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Mobile payments

2015-03-24 05:55:08

Unfriending cash

Facebook enters the booming market for mobile payments

Mar 21st 2015 | From the print edition

NEWS of the death of cash has always been exaggerated. But the wounds being

inflicted on notes and coins multiply. On March 17th Facebook, the world s

biggest social network, announced that in America its instant-messaging app

will soon allow users to send each other money just as easily as texts and

photos. All they need to do is link their debit cards to their Facebook

account, tap on a dollar sign in the app, type in the amount and press send.

Facebook is not the first to enter the market for free person-to-person (P2P,

as geeks have it) payments. In November, for instance, Snapchat, a messaging

app that lets users send each other photos that disappear after a few seconds,

introduced a service called Snapcash. It competes with Venmo, a popular

money-transfer app owned by PayPal, an online-payments firm. In Asia, messaging

apps, such as WeChat and Line, have offered P2P transfers for some time.

The incumbents don t have to worry too much, at least for now. In contrast to

Snapcash and Venmo, Facebook s service does not make instant payments: the

money only arrives after a few hours or even days, depending on how quickly

users banks act. This is because money is not transferred between accounts

managed by the social network, but goes through conventional payment channels

from one bank account to the other.

Still, Facebook s new offering is further proof that technology firms are

moving onto banks turf. Next month Apple will begin selling its smartwatch,

which lets consumers pay by waving their arm at the till; this will help the

firm s new contactless payment service, which already accounts for two of every

three dollars spent in America by gesturing with a smartphone or a card. Google

recently bought Softcard, a mobile-payment service, to boost its own payment

app and catch up with Apple. Meanwhile Naver, South Korea s biggest online

portal, will launch a new mobile-payment service in June.

Were Facebook to expand its offering internationally and make it truly instant,

the impact could be huge. Facebook has 1.4 billion members, its messaging

service 500m users. Many doubtless send remittances across borders; some are

probably unbanked. The regulatory and logistical challenges of serving such

customers would be huge. Banks struggle to profit from them. Then again, that

is just the sort of challenge tech firms relish.

From the print edition: Finance and economics