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The social network just wants to know everything about the consumer. Payments happen to be the best way for people to show they really "like" a product.
April 25 -
Virtual currency is prevalent in gaming, where users can deploy credits to continue using favorite social games or to buy virtual goods and powerups. But that's likely just the start. According to several market reports, virtual commerce is a $2.2 billion industry that's projected to grow to a whopping $6 billion in fewer than five years.
May 15 -
Zynga's social games — especially its hit Facebook game FarmVille — are a big deal in digital payments. Its games are the key to the success of Facebook Credits, and they may provide a similar boost to American Express' Serve.
May 22 -
Facebook is becoming a payments contender a lot faster than it has led observers to believe. It has money transmitter licenses in at least 15 states, according to an American Banker analysis.
February 21
Facebook (FB) is moving away from its Credits virtual currency to a more robust payment system that supports real money. At the same time, new survey data show that consumers are interested in bringing their banking business to the social network.
Nearly 30% of consumers surveyed said they might one day use Facebook for some type of banking service if it were offered, according to an online survey Cisco conducted in May among 1,061 consumers in North America. Cisco published its findings June 20.
Though Facebook does not currently offer traditional banking products, it is aggressively making its payment system more compatible with existing means of moving money. Most recently, Facebook began transitioning app developers away from Facebook Credits to a process that uses local currencies, such as the U.S. dollar or Japanese yen.
Previously, developers had to set prices in Facebook Credits, and Facebook handled currency conversion behind the scenes. Facebook's new structure, which it announced June 19, allows developers to set prices by market instead of sticking to the virtual currency's one-price-fits-all model.
Facebook is also allowing developers to set subscription-based pricing, which was not supported under the Facebook Credits system.
In Cisco's survey, 14% of respondents said that if Facebook offered banking or payment services, they would consider using it with a prepaid account they could reload, while 8% said they would consider using a Facebook checking account or debit card. Five percent said they would consider a Facebook savings account or online bill-payment service.
Just 4% said they would consider a line of credit from Facebook, 1% would consider a mortgage, and 1% would use Facebook for all of their banking services.
Facebook told developers that they will be required to accept real currencies by the end of this year. If developers prefer to use a virtual currency, they must design their own to replace Credits.
Facebook gets about 15% of its revenue from payments, and it has received or applied for a money transmitter's license in many U.S. states. However, the company may still have a lot of work ahead of it if it wants its payment system to measure up to banks' products in consumers' minds: 71% of respondents in Cisco's survey said they would not use Facebook for any of the proposed banking services.
Asked how comfortable they would be using Facebook credits to pay for goods and services at brick-and-mortar retail outlets, 55% said they would be extremely or somewhat uncomfortable, while 19% said they would be somewhat to extremely comfortable using Facebook to buy something at a store. Nearly a quarter, or 26%, was neutral.
Despite the reservations consumers have today, Facebook's payment system "could evolve to enabling more prepaid or banking services, and even become a conduit for payment in actual stores," says Philip Farah, a director of Cisco Internet Business Solutions Group.
Social media sites like Facebook would likely face "strong headwinds" before becoming widely accepted banking channels, he notes.
Banks and credit card companies have a long lead on other channels when it comes to consumers' preferred providers of mobile wallets, Cisco found.
Twenty-four percent of respondents said they would prefer to have a bank provide them with a mobile wallet, followed by 21% who said they would prefer a credit card issuer or network like Visa Inc., MasterCard Worldwide or American Express Co., to provide their mobile wallet.
Some 11% of respondents said they would prefer a peer-to-peer payments provider like eBay's PayPal Inc. to provide their mobile wallet, while 4% preferred a mobile phone company like AT&T, 3% opted for a technology company like Google Inc. and the remainder were unsure.
What consumers say they want from mobile payments is "faster payment at checkout, one-click payments for online purchases and the opportunity to automatically redeem coupons and special offers through their phones when near a store," Farah says. And a variety of nonbank providers could eventually bring those services to consumers, he suggests.
"Consumers look to banks and payment card issuers right now to provide basic payments services, but nonbank providers could easily find ways to encroach on banks' turf," he says. "Essentially, the mobile wallet arena is a category that is banks' to lose."
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