Facebook Pay FAQ: a new WeChat Pay or a compromise instead of Libra?

This week you can read about Facebook announced the launch of its own payment system, called Facebook Pay. It will allow users to make convenient and secure payments on Facebook, Messenger, Instagram and WhatsApp. I already wrote about plans to launch this project almost a year ago — and now is the time to recall the basic information and draw the first conclusions based on the initial package of facebook pay opportunities.

Formal and financial basis

The first and most important point — Facebook Pay has no connection with Libra cryptocurrency, the about which I a few weeks ago.

The system is built on existing financial infrastructure and partnerships. This is a classic digital card wallet, such as, for example, the popular Masterpass wallet.

To do this, Facebook Payments International Limited received a license from the Central Bank of Ireland for the use of electronic money, dated October 24, 2018. Ireland, as we know, is a member of the European Union — and this gives Facebook the right to work right away in 27 EU member states.

Opportunities

The mentioned Central Bank of Ireland License allows the issue of electronic money and gives the right to provide payment services, which include:

• Credit operations

• Payment for goods and services

• Money transfers

Protection of payment transactions is provided by the device’s capabilities — you can protect your information with a PIN code, Touch ID or Face ID.

What can I pay with Facebook Pay?

Not much. We can see this from the company’s official blog. At the first stages, a new payment instrument will start in a limited mode. This week, Facebook Pay will launch in the United States and will allow payments only in Messenger and the main social network client — but only for fundraising, payments in the games section and purchasing tickets for events. Later, opportunities will be expanded on Instagram and WhatsApp. But when will this happen? No one published a timeline or roadmap. It’s sad.

Why Messenger?

Firstly, the claimed audience of Facebook Messenger is 600 million people. It’s difficult to gather statistics for Ukraine, however, if you take into account 20 million Ukrainians on Facebook itself, then according to the most conservative estimates, Messenger is installed in 7–10 million of Ukrainian devices.

Secondly — the most easy monetization due to the specifics of instant messengers. There is no news feed in the messenger, so the user’s attention is not blurred/ It’s maximally concentrated, which greatly increases the involvement.

Messenger as advertising placement already gives ads directly to the chat list. I suspect the purchase button without a link to website/app will be possible in the near future. And since Facebook Pay will provide the binding of card data to the platform, the payment will be as seamless and simple as possible. And now, when users can link their billing information to social networks, they can make purchases faster and easier than ever before.

Why is Facebook Pay starting right now?

My personal opinion is that Facebook desperately wants to be the “second WeChat”. A universal answer to all communication questions of the audience: family & friends, payments, services, goods, privacy. A second passport in our digital era.

But the rest of the world is not an authoritarian China with censorship and a strong desire for building monopolies in everything. It’s difficult to build such a system. Libra didn’t work out — the cryptocurrency project in theory could change the principles of financial regulation, to which the regulators of the world’s leading economies responded with a maximum attack. And they were not mistaken — key investors and payment systems have already left.

Facebook Pay is a compromise: with licenses, endorsement and an absolutely classic work scheme that is common to everyone. So, there’s no surprise, that Stripe, PayPal and other leading payment services will process card payments as part of the new facebook financial project. It doesn’t look like a “second WeChat” is coming — but at the same time you shouldn’t bury Facebook Pay in advance.

CEO of the international payment system LEO, the shareholder of IBOX Bank