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Facebook’s P2P payments heightens competition in mobile-driven service area

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March 19, 2015

Facebook brings P2P payments to Messenger

Facebook brings P2P payments to Messenger

In a reflection of the increasing frequency with which millennials leverage their mobile devices to make small payments to one another, Facebook is bringing person-to-person payments to its Messenger application.

The strategy will help Facebook keep users on its platform and add value while opening the door to promotion and loyalty capabilities for advertisers. Facebook stiffens competition in the P2P payments space which includes eBay’s Venmo, Snapchat, several banks and others.

“Embedded P2P is clearly becoming a thing,” said Thad Peterson, senior analyst at Aite Group, Atlanta. “The question is whether there is sufficient consumer need/demand.

“I would expect that every social platform will have their own P2P capability, and they’ll all be competing with Venmo, Clear Xchange, and of course, cash,” he said. “From a user experience perspective, is a user going to register at each of these social media sites in order to enable payments on that platform?

“Probably not, more likely, if they are going to register, they will do it on the site where they are most active. If they want to pay through other channels, they’ll default to another payment alternative.”

Mobile payments
Up until now, if Facebook users who were communicating with one another about tickets to a concert, they would have to go to another site to exchange money for purchasing the tickets. The new P2P payments feature will help Facebook keep these users on its site.

To send money, users start a message with a friend, tap the $ icon, enter the amount they want to send, tap Pay in the top right and add their debit card to send money To receive money, users open a conversation from a friend, tap Add Card in the message and add their debit card to accept money for the first time.

The money is transferred right away. It may take one to three business days for the money to be available to users, depending on their bank.

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The first time users send or receive money in Messenger, they will need to add a Visa or MasterCard debit card issued by a U.S. bank to their account. Once this has been done, users can create a PIN. On iOS devices, users can also enable Touch ID.

The free P2P payments feature will be rolling out to Facebook over the coming months in the United States across Android, iOS and desktop.

Marketing opportunities
While the strategy is limited to P2P payments, it could open the door to a wider payments strategy for Facebook at a time when mobile payments as well as social commerce are both growing.

“I would think that in-app payments for products and services offered on FB and using their payments platform would be a revenue generating opportunity for FB that could be leveraged into promotion and loyalty capabilities for their advertisers,” Mr. Peterson said.

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While Facebook already processes more than one million transactions daily on its site, the company recognizes that security is a top concern when it comes to digital money.

To assuage concerns, Facebook highlighted its use of secure systems that encrypt the connection between users and Facebook as well as their card information in the blog post announcing the new P2P payments solution.

Facebook says that it uses layers of software and hardware protection, with its payment systems kept in a secured environment that is separate from other parts of the network and that receive additional monitoring and control.

Additionally, a team of anti-fraud specialists monitor for suspicious purchase activity to help keep accounts safe.

“User take up may be limited because of the inherent lack of ubiquity with FB payments,” Mr. Peterson said. “The opportunity is that it creates a new opportunity to engage and hold their users and add value to the social experience.”

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York

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