Facebook gets smart with Payments

For any social network being able to generate a virtual currency is part of the territory. That gets way more interesting when game or social network users can convert any credits they have earned into a virtual or real currency.

That is the real tipping point for the FB business model and PayPals recent moves to increase the % cut they take from transactions which has (in my view) opened up more competition in the payments space.

At my main bank (ASB ) I have also recently been able to open a direct US $ account. This was prompted by my security concerns with PayPal  – (my bank has the equivalent of 2 factor authentication) and the hike in transaction costs at PayPal.

The payments topping point has arrived for Facebook as announced on their developers blog. This is a key paradigm shift for FB and about 3 years overdue but ultimtaley good news for anyone who sells anything online.

“Introducing subscriptions and local currency pricing

By Prashant Fuloria – Tuesday, 19 June 2012 at 13:30

Today, we’re announcing two updates to our payments product: subscriptions and local currency pricing.

New ways to monetize with subscriptions
Many developers successfully monetize their apps with one-time purchases of virtual items. Beginning in July, we are launching subscriptions as another way for you to build your businesses on Facebook. With subscriptions, you can establish a recurring revenue stream and offer updated content or premium experiences for a monthly fee….

This transition will be seamless for your users on Facebook. Already, most people see items priced in their local currency in the payments flow. Additionally, we’ll convert any Credit balances into the equivalent amount of value in users’ local currency, which they can spend on in-app items in the same way they do today. People can still redeem gift cards and store unused balances in their account.”

So what does this mean for businesses using facebook credits and other payment scenarios?

Peter Vogel writes in “Why Facebook Is Folding On Credits And Doubling Down On Payments”

“Credits will be phased out by the end of the year and users will simply have a Facebook account with a balance measured in Dollars in the U.S., or whatever currency is native to a country. Facebook’s new member accounts will function similarly to an iTunes account: a user adds a credit card to their account, digital goods can be purchased and immediately charged to the card on file, or can be drawn from stored value in that account…”

“We still expect Facebook to be become a dominant player in the Payments space, similar to a PayPal. Last year, 15 million people bought Facebook Credits, according to their S-1 filing, so it’s assumed Facebook has close to 15 million credit cards on file. By the end of this year, once paid apps are added to Facebook’s App Center, it wouldn’t be surprising if 50 million people, or about five percent of Facebook’s users are purchasing apps and other digital good, like movies, music and TV episodes, which means Facebook would have a pool of 50 million people who have entrusted it with their credit card information

At that point it’s a very short distance to a “Pay with Facebook” blue box showing up every time you make an online purchase (on web sites everywhere, not just on Facebook). Why re-enter your credit card number when you already trust Facebook to handle the transaction and bill your card? For users this could be seen as more convenient and safer than entering their credit card number on multiple sites. Facebook is PayPal on steroids, with the strength of a billion members.

And then, what’s to stop Facebook from introducing a Facebook Credit Card?  Facebook could be bigger than PayPal and become Visa or MasterCard as well. Facebook has the potential to become a universal wallet for both online and offline purchases.”

The real question here is why has it taken Facebook so long to take on PayPal since converting credits to a local currency balance.

I think there will be some significant security challenges for Facebook ( as there already are for PayPal) and that is why I have opened foreign currecny accounts directly with my bank.

At least my bank has a security team in place and while the convenience of Facebook and Paypal payments is hard to beat – they and iTunes are now giant targets for online hackers.

If you have an online business that already takes Facebook credits then the guy to follow is

“Peter Vogel @pvogel Co-founder, Plink (Online-to-Offline loyalty program) 12.5% Canadian, social media entrepreneur, promoter and creator of disruptive technologies Denver, CO · http://www.plink.com”

 

I use a social media app called Foursquare to keep an eye on what is happening in local businesses. In NZ we suffer a little from lower population densities, lack of public WiFi, expensive smartphones and expensive mobile data but the last 2 are starting to swing back in favour of the consumer.

I recently worked on a foodie website called Tweet2Eat which is in the Hawkes bay at present. It combines dining out with the latest real time data from restaurants and cafes in that region. I can see a combination of Yelp / Foursquare / Plink and Tweet2Eat becoming very successful.

Much as I hate the idea of anyone earning $ on Facebook for eating at Burger King – I think that the Facebook payments changes open up a raft of new opportunities for everyone.

What do you think? – use your FB or twitter login to comment below.