18 Aug Facebook could be the future of money, if it learns to ignore the United States
Facebook has rolled out a product in the United States that allows users to transfer money to each other via Facebook message. Your Facebook Messenger account is linked to a debit card. It’s an interesting premise and amazingly well executed. I haven’t seen a better implementation of person-to-person money transfer.
But — there’s a big but. The collective response from my friends? Yawn.
I tried sending money to more than two dozen of my friends. The most common response was nothing. (The money was automatically returned to me a couple of weeks later.) The second most common response: I’m not giving my debit card to Facebook.
Facebook’s other payments experiments have failed, including a Facebook branded prepaid card issued by Discover and Facebook Gifts. Like money transfer, those products were all aimed at the U.S. market. That’s a terrible mistake.
The United States has firmly entrenched credit card networks such as Visa, MasterCard and American Express. There is a robust banking system. Credit ratings bureaus such as Experian and Equifax provide a trust index. Aside from a lunatic fringe, people have faith in the U.S. dollar.
All of this makes for an extremely difficult place to launch a payments products. You’re up against powerful players who have their own interests. The combined value of AmEx, MasterCard and Visa is $370 billion. Facebook is worth $260 billion, and only a sliver of the company is working on payments.
But there is tremendous opportunity for Facebook to go after payments in places like Latin America, Asia and Africa.
Facebook could partner with local businesses as a point of presence. Customers would give their money to a nearby retailer, who would add money to the customer’s Facebook account. People who need cash could come in and take cash from the retailer. Facebook could also work with a local mobile operator, which already has such a retail network network.
In many of these countries, there is a credibility gap. Citizens can’t trust banks or the government.