What are the optimistic and pessimistic scenarios for Facebook Payments?
Payments
Asked by Question Bot12/Nov/20121 answer
1 Answer
F
Faisal Khan
Answered 12/Nov/2012
The summary of it would be...
Bullish: They get it right and emerge as a paradigm shift player in the world of global payments.
Bearish: They miss the boat. They miss the writing on the wall. They miss it all together. They under-estimate the competition (Apple, Amazon, Google, Microsoft, Twitter, etc.)
Farhad Manjoo wrote a great article (IMHO) for Fast Company magazine, titled the The Great Tech War of 2012. (See: http://www.fastcompany.com/1784824/great-tech-war-2012).
One thing can be said for sure, a lot many people within Facebook and especially outside of Facebook are very closely watching how Facebook can / will roll out payments for their 1+ Billion users.
Here is what I think (sans the micro details).
Bullish Scenario
For Facebook payments to be successful globally, many facets have to be looked at, and addressed.
One of the most important factors is - Will Facebook be alone in the payment eco-system? Will it allow out 3rd party and banks to connect to it and utilize its payments platform, to be able to trade and exchange payments.
If the eco-system is closed for all others, that might not work. (a) Regulators for sure will step in (b) Facebook will lose a lot of revenue which it could otherwise have had easy access to, if it say integrates with PayPayl, and say M-Pesa in Kenya, etc. Its this financial hub-and-spoke connectivity that is essential for FB in the long run.
Barring the legal, compliance and regulatory issues FB will face, the easy part for FB would be the adaptation of its payment system.
1 Billion users and voila! Tomorrow you have a potential 1 Billion customers who are ready, have a strong loyalty / association and will be ready to use the FB Payments system.
The tricky part would be to manage micro payments, sub $5 or even sub $1 payments (note, not everyone lives in the US, and in large parts of the world, even $1 transaction is a sizable number for small payments).
I am assuming FB has already figured out the loading/unloading of money to the FB Payments Ecosystem.
FB's income would be via per transaction cost, cost of loading and unloading money from FB, and perhaps a bit of money on the FX component. FB would most likely not allow 3rd party payment system to operate on its platform by default. Too many legal and settlement issues in my opinion. They will however, allow all such 3rd party / external payment services to connect to FB.
The transaction engine within FB would be owned and operated by Facebook alone.
Facebook, could partner up with local bank (or banks) in each country it operates in, and offer branchless banking services also. Though, from the outside this would seem like a monumental task, and perhaps it is, but the end result would be nothing short of spectacular. FB rides on the banking license of each of its partner in each territory it operates in. Every bank would be scrambling to get on the FB Payments bandwagon.
A similar analogy would be to consider the interconnect agreements made by the Motorola Iridium project, where Motorola convinced and connected to almost every known country and its telecom partner in that country.
With such a setup, FB will honestly have a mammoth lead on how payments and money is played out on the virtual scene. When you are able to connect a bank account with Facebook and your mobile phone and are able to do payments --- the possibilities are endless.
Add the above with the FB sign-on API and you can extend and project Facebook payments on to other ecosystems (like say LinkedIn, or if the giants will allow, Amazon, Apple iTunes store, etc.)
The earnings opportunity for FB in developing markets (read: Outside main stream North America and Europe/UK) are enormous.
The applications on what and how FB payments can be used for are enormous. Even with capped limits, the ability to send each other small payments can change the very fabric of how money transfer, etc. is done today. A total game changer overnight and a serious threat to existing players.
With one go, Facebook can be a common denominator to payments for all territories and geographies.
Bearish Scenario
The bearish is easy to figure out. Refer to the article above about The Great Tech War of 2012. Google, Amazon, Microsoft, Twitter and Apple. They can be real game changers and challengers for Facebook payments. If Facebook fails to implement a payment system soon (globally), which is what everyone expects from them, and looking at the dismal performance of FB stock and its declining or stagnated advertising sales, FB payments promises to be the savior (in a crude form).
Missing out on the boat, could potentially mean, a miss out on once in a lifetime opportunity. Sometimes even with the best and the brightest people on board, companies either screw up their roll-outs or didn't think ahead about the playing field and players. With Facebook, lets hope this is not the case, but it certainly does warrant a shiver.
If others (i.e. Apple, Microsoft, Twitter, Amazon and Google) enter into the world of global payments - before Facebook, and get solid traction amongst its users, it might be too late for Facebook to play catch up.
I cannot stress enough how important the world global payments is to Facebook. Majority of Facebook's 1+ Billion users are outside the United States, so ignoring these markets can tantamount to being a catalyst for failure.
The key would be to get the formula right. By formula, I imply, the model right. Which markets? Loading/Unloading of Money? Costs and ease to the users? Partner banks? etc.
With all the intelligence reports and information pertaining to FB payments that keep coming out on the Web, no one has been able to predict with a relative degree of certainty what FB actually plans to do for itself regarding payments.
