Facebook Inc (NASDAQ:FB) is planning to enter the financial services business. The social networking giant is seeking regulatory approval in Ireland to provide users with e-money services. Sources familiar with the development told the Financial Times that Facebook is just a few weeks away from obtaining approval. With its e-money service, users will be able to store money on the social networking site, and use it to exchange for services or pay money to others.
Facebook negotiating deals with three London-based startups
Once Facebook Inc (NASDAQ:FB) gains the Irish central bank’s authorization to become an e-money institution, it will be able to issue units of stores money. Sources said that this electronic money will be valid throughout Europe through a process called “passporting.” The Menlo Park-based company is also in talks with three London-based startups offering international money transfer services via mobile and online. The three startups are TransferWise, Moni Technologies, and Azimo. To get Azimo on board, the social media company offered $10 million to hire Azimo’s co-founder as the director of business development.
This foray into electronic money and remittances is part of Facebook Inc (NASDAQ:FB)’s strategy to strengthen its presence in emerging markets. Facebook aims to become a utility company in emerging markets. Earlier this month, the Mark Zuckerberg-led company surpassed 100 million active users in India, making it the biggest market outside the United States.
Will users trust Facebook with their money?
However, it’s still unclear whether users will trust Facebook Inc (NASDAQ:FB) with their money. The social networking giant has been repeated accused of violating user privacy laws. The company generates most of its revenue through advertising. Its entry into the money transfer business indicates a strategic shift. The e-money project is headed by Sean Ryan, VP of platform partnerships.
Facebook Inc (NASDAQ:FB) has already gained approval for some forms of money transfer in the United States. It allows the company to process payments for app developers who charge users for in-app purchases. The company takes a 30% cut on such purchases. Last year, Facebook processed $2.1 billion worth of transactions.
Facebook Inc (NASDAQ:FB) stock surged 2.97% to $60.27 at 10:58 AM EDT on Monday.