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With more than 1 billion active mobile users, Facebook has the kind of scale to make any e-payments service jealous, but it could be years before the company gets that other important feature to running a viable financial business: trust.
Facebook has been working since at least late last year on a European-wide service that would allow end users to store and transfer money on Facebook, according to a source in the financial services industry with knowledge of Facebook's plans.
“Facebook is thinking about financial services in general, money transfer being one of these areas,” the source said, adding there was a 50-50 chance that Facebook would successfully launch such a business. “They are making their minds up about what to do.”
Facebook is reportedly weeks away from getting regulatory approval in Ireland to launch a European e-payments service, and is pushing into the remittances market in a bid to appeal to migrant workers in developed economies, according to The Financial Times, which first reported the news. Facebook’s second largest market is India, where it reportedly has about 100 million active users.
The company, whose European headquarters are in Ireland, is waiting on the country's central bank to approve Facebook as an electronic money institution in Europe, according to the FT.
Facebook could not be reached for comment.
Such a service would go a step beyond the company's problematic attempt to get into the virtual goods market with Facebook Credits, and put it head-to-head with traditional banks, PayPal, and money transfer business such as
The social network's foray into e-payments is nothing new: Facebook has already obtained Money Services Business (MSB) licenses in 48 U.S. states , giving it regulatory freedom to offer currency exchange services or money transmittal if it wants to. See the full list here.
But getting such licenses is relatively straight forward, and likely involves paying hundreds of thousands of dollars in legal fees; it does not necessarily foretell the imminent launch of financial services.
The real challenge for Facebook will be gaining users’ trust, given the criticisms leveled at the company in the last few years over data mining for its advertising business, not to mention the more recent blow to people’s confidence in Web-based transactions in the wake of the Heartbleed bug.
Until users become more comfortable with Facebook processing their personal data, it could be a while before they think it trustworthy enough to process their cash too.
