redesign | payments: Facebook and peer-to-peer payments

Connect buttonFacebook’s upcoming move into peer-to-peer payments brings it into a crowded field. The most obvious competitors are Square Cash, PayPal’s Venmo and PayPal itself. There are also competitors on the bank side, including Popmoney and Chase QuickPay.

Clearly Facebook is in a strong position to dominate the space. But with a near universal user base in the United States, that could be said about any space Facebook enters.

Facebook Payments will leverage the Messenger product and let people send money back-and-forth while messaging each other. Instead of using ACH, the system uses debit cards. (Just like Square Cash.)

Some of the big questions are:

    • How much will Facebook promote this product? A product without promotion will easily get lost within Facebook. Many Facebook products have died for lack of promotion.
    • Does this meet with the needs of Facebook users? Even heavily promoted products can fail. Facebook’s Gifts product was promoted all over the site and still failed. Part of this was due to the quality of the product, but it likely wasn’t improved because it didn’t get traction. If they’d fixed the holes — such as lack of personalization — it might have done better.

 

  • Is person-to-person payments a big market? Obviously remittances and trans-border transactions are, but that’s a completely different problem.
  • Is there a business model here? For P2P itself, it’s unlikely. There are too many free options. It becomes interesting if Facebook moves into person-to-merchant transactions.

Facebook has many mechanisms to promote the product:

  • Initial messaging within Messenger when a user is provisioned for the product.
  • Messaging on the news feed when someone signs up. e.g. “Rocky just signed up for Messenger Money.”
  • Messaging on each transaction, a la Venmo. e.g. “Rocky just paid Stan for dinner.” This will probably turn off a lot of people (e.g. age >30), but seems to be popular with the Venmo crowd. For them, it would be a powerful form of marketing.
  • Indicators in status lists showing that a person can be paid via messenger.
  • Contextual messaging triggered by words in messages like “owe” and “pay.”

Facebook has had promotional successes before. I consider people tagging in photos one of the greatest viral moves ever.

The mobile indicator that showed in the early days of mobile status updates provided a subtle sign that something new was going on. Its presence encouraged others to wonder what was going on and how they can update status from their mobile device.

For as much time as people spend interacting on Facebook — especially about things they did in real life — it makes sense that people would want to pay each other.

If Facebook can get people to use P2P in messenger, it opens up money-making opportunities in commerce. If I can pay for a purchase simply by sending a message, it should encourage me to transact more. And if users are comfortable using their debit cards, Facebook will make a lot of merchants really happy and give the merchants more reasons to promote Facebook.

There are a lot of IFs here, but there’s a good chance that Facebook can make a dent in this market. PayPal’s need to put out a statement about the Messenger payments product is an indication that they’re scared about the social media giant.
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