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Facebook Mobile Payment Push Faces Big Hurdles

Cracking the mobile payments market won't be easy, say analysts. Here's where Facebook might stumble.

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Facebook is testing a new mobile payments feature similar to PayPal, according to reports. This would let you make online purchases by logging in with your Facebook credentials. The feature, sources said, would be available to Facebook users who have already provided the social network with their credit card information for purposes such as game-related purchases or buying gifts.

Facebook is reportedly testing the new mobile payments system with just one retailer right now. Should it expand the pilot, the social network would likely face an uphill battle, Chris Silva, a mobile analyst with Altimeter Group, said in an interview.

"Moving into mobile payments is a natural extension of the identity Facebook has created, which is taking one set of credentials and using it across a host of websites," he said. "Salesforce did that for the business world. But I think Facebook moving into mobile payments will be as successful as PayPal moving into physical payments."

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According to sources, Facebook is building the mobile payments platform in-house. Jordan McKee, an analyst at Yankee Group who covers mobile transactions, said in an email that although this allows for greater flexibility and control, succeeding in developing an in-house system isn't easy.

"If payments are not a company's core competency, developing in-house systems tend to be an arduous and often unsuccessful task," he said. "Partnering is often the best route to go in payments. Leveraging economies of scale and best practices from established players can increase speed to market and the overall success of the initiative."

Facebook's main struggle, though, will lay in its users' distrust, Denee Carrington, senior analyst at Forrester, said in a statement. Because Facebook users are already wary of how the social network collects and uses personal data, convincing the masses to give up credit card information will be a challenge.

"Only 4% of U.S. consumers trust Facebook to offer a mobile digital wallet," she said. "Consumers want safe, seamless and convenient mobile payments, and there is a growing number of competitors that consumers trust more, such as PayPal and Visa's V.me."

If Facebook wants to be successful with this project, it needs to shore up privacy and security first, then focus on user experience, Yankee Group's McKee said.

"Facebook must be crystal clear in how it plans to use data obtained from users. Since Facebook profits from user data, the concept of offering payment credentials in addition to personal information may not sit well with many," McKee said. "Facebook must also put tremendous emphasis on the user experience. If they don't find Facebook's offering to be intuitive, easy and seamless, it will gain little traction and potentially dilute its brand."

Introducing a new payment option could ultimately be convenient for users, but getting them comfortable with a new way to make transactions will take time, Altimeter Group's Silva said.

"The nice thing about using your Facebook credentials across a number of sites is that it is an easy and familiar way to log on to any website," he said. "But getting people in the mindset of understanding this new transaction process won't be easy."

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afabbricino
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afabbricino,
User Rank: Apprentice
9/3/2013 | 11:38:35 PM
re: Facebook Mobile Payment Push Faces Big Hurdles
I'd have liked to see FB provide an additional payment method such as carrier billing. It has been proven to work time over time and I'm sure carriers would like to leverage that user base
Guest
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Guest,
User Rank: Apprentice
8/16/2013 | 5:38:42 PM
re: Facebook Mobile Payment Push Faces Big Hurdles
I've seen WAY too many Facebook friends have their accounts hacked. So, no thanks.
Thomas Claburn
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Thomas Claburn,
User Rank: Apprentice
8/16/2013 | 5:07:25 PM
re: Facebook Mobile Payment Push Faces Big Hurdles
I doubt Facebook will have much more success with payment than Google, which has struggled with Google Wallet.
kburg070
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kburg070,
User Rank: Apprentice
8/16/2013 | 5:02:35 PM
re: Facebook Mobile Payment Push Faces Big Hurdles
That is a very good point, thanks for the feedback.
Number 6
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Number 6,
User Rank: Apprentice
8/16/2013 | 4:55:53 PM
re: Facebook Mobile Payment Push Faces Big Hurdles
Consumers might distrust banks for their risky investment operations thanks to the repeal of Glass-Steagall, but know that their banking data... and money... is very secure.
Paypal took years to build up the high level of trust its users now have.
Facebook, on the other hand, has done nothing to build trust and has actually gone in the opposite direction. If it can't be trusted to keep data gleaned from my status posts to itself, do you think I'm going to trust it with my financial information? I'd sooner trust Number 2.
kburg070
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kburg070,
User Rank: Apprentice
8/16/2013 | 4:44:24 PM
re: Facebook Mobile Payment Push Faces Big Hurdles
It's interesting that the big challenges identified are a) technical difficulty of developing the platform internally, b) FB users' distrust. While those are valid concerns, it seems to me the bigger challenges might be around the relatively slow uptake of mobile payments and mobile wallets in the US. There are numerous initiatives underway involving tech companies (including Google), banks, retailers and telecoms and none has caught fire yet. What is FB going to do that will cause the tipping point? Regarding FB users' distrust -- well, consumers' distrust of their banks hasn't stopped them from using bank products (cards, checking accounts, online/mobile banking, etc.).
David F. Carr
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David F. Carr,
User Rank: Apprentice
8/16/2013 | 1:44:50 PM
re: Facebook Mobile Payment Push Faces Big Hurdles
Seems to me the issue is also the personality of the service. Facebook is for fun; consumers don't necessarily expect to do anything serious with it
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