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Get Ready for Facebook’s Foray into Payments

Facebook announced new features to their Messenger service in March allowing users to make P2P payments, but didn’t stop there. They have since announced plans to enable consumers and merchants to communicate via Facebook about purchases, known as Business on Messenger, and have started testing “Buy” buttons directly within advertisements that appear on a user’s News Feed.

In 2014 Facebook spun off the Messenger feature, originally part of the Facebook mobile app, into an app of its own. Although many users objected the company was determined to have users download the separate Messenger app as these features were discontinued within Facebook for mobile. While it left many Facebook users disgruntled, this transition was likely the planned early steps in preparing a bigger push into payments. Just a few months prior to this transition Facebook hired PayPal’s then president, David Marcus, as VP of Messaging Products.

In mid-March Facebook announced a new Person-to-Person (P2P) payment feature within their Messenger app, the features are gradually rolling out in the U.S. and will then expand internationally. On the tool bar where users can add smiley faces, photos, and other attachments there will also now be a dollar sign logo. Consumers can click on this to initiate payment, and P2P are payments are free.

To keep Messenger payments free for consumers Facebook only allows payments to be made using Visa or MasterCard debit cards, as credit cards have higher interchange and fees. Users are asked to set a passcode or use Apple’s TouchID fingerprint scanning to authenticate and confirm transfers, and Facebook may force additional verification if the transaction is suspicious.

Facebook isn’t the first to bundle P2P transfers with messaging. Snapchat, a popular image and video messaging app, previously unveiled their very similar Snapcash service, which can also only be used with debit cards. With over 200 million Messenger app users this P2P payment option will become an instant competitive threat to services like Venmo and other companies like PayPal that are used for P2P transfers.

Facebooks plans with Messenger don’t end there as more features were announced at their F8 developers conference in late March. With a service known as Business on Messenger the social media messaging platform can be used much like email. Merchants will be able to communicate directly with consumers about orders, such as confirming shipping and expected delivery, and even allowing the consumer to initiate a transaction based on requests and communications via Messenger.

Merchants will first need to partner with Facebook, and consumers will need to opt-in to allow businesses to contact them, but afterwards the parties can communicate about transactions. Online apparel retailer Everlane is already using the service to answer questions and provide information on existing orders. Facebook provided screenshots of the new features and it also shows a consumer verbally making an order and the merchant confirming the amount to initiate the purchase.

In addition to these new payment features around Facebook Messenger the company has also started testing the use of “Buy” buttons within advertisements that appear on Facebook users’ News Feeds. The potential impact of this should not be understated as Facebook earned over 90 percent of their revenue, about $11.5 billion, from advertising in 2014. The ads are targeted to users beyond cookies and browsing history, leveraging location and proprietary information such as interests and “likes”.

Within a Facebook advertisement a user today may also see a price and buy button under a product image or description. Rather than click on a link in the ad to go to the retailers site the consumer can now make a purchase without leaving Facebook. Clicking the buy button leads to a window with product information and options (such as size or color choices). When the consumer confirms the product options and quantity they provide their shipping and payment information and can place the order, all while staying on the Facebook domain.

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