Facebook is trying — again — to get into the payments business.
The move will be closely watched because payments — particularly mobile payments — are a huge growth area in tech right now. Facebook, however, has a fairly dismal record in this field.
This time, Facebook is working with bank regulators in Ireland to allow it to become a cash transfers and remittances company, like Western Union, according to the Financial Times.
On the one hand, this makes a lot of sense. Facebook has a huge international audience. Many immigrants keep in touch with their families in foreign countries via Facebook because it is free. Facebook’s audience is mostly mobile. And in developing countries and China there is already a strong mobile payments ecosystem. The remittance business is ripe for competition because cash transfer companies take huge fees and commissions on even the simplest of international cash transactions.
If Facebook could bring these factors together — mobile, payments, remitances, and its massive built-in audience — it would be on to a winner.
But Facebook has a long history of failing when it comes to financial products. Facebook’s discontinued e-commerce plays include Facebook Deals, Facebook Offers, Facebook Gifts, and the experimental “Want” shopping button. For some reason, consumers have repeatedly balked when it comes to using Facebook as a shopping device.
Facebook already has its own modest payments business: It takes revenues from people wanting to make purchases inside apps that run on Facebook, such as games. In Q4 2013, its payments revenue was $US241 million, down from $US256 million the year before. Facebook simply takes a 30% cut of app payment revenue generated by any game on Facebook. That payments business is, notably, the only part of Facebook’s business model that is stagnant right now.
International cash transfers are a much more complicated beast. That’s why the company has been looking to acquire companies in Europe that are already experts in it, the FT says:
Facebook has also discussed potential partnerships with at least three London start-ups that offer international money transfer services online and via smartphones: TransferWise, Moni Technologies and Azimo, according to three people involved in the discussions.