According to a report in AllThingsD, which Facebook apparently confirmed, the company is testing — emphasis on that word — a new payments system in which consumers would use stored credit card data (on Facebook) to buy things on third-party mobile apps.
Payment would be triggered using Facebook log-in credentials (not unlike Amazon’s one-click purchase capability). From a consumer perspective, it would remove considerable friction from the current mobile e-commerce purchase experience because they would no longer have to provide 16-digit credit card numbers to random (and untrusted) e-commerce sites.
This is one of the secrets to Amazon’s mobile commerce success: stored credit cards.
If rolled out broadly and successfully it could turn Facebook into a central player in the mobile commerce ecosystem. Reportedly Facebook wouldn’t process payments itself; rather it would simply hold and transmit the credit card information.
AllThingsD says “Thrillist-owned JackThreads, a flash-sale shopping site for young men, is the pilot partner.”
The already tired headline I’ve now seen multiple times asks whether this would “kill” or disrupt PayPal. That very much remains to be seen; the program is just in a testing phase.
Google Checkout when it launched was thought to be a major threat to PayPal. It didn’t turn out to be. And Google Wallet is not a success. Simply because you build it doesn’t mean people will show up and buy.
There’s also a major question about whether consumers would give Facebook their credit card numbers. Some already have for Gifts. But there’s a broad “chicken and egg problem.”
The credit card would already need to be in Facebook’s database for consumers to benefit from a streamlined checkout process on a third party site or app. But without experiencing that improved process people might not see a reason to give Facebook their credit card information.
Regardless of how many credit cards Facebook has on file it’s nothing like Amazon, Apple or Google’s credit card databases. Apple in particular is a sleeping giant in mobile payments.
Despite the various hurdles I’ve identified there are many reasons for Facebook to move forward. Think of the data and consumer insights the company would potentially gain — though there’s also a potential privacy PR landmine for Facebook to step on.
Despite these risks I’ve always believed there was a major payments and e-commerce opportunity waiting for Facebook, which has yet to be realized. Maybe this is the right time and right opportunity.
Postscript: TechCrunch goes to great lengths to argue that Facebook’s stored credit card data would not compete directly with PayPal as a credit card processor/bank. (The most interesting point made in the TechCrunch article is that part of Facebook’s motivation might be to have another tracking/analytics tool for advertisers.)
Right now I don’t see any threat to PayPal. PayPal will remain a consumer payment option and merchant card-processing vehicle where it already exists. Facebook is not becoming a way for developers or publishers to accept credit cards. It’s really just like your browser storing password information.
Over the longer term, assuming a number of things, Facebook payments might impact consumer behavior and preferences and that could adversely affect PayPal hypothetically. For example, if I as the consumer-buyer prefer to use the Facebook stored credit card instead my default payment method over at PayPal (i.e., card or bank account) then my payment relationship with Facebook might start to trump PayPal usage.
This scenario made some of the card issuers and banks nervous about Google Wallet when it came out. Google was potentially disrupting the relationship between the bank and the consumer. But since Wallet hasn’t succeeded nobody has been displaced and it’s all kind of moot.
Similarly with Facebook payments, we really have to wait and see 1) what the user experience is like 2) whether payments are broadly rolled out and 3) how willing the public is to embrace them.