Facebook readying itself to provide financial services in form of remittance and electronic money

Facebook will soon offer remittance and electronic money services. It’s another piece of the puzzle after the launch of Internet.org and buying Whatsapp.

The authorisation from Ireland’s central bank to become an “e-money” institution would allow Facebook to issue units of stored monetary value that represent a claim against the company. This e-money would be valid throughout Europe via a process known as “passporting”.

This is just another piece of the puzzle that Facebook is executing with determination.

The devil is in the detail on this one, though. Internet.org and buying Whatsapp have been clear plays towards the not-yet-developed world. Facebook can grow in the US and Europe by making ads more expensive per user. That works so far. Especially with organic reach approaching Zero. There is growth in optimization for the next few years. Especially now that Facebook seems to have understood how to work mobile.

But the growth that is needed to get to a distant future, one that might involve having bought Oculus, is only going to materialize by getting all those other internet users onto the platform. While that might not be a literal goal – there is no chance for them getting everybody –, this might not be as far from the vision that Mark Zuckerberg seems to pursue.

A big step towards that goal was the acquisition of Whatsapp and its presence and brand recognizability in said markets. While mobile is on its way to be king in our world, it already is in Africa and many parts of Asia. Feature phones still rule, but smartphones are on the rise. Especially with Huawei & Co. dumping cheap, reliable hardware powered by Android on everybody that holds a Nokia feature phone in their hands.

One, if not the, major application of mobile phones is those markets is dealing with money. It’s a big place and banks aren’t as accessible. Money is being managed, for years now, through services. Sending money (P2P/remittance)? Not a problem. Paying for groceries? Not a problem. Name a scenario that you wish would work here and it’s already an old thing in at least part of Africa.

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That’s why it’s so interesting that Facebook is about to acquire a remittance license in Europe. tl;dr – it makes total sense.

We’ve been part of a project that involved building a payment service into / for Facebook since 2011. For the record, I do not know, if our client is in some way involved what Facebook seems to be doing right now, but I wouldn’t be surprised if they are. That being said, when we started I didn’t know much about how money transfer works. Things changed in the last 3 years.

Europe is a messy, extremely tightly regulated market for financial services and products. At least from the perspective of anybody with a banking license or with the desire to have one. Compared to other markets, it’s still a “if you can make it here, you can make it anywhere”-situation. Additionally, many not-yet-developed countries are using European knowledge to build regulation for themselves.

Another expect is that to provide good remittance services, one has to be present in the market from which the money will flow to somewhere. Since remittance is used predominantly by foreign workers who transfer their money from the place of their work to the place where they and their family live, it makes a lot of sense for Facebook to be present in Europe. Both because European citizens are moving quite often between countries to earn their money as well as foreign workers from Eastern Europe, Africa and Asia are coming here to make a living, often financing the life of their relatives in the places they came from.

As a strategy, it makes all perfect sense. Buy yourself the app that people use to communicate with each other on the devices that they use for communicating and banking, get yourself a “banking license” to one day connect everything inside one company (and possibly one application).

If successful, this will have catastrophic consequences for the open web. The tragic part, for me, is the eloquence and decisiveness of Facebook in the execution of a vision. I can’t help myself, but to admire that.