August 19, 2013, 10:48 AM — Facebook is reportedly looking to get into the mobile payments game. If it does it right, businesses will reap the benefit of monetizing their Facebook presence and be able to simplify the process of turning Facebook followers into revenue.
Rivals should be worried any time an 800-pound gorilla like Facebook enters a market. Facebook is the online destination where users spend the most time each month, and with a billion-ish users it represents a dominating force in whatever market it chooses to compete.
Facebook's business courtship
Mobile payments is a logical culmination of the framework Facebook has put in place for businesses. Businesses have been encouraged to develop a Facebook presence and build a following of loyal customers to "Like" and share information about the company with their extended social networks. Brick-and mortar-businesses encourage customers to check-in so the they can increase visibility among the customers' Facebook friends. All of that effort also ties in to the Facebook Graph Search functionality to enable Facebook users to identify the music, restaurants, movies, and other things their extended social network likes.
With Facebook mobile payments, businesses can streamline the process of turning that social relationship with customers into a revenue stream. The idea has always been to promote the business and hopefully generate revenue, but if those billion potential customers can use the tool they're already logged into to do business with the companies they already Like and follow, it will make it that much easier.
The problem for other mobile payment providers like PayPal or an Internet currency like Bitcoin is that they're not used uniformly by the masses. They're all proprietary payment frameworks to an extent--including whatever Facebook does--but Facebook is able to capitalize on a massive active user base, and businesses and consumers can just click an extra button to complete a transaction rather than having to install and consciously choose to use some different payment provider.
Do You Trust Facebook?
There is one major hurdle Facebook has to deal with before a Facebook mobile payments system can really turn into an e-commerce goldmine. Security.
Most consumers are leery of the concept of mobile wallets to begin with. A Bloomberg BusinessWeek report from June claims that nearly seven out of 10 adults don't want to use a mobile wallet. Combine that with a general distrust of security and privacy on social networks, and you can see what a serious obstacle this could be for Facebook.
If history is any indication, though, consumers will choose convenience over security almost every time. That bodes well for Facebook in general, and means that a Facebook mobile payments system will be a jackpot for businesses with an established presence on the social network.