The world of international money transfers is constantly evolving, and it now seems that Facebook wants a piece of the action. The Internet giant has applied to Ireland’s central bank for permission to become an “e-money” institution. Once approved, Facebook money transfer services will be on offer throughout the EU market. But is sending money through Facebook a good idea?
Combined with Facebook’s current ability to offer money transfers in 48 US states, it seems like it is laying the groundwork for a new money transfer service that will span the globe. Money transfers are a logical move for a site whose main purpose is keeping friends and family in touch over distance, but is Facebook at risk of venturing too far away from doing what they do best?
Facebook’s Life on the Stock Market
Two years have now passed since Facebook’s IPO, and it’s facing pressure to find new ways to increase profits as a publicly-traded company. Despite its 1.2 billion users, the limitations on Facebook’s ability to monetize have been criticized since its inception. They may be banking on money transfers as a viable solution to that challenge.
According to the World Bank, the market for remittances is $500 billion per year. And the research firm Gartner predicts that mobile payments will increase to $721 billion by 2017, with a total of 450 million users transferring money every year. With these numbers in mind, money transfers make sense for Facebook as a pathway to further capitalizing on their existing user base.
Emerging Market Opportunities
Facebook’s transfer plans seem focused on the US and the EU, but it’s the emerging markets that Facebook may eventually target. Countries like India, Mexico, and the Philippines all have a large percentage of their citizens living overseas, and most of those expats remit money home on a regular basis. Since many of these people already use Facebook to interact with their family back home, Facebook may see this as a natural path to introducing their transfer service to this particular market segment.
Obstacles to Success
Trust will be one of the biggest problems the company faces as they aim to introduce the ability to send money through Facebook. Even though more than 15% of the world’s population uses Facebook, a large percentage of its users are concerned about their privacy.
One poll in 2013 by Reason-Rupe found that 61 percent of Americans do not trust Facebook at all with their personal information and privacy – a statistic that casts significant doubt on the viability of the new venture, given that security is one of the biggest factors customers consider when choosing a transfer service.
To overcome this obstacle, Facebook may end up acquiring a money transfer startup and using a separate brand name in order to offer a money transfer service to its users, or partnering with an existing service in order to create a new, separate company.
Facebook is a resilient company and has often found success when others predicted failure – and there’s no shortage of critics in the case of the new announcements around a transfer service. What happens this time around remains to be seen, but shareholders will continue to watch with eager anticipation as Facebook explores new ways to monetize its users.