There's Much to Like About Facebook's Mobile Pay Play

Facebook’s new mobile checkout initiative brings heft to the power of social data in areas such as advertising and payments risk, and aims to improve the user experience on mobile apps.

Facebook’s role in payments has been steadily increasing. Cardlytics uses Facebook to drive its rewards program, and Facebook also introduced a closed-loop gift card in February. The social network’s e-commerce pilot will give it a larger role in the mobile commerce industry, currently dominated by PayPal.

"This is further confirmation that there is no shortage of opportunity in payments," says Bill Clerico, CEO of WePay, in an email to PaymentsSource. WePay uses small business’ Facebook profiles as part of its registration process.

Facebook plans to allow consumers to make payments on e-commerce apps by using their Facebook login information. Users who provide Facebook with payment details will be able to make payments without entering their billing information at other e-commerce sites."The test is designed to make it easier and faster for people to make a purchase in a mobile app by simply prepopulating your payment information," says Tera Randall, a Facebook spokeswoman, in an email.

The pilot is expected to start in the next month, with JackThreads, an online clothes shop, participating as the initial trial merchant.

"Clunky checkouts online and in mobile applications lead to abandoned carts and missed opportunities," says Jordan McKee, an analyst at Yankee Group. "Seamless and intuitive checkout experiences can provide companies with increased sales and more satisfied customers."

Facebook is looking to help companies streamline their checkout process much in the same way that Braintree and Stripe are doing, McKee says. "Given Facebook’s sizable and loyal user base, the company is well-positioned to scale this initiative," McKee says.

Facebook is not processing payments, which would make it a direct competitor to PayPal, says Randall. "Additionally, this test does not involve moving the payment processing away form an app’s current payments provider, such as PayPal."

PayPal says it does not expect Facebook's new mobile commerce test to threaten the companies' work together.

"We have a great relationship with Facebook and expect that to continue," Jennifer Hakes, a PayPal spokesperson, wrote in an email. "Our customers love using PayPal on Facebook. We’ve been investing in mobile payments since 2006 and last year, 10% of our total payment volume — $14 billion — was from mobile devices. However, we always welcome competition and are looking forward to seeing what Facebook will announce."

Facebook’s move would give it a more detailed view of how its members shop and make payments, information that could also inform the performance of advertising campaigns. But Facebook would be wise to tread lightly in its leveraging of data, McKee says.

"Much attention must be paid to usage and storage of data to ensure privacy and security for users," McKee says. "Facebook profits from user data, and throwing payments into the mix is sure to raise a number of concerns. Specifically, Facebook will need to address how it plans to use the data it’s obtaining from users."

For WePay, Facebook’s further involvement in payments is a boost for risk management.

"One interesting asset to consider is the amount of data that Facebook has and how that might be used to prevent fraud and underwrite risk," Clerico says.

WePay uses small businesses’ Facebook profiles to vet users as part of a program called Veda. The information in a social media profile takes a long time to compile, and is difficult to fake, making it a good way for the company to ensure a fraudster isn’t trying to pose as a fake small business owner.

"We’ve had great success leveraging Facebook, LinkedIn and Twitter data as an input into our Veda risk engine," Clerico says.