in a number of roles at CIO magazine and CIO.com, most recently as senior ... View Full Bio

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catvalencia
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catvalencia,
User Rank: Apprentice
6/28/2014 | 6:47:43 AM
Re: Facebook not secure
Couldn't agree more with you. I don't think Facebook is trustworthy enough in handling financial transaction. I believe this is just one way for social media platforms to accumulate our private information, which is quiet brthering fr me. I'll still prefer Paypal or Google Wallet than this Facebook mobile payment service.
6 one way half a dozen another
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6 one way half a dozen another,
User Rank: Strategist
4/25/2014 | 1:48:44 AM
Re: Facebook not secure
That is true, but entirely irrelevant to any comment I or anyone else in this thread has made. It also does not address the point of whether Facebook can be trusted with our financial information, just that it knows how to make money.
emilyrobins
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emilyrobins,
User Rank: Apprentice
4/22/2014 | 7:59:24 PM
Re: Facebook not secure
FB Ad revenues grew in the last six consecutive quarters as the social media website leveraged its growing popularity to charge higher rates per ad. 
6 one way half a dozen another
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6 one way half a dozen another,
User Rank: Strategist
4/16/2014 | 4:06:34 PM
Re: Facebook not secure
Yes, I believe that in developing countries it may have an advantage that other companies will lack. I also am not as worried about fraud per se, but about their glitchy systems that inadvertantly expose information followed by their "whoops, our bad" attitude about the glitch. Zuckerberg can give all of the interviews he wants, but actions speak louder than words. Currently, Facebook actions say "we've really screwed up in the past, but we're more concerned about our monetization capabilities than with our users' experiences" (i.e. if I "like" a page, I want to see those posts whether or not I "interact" with them; one can't choose to "interact" if not given the post in the first place).
Lorna Garey
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Lorna Garey,
User Rank: Author
4/16/2014 | 11:14:52 AM
Re: Facebook not secure
Also, the security question becomes somewhat moot if Facebook guarantees that users will not lose money to fraud. A very low cost or free ability to transfer funds + protections comparable to what CC carriers offer will get it some customers.

Say you go to dinner with a few FB friends. One person could pay for the meal, and the others could use the service to transfer their shares of the cost, as opposed to having the server split a bill among cards or carrying cash. I can see it.
Kristin Burnham
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Kristin Burnham,
User Rank: Author
4/16/2014 | 10:20:45 AM
Re: Facebook not secure
I'd wager that many people share your same thoughts. I do wonder, though, whether the rate Facebook would charge for the transfer would sway users away from traditional transfer services (Western Union, etc.) if it were cheaper. Given Facebook's growing userbase in developing countries, that could be a strong motivator.
6 one way half a dozen another
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6 one way half a dozen another,
User Rank: Strategist
4/16/2014 | 4:33:50 AM
Facebook not secure
You are right, Kristen. I don't trust Facebook because I don't believe that they can keep my info secure. I've followed stories in the recent past about how their awkward privacy settings unwittingly exposed users hidden information. Combine that with their past of making privacy policy changes that default the private to public and I wouldn't blame anyone for turning up their noses to this project. I only gave Facebook the required info and nothing more. All the blue dinosaurs in the world won't convince me that they can be trusted.

Plus, nobody gets to monetize my financial records for online advertising.
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