Facebook is now enabling users, in some specific cases, to make payments without going through a third party. How and why has the world’s most popular social network provider set out to incorporate payments functionality into its platform?
“60 million firms now have a Facebook page and five million of them are actively looking for customers on our social network,‟ Kahina Van Dyke told the audience at the South by Southwest (SXSW) interactive festival held in Austin, Texas on 10-19 March. The figures put forward by Van Dyke, Global Director of Commerce & Payment Partnerships at Facebook, explain the Menlo Park giant’s development of new functionality intended to attract and retain these businesses on the network. Facilitating payments is part and parcel of this drive.
Kahina Van Dyke revealed that Facebook had drawn inspiration from what was happening in South-East Asia. “We saw a great deal of activity coming from those countries. People were posting photos and then taking them off the platform, several times a day. Finally we understood what was happening: merchants were posting photos of their products, announcing the price, and then once the article was sold they took down the relevant photo.‟ So Facebook users were selling items on the network without having any Facebook-integrated payment system to support the sale. “If someone was interested in buying an item all they had to do was send a message to the seller to agree the price, and then share a screenshot of the payment order; the merchant would then ship the product,” explained Van Dyke. When Facebook became aware of this it started working to enable users to trade on the platform with greater security.
One result of this work is Marketplace, which enables direct trading on Facebook. In October last year, this small ads platform was officially launched in the United States, enabling Internet users to see products for sale in their neighbourhood. The service is designed to compete with websites such as eBay, Craigslist and French site Le Bon Coin.
Facebook is now also offering an integrated payments system for selling merchandise listed on company pages without going through a third party. Having first offered this functionality to US merchants, Facebook has now tested the option in Thailand so as to adapt it to the specifics of the South-East Asian market. Facebook has been working with South-East Asia-based FinTech company 2C2P to enable users to buy products on sale on a Facebook page, without having to leave the platform. In addition, since 2016, users have also been able to use the Messenger app to trade, using one the thousands of bots developed for this purpose.
Paying for merchandise and transferring funds
When it decided to add these services, Facebook was not really a raw beginner in the field. Back in March 2015 the social network began to enable friend-to-friend money transfers via Messenger in the United States free-of-charge. And still today the payer and beneficiary only have to enter the numbers of their debit cards linked to an account in the US in order to send and receive money via Facebook Messenger.
“After twenty years working in payments I hesitated when Facebook contacted me. I tend to believe that the only people who want to enter the payments sector are those that have never done it and have never been in banking, because it’s just too hard,” joked Kahina Van Dyke. Avoiding fraud, authenticating users and creating trust are just some of the difficulties that Facebook is faced with in this new business. However, Facebook also authenticates users, “not in the banking sense, but in the ‘community’ sense. We have staff whose job it is to check that a person is who s/he says s/he is so that we know who’s talking to whom on the platform,” she told the SXSW audience.
But when it comes to ensuring that a payment is made in a safe and reliable manner, Facebook does have the answer. “We work in collaboration with the banks, which have the resources to verify user identity. They have lots of staff working in the risk management and compliance fields”, pointed out Kahina Van Dyke, underlining: “We’re not trying to do it all by ourselves, we use the banking infrastructure.” Payments via Facebook go from one bank account to another. This is the most convenient way to go, given that “there have never been so many people with a bank account as there are today.‟ But of course most users are totally unaware of the underlying technology: “There‘s a huge amount of infrastructure which as a user you never even think about; you just want the payment to go through.‟ That’s exactly Facebook’s philosophy as well.
Having forged so many partnerships with the banking sector around the world, including with Stripe, PayPal, Braintree, Visa, MasterCard and American Express, Facebook nowadays accepts close to 80 different payment channels, without it being obvious, and without any revenue-generating goals. For the moment, if we are to believe Facebook’s public communication, the reason for its involvement in the payments sector is basically to ensure that users stay on the platform.
#donate: Facebook helps you make a charitable donation
Facebook’s added value when it comes to payments is in fact related to the way social networks work. Donating to a charity is a good example of this. When a number of people belonging to an online group are able exchange ideas and see what the others are doing, this can create a movement, triggering consumption of a product or service, or encouraging others to make a donation. This phenomenon is a potential goldmine for all charity and non-profit organisations.
“I noticed that the way charity organisations collected donations was very different from the way my friends supported causes they were interested in,‟ said Dale Nirvani Pfeifer, founder and CEO of Goodworld, an organisation that aims to empower non-profits to raise money through social media fundraising. She immediately grasped how useful Facebook could be to collect funds. “People around me tend to discover good causes on the social networks, and a video that has gone viral could make them decide to act.‟ But the process has to be simple. This is exactly Goodworld’s goal; the Washington DC-based company wants to make it easier to send donations to charities via Facebook and Twitter. How this works is that you go on to the page of a given charity on Facebook or Twitter and use the comment #donate on Facebook or @reply or RT #donate on Twitter, indicating the amount you wish to give.
Using a hashtag is efficient in that it is quite spontaneous, can be used widely, and can be made public. Friends of a donor might be curious to know what causes s/he is supporting and may then wish do the same. “People tend to trust a charity more if they see that a friend of theirs also trusts it,” argues the Goodworld CEO. And if you search on #donate you can view on the same page all the causes that are trying to get a hearing.
As long ago as December 2013 Facebook had already integrated a donation feature by placing a ‘Donate now’ button on the pages of charity organisations. The feature has now been improved so as to also be visible on public messages. And the Menlo Park social platform has also launched a specific ‘fundraisers’ tool which enables charities to create a page dedicated to their cause, on which they can share a story, drum up enthusiasm, get people working together to raise funds and subsequently thank their donors easily and efficiently.
“25% of the time we spend online is on social networks,‟ pointed out Dale Nirvani Pfeiffer. So it is very much in the interests of charitable organisations to put this time to a good use. Using Facebook to tell the story of a person in distress using videos and photos and detailing just what is required to save or assist that person is remarkably effective when it comes to raising funds, far more so than posting the same story on the charity’s own website. The power of the social networks in this regard was underlined last week by a video uploaded by a YouTuber, who thus succeeded in persuading Internet users and an airline company to come forward and help alleviate famine in Somalia.
Meanwhile businesses and merchants can also make use of these efficient social network features to make an impact in e-tailing – as is happening in China, where WeChat is already a major player in the e-commerce sector.