Facebook expands into payments, partnering with PayPal, joining Visa Digital Enablement Program and offering food ordering service
Intention to keep users on Facebook and increase advertising revenues, rather than process payments itself
Having been granted a patent for P2P in Australia, could Facebook roll out payment services here in future?
Sources: Bloomberg, The Paypers; Visa
Point of View
Facebook is expanding into payments in the US, with the goal of keeping users on its platform for longer. Users are now able to use a new meal ordering feature, to place orders and make payments from within the platform.
Ultimately, Facebook’s strategy is to make the customer journey from advertisement to purchase frictionless, with the intention of increasing revenues. Facebook anticipates less customer friction will lead to more sales, and thus its merchant clients will be willing to pay more for advertising.
WeChat in China takes a similar strategic approach by offering additional services, including WeChat Pay, which are designed to increase platform ‘stickiness’. However, WeChat itself processes payments, whereas Facebook is working with Stripe, PayPal, Braintree, Visa, MasterCard and Amex to support payments in Messenger.
In a new agreement with PayPal, Facebook users with linked accounts to PayPal, numbering 2.5 million, can now make P2P payments through Messenger. In October last year, the companies enabled mutual customers to shop through Messenger using PayPal.
Visa announced on 24 October that Facebook has joined the Visa Digital Enablement Program (VDEP). The program is a commercial framework that connects Visa’s 14,000 financial institutions, payments service providers and future innovators, removing the need to negotiate bilateral agreements. VDEP also provides its members with streamlined access to the Visa Token Service. The objective of VDEP is to simplify and accelerate the roll-out of new payment and commerce services, globally.
The establishment of multiple partnerships will help Facebook with market reach. More than 15 million Australians use Facebook, around half of whom are aged 18-34, and 6 million people make purchases using PayPal. Visa is ubiquitous.
Facebook is not yet offering embedded payment services in Australia. However, with so many people using Facebook, PayPal and Visa in Australia, and Facebook having been granted a patent for P2P payments in July, that might not be far away.