Is Facebook Looking To Enter The Mobile Payments Business?
Recent reports suggest that Facebook (NASDAQ:FB) might roll out an in-store mobile payment option on its Messenger app, which the company is currently upgrading. As the app inches closer to the 1 billion user mark, the company may be planning to make messenger an “Everything App” which will ensure that users can access a broad range of services and businesses. The company recently announced a partnership with KLM airlines which will allow KLM customers to receive flight confirmations, boarding passes, reminders and flight status updates directly through Facebook’s Messenger App. While CEO Mark Zuckerberg mentioned on the recent earnings call that the company is not a payments business, Messenger allows users to transfer funds to their friends, and recent reports suggest that changes in the app’s code may expand Messenger as a payments tool. While Facebook would face intense competition from players such as Apple Pay and Android Pay in the mobile payments space, Messenger’s expanding utility for other functions could put it in an advantageous position and generate a new revenue stream for Facebook.
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Mobile Payments Can Be An Extension Of Facebook’s Services
As part of its plan to make Messenger an “Everything App”, Facebook plans to allow users to buy and sell products via the app and make it a retail hub. (Read Will 2016 Be The Year Of Facebook Messenger?) A payment feature in the app could facilitate these transactions and attract more users. While Facebook could partner with an existing mobile payment provider to add the feature, an in-house product could give the company more flexibility and better control over payments via Messenger. The code for the iPhone Facebook Messenger app reportedly includes commands such as “pay in person” and “pay directly in Messenger when you pick up the item’, implying that Messenger could be preparing an in-store purchasing method.
User adoption for mobile payments has been gradual, and for the quarter ending October 2015, 16% of users owning an iPhone 6/6s had tried Apple Pay (which was launched in September 2014) and only 5% have used it to pay at a POS terminal accepting Apple Pay. The primary reasons for the low usage were: users not being aware that certain stores accept payments via Apple Pay; and users simply not remembering to use Apple Pay. However, Facebook could see strong adoption should it launch a payments feature, given its strong penetration globally and the number of business pages on its platform. In April 2015, Facebook had 40 million active small business pages on its platform. While the company is looking to monetize them by way of advertisements on its platform, Messenger could also work as a transaction app for these businesses. As Facebook works towards monetizing its Messenger platform, a payments product could provide substantial revenue upside for the company.
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