Facebook Inc (FB) Tests Payment Service To Compete With Paypal


Facebook Inc (NASDAQ:FB) is planning to test its own payment service to make it easier for consumers to buy products or services through its e-commerce mobile apps partners, according to a report from Jason Del Rey and Mike Isaac of AllThingsD based on information from sources knowledgeable about the issue.

Facebook Inc (FB) Tests Payment Service To Compete With Paypal

The social network giant’s own payment service will allow users to make purchases by using their Facebook login information without providing their billing information on mobile apps if they previously bought something and provided their credit card details to Facebook Inc (NASDAQ:FB).

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Facebook payment service will launch next month

According to the report, Facebook Inc (NASDAQ:FB) confirmed that it is currently testing the new payment service, and it is scheduled to launch it next month. JackThreads, a members only, online shopping club for young men, which is owned by Thrillist is the pilot partner of the social network giant. JackThreads generates a significant amount of its revenue from consumers who make purchases using their mobile phones.

Given the fact that Facebook Inc (NASDAQ:FB) has 101 million active mobile users daily, its new payment service, if expanded from its small testing phase, will become a strong competitor against PayPal, the digital payment service of eBay Inc (NASDAQ:EBAY), and other offerings from Amazon.com, Inc. (NASDAQ:AMZN), Google Inc (NASDAQ:GOOG).

Facebook service compared to Paypal

At present, Facebook Inc (NASDAQ:FB) is focused on “creating a better mobile checkout experience” on its new payment service and it is not yet integrating a payment processing. Its e-commerce partners will be responsible in dealing with their payment processors. The social network giant handles payments for its Gift products and in-app game purchases, and accepts payments from consumers using their credit cards or PayPal accounts.

Sucharita Mulpuru, retail analyst at Forrester Research opined that the new payment service of Facebook Inc (NASDAQ:FB) “sounds like a dead-on competitor of PayPal.” Mulpuru added that it would be surprising if the social network giant has 10 million credit card numbers in the U.S. on file.

“Nobody trusts social networks with their financial information, and they are certainly not going to trust Facebook. Maybe they have a few million people that have bought something on things like FarmVille, but that does not a network make,” said Mulpuru.

Furthermore, she said, “PayPal is well-suited because they have more than 100 million accounts with real people who have trusted them with their information. To be a latecomer to the game in something as complex as payments, they would be better off buying Square.”

On the other hand, a spokesperson for PayPal said the company welcomes competition and it has a good relationship with Facebook Inc (NASDAQ:FB). The spokesperson emphasized that PayPal has been investing in mobile payments since 2006 and 10% of its $14 billion payment volume came from mobile devices last year. “We always welcome competition and are looking forward to seeing what Facebook will announce,” according to the spokesperson.

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