Facebook Sets Its Sights on Financial Services, Starting With Europe
According to a report from Financial Times, Facebook Inc. (NASDAQ:FB) has been quietly working on a new scheme in which it will provide financial services like remittances and electronic money. The social media giant will begin offering the services in Europe, where it is just weeks away from obtaining regulatory approval from the Central Bank of Ireland for the new service, which would allow Facebook users to pay and exchange money with others.
The service would work throughout Europe, rather than just Ireland, under an agreement referred to as “passporting,” in which digital payments are allowed across EU member states without having to gain regulatory approval from each one.
The company has also looked into partnering with several U.K.-based startups to offer international money transfers, including TransferWise, Moni Technologies, and Azimo, according to Financial Times.
The move towards e-money isn’t a huge step for Facebook: The company already has permission for some types of money transfer, such as payment within certain apps like the popular Candy Crush Saga and Farmville games. Facebook take a 30 percent cut of payments from those apps, in exchange for hosting them on its site, and the company has generated more than $2 billion from those transactions in 2013 alone, according to The Guardian.
“The market for money transfer is very, very large,” said Taavet Hinrikus, co-founder of the startup TransferWise, per The Guardian. “For remittance alone the market is worth $500 billion, according to the World Bank, but for money moved between developed nations, as well as between developed and developing individuals and businesses, the market is valued at an estimated $5 trillion to $10 trillion, based on our analysis of global money flow data.”
Bart Blau, director of the research firm Gartner, says that it’s possible that Facebook is thinking much further into the future with regards to its newest endeavor. He says that Facebook is hoping to eventually make paying customers out of the 2 billion people in developing nations which are just now beginning to really make use of the internet. “They’re happy to subsidize for awhile,” he says, “but at some point they have to become paying customers.”
“Payment schemes are the equivalent to credit cards in emerging markets and here is where Facebook can make progress … especially in those places where banking infrastructure is not as mature as it is in Europe or the U.S.,” Blau added, per The Guardian.
It’s possible, Blau adds, that Facebook could be hoping to make itself into a kind of utility in emerging markets, which given recent news (internet drones, anyone?) doesn’t seem all that surprising.