Facebook reached over 1 billion active users this month which shows how far reaching and entwined the social network has become in our digital lives. At the moment we interact via sharing photos, comments or events together, but should Facebook extend this to money in the future?
Facebook has long been mooted to get into the online/mobile payment space and even set up Facebook Payments Inc as a separate entity some years ago to facilitate this at some point in the future. While Facebook credits are used to currently purchase extra games and levels within the app gaming sphere, these have yet to rolled out to the wider user base or to the majority of its users. With over a billion active users accessing Facebook every day, the potential to extend this credit functionality to send actual money to their friends or the brands that they ‘like’ within the Facebook walls is massive.
Over 600 million of their users access the service through their mobiles which opens up even more opportunity to exchange money while on the go. Mobile is definitely the future for Facebook and even they have said that it will be a mobile company within two years and the purchase of Instagram for one billion earlier in the year shows that they are happy to put their hands in their pocket if it fits in with their long term plans (or at the very least threatens them).
Here are some of the main reasons why I think Facebook opening up a bank would help it to increase it valuation and help to reduce competition from Google, Twitter and others.
It will generate revenue. When digital money flows around online, it is the payment gateways who take small percentages along the way. By handling billions of transactions, online payment providers make millions in the process. Given that Facebook already has over half a billion active users already, getting just one or two percent of them using some sort of Facebook payment facility (ideally linked to an offline card – which I will come to) would allow it to generate quite a handsome income each year.
It will increase advertising revenues. Facebook can provide the link between its users and the brands who advertise on it. F-commerce pages have been around for some time now but haven’t really taken off for many reasons. To help make this a more viable option, certainly for Facebook users, the ability to pay for things using your Facebook bank account would make it a more attractive platform. If more money was spent through Fcommerce stores, using Facebook ‘money’, it would allow Facebook to collect more information about its users to then build a better idea of an individual’s spend and therefore the value of that person. At the moment Ad targeting options on Facebook are based around likes, interests and demographics. If Facebook could give advertisers some idea of the value of an individual, and then relay this to their advertisers, it would help to push up the amount it could charge for its advertising substantially.
It will help keep their users. Google, Apple, Amazon, Twitter and many other big companies all have registered users running in the hundreds of millions. All of them want to leverage this data and user base now and in the future. As Google pushes harder across the whole business to make Google+ THE social destination, it will start to introduce more and more features to get more and more eyeballs more often. Sat on billions of cash, there would be little to stop Google from launching a finance offering and beating Facebook to the punch. If Google were to do this then they would start to generate more loyalty and could start to break the Facebook bond that ties so many people together at the moment.
In conclusion, It’s fair to say that launching a finance offering or becoming a bank isn’t the easiest thing in the world to do. Because of the scale that Facebook has, regulation across all of the countries it operates in, let alone just the US, would be a huge issue to overcome. But with the money and expertise they can pull in, this is something I’m sure that they can overcome.
Whether it is Facebook, Google or someone else that offer become a ‘bank’ first remains to be seen but I for one believe that this will happen. It is just a matter of time.