Yesterday, Facebook announced Facebook Pay, its new payments system for Facebook, Instagram, and WhatsApp. Users can use Facebook Pay for “fundraisers, in-game purchases, event tickets, person-to-person payments on Messenger and purchases from select Pages and businesses on Facebook Marketplace.” The announcement comes on the back of years of fintech initiatives from the company. Among them: peer-to-peer payments in Messenger in 2015, WhatsApp Pay in 2018, and Instagram Checkout and Project Libra in 2019.
Here’s what digital businesses need to understand about the Facebook Pay news:
- Consumers don’t trust Facebook for digital payments. Only 5% of US online adults say they would trust Facebook to provide digital payment services.* That’s well below the likes of Amazon, Apple, Google and others. What’s more, this rate is surprisingly consistent across the globe. The one exception: Consumers in India trust Facebook at higher rates (20% of online adults in metropolitan say they’d trust Facebook for this purpose**) – likely because of WhatsApp Pay.
- The competition for consumer money movement and management is really stiff. Amazon wants us to use Alexa (and Amazon Pay) to pay our bills. Apple wants to finance our lives and future Apple purchases on its Apple card. Our Jaguar can earn and spend cryptocurrency autonomously (okay, not yet, but it’s coming!) And just today, Google announced plans to offer checking accounts. More companies want to get closer to our money and money management. Why? The more of the payments value chain they own: (1) the cheaper it is to process payments; (2) the faster they (and their consumers) can get access to the money; and (3) the more data they have about our spending habits to use, sell, or target ads around.
- But don’t expect Facebook to back down. Payments in the US is the new battleground for improving retail checkout experiences. The payments market in the US is antiquated and ripe for innovation. And payments contain treasure trove of customer data – which is why it’s appealing to so many companies. Facebook has the scale necessary to build a strong payments business and it knows that: it was awarded a patent in the personal financial management space to “compare a user’s financial transactions to financial transactions of a group.” (h/t Forrester’s Aurélie L’Hostis).
- Global markets may be the key to success. Today, Facebook Pay is only available in the US and on the Messenger platform. But Instagram and WhatsApp are already informal eCommerce and payments channels across Southeast Asia and Latin America. So I’m going to be paying close attention to its rollouts across the platforms and in other regions.
Bottom line: To be a successful payments business, Facebook will need to rebuild consumer trust. As my colleague Anjali Lai wrote earlier this year, “If [Facebook] consumer energy wanes further, drastic actions like policy revisions or innovation launches will fail to resonate with energy-drained consumers at all.”
What are your reactions the Facebook Pay news? I’d love to hear your thoughts!
*Source: Forrester Research Consumer Technographics Global Online Benchmark Survey (Part 2), 2019.
**Source: Forrester Research Consumer Technographics Asia Pacific Survey, 2019