Facebook tries new approach in payments

Facebook’s ambitious plans for a new cryptocurrency called Libra may be bogged down by heavy government scrutiny and the withdrawal of key partners from the project.

But that isn’t stopping the Silicon Valley giant in its bid to become a key part of the global payments infrastructure.

On Tuesday Facebook announced it was launching a new service called Facebook Pay, initially available to the company’s US-based users of Facebook Messenger.

The scale of this social network could offer Facebook a potentially unbeatable competitive position

“Over time, we plan to bring Facebook Pay to more people and places, including for use across Instagram and WhatsApp,” Facebook’s vice-president of marketplace and commerce, Deborah Liu, said in a blog on the subject.

Earlier this year, Mark Zuckerberg, Facebook’s founder and chief executive, said he planned to integrate Messenger, Instagram and WhatsApp, which have an estimated 2.6bn users worldwide.

The scale of this aggregate social network could offer Facebook a potentially unbeatable competitive position if it were allowed to become part of the financial infrastructure, say critics.

Unlike Libra, which aims to become both a separate currency and a payments medium, Facebook Pay is less of a radical departure from the current payments system.

Like Google Pay or Apple Pay, Facebook Pay will require users to specify a preferred payment method (such as a bank card) and then allow users to make payments directly to a third party.

The firm says Facebook Pay will initially enable payments for fundraisers, in-game purchases, event tickets, person-to-person payments on Messenger and purchases from select pages and businesses on Facebook Marketplace.

It’s the person-to-person payments option that could grant Facebook the greatest scope for keeping financial flows within its technology ecosystem.

Facebook says it is building in some client protections in its payment service, for example, by not automatically setting up Facebook Pay across the apps clients are active on, unless they choose to do so.

However, the firm makes it clear it aims to monetise the payment data it will be collecting, which will include details about clients’ payment method, transaction date, billing, shipping and contact details.

“The actions you take with Facebook Pay can be used for purposes such as to deliver you more relevant content and ads,” Facebook says.

the firm has recently received a rebuff in India

While Facebook is seeking to push forward with its payment plans in its home market, the firm has recently received a rebuff in India, where it has been trialling a messenger-based payments service since early last year.

Around 1 million Indian users of WhatsApp are able to pay each other directly using the app, after having linked their Indian bank account to their WhatsApp account.

Payments between WhatsApp users’ bank accounts then pass across India’s Unified Payments Interface (UPI), which offers a near-instantaneous settlement of transactions.

However, Indian regulators have so far prevented the trial being extended to all 400m Indian users of WhatsApp.

And last week the Times of India reported that the country’s central bank, the Reserve Bank of India (RBI), had decided not to allow the full-scale launch of a payments business in India by Facebook because of the firm’s non-compliance with a requirement to store data locally.

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