TechWeb

Facebook Mobile Payment Push Faces Big Hurdles

Aug 16, 2013 (05:08 AM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=240160039


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Facebook is testing a new mobile payments feature similar to PayPal, according to reports. This would let you make online purchases by logging in with your Facebook credentials. The feature, sources said, would be available to Facebook users who have already provided the social network with their credit card information for purposes such as game-related purchases or buying gifts.

Facebook is reportedly testing the new mobile payments system with just one retailer right now. Should it expand the pilot, the social network would likely face an uphill battle, Chris Silva, a mobile analyst with Altimeter Group, said in an interview.

"Moving into mobile payments is a natural extension of the identity Facebook has created, which is taking one set of credentials and using it across a host of websites," he said. "Salesforce did that for the business world. But I think Facebook moving into mobile payments will be as successful as PayPal moving into physical payments."

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According to sources, Facebook is building the mobile payments platform in-house. Jordan McKee, an analyst at Yankee Group who covers mobile transactions, said in an email that although this allows for greater flexibility and control, succeeding in developing an in-house system isn't easy.

"If payments are not a company's core competency, developing in-house systems tend to be an arduous and often unsuccessful task," he said. "Partnering is often the best route to go in payments. Leveraging economies of scale and best practices from established players can increase speed to market and the overall success of the initiative."

Facebook's main struggle, though, will lay in its users' distrust, Denee Carrington, senior analyst at Forrester, said in a statement. Because Facebook users are already wary of how the social network collects and uses personal data, convincing the masses to give up credit card information will be a challenge.

"Only 4% of U.S. consumers trust Facebook to offer a mobile digital wallet," she said. "Consumers want safe, seamless and convenient mobile payments, and there is a growing number of competitors that consumers trust more, such as PayPal and Visa's V.me."

If Facebook wants to be successful with this project, it needs to shore up privacy and security first, then focus on user experience, Yankee Group's McKee said.

"Facebook must be crystal clear in how it plans to use data obtained from users. Since Facebook profits from user data, the concept of offering payment credentials in addition to personal information may not sit well with many," McKee said. "Facebook must also put tremendous emphasis on the user experience. If they don't find Facebook's offering to be intuitive, easy and seamless, it will gain little traction and potentially dilute its brand."

Introducing a new payment option could ultimately be convenient for users, but getting them comfortable with a new way to make transactions will take time, Altimeter Group's Silva said.

"The nice thing about using your Facebook credentials across a number of sites is that it is an easy and familiar way to log on to any website," he said. "But getting people in the mindset of understanding this new transaction process won't be easy."