The expectation is the sky, and the hope is that they do not screw this (or miss) this opportunity up.
Bullish: They get it right and emerge as a paradigm shift player in the world of global payments.
Bearish: They miss the boat. They miss the writing on the wall. They miss it all together. They under-estimate the competition (Apple, Amazon, Google, Microsoft, Twitter, etc.)
Farhad Manjoo wrote a great article (IMHO) for Fast Company magazine, titled the The Great Tech War of 2012. (See: http://www.fastcompany.com/1784824/great-tech-war-2012).
One thing can be said for sure, a lot many people within Facebook and especially outside of Facebook are very closely watching how Facebook can / will roll out payments for their 1+ Billion users.
Here is what I think (sans the micro details).
Bullish Scenario
For Facebook payments to be successful globally, many facets have to be looked at, and addressed.
One of the most important factors is - Will Facebook be alone in the payment eco-system? Will it allow out 3rd party and banks to connect to it and utilize its payments platform, to be able to trade and exchange payments.
If the eco-system is closed for all others, that might not work. (a) Regulators for sure will step in (b) Facebook will lose a lot of revenue which it could otherwise have had easy access to, if it say integrates with PayPayl, and say M-Pesa in Kenya, etc. Its this financial hub-and-spoke connectivity that is essential for FB in the long run.
Barring the legal, compliance and regulatory issues FB will face, the easy part for FB would be the adaptation of its payment system.
1 Billion users and voila! Tomorrow you have a potential 1 Billion customers who are ready, have a strong loyalty / association and will be ready to use the FB Payments system.
The tricky part would be to manage micro payments, sub $5 or even sub $1 payments (note, not everyone lives in the US, and in large parts of the world, even $1 transaction is a sizable number for small payments).
I am assuming FB has already figured out the loading/unloading of money to the FB Payments Ecosystem.
FB's income would be via per transaction cost, cost of loading and unloading money from FB, and perhaps a bit of money on the FX component. FB would most likely not allow 3rd party payment system to operate on its platform by default. Too many legal and settlement issues in my opinion. They will however, allow all such 3rd party / external payment services to connect to FB.
The transaction engine within FB would be owned and operated by Facebook alone.
Facebook, could partner up with local bank (or banks) in each country it operates in, and offer branchless banking services also. Though, from the outside this would seem like a monumental task, and perhaps it is, but the end result would be nothing short of spectacular. FB rides on the banking license of each of its partner in each territory it operates in. Every bank would be scrambling to get on the FB Payments bandwagon.
A similar analogy would be to consider the interconnect agreements made by the Motorola Iridium project, where Motorola convinced and connected to almost every known country and its telecom partner in that country.
With such a setup, FB will honestly have a mammoth lead on how payments and money is played out on the virtual scene. When you are able to connect a bank account with Facebook and your mobile phone and are able to do payments --- the possibilities are endless.
Add the above with the FB sign-on API and you can extend and project Facebook payments on to other ecosystems (like say LinkedIn, or if the giants will allow, Amazon, Apple iTunes store, etc.)
The earnings opportunity for FB in developing markets (read: Outside main stream North America and Europe/UK) are enormous.
The applications on what and how FB payments can be used for are enormous. Even with capped limits, the ability to send each other small payments can change the very fabric of how money transfer, etc. is done today. A total game changer overnight and a serious threat to existing players.
With one go, Facebook can be a common denominator to payments for all territories and geographies.
Bearish Scenario
The bearish is easy to figure out. Refer to the article above about The Great Tech War of 2012. Google, Amazon, Microsoft, Twitter and Apple. They can be real game changers and challengers for Facebook payments. If Facebook fails to implement a payment system soon (globally), which is what everyone expects from them, and looking at the dismal performance of FB stock and its declining or stagnated advertising sales, FB payments promises to be the savior (in a crude form).
Missing out on the boat, could potentially mean, a miss out on once in a lifetime opportunity. Sometimes even with the best and the brightest people on board, companies either screw up their roll-outs or didn't think ahead about the playing field and players. With Facebook, lets hope this is not the case, but it certainly does warrant a shiver.
If others (i.e. Apple, Microsoft, Twitter, Amazon and Google) enter into the world of global payments - before Facebook, and get solid traction amongst its users, it might be too late for Facebook to play catch up.
I cannot stress enough how important the world global payments is to Facebook. Majority of Facebook's 1+ Billion users are outside the United States, so ignoring these markets can tantamount to being a catalyst for failure.
The key would be to get the formula right. By formula, I imply, the model right. Which markets? Loading/Unloading of Money? Costs and ease to the users? Partner banks? etc.
With all the intelligence reports and information pertaining to FB payments that keep coming out on the Web, no one has been able to predict with a relative degree of certainty what FB actually plans to do for itself regarding payments.
The expectation is the sky, and the hope is that they do not screw this (or miss) this opportunity up.