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Facebook Pay embeds in eCommerce beyond Facebook

July 26, 2021

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Jonathan Kriegel

CEO

The expansion of Facebook Pay beyond Facebook and into third party eCommerce sites is likely to accelerate the adoption of mobile payments amongst consumers whilst simultaneously introducing stronger competition for electronic wallets (eWallets). Facebook had around 2.8bn monthly active users (MAUs) in the first calendar quarter of 2021. The company reported that almost 3.5bn people used at least one of its core products (Facebook, WhatsApp, Instagram or Messenger) every month.

That doesn’t include Facebook Pay, introduced in November 2019 to give users on those four platforms uniform tools to transfer money to each other and buy goods and services online. So far, its availability remains limited to just Facebook in most countries, with only developed economies of Europe supporting Instagram mobile payments, alongside South Africa, Puerto Rico and the US Virgin Islands. To date, Facebook Pay on Messenger is only supported in Thailand and in the US, while Facebook lists only Brazil as supporting Facebook Pay payments on WhatsApp (WhatsApp Pay is also now available in India – see my blog on the subject here)

As with the original launch of Facebook Pay, availability on third-party websites will initially be limited to the US. Shopify will be the first partner on board, with other eCommerce sites due to be added next month as in August’21. The two companies are already well advanced in their respective technology integrations. Shopify has enabled its Shop Pay one-click checkout function for US merchants selling on Facebook and Instagram in February this year[i].

Apple, Google and PayPal in their sights

Google, PayPal and Amazon Pay already have integrations with third-party merchants similar to those now being offered with Facebook Pay, and Facebook will have a long way to catch up. The number of Facebook Pay users is also currently a fraction of the numbers that subscribe to Apple Pay or Google Pay.

Nevertheless, Facebook now seems determined to carve itself a larger slice of the market by offering a more seamless payment process to its subscribers, which means they do not have to leave its social media or messaging platforms to make a purchase. The company may also be aiming to attract more merchants onto its platform by maintaining no or low transaction fees. Facebook’s Mark Zuckerberg recently announced a zero percent revenue sharing structure for its paid online events, fan subscriptions, badges, and soon to be launched news service until 2023[ii].

The chief executive also stated that as and when Facebook did introduce a revenue share, it would be lower than the 30% being charged for Apple and others. And by launching a new payout interface that allows content creators to see how different companies’ fees and taxes are impacting their earnings, those companies should be able to make a clear comparison which Facebook will hope makes its own proposition appear to be a more attractive deal.

Payments expansion supports advertising activities

The evolution of Facebook Pay is just the latest step in the social media company’s move into digital payments. Former PayPal executive Stephane Kasriel took the reins at Facebook Pay in August last year[iii] as Facebook built its financial services and payments capabilities.

The company is also one of the original backers of the Libra blockchain-based digital payment system, subsequently rebranded to Diem and still awaiting a release date after other founding members, including PayPal, Mastercard, Stripe, Visa and Mercado Pago, withdrew their support for the project. Facebook is also building its own digital wallet, dubbed Novi (formerly Calibra), designed to let its users store and exchange their Diem digital coins.

Facebook’s expansion into digital payments is not just about opening up new revenue streams. The company’s prime source of income remains advertising, which expanded 21% year on year in FY20 to deliver US$84bn of turnover (98% of the total). Keeping that ad engine running involves ingesting large volumes of the end-user data, with Facebook Pay collecting information such as payment method, transaction date, billing, shipping and contact details for each transaction.

That data will subsequently be used to deliver more personal, customised advertising to Facebook users, which it hopes will ultimately lead to higher conversion rates and more ad spend amongst the social media companies partners. That again could boost the volume and value of mobile payments consumers make, but rival eWallet providers without Facebook’s advertising muscle may find it hard to compete.


[i]  Shopify to offer Shop Pay to all Facebook, Google merchants, RetailDive, 18th June 2021

[ii] Facebook Delays Taking a Cut on Paid Events and Fan Subscriptions till 2023, Criticizes Apple’s Fees, SocialMediaToday, 7th June 2021

[iii] Former PayPal exec Stephane Kasriel will head Facebook Pay, its Venmo-like service, backed by new team, CNBC, 10th August 2020

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