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Facebook Instant P2P Payments and the Future of Money

Op-ed - Facebook Instant P2P Payments and the Future of Money

The prestigious MIT Technology Review has published a Business Report on “The Future of Money.”

The report surveys emerging digital money and online payment technologies, including Apple Pay, Alibaba’s Alipay and Bitcoin, and concludes that promising advances will be integrated with mainstream fintech and controlled by large players.

“As technology-driven payment ideas give cash a run for its money, the big winners could be established banks and credit card companies,” the report begins, and goes on to describe fintech advances such as digital wallets, cryptocurrencies and mobile peer-to-peer payments.

“Which technologies and companies are likely to lead this transformation is the big question for this Business Report,” the report reads.

The MIT Technology Review report missed by a few days the announcement, reported by TechCrunch and also covered by The New York Times, that Facebook unveiled a new payments feature for Facebook Messenger.

The new Facebook payment features allows users to connect their Visa or Mastercard debit cards and send friends money on iOS, Android and desktop with zero fees. Facebook Messenger payments will roll out first in the United States over the coming months.

“We use secure systems that encrypt the connection between you and Facebook as well as your card information when you ask us to store it for you,” says the Facebook announcement. “We use layers of software and hardware protection that meet the highest industry standards. These payment systems are kept in a secured environment that is separate from other parts of the Facebook network and that receive additional monitoring and control. A team of anti-fraud specialists monitor for suspicious purchase activity to help keep accounts safe.”

Facebook doesn’t charge payment fees because it doesn’t have to monetize payments. For Facebook, it’s enough to keep users locked in the hugely popular Messenger app instead of switching to a dedicated payment service such as PayPal or Google Wallet to send money to friends.

Messenger is one of the largest platforms in the world, with more than 500 million monthly users. And last year Facebook spent nearly $22 billion to buy WhatsApp, a separate messaging platform that now counts more than 700 million active users globally.

The new integrated payment features, which are fast, easy to use and secured by solid technology and operating practices, could make digital friend-to-friend payments and micropayments commonplace.

“[C]onversations about money are already happening on Messenger,” as people chat about bar tabs, splitting dinner bills, and sharing the cost of an Uber, Facebook’s product manager Steve Davis told TechCrunch. “What we want to do is make it easy to finish the conversation in the same place you started. You don’t have to switch to another app.”

Given Facebook’s huge size and reach, the introduction of its payments feature is likely to disrupt the emerging market for instant P2P payments, notes The New York Times. And analysts said that if the payment system succeeded, Facebook would extend it to other types of purchases, such as consumers’ buying of products directly from advertisers.

With this announcement, the social networking giant seems to be claiming a place among the large companies that, according to the MIT Technology Review report, will be the big winners in the digital fintech arena.

The Facebook announcement doesn’t mention Bitcoin. But it would be technically easy to add a Bitcoin wallet besides a credit card, and send bitcoin payments to the wallet of the recipient. That leaves open the option for Facebook to integrate bitcoin payments.

Blogger Jimmy Song suspects that bitcoin payments may indeed be part of Facebook’s long-term plan. He notes that David Marcus, the former PayPal president who now runs Facebook’s Messenger division, has been a fan of bitcoin for a long time.