By Jeff Fread on Monday, July 18th, 2016 in FinTech.
Facebook Messenger provides a way for people to transfer to others once they’ve added a debit card number to their profile. Quick, easy, simple. Where could Facebook take their role in payments?
Facebook does not allow for business transactions currently. There may be a good legal, regulatory or business reason for this just as there probably is a good workaround. However, customers want secure, simple and quick ways to pay. From that perspective a logical extension would be for Facebook to extend Messenger to support direct payments to merchants for online transactions and at the point-of-sale.
There’s a real advantage to merchants as well. Even charging a modest fee will save merchants significant credit card processing fees. Those savings could be transferred to the end customer in the form of discounts. Combining Messenger payments with advertising on Facebook (as the only place to find these special discounts) would help grow the advertising side of Facebook’s business, too.
Not everyone has a bank account. There are a huge number of people worldwide who are unbanked. Facebook could fill this void by creating a Messenger payment account similar to a prepaid card or E-Z Pass account. Funds are added to accounts and used for purchases.
There’s also a benefit to merchants because this could speed payment settlement. This, in turn, may boost acceptance.
Benefits for many programs are distributed via debit cards. Could Messenger payments complement or even replace this?
Facebook could allow recurring payments (e.g., rent and subscriptions) via Messenger. This could readily be combined with related information and services. For example, let’s say I want my monthly public radio donation to be charged via Messenger. The station could send me personalized messages related to my favorite content. Or even a way to listen to programming during pledge breaks!
Banks regularly use loyalty or rewards programs to tie customers more tightly to the bank. Facebook could develop a rewards program tied to Messenger payments. The range of payment categories, payment frequency, or total volume could be used to drive rewards. What would the rewards be? Many merchants would love the opportunity for “free” advertising by offering their goods and services as rewards.
Rewards might boost both awareness and adoption rates for Messenger payments.
Facebook Live has gotten lots of attention lately. As Facebook extends its reach in live content viewers could purchase content with Messenger payments. Concerts, lectures, movies, shows, and other performances (even sports!) could all be streamed and purchased within the Facebook ecosystem. One point of distribution and delivery that could really disrupt current approaches delivering better value to viewers and more of the proceeds to performers.
The biggest opportunity for Facebook IMHO would be launching a co-brand card. A range of card products could be offered by issuers in each market. Cardholders might get discounts on (promoted) ads that factor in location, time, and customer history. Or they might simply get cash back on their purchases. Or both.
Co-brand cards have been around for a long time. While this may sound awfully traditional, it may well be the best way to deliver real value to all parties — customers, banks, and Facebook — in the short-term.