Facebook has struggled for years to develop a massive, global payments platform. Its latest effort is far more subtle.
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Consumer trust in largely unregulated social media platforms is weak, and Facebook is one of the least trusted of all major social networks, according to
The new Facebook Pay checkout button went live on e-commerce sites for the first time this week, and while Zuckerberg has played down expectations of immediate success, his long-term vision for the concept seems grand.
Merchants on Shopify's e-commerce platform can offer Facebook Pay as a one-click checkout option alongside other saved payment methods, including digital wallets like Apple Pay and Google Pay.
It's unclear whether consumers will be likely to choose Facebook — not yet a household name in financial services — over more established payment options in a sea of expanding choices.
Zuckerberg recognizes these challenges, but he recently told analysts he believes Facebook Pay could become the most convenient shortcut for users pivoting between Facebook's platform and other e-commerce sites, since they would already be logged into Facebook from those devices.
“When you click on an ad or engage with a business, it’s just going to be much better to do that natively — whether you’re in Instagram or Facebook or WhatsApp or whatever you’re using — than going to a website that doesn’t have your payment information and isn’t personalized,” Zuckerberg said during a July 29 earnings call.
Zuckerberg is hedging his bets on how long it might take for Facebook Pay to gain broad adoption.
“We shouldn’t expect that this is going to be a meaningful driver of our business or profitability in the near term, it’s just going to take a while for that compounding to become meaningful numbers,” he told analysts.
Facebook will have to work to earn consumers' trust, and since its platform was designed for sharing the very details that can be used for social engineering, it must also contend with an
"All a Facebook user has to do to add a new card number is enter the card details and create a PIN. With the number of Facebook accounts, usernames and passwords that have been breached over time, a fraudster could very easily take over one's account and use stolen payment credentials to make a purchase or create a new account and load stolen card data into it," said David Mattei, a senior analyst at Aite-Novarica Group.
Facebook says it uses technology to spot unauthorized purchases, along with advanced data storage and encryption for payment card and bank account details. Its notification systems can alert users to any unusual activity.
In recent weeks, the social network extended Facebook Pay for U.S. consumers across Facebook, Instagram, WhatsApp and its video channel Portal. Once users have added a payment method to Facebook Pay, they can click a “Buy now” tab to purchase eligible items without having to re-enter payment details.
Zuckerberg plans to get its merchants and advertisers to add Facebook Pay globally.
“Our next phase here is focused on building out shops, marketplace, business messaging and WhatsApp and Messenger to create more native commerce experiences across our apps,” Zuckerberg told analysts.
“And as we work our way down the stack from discovery and ads to native commerce storefront, we’re also making progress on payments at the same time. So WhatsApp payments are now available to everyone in Brazil, as well as India," he said.
Analysts say Facebook Pay offers the company many advantages beyond closer connections with users who may rely on the social network’s P2P service for paying friends and family. Facebook could gather valuable data about its users’ shopping habits beyond the boundaries of its apps.
“Facebook’s motivation here is to extend its tentacles, increasing user engagement and capturing more data off-platform, which is an astute move,” said Eric Grover, a principal with Intrepid Ventures.
There is no additional cost to businesses for accepting Facebook Pay at the moment, and Facebook is not acting as a processor in its current setup. Facebook Pay is managed by customers’ existing payment processor, the company’s website says.
Payment fees are understandably less important to Facebook at this point than building frictionless bridges with e-commerce platform providers, Grover said.
“With its enormous global network, Facebook still has the greatest payments potential of any U.S. tech titan, and if and when it achieves payment critical mass it may revisit the business of payment fees,” Grover said.
Facebook Pay also stands to enhance Facebook’s core revenue source of advertising, according to another expert.
“The more consumers use Facebook Pay, the more information Facebook has on those consumers and the more advertising revenue it can generate,” said Tim Sloane, vice president of payments innovation at Mercator Advisory Service.
But many consumers have trust issues with Facebook, given ongoing account takeovers users routinely report, following years of data breaches.
“Account takeovers are on the rise everywhere and if Facebook can’t protect those accounts they will fight a growing backlash,” Sloane said.
Facebook has already experienced plenty of friction in trying to become a payments intermediary.
The company's first big foray into payments was in 2009 with Facebook Credits, a closed-loop money system enabling users to make online purchases by loading funds (purchasing Credits) via a payment card or PayPal. Facebook took a 30% cut of transactions.
But sellers — including many video game developers — often have their own in-game currencies, creating confusion over the value of users’ Facebook Credits. Three years later Facebook shut down Credits and converted users’ balances into local currency, leaving app developers to handle their own payments.
With Facebook’s Libra, the social media giant cast itself as leader of a consortium to create a new digital currency with partners that originally included Visa, Stripe, PayPal, eBay and Uber. The goal was to build a crypto-based financial system to transform the way money moves around the world.
But regulatory concerns immediately became a source of uncertainty and Libra’s partners began bailing out within the first few months. At the end of 2020, Libra was rebranded as Diem with a broader focus on stablecoin development, with 27 companies participating in the Diem Association.
Facebook presaged its latest payments ambitions in August 2020 with the unveiling of Facebook Financial — codenamed F2 internally — headed by Libra co-creator David Marcus, formerly the president of PayPal.
Facebook has not disclosed how many consumers use Facebook Pay for P2P transactions, but Zuckerberg suggested to analysts that the QR code-based approach to paying consumers and businesses via Messenger may be integrated into customer service and other commercial functions.
“We have a full road map of deeper integrations that I’m excited about in the months ahead,” Zuckerberg said.
