Payments

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Bryan Yurcan
Bryan Yurcan
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Facebook Getting Into the E-Money Game

The social media giant has reportedly applied for a remittance license in Ireland.

Reports have surfaced in multiple media outlets this morning that Facebook is seeking regulatory approval from the Irish central bank for providing financial services in the form of remittances and electronic money-- an approval which they are apparently close to receiving.

According to reports, the popular social network is seeking to allow its users in Ireland to store money on the site and have the ability to send it to other users or pay for products.

As per the Irish Times:

"The authorisation from the Central Bank to become an “e-money” institution would allow Facebook to issue units of stored monetary value that represent a claim against the company. This e-money would be valid throughout Europe via a process known as “passporting”.

Obtaining an e-money authorisation in Ireland would require Facebook to hold capital of €350,000 and segregate funds equivalent to the amount of money it has issued, according to legal experts."

The idea of "social payments" has certainly been a hot topic in the financial services world over the last couple of years. Social payments can not only refer to money transferred between parties on social media web sites, like Facebook or Twitter, but also crowdfunding services like Kickstarter, and numerous other examples.

As social payments are still in their relative infancy, it's an area where banks are just dipping their foot into, if at all. But the benefits of getting in early, especially when in conjunction with a social media giant like Facebook, could prove highly beneficial.

In February, I reported on how Canada's RBC had partnered with Facebook on a p2p money transfer service. The service runs on the Canadian payments network cooperative Interac, which comprises more than 80 member Canadian financial institutions. Interac allows consumers to send money to anyone with an email address and Canadian bank account, and the new RBC partnership allows consumers to send money only needing to be friends with someone on Facebook for them to receive it.

Clearly, between their partnership with RBC and this most recent announcement, Facebook is taking the idea of social payments seriously. And with a whole generation of consumers who have grown up with social media an extension of themselves, that might be a good idea.

[Related Content: Social Media And The Next Generation Of Lending Customers]

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

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Kelly22
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Kelly22,
User Rank: Author
4/28/2014 | 2:40:22 PM
re: Facebook Getting Into the E-Money Game
Yeah I don't know anyone who has actually purchased anything on FB as a birthday/congratulations gift. You're right though, the money transfer presents a great chance for them to expand their e-gifting options.
Kelly22
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Kelly22,
User Rank: Author
4/28/2014 | 2:37:39 PM
re: Facebook Getting Into the E-Money Game
Ivy, I agree as well. Social payments will undoubtedly prove more popular among younger customers, but I think older FB users would also take advantage of that offering - especially those who already use online banking services.
Becca L
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Becca L,
User Rank: Author
4/27/2014 | 9:52:30 PM
re: Facebook Getting Into the E-Money Game
Great points, Ivy. And think of how the money transfer applies to birthdays and weddings and other gift-giving occasions. Facebook already has a wonderfully built notificaiton for these events, but their gifting services to-date have been rather pathetic (I don't know of anyone who has ever used them) so this could be a great opportunity for them to capitalize.
Becca L
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Becca L,
User Rank: Author
4/27/2014 | 9:49:52 PM
re: Facebook Getting Into the E-Money Game
One year ago I had never used a mobile or social payment service, in the last year I've signed up and actively used several. Kelly and Bryan, I agree this is a logical extension of the generation's social media connection.
Becca L
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Becca L,
User Rank: Author
4/27/2014 | 9:45:56 PM
re: Facebook Getting Into the E-Money Game
Does this mean I can go to the FB page of a fashion brand I like, select one of their posts, and click "by this" ? If so, that's rather dangerous for my bank account.
Ivy Schmerken
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Ivy Schmerken,
User Rank: Author
4/16/2014 | 2:52:56 PM
re: Facebook Getting Into the E-Money Game
Facebook is serious about becoming a leader in social payments. With 'passporting' in the EU it could mean that Facebook can allow users from all the other member countries to store money on the site. Even though this will appeal to the younger generation/millenials who have grown up with Facebook, I can see older consumers being drawn to use Facebook to transfer money or buy gifts for their teens, friends, relatives who are also on Facebook.
Byurcan
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Byurcan,
User Rank: Author
4/15/2014 | 12:57:14 PM
re: Facebook Getting Into the E-Money Game
Yes, I think the millennial generation, that has grown up with social media and mobile phones as second nature, will take to these kind of payments. RBC said when I interviewed them their Facebook p2p service was already becoming popular.
KBurger
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KBurger,
User Rank: Strategist
4/14/2014 | 8:30:11 PM
re: Facebook Getting Into the E-Money Game
This is further evidence that the payments business overall is ripe for disruption -- what with new forms of payments, virtual currencies, mobile payments, new players involved in processing, not to mention continued fraud and security breaches. It's exciting to see the innovation and activity, but it's discouraging from a banking perspective to see the innovation coming from nonbank players. What do banks need to do to avoid being marginalized in payments?
Kelly22
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Kelly22,
User Rank: Author
4/14/2014 | 4:28:43 PM
re: Facebook Getting Into the E-Money Game
While I'm not sure this is something that would appeal to older consumers, I think you're right in implying that the upcoming generation of banking customers will be more likely to try social payments. I already see more and more people using services like Venmo to transfer funds.
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